-----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, KT6OC5Jd/XpJpmhOESdgRBBNMg6uFaoaoEFe2h2vU7oQwHkJ6485a8jrmtNWRXNs xRsnr+pFQ7ib6Qrepqj9rw== /in/edgar/work/0000950137-00-004869/0000950137-00-004869.txt : 20001115 0000950137-00-004869.hdr.sgml : 20001115 ACCESSION NUMBER: 0000950137-00-004869 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 31 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN CLASSIC VOYAGES CO CENTRAL INDEX KEY: 0000315136 STANDARD INDUSTRIAL CLASSIFICATION: [4400 ] IRS NUMBER: 310303330 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-09264 FILM NUMBER: 766726 BUSINESS ADDRESS: STREET 1: TWO N RIVERSIDE PLZ STREET 2: 2ND FLOOR CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3122581890 MAIL ADDRESS: STREET 1: TWO NORTH RIVERSIDE PLAZA STREET 2: 2ND FLOOR CITY: CHICAGO STATE: IL ZIP: 60606 10-Q 1 c58427e10-q.txt QUARTERLY REPORT 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 --------------------------- FORM 10-Q [ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000 [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 COMMISSION FILE NUMBER: 0-9264 AMERICAN CLASSIC VOYAGES CO. (Exact name of registrant as specified in its charter) DELAWARE 31-0303330 (State or other jurisdiction of (I.R.S. Employer identification No.) incorporation or organization) TWO NORTH RIVERSIDE PLAZA, CHICAGO, IL 60606 (Address of principal executive offices) (Zip Code) (312) 258-1890 (Registrant's telephone number, including area code) 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 [ ] As of November 10, 2000, there were 21,015,365 shares of Common Stock outstanding. ================================================================================ 2 AMERICAN CLASSIC VOYAGES CO. INDEX
ITEM DESCRIPTION PAGE - ---------------- ---- Part I. Financial Information: Item 1. Condensed Consolidated Financial Statements (Unaudited) Condensed Consolidated Balance Sheets at September 30, 2000 and December 31, 1999.......................................................... 3 Condensed Consolidated Statements of Operations for the Three Months and Nine Months Ended September 30, 2000 and 1999................................................................... 4 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2000 and 1999.............................. 5 Notes to Condensed Consolidated Financial Statements....................... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................................. 11 Item 3. Quantitative and Qualitative Disclosures About Market Risk ................ 17 Part II. Other Information: Item 1. Legal Proceedings.......................................................... 18 Item 6. Exhibits and Reports on Form 8-K........................................... 18
2 3 AMERICAN CLASSIC VOYAGES CO. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except shares and par value)
(Unaudited) (Audited) September 30, December 31, 2000 1999 ------------ ----------- ASSETS Cash and cash equivalents ........................................ $ 47,781 $ 42,399 Restricted cash .................................................. 43,880 289 Short-term investments ........................................... 3,877 -- Accounts receivable .............................................. 2,553 1,205 Inventory ........................................................ 3,829 2,529 Prepaid air tickets .............................................. 3,093 1,930 Prepaid expenses and other current assets ........................ 4,434 3,491 --------- --------- Total current assets ........................................ 109,447 51,843 Property and equipment, net ...................................... 188,281 150,797 Vessels under construction ....................................... 194,918 74,601 Deferred income taxes, net ....................................... 15,727 12,446 Other assets ..................................................... 7,766 4,303 --------- --------- Total assets ................................................ $ 516,139 $ 293,990 --------- --------- LIABILITIES Accounts payable ................................................. $ 14,416 $ 14,534 Notes payable .................................................... 75,000 -- Other accrued liabilities ........................................ 21,163 23,712 Current portion of long-term debt ................................ 4,100 4,100 Unearned passenger revenues ...................................... 52,264 41,381 --------- --------- Total current liabilities ................................... 166,943 83,727 Long-term debt, less current portion ............................. 70,026 80,463 --------- --------- Total liabilities ........................................... $ 236,969 $ 164,190 --------- --------- Company-obligated mandatorily redeemable convertible preferred securities of subsidiary trust holding solely 7% convertible subordinated debentures of the Company ...................... $ 100,000 $ -- --------- --------- COMMITMENTS AND CONTINGENCIES (NOTE 8) STOCKHOLDERS' EQUITY Preferred stock, $.01 par value (10,000,000 and 5,000,000 shares authorized, respectively; none issued and outstanding) ........ $ -- $ -- Common stock, $.01 par value (100,000,000 and 40,000,000 shares authorized, respectively; 21,006,665 and 18,653,206 shares issued, respectively) 210 187 Additional paid-in capital ....................................... 204,307 151,094 Accumulated deficit .............................................. (23,649) (19,573) Common stock in treasury, at cost (51,000 shares) ................ (757) (757) Unearned restricted stock and stock units ........................ (941) (1,151) --------- --------- Total stockholders' equity .................................. 179,170 129,800 --------- --------- Total liabilities and stockholders' equity .................. $ 516,139 $ 293,990 --------- ---------
The accompanying notes are an integral part of these condensed consolidated financial statements. 3 4 AMERICAN CLASSIC VOYAGES CO. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited)
For the Three Months For the Nine Months Ended September 30, Ended September 30, --------------------------- --------------------------- 2000 1999 2000 1999 --------- --------- --------- --------- Revenues ............................................ $ 62,456 $ 57,460 $ 159,718 $ 153,226 Cost of operations (exclusive of depreciation expense shown below) ..................................... 38,603 35,768 102,272 98,230 --------- --------- --------- --------- Gross profit ........................................ 23,853 21,692 57,446 54,996 Selling, general and administrative expenses ........ 18,276 13,848 51,448 43,297 Depreciation expense ................................ 3,963 4,130 11,919 12,472 --------- --------- --------- --------- Operating income (loss) ............................. 1,614 3,714 (5,921) (773) Interest income ..................................... 1,787 1,071 4,951 2,282 Interest expense and other financing costs .......... 18 1,306 1,049 4,376 Other expense ....................................... 5 -- 12 -- --------- --------- --------- --------- Income (loss) before income taxes and accrued distributions on convertible preferred securities of subsidiary trust ................................. 3,378 3,479 (2,031) (2,867) Income tax (expense) benefit ........................ (1,248) (1,388) 751 1,150 Accrued distributions on convertible preferred securities of subsidiary trust, net of income tax benefit of $672 and $1,635, respectively ..... 1,150 -- 2,796 -- --------- --------- --------- --------- Net income (loss) ................................... $ 980 $ 2,091 $ (4,076) $ (1,717) --------- --------- --------- --------- Per Share Information Basic: Weighted-average shares outstanding .............. 21,013 18,505 20,478 16,694 Income (loss) per share .......................... $ 0.05 $ 0.11 $ (0.20) $ (0.10) Diluted: Weighted-average shares outstanding .............. 21,286 19,629 20,478 16,694 Income (loss) per share .......................... $ 0.05 $ 0.11 $ (0.20) $ (0.10)
The accompanying notes are an integral part of these condensed consolidated financial statements. 4 5 AMERICAN CLASSIC VOYAGES CO. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
For the Nine Months Ended September 30, --------------------------- 2000 1999 --------- --------- OPERATING ACTIVITIES: Net loss ....................................................... $ (4,076) $ (1,717) Depreciation expense ....................................... 11,923 12,472 Changes in working capital and other: Working capital changes and other ...................... (9,785) (4,450) Unearned passenger revenues ............................ 10,883 22,043 --------- --------- Net cash provided by operating activities .................. 8,945 28,348 --------- --------- INVESTING ACTIVITIES: Capital expenditures ........................................... (169,724) (45,108) Purchase of marketable securities .............................. (3,877) -- Increase in restricted investments ......................... (43,591) (1,000) --------- --------- Net cash used in investing activities ...................... (217,192) (46,108) --------- --------- FINANCING ACTIVITIES: Proceeds from borrowings ....................................... 91,300 2,000 Repayment of borrowings ........................................ (26,737) (5,262) Issuance of convertible preferred securities of subsidiary trust 100,000 -- Proceeds from issuance of common stock, net .................... 53,300 65,989 Deferred financing fees ........................................ (4,234) (2,224) --------- --------- Net cash provided by financing activities .................. 213,629 60,503 --------- --------- Increase in cash and cash equivalents ............................. 5,382 42,743 Cash and cash equivalents, beginning of period .................... 42,399 27,004 --------- --------- Cash and cash equivalents, end of period .......................... $ 47,781 $ 69,747 --------- --------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest (net of capitalized interest) ..................... $ 949 $ 4,676 Income taxes ............................................... 71 165
The accompanying notes are an integral part of these condensed consolidated financial statements. 5 6 AMERICAN CLASSIC VOYAGES CO. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2000 (Unaudited) 1. BASIS OF PRESENTATION These accompanying unaudited Condensed Consolidated Financial Statements ("Financial Statements") have been prepared pursuant to Securities and Exchange Commission ("SEC") rules and regulations and should be read in conjunction with the Consolidated Financial Statements and Notes thereto included on Form 10-K for the year ended December 31, 1999 (the "Form 10-K") for American Classic Voyages Co. ("AMCV") and its subsidiaries. These Financial Statements include the accounts of AMCV and its wholly owned subsidiaries, The Delta Queen Steamboat Co. ("DQSC"), Great Hawaiian Cruise Line, Inc. and Project America, Inc. (collectively with such subsidiaries, the "Company"). The following notes to the Financial Statements highlight significant changes to the notes included in the Form 10-K and such interim disclosures as required by the SEC. These Financial Statements reflect, in the opinion of management, all adjustments necessary for a fair presentation of the interim financial statements. All such adjustments are of a normal and recurring nature. Certain previously reported amounts have been reclassified to conform to the 2000 presentation. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. RESTRICTED CASH The $43.6 million increase in restricted cash through September 30, 2000 reflects 1) $30 million invested in a certificate of deposit which is being used as a collateral deposit for a letter of credit related to an October 2000 ship acquisition (see Notes 7, 8 and 11 for further information), and 2) $13.6 million of proceeds from an August 10, 2000 debt issuance which were placed into an escrow account (see Note 5 for further information). 3. SHORT-TERM INVESTMENTS Under the definitions provided in Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities, the Company has purchased securities which have been classified as available for sale and are, therefore, recorded at their fair values. The fair value for these securities approximates cost due to the short maturities of the instruments. 4. VESSELS UNDER CONSTRUCTION The vessels under construction balance includes payments to shipyards, design and engineering fees, construction management and oversights costs, various owner supplied items and capitalized interest. There are five vessels under construction or conversion: two coastal cruise vessels named the Cape May Light and Cape Cod Light; two newbuilds, as of yet unnamed, for the Hawaii cruise market; and the ms Patriot. The balance for the ms Patriot consists of design and engineering fees and various owner supplied items which have been purchased in advance of taking delivery of the ship. Capitalized interest on the vessels under construction amounted to $2.8 million and $0.3 for the three months ended September 30, 2000 and 1999, respectively. Capitalized interest amounted to $6.8 million and $0.5 for the nine months ended September 30, 2000 and 1999, respectively. The Columbia Queen riverboat was placed into service on May 27, 2000 and its capitalized cost of $43.4 million, including capitalized interest, was transferred from vessels under construction to property and equipment. The vessel is being depreciated over 30 years with a 15% salvage value. 6 7 5. NOTES PAYABLE On February 10, 2000 and August 10, 2000, the Company issued $25 million and $50 million, respectively, of notes guaranteed by the Maritime Administration ("MARAD"). These are the first issuances of debt under the $1.1 billion of financing guarantees from MARAD for the construction of the Hawaii cruise vessels. The notes, which relate to the first Hawaii cruise vessel, bear interest at LIBOR minus 0.05%. Interest is payable quarterly beginning April 28, 2000 for the $25 million note and October 31, 2000 for the $50 million note. The entire principal amount is due on January 31, 2001 for the $25 million note and July 31, 2001 for the $50 million note. The Company intends to refinance these notes on or before the maturity date. Upon issuance of the notes, the proceeds were deposited into an escrow account maintained by MARAD. From time to time, the Company requests that MARAD authorize the escrow agent to release funds to the Company to reimburse it for payments it has made in connection with the construction of the vessel. At September 30, 2000, all but $13.6 million of the proceeds of these first two note issuances had been released to the Company. 6. DEBT Long-term debt consisted of (in thousands):
September 30, December 31, 2000 1999 -------------- -------------- U.S. Government Guaranteed Ship Financing Note, American Queen Series .......... $11,961 $14,385 U.S. Government Guaranteed Ship Financing Bond, American Queen Series .......... 36,198 36,198 U.S. Government Guaranteed Ship Financing Note, Independence Series A .......... 7,265 7,926 U.S. Government Guaranteed Ship Financing Bond, Independence Series A .......... 13,215 13,215 U.S. Government Guaranteed Ship Financing Note, Independence Series B .......... 1,947 2,124 U.S. Government Guaranteed Ship Financing Bond, Independence Series B .......... 3,540 3,540 Chase credit facility (maximum availability of $30 million at September 30, 2000 and $70 million at December 31, 1999) ...................................... -- 7,175 ------- ------- 74,126 84,563 Less current portion ........................................................... 4,100 4,100 ------- ------- $70,026 $80,463 ======= =======
In the third quarter of 2000, DQSC, as borrower, amended its credit facility with The Chase Manhattan Bank, as agent, and several participant banks (the "Chase Facility"). The Company has a maximum of $30 million available to it in the form of revolving credit loans until the maturity date of the facility, which is September 13, 2001. Any amounts outstanding on the maturity date will be converted to a non-amortizing term loan which matures on September 13, 2002. Borrowings under the amended facility bear interest at a rate, at the option of the Company, equal to either (1) the greater of Chase's prime rate or certain alternative base rates plus a margin ranging from 0.50% to 0.75%, or (2) LIBOR plus a margin ranging from 1.50% to 1.75%. The Company is also required to pay an unused commitment fee at a rate of 0.50% per annum. The Chase Facility will be used for general corporate purposes. The amended facility is guaranteed by AMCV and secured by all of the assets of DQSC except the American Queen, Columbia Queen, Cape May Light and Cape Cod Light and has various limitations and restrictions on investments, additional indebtedness, the construction costs of the new vessels, and other capital expenditures. DQSC is required to comply with certain financial covenants, including maintenance of minimum interest coverage ratios and maximum leverage ratios. In 1999, the Company received a commitment from MARAD for up to $1.1 billion in financing guarantees. The commitment amount represents 87.5% of the total maximum potential cost of the initial two Hawaii vessels, including shipyard costs, contingencies, capitalized interest, and guarantee fees. See Notes 5 and 11 for further information. 7 8 On March 31, 2000, the Company received a commitment from MARAD for up to $78.3 million in financing guarantees. The commitment amount represents 87.5% of the total maximum potential cost of the initial two coastal vessels currently under construction, including shipyard costs, contingencies, capitalized interest, and guarantee fees. See Note 11 for further information. As of September 30, 2000, the Company complied with all covenants under its various debt agreements. 7. TRUST PREFERRED SECURITIES On February 22, 2000, the Company completed an offering of 2,000,000 Company-obligated mandatorily redeemable convertible preferred securities of a subsidiary trust ("trust preferred securities"). Each $50 security bears interest at 7% and is convertible at the holder's election into 1.6207 shares of common stock. All outstanding preferred securities are redeemable on February 15, 2015 or upon early redemption. The outstanding preferred securities may be redeemed for cash at the Company's option on or after February 19, 2003. The net proceeds to the Company, after underwriting fees and other costs, were approximately $96.3 million. A portion of the proceeds were used to fund the $30 million letter of credit facility related to the ms Nieuw Amsterdam purchase (see Note 8 for further information) and to pay down outstanding amounts on the Chase credit facility. The underwriters' overallotment option of 300,000 additional trust preferred securities was not exercised. 8. COMMITMENTS AND CONTINGENCIES SHIP PURCHASE In 1999, the Company finalized an agreement with Holland America Line ("HAL") to purchase the ms Nieuw Amsterdam for $114.5 million. The purchase agreement required the Company to make an earnest money deposit of $30 million by January 17, 2000. The Company arranged for an unsecured letter of credit facility with The Chase Manhattan Bank for up to $30 million and satisfied the deposit requirement by posting a letter of credit for $30 million. In 1999, persons and entities affiliated with Equity Group Investments, Inc. ("Equity"), the Company's largest stockholder, guaranteed the letter of credit facility for the Company with The Chase Manhattan Bank for up to $30 million. Under an agreement dated October 15, 1999, as consideration for issuance of the guarantee, the Company paid Equity a commitment fee of $500,000 in 1999 and agreed to pay Equity additional compensation in the form of stock appreciation units contingent, in part, upon appreciation in the Company's common stock above $21.90 per share. Equity's rights to receive this additional compensation vested, on a monthly basis, during the period that the guarantee remained outstanding. On February 22, 2000, the Company deposited $30 million into a cash collateral account with Chase from proceeds received by the Company from the Company's securities offering, as discussed in Note 7, thereby terminating the Equity guarantee. The Company has the right to retire Equity's stock appreciation units by paying a per unit price, which escalates each year, during the first three years after issuance. The price of the Company's right to retire Equity's stock appreciation units is $11 per share if the Company retires the units by October 15, 2000, $13 per share if the Company retires the units by October 15, 2001, and $15 per share if the Company retires the units by October 15, 2002. If the Company does not retire Equity's stock appreciation units during the first three years after issuance, Equity may exercise, during the fourth and fifth years after issuance, its right to receive payment based upon the market value of the Company's common stock at such time. On or before the first three anniversary dates of the issuance of Equity's stock appreciation units, the Company will evaluate whether to exercise its right to retire the units based on the Company's then current stock price, its liquidity and other factors. It is currently the Company's intent to retire Equity's stock appreciation units prior to October 15, 2002. HAL has agreed to provide financing for the remaining portion of the purchase price of the ms Nieuw Amsterdam totaling $84.5 million for 75 months at the prevailing prime rate. The HAL financing will be secured by a first preferred ship mortgage. See Note 11 for further information. 8 9 9. STOCKHOLDERS' EQUITY ACCUMULATED DEFICIT Changes in accumulated deficit for the nine months ended September 30, 2000 were (in thousands): Accumulated deficit at December 31, 1999 ............ $(19,573) Net loss ............................................ (4,076) -------- Accumulated deficit at September 30, 2000 ........... $(23,649) -------- COMMON STOCK OFFERING On February 22, 2000, the Company completed an offering of an additional 2,000,000 shares of common stock. The proceeds to the Company, after underwriting commissions and other costs, were $46.8 million and are being used for the construction of the second Hawaii vessel. The underwriters' overallotment option of 300,000 additional shares was not exercised. 10. EARNINGS PER SHARE Earnings per share have been computed as follows (in thousands, except per share data): For the Three Months Ended September 30, -------------------- 2000 1999 ------- ------- Basic: Net income ............................................ $ 980 $ 2,091 Weighted average shares outstanding ................... 21,013 18,505 ------- ------- Earnings per share .................................... $ 0.05 $ 0.11 ------- ------- Diluted: Net income ............................................ $ 980 $ 2,091 Weighted average shares outstanding ................... 21,013 18,505 Additional shares issuable under various stock plans... 273 1,124 ------- ------- Diluted weighted average shares outstanding ........... 21,286 19,629 ------- ------- Earnings per share .................................... $ 0.05 $ 0.11 ------- ------- As the Company reported losses for the nine months ended September 30, 2000 and 1999, diluted earnings per share was computed in the same manner as basic earnings per share. Conversion of trust preferred securities is not assumed, as the result would be antidilutive to the earnings and loss per share. 11. SUBSEQUENT EVENTS DEBT ISSUANCE On October 16, 2000, the Company issued $76.4 million of long-term bonds guaranteed by MARAD. The bonds bear interest at 7.25% per annum. The bonds were issued pursuant to a commitment received by the Company from MARAD for up to $78.3 million of financing guarantees for the construction of the Cape May Light and Cape Cod Light. The proceeds will be used to finance the construction of the vessels. See Note 6 for further information. On November 9, 2000, the Company issued $50 million of notes guaranteed by MARAD for construction of the first Hawaii cruise vessel. The notes bear interest at LIBOR minus 0.10% per annum. Interest is payable quarterly beginning January 31, 2001. The entire principal amount is due on October 31, 2001. The Company intends to refinance these notes on or before the maturity date. 9 10 SHIP ACQUISITION On October 18, 2000, the Company purchased the ms Nieuw Amsterdam from HAL for $114.5 million. Accordingly, the $30 million in restricted cash was released to HAL and a promissory note signed by the Company for the remaining portion of the purchase price. The promissory note bears interest at a floating rate equal to the prevailing prime rate, which is currently 9.50%. Principal paydowns of $5.1 million are scheduled for each March 31st and September 30th, beginning March 31, 2001, with a final payment of $23.7 million due on January 18, 2007. COMMITMENTS AND CONTINGENCIES After giving consideration to the Company's then current stock price and other factors, the Company decided not to exercise its right to retire Equity's vested stock appreciation units by October 15, 2000. Accordingly, the Company accrued an additional $2 per vested unit, or $0.6 million, in other financing costs on that date. 10 11 AMERICAN CLASSIC VOYAGES CO. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL American Classic Voyages Co. is a holding company which owns and controls The Delta Queen Steamboat Co., Great Hawaiian Cruise Line, Inc. and Project America, Inc. Through our various subsidiaries, we currently operate two cruise lines: Delta Queen, which owns and operates the American Queen, Mississippi Queen and Delta Queen steamboats; and American Hawaii, which owns and operates the Independence steamship. Delta Queen also owns and operates the Columbia Queen riverboat which began operating on May 27, 2000. We have formed a third cruise line, United States Lines, to operate the ms Patriot and the new Hawaii cruise vessels. Our revenues are composed of: (1) cruise fares; (2) onboard revenues, such as those from gift shops and shore excursions; and (3) trip cancellation insurance and pre- and post-cruise hotel packages. Additional revenue is also derived from the sale of airplane tickets to and from points of embarkation or disembarkation. Our cost for air tickets typically matches the revenue we generate from sales of airline tickets, so we recognize minimal profits from such sales. Our cost of operations are composed of: (1) passenger expenses, such as employee payroll and benefits and the cost of food and beverages; (2) vessel operating costs including lay-up and drydocking costs for our vessels; (3) insurance costs; (4) commissions paid to travel agents; and (5) air ticket and hotel costs. When we receive deposits from passengers for cruises, we establish a liability for unearned passenger revenue. We recognize these deposits as revenue on a pro-rata basis during the associated cruise. Our revenues and some of our expenses vary considerably when measured on a quarterly basis. This is due to the seasonality of our Delta Queen revenues, the timing of our layups and drydockings, and fluctuations in airfares. Fare revenue variations are reflected in our fare revenues per passenger night, which are commonly referred to as fare per diems, and our occupancy rates. Delta Queen's operations are seasonal. Historically, we have had greater passenger interest and higher yields in the spring and fall months of the year. The vessels typically undergo their annual layups in December or January. While American Hawaii has historically experienced greater passenger interest in the summer and fall months of the year, quarterly variations in its revenues are much smaller than those of Delta Queen. During the summer months, in particular, American Hawaii tends to have average occupancies in excess of 100% as the number of families sharing cabins with children increases significantly during this period. The following discusses the Company's consolidated results of operations and financial condition for the three months and nine months ended September 30, 2000 versus the comparable periods ended September 30, 1999. This section should be read in conjunction with the Management's Discussion and Analysis of Financial Condition and Results of Operations included in the Company's Form 10-K for the year ended December 31, 1999. 11 12 RESULTS OF OPERATIONS Operations data expressed as a percentage of total revenue for the periods indicated is as follows: Three Months Ended Nine Months Ended September 30, September 30, ------------------ ------------------ 2000 1999 2000 1999 ------ ------ ------ ------ Revenues 100% 100% 100% 100% Costs and Expenses: Operating expenses ........... 62 62 64 64 Selling and administrative.... 29 24 32 28 Depreciation ................. 6 7 7 8 Operating income (loss) ......... 3 6 (4) (1) Net income (loss) ............... 2 4 (3) (1) Selected operating statistics for the periods indicated are as follows:
Three Months Ended Nine Months Ended September 30, September 30, --------------------------- --------------------------- 2000 1999(5) 2000 1999(5) ----------- --------- --------- --------- Fare revenue per passenger night ........................... $ 239 $ 227 $ 233 $ 222 Total revenue per passenger night .......................... $ 328 $ 319 $ 324 $ 315 Weighted average operating days (1): DELTA QUEEN ........................................... 92 92 230 250 AMERICAN HAWAII ....................................... 92 92 256 273 Vessels capacity per day (berths) (2): DELTA QUEEN ........................................... 1,183 1,026 1,183 1,026 AMERICAN HAWAII ....................................... 863 867 863 867 Passenger nights (3) ....................................... 190,617 180,133 492,527 486,503 Physical occupancy percentage (berths) (4) ................ 102% 103% 100% 99%
- -------------------- (1) Weighted average operating days for each cruise line is determined by dividing capacity passenger nights for each cruise line by the cruise line's total vessel capacity per day. Delta Queen's weighted average operating days for the nine months ended September 30, 2000 are not comparable to the prior year due to the Columbia Queen introduction in May, 2000. Capacity passenger nights is determined by multiplying, for the respective period, the actual operating days of each vessel by each vessel's capacity per day. (2) Vessel capacity per day represents the number of passengers each cruise line can carry assuming double occupancy for cabins which accommodate two or more passengers. Some cabins on the Independence and the American Queen can accommodate three or four passengers. (3) A passenger night represents one passenger spending one night on a vessel; for example, one passenger taking a three-night cruise would generate three passenger nights. (4) Physical occupancy percentage is passenger nights divided by capacity passenger nights (5) For the three months ended September 30, 1999, passenger nights, fare and total revenue per passenger night and occupancy percentage were previously reported as 176,805, $231, $325 and 102% respectively. For the nine months ended September 30, 1999, passenger nights, fare and total revenue per passenger night and occupancy percentage were previously reported as 476,460, $227, $322 and 97%, respectively. 1999 amounts have been recalculated to conform to the current presentation, which now includes passengers sailing on complimentary tickets. The current presentation will be used in the future. 12 13 RESCISSION OF ACCOUNTING METHOD On November 2, 1999, we announced that we had rescinded our prior adoption of the American Institute of Certified Public Accountants Accounting Standards Executive Committee's Statement of Position ("SOP") No. 93-7, "Reporting on Advertising Costs," relating to the deferral of direct response advertising costs. The deferral method provided for in SOP 93-7 was adopted in 1999, and made effective as of January 1, 1999. Under SOP 93-7, we deferred recognition of direct response advertising costs related to direct response advertising efforts for future cruises. These deferred costs were recognized in the periods that the cruises promoted by the efforts were completed, and the related cruise revenue recognized. We rescinded our adoption of SOP 93-7 due to difficulties encountered in implementing the new method. In rescinding SOP 93-7, we returned to our prior method of recognizing expenses for direct response advertising costs when those costs are incurred. As a result of the rescission of SOP 93-7, we restated our earnings for the first quarter of 1999 to reflect a loss of $6.3 million, or ($0.44) per share, compared to our previously reported loss of $4.5 million, or ($0.32) per share. We also restated our earnings for the second quarter of 1999 to $2.5 million, or $0.14 per share compared to our previously reported earnings of $2.4 million or $0.13 per share. As previously disclosed, the Securities and Exchange Commission is conducting an informal investigation into our adopting and then rescinding the AICPA's Statement of Position No. 93-7 relating to the deferral of direct response advertising costs. While the SEC has not brought any formal proceedings against us, it is possible that the SEC's informal inquiry or a subsequent formal inquiry or proceeding could result in sanctions or orders against us. We cannot predict at this time whether any such sanctions would have a material impact. QUARTER ENDED SEPTEMBER 30, 2000 COMPARED TO QUARTER ENDED SEPTEMBER 30, 1999 Consolidated third quarter 2000 revenues increased $5.0 million to $62.5 million from $57.5 million for the third quarter of 1999. This represents a $4.6 million increase in fare revenues combined with a $0.4 million increase in other revenues. American Hawaii's fare revenues increased $1.2 million due to an 9% increase in fare per diems to $190 from $174. Delta Queen's fare revenues increased $3.4 million. Capacity increased by 16% due to the Columbia Queen introduction. Actual passenger nights increased by only 12% as occupancy on the other three steamboats decreased by 3%. Fare per diems increased 1% to $282 from $280. As a result, consolidated fare per diems for the third quarter of 2000 increased 5% to $239 from $227. The $0.4 million increase in other revenues was attributable to a increase in onboard revenues at American Hawaii. Consolidated cost of operations for the third quarter of 2000 increased $2.8 million to $38.6 million from $35.8 million for 1999. American Hawaii's operating costs increased $0.8 million reflecting an increase in air ticket costs and higher fuel costs. Delta Queen's operating costs increased $2.0 million as a result of the Columbia Queen introduction and higher fuel and maintenance costs. Offsetting this increase in operating costs were decreases in commission expense on the three original steamboats related to the occupancy decrease and a decrease in air and land expense. Consolidated gross profit increased $2.2 million in the third quarter of 2000 from 1999 as a result of the Columbia Queen introduction and higher fare per diems at American Hawaii. Consolidated selling, general and administrative expenses increased $4.5 million to $18.3 million for the third quarter of 2000 from $13.8 million in 1999. Marketing expenses for the Patriot and the Delta Queen Coastal vessels were $3.0 million in 2000. There were no marketing expenses in the comparable period in the prior year for these vessels. We also incurred $0.6 million of start-up costs during the quarter, primarily related to the Patriot. We incurred no start-up costs in connection with our new vessels in the third quarter of 1999. Marketing expenses for our vessels in operation were $0.8 million lower than in the prior year. This decrease was offset by a $1.7 million increase in general and administrative expenses primarily related to salary and benefits associated with new personnel hired within the past year and consulting costs incurred in connection with our capacity expansion efforts. The consolidated operating income for the third quarter of 2000 was $1.6 million as compared to $3.7 million for 1999. Interest income increased by $0.7 million as a result of higher average cash and marketable securities balances resulting from proceeds received by us upon the sale of additional common stock and other securities in February 2000 and on escrowed proceeds from our debt issuance. During the current quarter, we capitalized $2.8 million of interest expense related to our vessels under construction. We capitalized $0.3 million of interest expense in the prior year. We accrued for distributions on trust preferred securities of $1.2 million, net of tax, in the third quarter of 2000 for our trust preferred securities. 13 14 NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1999 Consolidated first nine months of 2000 revenues increased $6.5 million to $159.7 million from $153.2 million for the first nine months of 1999. This represents a $6.7 million increase in fare revenues combined with a $0.2 million decrease in other revenues. American Hawaii's fare revenues decreased $0.1 million due to a 7% decrease in capacity passenger nights as a result of the scheduled 18-day Independence drydock. This was offset by a 7% increase in fare per diems to $195 from $183. Delta Queen's fare revenues increased $6.8 million. Capacity passenger nights increased 6% due to the Columbia Queen introduction. Occupancy rates also increased 3% from 91% to 94% and fare per diems increased 1% to $268 from $265. As a result, consolidated fare per diems for the first nine months of 2000 increased 5% to $233 from $222. Consolidated cost of operations for the first nine months of 2000 increased $4.1 million to $102.3 million from $98.2 million for 1999. American Hawaii's operating costs decreased $0.9 million reflecting lower passenger, commission, air and hotel expenses associated with the capacity passenger night decrease offset by higher fuel prices. Delta Queen's operating costs increased $4.8 million reflecting the capacity and occupancy increase, and higher fuel and maintenance costs. Consolidated gross profit increased $2.5 million in the first nine months of 2000 from 1999 as a result of capacity and occupancy increase at Delta Queen and the increase in fare per diems at American Hawaii. Consolidated selling, general and administrative expenses increased $8.2 million to $51.4 million for the first nine months of 2000 from $43.3 million in 1999. Marketing expenses for the Delta Queen coastal vessels and Patriot were $8.3 million. There were no marketing expense in the comparable period of the prior year for these vessels. We also incurred $1.3 million of start-up costs in the first nine months of 2000, related to the Columbia Queen and the Patriot. We incurred no start-up costs in connection with our new vessels in the first nine months of 1999. Marketing expenses for our vessels in operation were $6.2 million lower than in the prior year. This decrease was offset by a $4.7 million increase in general and administrative expenses primarily related to salary and benefits associated with new personnel hired or contracted within the past year in connection with our capacity expansion efforts. The consolidated operating loss for the first nine months of 2000 was $5.9 million as compared to $0.8 million for 1999. Interest income increased by $2.7 million as a result of higher average cash and marketable securities balances resulting from proceeds received by us upon the sale of additional common stock and other securities in April 1999 and February 2000. Interest expense and other financing costs of $1.0 million in the first nine months of 2000 represent the accrual of $0.5 million payable to the guarantor of our letter of credit facility related to our agreed upon purchase of the ms Nieuw Amsterdam in October 2000. Additionally, we amortized $0.5 million of deferred financing fees related to this transaction. During the first nine months of 2000, we capitalized $6.8 million of interest expense related to our vessels under construction. We capitalized $0.5 million of interest expense in the prior year. We accrued for distributions on trust preferred securities of $2.8 million, net of tax, in the first nine months of 2000 for our trust preferred securities. LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION Operating Activities For the nine months ended September 30, 2000, cash provided by operations was $8.9 million compared to $28.3 million in 1999. Of the decrease, $11.2 million reflects a smaller seasonal increase in unearned passenger revenue, which increased $10.9 million from December 31, 1999 to September 30, 2000, as compared to an increase of $22.0 million from December 31, 1998 to September 30, 1999. The increase in unearned passenger revenues was greater in 1999 than in 2000 due to deposits received in 1999 for millennium cruises, differences in the timing of receipts of final payment from travel agents and lower advance reservations. The remainder of the decrease in cash provided by operations reflects 1) the greater net loss through the first nine months of 2000 as compared to 1999, and 2) the payment of costs during the first quarter of 2000 that had been accrued as of December 31, 1999 for layups, drydockings and employee bonuses. Such costs accrued at December 31, 1999 and paid during the first quarter of 2000 were approximately $5.0 million higher than similar costs accrued at December 31, 1998 and paid in the first quarter of 1999. 14 15 Investing Activities Our capital expenditures of $169.7 million included $163.7 million for vessels under construction which mainly consists of payments to shipyards. Other capital costs for the new shipbuilding programs include technical design, engineering, architectural fees and capitalized interest. For the Hawaii cruise ships under construction, we spent $93.4 million during the first nine months of 2000, while $70.3 million was spent on the Columbia Queen and Delta Queen coastal vessels projects. Other capital expenditures of $6.0 million were mainly related to layups for our existing Delta Queen vessels and the Independence drydock, all of which were completed in the first quarter of 2000. With proceeds from our common stock and preferred securities offerings, as described below, we purchased $3.9 million of short-term investments. Proceeds from these offerings were also used to fund a $30 million cash collateral account related to the October 2000 acquisition of the ms Nieuw Amsterdam. The remaining increase in restricted cash reflects a portion of proceeds placed into escrow from the issuance of $50 million in notes. Financing Activities Total proceeds from borrowings of $91.3 million includes the issuance of $75.0 million of one year notes related to the first Hawaii vessel under construction. The remaining amount represents borrowings under our credit facility. Our total repayments of borrowings of $26.7 million represents the paydown of all outstanding amounts on our credit facility of $23.5 million and scheduled principal payments of $3.2 million under the American Queen and Independence ship financing notes. We completed a public offering of an additional 2,000,000 shares of common stock. The net proceeds to us, after underwriting commissions and other costs, were approximately $46.8 million and are being used for construction of the second Hawaii vessel. Additional proceeds from the issuance of common stock were received from employee stock option exercises. We also completed a public offering of 2,000,000 American Classic Voyages Co. obligated mandatorily redeemable convertible preferred securities of a subsidiary trust (trust preferred securities). The net proceeds to us, after deferred financing fees, consisting of underwriting fees and other costs of $3.7 million, were $96.3 million. Capital Expenditures and Debt At September 30, 2000, we had approximately $95.5 million in cash, restricted cash, and short-term investments. These funds, along with future cash from operations and debt to be issued with the financing guarantees from the Maritime Administration, are expected to be our principal source of capital to fund our working capital and debt service requirements, ship construction costs and distributions on trust preferred securities. Additionally, we may also fund a portion of these cash requirements from borrowings under our revolving credit facility of which we had a maximum of $30 million available to us at September 30, 2000. For the Hawaii cruise market, we are constructing two new cruise ships over the next five years and will introduce an existing foreign-built cruise ship, which we acquired on October 18, 2000, into the Hawaii market prior to delivery of the new vessels. In 1999, we signed a definitive agreement with Ingalls Shipbuilding to construct two passenger ships, each containing approximately 1,900 passengers berths, with options to build up to four additional vessels. We expect the cost of the first ship, inclusive of shipyard contract price, shipyard incentives, design and engineering fees, construction management and oversight costs, various owner supplied items, and exclusive of capitalized interest, to be approximately $499 million, and the second ship to be approximately $490 million. The agreement provides that the first ship will be delivered in January 2003 and the second ship in January 2004. We will finance a significant portion of the construction cost of the Hawaii cruise ships through the Maritime Administration, which provides guarantees of private financing for new vessel construction projects conducted in U.S. shipyards. During the next twelve months, we expect to spend approximately $155 million on building the first new Hawaii cruise vessel and $85 million on building the second new Hawaii cruise vessel. On October 18, 2000, we acquired the ms Nieuw Amsterdam from Holland America Line for $114.5 million, consummating an agreement entered into in 1999. We paid Holland America Line $30.0 million cash and issued a $84.5 million note for the balance of the purchase price. The note matures in 75 months, bears interest on a floating basis at the prevailing prime rate and is secured by a first preferred ship mortgage. Upon taking delivery of the ship, we renamed it the ms Patriot. The vessel will undergo a refurbishment and conversion, which will cost approximately $19.0 to $21.0 million, prior to entering service in Hawaii in December 2000. 15 16 As part of the agreement to acquire the Nieuw Amsterdam, we were required to make an earnest money deposit of $30.0 million by January 17, 2000. We arranged for an unsecured letter of credit facility with The Chase Manhattan Bank for up to $30.0 million and satisfied the deposit requirement under the Holland America Line agreement by posting letters of credit for $30.0 million. In 1999, persons and entities affiliated with Equity Group Investments, Inc. ("Equity"), our largest stockholder, guaranteed the letter of credit facility for us with The Chase Manhattan Bank for up to $30 million. Under an agreement dated October 15, 1999, as consideration for issuance of the guarantee, we paid Equity a commitment fee of $500,000 in 1999 and agreed to pay Equity additional compensation in the form of stock appreciation units contingent, in part, upon appreciation in our common stock above $21.90 per share. Equity's rights to receive this additional compensation vested, on a monthly basis, during the period that the guarantee remained outstanding. On February 22, 2000, we deposited $30 million into a cash collateral account with Chase from proceeds received by us from our securities offering thereby terminating the Equity guarantee. We have the right to retire Equity's stock appreciation units by paying a per unit price, which escalates each year, during the first three years after issuance. The price of our right to retire Equity's stock appreciation units was $11 per share if we retired the units by October 15, 2000, $13 per share if we retire the units by October 15, 2001, and $15 per share if we retire the units by October 15, 2002. After giving consideration to our then current stock price, our liquidity and other factors, we decided not to exercise our right to retire Equity's vested stock appreciation units by October 15, 2000. Accordingly, we accrued for an additional $2 per vested unit, or $0.6 million, in other financing costs on that date. If we do not retire Equity's stock appreciation units during the first three years after issuance, Equity may exercise, during the fourth and fifth years after issuance, its right to receive payment based upon the market value of our common stock at such time. On or before the next two anniversary dates of the issuance of Equity's stock appreciation units, we will evaluate whether to exercise our right to retire the units based on our then current stock price and other factors. It is currently our intent to retire Equity's stock appreciation units prior to October 15, 2002. We entered into a construction contract in 1999 with Atlantic Marine, Inc. of Jacksonville, Florida to construct the first two coastal cruise vessels, named the Cape May Light and Cape Cod Light, for our Delta Queen line. Under the construction contract, the price of the vessels will be $30 million each. We expect each vessel to have a total construction cost, including design and engineering fees, construction management and oversight costs, various owner supplied items, and exclusive of capitalized interest, to be approximately $40 million. The contract provides that the delivery date will be March 2001 for the Cape May Light and June 2001 for the Cape Cod Light. During the next twelve months, we expect to spend up to $16 million on building the Cape May Light and up to $20 million on the Cape Cod Light. This will be funded from cash on hand and debt guaranteed by the Maritime Administration. On October 16, 2000, we issued $76.4 million of debt guaranteed by the Maritime Administration. As of September 30, 2000, we complied with all covenants under our various debt agreements. We believe we will have adequate access to capital resources, both internally and externally, to meet our current short-term and long-term capital commitments. Such resources may include cash on hand, new borrowings from lenders, and the ability to secure additional financing through the capital markets. We continually evaluate opportunities to increase capacity at both Delta Queen and in Hawaii and to strategically grow our business. Although we believe that we have obtained sufficient equity and debt financing from the capital markets to satisfy our financial obligations relating to construction of the new vessels, and to acquire, renovate and introduce the ms Patriot into service, we cannot assure you that we will be able to obtain additional financing, if necessary, at commercially acceptable levels to finance these projects and, if we so choose, to pursue strategic business opportunities. If we fail to obtain such financing, we may have to postpone or abandon some of our plans. OTHER MATTERS Relocation On September 8, 2000, we announced that we will relocate our Chicago corporate office and most of our New Orleans operations to South Florida. We will incur relocation and severance costs in connection with the move. The employee relocation costs, to be expensed as incurred over approximately the next 18 months, are expected to range from $0.5 million to $1.0 million. Other relocation costs for the move of our equipment and furniture will be expensed as incurred and will cost up to $0.5 million. 16 17 We have offered to relocate most employees to the new location but have not yet determined which employees are likely to move. As we determine which employees or groups of employees will not relocate, we will charge to expense severance costs for employees. In addition, beginning in January 2001, we will pay certain employees a retention bonus. The severance and retention costs to be accrued over approximately the next six to twelve months are not expected to exceed $4.0 million. We have not yet determined whether we will fully vacate our Chicago and New Orleans facilities, or whether we will continue to use these facilities for some period of time. If we choose to vacate or reduce the size of one or both of our offices, we may incur costs to terminate a lease or we may accelerate depreciation expense due to revision of the useful lives of our existing leasehold improvements. At this time, we cannot yet estimate any potential lease termination expenses or accelerated depreciation. In connection with the relocation, we will become eligible for incentives of up to $3.8 million from state and local municipalities, such as tax refunds and direct cash incentives upon occupancy. These incentives will be recognized in the future upon occupancy of the new headquarters facility and as taxes eligible for refund are incurred. Stock Repurchase Plan In June 1997, our board of directors approved a stock repurchase plan. The plan authorizes us to repurchase up to one million shares of our stock. These shares may be purchased from time to time in the public market or through privately negotiated transactions. As of December 31, 1998, we had repurchased 51,000 shares at an average purchase price of $14.84 per share under the plan. We have not purchased any additional shares since then and currently have no intention to repurchase any additional shares of common stock. Factors Concerning Forward-Looking Statements Certain statements in "Management's Discussion and Analysis of Financial Condition and Results of Operations" constitute "forward-looking statements" which we believe are within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions. Such factors include, among others, the following: the SEC is conducting an informal inquiry of our accounting practices with respect to direct response advertising costs; construction delays and deviations from specifications for the new vessels may adversely affect expansion plans and future financial performance; failure to obtain significant amounts of capital to build, purchase and renovate vessels, may adversely affect our expansion plans and future operating results; increased leverage may adversely affect our financial performance and cash flow; inability to maintain adequate managerial resources during our expansion may adversely affect our business; inability to manage our financial resources during our expansion may adversely affect our financial performance; if demand for our new cruise products fails to develop as expected or competition increases, our business may be adversely affected; increased capacity in Hawaii may reduce occupancy on the Independence, adversely affecting revenues; loss of exclusive rights of the Pilot Project Statute may adversely affect our revenue growth in Hawaii; modification of existing governmental regulations may adversely affect our business; increased fuel prices may adversely affect our financial performance; increased competition in the Hawaii cruise market and from other vacation alternatives may adversely impact our financial performance; increases in cruise industry capacity may adversely affect our revenues; sensitivity of the vacation and leisure industry to general economic and business conditions; failure to complete drydocking on schedule or within budget may adversely affect our revenues; weather factors can adversely affect our operations and our financial performance; the loss of vessels from service would adversely impact our business; anti-takeover and transferability limitations of U.S. ownership requirements may adversely affect the liquidity of our common stock; our controlling stockholder may take actions that adversely affect our business; sales of our controlling stockholder's shares could have an adverse effect on our common stock price or ability to raise capital; and our controlling stockholder may have conflicts of interest with competing interests. ITEM 3. Quantitative and Qualitative Disclosures About Market Risk For a discussion of certain market risks related to us, see Part I Item 7A "Quantitative and Qualitative Disclosures About Market Risks" in our Annual Report on Form 10-K for the fiscal year ended December 31, 1999. There have been no significant developments with respect to exposure to market risk. 17 18 AMERICAN CLASSIC VOYAGES CO. PART II - OTHER INFORMATION ITEM 1. Legal Proceedings There are no other material legal proceedings, to which the Company is a party or of which any of its property is the subject, other than ordinary routine litigation and claims incidental to the business. The Company believes it maintains adequate insurance coverage and reserves for such claims. ITEM 6. Exhibits and Reports on Form 8-K a) Exhibits: 4.(ii)(a)(8) Amended and Restated Credit Agreement dated as of September 14, 2000 among The Delta Queen Steamboat Co. ("Borrower"), the financial institutions listed on the signature pages as Lenders and each other financial institution which from time to time becomes a party thereto ("Lenders"), The Chase Manhattan Bank, as Issuing Bank and as Administrative Agent for the Lenders thereunder (in such latter capacity, the "Agent"), and Hibernia National Bank, as Documentation Agent. 4.(ii)(a)(9) Guaranty dated September 14, 2000 executed by American Classic Voyages Co. in favor of the Agent. 4.(ii)(a)(10) Amended and Restated Contribution Agreement dated September 14, 2000 executed by the Parent Guarantor and each Borrower Subsidiary that is a party to a Subsidiary Guaranty. 4.(ii)(a)(11) First Amendment to Trust Indenture dated September 14, 2000 among the Agent, the Lenders, Great River Cruise Line, L.L.C. and The Chase Manhattan Bank, as Trustee covering the Delta Queen (a substantially identical First Amendment to Trust Indenture covering the Mississippi Queen and Columbia Queen has also been executed). 4.(ii)(a)(12) First Amendment to Preferred Ship Mortgage dated September 14, 2000 executed by Great River Cruise Line, L.L.C. for the benefit of The Chase Manhattan Bank, as Trustee covering the Delta Queen (a substantially identical First Amendment to Preferred Ship Mortgage covering the Mississippi Queen and Columbia Queen has also been executed). 4.(ii)(d)(9) Secretary's Determination, dated August 10, 2000, as it relates to $50,000,000 of United States Government Guaranteed Ship Financing Notes. 4.(ii)(d)(10) $50,000,000 Note Purchase Agreement dated August 10, 2000 as it relates to United States Government Guaranteed Ship Financing Notes -- Variable Rate Notes due July 31, 2001 signed by Project America, Inc. and accepted by Chase Securities, Inc. 4.(ii)(d)(11) $50,000,000 Promissory Note to United States of America dated August 10, 2000 by Project America Ship I, Inc. 4.(ii)(e)(1) Commitment to Guarantee Obligations dated October 16, 2000 by The United States of America, represented by the Secretary of Transportation, acting by and through the Maritime Administrator, and accepted by Cape May Light, L.L.C., the Shipowner. 18 19 4.(ii)(e)(2) Bond Purchase Agreement dated October 16, 2000 as it relates to United States Government Guaranteed Ship Financing Bonds, 2000 Series - 7.25% Sinking Fund Bonds due April 15, 2027 in the aggregate principal amount of $37,900,000 signed by Cape May Light, L.L.C. and accepted by Chase Securities Inc. 4.(ii)(e)(3) $37,900,000 U.S. Government Guaranteed Ship Financing Bonds, 2000 Series, 7.25% Sinking Fund Bonds due April 15, 2027, issued by Cape May Light, L.L.C. 4.(ii)(e)(4) Trust Indenture Relating to United States Government Guaranteed Ship Financing Obligations dated October 16, 2000 between Cape May Light, L.L.C., as Shipowner, and The Bank of New York, as Indenture Trustee. 4.(ii)(e)(5) Authorization Agreement dated October 16, 2000 between The United States of America, represented by the Secretary of Transportation, acting by and through the Maritime Administrator, and The Bank of New York, as the Indenture Trustee under the Trust Indenture dated October 16, 2000 between the Indenture Trustee and Cape May Light, L.L.C., the Shipowner. 4.(ii)(e)(6) Security Agreement Relating to United States Government Guaranteed Ship Financing Obligations dated October 16, 2000 between Cape May Light, L.L.C., as Shipowner, and The United States of America. 4.(ii)(e)(7) Title XI Reserve Fund and Financial Agreement dated October 16, 2000 between Cape May Light, L.L.C. and The United States of America, represented by the Secretary of Transportation, acting by and through the Maritime Administrator. 4.(ii)(e)(8) Guaranty Agreement in Favor of the United States of America dated October 16, 2000 by and between Cape May Light, L.L.C., as Guarantor, and The United States of America, represented by the Secretary of Transportation, acting by and through the Maritime Administrator. 4.(ii)(f)(1) Commitment to Guarantee Obligations dated October 16, 2000 by The United States of America, represented by the Secretary of Transportation, acting by and through the Maritime Administrator, and accepted by Cape Cod Light, L.L.C., the Shipowner. 4.(ii)(f)(2) Bond Purchase Agreement dated October 16, 2000 as it relates to United States Government Guaranteed Ship Financing Bonds, 2000 Series - 7.25% Sinking Fund Bonds due April 15, 2027 in the aggregate principal amount of $38,500,000 signed by Cape Cod Light, L.L.C. and accepted by Chase Securities Inc. 4.(ii)(f)(3) $38,500,000 U.S. Government Guaranteed Ship Financing Bonds, 2000 Series, 7.25% Sinking Fund Bonds due April 15, 2027, issued by Cape Cod Light, L.L.C. 4.(ii)(f)(4) Trust Indenture Relating to United States Government Guaranteed Ship Financing Obligations dated October 16, 2000 between Cape Cod Light, L.L.C., as Shipowner, and The Bank of New York, as Indenture Trustee. 4.(ii)(f)(5) Authorization Agreement dated October 16, 2000 between The United States of America, represented by the Secretary of Transportation, acting by and through the Maritime Administrator, and The Bank of New York, as the Indenture Trustee under the Trust Indenture dated October 16, 2000 between the Indenture Trustee and Cape Cod Light, L.L.C., the Shipowner. 4.(ii)(f)(6) Security Agreement Relating to United States Government Guaranteed Ship Financing Obligations dated October 16, 2000 between Cape Cod Light, L.L.C., as Shipowner, and The United States of America. 4.(ii)(f)(7) Title XI Reserve Fund and Financial Agreement dated October 16, 2000 between Cape Cod Light, L.L.C. and The United States of America, represented by the Secretary of Transportation, acting by and through the Maritime Administrator. 19 20 4.(ii)(f)(8) Guaranty Agreement in Favor of the United States of America dated October 16, 2000 by and between Cape Cod Light, L.L.C., as Guarantor, and The United States of America, represented by the Secretary of Transportation, acting by and through the Maritime Administrator. 4.(ii)(g)(1) Preferred Ship Mortgage dated October 18, 2000 executed by Oceanic Ship Co. in favor of Hal Antillen N.V. (in connection with the purchase of the ms Patriot). 4.(ii)(g)(2) $84,500,000 Promissory Note dated October 18, 2000 to Hal Antillen N.V. by Oceanic Ship Co. (in connection with the purchase of the ms Patriot). 10.(a)(iv)(10) Amendment "1" to May 1, 1999 Construction Contract between Coastal Queen Holdings, L.L.C. and Atlantic Marine, Inc. dated June 13, 2000. 10.(a)(iv)(11) Assignment and Assumption of Contract dated September 25, 2000 by and between Delta Queen Coastal Voyages, L.L.C. (f/k/a Coastal Queen Holdings, L.L.C.), as Assignor, and Cape May Light, L.L.C. and Cape Cod Light, L.L.C., as Assignees. 10.(a)(iv)(12) Amendment No. 2 to Construction Contract for Coastal Queen Class Vessel dated October 16, 2000 by and between Atlantic Marine, Inc. and Cape May Light, L.L.C. and Cape Code Light, L.L.C. 27. Financial data schedule. b) Reports on Form 8-K: None 20 21 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMERICAN CLASSIC VOYAGES CO. By: /s/ Philip C. Calian --------------------------------------------- Philip C. Calian Chief Executive Officer By: /s/ Randall L. Talcott --------------------------------------------- Randall L. Talcott Vice President-Finance and Treasurer (Principal Financial and Accounting Officer) Dated: November 14, 2000 21 EX-4.(II)(A)(8) 2 c58427ex4-iia8.txt AMENDED AND RESTATED CREDIT AGREEMENT 1 EXHIBIT 4(ii)(a)(8) EXECUTION COPY AMENDED AND RESTATED CREDIT AGREEMENT Dated as of September 14, 2000 among THE DELTA QUEEN STEAMBOAT CO., as Borrower, THE FINANCIAL INSTITUTIONS FROM TIME TO TIME PARTY HERETO, as Lenders, THE CHASE MANHATTAN BANK, as Issuing Bank and as Administrative Agent, and HIBERNIA NATIONAL BANK, as Documentation Agent 2 TABLE OF CONTENTS ARTICLE I DEFINITIONS..........................................................1 1.01. Certain Defined Terms..............................................1 1.02. Computation of Time Periods.......................................23 1.03. Accounting Terms..................................................23 1.04. Other Definitional Provisions.....................................23 ARTICLE II AMOUNTS AND TERMS OF REVOLVING CREDIT FACILITY......................24 2.01. The Revolving Loans...............................................24 2.02. Loan Facility Mechanics...........................................25 2.03. Interest on the Loans.............................................27 2.04. Letters of Credit.................................................29 2.05. Fees..............................................................33 2.06. Prepayments.......................................................34 2.07. Payments..........................................................35 2.08. Interest Periods..................................................38 2.09. Special Provisions Governing Eurodollar Rate Loans................38 2.10. Taxes.............................................................41 2.11. Capital Adequacy; Increased Costs.................................44 2.12. Use of Proceeds of the Loans and the Letters of Credit............46 2.13. Authorized Officers of Borrower...................................46 2.14. Replacement of Certain Lenders....................................46 ARTICLE III CONDITIONS TO LOANS.................................................47 3.01. Conditions Precedent to Effectiveness.............................47 3.02. Conditions Precedent to all Loans.................................48 ARTICLE IV REPRESENTATIONS AND WARRANTIES......................................49 4.01. Representations and Warranties on the Initial Funding Date........49 4.02. Subsequent Funding Representations and Warranties.................57 ARTICLE V REPORTING COVENANTS.................................................57 5.01. Financial Statements..............................................57
i 3 5.02. Environmental Notices.............................................62 ARTICLE VI AFFIRMATIVE COVENANTS...............................................63 6.01. Corporate Existence, Etc..........................................63 6.02. Corporate Powers, Etc.............................................63 6.03. Compliance with Laws..............................................63 6.04. Payment of Taxes and Claims.......................................63 6.05. Maintenance of Properties; Insurance..............................63 6.06. Inspection of Property; Books and Records; Discussions............64 6.07. Labor Matters.....................................................64 6.08. Maintenance of Permits............................................64 6.09. Employee Benefit Matters..........................................64 6.10. Formation of Subsidiaries.........................................65 6.11. Acquisition or Construction of New Vessels........................66 6.12. Hedging Contracts.................................................66 ARTICLE VII NEGATIVE COVENANTS..................................................66 ARTICLE VIII FINANCIAL COVENANTS.................................................72 8.01. Maximum Bank Indebtedness Leverage Ratio..........................72 8.02. Minimum Bank Interest Coverage Ratio..............................72 8.03. Capital Expenditures..............................................72 ARTICLE IX EVENTS OF DEFAULT; RIGHTS AND REMEDIES..............................73 9.01. Events of Default.................................................73 9.02. Rights and Remedies...............................................75 ARTICLE X THE AGENT...........................................................76 10.01. Appointment.......................................................76 10.02. Nature of Duties..................................................77 10.03. Rights, Exculpation, Etc..........................................77 10.04. Reliance..........................................................78 10.05. Indemnification...................................................78 10.06. The Agent Individually............................................79 10.07. Successor Agent; Resignation of Agent.............................79 10.08. Collateral Matters................................................79
ii 4 10.09. Relations Among Lenders...........................................82 ARTICLE XI MISCELLANEOUS.......................................................82 11.01. Survival of Warranties and Agreements.............................82 11.02. Assignments and Participations....................................82 11.03. Expenses..........................................................86 11.04. Indemnification and Waiver........................................87 11.05. Limitation of Liability...........................................87 11.06. Ratable Sharing...................................................88 11.07. Amendments and Waivers............................................88 11.08. Notices...........................................................89 11.09. Failure or Indulgence Not Waiver; Remedies Cumulative.............89 11.10. Termination.......................................................90 11.11. Marshalling; Recourse to Security; Payments Set Aside.............90 11.12. Severability......................................................90 11.13. Headings..........................................................90 11.14. GOVERNING LAW.....................................................90 11.15. Successors and Assigns; Subsequent Holders of Notes...............91 11.16. CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL...........91 11.17. Counterparts; Effectiveness; Inconsistencies......................93 11.18. Performance of Obligations........................................93 11.19. ENTIRE AGREEMENT..................................................94 11.20. Confidentiality...................................................94 11.21. Exiting Lenders...................................................94 11.22. Effect Upon Loan Documents........................................95
iii 5 EXHIBITS Exhibit 1 -- Assignment and Acceptance (ss.ss.1.01, 11.02(d)) Exhibit 2 -- Compliance Certificate (ss.ss.1.01, 5.01(e)) Exhibit 3 -- Notice of Borrowing (ss.ss.1.01, 2.02) Exhibit 4 -- Notice of Conversion/Continuation (ss.ss.1.01, 2.03(c)) Exhibit 5 -- Form of Revolving Loan Note (ss.2.02) Exhibit 6 -- List of Closing Documents (ss.3.01(a)) Exhibit 7 -- Form of Loss Payable Endorsement (ss.6.05) iv 6 SCHEDULES Schedule A -- List of Lenders, Domestic and Eurodollar Lending Offices and Commitments (ss.ss.1.01, 11.02(c), 11.10) Schedule 1.01-A -- Existing Indebtedness (ss.1.01) Schedule 1.01-B -- Permitted Existing Liens (ss.1.01) Schedule 1.01-C -- Vessels (ss. 1.01) Schedule 4.01(c) -- Subsidiaries (ss.ss.4.01(c), 6.01) Schedule 4.01(d) -- Violation of Requirements of Law (ss.4.01(d)) Schedule 4.01(i) -- Capitalization (ss.4.01(i)) Schedule 4.01(j) -- Pending or Threatened Litigation (ss.4.01(j)) Schedule 4.01(l) -- Tax Assessments (ss.4.01(l)) Schedule 4.01(t) -- ERISA Matters (ss.4.01(t)) Schedule 4.01(w) -- Joint Ventures (ss.4.01(w)) Schedule 4.01(x) -- Labor Matters (ss.4.01(x)) Schedule 6.05 -- Insurance (ss.6.05) Schedule 7.02(a) -- Intercompany Leases (ss.7.02(a)) v 7 AMENDED AND RESTATED CREDIT AGREEMENT This Amended and Restated Credit Agreement dated as of September 14, 2000 (as amended, supplemented, modified or restated from time to time, this "Agreement") is entered into among THE DELTA QUEEN STEAMBOAT CO., a Delaware corporation ("Borrower"), THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF AS LENDERS and each other financial institution which from time to time becomes a party hereto in accordance with Section 11.02(a) (together with their respective successors and assigns, individually, a "Lender" and, collectively, the "Lenders"), THE CHASE MANHATTAN BANK, a New York banking corporation, in its separate capacities as Issuing Bank and as Administrative Agent for the Lenders hereunder (in such latter capacity, the "Agent"), and HIBERNIA NATIONAL BANK, as Documentation Agent. RECITAL The Borrower entered into a Credit Agreement dated as of February 25, 1999, as amended prior to the date hereof, with certain lenders, The Chase Manhattan Bank, as Administrative Agent, and Hibernia National Bank, as Documentation Agent (as previously amended, the "Original Credit Agreement"). The Borrower, the Lenders and the Agent have entered into this Agreement to amend in certain respects, and to restate in its entirety, the Original Credit Agreement. Accordingly, the parties hereto agree as follows: ARTICLE I Definitions 1.01. Certain Defined Terms. The following terms used in this Agreement shall have the following meanings (such meanings to be applicable, except to the extent otherwise indicated in a definition of a particular term, both to the singular and the plural forms of the terms defined): "Accommodation Obligation," as applied to any Person, shall mean any contractual obligation, contingent or otherwise, of that Person with respect to any Indebtedness or other obligation or liability of another, including, without limitation, any such Indebtedness, obligation or liability directly or indirectly guaranteed, endorsed (otherwise than for collection or deposit in the ordinary course of business), co-made or discounted or sold with recourse by that Person, or in respect of which that Person is otherwise directly or indirectly liable, including Contractual Obligations (contingent or otherwise) arising through any agreement to purchase, repurchase, or otherwise acquire such Indebtedness, obligation or liability or any security therefor, or to provide funds for the payment or discharge thereof (whether in the form of loans, 8 advances, stock purchases, capital contributions or otherwise), or to maintain solvency, assets, level of income, or other financial condition, or to make payment other than for value received. For purposes of interpreting any provision of this Agreement which refers to the Dollar amount of Accommodation Obligations of any Person, such provision shall be deemed to mean the maximum amount of such Accommodation Obligations or, in the case of an Accommodation Obligation to maintain solvency, assets, level of income or other financial condition, the amount of Indebtedness to which such Accommodation Obligation relates, or if less, the stated maximum, if any, in the documents evidencing such Accommodation Obligation. "Adjusted EBITDA" for any period shall mean (a) EBITDA for the Consolidated Borrower Group minus (b) the sum of (i) MARAD Debt Service, (ii) EBITDA for the Consolidated DQCV Group and (iii) Excess Preopening/Premarketing Expenses, in each case determined for or incurred in such period. "Adjusted LIBO Rate" means, with respect to any Borrowing of Eurodollar Rate Loans for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate. "Affiliate," as applied to any Person, shall mean any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting Securities or by contract or otherwise. "Agent" shall have the meaning ascribed to such term in the preamble hereto and shall include any successor Agent appointed pursuant to Section 10.07. "Agreement" shall have the meaning ascribed to such term in the preamble hereto. "Agreement Accounting Principles" shall mean GAAP as of the date of this Agreement together with any changes in GAAP after the date hereof which are not "Material Accounting Changes" (as defined below). If any changes in GAAP are hereafter required or permitted and are adopted by the Borrower with the agreement of its independent certified public accountants and such changes result in a material change in the calculation of any of the financial covenants, restrictions or standards herein or in the related definitions or terms used therein ("Material Accounting Changes"), the parties hereto agree to enter into negotiations, in good faith, in order to amend such provisions in a credit neutral manner so as to reflect equitably such changes with the desired result that the criteria for evaluating the Borrower's financial condition shall be the same after such changes as if such changes had not been made; provided, however, that no Material Accounting Change shall be given effect in such calculations until such provisions are amended, in a manner reasonably satisfactory to the Requisite Lenders. In the 2 9 event such amendment is entered into, all references in this Agreement to Agreement Accounting Principles shall mean GAAP as of the date of such amendment together with any changes in GAAP after the date of such amendment which are not Material Accounting Changes. "Agreement Obligations" shall mean all Obligations other than with respect to Eligible Hedging Contracts. "Alternate Base Rate" shall mean, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate, respectively. "American Queen" shall mean the vessel of the same name identified on Schedule 1.01-C. "Applicable Base Rate Margin" as at any date of determination, shall be the rate per annum then applicable to Base Rate Loans determined in accordance with the provisions of Section 2.03(e). "Applicable Eurodollar Rate Margin" as at any date of determination, shall be the rate per annum then applicable to Eurodollar Rate Loans determined in accordance with the provisions of Section 2.03(e). "Applicable Lending Office" shall mean, with respect to each Lender, such Lender's Domestic Lending Office, in the case of a Base Rate Loan and such Lender's Eurodollar Lending Office, in the case of a Eurodollar Rate Loan. "Applicable Margin" shall mean the Applicable Base Rate Margin and/or the Applicable Eurodollar Rate Margin, as the case may be. "Assessment Rate" shall mean, for any day, the annual assessment rate in effect on such day that is payable by a member of the Bank Insurance Fund classified as "well-capitalized" and within supervisory subgroup "B" (or a comparable successor risk classification) within the meaning of 12 C.F.R. Part 327 (or any successor provision) to the FDIC for insurance by the FDIC of time deposits made in dollars at the offices of such member in the United States; provided that if, as a result of any change in any law, rule or regulation, it is no longer possible to determine the Assessment Rate as aforesaid, then the Assessment Rate shall be such annual rate as shall be determined by the Agent to be representative of the cost of such insurance to the Lenders. "Assignment and Acceptance" shall mean an Assignment and Acceptance in the form of Exhibit 1 (with blanks appropriately filled in) delivered to the Agent in connection with an assignment of a Lender's interest under this Agreement pursuant to Section 11.02. 3 10 "Bank Indebtedness Leverage Ratio" shall mean, for any fiscal quarter, the ratio of (a) the total Revolving Credit Exposures on the last day of such fiscal quarter to (b) Adjusted EBITDA, in each case for the four fiscal quarter period ending on the last day of such fiscal quarter, determined in accordance with Agreement Accounting Principles consistently applied. "Bank Interest Coverage Ratio" shall mean, for any period, the ratio of (a) Adjusted EBITDA for such period to (b) Bank Interest Expense for such period, determined in accordance with Agreement Accounting Principles consistently applied. "Bank Interest Expense" shall mean, for any period, interest expense of the Consolidated Borrower Group in connection with the incurrence of the Obligations for such period. "Base CD Rate" shall mean the sum of (a) the Three-Month Secondary CD Rate multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate. "Base Rate Loans" shall mean all Loans outstanding which bear interest at a rate determined by reference to the Alternate Base Rate, as provided in Section 2.03(a)(i). "Benefit Plan" shall mean a defined benefit plan as defined in Section 3(35) of ERISA (other than a Multiemployer Plan) in respect of which Borrower or any ERISA Affiliate is, or within the immediately preceding six (6) years was, an "employer" as defined in Section 3(5) of ERISA. "Borrower" shall have the meaning ascribed to such term in the preamble hereto. "Borrower Subsidiaries" shall mean any Subsidiary of the Borrower. "Borrowing" shall mean a borrowing consisting of Loans of the same Type, having the same Interest Period, in the case of Eurodollar Rate Loans, and made on the same day by the Lenders. "Business Day" shall mean (i) for all purposes other than as described by clause (ii) below, any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of New York, or is a day on which banking institutions located in New York are required or authorized by law or other governmental action to close and (ii) with respect to all notices, determinations, fundings and payments in connection with Eurodollar Rate Loans, any day which is a Business Day described in clause (i) and which is also a day for trading in dollar deposits by and between banks in the London interbank Eurodollar market. "Cape Cod Light" shall mean the vessel named cv Cape Cod Light identified on Schedule 1.01-C. "Cape May Light" shall mean the vessel named cv Cape May Light identified on Schedule 1.01-C. 4 11 "Capital Lease," as applied to any Person, shall mean any lease of any property (whether real, personal, or mixed) by that Person as lessee which, in conformity with Agreement Accounting Principles, is or should be accounted for as a capital lease on the balance sheet of that Person. "Carryover Amount" shall have the meaning ascribed to such term in Section 8.04. "Cash Equivalents" shall mean (i) marketable direct obligations issued or unconditionally guaranteed by the United States Government or issued by an agency thereof and backed by the full faith and credit of the United States of America, in each case maturing within one year after the date of acquisition thereof; (ii) marketable direct obligations issued by any state or municipality of the United States of America maturing or puttable within six months after the date of acquisition thereof and, at the time of acquisition, having one of the two highest short-term ratings obtainable from either Standard & Poor's Rating Services ("S&P") or Moody's Investors Service, Inc. ("Moody's") (or, if at any time neither S&P nor Moody's shall be rating such obligations, then from such other nationally recognized rating services acceptable to the Agent); and (iii) commercial paper (other than commercial paper issued by Parent, Borrower or any of their respective Subsidiaries or any of their Affiliates), domestic and Eurodollar certificates of deposit, time deposits or bankers' acceptances, in any such case maturing no more than 180 days after the date of acquisition thereof and, at the time of the acquisition thereof, the issuer's rating on its commercial paper is at least A-1 or P-1 from either S&P or Moody's (or, if at any time neither S&P nor Moody's shall be rating such obligations, then the highest rating from other nationally recognized rating services acceptable to the Agent). "Change of Control" shall mean that either (a) the Zell Group shall cease to own, directly or indirectly, more than 10% of the combined voting power of the Parent's outstanding securities ordinarily having the right to vote at elections of directors (excluding any such securities which Ann Lurie has the right to vote, or to direct or control the right to vote, at elections of directors without the consent or approval of any other person), (b) Sam Zell shall cease to be a director of the Parent or (c) the Parent shall cease to directly own 100% of the Borrower's outstanding securities ordinarily having the right to vote at elections of directors. "Collateral" shall mean all property and interests in property now owned or hereafter acquired by the Borrower or any of its Subsidiaries (other than the Consolidated DQCV Group, GAQSC and, upon the consummation of the MARAD Financing for the Columbia Queen, GPCL) in or upon which a security interest, pledge, lien or mortgage is intended to be granted, or of which a collateral assignment is intended to be made, under the Collateral Documents. "Collateral Documents" shall mean the Security Agreement, the Subsidiary Security Agreements, the Subsidiary Guaranties, the Parent Guaranty, the Intellectual Property Agreements, the Pledge Agreements, the Ship Mortgages, and all other security agreements, mortgages, deeds of trust, collateral assignments, financing statements and other agreements, 5 12 conveyances or documents at any time delivered to the Agent by the Borrower or any Borrower Subsidiary which intend to create or evidence Liens to secure or to guarantee the Obligations. "Columbia Queen" shall mean the vessel of the same name identified on Schedule 1.01-C. "Commission" shall mean the Securities and Exchange Commission or any Governmental Authority succeeding to the functions thereof. "Commitment" shall mean, with respect to each Lender, the commitment of such Lender to make Revolving Loans and to acquire participations in Letters of Credit hereunder, expressed as an amount representing the maximum aggregate amount of such Lender's Revolving Credit Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.02(d) and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 11.02. The amount of each Lender's Commitment as of the Effective Date is set forth on Schedule A, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Commitment, as applicable. The aggregate amount of the Lenders' Commitments as of the Effective Date is $30,000,000. "Commitments" shall mean the aggregate amount of the Commitments of all Lenders. "Commitment Fee" shall have the meaning ascribed to that term in Section 2.05(a). "Compliance Certificate" shall mean an Officer's Certificate in substantially the form of Exhibit 2 delivered to the Agent and each Lender by Borrower pursuant to Section 5.01(d) and covering Borrower's compliance with the covenants contained in Article VIII and certain other provisions of this Agreement. "Consolidated Borrower Group" shall mean the Borrower and all of its Subsidiaries on a consolidated basis. "Consolidated DQCV Group" shall mean DQCV and all of its Subsidiaries on a consolidated basis. "Consolidated Net Income" shall mean, with respect to any Person on a consolidated basis for any period, net income for such period including, without duplication, the proceeds of business interruption insurance in respect of cruise revenues but excluding from the definition of Consolidated Net Income the effect of any extraordinary or non-recurring gains or losses, all computed on a consolidated basis in accordance with Agreement Accounting Principles consistently applied. "Consolidated Parent Group" shall mean the Parent and all of its Subsidiaries on a consolidated basis. "Contaminant" shall mean any pollutant, hazardous substance, hazardous chemical, toxic substance, hazardous waste or special waste, as those terms are defined in 6 13 federal, state or local laws and regulations, radioactive material, petroleum, including crude oil or any petroleum-derived substance, or breakdown or decomposition product thereof, or any constituent of any such substance or waste, including but not limited to polychlorinated biphenyls and asbestos. "Contractual Obligation", as applied to any Person, shall mean any provision of any Securities issued by that Person or any indenture, mortgage, deed of trust, contract, undertaking, document, instrument or other agreement or instrument to which that Person is a party or by which it or any of its properties is bound, or to which it or any of its properties is subject (including, without limitation, any restrictive covenant affecting such Person or any of its properties). "Contribution Agreement" shall mean that certain Amended and Restated Contribution Agreement executed by each of the Subsidiaries of the Borrower (other than GAQSC, DQCV, Cape Cod Light, L.L.C., Cape May Light, L.L.C. and, upon consummation of the MARAD Financing for the Columbia Queen, GPCL) of even date herewith, as the same may be amended, restated, supplemented or otherwise modified from time to time with the consent of the Requisite Lenders. "Customary Permitted Liens" shall mean (i) Liens (other than Environmental Liens, Liens imposed under ERISA or Enforceable Judgments) for claims, taxes, assessments or charges of any Governmental Authority not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with Agreement Accounting Principles, (ii) statutory Liens of landlords, bankers, carriers, warehousemen, mechanics, materialmen, and other Liens (other than Environmental Liens, Liens imposed under ERISA or Enforceable Judgments) imposed by law including without limitation preferred maritime liens, arising in the ordinary course of business and for amounts which (A) are not yet due, (B) are not more than thirty (30) days past due as long as no notice of default has been given or other action taken to enforce such Liens, or (C) (1) are not more than thirty (30) days past due and a notice of default has been given or other action taken to enforce such Liens, or (2) are more than thirty (30) days past due, and, in the case of clause (1) or (2), are being contested in good faith by appropriate proceedings which are sufficient to prevent imminent foreclosure of such Liens and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with Agreement Accounting Principles, (iii) Liens (other than Environmental Liens, Liens imposed under ERISA or Enforceable Judgments) incurred or deposits made in the ordinary course of business (including, without limitation, surety bonds and appeal bonds) in connection with workers' compensation, unemployment insurance and other types of employment benefits or to secure the performance of tenders, bids, leases, contracts (other than for the repayment of Indebtedness), statutory obligations and other similar obligations or arising as a result of progress payments under government contracts, (iv) easements (including, without limitation, reciprocal easement agreements and utility agreements), rights-of-way, covenants, consents, rights of landlords, reservations, encroachments, variations and other restrictions, charges or encumbrances (whether or not recorded) affecting the use of real property, which do not materially interfere with the ordinary conduct of the business of Borrower or any of its 7 14 Subsidiaries, (v) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; and (vi) precautionary filings of financing statements in connection with Operating Leases entered into in the ordinary course of business. "Default Rate" shall have the meaning ascribed to that term in Section 2.03(d). "Delta Queen" shall mean the vessel of the same name identified on Schedule 1.01-C. "DOL" shall mean the United States Department of Labor and any successor department or agency. "Dollars" and "$" shall mean the lawful money of the United States of America. "Domestic Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Domestic Lending Office" under its name on Schedule A or on the Assignment and Acceptance by which it became a Lender or such other office of such Lender as such Lender may from time to time specify by written notice to Borrower and the Agent. "DQCV" shall mean Delta Queen Coastal Voyages, L.L.C., a Delaware limited liability company. "DQCV Obligations" shall mean, upon consummation of the MARAD Financing for the Cape Cod Light and the Cape May Light, the obligations of the members of the Consolidated DQCV Group in connection therewith. "EBITDA" shall mean, with respect to any Person on a consolidated basis for any period, the sum for such Person for such period of Consolidated Net Income plus, to the extent reflected in the income statement of such Person for such period from which Consolidated Net Income is determined, without duplication, (i) interest expense, (ii) federal, state and local income and franchise tax expense, (iii) depreciation expense, (iv) amortization expense, and (v) any other noncash items which had the effect of reducing Consolidated Net Income for such period, but minus any noncash items which had the effect of increasing Consolidated Net Income for such period. "Effective Date" shall mean the date on which the conditions specified in Section 3.01 are satisfied (or waived in accordance with Section 11.07). "Eligible Hedging Contract" shall mean Hedging Contracts with any Lender or any Affiliate of any Lender as the counterparty. "Enforceable Judgment" means a judgment or order as to which (a) the Borrower has not demonstrated to the reasonable satisfaction of the Agent that the Borrower is covered by third-party insurance (other than retro-premium insurance that determines retro-premiums solely on the basis of losses of the Borrower) therefor or that the Borrower has adequate reserves 8 15 therefor and (b) the period, if any, during which the enforcement of such judgment or order is stayed shall have expired, it being understood that a judgment or order which is under appeal or as to which the time in which to perfect an appeal has not expired shall not be deemed an "Enforceable Judgment" so long as enforcement thereof is effectively stayed pending the outcome of such appeal or the expiration of such period, as the case may be; provided that if enforcement of a judgment or order has been stayed on condition that a bond or collateral equal to or greater than $2,500,000 be posted or provided, such judgment or order shall be an "Enforceable Judgment." "Environmental Lien" shall mean a Lien in favor of any Governmental Authority for (i) any liability of the Borrower or any of its Subsidiaries under federal or state environmental laws or regulations, or (ii) damages arising from, or costs incurred by such Governmental Authority in response to, a Release or threatened Release of a Contaminant into the environment. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute. "ERISA Affiliate" shall mean any (i) corporation which is a member of the same controlled group of corporations (within the meaning of Section 414(b) of the IRC) as Borrower or any of its Subsidiaries, (ii) partnership or other trade or business (whether or not incorporated) under common control (within the meaning of Section 414(c) of the IRC) with Borrower or any of its Subsidiaries, and (iii) member of the same affiliated service group (within the meaning of Section 414(m) of the IRC) as Borrower or any of its Subsidiaries, any corporation described in clause (i) above or any partnership or trade or business described in clause (ii) above. "Eurodollar Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Eurodollar Lending Office" under its name on Schedule A or on the Assignment and Acceptance by which it became a Lender (or, if no such office is specified, its Domestic Lending Office) or such other office of such Lender as such Lender may from time to time specify by written notice to Borrower and the Agent. "Eurodollar Rate Loans" shall mean those Loans outstanding which bear interest at a rate determined by reference to the Adjusted LIBO Rate as provided in Section 2.03(a)(ii). "Event of Default" shall mean any of the occurrences set forth in Section 9.01 after the expiration of any applicable grace period expressly provided therein. "Excess Preopening/Premarketing Expenses" shall mean all expenses, including, without limitation, marketing expenses, incurred prior to the first cruise of each of the Cape Cod Light and the Cape May Light, but only to the extent that such expenses exceed $8,000,000 in the aggregate. "Existing Indebtedness" shall mean the Indebtedness of the Borrower or any of its Subsidiaries reflected on Schedule 1.01-A. 9 16 "FDIC" shall mean the Federal Deposit Insurance Corporation or any Governmental Authority succeeding to its functions. "Federal Funds Effective Rate" shall mean, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Agent from three Federal funds brokers of recognized standing selected by it. "Federal Reserve Board" shall mean the Board of Governors of the Federal Reserve System or any Governmental Authority succeeding to its functions. "Fee Letter" shall have the meaning ascribed to that term in Section 2.05(c). "Fiscal Year" shall mean the fiscal year of the Borrower, which shall be each twelve (12) month period ending on December 31 of each calendar year or such other period as the Borrower may designate and the Requisite Lenders may approve in writing. "Funding Date" shall mean, with respect to any Loan, the date of the funding of such Loan, and with respect to any Letter of Credit, the date of the issuance of such Letter of Credit. "GAAP" shall mean generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board, or in such other statements by such other entity as may be in general use by significant segments of the accounting profession, which are applicable to the circumstances as of the date of determination. "GAQSC" shall mean Great AQ Steamboat, L.L.C., a Delaware limited liability company. "GAQSC Depository Agreement" shall mean the Depository Agreement dated as of August 24, 1995, among GAQSC, the Secretary and The Bank of New York, as Depository-Bailee. "GAQSC Financial Agreement" shall mean the Title XI Reserve Fund and Financial Agreement dated as of August 24, 1995, between GAQSC and the Secretary. "GAQSC Guaranty" shall mean the Guaranty Agreement dated as of August 24, 1995, executed by the Borrower in favor of the Secretary guaranteeing the payment and performance by GAQSC of the Secretary's Note. 10 17 "GAQSC Obligations" shall mean the United States Government Guaranteed Ship Financing Obligations, American Queen Series, issued by GAQSC in the aggregate original principal amount of $60,589,000 under the GAQSC Trust Indenture. "GAQSC Security Agreement" shall mean the Security Agreement dated as of August 24, 1995, between GAQSC and the Secretary, securing payment of the Secretary's Note. "GAQSC Ship Mortgage" shall mean the First Preferred Ship Mortgage dated as of August 24, 1995, executed by GAQSC, as shipowner and mortgagor, in favor of the Secretary, as mortgagee, covering the American Queen and securing payment of the Secretary's Note. "GAQSC Trust Indenture" shall mean the Trust Indenture dated as of August 24, 1995, between GAQSC and The Bank of New York, as Indenture Trustee. "Governmental Authority" shall mean any nation, state, sovereign, or government, any federal, regional, state, local or political subdivision and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government including without limitation, any central bank. "GPCL" shall mean Great Pacific NW Cruise Line, L.L.C., a Delaware limited liability company. "GPCL Obligations" shall mean, upon the consummation of the MARAD Financing with respect to the Columbia Queen, the obligations of GPCL in connection therewith. "Hedging Contract" shall mean (i) any exchange-traded or over-the-counter futures, forward, swap or option contract or other financial instrument with similar characteristics, or (ii) any agreements, devices or arrangements providing for payments related to fluctuations of interest rates, exchange rates, forward rates or commodity prices, including, but not limited to, interest rate swap or exchange agreements, forward currency exchange agreements, interest rate cap or collar protection agreements, forward rate currency or interest rate options. "Holders of Secured Obligations" shall mean the holders of the Obligations from time to time and shall refer to (i) each Lender in respect of its Revolving Credit Exposure, (ii) the Issuing Bank in respect of Letters of Credit and LC Disbursements, (iii) the Agent and the Lenders in respect of all other present and future obligations and liabilities of Borrower of every type and description arising under or in connection with this Agreement or any other Loan Document, (iv) each other Person entitled to indemnification pursuant to Section 11.04, in respect of the obligations and liabilities of Borrower to such Person thereunder, (v) each Lender and each Affiliate of each Lender, in respect of all obligations and liabilities of Borrower to such Lender or such Affiliate as exchange party or counterparty under any Eligible Hedging Contract, and (vi) their respective successors, transferees and assigns. "Indebtedness" of any Person shall mean, without duplication, (i) all indebtedness, obligations or other liabilities of such Person for borrowed money or under any 11 18 debt Securities, whether or not subordinated, (ii) all obligations with respect to redeemable stock and redemption or repurchase obligations under any equity securities or profit payment agreements, (iii) all reimbursement obligations (absolute or contingent) and other liabilities of such Person with respect to letters of credit issued for such Person's account or for which such party is a co-applicant, (iv) all obligations of such Person to pay the purchase price of property or services, except trade payables and accrued expenses incurred by such Person in the ordinary course of business, (v) all obligations in respect of Capital Leases of such Person, (vi) all Accommodation Obligations of such Person, (vii) all indebtedness, obligations or other liabilities, contingent or otherwise, of such Person or others secured, by a Lien on any asset of such Person, whether or not such indebtedness, obligations or liabilities are assumed by or are a personal liability of such Person, (viii) all obligations upon which interest charges are customarily paid (including zero coupon instruments) and (ix) all obligations under conditional sale or other title retention agreements relating to property purchased by such Person. "Initial Funding" shall mean the first funding of any Loans hereunder. "Initial Funding Date" shall mean the date, if any, on which the Initial Funding occurs. "Intellectual Property Agreements" shall mean any and all patent and/or trademark security agreements executed by the Borrower and certain of its Subsidiaries in favor of the Agent on behalf of itself and the Holders of Secured Obligations as the same may be amended, restated, supplemented or otherwise modified from time to time. "Intercompany Receivables" shall mean receivables owed to the Borrower by the Parent arising from loans made by the Borrower to the Parent on open account. "Interest Payment Date" shall mean with respect to any Eurodollar Rate Loan, (i) the last day of each Interest Period applicable to such Loan and (ii) with respect to any Eurodollar Rate Loan having an Interest Period in excess of three (3) calendar months, the last day of each three (3) calendar month interval during such Interest Period and, in addition, the date of any refinancing or conversion of such Borrowing with or to a Borrowing of a different Type. "Interest Period" shall have the meaning ascribed to such term in Section 2.08. "Interest Rate Determination Date" shall mean the date on which the Agent determines the LIBO Rate applicable to a Borrowing, continuation or conversion of Eurodollar Rate Loans. The Interest Rate Determination Date shall be the second (2nd) Business Day prior to the first day of the Interest Period applicable to such Borrowing, continuation or conversion. "Investment" shall have the meaning ascribed to that term in Section 7.03. "IRC" shall mean the Internal Revenue Code of 1986, as amended from time to time hereafter, and any successor statute. 12 19 "IRS" shall mean the Internal Revenue Service of the United States or any Governmental Authority succeeding to the functions thereof. "Issuing Bank" shall mean The Chase Manhattan Bank, in its capacity as the issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.04(i). The Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of the Issuing Bank, in which case the term "Issuing Bank" shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate. "LC Disbursement" shall mean a payment made by the Issuing Bank pursuant to a Letter of Credit. "LC Exposure" shall mean, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any Lender at any time shall be its Pro Rata Share of the total LC Exposure at such time. "Lender" shall have the meaning ascribed to such term in the preamble and shall include The Chase Manhattan Bank, in its individual capacity, and each Person which at any time becomes a Lender pursuant to Section 11.02(a). "Letter of Credit" shall mean any letter of credit issued pursuant to this Agreement. "Liabilities and Costs" shall mean all liabilities, claims, obligations, responsibilities, losses, damages, punitive damages, consequential damages, treble damages, charges, costs and expenses (including, without limitation, attorneys', experts' and consulting fees and costs of investigation and feasibility studies), fines, penalties and monetary sanctions, interest, direct or indirect, known or unknown, absolute or contingent, past, present or future. "LIBO Rate" shall mean, with respect to any Borrowing of Eurodollar Rate Loans for any Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the "LIBO Rate" with respect to such Borrowing for such Interest Period shall be the rate at which dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. 13 20 "Lien" shall mean any mortgage, deed of trust, pledge, hypothecation, assignment, deposit arrangement, security interest, encumbrance (including, but not limited to, easements, rights of way and the like), judgment, lien (statutory or other), Environmental Lien, Enforceable Judgment, charge, security agreement or transfer intended as security, including, without limitation, any conditional sale or other title retention agreement, the interest of a lessor under a Capital Lease, any financing lease having substantially the same economic effect as any of the foregoing and, in the case of securities, any purchase option, call or similar right of a third party with respect to such securities. "Loan" shall mean any Revolving Loan. "Loan Account" shall have the meaning ascribed to such term in Section 2.07(d). "Loan Documents" shall mean this Agreement, the Notes, the Fee Letter, the Collateral Documents and all other agreements delivered to the Agent, the Issuing Bank or any Lender by or on behalf of the Borrower or any of its Subsidiaries in satisfaction or furtherance of the requirements of this Agreement or any other Loan Document. "Maintenance Capital Expenditures" shall mean, with respect to any Person on a consolidated basis for any period, the aggregate of all expenditures incurred by such Person during such period that, in accordance with Agreement Accounting Principles, are or should be included in "additions to property, plant or equipment" or similar items reflected in the statement of cash flows of such Person, including maintenance, renovation and layup expenditures but excluding interest and start-up expenses that otherwise would be included; provided, however, that Maintenance Capital Expenditures shall not include (i) expenditures of proceeds of insurance settlements in respect of lost, destroyed or damaged assets, equipment or other property to the extent such expenditures are made to replace or repair such lost, destroyed or damaged assets, equipment or other property within 6 months of the receipt of any such insurance proceeds related to such destruction or damage, or (ii) expenditures in connection with the purchasing, outfitting or construction of the New Vessels. "MARAD Debt Service" shall mean principal and interest payments made by any member of the Borrower Consolidated Group pursuant to the MARAD Financing obtained for the American Queen and the Columbia Queen. "MARAD Financing" shall mean the long-term mortgage financing of the American Queen guaranteed by the Secretary in an initial amount of $60,589,000 as evidenced by the GAQSC Trust Indenture and, upon consummation thereof, the long-term mortgage financing of the Columbia Queen, the Cape Cod Light and the Cape May Light guaranteed by the Secretary, provided that the terms and conditions of the MARAD Financing for the Columbia Queen shall have been consented to by the Requisite Lenders (which consent shall not be unreasonably withheld or delayed). "Margin Stock" shall have the meaning ascribed to such term in Regulation U. 14 21 "Material Adverse Effect" shall mean a material adverse effect (a) upon the business, assets or other properties, liabilities or condition (financial or otherwise) or results of operations of Borrower, individually, or the Consolidated Borrower Group taken as a whole or (b) upon the ability of any of the Borrower or any of its Subsidiaries to perform any of their respective Obligations under any Loan Document in any material respects to which it is or will be a party, including, without limitation, payment of the Obligations. "Maturity Date" shall mean the first anniversary of the Termination Date. "Mississippi Queen" shall mean the vessel of the same name identified on Schedule 1.01-C. "Multiemployer Plan" shall mean a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA which is, or within the immediately preceding six (6) years was, contributed to by either Borrower or any ERISA Affiliate. "Net Proceeds" shall mean with respect to any Prepayment Event (a) the gross amount of cash proceeds (including in each Fiscal Year the amount of insurance settlements and condemnation awards in such fiscal year in excess of Set Aside Amounts (it being understood that Set Aside Amounts shall not be included in "Net Proceeds," and may be retained by the Borrower or a Subsidiary of Borrower, as applicable, for the purposes described in clause (a) of the definition of the term "Set Aside Amount", unless and until any such amount shall cease to be a "Set Aside Amount" as a result of any failure to meet any of the criteria set forth in clause (a) or (b) of such definition)) paid to or received by the Borrower or any Subsidiary of Borrower in respect of such Prepayment Event (including cash proceeds subsequently received in respect of such Prepayment Event in respect of non-cash consideration initially received or otherwise), less (b) the amount, if any, of all taxes (other than income taxes) and the Borrower's good-faith best estimate of all income taxes (to the extent that such amount shall have been set aside for the purpose of paying such taxes when due), and customary fees, commissions, costs and other expenses (other than those payable to the Borrower, any Affiliate of the Borrower or any Subsidiary of Borrower) that are incurred in connection with such Prepayment Event and are payable by the seller or the transferor of the assets or property or issuer of the securities, as the case may be, to which such Prepayment Event relates, and, in the case of any Prepayment Event described in clause (i) of the definition of "Prepayment Event," the amount of all Indebtedness secured by a Lien on the assets to which such Prepayment Event relates which is repaid in connection with such Prepayment Event, but in any case under this clause (b) only to the extent such amount was not already deducted in arriving at the amount referred to in clause (a). "New Vessel" shall mean any new vessel purchased or built or otherwise acquired by the Borrower or any of its Subsidiaries for operation in its cruise business, including, without limitation, the Cape Cod Light and the Cape May Light. "New Vessel Capital Expenditures" shall mean, with respect to any Person on a consolidated basis for any period, all expenditures incurred by such Person during such period that would be Maintenance Capital Expenditures but for the exclusion in clause (ii) of the 15 22 definition of "Maintenance Capital Expenditures" of expenditures in connection with the purchasing, outfitting or construction of the New Vessels. "Notes" shall mean the amended and restated revolving loan notes executed by the Borrower and delivered to each Lender pursuant to Section 2.02 or Section 11.02. "Notice of Borrowing" shall mean, with respect to a proposed Borrowing pursuant to Section 2.02(a), a notice substantially in the form of Exhibit 3. "Notice of Conversion/Continuation" shall mean, with respect to a proposed conversion or continuation of a Loan pursuant to Section 2.03(c), a notice substantially in the form of Exhibit 4. "Obligations" shall mean the principal of and all interest on all Loans, all reimbursement obligations with respect to Letters of Credit, all fees, expense reimbursements, taxes, compensation and indemnities payable by Borrower to the Agent or any Lender pursuant to this Agreement and all other present and future Indebtedness and other liabilities of Borrower owing to the Agent, any Lender, any Affiliate of any Lender (in connection with any Eligible Hedging Contract) or any Person entitled to indemnification pursuant to Section 11.04, or any of their respective successors, permitted transferees or assigns, of every type and description, whether or not evidenced by any note, guaranty or other instrument, arising under or in connection with this Agreement, any Note, the Fee Letter, any other Loan Document or any Eligible Hedging Contract whether or not for the payment of money, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising and however arising. "Officer's Certificate" shall mean, as to any corporation, a certificate executed on behalf of such corporation by its chairman or vice chairman of the board (if an officer), its president or any vice president, its chief financial officer, its controller or its treasurer. "Operating Lease" shall mean, as applied to any Person, any lease of any Property by that Person as lessee which is not a Capital Lease. "Original Credit Agreement" shall have the meaning ascribed to such term in the Recital hereto. "Other Indebtedness" shall mean all Indebtedness of Borrower and its Subsidiaries other than the Obligations. "Parent" shall mean American Classic Voyages Co., a Delaware corporation. "Parent Guaranty" shall mean the guaranty executed by the Parent in favor of the Agent, for the benefit of itself and the Holders of Secured Obligations, as the same may be amended, restated, supplemented or otherwise modified from time to time. 16 23 "PBGC" shall mean the Pension Benefit Guaranty Corporation and any Person succeeding to the functions thereof. "Permits" shall mean any permit, approval, consent, authorization, license, variance, or permission required from a Governmental Authority under an applicable Requirement of Law. "Permitted Amount" shall mean $7,500,000. "Permitted Existing Liens" shall mean the Liens on any property of the Borrower or its Subsidiaries, in each case reflected on Schedule 1.01-B. "Person" shall mean any natural person, corporation, limited partnership, general partnership, joint stock company, joint venture, association, company, trust, bank, trust company, land trust, business trust or other organization, whether or not a legal entity, or any other non-governmental entity, or any Governmental Authority. "Plan" shall mean an employee benefit plan defined in Section 3(3) of ERISA in respect of which either the Borrower or any ERISA Affiliate is, or within the immediately preceding six (6) years was, an "employer" as defined in Section 3(5) of ERISA. "Pledge Agreements" shall mean the Stock Pledge Agreements and Limited Liability Company Pledge Agreements, as applicable, executed by (i) the Borrower in connection with the pledge of the stock of, or its membership interest in, each of the Borrower Subsidiaries (other than GAQSC, each member of the Consolidated DQCV Group and, upon consummation of the MARAD Financing for the Columbia Queen, GPCL), and (ii) DQSB II, Inc., a Delaware corporation, in connection with the pledge of its membership interests in each of the other Borrower Subsidiaries (other than GAQSC, each member of the Consolidated DQCV Group and, upon consummation of the MARAD Financing for the Columbia Queen, GPCL), as any of the same may be amended, restated, supplemented or otherwise modified from time to time. "Potential Event of Default" shall mean an event, condition or circumstance which, with the giving of notice or the lapse of time, or both, would constitute an Event of Default. "Prepayment Event" shall mean (i) any sale, lease, transfer, assignment, loss, damage or destruction (in the case of loss, damage or destruction, to the extent covered by insurance) or other disposition of assets (including trademarks and other intangibles), business units, individual business assets or property of the Borrower or any of its Subsidiaries, including the sale, transfer or disposition of any capital stock thereof or (ii) the incurrence, creation or assumption by the Borrower or its Subsidiaries of any Indebtedness (other than Indebtedness that is permitted to be incurred pursuant to Section 7.01) or the issuance or sale by the Borrower or any Subsidiaries of the Borrower of any debt securities or any obligations convertible into or exchangeable for, or giving any person or entity any right, option or warrant to acquire from the Borrower or any of the Subsidiaries of Borrower any Indebtedness or any such debt securities or 17 24 any such convertible or exchangeable obligations; provided, however, that none of the following shall be deemed to be a "Prepayment Event": (a) the sale of inventory in the ordinary course of business, (b) the sale, lease, transfer, assignment or other disposition of assets of the Borrower or any Subsidiary of the Borrower to the Borrower or any other Wholly-Owned Subsidiary of the Borrower, (c) the sale, lease, transfer, assignment or other disposition of assets of the Borrower or any of its Subsidiaries (other than dispositions described in clauses (a) or (b) of this proviso) to the extent that the Net Proceeds of any such disposition of assets received since the Effective Date do not in the aggregate exceed $5,000,000, and (d) the loss, damage or destruction of assets of the Borrower or any of its Subsidiaries (to the extent covered by insurance) to the extent that the Net Proceeds of any single loss do not exceed $1,000,000. "Prime Rate" shall mean the rate of interest per annum publicly announced from time to time by The Chase Manhattan Bank as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective. "Property" shall mean with respect to any Person, any real or personal property, plant, building, facility, structure, equipment or unit, or other asset (tangible or intangible) owned, leased or operated by such Person. "Pro Rata Share" shall mean, at any particular time and with respect to any Lender, a fraction (expressed as a percentage), the numerator of which shall be the then amount of such Lender's Commitment and the denominator of which shall be the then aggregate amount of all Commitments, as adjusted from time to time pursuant to the terms of this Agreement; provided that, in the event that the Commitments have been terminated pursuant to the terms of this Agreement, "Pro Rata Share" shall mean, at any particular time and with respect to any Lender, a fraction (expressed as a percentage), the numerator of which shall be the then amount of such Lender's Revolving Credit Exposure and the denominator of which shall be the then aggregate amount of the Revolving Credit Exposures of all of the Lenders. "RCRA" shall mean the Resource Conservation and Recovery Act, 42 U.S.C.ss.ss. 6901 et seq., and any successor statute, and regulations promulgated thereunder. "Regulation D," "Regulation T," "Regulation U" and "Regulation X" shall mean Regulation D, Regulation T, Regulation U and Regulation X, respectively, of the Federal Reserve Board as in effect from time to time. "Related Parties" shall mean, with respect to any specified Person, such Person's Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person's Affiliates. "Release" shall mean any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration from any Property into the indoor or outdoor environment, including the movement of Contaminants through or in the air, soil, surface water, groundwater or Property. 18 25 "Remedial Action" shall mean any action required to (i) clean up, remove, treat or in any other way address Contaminants in the indoor or outdoor environment; (ii) prevent a Release or threat of Release or minimize the further Release of Contaminants so they do not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment; or (iii) perform pre-remedial studies and investigations or post-remedial monitoring and care. "Reportable Event" shall mean the events described in Section 4043 of ERISA or the regulations thereunder other than a Reportable Event described in subsections (3), (4) or (8) of Section 4043(c). "Requirements of Law" shall mean, as to any Person, the charter and by-laws or other organizational or governing documents of such Person, and any law, rule or regulation, Permit, or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its Property or to which such Person or any of its property is subject, including, without limitation, the Securities Act, the Securities Exchange Act, Regulation T, Regulation U and Regulation X, and any certificate of occupancy, zoning ordinance, building, environmental or land use, law, rule, regulation, ordinance or Permit or occupational safety or health law, rule or regulation. "Requisite Lenders" shall mean Lenders whose Pro Rata Shares, in the aggregate, are greater than fifty percent (50%). "Restricted Junior Payment" shall mean (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of capital stock of or membership interests in Borrower or any of its Subsidiaries, except a distribution of stock as part of a stock split and except a dividend or distribution payable solely in shares of that class of stock or membership interests or in any junior class of stock or membership interests to the holders of that class, provided that the issuance of such stock or membership interests or junior class of stock or membership interests is not an incurrence of Indebtedness, (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of capital stock of or membership interests in Borrower or any of its Subsidiaries now or hereafter outstanding, (iii) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of capital stock of or membership interests in Borrower or any of its Subsidiaries now or hereafter outstanding, (iv) any payment of a claim for the rescission of the purchase or sale of, or for material damages arising from the purchase or sale of, any shares of the capital stock of or membership interests in Borrower or any of its Subsidiaries or of a claim for reimbursement, indemnification or contribution arising out of or related to any such claim for damages or rescission, (v) any payment of tax-sharing payments, allocated corporate overhead, guaranty fees or management fees to Parent or any of its Affiliates (other than Borrower and its Subsidiaries) and (vi) any payment in the nature of a loan from Borrower or any of its Subsidiaries to Parent or any of Parent's Subsidiaries (other than Borrower and its Subsidiaries). 19 26 "Revolving Credit Availability" shall mean, as at any particular date of determination, the amount by which the Commitments exceed the total Revolving Credit Exposures. "Revolving Credit Exposure" shall mean, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender's Revolving Loans and its LC Exposure at such time. "Revolving Credit Facility" shall mean the revolving credit facility established for Revolving Loans and Letters of Credit pursuant to Article II. "Revolving Loan" shall have the meaning ascribed to such term in Section 2.01(a). "Secretary" shall mean the United States of America, represented by the Secretary of Transportation, acting by and through the Maritime Administrator. "Secretary's Note" shall mean the Promissory Note to United States of America dated August 24, 1995, made by GAQSC to the Secretary in the original principal amount of $60,589,000. "Securities" shall mean any stock, shares, voting trust certificates, bonds, debentures, notes or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities", or any certificates of interest, shares, or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire any of the foregoing, but shall not include any evidence of the Obligations. "Securities Act" shall mean the Securities Act of 1933, as amended to the date hereof and from time to time hereafter, and any successor statute. "Securities Exchange Act" shall mean the Securities Exchange Act of 1934, as amended to the date hereof and from time to time hereafter, and any successor statute. "Security Agreement" shall mean that certain Security Agreement executed by the Borrower in favor of the Agent for the benefit of itself and the Holders of Secured Obligations of even date herewith, as the same may be amended, restated, supplemented or otherwise modified from time to time. "Set Aside Amount" shall mean, in respect of any insurance settlement or condemnation award which does not in the aggregate exceed $5,000,000 received by the Borrower or any Subsidiary of Borrower, the portion thereof, if any, (a) (i) set aside by the Borrower or the applicable Subsidiary for the replacement or repair of any lost, destroyed or damaged assets, equipment or other property that were the subject of an insurable loss, destruction or damage and for which an insurance settlement was made or (ii) set aside by the Borrower or the applicable Subsidiary for the replacement of any real property that was the 20 27 subject of a taking and in respect of which a condemnation award was made and (b) used within 6 months of the receipt of any such condemnation award or insurance proceeds related to such loss, destruction or damage or such taking, as applicable. "Ship Mortgages" shall mean the preferred ship mortgages of even date herewith covering the Delta Queen, the Mississippi Queen and the Columbia Queen, executed by the Borrower or a Subsidiary of the Borrower, as applicable, in favor of the Agent as trustee for the benefit of itself and the Holders of Secured Obligations, as the same may be amended, supplemented or otherwise modified from time to time. "Solvent" shall mean, when used with respect to any Person, that at the time of determination: (i) the fair value of its assets (both at fair valuation and at present fair saleable value) is equal to or in excess of the total amount of its liabilities, including, without limitation, contingent liabilities; and (ii) it is then able and expects to be able to pay its debts as they mature; and (iii) it has capital sufficient to carry on its business as conducted and as proposed to be conducted. With respect to contingent liabilities (such as litigation, guarantees and pension plan liabilities), such liabilities shall be computed at the amount which, in light of all the facts and circumstances existing at the time, represent the amount which can reasonably be expected to become an actual or matured liability. "Statutory Reserve Rate" shall mean a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum applicable reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Federal Reserve Board and any other banking authority to which the Agent or any Lender is subject (a) with respect to the Base CD Rate, for new negotiable nonpersonal time deposits in dollars of over $100,000 with maturities approximately equal to three months and (b) with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D). Such reserve percentages shall include those imposed pursuant to Regulation D. Eurodollar Rate Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exceptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. "Subsidiary" of a Person shall mean (i) any corporation more than 50% of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii) any company, partnership, limited liability 21 28 company, association, joint venture or similar business organization more than 50% of the ownership or membership interests having ordinary voting power of which shall at the time be so owned or controlled. "Subsidiary Guaranties" shall mean each guaranty executed by each of the Borrower Subsidiaries (other than GAQSC, DQCV, Cape Cod Light, L.L.C., Cape May Light, L.L.C. and, upon consummation of the MARAD Financing for the Columbia Queen, GPCL) in favor of the Agent, for the benefit of itself and the Holders of Secured Obligations, as the same may be amended, restated, supplemented or otherwise modified from time to time. "Subsidiary Security Agreements" shall mean each security agreement executed by each of the Subsidiaries (other than GAQSC, DQCV, Cape Cod Light, L.L.C., Cape May Light, L.L.C. and, upon consummation of the MARAD Financing for the Columbia Queen, GPCL) of the Borrower in favor of the Agent, for the benefit of itself and the Holders of Secured Obligations as the same may be amended, restated, supplemented or otherwise modified from time to time. "Taxes" shall have the meaning ascribed to such term in Section 2.10(a). "Termination Date" shall mean the earlier of (a) September 13, 2001 and (b) the date of termination of the Commitments pursuant to Section 2.02(d) or Section 9.02(a). "Termination Event" shall mean (i) a Reportable Event with respect to any Benefit Plan; (ii) the withdrawal of Borrower or any ERISA Affiliate from a Benefit Plan during a plan year in which Borrower or such ERISA Affiliate was a "substantial employer" as defined in Section 4001(a)(2) of ERISA; (iii) the imposition of an obligation on Borrower or any ERISA Affiliate under Section 4041 of ERISA to provide affected parties written notice of intent to terminate a Benefit Plan in a distress termination described in Section 4041(c) of ERISA; (iv) the institution by the PBGC of proceedings to terminate a Benefit Plan; (v) any event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Benefit Plan; or (vi) the partial or complete withdrawal of Borrower or any ERISA Affiliate from a Multiemployer Plan if such withdrawal would result in the imposition of withdrawal liability under Section 4219 of ERISA. "Three-Month Secondary CD Rate" shall mean, for any day, the secondary market rate for three-month certificates of deposit reported as being in effect on such day (or, if such day is not a Business Day, the next preceding Business Day) by the Federal Reserve Board through the public information telephone line of the Federal Reserve Bank of New York (which rate will, under the current practices of the Federal Reserve Board, be published in Federal Reserve Statistical Release H.15(519) during the week following such day) or, if such rate is not so reported on such day or such next preceding Business Day, the average of the secondary market quotations for three-month certificates of deposit of major money center banks in New York City received at approximately 10:00 a.m., New York City time, on such day (or, if such day is not a Business Day, on the next preceding Business Day) by the Agent from three negotiable certificate of deposit dealers of recognized standing selected by it. 22 29 "Transaction Costs" shall mean the fees, costs and expenses payable by the Borrower or any of its Subsidiaries pursuant hereto or in connection herewith or in respect hereof or of the other Loan Documents. "Transaction Documents" shall mean the Loan Documents and the Contribution Agreement. "Type" when used in respect of any Loan or Borrowing, shall refer to the rate by reference to which interest on such Loan or on the Loans comprising such Borrowing is determined. "Wholly-Owned Subsidiary" of a Person shall mean any subsidiary of such Person 100% of the capital stock of each class of such Subsidiary, in the case of a corporation, or 100% of the membership or other equity interests of such Subsidiary, in the case of a limited liability company, in each case at the time as of which any determination is being made, is owned and controlled, beneficially and of record, by such Person, or by one or more other Wholly-Owned Subsidiaries, or both. "Zell Group" shall mean Samuel Zell or any of his affiliates (as such term is defined in Rule 12b-2 of the Securities Exchange Act) or associates (as such term is defined in Rule 12b-2 of the Securities Exchange Act). 1.02. Computation of Time Periods. In this Agreement, in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding". Periods of days referred to in this Agreement shall be counted in calendar days unless Business Days are expressly prescribed. 1.03. Accounting Terms. For purposes of this Agreement, all accounting terms not otherwise defined herein shall have the meanings assigned to them in conformity with Agreement Accounting Principles. 1.04. Other Definitional Provisions. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (c) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this 23 30 Agreement and (d) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. ARTICLE II Amounts and Terms of Revolving Credit Facility 2.01. The Revolving Loans. (a) Revolving Credit Availability. Subject to the terms and conditions set forth in this Agreement, each Lender hereby severally and not jointly agrees to make revolving loans, in Dollars (each individually, a "Revolving Loan" and, collectively, the "Revolving Loans") to Borrower from time to time during the period from the Effective Date to the Business Day immediately preceding the Termination Date, in an amount which shall not exceed such Lender's Pro Rata Share of the Revolving Credit Availability at such time. (b) Several Commitments. All Revolving Loans comprising the same Borrowing under this Agreement shall be made by the Lenders simultaneously and proportionately to their respective Pro Rata Shares, it being understood that no Lender shall be responsible for any failure by any other Lender to perform its obligation to make a Revolving Loan hereunder and that the Commitment of any Lender shall not be increased or decreased without the prior written consent of such Lender as a result of the failure by any other Lender to perform its obligation to make a Revolving Loan. The failure of any Lender to make available to the Agent its Pro Rata Share of any Borrowing shall not relieve any other Lender of its obligation hereunder to make available to the Agent such other Lender's Pro Rata Share of such Borrowing on the date such funds are to be made available pursuant to the terms of this Agreement. (c) Repayments and Prepayments. Loans may be voluntarily repaid at any time, shall be mandatorily prepaid pursuant to Section 2.05 and, subject to the provisions of this Agreement, any amounts voluntarily repaid in respect of Revolving Loans may be reborrowed, up to the amount available under Section 2.01 at the time of such Borrowing, until the Business Day immediately preceding the Termination Date. The Borrower hereby unconditionally promises to pay to the Agent for the account of the Lenders the then unpaid principal amount of each Revolving Loan and all other outstanding Obligations on the Maturity Date. (d) Minimum Amounts. Loans made on any Funding Date shall be in integral multiples of $100,000 and in the aggregate minimum amount of $500,000, in the case of Loans constituting Base Rate Loans, and in integral multiples of $500,000 and in the aggregate minimum amount of $1,500,000, in the case of Loans constituting Eurodollar Rate Loans; provided that a Borrowing of Base Rate Loans may be in an aggregate amount that is equal to the entire unused balance of the Commitments or that is required to finance the reimbursement of an LC Disbursement as contemplated by Section 2.04(e). 24 31 2.02. Loan Facility Mechanics. (a) Notice of Borrowing. Whenever Borrower desires to borrow under Section 2.01(a), Borrower shall deliver to the Agent a Notice of Borrowing no later than 11:00 a.m. (New York City time) (i) on the proposed Funding Date, in the case of a Borrowing of Base Rate Loans, and (ii) at least three (3) Business Days in advance of the proposed Funding Date, in the case of a Borrowing of Eurodollar Rate Loans. The Notice of Borrowing shall specify (A) the Funding Date (which shall be a Business Day) in respect of the Revolving Loan, (B) the amount of the proposed Borrowing, (C) whether the proposed Borrowing will be of Base Rate Loans or Eurodollar Rate Loans, (D) in the case of Eurodollar Rate Loans, the requested Interest Period, and (E) the Borrower's account to which funds are to be disbursed. In lieu of delivering the above-described Notice of Borrowing, and only with the consent of the Agent in its sole discretion at such time, Borrower may give the Agent telephonic notice of any proposed Borrowing by the time required under this Section 2.02(a); provided that, in the event the Agent so consents, such notice shall be confirmed in writing by delivery to the Agent promptly (but in no event later than 2:00 p.m. (New York City time) on the Funding Date of the requested Loan) of a Notice of Borrowing. Any Notice of Borrowing (or telephonic notice in lieu thereof) pursuant to this Section 2.02(a) shall be irrevocable. (b) Making of Loans. Promptly after receipt of a Notice of Borrowing under Section 2.02(a) (or telephonic notice in lieu thereof if the Agent consents to such telephonic notice), the Agent shall notify each Lender by telex or telecopy or other similar form of teletransmission, of the proposed Borrowing. Each Lender shall make the amount of its Revolving Loan available to the Agent in Dollars and in immediately available funds, not later than 2:00 p.m. (New York City time) on the Funding Date. After the Agent's receipt of the proceeds of such Revolving Loans, the Agent shall (unless it has not received the Notice of Borrowing in satisfaction of the requirements of Section 2.02(a) or has been notified in writing that any of the conditions precedent set forth in Section 3.02(a) have not been satisfied) make the proceeds of such Revolving Loans available to Borrower on such Funding Date and shall disburse such funds in Dollars and in immediately available funds to the account of Borrower designated in the Notice of Borrowing; provided that a Borrowing of Base Rate Loans made to finance the reimbursement of an LC Disbursement as contemplated by Section 2.04(e) shall be remitted by the Agent to the Issuing Bank. (c) Failure to Fund by Lender. Unless the Agent shall have been notified by any Lender prior to any Funding Date in respect of any Borrowing of Revolving Loans that such Lender does not intend to make available to the Agent such Lender's Revolving Loan on such Funding Date, the Agent may assume that such Lender has made such amount available to the Agent on such Funding Date and the Agent in its sole discretion may, but shall not be obligated to, make available to Borrower a corresponding amount on such Funding Date. If such corresponding amount is not in fact made available to the Agent by such Lender on or prior to 2:00 p.m. (New York City time) on a Funding Date, such Lender agrees to pay, and Borrower agrees to repay, to the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to Borrower until the date such amount is paid or repaid to the Agent, at (i) in the case of such Lender, the Federal 25 32 Funds Effective Rate for the first three (3) Business Days and thereafter at the Alternate Base Rate, and (ii) in the case of Borrower, the interest rate which would be applicable at the time to a Borrowing of Base Rate Loans. If such Lender shall pay to the Agent such corresponding amount, such amount so paid shall constitute such Lender's Revolving Loan, and if both such Lender and Borrower shall have paid and repaid, respectively, such corresponding amount, the Agent shall promptly pay over to Borrower such corresponding amount in same day funds, but Borrower shall remain obligated for all interest thereon. Nothing in this Section 2.02(c) shall be deemed to relieve any Lender of its obligation hereunder to make its Revolving Loan on any Funding Date. (d) Voluntary Reduction of Commitments. Borrower shall have the right, at any time and from time to time, (i) to terminate the Commitments in whole, without premium or penalty, if no Revolving Loans or Letters of Credit are then outstanding, no Revolving Loans have been requested but not yet advanced and no Letters of Credit have been requested but not yet issued, or (ii) subject to the second to last sentence of this Section 2.02(d), permanently to reduce in part, without premium or penalty, the Commitments up to the amount by which the Commitments exceed the sum of (A) the total Revolving Credit Exposures, (B) the aggregate principal amount of all Revolving Loans requested hereunder but not yet advanced and (C) the aggregate face amount of all Letters of Credit requested hereunder but not yet issued. Borrower shall give not fewer than five (5) Business Days' prior written notice to the Agent designating the date (which shall be a Business Day) of such termination or reduction and the amount of any partial reduction. Promptly after receipt of a notice of such termination or reduction, the Agent shall notify each Lender of the proposed termination or reduction. Such termination or partial reduction of the Commitments shall be effective on the date specified in the Borrower's notice and shall reduce the Commitment of each Lender proportionately in accordance with its Pro Rata Share. Any such partial reduction of the Commitments shall be in an aggregate minimum amount of $5,000,000 and integral multiples of $1,000,000 in excess of that amount. Any notice of reduction or termination pursuant to this Section 2.02(d) shall be irrevocable. (e) Notes. The Borrower shall execute and deliver to each Lender (or to the Agent on behalf of each Lender) on or before the Effective Date a revolving loan note substantially in the form of Exhibit 5 to evidence the aggregate amount of that Lender's Loans and with other appropriate insertions. The Note delivered to each Lender shall be dated the Effective Date and shall be stated to mature on the Maturity Date. Each Lender is hereby authorized to, and prior to any transfer of the Note issued to it each Lender shall, endorse the date and amount of the Loans made by such Lender, as applicable, and each payment or prepayment of principal of the Loans evidenced thereby on the schedule annexed to and constituting a part of such Note, which endorsement shall constitute prima facie evidence, absent manifest error, of the accuracy of the information so endorsed, provided that failure by any such Lender to make such endorsement shall not affect the obligations of the Borrower hereunder or under such Note. In lieu of endorsing such schedule as hereinabove provided, prior to any transfer of a Note, each Lender is hereby authorized, at its option, to record such Loans and such payments or prepayments in its books and records, such books and records constituting prima facie evidence, absent manifest error, of the accuracy of the information contained therein; 26 33 provided, however, that if the Loan Account differs from the information endorsed by a Lender on such Lender's Note, the Loan Account, absent manifest error, shall govern. 2.03. Interest on the Loans. (a) Rate of Interest. All Loans shall bear interest on the unpaid principal amount thereof from the date made until paid in full at a fluctuating rate determined from time to time by reference to the Alternate Base Rate or the Adjusted LIBO Rate. The applicable basis for determining the rate of interest shall be selected by Borrower at the time a Notice of Borrowing is given by the Borrower pursuant to Section 2.02(a) or at the time a Notice of Conversion/Continuation is delivered by Borrower pursuant to Section 2.03(c); provided, however, that Borrower may not select the Adjusted LIBO Rate as the applicable basis for determining the rate of interest on a Loan (1) if at the time of such selection a Potential Event of Default or Event of Default exists or (2) if such a selection would be otherwise prohibited by the terms of this Agreement. If the Borrower fails to deliver a Notice of Conversion/Continuation to the Agent in accordance with the terms of this Agreement specifying the basis for determining the rate of interest for all or any portion of any Eurodollar Rate Loans then having the same Interest Period, then such Loans, or the portion thereof for which no Notice of Conversion/Continuation shall have been delivered, shall be automatically converted to Base Rate Loans on the last day of such Interest Period. Loans shall bear interest, subject to Section 2.03(d), at the following rates: (i) if a Base Rate Loan, then at a rate per annum equal to the sum of (A) the Applicable Base Rate Margin and (B) the Alternate Base Rate as in effect from time to time as interest accrues; and (ii) if a Eurodollar Rate Loan, then at a rate per annum equal to the sum of (A) the Applicable Eurodollar Rate Margin and (B) the Adjusted LIBO Rate determined for the applicable Interest Period. (b) Interest Payments. Subject to Section 2.03(d), (i) interest accrued on each Base Rate Loan shall be payable in arrears (A) on the last calendar day of each calendar quarter occurring after the Effective Date, (B) upon the prepayment in full of the Loans and the termination of all Commitments under this Agreement, (C) upon the date any principal of the Loan is due, with respect to the principal amount then due and (D) on the Maturity Date, and (ii) interest accrued on each Eurodollar Rate Loan shall be payable in arrears (A) on each Interest Payment Date applicable to such Eurodollar Rate Loan, (B) upon the prepayment in full of the Loans and the termination of all Commitments under this Agreement, (C) upon the prepayment thereof upon the date any principal of the Loan is due, with respect to the principal then due and (D) on the Maturity Date. (c) Conversion or Continuation. (i) Subject to the provisions of Sections 2.08 and 2.09, Borrower shall have the option (A) to convert at any time all or any part of outstanding Base Rate Loans 27 34 which, in the aggregate, equal or exceed $1,500,000 from Base Rate Loans to Eurodollar Rate Loans; or (B) to convert all or any part of outstanding Eurodollar Rate Loans which, in the aggregate, equal or exceed $1,000,000 from Eurodollar Rate Loans to Base Rate Loans on the expiration date of any Interest Period applicable thereto or upon the payment of compensation payable pursuant to Section 2.09(d); or (C) upon the expiration of any Interest Period applicable to any Eurodollar Rate Loans having the same Interest Period, to continue all or any portion of such Loans equal to or in excess of $1,500,000 as Eurodollar Rate Loans, and the succeeding Interest Period of such continued Loans shall commence on the expiration date of the Interest Period applicable thereto; provided that no outstanding Loan may be continued as, or be converted into, a Eurodollar Rate Loan if any Potential Event of Default or Event of Default exists or if such a continuation or conversion would otherwise be prohibited by the terms of this Agreement. Any conversion or continuation of Loans pursuant to this Section 2.03(c) shall apply to the applicable Loans of the Lenders on a pro rata basis. (ii) In the event Borrower shall elect to convert or continue a Loan under this Section 2.03(c), Borrower shall deliver a Notice of Conversion/Continuation to the Agent no later than 11:00 a.m. (New York City time) (A) at least one (1) Business Day in advance of the proposed conversion date in the case of a conversion to a Base Rate Loan and (B) at least three (3) Business Days in advance of the proposed conversion or continuation date in the case of a conversion to, or a continuation of, a Eurodollar Rate Loan. A Notice of Conversion/Continuation shall specify (1) the proposed conversion or continuation date (which shall be a Business Day), (2) the amount of the Loan to be converted or continued, (3) the nature of the proposed conversion or continuation, and (4) in the case of a conversion to, or a continuation of, a Eurodollar Rate Loan, the requested Interest Period. If no Interest Period is specified in any such Notice of Conversion/Continuation with respect to a Eurodollar Rate Loan, the Borrower shall be deemed to have selected an Interest Period of one month's duration. In lieu of delivering the above-described Notice of Conversion/Continuation, Borrower may give the Agent telephonic notice of any proposed conversion or continuation by the time required under this Section 2.03(c); provided that such notice shall be confirmed in writing by delivery to the Agent promptly (but in no event later than 11:00 a.m. (New York City time) on the proposed conversion or continuation date) of a Notice of Conversion/Continuation. Promptly after receipt of a Notice of Conversion/Continuation under this Section 2.03(c) (or telephonic notice in lieu thereof), the Agent shall notify each Lender by telex, telecopy, telephone or other similar form of transmission, of the proposed conversion or continuation. (iii) Any Notice of Conversion/Continuation for conversion to, or continuation of, a Loan (or telephonic notice in lieu thereof) shall be irrevocable and the Borrower shall be bound to convert or continue in accordance therewith. (d) Default Interest. Notwithstanding the rates of interest specified in Section 2.03(a) and the payment dates specified in Section 2.03(b), (i) from and after the occurrence of a payment default constituting an Event of Default under Section 9.01(a), until the 28 35 past-due amount is paid, such amount not paid when due shall bear interest payable upon demand at a rate per annum equal to the sum of (A) two percent (2.0%) and (B) the interest rate otherwise in effect from time to time (the "Default Rate"), and (ii) (x) from and after the occurrence of any Event of Default described in Section 9.01(f) or 9.01(g) with respect to the Borrower and (y) from and after the occurrence of any other Event of Default set forth in a notice from the Agent or Requisite Lenders to the Borrower, and for so long thereafter as such Event of Default is continuing, the principal balance of all Loans and other Agreement Obligations then outstanding (including, without limitation, all amounts due and payable pursuant to Section 9.02(a)) and, to the extent permitted by applicable law, any interest payments on the Loans not paid when due, shall bear interest payable upon demand at the Default Rate. (e) Applicable Margins; Computation of Interest. (i) The Applicable Base Rate Margin shall be 0.50% per annum, and the Applicable Eurodollar Rate Margin shall be 1.50% per annum; provided, however, that for each day on which the aggregate amount of the Lenders' Revolving Credit Exposures on such day exceeds 50% of the aggregate amount of the Lenders' Commitments on such day (or, on and after the Termination Date, the aggregate amount of Lenders' Commitments immediately prior to the Termination Date), the Applicable Base Rate Margin shall be 0.75% per annum, and the Applicable Eurodollar Rate Margin shall be 1.75% per annum. (ii) Interest on all Agreement Obligations (other than those on which the interest rate is determined by reference to the Prime Rate) shall be computed on the basis of the actual number of days elapsed in the period during which interest accrues and a year of 360 days. Interest on all Agreement Obligations with respect to which the interest rate is determined by reference to the Prime Rate shall be computed on the basis of the actual number of days elapsed in the period during which interest accrues and a year of 365 or 366 days, as applicable. In computing interest on any Loan, the date of the making of the Loan or the first day of an Interest Period, as the case may be, shall be included and the date of payment or the expiration date of an Interest Period, as the case may be, shall be excluded; provided that if a Loan is repaid on the same day on which it is made, one (1) day's interest shall be paid on that Loan. 2.04. Letters of Credit. (a) General. Subject to the terms and conditions set forth herein, the Borrower may request the issuance of Letters of Credit for its own account, in a form reasonably acceptable to the Agent and the Issuing Bank, at any time and from time to time during the period from the Effective Date until the date that is thirty days prior to the Termination Date. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by the Borrower to, or entered into by the Borrower with, the Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control. 29 36 (b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuing Bank) to the Issuing Bank and the Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, the date of issuance, amendment, renewal or extension, the date on which such Letter of Credit is to expire (which shall comply with paragraph (c) of this Section), the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. If requested by the Issuing Bank, the Borrower also shall submit a letter of credit application on the Issuing Bank's standard form in connection with any request for a Letter of Credit, with such modifications as may be necessary to ensure that such application imposes no additional material burdens or obligations on the Borrower and provides no additional material rights, remedies or benefits (including exculpations) to the Issuing Bank not otherwise provided in this Agreement. A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit the Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension (i) the LC Exposure shall not exceed $5,000,000 and (ii) the total Revolving Credit Exposures shall not exceed the total Commitments. (c) Expiration Date. Each Letter of Credit shall expire at or prior to the close of business on the date that is five Business Days prior to the Maturity Date. (d) Participations. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby grants to each Lender, and each Lender hereby acquires from the Issuing Bank, a participation in such Letter of Credit equal to such Lender's Pro Rata Share of the aggregate amount available to be drawn under such Letter of Credit. In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to the Agent, for the account of the Issuing Bank, such Lender's Pro Rata Share of (i) each LC Disbursement made by the Issuing Bank and not reimbursed by the Borrower on the date due as provided in paragraph (e) of this Section, (ii) each LC Disbursement made by the Issuing Bank on or after the Termination Date and (iii) any reimbursement payment required to be refunded to the Borrower for any reason. Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of an Event of Default or Potential Event of Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. (e) Reimbursement. If the Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such LC Disbursement by paying to 30 37 the Agent an amount equal to such LC Disbursement not later than 12:00 noon, New York City time, on the date that such LC Disbursement is made, if the Borrower shall have received notice of such LC Disbursement prior to 10:00 a.m., New York City time, on such date, or, if such notice has not been received by the Borrower prior to such time on such date, then not later than 12:00 noon, New York City time, on (i) the Business Day that the Borrower receives such notice, if such notice is received prior to 10:00 a.m., New York City time, on the day of receipt, or (ii) the Business Day immediately following the day that the Borrower receives such notice, if such notice is not received prior to such time on the day of receipt; provided that, (A) in the case of any LC Disbursement made prior to the Termination Date, the Borrower may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.02 that such payment be financed with a Borrowing of Base Rate Loans in the amount of such LC Disbursement and, to the extent so financed, the Borrower's obligation to reimburse the Issuing Bank for such LC Disbursement shall be discharged and replaced by the resulting Borrowing and (B) in the case of any LC Disbursement made on or after the Termination Date, the Borrower shall reimburse such LC Disbursement on the Maturity Date. If the Borrower fails to make such payment when due or if such LC Disbursement is made on or after the Termination Date, the Agent shall notify each Lender of the applicable LC Disbursement, the payment then due or due on the Maturity Date, as applicable, from the Borrower in respect thereof and such Lender's Pro Rata Share thereof. Promptly following receipt of such notice, each Lender shall pay to the Agent its Pro Rata Share of the payment then due or due on the Maturity Date, as applicable, from the Borrower, in the same manner as provided in Section 2.02 with respect to Loans made by such Lender (and Section 2.02 shall apply, mutatis mutandis, to the payment obligations of the Lenders), and the Agent shall promptly pay to the Issuing Bank the amounts so received by it from the Lenders. Promptly following receipt by the Agent of any payment from the Borrower pursuant to this paragraph (including the proceeds of any such Base Rate Loans), the Agent shall distribute such payment to the Issuing Bank or, to the extent that Lenders have made payments pursuant to this paragraph to reimburse the Issuing Bank, then to such Lenders and the Issuing Bank as their interests may appear. Any payment made by a Lender pursuant to this paragraph to reimburse the Issuing Bank for any LC Disbursement (other than the funding of Base Rate Loans as contemplated above) shall not constitute a Loan and shall not relieve the Borrower of its obligation to reimburse such LC Disbursement. (f) Obligations Absolute. The Borrower's obligation to reimburse LC Disbursements as provided in paragraph (e) of this Section shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrower's obligations hereunder. Neither the Agent, the Lenders nor the Issuing Bank, nor any of their Related Parties, shall have any liability or responsibility by reason of or in connection 31 38 with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Bank; provided that nothing in this paragraph (f) shall be construed to excuse the Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by (x) the Issuing Bank's grossly negligent or willful failure to pay under a Letter of Credit against presentation of a draft and other documents that strictly comply with the terms of such Letter of Credit or (y) the Issuing Bank's failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of the Issuing Bank (as finally determined by a court of competent jurisdiction), the Issuing Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, the Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit. (g) Disbursement Procedures. The Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. The Issuing Bank shall promptly notify the Agent and the Borrower by telephone (confirmed by telecopy) of such demand for payment and whether the Issuing Bank has made or will make an LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse the Issuing Bank and the Lenders with respect to any such LC Disbursement. (h) Interim Interest. If the Issuing Bank shall make any LC Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Borrower reimburses such LC Disbursement, at the rate per annum then applicable to Base Rate Loans; provided that, if the Borrower fails to reimburse such LC Disbursement when due pursuant to paragraph (e) of this Section, then Section 2.03(d) shall apply. Interest accrued pursuant to this paragraph shall be for the account of the Issuing Bank, except that interest accrued on and after the date of payment by any Lender pursuant to paragraph (e) of this Section to reimburse the Issuing Bank shall be for the account of such Lender to the extent of such payment. (i) Replacement of the Issuing Bank. The Issuing Bank may be replaced at any time by written agreement among the Borrower, the Agent, the replaced Issuing Bank and 32 39 the successor Issuing Bank. The Agent shall notify the Lenders of any such replacement of the Issuing Bank. At the time any such replacement shall become effective, the Borrower shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 2.04(b). From and after the effective date of any such replacement, (i) the successor Issuing Bank shall have all the rights and obligations of the Issuing Bank under this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein to the term "Issuing Bank" shall be deemed to refer to such successor or to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit. (j) Cash Collateralization. If any Event of Default shall occur and be continuing, on the Business Day that the Borrower receives notice from the Agent or the Requisite Lenders demanding the deposit of cash collateral pursuant to this paragraph, the Borrower shall deposit in an account with the Agent, in the name of the Agent and for the benefit of the Lenders, an amount in cash equal to the LC Exposure as of such date plus any accrued and unpaid interest thereon; provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to the Borrower described in clause (f) or (g) of Section 9.01. Such deposit shall be held by the Agent as collateral for the payment and performance of the obligations of the Borrower under this Agreement. The Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Agent and at the Borrower's risk and expense, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the Agent to reimburse the Issuing Bank for LC Disbursements for which it has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated, be applied to satisfy other obligations of the Borrower under this Agreement. If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to the Borrower within three Business Days after all Events of Default have been cured or waived. 2.05. Fees. (a) Commitment Fee. The Borrower shall pay to the Agent, for the account of the Lenders in accordance with their respective Pro Rata Shares, a fee (the "Commitment Fee"), accruing at the rate of 0.50% per annum on the average daily amount by which the Commitments exceed the total Revolving Credit Exposures for the period commencing on the Effective Date and ending on the Termination Date, such Commitment Fee being payable quarterly, in arrears, 33 40 on the last calendar day of each calendar quarter occurring after the Effective Date and on the Termination Date. (b) Letter of Credit Fees. The Borrower agrees to pay (i) to the Agent for the account of each Lender a participation fee with respect to its participations in Letters of Credit, which shall accrue at a per annum rate equal to the Applicable Eurodollar Rate Margin in effect from time to time on the average daily amount of such Lender's LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date on which such Lender's Commitment terminates and the date on which such Lender ceases to have any LC Exposure, and (ii) to the Issuing Bank a fronting fee, which shall accrue at the rate of 0.25% per annum on the average daily amount of the LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date of termination of the Commitments and the date on which there ceases to be any LC Exposure, as well as the Issuing Bank's standard fees with respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. Participation fees and fronting fees accrued through and including the last day of March, June, September and December of each year shall be payable on the third Business Day following such last day, commencing on the first such date to occur after the Effective Date; provided that (x) from and after the occurrence of any Event of Default described in Section 9.01(f) or 9.01(g) with respect to the Borrower and (y) from and after the occurrence of any other Event of Default set forth in a notice from the Agent or Requisite Lenders to the Borrower, and for so long thereafter as such Event of Default is continuing, the participation fees shall accrue at a rate per annum equal to the sum of (A) two percent (2.0%) and (B) the Applicable Eurodollar Rate Margin in effect from time to time, and all of the foregoing fees shall be payable on demand. Any other fees payable to the Issuing Bank pursuant to this paragraph shall be payable within 10 days after demand. (c) Payment of Fees. The fees described in this Section 2.05 represent compensation for services rendered and to be rendered separate and apart from the lending of money or the provision of credit and do not constitute compensation for the use, detention or forbearance of money, and the obligation of Borrower to pay each fee described herein shall be in addition to, and not in lieu of, the obligation of Borrower to pay interest, other fees and expenses otherwise described in this Agreement. Fees and expenses shall be payable when due in immediately available funds. All fees and expenses shall be nonrefundable when paid. All fees and expenses specified or referred to in this Agreement or in the letter agreement dated September 1, 2000 among Chase Securities, Inc., The Chase Manhattan Bank and the Borrower (the "Fee Letter") due to the Agent, the Issuing Bank or any Lender, including, without limitation, amounts referred to in this Section 2.05 and in Section 11.03, shall constitute Obligations and shall be secured by all the Collateral. All fees described in this Section 2.05 which are expressed as a per annum charge shall be calculated on the basis of the actual number of days elapsed in a 360-day year. 2.06. Prepayments. 34 41 (a) Borrower shall not at any time prior to the Termination Date cause or permit the total Revolving Credit Exposures to exceed the Commitments. If at any time prior to the Termination Date the total Revolving Credit Exposures exceed the Commitments at such time, Borrower shall, without demand or notice, promptly pay to the Agent such amount as may be necessary to eliminate such excess, which prepayment shall be applied as set forth in Section 2.07(b). (b) (i) In the event and on each occasion after the Effective Date that a Prepayment Event described in clause (ii) of the definition of the term Prepayment Event occurs, the Borrower shall, promptly upon (and in any event not later than the third Business Day next following) the occurrence of such Prepayment Event subject to the provisions of subsection (b)(iii) below, pay to the Agent 100% of the amount of Net Proceeds of such Prepayment Event to the Agent. All such prepayments under this subsection (b)(i) shall be applied as set forth in Section 2.07(b). (ii) In the event and on each occasion after the Effective Date that a Prepayment Event that is an event described in clause (i) of the definition of the term "Prepayment Event" and is not excluded from the definition of such term pursuant to the proviso in such definition (an "Asset Sale Prepayment Event") occurs, the Borrower shall, promptly upon (and in any event not later than the third Business Day next following) receipt by or on behalf of the Borrower or any Subsidiary thereof of the Net Proceeds from such Prepayment Event, pay 100% of the aggregate amount of Net Proceeds of all such Asset Sale Prepayment Events to the Agent, which amount, in the case of any Asset Sale Prepayment Event with respect to the American Queen, the Columbia Queen, the Cape Cod Light or the Cape May Light shall be reduced by any amounts required to be paid in connection with the MARAD Financing. All such prepayments under this subsection (b)(ii) shall be applied as set forth in Section 2.07(b). (iii) In the event that the calculation of the Net Proceeds relating to any Prepayment Event included an estimate for income taxes that was at least $100,000 greater than the income taxes actually payable in respect thereof, the Borrower shall, promptly after determining the amount of income taxes actually payable, pay the amount by which such estimate exceeded the amount of taxes actually payable to the Agent, which prepayment shall be applied as set forth in Section 2.07(b). (c) Any payment required by this Section 2.06 shall be payable without penalty or premium, except as may be required by Section 2.09(d) with respect to any Eurodollar Rate Loan prepaid as a result thereof. 2.07. Payments. (a) Manner and Time of Payment. Except as otherwise expressly set forth herein, all payments of principal of and interest on the Loans and other Agreement Obligations (including without limitation, fees and expenses) payable to the Agent, the Issuing Bank or the Lenders (or any of them) shall be made without setoff, counterclaim, defense, condition or reservation of right, in Dollars and in immediately available funds, delivered to the Agent not 35 42 later than 11:00 a.m.(New York City time) on the date and at the place due, to such account of the Agent as it may designate, for the account of the Agent, the Issuing Bank or the Lenders as the case may be; and funds received by the Agent after that time and date shall be deemed to have been paid and received by the Agent on the next succeeding Business Day. Payments actually received by the Agent for the account of the Agent, the Issuing Bank or the Lenders or any of them, shall be paid to them promptly after receipt thereof by the Agent. (b) Apportionment of Payments and Prepayments. (i) All payments and prepayments of principal and interest in respect of outstanding Loans and all payments of fees and all other payments in respect of any other Agreement Obligations, shall be allocated among the Issuing Bank and such of the Lenders as are entitled thereto, in proportion to their respective Pro Rata Shares or otherwise as provided herein. Subject to the provisions of Section 2.07(b)(ii), all such payments and prepayments and any other amounts received by the Agent from or for the benefit of the Borrower shall be applied first, to pay principal of and interest on any portion of the Loans which the Agent may have advanced on behalf of any Lender for which the Agent has not then been reimbursed by such Lender or the Borrower, second, to pay principal of and interest on any advance made under Section 11.18 for which the Agent has not then been paid by the Borrower or reimbursed by the Lenders, third, to pay all other Agreement Obligations (other than as those referred to in clauses fourth and fifth) then due and payable, fourth, to pay interest in respect of the Revolving Loans and unreimbursed LC Disbursements then due and payable, and fifth, to pay the principal of the Revolving Loans and unreimbursed LC Disbursements. All principal payments and prepayments in respect of Loans shall be applied first, to the Eurodollar Rate Loans maturing on the date of such payment, second, to repay outstanding Base Rate Loans, and then to repay outstanding Eurodollar Rate Loans with those Eurodollar Rate Loans which have earlier expiring Interest Periods being repaid prior to those which have later expiring Interest Periods. (ii) After the occurrence of an Event of Default and while the same is continuing, the Agent shall, unless otherwise specified at the direction of the Requisite Lenders, which direction shall be consistent with the last sentence of this clause (ii), apply all payments and prepayments in respect of any Obligations and all proceeds of Collateral in the following order: (A) first, to pay interest on and then principal of any portion of the Loans which the Agent may have advanced on behalf of any Lender for which the Agent has not then been reimbursed by such Lender or the Borrower; (B) second, to pay interest on and then principal of any advance made under Section 11.18 for which the Agent has not then been paid by the Borrower or reimbursed by the Lenders; 36 43 (C) third, to pay Agreement Obligations in respect of any fees, expense reimbursements or indemnities then due to the Agent; (D) fourth, to pay Agreement Obligations in respect of any fees, expense reimbursements or indemnities then due to the Lenders; (E) fifth, to pay interest due in respect of Revolving Loans and unreimbursed LC Disbursements; (F) sixth, to the ratable payment or prepayment of principal outstanding on Loans and unreimbursed LC Disbursements in such order as the Agent may determine in its sole discretion; (G) seventh, to the ratable payment of all other Agreement Obligations; and (H) eighth, to the ratable payment of all Obligations in respect of Eligible Hedging Contracts. The order of priority set forth in this Section 2.07(b)(ii) and the related provisions of this Agreement are set forth solely to determine the rights and priorities of the Agent, the Issuing Bank, the Lenders and the other Holders of Secured Obligations as among themselves. The order of priority set forth in clauses (D) through (H) of this Section 2.07(b)(ii) may at any time and from time to time be changed by the Requisite Lenders without necessity of notice to or consent of or approval by the Borrower, or any other Person. The order of priority set forth in clauses (A) through (C) of this Section 2.07(b)(ii) may be changed only with the prior written consent of the Agent. (ii) The Agent shall promptly distribute to the Issuing Bank and to each Lender at its primary address set forth on the appropriate signature page hereof or the signature page to the Assignment and Acceptance by which it became a Lender, or at such other address as the Issuing Bank, a Lender or other Holder of Secured Obligations may request in writing, such funds as such Person may be entitled to receive; provided that the Agent shall under no circumstances be bound to inquire into or determine the validity, scope or priority of any interest or entitlement of the Issuing Bank, any Lender or any other Holder of Secured Obligations and may suspend all payments or seek appropriate relief (including, without limitation, instructions from the Requisite Lenders or an action in the nature of interpleader) in the event of any doubt or dispute as to any apportionment or distribution contemplated hereby. (c) Payments on Non-Business Days. Whenever any payment to be made by Borrower hereunder shall be stated to be due on a day which is not a Business Day, payments shall be made on the next succeeding Business Day, unless such Business Day occurs in the succeeding month in which case such payment shall be made on the immediately preceding Business Day, and such extension of time, if any, shall be included in the computation of the payment of interest hereunder and of any of the fees specified in Section 2.05, as the case may be. 37 44 (d) Agent's Accounting. The Agent shall maintain such accounts, books and records (a "Loan Account") in which it shall record (i) the names and addresses of the Issuing Bank and the Lenders and the respective Commitments of, and principal amount of Loans owing to, each Lender from time to time; (ii) other appropriate debits and credits as provided in this Agreement, including, without limitation, all interest and fees constituting Obligations; and (iii) all payments of such Obligations made by Borrower or for Borrower's account. Each Lender shall maintain in accordance with its usual practices an account or accounts evidencing the indebtedness of Borrower to such Lender resulting from each Loan owing to such Lender from time to time, including the amount of principal and interest payable and paid to such Lender from time to time hereunder. Entries in any Loan Account made in accordance with the Agent's or any Lender's customary accounting practices as in effect from time to time shall constitute prima facie evidence of the matters reflected therein. 2.08. Interest Periods. By giving notice as set forth in Section 2.02(a) or 2.03(c) with respect to a Borrowing of, conversion into or continuation of Loans consisting of Eurodollar Rate Loans, Borrower shall have the option, subject to the other provisions of this Section 2.08 and Section 2.09, to specify an interest period (each an "Interest Period") to apply to the Borrowing described in such notice, which Interest Period shall be either a one (1), two (2), three (3) or six (6) month period. The determination of Interest Periods shall be subject to the following provisions: (a) In the case of immediately successive Interest Periods, each successive Interest Period shall commence on the day on which the next preceding Interest Period expires; (b) If any Interest Period would otherwise expire on a day which is not a Business Day, the Interest Period shall be extended to expire on the next succeeding Business Day; provided that if any such Interest Period would otherwise expire on a day which is not a Business Day and no further Business Day occurs in that calendar month, that Interest Period shall expire on the immediately preceding Business Day; (c) Borrower may not select an Interest Period which terminates later than the Maturity Date; and (d) Without the prior written consent of the Agent, there shall be no more than eight (8) Interest Periods under this Agreement in effect at any one time. 2.09. Special Provisions Governing Eurodollar Rate Loans. Notwithstanding other provisions of this Agreement, the following provisions shall govern with respect to Eurodollar Rate Loans as to the matters covered: (a) Determination of Interest Rate. As soon as practicable after 11:00 a.m. (New York City time) on the Interest Rate Determination Date, the Agent shall determine (which determination shall, absent manifest error, be presumptively correct) the interest rate which shall apply to the Eurodollar Rate Loans for which an interest rate is then being determined for the 38 45 applicable Interest Period and shall promptly give notice thereof (in writing or by telephone confirmed in writing) to Borrower and to each Lender. (b) Interest Rate Unascertainable, Inadequate or Unfair. If prior to the commencement of any Interest Period for a Borrowing of Eurodollar Rate Loans: (i) the Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate for such Interest Period; or (ii) the Agent is advised by the Requisite Lenders that the Adjusted LIBO Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period; then the Agent shall forthwith give notice thereof to Borrower and each Lender, whereupon until the Agent has determined that the circumstances giving rise to such suspension no longer exist, (a) the right of Borrower to elect to have Loans bear interest based upon the Adjusted LIBO Rate shall be suspended, and (b) each outstanding Eurodollar Rate Loan shall be converted into a Base Rate Loan on the last day of the then current Interest Period therefor, notwithstanding any prior election by the Borrower to the contrary. (c) Illegality. (i) In the event that on any date any Lender shall have determined (which determination shall, in the absence of manifest error, be final and conclusive and binding upon all parties) that the making or continuation of any Eurodollar Rate Loan has become unlawful by reason of (i) on or after the date of this Agreement, the adoption of any law, rule or regulation applicable to such Lender, or any change in any law, rule or regulation applicable to such Lender, or any change in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof, or (ii) compliance in good faith by such Lender with any request or directive (whether or not having the force of law) made after the date of this Agreement of any such Governmental Authority, then, and in any such event, such Lender shall promptly give notice (by teletransmission or by telephone promptly confirmed in writing) to Borrower and the Agent of that determination and the reasons therefor. Before giving any notice to Borrower or the Agent pursuant to this Section 2.09(c)(i), such Lender shall use reasonable efforts to make, fund and maintain its Eurodollar Rate Loans through another Applicable Lending Office if such change will avoid the need for giving such notice and will not, in the reasonable judgment of such Lender, be disadvantageous to such Lender. The Agent shall promptly forward any such notice it receives to the other Lenders. (ii) Upon the giving of the notice referred to in Section 2.09(c)(i), (A) Borrower's right to request of such Lender and such Lender's obligation to make Eurodollar Rate Loans with respect to any requested Borrowing or to convert Base Rate 39 46 Loans to Eurodollar Rate Loans shall be immediately suspended, and such Lender shall make Loans with respect to such requested Borrowing of Eurodollar Rate Loans as Base Rate Loans, and (B) if such Lender shall have determined that it may not lawfully continue to maintain any of its outstanding Eurodollar Rate Loans to the end of the Interest Period applicable thereto and shall so specify in such notice, the Borrower shall be deemed to have delivered (and is hereby permitted to so deliver) a Notice of Conversion/Continuance solely with respect to such Lender's Eurodollar Rate Loans and such Eurodollar Rate Loans shall be converted as of such date to Base Rate Loans on which interest and principal shall be payable contemporaneously with the related Eurodollar Rate Loans of the other Lenders. (iii) In the event that a Lender determines at any time following its giving of a notice referred to in Section 2.09(c)(i) that the circumstances giving rise to such suspension no longer exist, such Lender shall promptly give notice (by teletransmission or by telephone promptly confirmed in writing) to Borrower and the Agent of that determination, whereupon Borrower's right to request of such Lender and such Lender's obligation to make, or convert Base Rate Loans to, Eurodollar Rate Loans shall be restored. The Agent shall promptly forward any such notice it receives to the other Lenders. (d) Compensation. In addition to such amounts as are required to be paid by Borrower pursuant to Sections 2.03(a), 2.03(d), 2.05 and each other provision of this Agreement requiring payment by Borrower, Borrower shall compensate each Lender, upon demand, for all losses (but not including lost profits or loss of margin), expenses and liabilities (including, without limitation, any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund or maintain such Lender's Eurodollar Rate Loans to the Borrower) which such Lender may sustain (i) if for any reason a Borrowing of, conversion into or continuation of Eurodollar Rate Loans does not occur on a date specified therefor in a Notice of Borrowing or a Notice of Conversion/Continuation or in a telephonic request for borrowing or conversion or continuation or a successive Interest Period does not commence after notice therefor is given pursuant to Section 2.03(c)(ii), (ii) if any principal payment of any Eurodollar Rate Loan (including, without limitation, any prepayment pursuant to Section 2.06 but excluding any prepayment of any Eurodollar Rate Loan in connection with the replacement of any Lender under clause (i) of Section 2.14) occurs for any reason on a date which is not the last day of the applicable Interest Period, (iii) as a consequence of any required conversion of a Eurodollar Rate Loan to a Base Rate Loan as a result of any of the events indicated in Section 2.09(c) or (iv) as a consequence of an acceleration of the Obligations pursuant to Section 9.02(a). Such Lender shall deliver to Borrower, as a condition of Borrower's obligation to compensate such Lender, a written statement as to such losses, expenses and liabilities which statement, in the absence of manifest error, shall be conclusive as to such amounts. (e) Booking of Eurodollar Rate Loans. Any Lender may make, carry or transfer Eurodollar Rate Loans at, to, or for the account of, any of its branch offices, agencies or the office of an Affiliate of that Lender; provided that no such Lender shall be entitled to receive 40 47 any greater amount under Section 2.10 or Section 2.11(b) as a result of the transfer of any such Loan than such Lender would be entitled to immediately prior thereto unless (i) such transfer occurred at a time when circumstances giving rise to the claim for such greater amount did not exist and were not reasonably foreseeable by such Lender, or (ii) such claim would have arisen even if such transfer had not occurred. 2.10. Taxes. (a) Any and all payments by Borrower hereunder shall be made, in accordance with Section 2.07, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges, or withholdings, and all liabilities with respect thereto including those arising after the date hereof as a result of the adoption of or any change in any law, treaty, rule, regulation, guideline or determination of a Governmental Authority or any change in the interpretation or application thereof by a Governmental Authority but excluding, in the case of each Lender, the Issuing Bank and the Agent, such taxes (including income taxes, franchise taxes and branch profit taxes) as are imposed on or measured by such Lender's, the Issuing Bank's or the Agent's, as the case may be, net income by the United States of America or any Governmental Authority of the jurisdiction under the laws of which such Lender, the Issuing Bank or Agent, as the case may be, is organized, maintains an Applicable Lending Office or is deemed to be engaged in trade or business other than by reason of this Agreement or the transaction contemplated hereby (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings, and liabilities which the Agent, the Issuing Bank or a Lender determines to be applicable to this Agreement, the other Loan Documents, the Commitments, the Loans or the Letters of Credit being hereinafter referred to as "Taxes"). If Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under the other Loan Documents to any Lender, the Issuing Bank or the Agent, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.10) such Lender, the Issuing Bank or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) Borrower shall make such deductions, and (iii) Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. If a withholding tax of the United States of America or any other Governmental Authority shall be or become applicable (y) after the date of this Agreement, to such payments by Borrower made to the Applicable Lending Office or any other office that a Lender may claim as its Applicable Lending Office, or (z) after such Lender's selection and designation of any other Applicable Lending Office, to such payments made to such other Applicable Lending Office, such Lender shall use reasonable efforts to make, fund and maintain its Loans through another Applicable Lending Office of such Lender in another jurisdiction so as to reduce such Borrower's liability hereunder, if the making, funding or maintenance of such Loans through such other Applicable Lending Office of such Lender does not, in the reasonable judgment of such Lender, otherwise materially adversely affect such Loans, obligations under the Commitments or such Lender. (b) In addition, Borrower agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges, or similar levies which arise 41 48 from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement, the other Loan Documents, the Commitments, the Loans or the Letters of Credit (hereinafter referred to as "Other Taxes"). (c) Borrower will indemnify each Lender, the Issuing Bank and the Agent for the full amount of Taxes and Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any Governmental Authority on amounts payable under this Section 2.10) paid by such Lender, the Issuing Bank or the Agent (as the case may be) and, so long as such Lender, the Issuing Bank or the Agent (as the case may be) shall not have unreasonably delayed making such payment, any additional liability (including penalties, interest, and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within thirty (30) days after the date such Lender, the Issuing Bank or the Agent (as the case may be) makes written demand therefor. A certificate as to any such amount payable to any Lender, the Issuing Bank or the Agent under this Section 2.10 submitted to Borrower and the Agent (if a Lender or the Issuing Bank is so submitting) by such Lender, the Issuing Bank or the Agent shall show in reasonable detail the amount payable and the calculations used to determine such amount and shall, absent manifest error, be final, conclusive and binding upon all parties hereto. With respect to such deduction or withholding for or on account of any Taxes and to confirm that all such Taxes have been paid to the appropriate Governmental Authorities, Borrower shall promptly (and in any event not later than thirty (30) days after receipt) furnish to each Lender, the Issuing Bank and the Agent such certificates, receipts and other documents as may be required (in the reasonable judgment of such Lender, the Issuing Bank or the Agent) to establish any tax credit to which such Lender, the Issuing Bank or the Agent may be entitled, and, to the extent that the Borrower shall have paid, or reimbursed any Lender, the Issuing Bank or the Agent for, any such Taxes, such Lender, the Issuing Bank or the Agent, as applicable, shall promptly refund such amount to the Borrower to the extent that such Lender, the Issuing Bank or the Agent, as applicable, receives a permanent tax benefit as a result of any such credit. (d) Within thirty (30) days after the date of any payment of Taxes or Other Taxes by Borrower, Borrower will furnish to the Agent, at its address referred to in Section 11.08, the original or a certified copy of a receipt evidencing payment thereof. (e) Without prejudice to the survival of any other agreement of Borrower hereunder, the agreements and obligations of Borrower contained in this Section 2.10 shall survive the payment in full of principal and interest hereunder and the termination of this Agreement. (f) Each Lender that is not created or organized under the laws of the United States of America or a political subdivision thereof shall deliver to Borrower and the Agent on or before the Effective Date, or, if later, the date on which such Lender becomes a Lender pursuant to Section 11.02 hereof, a true and accurate certificate executed in duplicate by a duly authorized officer of such Lender, in a form satisfactory to Borrower and the Agent, to the effect that such Lender is entitled to receive payments under this Agreement without deduction or withholding of United States federal income taxes and two properly completed and duly executed copies of IRS 42 49 Form W-8BEN or W-8ECI (or a successor form thereto). Each such Lender further agrees to deliver to Borrower and the Agent from time to time a true and accurate certificate executed in duplicate by a duly authorized officer of such Lender substantially in a form satisfactory to Borrower and the Agent, before or promptly upon the occurrence of any event requiring a change in the most recent certificate previously delivered by it to Borrower and the Agent pursuant to this Section 2.10(f). Further, each Lender which delivers a certificate accompanied by Form W-8BEN or W-8ECI of the IRS covenants and agrees to deliver to Borrower and the Agent within fifteen (15) days prior to the last day of the third (3rd) succeeding calendar year, and every third (3rd) anniversary of such date thereafter, on which this Agreement is still in effect, another such certificate and two accurate and complete original signed copies of Form W-8BEN or W-8ECI (or any successor form or forms required under the IRC or the applicable regulations promulgated thereunder). Each such certificate shall certify as to one of the following: (i) that such Lender is capable of receiving payments of interest hereunder without deduction or withholding of United States of America federal income tax or, in the case of a Lender claiming exemption from withholding of any United States federal income taxes under Section 871(h) or 881(c) of the IRC with respect to payments of "portfolio interest", a certificate representing that such Lender is not (i) a "bank" for purposes of Section 881(c) of the IRC, (ii) a ten-percent shareholder of the Borrower (within the meaning of Section 871(h)(3)(B) of the IRC), or (iii) a controlled foreign corporation related to the Borrower (within the meaning of Section 864(d)(4) of the IRC); (ii) that such Lender is not capable of receiving payments of interest hereunder without deduction or withholding of United States of America federal income tax as specified therein but is capable of recovering the full amount of any such deduction or withholding from a source other than the Borrower and will not seek any such recovery from Borrower; or (iii) that, as a result of the adoption of or any change in any law, treaty, rule, regulation, guideline or determination of a Governmental Authority or any change in the interpretation or application thereof by a Governmental Authority after the date such Lender became a party hereto, such Lender is not capable of receiving payments of interest hereunder without deduction or withholding of United States of America federal income tax as specified therein and that it is not capable of recovering the full amount of the same from a source other than the Borrower. If the form provided by any Lender at the time such Lender first becomes a party to this Agreement indicates a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from "Taxes" as defined in Section 2.10(a). Each Lender shall promptly furnish to Borrower and the Agent such additional documents as may be reasonably required by Borrower or the Agent to establish any exemption from or reduction of any Taxes or Other Taxes required to be deducted or withheld and which may be obtained without undue expense to such Lender. 43 50 (g) For any period with respect to which a Lender has failed to provide Borrower with the appropriate form pursuant to Section 2.10(f) (unless such failure is due to a change in treaty, law or regulation occurring subsequent to the date on which a form originally was required to be provided), such Lender shall not be entitled to indemnification under Section 2.10(c), and Borrower shall not be required to comply with Section 2.10(a), with respect to Taxes imposed by the United States; provided, however, that should a Lender, which is otherwise exempt from or subject to a reduced rate of withholding tax, become subject to Taxes because of its failure to deliver a form required hereunder, Borrower shall take such steps as such Lender shall reasonably request to assist such Lender to recover such Taxes so long as Borrower shall incur no costs or liability as a result thereof. (h) In cases in which the Borrower makes a payment under this Agreement to a U.S. person with knowledge that such U.S. person is acting as an agent for a foreign person, the Borrower will not treat such payment as being made to a U.S. person for purposes of Treas. Reg.ss.1.1441-1(b)(2)(ii) (or a successor provision) without the express written consent of such U.S. person. 2.11. Capital Adequacy; Increased Costs. (a) If any Lender or the Issuing Bank determines that (i) the introduction of or any change in any law, order or regulation or in the interpretation or administration of any law, order or regulation by any Governmental Authority charged with the interpretation or administration thereof after the date hereof or (ii) compliance with any guideline or request issued or made after the date hereof from any central bank or other Governmental Authority (whether or not having the force of law) has or would have the effect of reducing the rate of return on the capital of such Lender or the Issuing Bank or any corporation controlling such Lender or the Issuing Bank, as a consequence of or with reference to this Agreement, such Lender's Commitment or its making or maintaining Loans, or the Issuing Bank's issuing or maintaining, or such Lenders participating in, Letters of Credit, below the rate which such Lender or the Issuing Bank or such other corporation could have achieved but for such compliance (taking into account the policies of such Lender or the Issuing Bank or such corporation with regard to capital) by an amount deemed by such Lender or the Issuing Bank, as applicable, to be material, then Borrower shall from time to time, upon demand by such Lender or the Issuing Bank (with a copy of such demand to the Agent), pay to such Lender or the Issuing Bank, as applicable, additional amounts sufficient to compensate such Lender or the Issuing Bank, as applicable, for such reduction, upon receipt by Borrower (with a copy to the Agent) of a certificate as to such amounts, by such Lender or the Issuing Bank, as applicable, setting forth in reasonable detail the basis for, and the calculations used by such Lender or the Issuing Bank, as applicable, in determining, any such amounts. Such certificate, in the absence of manifest error, shall be conclusive and binding for all purposes. (b) In the event that after the date hereof (i) the adoption of or any change in any law, treaty, rule, regulation, guideline or determination of a Governmental Authority or any change in the interpretation or application thereof by a Governmental Authority, or (ii) compliance by any Lender or the Issuing Bank with any request or directive (whether or not 44 51 having the force of law and whether or not the failure to comply therewith would be unlawful) from any central bank or other Governmental Authority or quasi-governmental authority exercising jurisdiction, power or control over banks or financial institutions generally, does impose, modify, or hold applicable, in the determination of a Lender, any reserve, special deposit, compulsory loan, FDIC insurance, capital allocation or similar requirement against assets held by, or deposits or other liabilities in or for the account of, advances or loans by, commitments made, letters of credit issued or participated in, or other credit extended by, or any other acquisition of funds by, a Lender or any Applicable Lending Office of such Lender (except with respect to Base Rate Loans, so long as the Alternate Base Rate in effect at the time is determined by reference to the Prime Rate) or the Issuing Bank which is not otherwise taken into account in the calculation of the Adjusted LIBO Rate or the Alternate Base Rate, and the result of any of the foregoing is to increase the cost to such Lender or the Issuing Bank of making, renewing or maintaining the Loans or its Commitment or issuing, maintaining or participating in any Letter of Credit or to reduce any amount receivable hereunder or thereunder; then, in any such case, Borrower shall upon written notice from and demand by that Lender or the Issuing Bank pay to such Lender or the Issuing Bank, as applicable, within fifteen (15) Business Days of the date specified in such notice and demand, such amount or amounts (based upon a reasonable allocation thereof by such Lender or the Issuing Bank, as applicable, to the financing transactions contemplated by this Agreement and affected by this Section 2.11(b)) as may be necessary to compensate that Lender or the Issuing Bank, as applicable, for any such additional cost incurred or reduced amount received. Such Lender or the Issuing Bank, as applicable, shall deliver to the Borrower with any such notice and demand a certificate setting forth in reasonable detail the basis for, and the calculations used by such Lender or the Issuing Bank, as applicable, in determining, the costs or reductions so claimed and the allocation made by such Lender or the Issuing Bank, as applicable, of such costs and reductions. Such certificate, in the absence of manifest error, shall be conclusive and binding for all purposes. If a Lender or the Issuing Bank, as applicable, subsequently recovers from another Person any amount previously paid by Borrower pursuant to this Section 2.11(b), such Lender or the Issuing Bank, as applicable, shall, within thirty (30) days after receipt of such refund and to the extent permitted by applicable law, pay to the Borrower, without interest, the amount of any such recovery. (c) Failure or delay on the part of any Lender or the Issuing Bank to demand compensation pursuant to this Section 2.11 shall not constitute a waiver of such Lender's or the Issuing Bank's right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender or the Issuing Bank pursuant to this Section 2.11 for any increased costs or reduction incurred more than 180 days prior to the date that such Lender or the Issuing Bank, as the case may be, notifies the Borrower of the circumstances giving rise to such increased costs or reductions and of such Lender's or the Issuing Bank's intention to claim compensation therefor; provided further that, if the change or compliance giving rise to such increased costs or reductions is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof. (d) If any Lender requests compensation under this Section 2.11, then such Lender shall use reasonable efforts to designate a different Applicable Lending Office for funding or booking its Loans hereunder, if, in the reasonable judgment of such Lender, such 45 52 designation (i) would eliminate or reduce amounts payable pursuant to this Section 2.11 in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. 2.12. Use of Proceeds of the Loans and the Letters of Credit. The proceeds of the Loans and the Letters of Credit shall be used for general corporate purposes. 2.13. Authorized Officers of Borrower. Borrower shall notify the Agent in writing of the names of the officers and employees authorized to request Loans and Letters of Credit and to request a conversion or continuation of any Loan and shall provide the Agent with a specimen signature of each such officer or employee. The Agent shall be entitled to rely conclusively on such officer's or employee's authority to request such Loan or Letter of Credit or such conversion or continuation until the Agent receives written notice to the contrary. The Agent shall have no duty to verify the authenticity of the signature appearing on any written Notice of Borrowing, notice of request for the issuance of a Letter of Credit or Notice of Conversion/Continuation and, with respect to an oral request for such a Loan or such conversion or continuation, the Agent shall have no duty to verify the identity of any person representing himself as one of the officers or employees authorized to make such request on behalf of Borrower. Neither the Agent nor any Lender shall incur any liability to Borrower in acting upon any telephonic notice referred to above which the Agent believes to have been given by a duly authorized officer or other person authorized to borrow on behalf of Borrower. 2.14. Replacement of Certain Lenders. In the event a Lender ("Affected Lender") shall have: (i) failed to fund its Pro Rata Share of any Borrowing requested by the Borrower which such Lender is obligated to fund under the terms of this Agreement and which such failure has not been cured, (ii) has requested compensation from the Borrower under Section 2.10 or 2.11 to recover additional costs incurred by such Lender which are not being incurred generally by the other Lenders, or (iii) delivered a notice pursuant to Section 2.09(c)(i) claiming that such Lender is unable to extend Eurodollar Rate Loans to the Borrower for reasons not generally applicable to the other Lenders, then, in any such case, the Borrower or the Agent may make written demand on such Affected Lender (with a copy to the Agent in the case of a demand by the Borrower and a copy to the Borrower in the case of a demand by the Agent) for the Affected Lender to assign, and such Affected Lender shall assign pursuant to one or more duly executed Assignment and Acceptances five (5) Business Days after the date of such demand, to one or more financial institutions which complies with the provisions of Section 11.02) (and, if selected by the Borrower is reasonably acceptable to the Agent) which the Borrower or the Agent, as the case may be, shall have engaged for such purpose ("Replacement Lender"), all of such Affected Lender's rights and obligations under this Agreement and the other Loan Documents (including, without limitation, its Commitment and Revolving Credit Exposure) in accordance with Section 11.02. Further, with respect to such assignment, the Affected Lender shall have concurrently received, in cash, all amounts due and owing to the Affected Lender hereunder or under any other Loan Document, including, without limitation, the aggregate outstanding principal amount of the Loans and unreimbursed LC Disbursements owed to such Lender, together with accrued interest thereon through the date of such assignment, amounts payable under Sections 2.10 and 2.11, and compensation payable under Section 2.09(d) 46 53 in the event of any replacement of any Affected Lender under clause (ii) or clause (iii) of this Section 2.14; provided, upon such Affected Lender's replacement, such Affected Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.09, 2.10, 2.11, 11.03 and 11.04, as well as to any fees accrued for its account hereunder and not yet paid. Upon the replacement of any Affected Lender pursuant to this Section 2.14, each such Affected Lender shall cease to have any participation in, entitlement to, or other right to share in the security interests and liens of the Agent and the Holders of Secured Obligations in the Collateral except with respect to Eligible Hedging Contracts. ARTICLE III Conditions to Loans 3.01. Conditions Precedent to Effectiveness. The effectiveness of this Agreement, and the obligation of each Lender to make Revolving Loans and of the Issuing Bank to issue Letters of Credit hereunder, shall be subject to the satisfaction of all of the following conditions precedent: (a) Documents. The Agent and the Lenders shall have received on or before the Effective Date (i) this Agreement, the Notes, the other Transaction Documents and all other agreements, documents and instruments described in the List of Closing Documents attached hereto as Exhibit 6 and made a part hereof, each duly executed where appropriate and in form and substance satisfactory to the Agent and the Lenders and (ii) such additional documentation as the Agent or any Lender may reasonably request. (b) No Legal Impediments. No law, regulation, order, judgment or decree of any Governmental Authority shall, and the Agent shall not have received any notice that litigation is pending or threatened which is likely to (i) enjoin, prohibit or restrain the making of the Loans on the Effective Date or (ii) impose or result in the imposition of a Material Adverse Effect. (c) No Change in Condition. No change in the business, assets, management, operations or financial condition of the Borrower or the Consolidated Borrower Group taken as a whole shall have occurred since December 31, 1999, which change, in the judgment of the Lenders, could reasonably be expected to have a Material Adverse Effect. (d) No Default. No Event of Default or Potential Event of Default shall have occurred and be continuing or would result from the making of the Loans. (e) Representations and Warranties. All of the representations and warranties contained in Section 4.01 and in any of the other Loan Documents shall be true and correct in all material respects on and as of the Effective Date. (f) Payment of Fees and Expenses. On the Effective Date, the Borrower shall have paid to the Agent, for the accounts of the Lenders and the Agent, as applicable, an amount 47 54 equal to the sum of (i) all fees due and payable on or before the Effective Date (including, without limitation, all fees described in the Fee Letter) and (ii) all expenses due and payable on or before the Effective Date (including the expenses and fees of Sidley & Austin then due and payable). (g) Legal Matters. All legal and regulatory matters shall be satisfactory to the Agent and its counsel and to each Lender and their respective counsel. 3.02. Conditions Precedent to all Loans. The obligation of each Lender to make any Revolving Loan on any date, and of the Issuing Bank to issue, amend, renew or extend any Letter of Credit on any date, is subject to the following conditions precedent as of such date: (a) Representations and Warranties. All of the representations and warranties of Borrower contained in or repeated pursuant to Section 4.02 and of Borrower or its Subsidiaries contained in any other Loan Document (other than representations and warranties which expressly speak only as of a different date) shall be true and complete in all respects on and as of such date as though made on and as of such date both before and after taking into account the requested Revolving Loan to be made or the requested Letter of Credit to be issued. (b) No Default. No Event of Default or Potential Event of Default shall have occurred and be continuing or would result from the making of the requested Revolving Loan or the issuance of the requested Letter of Credit. (c) No Injunction. No law or regulation shall have been adopted, no order, judgment or decree of any Governmental Authority shall have been issued, and no litigation shall be pending or threatened (other than as a result of any condition described in Section 2.09(d), 2.10 or 2.11), which in the reasonable judgment of the Requisite Lenders, would enjoin, prohibit or restrain any Lender from making the requested Revolving Loan or the Issuing Bank from issuing the requested Letter of Credit or as a result of making any such Loan or issuing any such Letter of Credit impose or result in the imposition of any material adverse condition upon any Lender. (d) No Material Adverse Change. No event shall have occurred after December 31, 1999 which, in the reasonable judgment of the Requisite Lenders, could reasonably be expected to have a Material Adverse Effect. (e) No Forfeiture Proceedings. Neither the Borrower nor any of its Subsidiaries shall have been named as a defendant in a criminal indictment under the Racketeering Influenced and Corrupt Organizations Act or any similar federal or state statute which provides for forfeiture of assets as a potential criminal penalty unless such proceeding shall not be adverse to the interests of the Lenders. Each Borrowing and each issuance, amendment, renewal or extension of a Letter of Credit shall constitute a representation and warranty by Borrower as of the date thereof that all the conditions contained in this Section 3.02 have been satisfied or waived in writing pursuant to Section 11.07. 48 55 ARTICLE IV Representations and Warranties 4.01. Representations and Warranties on the Initial Funding Date. To induce each Lender, the Issuing Bank and the Agent to enter into this Agreement and to make the Loans and to issue and participate in Letters of Credit hereunder, the Borrower hereby represents and warrants to each Lender, the Issuing Bank and the Agent that the following statements are true and correct: (a) Organization; Corporate Powers. The Parent, the Borrower and each of their respective Subsidiaries (i) is a corporation or limited liability company duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (ii) is duly qualified to do business as a foreign corporation or limited liability company and is in good standing under the laws of each jurisdiction in which it owns or leases real property or in which the nature of its business requires it to be so qualified, except those jurisdictions where the failure to be in good standing or to so qualify could not reasonably be expected to have a Material Adverse Effect, and (iii) has all requisite power and authority to own, operate and encumber its property and assets and to conduct its business as presently conducted and as proposed to be conducted in connection with and following the consummation of the transactions contemplated by the Transaction Documents. (b) Authority. (i) The Parent and the Borrower and each of its Subsidiaries has the requisite power and authority to execute, deliver and perform its obligations under each of the Transaction Documents executed by it, or to be executed by it. (ii) The execution, delivery and performance (or filing or recording, as the case may be) of each of the Transaction Documents to which the Parent or the Borrower or any of its Subsidiaries is a party, and the consummation of the transactions contemplated thereby, have been duly authorized by all necessary corporate or company action on the part of each such Person, the respective boards of directors or managers, as applicable, of each such Person, and, if necessary, the stockholders or members, as applicable, of each such Person, and no other corporate or company proceedings on the part of any such Person are necessary to consummate such transactions. (iii) Each of the Transaction Documents to which the Parent or the Borrower or any of its Subsidiaries is a party has been duly executed and delivered (or filed or recorded, as the case may be) by each such Person and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles), is in full force and effect (unless terminated in accordance with the terms thereof) and no term or condition thereof has been amended, 49 56 modified or waived from the terms and conditions contained therein without the prior written consent of the Agent and the Requisite Lenders or, where so required, all of the Lenders, and the Parent and the Borrower and each of its Subsidiaries have performed and complied in all material respects with all the material terms, provisions, agreements and conditions set forth therein and required to be performed or complied with by such parties on or before the effective date thereof, and no default by any such party exists thereunder. (c) Subsidiaries. The Borrower has no Subsidiaries other than those described in Schedule 4.01(c) and those, if any, which are permitted by Section 7.03 to be created or acquired after the Effective Date. (d) No Conflict. The execution, delivery and performance by the Parent and the Borrower and each of its Subsidiaries of each Transaction Document to which it is a party and each of the transactions contemplated thereby do not and will not (i) conflict with any Contractual Obligation of any such Person, any liability resulting from which could reasonably be expected to have a Material Adverse Effect, or (ii) conflict with the documents of organization or governance of any such Person, or (iii) except as set forth on Schedule 4.01(d), conflict with, result in a breach of or constitute (with or without notice or lapse of time or both) a default under any Requirement of Law or Contractual Obligation of any such Person, or (iv) result in or require the creation or imposition of any Lien whatsoever upon any of the properties or assets of any such Person (other than Liens in favor of the Agent, for the benefit of itself and the Holders of Secured Obligations, arising pursuant to the Loan Documents or Liens permitted pursuant to Section 7.02(b)), or (v) require any approval of stockholders or members of any such Person, unless such approval has been obtained. (e) Governmental Consents. The execution, delivery and performance by the Parent and the Borrower and each of its Subsidiaries of each Transaction Document to which it is a party and the transactions contemplated thereby do not and will not require any registration with, consent or approval of, or notice to, or other action with or by, any Governmental Authority. (f) Governmental Regulation. Neither the Parent nor Borrower nor any of its Subsidiaries is subject to regulation under the Public Utility Holdings Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, the Investment Company Act of 1940 or any other statute or regulation of any Governmental Authority such that its ability to incur indebtedness is limited or its ability to consummate the transactions contemplated hereby or by the other Transaction Documents is materially impaired. (g) Financial Position. (i) As of the Effective Date, all quarterly and annual financial statements of Borrower or of the Consolidated Borrower Group or the Consolidated Parent Group delivered to the Agent were prepared in conformity with Agreement Accounting Principles (except as otherwise noted therein) and fairly present the financial position of 50 57 Borrower or the consolidated financial position of the Consolidated Borrower Group or the Consolidated Parent Group, as the case may be, as at the respective dates thereof and the results of operations and changes in cash flows for each of the periods covered thereby, subject, in the case of any unaudited interim financial statements, to normal year-end adjustments. (ii) All quarterly and annual financial statements of the Borrower or of the Consolidated Borrower Group or the Consolidated Parent Group delivered to the Agent after the Effective Date were prepared in conformity with Agreement Accounting Principles (except as otherwise noted therein) and fairly present the financial position of Borrower or the consolidated financial position of the Consolidated Borrower Group or the Consolidated Parent Group, as the case may be, as at the respective dates thereof and the results of operations and changes in cash flows for each of the periods covered thereby, subject, in the case of any unaudited interim financial statements, to normal year-end adjustments. Except as contemplated in the Transaction Documents, neither the Parent nor the Borrower nor any of their respective Subsidiaries has any material obligations, contingent liabilities or liabilities for taxes, long term leases or material or unusual forward or long term commitments which are not reflected in such financial statements and the notes thereto as at the respective dates thereof. (h) Financial Projections. As of the Effective Date, the financial statement projections for the Consolidated Borrower Group contained in the Confidential Information Memorandum dated August 2000 delivered to the Lenders reflect the Borrower's best estimate of future performance based upon the past operations of its business, current conditions and other information available to the Borrower at the time, and the assumptions and methodology used in such projections were reasonable. (i) Capitalization. (i) As of April 28, 2000, the date of filing of the Parent's most recent proxy statement, Schedule 4.01(i) sets forth the number of shares and the relevant percentages of capital stock held by each shareholder of the Parent that holds in excess of 5% of the Capital Stock of the Parent of which the Borrower has knowledge. (ii) As of the Effective Date, there are outstanding no shares of any class of capital stock and no membership interests of any class (or any securities, instruments, warrants, option or purchase rights, conversion or exchange rights, calls, commitments or claims of any character convertible into or exercisable for capital stock or membership interests) of: (A) Borrower other than capital stock described on Schedule 4.01(i); and (B) any Subsidiary of the Borrower other than (1) the capital stock of DQSB II, Inc., of DQSC Property Co. and of Cruise America Travel, Incorporated held by Borrower, (2) the membership interests in Great River Cruse Line, L.L.C., in Great Ocean Cruise Line, L.L.C, in GAQSC, in GPCL and in DQCV, in each case owned by Borrower and by DQSB II, Inc. and 51 58 (3) the membership interests in Cape Cod Light, L.L.C. and in Cape May Light, L.L.C., in each case owned by DQCV and by DQSB II, Inc., and in each case, other than with respect to GAQSC, DQCV, Cape Cod Light, L.L.C., Cape May Light, L.L.C. and, upon consummation of the MARAD Financing with respect to the Columbia Queen, GPCL, pledged to the Agent for the benefit of itself and Holders of Secured Obligations pursuant to the Pledge Agreements. (iii) None of the capital stock or membership interests of any Subsidiary of the Borrower, other than with respect to GAQSC and, upon consummation of the MARAD Financing for the Columbia Queen, the Cape Cod Light and the Cape May Light, GPCL, Cape Cod Light, L.L.C. and Cape May Light, L.L.C., in each case pursuant to the MARAD Financing, is subject to any security, instrument, warrant, option or purchase rights, agreement, conversion or exchange rights, call, commitment or claim of any right, title or interest therein or thereto other than pursuant to the Pledge Agreements. The outstanding capital stock of each Subsidiary of the Borrower that is a corporation is duly authorized, validly issued, fully paid and nonassessable. Neither the Borrower nor any of its Subsidiaries that is a member of any other Subsidiary that is a limited liability company has any further liability to such other Subsidiary for contribution or otherwise in its capacity as such a member. (j) Litigation; Adverse Effects. (i) Except as set forth in Schedule 4.01(j), there is no action, suit, proceeding, investigation of any Governmental Authority or arbitration, at law or in equity, or before or by any Governmental Authority, pending, or, to the best knowledge of Borrower, threatened against the Parent, the Borrower or any of their respective Subsidiaries or any Property of any of them, as to which there is a reasonable possibility of an adverse determination and which if adversely determined could reasonably be expected to have a Material Adverse Effect. (ii) Neither the Parent, the Borrower nor any of their respective Subsidiaries is (A) to the knowledge of Borrower, in violation of any applicable law which violation could reasonably be expected to have a Material Adverse Effect, or (B) subject to or in default with respect to any final judgment, writ, injunction, decree, order, rule or regulation of any court or Governmental Authority which could reasonably be expected to have a Material Adverse Effect. Except as set forth in Schedule 4.01(j), there is no action, suit, proceeding or investigation pending or, to the knowledge of Borrower, threatened against or affecting the Parent or the Borrower or any of its Subsidiaries (1) which challenges the validity or the enforceability of any of the Transaction Documents, (2) which will or would reasonably be expected to result in any liability in the aggregate in the amount of greater than $1,000,000 with respect to any such Person other than the Parent (in each case net of applicable third-party insurance coverage other than retro-premium insurance that determines retro-premiums solely on the basis of losses of the insured person) or (3) which involves a claim under the Racketeering Influenced and Corrupt Organizations Act or any similar federal or state statute where such Person is a defendant in a criminal indictment that provides for the forfeiture of assets to any Governmental Authority as a potential criminal penalty. 52 59 (k) No Material Adverse Change. With respect to Borrower or the Consolidated Borrower Group taken as a whole, there has occurred no event since December 31, 1999 which could reasonably be expected to have a Material Adverse Effect. (l) Payment of Taxes. All tax returns and reports of Borrower and its Subsidiaries required to be filed (including extensions), have been timely filed, and all taxes, assessments, fees and other charges of Governmental Authorities thereupon and upon their respective properties, assets, income and franchises which are shown on such returns as being due and payable, have been paid when due and payable, except (i) taxes being contested in good faith by appropriate proceedings and that are reserved against in accordance with Agreement Accounting Principles, (ii) taxes which are not yet delinquent, (iii) taxes which are payable in installments so long as paid before any penalty accrues with respect thereto and (iv) other taxes, assessments, fees and other charges of Governmental Authorities the failure of which to pay could not be reasonably expected to have a Material Adverse Effect in the aggregate and tax returns and reports with respect to taxes that are reserved against in accordance with Agreement Accounting Principles. On the Effective Date, except as set forth in clause (iv) above or on Schedule 4.01(l), and after the Effective Date, except as set forth in clauses (i) through (iv) above or on Schedule 4.01(l), Borrower has no knowledge of any proposed tax assessment against Borrower or any Borrower Subsidiary. All tax assessments referred to in Schedule 4.01(l) are being contested in good faith by Borrower or such Subsidiary or a settlement with respect to any such assessment is being negotiated in good faith by such Person and appropriate reserves have been established in accordance with Agreement Accounting Principles. (m) Material Adverse Agreements. Neither the Borrower nor any of its Subsidiaries is a party to or subject to any Contractual Obligation or other restriction contained in its charter or By-laws which could reasonably be expected to have a Material Adverse Effect after giving effect to the consummation of the transactions contemplated in the Transaction Documents or otherwise. (n) Performance. Neither the Borrower nor any of its Subsidiaries is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any Contractual Obligation applicable to it under any agreement or instrument the absence or termination of which Contractual Obligations could reasonably be expected to have a Material Adverse Effect, and no condition exists which, with the giving of notice or the lapse of time, or both, would constitute a default under such Contractual Obligation, except where the consequences, direct or indirect, of such default or defaults, if any, could not reasonably be expected to have a Material Adverse Effect. (o) Securities Activities. Neither the Parent nor the Borrower nor any of its Subsidiaries is engaged in the business of extending credit for the purpose of purchasing or carrying any Margin Stock. (p) Disclosure. Subject to changes in facts or conditions which are required or permitted under this Agreement, the representations and warranties of the Parent and the Borrower and its Subsidiaries contained in the Transaction Documents, and all certificates and 53 60 other documents delivered to the Agent in connection therewith, taken as a whole do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading. (q) Requirements of Law. The Parent and the Borrower and each of its Subsidiaries is in compliance with all Requirements of Law (including, without limitation, the Securities Act and the Securities Exchange Act, the applicable rules and regulations thereunder, and state securities laws) applicable to it and its business, where the failure to so comply could not reasonably be expected to have a Material Adverse Effect. (r) Patents, Trademarks, Permits, Etc. The Borrower and each of its Subsidiaries owns, is licensed or otherwise has the lawful right to use, or has all permits and other approvals of Governmental Authorities, patents, trademarks, service marks, trade names, copyrights, technology, know-how and processes used in or necessary for the conduct of its business except to the extent that the absence of which could not reasonably be expected to have Material Adverse Effect. The use of such permits and other approvals of Governmental Authorities, patents, trademarks, service marks, trade names, copyrights, technology, know-how and processes by the Borrower or any of its Subsidiaries does not infringe on the rights of any Person, subject to such claims and infringements the existence of which could not reasonably be expected to have a Material Adverse Effect. The consummation of the transactions contemplated by the Transaction Documents will not impair the ownership of or rights under (or the license or other right to use, as the case may be) any permits and governmental approvals, patents, trademarks, service marks, trade names, copyrights, technology, know-how or processes by the Borrower or any of its Subsidiaries in any manner which could reasonably be expected to have a Material Adverse Effect. (s) Environmental Matters. Except where the failure of which could not reasonably be expected to have a Material Adverse Effect, (i) each of the operations of the Borrower and its Subsidiaries comply in all material respects with all applicable environmental, health and safety Requirements of Law; (ii) the Borrower and each of its Subsidiaries has obtained all environmental, health and safety Permits necessary for its operations, all such Permits are in good standing and the Borrower and each of its Subsidiaries is in compliance with all terms and conditions of such Permits; (iii) (A) neither the Borrower nor any of its Subsidiaries, any of their present Property or operations and (B) to the knowledge of the Borrower, none of the Borrower's nor any of its Subsidiaries' previously owned Property or past operations is subject to any order from or agreement with any Governmental Authority or private party or any judicial or administrative proceeding or investigations respecting any environmental, health or safety Requirements of Law or is the subject of any investigation by any Governmental Authority evaluating the need for Remedial Action to respond to a material Release or threatened Release of a Contaminant into the environment, or is subject to any Remedial Action or other Liabilities and Costs arising from the Release or threatened Release of a Contaminant into the environment; (iv) none of the operations of the Borrower or any of its Subsidiaries is subject to any judicial or administrative proceeding alleging a violation of any environmental, health or safety Requirement of Law; (v) none of the present or, to the 54 61 knowledge of the Borrower, past operations of the Borrower or its Subsidiaries is the subject of any investigation by any Governmental Authority evaluating whether any Remedial Action is needed to respond to a Release or threatened Release of a Contaminant into the environment; (vi) to the knowledge of the Borrower, no past or present property of the Borrower or any of its Subsidiaries is now or has ever been a storage, treatment or disposal facility for hazardous waste, as those terms are defined under 40 CFR Part 261 or any state equivalent; (vii) neither the Borrower nor any of its Subsidiaries has filed any notice under any applicable Requirement of Law reporting a Release of a Contaminant into the environment; (viii) there is not now, nor has there ever been, on or in the Property of the Borrower or any of its Subsidiaries: (A) any underground storage tanks or surface impoundments or (B) any polychlorinated biphenyls used in hydraulic oils, electrical transformers or other equipment; (ix) neither the Borrower nor any of its Subsidiaries has received any notice or claim to the effect that it is or might be liable to any Person as a result of the Release or threatened Release of a Contaminant into the environment, or as a result of exposure to asbestos or to any other hazardous substance, which might result in liability in excess of workers compensation; (x) no Environmental Lien has attached to any Property of the Borrower or any of its Subsidiaries; or (xi) within the last eighteen months, the Borrower has inspected its Property and the Property of its Subsidiaries which the Borrower knows contains asbestos containing material or which was acquired during such eighteen-month period and which the Borrower has reason to believe could contain asbestos containing material, and all asbestos containing material, if any, which is on or part of such Property (excluding any raw materials which are used in the manufacture of products or products themselves) is in good repair according to the current standards and practices governing such material, and its presence or condition does not violate any currently applicable or proposed Requirement of Law; and (xii) none of the products which the Borrower or any of its Subsidiaries manufactures, distributes or sells, or ever has manufactured, distributed or sold, contains asbestos material. (t) ERISA. Neither Borrower nor any ERISA Affiliate maintains or contributes to any Plan other than those listed on Schedule 4.01(t). Each Plan which is intended to be qualified under Section 401(a) of the IRC as currently in effect has been determined by the IRS to be so qualified (or will be submitted to the IRS for a determination as to its qualified status within the applicable remedial amendment period for such Plan), and each trust related to any such Plan has been determined to be exempt from Federal income tax under Section 501(a) of the IRC as currently in effect. Except as disclosed in Schedule 4.01(t), neither Borrower nor any ERISA Affiliate maintains or contributes to any employee welfare benefit plan within the meaning of Section 3(1) of ERISA which provides benefits to employees after termination of employment other than as required by Section 601 of ERISA. The Borrower and all of its ERISA Affiliates are in compliance in all material respects with all of the responsibilities, obligations or duties imposed on them by ERISA or regulations promulgated thereunder with respect to all Plans. No Benefit Plan has incurred any accumulated funding deficiency (as defined in Sections 302(a)(2) of ERISA and 412(a) of the IRC) whether or not waived. Neither the Borrower nor any ERISA Affiliate or any fiduciary of any Plan which is not a Multiemployer Plan (i) has engaged in a nonexempt prohibited transaction described in Section 406 of ERISA or 4975 of the IRC which could result in the imposition of a penalty or fine, the payment of which could reasonably be expected to have a Material Adverse Effect, or (ii) has taken or failed to take any action which would constitute or result in a Termination Event that could subject either the 55 62 Borrower or an ERISA Affiliate to a material liability to pay money. Except as disclosed on Schedule 4.01(t), neither the Borrower nor any ERISA Affiliate has any potential liability of a material amount under Section 4063, 4064, 4069, 4204 or 4212(c) of ERISA. Neither the Borrower nor any ERISA Affiliate has incurred any liability to the PBGC which remains outstanding other than the payment of premiums, and there are no premium payments which have become due which are unpaid. Neither Borrower nor any ERISA Affiliate has (i) failed to make a required contribution or payment to a Multiemployer Plan or (ii) made a complete or partial withdrawal under Section 4203 or 4205 of ERISA from a Multiemployer Plan. Neither Borrower nor any ERISA Affiliate has failed to make a required installment or any other required payment under Section 412 of the IRC on or before the due date for such installment or other payment. Neither Borrower nor any ERISA Affiliate is required to provide security to a Benefit Plan under Section 401(a)(29) of the IRC due to a Plan amendment that results in an increase in current liability for the plan year. Neither the Borrower nor any ERISA Affiliate has by reason of the transactions contemplated hereby any obligation to make any payment to any employee pursuant to any Plan or existing contract or arrangement. (u) Solvency. The Borrower, individually, and the Consolidated Borrower Group, considered as one enterprise, are each Solvent after giving effect to the transactions contemplated by this Agreement and the other Transaction Documents and the payment and accrual of all Transaction Costs with respect to any of the foregoing. (v) Assets and Properties. The Borrower and each of its Subsidiaries has good title to all of the assets (tangible and intangible) owned by it, except for imperfections of title (including Liens to the extent permitted under Section 7.02(b)) which in the aggregate could not reasonably be expected to have a Material Adverse Effect; and all such assets are free and clear of all Liens, except as otherwise specifically permitted by the terms and provisions of this Agreement and the other Loan Documents. Other than the New Vessels during any period in which such New Vessels are being purchased, outfitted or constructed or assets or properties damaged or destroyed by casualty or condemnation during the period of any repair or reconstruction, substantially all of the assets and properties owned by, leased to or used by Borrower or any of its Subsidiaries are in good repair, working order and condition, excepting ordinary wear and tear, are free and clear of any known defects except such defects as do not substantially interfere with the continued use thereof in the conduct of normal operations. (w) Joint Venture; Partnership. Except as set forth in Schedule 4.01(w) or permitted under Section 7.03, neither the Borrower nor any of its Subsidiaries is engaged in any joint venture or partnership with any other Person. (x) Labor Matters. Except as listed on Schedule 4.01(x), there are no collective bargaining agreements, other labor agreements or Multiemployer Plans covering any of the employees of Borrower or any of its Subsidiaries. No attempt to organize the employees of Borrower or any of its Subsidiaries, and no labor disputes, strikes or walkouts affecting the operations of Borrower or any of its Subsidiaries is pending or, to Borrower's knowledge, threatened, planned or contemplated. 56 63 (y) No Default. No Potential Event of Default or Event of Default exists. (z) Restricted Junior Payments. On or after the Effective Date, neither Borrower nor any Subsidiary of Borrower has directly or indirectly declared, ordered, paid or made or set apart any sum or property for any Restricted Junior Payment or agreed to do so, except to the extent permitted pursuant to Section 7.05. (aa) Advances to Parent. All Investments of the Borrower in the Parent constitute Indebtedness of the Parent extended by the Borrower on open account and none are evidenced by any promissory note or other instrument. 4.02. Subsequent Funding Representations and Warranties. To induce each Lender, the Issuing Bank and the Agent to enter into this Agreement and to make the Loans and issue Letters of Credit hereunder, Borrower hereby represents and warrants to each Lender, the Issuing Bank and the Agent that the statements set forth in Section 4.01 (except to the extent that such statements expressly are made only as of the Effective Date or another earlier date) are true, correct and complete in all material respects on and as of the Funding Date in respect of each Borrowing and each issuance of a Letter of Credit after the Effective Date, except that the representations and warranties need not be true and correct to the extent that changes in the facts and conditions on which such representations and warranties are based are required or permitted under this Agreement. ARTICLE V Reporting Covenants So long as Borrower shall have any outstanding Agreement Obligations or any Lender shall have any Commitment hereunder: 5.01. Financial Statements. Borrower shall maintain or cause to be maintained a system of accounting established and administered in accordance with sound business practices and consistent with past practice to permit preparation of financial statements in conformity with GAAP, and, if required by the terms of this Agreement, in conformity with Agreement Accounting Principles, and each of the financial statements described below shall be prepared from such system and records. Borrower shall deliver or cause to be delivered to the Agent and each Lender: (a) Quarterly Reports. As soon as practicable, and in any event within fifty-five (55) days after the end of each of Borrower's first three fiscal quarters of any Fiscal Year, on a consolidated basis for each of the Consolidated Parent Group and the Consolidated Borrower Group, each of the following: (A) a balance sheet as of the end of such fiscal quarter, and as of the end of the previous Fiscal Year; 57 64 (B) an income statement for such fiscal quarter and for the period from the beginning of the current Fiscal Year to the end of such fiscal quarter, setting forth in each case in comparative form and in reasonable detail the figures for the corresponding periods of the previous Fiscal Year; and (C) a cash flow statement for the period from the beginning of the current Fiscal Year to the end of such fiscal quarter, setting forth in each case in comparative form and in reasonable detail the figures for the corresponding period of the previous Fiscal Year; together with an Officer's Certificate of the Borrower stating that such financial statements fairly represent the financial condition, results of operations and cash flows of the Persons covered thereby as at the dates and for the periods indicated in accordance with Agreement Accounting Principles, subject to normal year-end adjustments. (b) Annual Reports. As soon as practicable, and in any event within one hundred (100) days after the end of each Fiscal Year, on a consolidated basis for each of the Consolidated Parent Group and the Consolidated Borrower Group, annual financial statements consisting of a balance sheet, income statement and cash flow statement, setting forth in comparative form in each case the consolidated figures for the corresponding periods of the previous Fiscal Year and for the Fiscal Year of the current financial statement, all in reasonable detail, and accompanied by an opinion (unqualified as to scope or going concern and which is not adverse) thereon of the firm of independent certified public accountants of recognized national standing regularly retained by the Parent or the Borrower and acceptable to the Requisite Lenders (it being understood that any of the five largest accounting firms in the United States shall be deemed acceptable), which report shall state that such financial statements present fairly in all material respects the financial position of the Persons covered thereby as at the dates indicated and the results of their operations and cash flow for the periods indicated in conformity with GAAP applied on a basis consistent with prior years (or, in the event of a change in accounting principles, such accountants' concurrence with such change) and that such firm's audit has been conducted in accordance with generally accepted auditing standards. (c) Budget and Business Plan. Promptly upon completion, but in any event not later than one hundred twenty (120) days after the end of each Fiscal Year (commencing with Fiscal Year 2000), a copy of the operating budget and projections by the Borrower of the income statement, balance sheet and cash flow of the Consolidated Borrower Group, taken as a whole, for the next succeeding Fiscal Year (commencing with Fiscal Year 2000) of the Consolidated Borrower Group, all in form customarily prepared by the Borrower's management, such operating budget and projected financial statements to be accompanied by an Officer's Certificate of Borrower stating that such operating budget and projected financial statements have been prepared on the basis of sound financial planning practice and that such officer has no reason to believe they are incorrect or misleading in any material respect. (d) Compliance Certificate. Together with each delivery of (i) the financial statements pursuant to subsections (a) and (b) above, (A) an Officer's Certificate of Borrower stating that such officer has reviewed the terms of this Agreement and the Loan Documents and 58 65 has made, or caused to be made under such officer's supervision, a review in reasonable detail of the transactions and condition of Borrower and its Subsidiaries during the accounting period covered by such financial statements, and that such review has not disclosed the existence during or at the end of such accounting period, and that such officer does not have knowledge of the existence, as at the date of the Officer's Certificate, of any condition or event which constitutes an Event of Default or Potential Event of Default, or, if any such condition or event existed or exists, specifying the nature and period of existence thereof and what action Borrower or Parent has taken, is taking and proposes to take with respect thereto; and (B) a Compliance Certificate (1) demonstrating in reasonable detail compliance during and at the end of such accounting periods, as applicable, with the provisions set forth in Sections 2.06, 7.01, 7.03 and 7.05 and Article VIII and (2) stating that such financial statements present fairly in all material respects the financial position of each of the Consolidated Parent Group and the Consolidated Borrower Group as at the dates indicated and the results of their operations and changes in their cash flow for the periods indicated in conformity with Agreement Accounting Principles (except as otherwise noted therein) consistently applied and (ii) the financial statements pursuant to subsection (b) above, a written discussion and analysis by the management of the Parent and the Borrower, as applicable, of such financial statements. (e) Accountant's Compliance Certificate. Simultaneously with the delivery of the financial statements referred to in subsection (b) above, a statement of the firm of independent certified public accountants which reported on such financial statements (i) whether anything has come to their attention to cause them to believe that there existed on the date of such statements any Event of Default or Potential Event of Default and (ii) confirming the calculations set forth in the Compliance Certificate delivered simultaneously therewith pursuant to subsection (d) above. (f) Report of Material Events. Promptly upon Borrower obtaining knowledge (A) of any condition or event which constitutes an Event of Default or Potential Event of Default, or (B) of any condition or event which has had or could reasonably be expected to have a Material Adverse Effect, an Officer's Certificate specifying the nature and period of existence of any such condition or event and what action Borrower has taken, is taking and proposes to take with respect thereto. (g) Notice of Claims and Proceedings. (i) Promptly after learning thereof, notice of the institution of, or threat of, any action, suit, proceeding, governmental investigation or arbitration against or affecting Borrower or any of its Subsidiaries (or any Property of such Person) involving claims in an aggregate amount in excess of $5,000,000 or in excess of $1,000,000 with respect to any such Person or any Property of such Person except where the same is fully covered (other than any applicable deductible) by insurance (other than insurance in the nature of retro-premium insurance or other self insurance programs) and of any material adverse change in any existing action, suit, proceeding, governmental investigation or arbitration; and (ii) promptly upon learning thereof, notice of any investigation or proceeding before or by any Governmental Authority, the effect of which might limit, prohibit or restrict materially the manner in which Borrower or any of its Subsidiaries currently conducts its business or to declare any substance contained in the products manufactured or distributed by it 59 66 to be dangerous, if such declaration has had or could reasonably be expected to have a Material Adverse Effect. (h) ERISA Matters. (i) As soon as possible, and in any event within thirty (30) Business Days after Borrower or any ERISA Affiliate knows or has reason to know that a Termination Event has occurred, a written statement of the chief financial officer of Borrower describing such Termination Event and the action, if any, which Borrower or such ERISA Affiliate has taken, is taking or proposes to take with respect thereto, and when known, any action taken or threatened by the IRS, DOL or PBGC with respect thereto; (ii) As soon as possible, and in any event within thirty (30) Business Days, after Borrower or any ERISA Affiliate knows or has reason to know that a prohibited transaction (as defined in Section 406 of ERISA and Section 4975 of the IRC) involving Borrower or any ERISA Affiliate has occurred, a statement of the chief financial officer of Borrower describing such transaction and the action which Borrower or such ERISA Affiliate has taken, is taking or proposes to take with respect thereto; (iii) Within ten (10) Business Days after receipt by the Borrower or any ERISA Affiliate of a written request from the Agent (which shall make such request at the request of any Lender), a copy of each annual report (Form 5500 series), including Schedule B thereto, filed after the Effective Date with respect to each Benefit Plan; (iv) Within ten (10) Business Days after the filing thereof with the IRS, a copy of each funding waiver request filed with respect to any Benefit Plan and within ten (10) Business Days after receipt, a copy of any communications received by Borrower or any ERISA Affiliate with respect to such request; (v) Within (30) Business Days after receipt by the Borrower or any ERISA Affiliate of a written request from the Agent (which shall make such request at the request of any Lender), a copy of each actuarial report for any Benefit Plan or Multiemployer Plan and each annual report for any Multiemployer Plan; provided that neither Borrower nor any ERISA Affiliate shall have an obligation to provide a copy of any actuarial report or annual report for any Multiemployer Plan if it is unable to obtain such documents after good faith efforts to do so; (vi) Within thirty (30) Business Days after the occurrence thereof, notification of any material increases in the benefits of any existing Benefit Plan or the establishment of any new Plan or the commencement of contributions to any Multiemployer Plan to which Borrower or any ERISA Affiliate was not previously contributing; (vii) Within ten (10) Business Days after receipt by Borrower or an ERISA Affiliate of notice of the PBGC's intention to terminate a Benefit Plan or to have a trustee appointed to administer a Benefit Plan, a copy of each such notice; 60 67 (viii) Within ten (10) Business Days after receipt by Borrower or any ERISA Affiliate of any unfavorable determination letter from the IRS regarding the qualification of a Plan under Section 401(a) of the IRC which could reasonably be expected to result in a liability to the Borrower or an ERISA Affiliate in excess of $500,000, a copy of such letter; (ix) Within ten (10) Business Days after receipt by Borrower or an ERISA Affiliate of a notice from a Multiemployer Plan regarding the imposition of withdrawal liability which could reasonably be expected to result in a liability to the Borrower or an ERISA Affiliate in excess of $500,000, copies of each such notice; (x) Within ten (10) Business Days after the failure by Borrower or any ERISA Affiliate to make a required installment or any other payment required under Section 412 of the IRC on or before the due date for such installment or payment if such failure could reasonably be expected to result in a lien under Section 412(n) of the IRC, a notification of such failure; and (xi) Within seven (7) Business Days after Borrower or any ERISA Affiliate knows or has reason to know (A) a Multiemployer Plan has been terminated, (B) the administrator or plan sponsor of a Multiemployer Plan intends to terminate a Multiemployer Plan, or (C) the PBGC has instituted or will institute proceedings under Section 4042 of ERISA to terminate a Multiemployer Plan if such event could reasonably be expected to result in liability to the Borrower or an ERISA Affiliate in excess of $500,000, a notification of such information. For purposes of this Section 5.01, Borrower and any ERISA Affiliate shall be deemed to know all facts known by the administrator of any Plan of which Borrower or any ERISA Affiliate is the plan sponsor. (i) Other Information. Such other information respecting the financial condition of Borrower or its business, operations, assets, performance or prospects as the Agent or any Lender may, from time to time, reasonably request. (j) Publicly Distributed Information. On a timely basis, copies of all financial statements, reports and notices, sent or made available generally by Parent to the holders of its publicly-held securities, if any, or filed with the Commission, and of all press releases made available generally by Parent to the public, if any, concerning material developments in the business of Borrower. (k) Property Damage or Condemnation. Promptly after the occurrence thereof, written notification (or telephonic notice promptly confirmed in writing) of and a description of any Property of Borrower or any of its Subsidiaries with an aggregate value in excess of $2,500,000 damaged, lost or taken and the anticipated amount of any insurance or condemnation proceeds in connection therewith. 61 68 (l) Loss of Right to Self-Insure. Promptly upon Borrower obtaining knowledge thereof, notice of the loss of the permission of the Federal Maritime Commission for any member of the Consolidated Borrower Group to self-insure with respect to the obligation to indemnify passengers with respect to ticket deposits with any such Person in the event of nonperformance of water transportation pursuant to Subpart A of Part 540 of Title 46, Code of Federal Regulations. 5.02. Environmental Notices. Borrower shall notify the Agent and each Lender in writing, promptly upon Borrower's learning thereof, of any: (a) Notice or claim to the effect that the Borrower or any of its Subsidiaries is or may be liable to any Person as a result of the Release or threatened Release of any Contaminant into the environment, which liability could reasonably be expected to be in excess of $500,000; (b) Notice that the Borrower or any of its Subsidiaries is subject to investigation by any Governmental Authority evaluating whether any Remedial Action is needed to respond to the Release or threatened Release of any Contaminant into the environment which could reasonably be expected to result in a liability to the Borrower or such Subsidiary in excess of $500,000; (c) Notice that any Property of Borrower or any of its Subsidiaries is subject to an Environmental Lien; (d) Notice of violation to the Borrower or any of its Subsidiaries or awareness by the Borrower or any of its Subsidiaries of a condition which might reasonably be expected to result in a notice of violation of any environmental, health or safety Requirement of Law which has had or could reasonably be expected to have a Material Adverse Effect; (e) Commencement or threat of any judicial or administrative proceeding alleging a violation by Borrower or any of its Subsidiaries of any environmental, health or safety Requirement of Law which, if adversely determined, could reasonably be expected to have a Material Adverse Effect; (f) New or proposed changes to any existing environmental, health or safety Requirement of Law that have had or could reasonably be expected to have a Material Adverse Effect; or (g) Any proposed acquisition of stock, assets, real estate, or leasing of property, or any other action by Borrower or any of its Subsidiaries that would be reasonably likely to subject Borrower or any such Subsidiary to environmental, health or safety Liabilities and Costs in excess of $1,000,000. 62 69 ARTICLE VI Affirmative Covenants Borrower covenants and agrees that, on and after the date hereof and so long as Borrower shall have any outstanding Agreement Obligations or any Lender shall have any Commitment hereunder: 6.01. Corporate Existence, Etc. Except as permitted in Section 7.08, Borrower shall, and shall cause each of its Subsidiaries to, at all times, maintain its existence as a corporation or limited liability company, as applicable, and, except as permitted by Section 6.08, preserve and keep in full force and effect its rights and franchises. Borrower shall promptly provide the Agent and each of the Lenders with a complete list of its Subsidiaries upon the occurrence of any change in the list set forth on Schedule 4.01(c) hereto. 6.02. Corporate Powers, Etc. Borrower shall, and shall cause each of its Subsidiaries to, qualify and remain qualified to do business in each jurisdiction in which the nature of its business requires it to be so qualified, except in those jurisdictions where the failure to so qualify could not reasonably be expected to have a Material Adverse Effect. 6.03. Compliance with Laws. Borrower shall, and shall cause each of its Subsidiaries to, comply with all Requirements of Law, and all Contractual Obligations affecting it or its business, properties, assets or operations, except where the failure so to comply could not reasonably be expected to have a Material Adverse Effect. 6.04. Payment of Taxes and Claims. Borrower shall, and shall cause each of its Subsidiaries to, pay (a) all taxes, assessments and other governmental charges imposed upon it or on any of its properties or assets or in respect of any of its franchises, business, income or property before any penalty or interest accrues thereon, and (b) all claims (including, without limitation, claims for labor, services, materials and supplies) for sums which have become due and payable and which by law have or may become a Lien (other than a Customary Permitted Lien) upon any of its properties or assets, prior to the time when any penalty or fine shall be incurred with respect thereto; provided that no such taxes, assessments and governmental charges referred to in clause (a) above or claims referred to in clause (b) above need be paid (i) if being contested in good faith by appropriate proceedings promptly instituted and diligently conducted and if such reserve or other appropriate provision, if any, as shall be required in conformity with Agreement Accounting Principles shall have been made therefor or (ii) if adequate reserves in the absence of a contested claim are maintained therefor in accordance with Agreement Accounting Principles. 6.05. Maintenance of Properties; Insurance. Borrower shall, and shall cause each of the Borrower Subsidiaries to, maintain or cause to be maintained in good repair, working order and condition, excepting ordinary wear and tear and damage, due to casualty or condemnation, all Property material to its operations (which shall in any event include each vessel, whether subject to a Ship Mortgage or otherwise) and will make or cause to be made all 63 70 appropriate repairs, renewals and replacements thereof. Borrower shall, and shall cause each of the Borrower Subsidiaries to, maintain with financially sound insurance companies the insurance policies and programs, including, self-insurance retention levels, listed on Schedule 6.05 hereto (or substantially similar programs or policies and amounts or other programs, policies and amounts acceptable to the Requisite Lenders) insuring all Property and other assets material to the operations of Borrower and the Borrower Subsidiaries (which shall in any event include each vessel, whether subject to a Ship Mortgage or otherwise) against loss or damage by fire, theft, burglary, pilferage and loss in transit and business interruption, together with such other hazards as are reasonably consistent with prudent industry practice, and maintain liability insurance consistent with prudent industry practice with financially sound insurance companies. Not later than thirty (30) days after the renewal, replacement or material modification of any policy or program, the Borrower shall deliver or cause to be delivered to the Agent (in sufficient quantity for each of the Lenders, which the Agent shall promptly distribute to each Lender) a detailed schedule setting forth for each such policy or program: (a) the amount of such policy, (b) the risks insured against by such policy, (c) the name of the insurer and each insured party under such policy, and (d) the policy number of such policy. All casualty and business interruption insurance covering Borrower or any Subsidiary of the Borrower or any Property of Borrower or any Subsidiary of the Borrower shall contain an endorsement in the form of Exhibit 7. 6.06. Inspection of Property; Books and Records; Discussions. Borrower shall permit, and shall cause each of its Subsidiaries to permit, any authorized representative(s) designated by Agent or any Lender to visit and inspect any of its properties and to discuss its affairs, finances and accounts with its officers and independent certified public accountants, all upon reasonable notice to the president, chief financial officer, treasurer or general counsel of the Borrower and at such reasonable time and as often as may be reasonably requested. The Borrower shall have the right to attend or otherwise participate in any discussion with its independent accountants. Each such visitation and inspection made by or on behalf of the Agent or any Lender shall be at the Agent's or such Lender's expense if no Event of Default shall have occurred and be continuing and at all other times at Borrower's expense. 6.07. Labor Matters. Borrower shall notify the Agent and each Lender in writing, promptly, but in any event within five (5) Business Days after learning thereof, of any material labor dispute to which it or any of its Subsidiaries may become a party, any strikes or walkouts relating to any of its or its Subsidiaries' facilities and the expiration of any material labor contract to which it or any of its Subsidiaries is a party or by which it or any of its Subsidiaries is bound. 6.08. Maintenance of Permits. Borrower shall obtain and maintain, and shall cause each of its Subsidiaries to obtain and maintain, in full force and effect all licenses, franchises, Permits or other rights necessary for the operation of its business, except where the failure to obtain or maintain such licenses, franchises, Permits or rights could not reasonably be expected to have a Material Adverse Effect. 6.09. Employee Benefit Matters. Borrower shall establish, maintain and operate, and cause each of its Subsidiaries and other ERISA Affiliates to establish, maintain and 64 71 operate, all Plans in all material respects in compliance with the applicable provisions of ERISA, the IRC, and all other applicable laws, and the regulations and interpretations thereunder, and the respective requirements of the governing documents for such Plans. 6.10. Formation of Subsidiaries. The Borrower may form or acquire additional Wholly-Owned Subsidiaries organized as corporations or limited liability companies under the laws of one of the states of the United States provided each of the following conditions is met in connection therewith within fifteen (15) Business Days after the Borrower or any Borrower Subsidiary has made an aggregate Investment in such additional Subsidiary in excess of $50,000: (i) such Subsidiary shall have executed and delivered a Subsidiary Guaranty, a Subsidiary Security Agreement, and if requested by the Agent, an Intellectual Property Agreement; (ii) such Subsidiary shall have executed and become a party to the Contribution Agreement; (iii) to the extent such Subsidiary has an interest of record in real property or in a vessel, such Subsidiary shall execute and deliver such ship mortgages and/or real property mortgages in connection therewith as shall be requested by the Agent (with Schedule 1.01-C being automatically amended as of the execution thereof); (iv) all financing statements and mortgages relating to the Collateral of such Subsidiary shall have been filed or recorded and the Agent shall have received in form and substance reasonably satisfactory to the Agent, such assurances, including, without limitation, insurance policies, as the Agent may deem appropriate to establish such Subsidiary's title, the due creation, perfection and priority of the Agent's Liens for the benefit of itself and the Holders of Secured Obligations on such Collateral and the absence of any Liens which are not specifically permitted hereunder; (v) Borrower shall have executed and/or shall have caused its appropriate Subsidiary to execute a Pledge Agreement in respect of all of the stock or membership interests, as applicable, of such new Subsidiary and Borrower and any other pledgor Subsidiary shall have executed and delivered all financing statements and other documents reasonably requested by the Agent in connection therewith; (vi) the Agent shall have received an opinion of counsel, in form and substance reasonably satisfactory to the Agent, covering such matters relating to the proposed Subsidiary and the Transaction Documents executed and delivered to the Agent pursuant to this Section 6.10 as the Agent deems necessary; (vii) the Agent shall have received a compliance certificate from an executive officer of the Borrower certifying that after the formation of such Subsidiary, no Event of Default or Potential Event of Default exists; and 65 72 (viii) the Lenders shall have received such other documents, instruments or agreements as are reasonably requested by the Agent or the Requisite Lenders in order to ensure that the documentation with respect to such Subsidiary is substantially the same as that received with respect to the Subsidiaries of the Borrower existing on the date hereof. 6.11. Acquisition or Construction of New Vessels. At such time as the Borrower or any of its Subsidiaries acquires or commences construction of any New Vessel (other than the Cape Cod Light and the Cape May Light), the Borrower or such Subsidiary, as applicable, shall promptly execute and deliver to the Agent all preferred ship mortgages, construction mortgages, assignments of ship-building or construction contracts, consents and agreements of the shipbuilder, financing statements and other appropriate Collateral Documents with respect thereto as the Agent reasonably requests, all in form and substance reasonably satisfactory to the Agent, together with all title assurances, governmental certificates and Permits, insurance certificates, endorsements and assignments and other documents as the Agent may reasonably request to establish and perfect the Borrower's or such Subsidiary's title thereto and the due creation, perfection, priority and protection of the Agent's Liens thereon for the benefit of itself and the other Holders of Secured Obligations. 6.12. Hedging Contracts. The Borrower shall not, and shall not permit any Subsidiary to, enter into any Hedging Contract other than Hedging Contracts pursuant to which the Borrower or such Subsidiary has hedged its reasonably estimated interest rate, foreign currency or commodity exposure, and not for speculative purposes. ARTICLE VII Negative Covenants Borrower covenants and agrees that, on and after the date hereof and so long as Borrower shall have any outstanding Agreement Obligations or any Lender shall have any Commitment hereunder: 7.01. Indebtedness. Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly create, incur, assume or otherwise become or remain directly or indirectly liable with respect to any Indebtedness, except: (i) the Obligations; (ii) the Existing Indebtedness; (iii) Indebtedness in respect of Accommodation Obligations permitted by Section 7.04; (iv) Indebtedness incurred by any Subsidiary of the Borrower with respect to which the Parent, the Borrower or any other Subsidiary of the Borrower is the obligee; 66 73 (v) Indebtedness incurred by the Borrower with respect to which the Parent or any Subsidiary of the Borrower is the obligee; (vi) other Indebtedness of the Borrower and its Subsidiaries not exceeding in the aggregate $5,000,000 at any one time outstanding; (vii) any refinancing of the Indebtedness described in clauses (i) through (vi), provided that any such refinancing is on terms no less favorable in any material respect to the obligor than the Indebtedness being refinanced and provided, further, that the new Indebtedness incurred in connection with such refinancing does not exceed the principal amount (together with any premium or penalty) of the Indebtedness refinanced; and (viii) the GAQSC Obligations, the GPCL Obligations and the DQCV Obligations; provided, however, in each case after taking such Indebtedness into account the Consolidated Borrower Group is in full compliance with the provisions of Article VIII. 7.02. Sales of Assets; Liens. (a) Limitation on Sales. Borrower shall not, and shall not permit any of its Subsidiaries to, sell, assign, transfer, lease (other than pursuant to the intercompany leases set forth on Schedule 7.02(a)), convey or otherwise dispose of any properties or assets, including, without limitation, any capital stock or membership interests of any of its Subsidiaries, whether now owned or hereafter acquired, or any income or profits therefrom to the extent such disposition constitutes a Prepayment Event, unless the Net Proceeds of such disposition are paid to the Agent in accordance with Section 2.06(b); provided, however, that the Borrower shall not, and shall not permit any of its Subsidiaries to sell, assign, transfer, lease, convey or otherwise dispose of the American Queen, the Delta Queen, the Mississippi Queen, the Columbia Queen or any New Vessel or any of the capital stock or membership interests of any Subsidiary which owns any of the foregoing except for fair market value and with the prior written approval of all of the Lenders, and provided all of the Net Proceeds of any such disposition are paid to the Agent in accordance with Section 2.06(b) (subject, in the case of dispositions with respect to the American Queen, the Columbia Queen, the Cape Cod Light or the Cape May Light, to payment of amounts required to be paid in connection with the MARAD Financing). (b) Liens. Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly create, incur, assume or permit to exist any Lien on or with respect to any of its Property (including all capital stock or membership interests, as applicable, of any Subsidiary of Borrower and all Collateral) except: (i) Liens granted to the Agent for the benefit of itself and the Holders of Secured Obligations, securing the Obligations; (ii) Customary Permitted Liens; 67 74 (iii) Permitted Existing Liens; (iv) Liens on property existing at the time of acquisition thereof by Borrower or any of its Subsidiaries and not created in contemplation of such acquisition and Liens securing purchase money Indebtedness for equipment to the extent the aggregate outstanding principal amount of such Indebtedness does not exceed $2,500,000, is permitted under Section 7.01 and such Indebtedness does not exceed the purchase price of such equipment securing such Indebtedness, provided that in each case such Liens do not apply to other property or assets of such Person; (v) Liens with respect to judgments or attachments which do not result in an Event of Default or Potential Event of Default hereunder; (vi) Liens on the American Queen and other property of GAQSC created pursuant to the GAQSC Security Agreement, the GAQSC Financial Agreement, the GAQSC Trust Indenture, the GAQSC Ship Mortgage and the GAQSC Depository Agreement to secure the GAQSC Obligations and, after the consummation of the MARAD Financing with respect to the Columbia Queen, Liens on the Columbia Queen and other property of GPCL to secure the GPCL Obligations; (vii) Liens on the Cape Cod Light and the Cape May Light and other property of any member of the Consolidated DQCV Group to secure the DQCV Obligations; and (viii) Liens granted on cash collateral securing letters of credit permitted pursuant to Section 7.01(vi) in favor of the issuer of such letter of credit. 7.03. Investments. Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly make or commit to make any advance, loan, extension of credit or capital contribution to, or purchase of any stock, bonds, notes, debentures or other securities of, or make any other investment in, any Person, including, without limitation, any Affiliate of the Borrower (all such transactions being referred to as "Investments"), except: (i) Investments by Borrower or any of its Subsidiaries in Cash Equivalents; and Investments by the Borrower in commercial paper that would qualify as a Cash Equivalent but for the fact that the issuer's rating on such commercial paper is not at least A-1 from S&P or P-1 from Moody's, provided that (i) such rating is at least A-2 from S&P or P-2 from Moody's and (ii) the aggregate amount of such Investments at any time shall not exceed $10,000,000; (ii) Investments constituting Intercompany Receivables arising prior to the Termination Date; (iii) Investments by the Borrower in its Wholly-Owned Subsidiaries or by a Borrower Subsidiary in the Parent (arising prior to the Termination Date), the Borrower or another Wholly-Owned Subsidiary of the Borrower (including, without limitation, 68 75 Investments in any Person which, as a result of such Investment, becomes a Wholly-Owned Subsidiary pursuant to and in compliance with Section 6.10); provided, however, that such Investments by the Borrower in GAQSC may not exceed an aggregate amount of $10,000,000 and provided, further, that no such Investment shall be permitted to be made if before or after making such Investment an Event of Default has occurred and is continuing or would result therefrom; (iv) loans to employees in the ordinary course of business not in excess of an aggregate amount of $500,000 outstanding at any one time; (v) other Investments by Borrower and the Borrower Subsidiaries not in excess of an aggregate amount during any Fiscal Year which, when added to the aggregate amount of all Restricted Junior Payments during such Fiscal Year pursuant to Section 7.05(ii), does not exceed the Permitted Amount; provided that no such Investment shall be permitted to be made if before or after making such Investment an Event of Default has occurred and is continuing or would result therefrom; and (vi) Investments by GAQSC in accordance with the GAQSC Security Agreement, the GAQSC Financial Agreement and the GAQSC Depository Agreement. Notwithstanding anything herein to the contrary, (a) there shall be excluded from the calculation of Investments the accrual of intercompany charges incurred in the ordinary course and (b) there shall be included in the calculation of investments all transfers of cash or assets (other than the purchase of inventory in the ordinary course of business and upon terms that would be obtained in an arms-length transaction). 7.04. Accommodation Obligations. Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create or become or be liable with respect to any Accommodation Obligation, except: (i) guaranties resulting from endorsement of negotiable instruments for collection in the ordinary course of business; (ii) Accommodation Obligations arising in connection with the Transaction Documents; (iii) Accommodation Obligations of the Borrower pursuant to the GAQSC Guaranty; (iv) Accommodation Obligations with respect to any Indebtedness permitted by Section 7.01; and (v) Accommodation Obligations with respect to any Contractual Obligation of the Borrower or any Subsidiary (other than GAQSC, except as permitted by clause (iii) above) if such Contractual Obligation is not otherwise prohibited under this Agreement. 69 76 7.05. Restricted Junior Payments. Borrower shall not, and shall not permit any Subsidiary of Borrower to, declare or make any Restricted Junior Payment, except: (i) Restricted Junior Payments by Borrower or a Borrower Subsidiary to Parent made prior to the Termination Date, provided that no such Restricted Junior Payment shall be permitted to be made if before or after making such Restricted Junior Payment an Event of Default or a Potential Event of Default has occurred and is continuing or would result therefrom; (ii) from and after the Termination Date, Restricted Junior Payments by the Borrower or any of its Subsidiaries to Parent or any Affiliate of Parent (other than the Borrower and its Subsidiaries) not in excess of an aggregate amount during any Fiscal Year which, when added to the aggregate amount of all Investments during such Fiscal Year pursuant to Section 7.03(v), does not exceed the Permitted Amount; provided that no such Restricted Junior Payment shall be permitted to be made if before or after making such Restricted Junior Payment an Event of Default has occurred and is continuing or would result therefrom; and (iii) any Subsidiary of Borrower may pay dividends, distributions or other payments (including loan payments) to Borrower or another Wholly-Owned Subsidiary of Borrower. 7.06. Conduct of Business. Borrower shall not, and shall not permit any of its Subsidiaries to, engage in any business other than the business engaged in by the Borrower and its Subsidiaries on the date hereof and any business activities substantially similar or related thereto, including without limitation, the operation of any New Vessel in its cruise business. 7.07. Transactions with Affiliates. Except as expressly permitted by Section 7.01, 7.03, 7.04 or 7.05, Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly enter into or permit to exist any transaction (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with any of its Affiliates (other than a member of the Consolidated Borrower Group) on terms that are less favorable to it than those fair and reasonable terms that might be obtained in a comparable arms-length transaction at the time. 7.08. Restriction on Fundamental Changes. (a) Borrower shall not, and shall not permit any of its Subsidiaries to, enter into any merger or consolidation, or liquidate, wind-up or dissolve (or suffer any liquidation or dissolution) or discontinue its business, except that any Subsidiary of Borrower may merge into or convey, sell, lease or transfer all or substantially all of its assets to Borrower or any other Subsidiary of Borrower (other than GAQSC, DQCV, Cape Cod Light, L.L.C., Cape May Light, L.L.C. or, upon consummation of the MARAD Financing for the Columbia Queen, GPCL). (b) Borrower shall not, and shall not permit its Subsidiaries to, acquire by purchase or otherwise any property or assets of any other Person, except in the ordinary course 70 77 of its business (including, without limitation, the acquisition of New Vessels for operation in its cruise business) or to the extent permitted pursuant to Section 7.03. 7.09. Employee Benefit Matters. Borrower shall not, and shall not permit any of its ERISA Affiliates to: (i) Engage in any prohibited transaction described in Section 406 of ERISA or 4975 of the IRC for which a statutory or class exemption is not available or a private exemption has not been previously obtained from the DOL and for which a civil penalty pursuant to Section 502(i) of ERISA or a tax pursuant to Section 4975 of the IRC, in excess of $1,000,000 is imposed. (ii) permit to exist any accumulated funding deficiency (as defined in Sections 302 of ERISA and 412 of the IRC), which has not been waived; (iii) fail to pay timely required contributions or annual installments due with respect to any waived funding deficiency to any Benefit Plan; (iv) terminate any Benefit Plan in a distress termination under Section 4041(c) of ERISA which would result in any material liability to Borrower or any ERISA Affiliate; (v) fail to make any contribution or payment to any Multiemployer Plan which Borrower or any ERISA Affiliate may be required to make under any agreement relating to such Multiemployer Plan, or any law pertaining thereto which could reasonably be expected to result in a liability in excess of $1,000,000; (vi) fail to pay any required installment or any other payment required under Section 412 of the IRC on or before the due date for such installment or other payment which could reasonably be expected to result in a lien under Section 412(n) of the IRC; or (vii) amend a Plan resulting in an increase in current liability for the plan year such that Borrower or any ERISA Affiliate is required to provide security to such Plan under Section 401(a)(29) of the IRC. 7.10. Environmental Liabilities. Borrower shall not, and shall not permit any of its Subsidiaries to, become subject to any Liabilities and Costs, which could reasonably be expected to have a Material Adverse Effect, arising out of or related to (a) the Release or threatened Release at any location of any Contaminant into the environment, or any Remedial Action in response thereto, or (b) any violation of any environmental, health and safety Requirements of Law. 7.11. Margin Regulations. No portion of the proceeds of any credit extended under this Agreement shall be used in any manner which might cause the extension of credit or 71 78 the application of such proceeds to violate Regulation T, Regulation U or Regulation X or any other regulation of the Federal Reserve Board or to violate the Securities Exchange Act or the Securities Act, in each case as in effect on the date or dates of such Borrowing and the use of such proceeds. 7.12. Change of Fiscal Year. Borrower shall not change its Fiscal Year. 7.13. Amendment of Certain Documents. Borrower and its Subsidiaries shall not permit any termination of, or any modification or amendment that is adverse in any respect to the Lenders to be made to the certificate of incorporation or by-laws or the certificate of formation or limited liability company agreement, or other comparable organizational or governing documents, as applicable, of Borrower or any of its Subsidiaries. Except for modification, assumption and supplemental documents effective as of December 31, 1996, in connection with the merger of Great AQ Steamboat Co. into Great AQ Steamboat, L.L.C., Borrower and GAQSC shall not modify or amend the GAQSC Obligations, the GAQSC Trust Indenture, the GAQSC Security Agreement, the GAQSC Financial Agreement, the GAQSC Ship Mortgage, the GAQSC Depository Agreement or the GAQSC Guaranty without the prior written consent of the Agent. ARTICLE VIII Financial Covenants Borrower covenants and agrees that, on and after the date hereof and so long as Borrower shall have any outstanding Agreement Obligations or any Lender shall have any Commitment hereunder: 8.01. Maximum Bank Indebtedness Leverage Ratio. Borrower shall not permit the Bank Indebtedness Leverage Ratio calculated at the end of each fiscal quarter to be greater than 3.25 to 1. 8.02. Minimum Bank Interest Coverage Ratio. Borrower shall not permit the Bank Interest Coverage Ratio calculated at the end of each fiscal quarter for the period of the immediately preceding four fiscal quarters to be less than 3.00 to 1. 8.03. Capital Expenditures. (a) Borrower shall not, and shall not permit any of its Subsidiaries to, incur Maintenance Capital Expenditures which exceed, in the aggregate, $12,000,000 in any Fiscal Year, plus for each Fiscal Year after Fiscal Year 2000, the difference (the "Carryover Amount"), if positive, between (1) the maximum aggregate amount of Maintenance Capital Expenditures permitted pursuant to this Section 8.03(a) for the immediately preceding Fiscal Year and (2) the aggregate amount of actual Maintenance Capital Expenses for such preceding Fiscal Year; provided, however, that the Carryover Amount shall not exceed $6,000,000 for any Fiscal Year. 72 79 (b) Borrower shall not, and shall not permit any of its Subsidiaries to, incur New Vessel Capital Expenditures, other than New Vessel Capital Expenditures for the Cape Cod Light and the Cape May Light which do not exceed, in the aggregate, $89,500,000. ARTICLE IX Events of Default; Rights and Remedies 9.01. Events of Default. Each of the following occurrences shall constitute an Event of Default under this Agreement: (a) Failure to Make Payments When Due. Borrower shall fail (i) to pay when due any principal of any Loan or LC Disbursement or (ii) to pay when due any interest on any Loan or any fee or other amount payable under this Agreement or any of the other Loan Documents and such failure under this clause (ii) shall continue for three (3) Business Days. (b) Breach of Certain Covenants. Borrower or any of its Subsidiaries shall fail duly and punctually to perform or observe any agreement, covenant or obligation under Section 5.01 or under Article VII (other than Sections 7.07 and 7.09) or VIII. (c) Breach of Representation or Warranty. Any representation or warranty made or deemed made by Borrower to the Agent or any Lender herein or by Borrower or any of its Subsidiaries in any of the other Loan Documents or in any written statement or certificate at any time given by Borrower or any of its Subsidiaries pursuant to any of the Loan Documents shall be false or misleading in any material respect on the date as of which made or deemed made. (d) Other Defaults. Borrower or any of its Subsidiaries shall fail duly and punctually to perform or observe any agreement, covenant or obligation arising under this Agreement (except those described in Sections 9.01(a), (b) and (c)) or under any of the other Loan Documents, and such failure shall continue for thirty (30) days (or, in the case of Loan Documents other than this Agreement, any longer period of grace expressly set forth therein). (e) Default as to Other Indebtedness. Borrower or any of its Subsidiaries shall fail to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) on any Other Indebtedness of Borrower or any such Subsidiary, if the aggregate outstanding amount of all such Indebtedness is $2,500,000 or more, or any breach, default or event of default shall occur, or any other event shall occur or condition shall exist, under any instrument, agreement or indenture pertaining thereto, if the effect thereof is to accelerate, or permit the holder(s) of such Indebtedness to accelerate, the maturity of any such Indebtedness; or any such Indebtedness shall be declared to be due and payable or required to be prepaid or mandatorily redeemed (other than by a regularly scheduled required prepayment prior to the stated maturity thereof); or the holder of any Lien, in any amount, shall commence foreclosure of such Lien upon property of Borrower or any of its Subsidiaries having a book or fair market value in excess of $1,000,000 in the aggregate. 73 80 (f) Involuntary Bankruptcy; Appointment of Receiver, Etc. (i) An involuntary case shall be commenced against Parent or against Borrower or any of its Subsidiaries and the petition shall not be dismissed within sixty (60) days after commencement of the case, or a court having jurisdiction in the premises shall enter a decree or order for relief in respect of Parent or in respect of Borrower or any of its Subsidiaries in an involuntary case, under any applicable bankruptcy, insolvency or other similar law now or hereinafter in effect; or any other similar relief shall be granted under any applicable federal, state or foreign law. (ii) A decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over Parent or over Borrower or any of its Subsidiaries or over all or a substantial part of the property of Parent or of Borrower or any of its Subsidiaries shall be entered; or an interim receiver, trustee or other custodian of Parent or of Borrower or any of its Subsidiaries or of all or a substantial part of the property of Parent or of Borrower or any of its Subsidiaries shall be appointed or a warrant of attachment, execution or similar process against any substantial part of the property of Parent or of Borrower or any of its Subsidiaries, shall be issued and any such event shall not be stayed, vacated, dismissed, bonded or discharged within sixty (60) days of entry, appointment or issuance. (g) Voluntary Bankruptcy; Appointment of Receiver, Etc. Parent or Borrower or any of its Subsidiaries shall have an order for relief entered with respect to it or commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law, or shall consent to the appointment of or taking of possession by a receiver, trustee or other custodian for all or a substantial part of its property; Parent or Borrower or any of its Subsidiaries shall make any assignment for the benefit of creditors or shall be unable or generally fail, or admit in writing its inability, to pay its debts as such debts become due; or the board of directors (or any committee thereof) or the managing members of Parent or of Borrower or any of its Subsidiaries adopts any resolution to authorize or approve any of the foregoing. (h) Judgments. (i) Enforceable Judgments (other than an Enforceable Judgment described in the proviso contained in the definition of Enforceable Judgment) for the payment of money in an aggregate amount in excess of $5,000,000 shall be rendered against Borrower or any of its Subsidiaries and such Enforceable Judgments shall continue unsatisfied or unstayed for a period of thirty (30) days or action shall have been commenced to foreclose on such Enforceable Judgments, or (ii) Enforceable Judgments described in the proviso contained in the definition of Enforceable Judgments shall be rendered against Borrower or any of its Subsidiaries. (i) Dissolution. Any order, judgment or decree shall be entered against Borrower or any of its Subsidiaries decreeing its involuntary dissolution or split-up and such order shall remain undischarged and unstayed for a period in excess of thirty (30) days; or 74 81 Borrower or any of its Subsidiaries shall otherwise dissolve or cease to exist except as expressly permitted pursuant to Section 7.08. (j) Collateral Documents; Failure of Security. For any reason other than a release of Liens in accordance with the terms of the Loan Documents or the failure of the Agent and the Lenders to take any action available to them to maintain the perfection of the Liens created in favor of the Agent, for the benefit of itself and the Holders of Secured Obligations, pursuant to this Agreement and the Collateral Documents, any Collateral Document ceases to be in full force and effect in any material respect or any Lien intended to be created thereby ceases to be or is not valid and perfected or the Borrower or any of its Subsidiaries asserts that any such Lien is not valid and perfected. (k) Change in Control. (i) Any Change of Control occurs; or (ii) Borrower shall cease to own directly or indirectly all of the capital stock or membership interests of its Subsidiaries. (l) Employee Benefit Related Liabilities. (i) Any Termination Event occurs which the Agent believes could subject Borrower or an ERISA Affiliate to a material liability to pay money if the payment of such liability could reasonably be expected to have a Material Adverse Effect, (ii) the plan administrator of any Plan applies under Section 412(d) of the IRC for a waiver of the minimum funding standards of Section 412(a) of the IRC and the Agent believes that the substantial business hardship upon which the application for the waiver is based could subject either the Borrower or any ERISA Affiliate to a material liability to pay money if the payment of such liability could reasonably be expected to have a Material Adverse Effect. (m) Contribution Agreement Default. Any party to the Contribution Agreement shall terminate or revoke any of its obligations under the Contribution Agreement or breach any of the material terms of the Contribution Agreement. (n) Subsidiary Guaranty Default. Any Borrower Subsidiary party to any Subsidiary Guaranty shall terminate or revoke any of its obligations under its Subsidiary Guaranty or breach any of the terms of its Subsidiary Guaranty, or any Subsidiary Guaranty shall otherwise become unenforceable for any reason. (o) Parent Guaranty Default. The Parent shall terminate or revoke any of its obligations under the Parent Guaranty or breach any of the terms of the Parent Guaranty, or the Parent Guaranty shall otherwise become unenforceable for any reason. For purposes of this Agreement and each of the other Loan Documents, an Event of Default shall be deemed "continuing" until cured or waived in writing in accordance with Section 11.08. 9.02. Rights and Remedies. (a) Acceleration and Termination of Commitments. Upon the occurrence of any Event of Default described in Section 9.01(f) or 9.01(g) with respect to Borrower, the 75 82 Commitments shall automatically and immediately terminate and the unpaid principal amount of and any and all accrued interest on the Loans and all other Agreement Obligations shall automatically become immediately due and payable, with all additional interest from time to time accrued thereon and without presentment, demand, or protest or other requirements of any kind (including, without limitation, valuation and appraisement, diligence, presentment, notice of intent to demand or accelerate and of acceleration), all of which are hereby expressly waived by Borrower, and the obligation of each Lender to make any Loan and of the Issuing Bank to issue any Letter of Credit hereunder shall thereupon terminate; and upon the occurrence and during the continuance of any other Event of Default, the Agent shall at the request, or may with the consent, of the Requisite Lenders, by written notice to Borrower, (i) declare that the Commitments are terminated, whereupon the Commitments and the obligation of each Lender to make any Loan and of the Issuing Bank to issue any Letter of Credit hereunder shall immediately terminate, and (ii) declare the unpaid principal amount of and any and all accrued and unpaid interest on the Loans and all other Agreement Obligations to be, and the same shall thereupon be, immediately due and payable with all additional interest from time to time accrued thereon and without presentment, demand, or protest or other requirements of any kind (including, without limitation, valuation and appraisement, diligence, presentment, notice of intent to demand or accelerate and of acceleration), all of which are hereby expressly waived by Borrower. (b) Rescission. If at any time after acceleration of the maturity of the Loans, Borrower shall pay all arrears of interest and all payments on account of principal of the Loans which shall have become due otherwise than by acceleration (with interest on principal and, to the extent permitted by law, on overdue interest, at the rates specified in this Agreement) and all Events of Default and Potential Events of Default (other than nonpayment of principal of and accrued interest on the Loans due and payable solely by virtue of acceleration) shall be remedied or waived pursuant to Section 11.08, then by written notice to Borrower, the Requisite Lenders may elect, in the sole discretion of such Requisite Lenders, to rescind and annul the acceleration and its consequences; but such action shall not affect any subsequent Event of Default or Potential Event of Default or impair any right or remedy consequent thereon. The provisions of the preceding sentence are intended merely to bind the Lenders to a decision which may be made at the election of the Requisite Lenders; they are not intended to benefit Borrower and do not give Borrower the right to require the Lenders to rescind or annul any acceleration hereunder, even if the conditions set forth herein are met. ARTICLE X The Agent 10.01. Appointment. (a) Each of the Lenders and the Issuing Bank hereby designates and appoints The Chase Manhattan Bank as the Agent of such Lender under this Agreement and the Loan Documents, and each of the Lenders and the Issuing Bank hereby irrevocably authorizes the Agent to take such action on its behalf under the provisions of this Agreement and the other 76 83 Loan Documents and to exercise such powers as are set forth herein or therein, together with such other powers as are incidental thereto. The Agent agrees to act as such on the express conditions contained in this Article X. (b) The provisions of this Article X (other than Sections 10.07, 10.08 and 10.09(c)) are solely for the benefit of the Agent and the Holders of Secured Obligations and Borrower shall have no right to rely on or enforce any of the provisions hereof (other than Sections 10.07, 10.08 and 10.09(c)). In performing its functions and duties under this Agreement, the Agent shall act solely as agent for the Lenders and the Issuing Bank and does not assume and shall not be deemed to have assumed any obligation toward or relationship of agency or trust with or for Borrower or any of its Affiliates. 10.02. Nature of Duties. The Agent shall not have any duties or responsibilities except those expressly set forth in this Agreement or in the other Loan Documents. The duties of the Agent shall be mechanical and administrative in nature. The Agent shall not have by reason of this Agreement a fiduciary relationship in respect of any Holder of Secured Obligations. Nothing in this Agreement or any of the other Loan Documents, expressed or implied, is intended to or shall be construed to impose upon the Agent any obligations in respect of this Agreement or any of the other Loan Documents except as expressly set forth herein or therein. Each Holder of Secured Obligations shall make its own independent investigation of the financial condition and affairs of Borrower and its Subsidiaries in connection with the making and the continuance of the Loans and the issuance of Letters of Credit hereunder and the entering into any Eligible Hedging Contract and shall make its own appraisal of the creditworthiness of Borrower and its Subsidiaries, and the Agent shall not have any duty or responsibility, either initially or on a continuing basis, to provide any Holder of Secured Obligations with any credit or other information with respect thereto, whether coming into its possession on or before the Effective Date or at any time or times thereafter. Each Lender and the Issuing Bank acknowledges that neither the Agent nor counsel to the Agent nor any other Lender is providing any assurances, or shall have any responsibility, with respect to the ownership of the Property or the absence of any prior Liens or defects of title, or the legality, sufficiency or effect of any mortgage, certificate or notice, or any other document, or the validity, creation, perfection or priority of any Lien, or as to any decision to request, take, defer, omit or release any Collateral or to investigate or not to investigate any of those matters, and each Lender agrees to look solely to its rights as one of the Lenders with respect to any of the foregoing. If the Agent seeks the consent or approval of the Requisite Lenders to the taking or refraining from taking any action hereunder, the Agent shall send notice thereof to each Lender. The Agent shall promptly notify each Lender at any time that the Requisite Lenders or, where expressly required, all of the Lenders, have instructed the Agent to act or refrain from acting pursuant hereto. 10.03. Rights, Exculpation, Etc. Neither the Agent nor any of its Affiliates nor any of its officers, directors, employees, agents, attorneys or consultants shall be liable to any Holder of Secured Obligations for any action taken or omitted by it or such Person hereunder or under any of the Loan Documents, or in connection herewith or therewith, except that (i) the Agent shall be obligated on the terms set forth herein for performance of its express obligations hereunder, and (ii) no Person shall be relieved of any liability imposed by law for its gross 77 84 negligence or willful misconduct (as determined by the final judgment of a court of competent jurisdiction). The Agent shall not be liable for any apportionment or distribution of payments made by it in good faith pursuant to the terms of this Agreement and if any such apportionment or distribution is subsequently determined to have been made in error the sole recourse of any Holder of Secured Obligations to whom payment was due, but not made, shall be to recover from other Holders of Secured Obligations any payment in excess of the amount to which they are determined to have been entitled. The Agent shall not be responsible to any Holder of Secured Obligations for any recitals, statements, representations or warranties herein or for the execution, effectiveness, genuineness, validity, enforceability, collectibility, or sufficiency of this Agreement, any of the Collateral Documents or any of the other Loan Documents, or any of the transactions contemplated hereby and thereby, or of any of the Transaction Documents or any of the transactions contemplated thereby, or for the financial condition of Borrower or any of its Subsidiaries. The Agent shall not be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement or any of the Loan Documents or the financial condition of Borrower or any of Subsidiaries or the existence or possible existence of any Potential Event of Default or Event of Default. The Agent may at any time request instructions from the Lenders with respect to any actions or approvals which by the terms of this Agreement or of any of the other Loan Documents the Agent is permitted or required to take or to grant, and if such instructions are promptly requested, the Agent shall be absolutely entitled to refrain from taking any action or to withhold any approval and shall not be under any liability whatsoever to any Person for refraining from any action or withholding any approval under any of the Loan Documents until it shall have received such instructions from the Requisite Lenders or, where expressly required, all of the Lenders. Without limiting the foregoing, no Holder of Secured Obligations shall have any right of action whatsoever against the Agent as a result of the Agent acting or refraining from acting under this Agreement, the Collateral Documents or any of the other Loan Documents in accordance with the instructions of the Requisite Lenders or, where expressly required, all of the Lenders. 10.04. Reliance. The Agent shall be entitled to rely upon any written notices, statements, certificates, orders or other documents or any telephone message believed by it in good faith to be genuine and correct and to have been signed, or made by the proper Person, and with respect to all matters pertaining to this Agreement, the Collateral Documents or any of the other Loan Documents and its duties hereunder or thereunder, upon advice of legal counsel (including counsel for Borrower), independent public accountants and other experts selected by it in good faith. 10.05. Indemnification. To the extent that the Agent is not reimbursed and indemnified by Borrower or Borrower fails upon demand by the Agent to perform its obligations to reimburse or indemnify the Agent, the Lenders will reimburse and indemnify the Agent for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Agent in any way relating to or arising out of this Agreement, the Collateral Documents or any of the other Transaction Documents or any action taken or omitted by the Agent under this Agreement, the Collateral Documents or any of the other Transaction Documents, in proportion to each Lender's Pro Rata Share; provided that no 78 85 Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent's gross negligence or willful misconduct, as determined by the final judgment of a court of competent jurisdiction. The obligations of the Lenders under this Section 10.05 shall survive the payment in full of the Loans and the termination of this Agreement. 10.06. The Agent Individually. With respect to its Pro Rata Share hereunder and the Loans made by it, the Agent shall have and may exercise the same rights and powers hereunder and is subject to the same obligations and liabilities as and to the extent set forth herein for any other Lender. The terms "Lenders" or "Requisite Lenders" or any similar terms shall, unless the context clearly otherwise indicates, include the Agent in its individual capacity as a Lender or one of the Requisite Lenders. The Agent may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with Borrower as if it were not acting as Agent pursuant hereto. 10.07. Successor Agent; Resignation of Agent. (a) The Agent may resign from the performance of its functions and duties hereunder at any time by giving at least thirty (30) days prior written notice to the Lenders, the Issuing Bank and Borrower. In the event that the Agent gives notice of its desire to resign from the performance of its functions and duties as Agent, any such resignation shall take effect only upon the acceptance by a successor Agent of appointment pursuant to clauses (b) and (c) below. (b) The Requisite Lenders shall appoint a successor Agent who shall be reasonably satisfactory to Borrower provided no such approval of the Borrower shall be required after the occurrence and during the continuance of an Event of Default. (c) If a successor Agent shall not have been so appointed within said thirty (30) day period, the retiring Agent, with the consent of Borrower (which may not be withheld unreasonably), shall then appoint a successor Agent who shall serve as Agent until such time, if any, as the Requisite Lenders, with the consent of Borrower (which may not be withheld unreasonably), appoint a successor Agent as provided above. No consent of the Borrower shall be required after the occurrence and during the continuance of an Event of Default. (d) Upon the appointment of a successor Agent, the term "Agent" shall, for all purposes of this Agreement, thereafter include such successor, except that the retiring Agent shall reserve all rights as to Obligations accrued or due to it, in its capacity as such, at the time of such succession and all rights (whenever arising) under Section 11.04. (e) Notwithstanding anything in this Section 10.07 to the contrary, no Person shall serve as an Agent unless such Person is a Lender. 10.08. Collateral Matters. (a) Each of the Lenders authorizes and directs the Agent to enter into the Loan Documents relating to the Collateral for the benefit of itself and the Holders of Secured 79 86 Obligations. Each of the Lenders agrees that any action taken by the Agent or the Requisite Lenders (or, where required by the express terms of this Agreement or any other Loan Document, a greater proportion of the Lenders) in accordance with the provisions of this Agreement or the other Loan Documents, and the exercise by the Agent or the Requisite Lenders (or, where so required, such greater proportion) of the powers set forth herein or therein, together with such other powers as are reasonably incidental thereto, shall be authorized and binding upon all of the Lenders. Without limiting the generality of the foregoing, the Agent shall have the sole and exclusive right and authority to (i) act as the disbursing and collecting agent for the Lenders with respect to all payments and collections arising in connection with this Agreement and the other Loan Documents relating to the Loans or Collateral; (ii) execute and deliver each Loan Document relating to the Collateral and accept delivery of each such agreement delivered by the Borrower or any of its Subsidiaries; (iii) act as collateral agent for the Lenders for purposes of the perfection of all security interests and Liens created by such agreements and all other purposes stated therein, provided, however, the Agent hereby appoints, authorizes and directs the Lenders to act as collateral sub-agent for the Agent and the Lenders for purposes of the perfection of all security interests and Liens with respect to the Borrower's and the Borrower's Subsidiaries' respective deposit accounts maintained with, and cash and Cash Equivalents held by, such Lender; (iv) manage, supervise and otherwise deal with the Collateral in accordance with the terms of this Agreement and the other Loan Documents; (v) take such action as is necessary or desirable to maintain the perfection and priority of the security interests and Liens created or purported to be created by the Loan Documents; and (vi) except as may be otherwise specifically restricted by the terms of this Agreement or any other Loan Document, exercise all remedies given to the Agent or the Lenders with respect to the Collateral under the Loan Documents relating thereto, under applicable law or otherwise. (b) The Holders of Secured Obligations hereby irrevocably authorize the Agent, at the option and in the discretion of the Agent, to release any Lien granted to or held by the Agent upon any Collateral (i) upon termination of the Commitments and payment and satisfaction of all Loans and all other Agreement Obligations which have matured and which the Agent has been notified in writing are then due and payable; or (ii) constituting property being sold or disposed of if Borrower certifies to the Agent that the sale or disposition is made in compliance with Section 7.02 (and the Agent may rely conclusively on any such certificate, without further inquiry); or (iii) constituting property in which neither the Borrower nor any Subsidiary of the Borrower owned any interest at the time the Lien was granted or at any time thereafter; or (iv) as required to permit the consummation of the MARAD Financing for the Columbia Queen; or (v) if approved or consented to by the Requisite Lenders (or, where so required, all of the Lenders); provided that, upon consummation of the MARAD Financing for the Columbia Queen, the Agent and the Lenders shall release the Liens on the Columbia Queen and all other property of GPCL and shall release GPCL from its Subsidiary Guaranty and the Contribution Agreement. Upon request by the Agent at any time, the Lenders will confirm in writing the Agent's authority to release particular types or items of Collateral pursuant to this Section 10.08(b). (c) Without in any manner limiting the Agent's authority to act without any specific or further authorization or consent by the Requisite Lenders (as set forth in Section 80 87 10.08(b)), each Lender agrees to confirm in writing, upon request by Borrower, the authority to release Collateral conferred upon the Agent under clauses (i) through (iv) of Section 10.08(b). So long as no Event of Default is then continuing, upon receipt by the Agent of the net cash proceeds of any sale and transfer of Collateral which is expressly permitted pursuant to the terms of this Agreement, to the extent such proceeds are required to be paid to the Lenders, and upon at least five (5) Business Days' prior written request by Borrower, the Agent shall (and is hereby irrevocably authorized by the Holders of Secured Obligations to) execute such documents as may be necessary to evidence the release of the Liens granted to the Agent for the benefit of the Holders of Secured Obligations herein or pursuant hereto upon such Collateral; provided, that (i) the Agent shall not be required to execute any such document on terms which, in the Agent's opinion, would expose the Agent to liability or create any obligation or entail any consequence other than the release of such Liens without recourse or warranty, and (ii) such release shall not in any manner discharge, affect or impair the Obligations or any Liens upon (or obligations of Borrower in respect of) all interests retained by Borrower, including, without limitation, the proceeds of any sale, all of which shall continue to constitute part of the Collateral. (d) The benefit of the Collateral Documents and of the provisions of this Agreement relating to the Collateral shall extend to and be available in respect of any Obligations ("Related Obligations") which arise under any Eligible Hedging Contracts or which are otherwise owed to Persons entitled to indemnification pursuant to Section 11.04; provided that (i) the Related Obligations shall be entitled to the benefit of the Collateral to the extent and with the priority expressly set forth in this Agreement and the Collateral Documents, and to such extent the Agent shall hold, and have the right and power to act with respect to, the Collateral on behalf of and as agent for the holders of the Related Obligations; but the Agent is otherwise acting solely as agent for the Lenders and shall have no separate fiduciary duty, duty of loyalty, duty of care, duty of disclosure or other obligation whatsoever to any holder of Related Obligations; and (ii) all matters, acts and omissions relating in any manner to the Collateral, or the omission, creation, perfection, priority, abandonment or release of any Lien, shall be governed solely by the provisions of this Agreement and the Collateral Documents, and no separate Lien, right, power or remedy shall arise or exist in favor of any Holder of Secured Obligations under any separate instrument or agreement or in respect of any Related Obligations; and (iii) each Holder of Secured Obligations shall be bound by all actions taken or omitted, in accordance with the provisions of this Agreement and the Collateral Documents, by the Agent and the Requisite Lenders or, where expressly required, all of the Lenders, each of whom shall be entitled to act at its sole discretion and exclusively in its own interest given its own Commitments and its own interest in the Loans, and its other Agreement Obligations, without any duty or liability to any other Holder of Secured Obligations or as to any Related Obligations and without regard to whether any Related Obligations remain outstanding or are deprived of the benefit of the Collateral or become unsecured or are otherwise affected or put in jeopardy thereby; and (iv) no holder of Related Obligations and no other Holder of Secured Obligations (except the Agent and the Lenders, to the extent set forth in this Agreement) shall have any right to be notified of, or to direct, require or be heard with respect to, any action taken or omitted in respect of the Collateral or under this Agreement or the Collateral Documents; and (v) no holder of any Related Obligations shall exercise any right of setoff, banker's lien or similar right. 81 88 10.09. Relations Among Lenders. (a) Except as set forth in the following clause (b) of this section, each Lender agrees that it will not take any action, nor institute any actions or proceedings, against Borrower or any other obligor hereunder or with respect to any Collateral or Loan Document, without the prior written consent of the Requisite Lenders or, as may be provided in this Agreement or the other Loan Documents, at the direction of the Agent. (b) The Lenders are not partners or co-venturers, and no Lender shall be liable for the acts or omissions of, or (except as otherwise set forth herein in case of the Agent) authorized to act for, any other Lender. (c) Hibernia National Bank, as Documentation Agent, shall have no right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders as such. Without limiting the foregoing, Hibernia National Bank shall not have by reason of this Agreement a fiduciary relationship in respect of any Lender. ARTICLE XI Miscellaneous 11.01. Survival of Warranties and Agreements. All agreements, representations and warranties made herein shall survive the execution and delivery of this Agreement and the other Loan Documents and the making of the Loans and the issuance of Letters of Credit hereunder. 11.02. Assignments and Participations. (a) At any time after the Effective Date, each Lender may assign to one or more banks or financial institutions all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment and Revolving Credit Exposure) in conformity with the following provisions: (i) each such assignment shall be of a constant, and not a varying, percentage of the assigning Lender's rights and obligations under this Agreement and the assignment shall transfer the same percentage of such Lender's Commitment, Revolving Credit Exposure and other interests hereunder; (ii) unless the Agent and the Borrower otherwise consent, the amount of the Commitment or Revolving Credit Exposure of the assigning Lender being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than $5,000,000 or, if less, the entire amount of such assigning Lender's Commitment, Revolving Credit Exposure and other interests hereunder (provided that assignments between Lenders shall have no minimum amount and assignments 82 89 after the occurrence and during the continuance of an Event of Default shall not require Borrower's consent regardless of the size of such assignment); (iii) the Agent shall have consented (which consent shall not unreasonably be withheld) to each such assignment and the parties to each such assignment shall execute and deliver to the Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500; provided that such consent of the Agent shall not be required for any assignment made by a Lender to an Affiliate of such Lender; and (iv) With respect to any assignment made at a time when no Event of Default exists, the Borrower shall have consented to such assignment, which consent shall not unreasonably be withheld; provided that such consent of the Borrower shall not be required for any assignment made by a Lender to an Affiliate of such Lender. Upon such execution, delivery, approval, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five (5) Business Days after the execution date thereof, (x) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned or negotiated to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder (including, in respect of the Collateral, all the rights and obligations of a Holder of Secured Obligations, as fully as if such assignee had been named as a Lender in accordance with the terms of this Agreement) and (y) the Lender assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned or negotiated by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.09, 2.10, 2.11, 11.03 and 11.04, as well as to any fees accrued for its account hereunder and not yet paid. (b) By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) the assignment made under such Assignment and Acceptance is made without recourse and, other than as provided in such Assignment or and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or any other Loan Document or any other document, instrument or agreement executed or delivered in connection herewith or therewith or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other Transaction Document or any other instrument or document furnished pursuant hereto or thereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of Borrower or any of its Subsidiaries or the performance or observance by Borrower or any of its Subsidiaries of any of its obligations under any Transaction Document or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements most recently delivered pursuant to Article V and such other Loan Documents and 83 90 other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Agent, such assigning Lender or any other Lender or the Issuing Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee appoints and authorizes the Agent to take such action as an Agent on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to the Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto; and (vi) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (c) The Agent shall maintain at its address referred to on Schedule A, a copy of each Assignment and Acceptance delivered to and accepted by it and shall record in the Agent's Loan Account the names and addresses of each Lender and the Commitment of, and principal amount of the Loans owing to, such Lender from time to time. Borrower, the Agent, the Issuing Bank and the Lenders may treat each Person whose name is recorded in the Loan Account as a Lender, and all of such Persons as the only Lenders, hereunder for all purposes of this Agreement. (d) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and the assignee, the Agent shall, if such Assignment and Acceptance has been properly completed and is in substantially the form of Exhibit 1 and if the conditions for the assignment referred to in the Assignment and Acceptance and set forth in Section 11.02(a) have been met, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Agent's Loan Account and (iii) give prompt notice thereof to Borrower. (e) Each Lender may sell participations to one or more banks or other entities as to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment and Revolving Credit Exposure; provided that (i) notice thereof is given to the Borrower and the Agent, (ii) such Lender's obligations under this Agreement (including, without limitation, its Commitment to Borrower hereunder) shall remain unchanged, (iii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iv) the participating banks or other entities shall be entitled to the benefit of the cost protection provisions contained in Sections 2.09, 2.10 and 2.11 to the same extent as if they were Lenders; provided, however, that no such participating bank or entity shall be entitled to receive any greater amount pursuant to such Sections than the Lender from which it purchased its participation would have been entitled to receive in respect of the amount of the participation transferred by such Lender to such participating bank or entity had no transfer occurred, (v) Borrower, the Agent, the Issuing Bank and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and with regard to any and all payments to be made under this Agreement, and (vi) the holder of any such participation shall not be entitled to voting rights under this Agreement; provided that, subject to Section 10.08, the participation agreement between a Lender and its participants may provide that such Lender will obtain the approval of such 84 91 participant prior to any amendment or waiver of any provisions of this Agreement which would (A) extend the Termination Date or the time of payment of interest thereon or fees, (B) reduce the interest rate or any fees hereunder, or the principal amount of the Loans or LC Disbursements, (C) increase the aggregate amount of the Commitment or the Revolving Credit Exposure of the Lender granting the participation, or increase such Lender's Pro Rata Share, (D) release all or substantially all of the Collateral, or (E) release any of the Subsidiary Guaranties (except as contemplated by the Loan Documents). (f) Upon the acceptance by the Agent of any Assignment and Acceptance, the parties to such Assignment and Acceptance may at any time request that new Notes be issued to the Lender assignor and the Lender assignee by (i) providing written notice of such request to the Agent and the Borrower and (ii) delivering to the Borrower such assigning Lender's Note for cancellation and substitution. Promptly following receipt by the Borrower of any such notice, and verification from the Agent that the applicable Assignment and Acceptance shall have been accepted by the Agent, the Borrower forthwith shall cause to be executed, and shall deliver to the Lender assignee, a new Note to the order of the assignee and, if applicable, a replacement Note to the order of the Lender assignor, and such Notes shall equal the aggregate principal amount of such assigning Lender's Note issued by the Borrower immediately prior to the acceptance by the Agent of the applicable Assignment and Acceptance. The Borrower shall immediately upon delivery of such new Note(s), cancel the original Note delivered by the Lender assignor to the Borrower. (g) Notwithstanding anything herein to the contrary, each Lender may assign all or any portion of its rights under this Agreement as collateral security to any Federal Reserve Bank or any Governmental Authority succeeding to its functions. (h) Notwithstanding the foregoing, no Lender, assignee or participant shall assign any portion of its rights or obligations under this Agreement or sell a participating interest in any Note held by such Lender, assignee or participant or assign, sell or otherwise transfer any stock pursuant to any Pledge Agreement to (i) any individual not a citizen of the United States, or (ii) any entity that is not a citizen of the United States qualified to operate vessels in coastwise trade within the meanings of Section 2 of the Shipping Act, 1916 as amended (46 App. U.S.C. ss. 802); provided, however, that the foregoing restriction as to assignment, sale or transfer to entities not qualified to operate vessels in coastwise trade may be waived if, in the opinion of counsel to the Agent, said assignment, sale or transfer does not result in the loss of U.S. citizen status of the Borrower or any of its Subsidiaries. Within the meaning of the Shipping Act, no corporation, partnership, or association is a citizen of the United States for purposes of operating a vessel in coastwise trade unless at least 75% of the interest in the entity is owned by citizens of the United States. A corporation is not a citizen of the United States unless (a) its president or other chief executive officer and the chairman of its board of directors are citizens of the United States and (b) no more of its directors than a minority of the number necessary to constitute a quorum are noncitizens and (c) the corporation itself is organized under the laws of the United States or of a State, Territory, District, or possession thereof. In the case of a corporation, 75% of the stock is 85 92 not deemed to be owned by a citizen of the United States (a) if title to 75% of the stock is not vested in citizens of the United States free from any trust or fiduciary obligation in favor of any person not a citizen of the United States; or (b) if 75% of the voting power in such corporation is not vested in citizens of the United States; or (c) if, through any contract or understanding, it is so arranged that more than 25% of the voting power in such corporation may be exercised, directly or indirectly, in behalf of any person who is not a citizen of the Untied States; or (d) if by any other means whatsoever control of any interest in the corporation in excess of 25% is conferred upon or permitted to be exercised by any person who is not a citizen of the United States. 11.03. Expenses. (a) Generally. Whether or not any Funding Date shall have occurred, Borrower agrees upon demand to pay, or reimburse the Agent for all such Agent's and any of its Affiliates' costs and expenses of every type and nature (including, without limitation, the reasonable fees, expenses and disbursements of attorneys and legal assistants (including allocated costs of internal counsel and legal assistants), and such auditors, accountants, appraisers, printers, insurance and environmental advisers, and other consultants retained by the Agent as shall have been reasonably approved by Borrower, and other legal, travel, search and filing fees and expenses and all fees, taxes (except income and franchise taxes), assessments and duties incurred by any of them) incurred by the Agent or its Affiliates in connection with (i) the negotiation, preparation and execution of this Agreement and any amendments or waivers thereto (including, without limitation, the satisfaction or attempted satisfaction of any of the conditions set forth in Article III, the Collateral Documents and the other Transaction Documents or any amendment or waiver thereto and the making of the Loans); (ii) the creation, perfection or protection of the Agent's Liens in the Collateral for the benefit of itself and the Holders of Secured Obligations (including, without limitation, any fees and expenses for title and lien searches, filing and recording fees and taxes, trustee's fees, duplication costs and corporate search fees); (iii) reasonable fees, expenses and disbursements of the Agent's legal counsel (including allocated costs of internal counsel and legal assistants) in connection with the administration of this Agreement, the Transaction Documents, the Loans and the Collateral; and (iv) the protection, collection or enforcement of any of the Obligations or the Collateral. (b) After Default. Borrower further agrees to pay, or reimburse the Agent, the Issuing Bank and the Lenders for all out-of-pocket costs and expenses, including, without limitation, reasonable attorneys' and legal assistants' fees, expenses and disbursements (including allocated costs of internal counsel and costs of settlement) incurred by the Agent, the Issuing Bank or any Lender after the occurrence of an Event of Default (i) in enforcing any of the Obligations or in foreclosing against the Collateral or exercising or enforcing any other right or remedy available by reason of such Event of Default; (ii) in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a "work-out" or in any insolvency or bankruptcy proceeding; (iii) in commencing, defending or intervening in any litigation or in filing a petition, complaint, answer, motion or other pleading in any legal proceeding relating to Borrower or any of its Subsidiaries and related to or arising out of the transactions contemplated hereby or by any of the Transaction Documents; (iv) in 86 93 protecting, preserving, collecting, leasing, selling, taking possession of, or liquidating any of the Collateral; or (v) in attempting to enforce or enforcing any security interest in any of the Collateral or any other rights under the Collateral Documents. Any payments made by Borrower or received by the Agent and applied as reimbursements for costs and expenses under this Section 11.03(b) shall be apportioned among the Agent, the Issuing Bank and the Lenders in the order of priority set forth in Section 2.07. 11.04. Indemnification and Waiver. Borrower agrees to defend, protect, indemnify, and hold harmless the Agent, the Issuing Bank, each Lender and each Related Party of each of the foregoing (collectively called the "Indemnitees") from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for such Indemnitees) in connection with any investigative, administrative or judicial proceeding, whether or not such Indemnitees shall be designated a party thereto that may be imposed on, incurred by, or asserted against such Indemnitees (whether direct, indirect or consequential and whether based on any federal or state laws or other statutory regulations, including, without limitation, securities and commercial laws and regulations, under common law or at equitable cause, or on contract or otherwise, including any liabilities and costs under federal, state or local environmental, health or safety laws, regulations, or common law principles, arising from or in connection with the past, present or future operations of Borrower and of its Subsidiaries, or their respective predecessors in interest, or the past, present or future environmental condition of the Property of Borrower or any of its Subsidiaries, the presence of asbestos-containing materials at any such Property, or the Release or threatened Release of any Contaminant into the environment from any such Property) in any manner relating to or arising out of this Agreement, the Collateral Documents or any of the other Transaction Documents, the capitalization of Borrower, the Lenders' Commitments, the making or issuance of, management of and participation in the Loans or the Letters of Credit or the use or intended use of and the proceeds of the Loans or the Letters of Credit hereunder (collectively, the "Indemnified Matters"); provided that Borrower shall have no obligation to an Indemnitee hereunder with respect to (i) matters for which such Indemnitee has been compensated pursuant to or for which an exemption is provided in Section 2.09(d) or 2.11(b) or any other provision of this Agreement and (ii) Indemnified Matters caused by or resulting from the gross negligence or willful misconduct of that Indemnitee, as determined by a final judgment of a court of competent jurisdiction. To the extent that the undertaking to indemnify, pay and hold harmless set forth in this Section 11.04 may be unenforceable because it is violative of any law or public policy, Borrower shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law, to the payment and satisfaction of all Indemnified Matters incurred by the Indemnitees. Without prejudice to the survival of any other agreement of Borrower hereunder, the agreements and obligations of Borrower contained in this Section 11.04 shall survive the payment in full of principal and interest hereunder and the termination of this Agreement. 11.05. Limitation of Liability. No claim may be made by Borrower, any Lender or other Person against the Agent, the Issuing Bank, any Lender or any Related Party of any of them for any special, indirect, consequential or punitive damages in respect of any claim for breach of contract or any other theory of liability arising out of or related to the transactions 87 94 contemplated by this Agreement or any other Transaction Document, or any act, omission or event occurring in connection therewith, and Borrower and each Lender hereby waives, releases and agrees not to sue upon any claim for any such damages, whether or not accrued and whether or not known or suspected to exist in its favor. 11.06. Ratable Sharing. Subject to Sections 2.07, the Lenders agree among themselves that (i) with respect to all amounts received by them which are applicable to the payment of the Agreement Obligations (excluding amounts payable under this Agreement which are determined on a non-pro-rata basis, including, without limitation, amounts payable under Sections 2.02(c), 2.05(b), 2.09(d), 2.10, 2.11, 2.14, 11.03 and 11.04), equitable adjustment will be made so that, in effect, all such amounts will be shared among them ratably in accordance with their Pro Rata Shares, whether received by voluntary payment, by the exercise of the right of set-off or banker's lien, by counterclaim or cross action or by the enforcement of any or all of the Agreement Obligations (excluding amounts payable under this Agreement which are determined on a non-pro-rata basis, including, without limitation, amounts payable under Sections 2.02(c), 2.05(b), 2.09(d), 2.10, 2.11, 2.14, 11.03 and 11.04) or the Collateral, (ii) if any of them shall by voluntary payment or by the exercise of any right of counterclaim, setoff, banker's lien or otherwise, receive payment of a proportion of the aggregate amount of the Agreement Obligations held by it which is greater than its Pro Rata Share of the payments on account of the Agreement Obligations (excluding the fees described or referred to in Section 2.05), the one receiving such excess payment shall purchase, without recourse or warranty, an undivided interest and participation (which it shall be deemed to have been done simultaneously upon the receipt of such payment) in such Agreement Obligations owed to the others so that all such recoveries with respect to such Agreement Obligations shall be applied ratably in accordance with their Pro Rata Shares; provided that if all or part of such excess payment received by the purchasing party is thereafter recovered from it, those purchases shall be rescinded and the purchase prices paid for such participations shall be returned to that party to the extent necessary to adjust for such recovery, but without interest except to the extent the purchasing party is required to pay interest in connection with such recovery. Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 11.06 may, to the fullest extent permitted by law, exercise all its rights of payment with respect to such participation as fully as if such Lender were the direct creditor of Borrower in the amount of such participation. 11.07. Amendments and Waivers. Subject to the provisions of Section 2.07(b)(ii) no amendment or modification of any provision of this Agreement shall be effective without the written agreement of the Requisite Lenders and Borrower, and no termination or waiver of any provision of this Agreement, or consent to any departure by Borrower therefrom, shall in any event be effective without the written concurrence of the Requisite Lenders, which the Requisite Lenders shall have the right to grant or withhold at their sole discretion; provided that any amendment, modification, or waiver of any provision of this Agreement which would (i) extend the time of expiration or termination of any of the Commitments or the Termination Date or the time of payment of principal on any Loan or LC Disbursement, interest thereon or fees or waive any prescribed prepayment (including, without limitation by any amendment to or waiver of Section 9.02(a)), (ii) reduce the interest rate, the amount of any fees, indemnities or 88 95 reimbursements hereunder, or the principal amount of the Loans or LC Disbursements (including, without limitation by any amendment to or waiver of Section 9.02(a)), (iii) increase the aggregate amount of the Commitments or the Loans of the Lenders or the Lenders' participations in Letters of Credit or LC Disbursements or increase any Lender's Pro Rata Share or waive any prescribed reduction in the Commitments, (iv) release the security interest of the Holders of Secured Obligations in all or substantially all of the Collateral or, except in connection with a sale or other disposition permitted under Section 7.02 and subject to Section 10.08, any of the Delta Queen, the Mississippi Queen, the Columbia Queen or any New Vessel, (v) release any of the Subsidiary Guaranties (except as contemplated by the Loan Documents) or the Parent Guaranty or (vi) amend the definitions of "Requisite Lenders" or "Pro Rata Share," the provisions of Section 2.01(b), the provisions of Section 7.02(a), the next to the last sentence of Section 11.15 or the provisions contained in Section 11.06 or in this Section 11.07 or the parties whose consent is required for action hereunder or under the other Loan Documents, shall be effective only if evidenced by a writing signed by or on behalf of all Lenders. No amendment, modification, termination, or waiver of any provision of Article X or any other provision referring to the Agent shall be effective without the written concurrence of the Agent, and no amendment, modification, termination or waiver of any provision of this Agreement affecting the rights or obligations of the Issuing Bank shall be effective without the written concurrence of the Issuing Bank. The Agent may, but shall have no obligation to, with the concurrence of any Lender, execute amendments, modifications, waivers or consents on behalf of such Lender. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on Borrower in any case shall entitle Borrower to any other or further notice or demand in similar or other circumstances. The making of a Loan or the issuance of a Letter of Credit shall not be construed as a waiver of any Event of Default or Potential Event of Default, regardless of whether the Agent, any Lender or the Issuing Bank may have had notice or knowledge thereof at the time. Any amendment, modification, termination, waiver or consent effected in accordance with this Section 11.07 shall be binding on each assignee, transferee or recipient of a Lender's Commitment or Revolving Credit Exposure, each future assignee, transferee, recipient of a Lender's Commitment or Revolving Credit Exposure, and, if signed by Borrower, on Borrower. 11.08. Notices. Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given shall be in writing and may be personally served, telecopied, telexed or sent by courier service or United States mail and shall be deemed to have been given when delivered in person or by courier service, upon receipt of a telecopy or telex or upon delivery or refusal to accept delivery if deposited in the United States mail (registered or certified, with postage prepaid and properly addressed). Notices to the Agent shall not be effective until received by the Agent. For the purposes hereof, the addresses of the parties hereto (until notice of a change thereof is delivered as provided in this Section 11.08) shall be as set forth in Schedule A or on the applicable Assignment and Acceptance, or, as to each party, at such other address as may be designated by such party in a written notice to all of the other parties. 11.09. Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or delay on the part of the Agent or any Lender in the exercise of any power, right or privilege 89 96 under any of the Loan Documents shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing under the Loan Documents are cumulative to and not exclusive of any rights or remedies otherwise available. 11.10. Termination. Upon the termination in whole of the Commitments pursuant to Section 2.02(d), Borrower shall pay to the Agent for the benefit of the Lenders an amount equal to any and all Agreement Obligations then outstanding. 11.11. Marshalling; Recourse to Security; Payments Set Aside. Neither any Lender nor the Agent shall be under any obligation to marshal any assets in favor of Borrower or any other party or against or in payment of any or all of the Obligations. Recourse to security shall not be required at any time. To the extent that Borrower makes a payment or payments to the Agent, the Issuing Bank or the Lenders, or the Agent, the Issuing Bank or the Lenders enforce their security interests or exercise their rights of setoff, and such payment or payments or the proceeds of such enforcement or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all Liens, right and remedies therefor, shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred. 11.12. Severability. In case any provision in or obligation under this Agreement or the other Loan Documents shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. 11.13. Headings. Article and Section headings in this Agreement and in the Table of Contents hereto are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect. 11.14. GOVERNING LAW. THE AGENT HEREBY ACCEPTS THIS AGREEMENT, ON BEHALF OF ITSELF AND THE LENDERS, AT NEW YORK, NEW YORK BY ACKNOWLEDGING AND AGREEING TO IT THERE. ANY DISPUTE AMONG THE BORROWER, THE AGENT, THE ISSUING BANK, ANY LENDER OR ANY OTHER HOLDER OF SECURED OBLIGATIONS ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE GENERAL MARITIME LAWS OF THE UNITED STATES. 90 97 11.15. Successors and Assigns; Subsequent Holders of Notes. This Agreement and the other Loan Documents shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. The terms and provisions of this Agreement shall inure to the benefit of any assignee or transferee of the Revolving Credit Exposure and Commitment of any Lender (to the extent such assignment or transfer is effected in accordance with Section 11.02), and in the event of such transfer or assignment, the rights and privileges herein conferred upon Lenders shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. Borrower's rights or any interest therein hereunder, and Borrower's duties and Obligations hereunder, may not be assigned without the written consent of all of the Lenders. All of Borrower's obligations and duties under this Agreement and under each of the other Loan Documents shall be binding upon each of Borrower's successors and assigns, including, without limitation, any receiver, trustee or debtor-in-possession of or for Borrower. 11.16. CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL. (A) EXCLUSIVE JURISDICTION. EXCEPT AS PROVIDED IN SUBSECTION (B), EACH OF THE PARTIES HERETO AGREES THAT ALL DISPUTES AMONG THEM ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED EXCLUSIVELY BY STATE OR FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK, BUT THE PARTIES HERETO ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK, NEW YORK. EACH OF THE PARTIES HERETO WAIVES IN ALL DISPUTES BROUGHT PURSUANT TO THIS SUBSECTION ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE. (B) OTHER JURISDICTIONS. BORROWER AGREES THAT THE AGENT, THE ISSUING BANK OR ANY LENDER SHALL HAVE THE RIGHT TO PROCEED AGAINST BORROWER OR ITS PROPERTY IN A COURT IN ANY LOCATION TO ENABLE SUCH PERSON TO (1) OBTAIN PERSONAL JURISDICTION OVER THE BORROWER OR (2) REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF SUCH PERSON. BORROWER AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY SUCH PERSON TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF SUCH PERSON. 91 98 BORROWER WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH SUCH PERSON HAS COMMENCED A PROCEEDING DESCRIBED IN THIS SUBSECTION. (C) SERVICE OF PROCESS. BORROWER WAIVES PERSONAL SERVICE OF ANY PROCESS UPON IT AND, AS ADDITIONAL SECURITY FOR THE OBLIGATIONS, IRREVOCABLY APPOINTS THE PRENTICE HALL CORPORATION SYSTEM, INC., WHOSE ADDRESS IS 500 CENTRAL AVENUE, ALBANY, NEW YORK, 12206, AS BORROWER'S AGENT FOR THE PURPOSE OF ACCEPTING SERVICE OF PROCESS ISSUED BY ANY COURT. BORROWER IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH IN ANY JURISDICTION SET FORTH ABOVE. (D) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH. EACH OF THE PARTIES HERETO AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. (E) WAIVER OF BOND. BORROWER WAIVES THE POSTING OF ANY BOND OTHERWISE REQUIRED OF ANY PARTY HERETO IN CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS OR TO ENFORCE ANY JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF SUCH PARTY, OR TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER, PRELIMINARY OR PERMANENT INJUNCTION, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT. 92 99 (F) ADVICE OF COUNSEL. EACH OF THE PARTIES REPRESENTS TO EACH OTHER PARTY HERETO THAT IT HAS DISCUSSED THIS AGREEMENT AND, SPECIFICALLY, THE PROVISIONS OF THIS SECTION 11.16, WITH ITS COUNSEL. 11.17. Counterparts; Effectiveness; Inconsistencies. This Agreement and any amendments, waivers, consents, or supplements may be executed in counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. This Agreement shall become effective against Borrower, each Lender, the Issuing Bank and the Agent on the date when all of such parties have duly executed and delivered this Agreement to each other (delivery by Borrower to the Lenders and the Issuing Bank and by any Lender or the Issuing Bank to the Borrower and any other Lender being deemed to have been made by delivery to the Agent). This Agreement and each of the other Loan Documents shall be construed to the extent reasonable to be consistent one with the other, but to the extent that the terms and conditions of this Agreement are actually inconsistent with the terms and conditions of any other Loan Document, this Agreement shall govern. 11.18. Performance of Obligations. Borrower agrees that the Agent may, but shall have no obligation to, make any payment or perform any act required of Borrower under any Loan Document or take any other action which the Agent in its discretion deems necessary or desirable to protect or preserve the Collateral, including, without limitation, any action to (i) pay or discharge taxes, liens, security interests or other encumbrances levied or placed on or threatened against any Collateral, (ii) effect any repairs or obtain any insurance called for by the terms of any of the Loan Documents and to pay all or any part of the premiums therefor and the costs thereof and (iii) pay any rents payable by Borrower which are more than 30 days past due, or as to which the landlord has given notice of termination, under any lease. The Agent shall use its best efforts to give Borrower notice of any action taken under this Section 11.18 prior to the taking of such action or promptly thereafter provided the failure to give such notice shall not affect Borrower's obligations in respect thereof. The Borrower agrees to pay the Agent, upon demand, the principal amount of all funds advanced by the Agent under this Section 11.18, together with interest thereon at the rate from time to time applicable to Base Rate Loans from the date of such advance until the outstanding principal balance thereof is paid in full. If the Borrower fails to make payment in respect of any such advance under this Section 11.18 within one (1) Business Day after the date the Borrower receives written demand therefor from the Agent, the Agent shall promptly notify each Lender and each Lender agrees that it shall thereupon make available to the Agent, in Dollars in immediately available funds, the amount equal to such Lender's Pro Rata Share of such advance. If such funds are not made available to the Agent by such Lender within one (1) Business Day after the Agent's demand therefor, the Agent will be entitled to recover any such amount from such Lender together with interest thereon at the Federal Funds Effective Rate for each day during the period commencing on the date of such demand and ending on the date such amount is received. The failure of any Lender to make available to the Agent its Pro Rata Share of any such unreimbursed advance under this Section 11.18 shall neither relieve any other Lender of its obligation hereunder to make available to the Agent such other Lender's Pro Rata Share of such advance on the date such payment is to 93 100 be made nor increase the obligation of any other Lender to make such payment to the Agent. All outstanding principal of, and interest on, advances made under this Section 11.18 shall constitute Obligations secured by the Collateral until paid in full by the Borrower. 11.19. ENTIRE AGREEMENT. THIS WRITTEN CREDIT AGREEMENT, TOGETHER WITH THE OTHER LOAN DOCUMENTS, REPRESENTS THE FINAL AGREEMENT AMONG THE PARTIES AS TO ITS SUBJECT MATTER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS AMONG THE PARTIES. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES. 11.20. Confidentiality. Each of the Agent, the Issuing Bank and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates' directors, officers, employees, accountants, legal counsel and other advisors who are actively and directly participating in the preparation, evaluation, administration or enforcement of the Loan Documents (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to any assignee of or participant in, or any prospective assignee of or participant in, any of its rights or obligations under this Agreement, (g) with the consent of the Borrower or (h) to the extent such Information (1) becomes publicly available other than as a result of a breach of this Section or (2) becomes available to the Agent, the Issuing Bank or any Lender on a nonconfidential basis from a source other than the Borrower. For the purposes of this Section, "Information" means all information received from the Borrower relating to the Parent or the Borrower or its business, other than any such information that is available to the Agent, the Issuing Bank or any Lender on a nonconfidential basis prior to disclosure by the Borrower. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. 11.21. Exiting Lenders. (a) Certain of the lenders under the Original Credit Agreement (the "Exiting Lenders") will not be Lenders under this Agreement. Accordingly, on the Effective Date, the Borrower shall pay to the Agent for the account of each of the Exiting Lenders all accrued and unpaid commitment fees under the Original Credit Agreement to but excluding the Effective Date, all accrued and unpaid interest on the outstanding loans of the Exiting Lenders under the Original Credit Agreement to but excluding the Effective Date and all amounts owing to the Exiting Lenders pursuant to Section 2.09(d) of the Original Credit Agreement. Upon receipt of 94 101 such amounts from the Borrower, the Agent shall promptly pay such amounts to the respective Exiting Lenders. (b) As of the Effective Date, the Borrower shall be deemed to have requested Loans pursuant to this Agreement from each of the Lenders, the proceeds of which shall be used to repay the principal amount of the outstanding loans of the Exiting Lenders under the Original Credit Agreement as of the Effective Date. The respective amounts of such requested Loans shall be determined by the Agent such that, after the making of such Loans by the Lenders and the repayment of the loans of the Exiting Lenders, the outstanding Loans on the Effective Date shall be held by the Lenders pro rata in accordance with their respective Commitments. The Agent shall give the Lenders reasonable notice of the amount of the respective Loans to be made on the Effective Date, and each Lender shall make its Loan available to the Agent prior to 12:00 noon (New York time) on the Effective Date. Upon receipt thereof, the Agent shall promptly use the proceeds of such Loans to repay the principal amount of the outstanding loans of the Exiting Lenders. (c) From and after the Effective Date and upon payment to each Exiting Lender of all principal of and interest on such Exiting Lender's outstanding loans under the Original Credit Agreement and all commitment fees and all funding indemnification owing to such Exiting Lender under the Original Credit Agreement in accordance with subsections (a) and (b) above, each such Exiting Lender shall have no further obligation to any other party to the Original Credit Agreement or to this Agreement. (d) On the Effective Date, the Borrower shall pay to the Agent for the account of each of the Lenders all amounts owing to such Lenders pursuant to Section 2.09(d) of the Original Credit Agreement. Upon receipt of such amounts from the Borrower, the Agent shall promptly pay such amounts to such respective Lenders. 11.22. Effect Upon Loan Documents. Upon the effectiveness of this Agreement, each reference in the other Loan Documents to "the Credit Agreement," "thereunder," "thereof," "therein," or words of like import, shall mean and be a reference to this Agreement. Except as expressly set forth herein or contemplated hereby, all terms and conditions of the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed in all respects. [Signature Pages Follow] 95 102 IN WITNESS WHEREOF, this Agreement has been duly executed on the date set forth above. THE DELTA QUEEN STEAMBOAT CO. as Borrower /s/ Jordan B. Allen By:______________________________ Name: Jordan B. Allen Title: Executive Vice President THE CHASE MANHATTAN BANK, as Administrative Agent, as Issuing Bank and as a Lender /s/ Jonathan E. Twichell By:______________________________ Name: Jonathan E. Twichell Title: Vice President HIBERNIA NATIONAL BANK, as Documentation Agent and as a Lender /s/ Cheryl H. Denenea By:______________________________ Name: Cheryl H. Denenea Title: Vice President NATIONAL CITY BANK OF MICHIGAN/ILLINOIS, /s/ Stephanie Pass By:______________________________ Name: Stephanie Pass Title: Vice President 96 EX-4.(II)(A)(9) 3 c58427ex4-iia9.txt GUARANTY DATED 9/14/00 1 EXHIBIT 4(ii)(a)(9) EXECUTION COPY PARENT GUARANTY This PARENT GUARANTY (this "Guaranty") is made as of September 14, 2000, by American Classic Voyages Co., a Delaware corporation (the "Guarantor"), in favor of The Chase Manhattan Bank, a New York banking corporation, as agent (hereinafter in such capacity, the "Agent") for its benefit and the benefit of the other "Holders of Secured Obligations" (as defined in that certain Credit Agreement referred to below). Unless otherwise defined herein, capitalized terms used herein shall have the meanings ascribed to them in the Credit Agreement. WHEREAS, The Delta Queen Steamboat Co., a Delaware corporation (the "Borrower"), the financial institutions listed on the signature pages thereof and each other financial institution which from time to time becomes a party thereto in accordance with Section 11.02(a) thereof (together with their respective successors and permitted assigns, individually, a "Lender" and, collectively, the "Lenders") and the Agent are parties to that certain Amended and Restated Credit Agreement dated as of September 14, 2000 (as amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement") providing, subject to the terms and conditions thereof, for extensions of credit to be made by the Lenders to the Borrower; WHEREAS, the Guarantor directly or indirectly owns 100% of the outstanding capital stock of the Borrower and will derive both direct and indirect benefits from the loans made to the Borrower pursuant to the Credit Agreement; WHEREAS, as a condition to the Lenders' and the Agent's willingness to enter into the Credit Agreement and the Lenders' willingness to extend credit to Borrower under the Credit Agreement, the Lenders have required that the Guarantor enter into this Guaranty; NOW, THEREFORE, in consideration of the premises set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Guarantor agrees as follows: 1. Guaranty. (a) For value received and in consideration of any loan, advance or financial accommodation of any kind whatsoever heretofore, now or hereafter made, given or granted to the Borrower by the Lenders, the Guarantor unconditionally and irrevocably guarantees for the benefit of the Agent and the other Holders of the Secured Obligations the full and prompt payment when due (whether at maturity or earlier, by reason of acceleration or otherwise, and at all times thereafter), and the performance of (i) all of the Obligations of Borrower under the Credit Agreement (including, without limitation, interest accruing following the filing of a bankruptcy petition by or against Borrower, at the applicable rate specified in the Credit Agreement, whether or not such interest is allowed as a claim in bankruptcy) and (ii) all other Obligations of Borrower to the Agent or any other Holder of Secured Obligations under the Loan 2 Documents (the Obligations of Borrower which are described in clauses (i) through (ii) of this Section 1(a) are hereinafter referred to collectively as the "Obligations"). (b) At any time after the occurrence and during the continuance of an Event of Default, the Guarantor shall pay to the Agent, for the benefit of the Agent and the other Holders of Secured Obligations, on demand by the Agent and in immediately available funds, the full amount of the Obligations then due and payable. The Guarantor unconditionally further agrees to pay to the Agent, for the benefit of the Agent and the other Holders of Secured Obligations, as applicable, and reimburse the Agent for the benefit of the Agent and the other Holders of Secured Obligations, as applicable, for, on demand and in immediately available funds, (a) all losses, reasonable fees, reasonable costs and expenses of the type and to the extent permitted under Section 11.03 of the Credit Agreement (including, without limitation, all court costs and reasonable attorneys' and paralegals' fees, costs and expenses) paid or incurred by the Agent or any other Holder of Secured Obligations in: (1) endeavoring to collect all or any part of the Obligations from, or in prosecuting any action against, Borrower, the Guarantor or any of the Borrower Subsidiaries relating to the Credit Agreement, this Guaranty, the Subsidiary Guaranties, the other Loan Documents or the transactions contemplated thereby; (2) taking any action with respect to any security or collateral securing the Obligations or obligations of the Guarantor hereunder or of any Borrower Subsidiary under the Subsidiary Guaranties (collectively, the "Subsidiary Guarantors"); and (3) preserving, protecting or defending the enforceability of, or enforcing, this Guaranty or their respective rights hereunder (all such costs and expenses described in clauses (1) through (3) of this Section 1(b)(a) are hereinafter referred to as the "Expenses") and (b) interest on the Expenses, from the date of demand under this Guaranty until paid in full at the Default Rate described in Section 2.03(d) of the Credit Agreement (the "Interest Rate") (all such Obligations and other indebtedness, liabilities and obligations set forth in this Section 1 being hereinafter collectively referred to as the "Guaranteed Obligations"). The Guarantor hereby agrees that this Guaranty is an absolute guaranty of payment and is not a guaranty of collection. 2. Obligations Unconditional. The Guarantor hereby agrees that its obligations under this Guaranty shall be unconditional, irrespective of: (i) The validity, enforceability, avoidance, assignment or subordination of any of the Guaranteed Obligations or any of the Loan Documents; (ii) the absence of any attempt by, or on behalf of, the Agent or any other Holder of Secured Obligations to collect, or to take any other action to enforce, all or any part of the Guaranteed Obligations whether from or against Borrower, any of the Subsidiary Guarantors or any other Person; (iii) the election of any remedy by, or on behalf of, the Agent or any other Holder of Secured Obligations with respect to all or any part of the Guaranteed Obligations; (iv) any change in the time, manner or place of payment of, or in any other term of, or any increase in the amount of, all or any of the Obligations, or the waiver, consent, extension, forbearance or granting of any indulgence, by, or on behalf of, the 2 3 Agent or any other Holder of Secured Obligations with respect to any provision of any of the Loan Documents; (v) the failure of the Agent or any other Holder of Secured Obligations to take any steps to perfect and maintain its security interest in, or to preserve its rights to, any security or collateral for any or any part of the Guaranteed Obligations; (vi) the election by, or on behalf of, the Agent or any one or more of the other Holders of Secured Obligations, in any proceeding instituted under Chapter 11 of Title 11 of the United States Code (11 U.S.C. 101 et seq.) (the "Bankruptcy Code"), of the application of Section 1111(b)(2) of the Bankruptcy Code; (vii) any borrowing or grant of a security interest by Borrower as debtor-in-possession under Section 364 of the Bankruptcy Code; (viii) the disallowance, under Section 502 of the Bankruptcy Code, of all or any portion of the claims of any of the Agent or any other Holder of Secured Obligations for repayment of all or any part of the Guaranteed Obligations; (ix) any other circumstance which might otherwise constitute a legal or equitable discharge or defense of Borrower, the Guarantor or any of the Subsidiary Guarantors; or (x) any change, restructuring or termination of or to the corporate structure or existence of the Guarantor, Borrower or any Subsidiary Guarantor or any restructuring or refinancing of all or any portion of the Guaranteed Obligations. 3. Enforcement; Application of Payments. Upon the occurrence and during the continuance of an Event of Default, the Agent may proceed directly and at once, without notice, against the Guarantor to obtain performance of and to collect and recover the full amount, or any portion, of the Guaranteed Obligations, without first proceeding against Borrower or any of the Subsidiary Guarantors, or any other Person, or against any security or collateral for the Guaranteed Obligations. Subject only to the terms and provisions of the Credit Agreement, the Agent shall have the exclusive right to determine the application of payments and credits, if any, from the Guarantor, any of the Subsidiary Guarantors, Borrower or from any other Person on account of the Guaranteed Obligations or any other liability of any of the Guarantor to the Agent or any other Holder of Secured Obligations. 4. Waivers. (a) The Guarantor hereby waives promptness, diligence, presentment, demand of payment, filing of claims with a court in the event of receivership or bankruptcy of Borrower, protest or notice with respect to any or any part of the Guaranteed Obligations, all setoffs and counterclaims and all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor and notices of acceptance of this Guaranty or any other guaranty, the benefits of all statutes of limitation, the benefits of any statute the effect of which would require the Agent or any other Holder of Secured Obligations to first proceed against Borrower, any Subsidiary Guarantor or any other Person to enforce or collect all or any 3 4 portion of the Guaranteed Obligations before proceeding against the Guarantor for the enforcement of the Guarantor's obligations and indebtedness hereunder, and all other demands whatsoever (and shall not require that the same be made on Borrower or any Subsidiary Guarantor as a condition precedent to the obligations of the Guarantor hereunder), and covenants that this Guaranty will not be discharged, except by indefeasible payment and performance in full of all of the Guaranteed Obligations and any other obligations contained herein. The Guarantor further waives all notices of the existence, creation or incurring of new or additional indebtedness, arising either from additional loans extended to Borrower or otherwise, and also waives all notices that the principal amount, or any portion thereof, and/or any interest on any instrument or document evidencing all or any part of the Guaranteed Obligations is due, notices of any and all proceedings to collect from the maker, any endorser or any other guarantor of all or any part of the Guaranteed Obligations, or from any other Person, and, to the extent permitted by law, notices of exchange, sale, surrender or other handling of any security or collateral given to the Agent or any other Holder of Secured Obligations to secure payment of all or any part of the Guaranteed Obligations. The Guarantor further waives any requirement that the Agent or any other Holder of Secured Obligations protect, secure, perfect or insure any security interest or exhaust any right to take action against Borrower or any other Person or any collateral. (b) The Guarantor hereby waives, to the fullest extent permitted by applicable law in accordance with Section 2856 of the California Civil Code, all rights and benefits under California Civil Code Sections 2787 to 2855, inclusive (or any similar laws in other jurisdictions) and all rights and benefits of California Civil Code Sections 2899 and 3433 (or any similar laws in any other jurisdiction). In addition, without limiting the generality of the foregoing or any other provision hereof, the Guarantor hereby waives, in accordance with Section 2856 of the California Civil Code, all rights and defenses (including, without limitation, all rights and defenses arising out of an election of remedies by the Agent or any other Holder of Secured Obligations) that the Guarantor may have because the Obligations are secured by real property. This means, among other things: (i) the Agent or any other Holder of Secured Obligations may collect from the Guarantor without first foreclosing on any real or personal property collateral pledged to or for the benefit of the Agent or any other Holder of Secured Obligations; and (ii) if the Agent or any other Holder of Secured Obligations forecloses on any real property collateral pledged by the Borrower: (A) the amount of the debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price; and (B) the Agent or any other Holder of Secured Obligations may collect from the Guarantor even if the Agent or any other Holder of Secured Obligations, by foreclosing on the real property collateral, has destroyed any right the Guarantor may have to collect from the Borrower. This is an unconditional and irrevocable waiver of any rights and defenses the Guarantor may have because the Guaranteed Obligations are or may be secured by real property. These rights 4 5 and defenses include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d or 726 of the California Code of Civil Procedure (or any similar laws in any other jurisdiction). In accordance with Section 15 below, this Guaranty shall be governed by, and shall be construed and enforced in accordance with, the internal laws (as opposed to the conflicts of laws provisions other than those contained in New York General Obligations Law Section 5-1401) of the State of New York. This Section 4b(ii) and any other referenced provisions of California law are included solely out of an abundance of caution, and shall not be construed to mean that any of the referenced provisions of California law are in any way applicable to this Guaranty or to any of the Guaranteed Obligations. (c) The Guarantor agrees that notwithstanding the foregoing and without limiting the generality of the foregoing if, after the occurrence and during the continuance of an Event of Default, any of the Agent or any other Holder of Secured Obligations is prevented by applicable law from exercising its rights to accelerate the maturity of the Obligations, to collect interest on the Obligations, or to enforce or exercise any other right or remedy with respect to the Obligations, or the Agent is prevented from taking any action to realize on the Collateral, the Guarantor agrees to pay to the Agent for the account of the Agent and the other Holders of Secured Obligations, upon demand therefor, the amount which otherwise would have been due and payable had such rights and remedies been permitted to be exercised by the Agent or such Holder. (d) The Holders of Secured Obligations, either themselves or acting through the Agent, are hereby authorized, without notice or demand and without affecting the liability of the Guarantor hereunder, from time to time, (i) to renew, extend, accelerate or otherwise change the time for payment of, or other terms relating to, all or any part of the Guaranteed Obligations, or to otherwise modify, amend or change the terms of any of the Loan Documents; (ii) to accept partial payments on all or any part of the Guaranteed Obligations; (iii) to take and hold security or collateral for the payment of all or any part of the Guaranteed Obligations, this Guaranty, or any other guaranty of all or any part of the Guaranteed Obligations or other liabilities of Borrower, the Guarantor or any of the Subsidiary Guarantors, (iv) to exchange, enforce, waive and release any such security or collateral; (v) to apply such security or collateral and direct the order or manner of sale thereof as in their discretion they may determine; (vi) to settle, release, exchange, enforce, waive, compromise or collect or otherwise liquidate all or any part of the Guaranteed Obligations, this Guaranty, any other guaranty of all or any part of the Guaranteed Obligations, and any security or collateral for the Guaranteed Obligations or for any such guaranty; or (vii) to the extent permitted under the Credit Agreement, to assign all or any portion of their rights and interests in the Guaranteed Obligations and/or any collateral or other security therefor to any Person. Any of the foregoing may be done in any manner, without affecting or impairing the obligations of the Guarantor hereunder. 5. Financial Information. The Guarantor hereby assumes responsibility for keeping itself informed of the financial condition of Borrower and the Subsidiary Guarantors, any endorsers and/or other guarantors of all or any part of the Guaranteed Obligations, and of all other circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations, or any part thereof, that diligent inquiry would reveal, and the Guarantor hereby agrees that neither the Agent nor any other Holder of Secured Obligations shall have any duty to advise the Guarantor of information known to any of them regarding such condition or any such circumstances. In the 5 6 event the Agent or any other Holder of Secured Obligations, in its sole discretion, undertakes at any time or from time to time to provide any such information to the Guarantor, such Holder or the Agent shall be under no obligation (i) to undertake any investigation not a part of its regular business routine (ii) to disclose any information which such Holder or the Agent pursuant to accepted or reasonable commercial finance or banking practices, wishes to maintain confidential or (iii) to make any other or future disclosure of such information or any other information to the Guarantor. 6. No Marshaling; Reinstatement. The Guarantor consents and agrees that neither the Agent nor any other Holder of Secured Obligations nor any Person acting for or on behalf of the Agent or any other Holder of Secured Obligations shall be under any obligation to marshall any assets in favor of the Guarantor or against or in payment of any or all of the Guaranteed Obligations. The Guarantor further agrees that, to the extent that Borrower, the Guarantor, any of the Subsidiary Guarantors or any other guarantor of all or any part of the Guaranteed Obligations makes a payment or payments to the Agent or any other Holder of Secured Obligations receives any proceeds of Collateral, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to Borrower, the Guarantor, any of the Subsidiary Guarantors, such other guarantors or any other Person, or their respective estates, trustees, receivers or any other party, under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or repayment, the part of the Guaranteed Obligations which has been paid, reduced or satisfied by such amount shall be reinstated and continued in full force and effect as of the time immediately proceeding such initial payment, reduction or satisfaction. 7. Waiver of Subrogation. THE GUARANTOR HEREBY IRREVOCABLY WAIVES ALL RIGHTS OF SUBROGATION (WHETHER CONTRACTUAL, UNDER SECTION 509 OF THE BANKRUPTCY CODE, UNDER COMMON LAW, OR OTHERWISE) TO THE CLAIMS OF THE HOLDERS OF SECURED OBLIGATIONS OR THE AGENT AGAINST THE BORROWER AND ALL CONTRACTUAL, STATUTORY OR COMMON LAW RIGHTS OF CONTRIBUTION, REIMBURSEMENT, INDEMNIFICATION AND SIMILAR RIGHTS AND "CLAIMS" (AS SUCH TERM IS DEFINED IN THE BANKRUPTCY CODE) AGAINST THE BORROWER WHICH ARISE IN CONNECTION WITH, OR AS A RESULT OF, THIS GUARANTY OR PAYMENT BY THE GUARANTOR OF ANY OF THE GUARANTEED OBLIGATIONS. 8. Subordination. The Guarantor agrees that any and all claims of the Guarantor against any endorser or any other guarantor of all or any part of the Obligations, or against any of their respective properties, shall be subordinate and subject in right of payment to the prior payment, in full, of all of the Guaranteed Obligations. Notwithstanding any right of the Guarantor to ask, demand, sue for, take or receive any payment from any Subsidiary Guarantor, all rights, liens and security interests of the Guarantor, whether now or hereafter arising and howsoever existing, in any assets of any Subsidiary Guarantor (whether constituting part of the security or collateral given to the Agent, for the benefit of itself and the other Holders of Secured Obligations, to secure payment of all or any part of the Guaranteed Obligations or otherwise) shall be and hereby are subordinated to the rights of the Agent and the other Holders of Secured Obligations in those assets. The Guarantor shall have no rights to possession of any such asset or to foreclose upon any such asset, whether by judicial action of otherwise, unless and until all of 6 7 the Guaranteed Obligations are indefeasibly paid and performed in full and financing arrangements between Borrower and the Holders of Secured Obligations have been terminated. Should any payment, distribution, security or instrument or proceeds thereof be received by the Guarantor upon or with respect to any indebtedness of any Subsidiary Guarantor to the Guarantor after the occurrence and during the continuance of an Event of Default and prior to the satisfaction of all of the Guaranteed Obligations and the termination of all financing arrangements between the Borrower and the Holders of Secured Obligations, the Guarantor shall receive and hold the same in trust, as trustee for the benefit of the Agent and the other Holders of Secured Obligations and shall forthwith deliver the same to the Agent, in precisely the form received (except for the endorsement or assignment of such Guarantor where necessary), for application on any of the Guaranteed Obligations, due or not due, and, until so delivered, the same shall be held in trust by the Guarantor as the property of the Agent and the other Holders of Secured Obligations. If the Guarantor fails to make any such endorsement or assignment to the Agent, the Agent or any of its officers or employees are hereby irrevocably authorized to make the same. The Guarantor agrees that until the Guaranteed Obligations are indefeasibly paid and performed in full and all financing arrangements between the Borrowers and the Holders of Secured Obligations have been terminated, the Guarantor will not assign or transfer to others any claim the Guarantor has or may have against Borrower except for items payable by the Borrower and deposited by the Guarantor with a financial institution for payment. 9. Enforcement; Amendments; Waivers. No delay on the part of the Agent or any other Holder of Secured Obligations in the exercise of any right or remedy arising under this Guaranty, the Credit Agreement, any of the other Loan Documents or otherwise with respect to all or any part of the Guaranteed Obligations, the Collateral or any other guaranty of or security for all or any part of the Guaranteed Obligations, shall operate as a waiver thereof, and no single or partial exercise by any such Person of any such right or remedy shall preclude any further exercise thereof. The remedies set forth herein are cumulative and not exclusive of any remedies provided by law or the other Loan Documents. No modification or waiver of any of the provisions of this Guaranty shall be binding upon the Agent or any other Holder of Secured Obligations, except as expressly set forth in a writing duly signed and delivered in accordance with the provisions of Section 11.07 of the Credit Agreement. Failure by the Agent or any other Holder of Secured Obligations at any time or times hereafter to require strict performance by Borrower, the Guarantor, any other guarantor of all or any part of the Guaranteed Obligations or any other Person of any of the provisions, warranties, terms and conditions contained in any of the Loan Documents now or at any time or times hereafter executed by such Persons and delivered to the Agent or any other Holder of Secured Obligations shall not waive, affect or diminish any right of the Agent or such Holder of Secured Obligations at any time or times hereafter to demand strict performance thereof and such right shall not be deemed to have been waived by any act or knowledge of the Agent or any other Holder of Secured Obligations, or their respective agents, officers or employees, unless such waiver is contained in an instrument in writing, directed and delivered to Borrower or the Guarantor, as applicable, specifying such waiver, and is signed by the party or parties necessary to give such waiver under Section 11.07 of the Credit Agreement. No waiver of any Event of Default by the Agent or any other Holder of Secured Obligations shall operate as a waiver of any other Event of Default or the same Event of Default on a future occasion, and no action by the Agent or any other Holder of Secured Obligations permitted hereunder shall in any way affect or impair the Agent's or such Holder's rights and remedies or the obligations of the Guarantor under this Guaranty. Any determination 7 8 by a court of competent jurisdiction of the amount of any principal and/or interest owing by Borrower or the Guarantor to any Holder of Secured Obligations shall be conclusive and binding on the Guarantor irrespective of whether the Guarantor was a party to the suit or action in which such determination was made. 10. Effectiveness; Termination; Release. This Guaranty shall become effective upon its execution by the Guarantor and shall continue in full force and effect and may not be terminated or otherwise revoked until the Credit Agreement and all financing arrangements governed by the Loan Documents among the Borrower, the Agent and the other Holders of Secured Obligations shall have been terminated (other than continuing contingent indemnity obligations) and the Guaranteed Obligations shall have been indefeasibly and fully paid and discharged. If, notwithstanding the foregoing, the Guarantor shall have any right under applicable law to terminate or revoke this Guaranty, the Guarantor agrees that such termination or revocation shall not be effective until a written notice of such revocation or termination, specifically referring hereto, signed by the Guarantor, is actually received by the Agent and each of the Lenders. Such notice shall not affect the right and power of any of the Agent or any other Holder of Secured Obligations to enforce rights arising prior to receipt thereof by the Agent and each other Holder of Secured Obligations. If the Agent or any other Holder of Secured Obligations grants loans or takes other action after the Guarantor terminates or revokes this Guaranty but before such Person receives such written notice, the rights of such Person with respect thereto shall be the same as if such termination or revocation had not occurred. 11. Successors and Assigns. This Guaranty shall be binding upon the Guarantor and upon its successors and assigns and shall inure to the benefit of the Agent and the other Holders of Secured Obligations and their respective successors and assigns; all references herein to Borrower and to the Guarantor shall be deemed to include their respective successors and assigns. The successors and assigns of the Guarantor and Borrower shall include, without limitation, their respective receivers, trustees or debtors-in-possession; provided, however, that the Guarantor shall not voluntarily assign or transfer its rights or obligations hereunder without the Agent's prior written consent. 12. Definitions. All references to the singular shall be deemed to include the plural and vice versa where the context so requires. 13. Payments to be Free of Deductions; Withholding Tax Exemption. All payments by the Guarantor under this Guaranty shall be made without setoff or counterclaim and free and clear of, and without deductions of the type and to the extent described in Section 2.10 of the Credit Agreement. A delivery by a Lender that is not incorporated under the laws of the United States of America of its IRS Form W-8BEN or W-8ECI to Borrower pursuant to the Credit Agreement shall be deemed a delivery of such form to the Guarantor hereunder. 14. Officer Authority. The undersigned hereby certifies that he/she has all necessary authority to execute and deliver this Guaranty on behalf of the Guarantor. 15. GOVERNING LAW. THE AGENT HEREBY ACCEPTS THIS GUARANTY, ON BEHALF OF ITSELF AND THE OTHER HOLDERS OF SECURED OBLIGATIONS, AT NEW YORK, NEW YORK, BY ACKNOWLEDGING AND AGREEING TO IT THERE. ANY DISPUTE AMONG THE AGENT, ANY OTHER HOLDERS 8 9 OF SECURED OBLIGATIONS AND THE GUARANTOR ARISING OUT OF OR RELATED TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS GUARANTY, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS, AND NOT THE CONFLICTS OF LAW PROVISIONS OTHER THAN THOSE CONTAINED IN NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1401, OF THE STATE OF NEW YORK. 16. CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL. (A) EXCLUSIVE JURISDICTION. EXCEPT AS PROVIDED IN SUBSECTION (B), EACH OF THE PARTIES HERETO AGREES THAT ALL DISPUTES AMONG THEM ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED EXCLUSIVELY BY STATE OR FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK, BUT THE PARTIES HERETO ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK, NEW YORK. EACH OF THE PARTIES HERETO WAIVES IN ALL DISPUTES BROUGHT PURSUANT TO THIS SUBSECTION ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE. (B) OTHER JURISDICTIONS. THE GUARANTOR AGREES THAT THE AGENT OR ANY OTHER HOLDER OF SECURED OBLIGATIONS SHALL HAVE THE RIGHT TO PROCEED AGAINST THE GUARANTOR OR ITS PROPERTY IN A COURT IN ANY LOCATION TO ENABLE SUCH PERSON TO (1) OBTAIN PERSONAL JURISDICTION OVER THE GUARANTOR OR (2) REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF SUCH PERSON. THE GUARANTOR AGREES THAT IT WILL NOT ASSERT ANY PERMISSIBLE COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY SUCH PERSON TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF SUCH PERSON. THE GUARANTOR WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH SUCH PERSON HAS COMMENCED A PROCEEDING DESCRIBED IN THIS SUBSECTION. (C) SERVICE OF PROCESS. THE GUARANTOR WAIVES PERSONAL SERVICE OF ANY PROCESS UPON IT AND, AS ADDITIONAL SECURITY FOR THE OBLIGATIONS, IRREVOCABLY APPOINTS THE PRENTICE HALL CORPORATION SYSTEM, INC., WHOSE ADDRESS IS 500 CENTRAL AVENUE, ALBANY, NEW YORK, 12206, AS THE GUARANTOR'S AGENT FOR THE PURPOSE OF ACCEPTING SERVICE OF PROCESS ISSUED BY ANY COURT. THE GUARANTOR IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH 9 10 ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH IN ANY JURISDICTION SET FORTH ABOVE. (D) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECT WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH. EACH OF THE PARTIES HERETO AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY HEREWITH MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. (E) WAIVER OF BOND. THE GUARANTOR WAIVES THE POSTING OF ANY BOND OTHERWISE REQUIRED OF ANY PARTY HERETO IN CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS OR TO ENFORCE ANY JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF SUCH PARTY, OR TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER, PRELIMINARY OR PERMANENT INJUNCTION, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT. 17. Advice of Counsel. The Guarantor represents and warrants to the Agent and the other Holders of Secured Obligations that it has discussed this Guaranty and, specifically, the provisions of Sections 16 hereof, with its lawyers. 18. Notices. The Guarantor appoints Borrower as the Guarantor's agent to receive notices and other communications under this Guaranty. Any such notice or communication received by Borrower under this Guaranty shall be deemed to have been received by the Guarantor. All such notices to Borrower shall be given in the manner and to the addresses set forth in the Credit Agreement. 19. Severability. Wherever possible, each provision of this Guaranty shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Guaranty shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Guaranty. 20. Merger. This Guaranty represents the final agreement of the Guarantor with respect to the matters contained herein and may not be contradicted by evidence of prior or contemporaneous agreements, or prior or subsequent oral agreements, between the Guarantor and the Agent or any other Holder of Secured Obligations. 10 11 21. Execution in Counterparts. This Guaranty may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 22. Definitions. The singular shall include the plural and vice versa and any gender shall include any other gender as the context may require. 23. Section Headings. The section headings herein are for convenience of reference only, and shall not affect in any way the interpretation of any of the provisions hereof. 11 12 IN WITNESS WHEREOF, this Guaranty has been duly executed by the Guarantor as of the day and year first set forth above. AMERICAN CLASSIC VOYAGES CO. /s/ Jordan B. Allen By: ______________________________ Name: Jordan B. Allen Title: Executive Vice President 12 EX-4.(II)(A)(10) 4 c58427ex4-iia10.txt AMENDED AND RESTATED CONTRIBUTION AGREEMENT 1 EXHIBIT 4(ii)(a)(10) EXECUTION COPY AMENDED AND RESTATED CONTRIBUTION AGREEMENT THIS AMENDED AND RESTATED CONTRIBUTION AGREEMENT (this "Agreement") is entered into as of September 14, 2000 by and among AMERICAN CLASSIC VOYAGES CO., (the "Parent"), CRUISE AMERICA TRAVEL, INCORPORATED, DQSC PROPERTY CO., DQSB II, INC., GREAT OCEAN CRUISE LINE, L.L.C., GREAT RIVER CRUISE LINE, L.L.C. and GREAT PACIFIC NW CRUISE LINE, L.L.C. (all of the foregoing being referred to herein individually as "Co-Obligor" and collectively as the "Co-Obligors"). Undefined capitalized terms which are used herein shall have the meanings ascribed to such terms in the "Credit Agreement" referred to below. WHEREAS, pursuant to that certain Amended and Restated Credit Agreement of even date herewith among THE DELTA QUEEN STEAMBOAT CO., a Delaware corporation ("Borrower"), THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES THEREOF and each other financial institution which from time to time becomes a party thereto in accordance with Section 11.02(a) thereof (together with their respect successors and assigns, individually, a "Lender" and, collectively, the "Lenders") and THE CHASE MANHATTAN BANK, a New York banking corporation, as agent for the lenders (the "Agent") (as amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement"), the Lenders have agreed to make certain loans or otherwise extend credit to Borrower, among other things, to enable Borrower to make loans or otherwise extend certain credit to the Co-Obligors; WHEREAS, as a condition, among others, to the Lenders' willingness to enter into the Credit Agreement, the Lenders have required that the Parent execute and deliver that certain Parent Guaranty of even date herewith (the "Parent Guaranty"), and the other Co-Obligors are parties to the Subsidiary Guaranty dated as of February 25, 1999, as supplemented (together with the Parent Guaranty, referred to hereinafter collectively as the "Guaranty"), pursuant to which, among other things, the Co-Obligors have jointly and severally agreed to guaranty Borrower's "Obligations" to the Lenders under and as defined in the Credit Agreement (the "Accommodation Obligations"); and WHEREAS, pursuant to certain "Collateral Documents" executed pursuant to, and as defined in, the Credit Agreement, the Co-Obligors (other than Parent) have granted liens on, and security interests in, substantially all of their respective properties, as security for their obligations under the Guaranty ("Collateral"); NOW, THEREFORE, in consideration of the premises and the covenants hereinafter contained, and to induce the Parent to enter into the Parent Guaranty, it is agreed as follows: 1. Contribution. As used herein, the "Allocable Amount" of any Co-Obligor, as of any date of determination, shall be determined to be an amount equal to the maximum amount which could then be claimed against such Co-Obligor's Collateral or under such Co-Obligor's Accommodation Obligations without rendering such claim voidable or avoidable under Section 548 of Chapter 11 of the United States Federal Bankruptcy Code (11 U.S.C. Sec. 2 101 et seq.) or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law. To the extent that a payment is made on the Obligations by a Co-Obligor pursuant to an Accommodation Obligation or out of Collateral owned by such Co-Obligor (a "Co-Obligor Payment") which, taking into account all other Co-Obligor Payments then previously or concurrently made by or attributable to any other Co-Obligor, exceeds the amount of the Co-Obligor Payment which otherwise would have been made by or attributable to such Co-Obligor if each such Co-Obligor had paid the aggregate Obligations satisfied by such Co-Obligor Payments in the same proportion as such Co-Obligor's Allocable Amount in effect immediately prior to such Co-Obligor Payment bore to the aggregate Allocable Amounts of all such Co-Obligors in effect immediately prior to such Co-Obligor Payment, then such Co-Obligor shall be entitled to contribution and indemnification from, and to be reimbursed by, each of the other Co-Obligors for the amount of such excess, pro rata based upon their respective Allocable Amounts in effect immediately prior to such Co-Obligor Payment. 2. Miscellaneous. (a) This Agreement is intended only to define the relative rights of the Co-Obligors, and nothing set forth in this Agreement is intended to or shall impair the obligations of the Co-Obligors, jointly and severally, to pay any amounts, as and when the same shall become due and payable in accordance with the terms of the Guaranty. (b) The parties hereto acknowledge that the rights of contribution and indemnification hereunder shall constitute assets in favor of the Co-Obligor to which such contribution and indemnification are owing. (c) This Agreement shall become effective upon its execution by each of the Co-Obligors and shall continue in full force and effect and may not be terminated or otherwise revoked by any Co-Obligor until all of the Obligations under and as defined in the Credit Agreement shall have been indefeasibly paid in full and discharged and the Credit Agreement shall have been terminated. 3. Additional Co-Obligors. Pursuant to Section 6.10(ii) of the Credit Agreement, any Subsidiary of the Borrower formed or acquired after the date hereof shall become obligated as a Co-Obligor hereunder (each as fully as though an original signatory hereto) within the applicable time period specified by the Credit Agreement by executing and delivering to the Agent (with sufficient copies for the Agent and each of the Lenders) that certain supplemental contribution agreement in the form of Exhibit A attached hereto together with such additional supporting documentation required pursuant to Section 6.10 of the Credit Agreement. 3 IN WITNESS WHEREOF, each of the Co-Obligors has executed and delivered this Agreement as of the date first above written. AMERICAN CLASSIC VOYAGES CO. CRUISE AMERICA TRAVEL, INCORPORATED DQSB II, INC. DQSC PROPERTY CO. By: / s / Jordan B. Allen -------------------------------------- Name: Jordan B. Allen Title: Executive Vice President GREAT OCEAN CRUISE LINE, L.L.C. GREAT RIVER CRUISE LINE, L.L.C. By: The Delta Queen Steamboat Co., a Managing Member By: / s / Jordan B. Allen -------------------------------------- Name: Jordan B. Allen Title: Executive Vice President By: DQSB II, Inc., a Managing Member By: / s / Jordan B. Allen -------------------------------------- Name: Jordan B. Allen Title: Executive Vice President GREAT PACIFIC NW CRUISE LINE, L.L.C. By: The Delta Queen Steamboat Co., its Managing Member By: / s / Jordan B. Allen -------------------------------------- Name: Jordan B. Allen Title: Executive Vice President 4 EXHIBIT A SUPPLEMENTAL CONTRIBUTION AGREEMENT _____________, _____ The Chase Manhattan Bank, as Agent for the Lenders party to the Credit Agreement (as defined below) Ladies and Gentlemen: Reference is hereby made to (i) that certain Amended and Restated Credit Agreement, dated as of September [ ], 2000 among The Delta Queen Steamboat Co., the Lenders party thereto and The Chase Manhattan Bank, as a Lender, Issuing Bank and as agent for the Lenders (the "Agent") (as amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement"), and (ii) that certain Amended and Restated Contribution Agreement, dated as of September [ ], 2000, among American Classic Voyages Co., Cruise America Travel, Incorporated, DQSB II, Inc., DQSC Property Co., Great River Cruise Line, L.L.C., Great Ocean Cruise Line, L.L.C. and Great Pacific NW Cruise Line, L.L.C. (each individually a "Co-Obligor" and collectively the "Co-Obligors") (as amended, restated, supplemented or otherwise modified from time to time, the "Contribution Agreement"). Terms not defined herein which are defined in the Credit Agreement shall have for the purposes hereof the meaning provided therein. In accordance with Section 6.10 (ii) of the Credit Agreement, the undersigned, [CO-OBLIGOR], a ___, hereby elects to be a Co-Obligor for all purposes of the Contribution Agreement, effective from the date hereof. Without limiting the generality of the foregoing, the undersigned hereby agrees to perform all of the obligations of a Co-Obligor under, and to be bound in all respects by the terms of the Contribution Agreement to the same extent and with the same force and effect as if the undersigned were a direct signatory thereto. This Supplemental Contribution Agreement shall be construed in accordance with and governed by the internal laws of the State of New York except for its conflict of laws principles. 5 IN WITNESS WHEREOF, this Supplemental Contribution Agreement has been duly executed by the undersigned as of _________, _____. [CO-OBLIGOR] By:_____________________________________ Name:___________________________________ Title:__________________________________ EX-4.(II)(A)(11) 5 c58427ex4-iia11.txt FIRST AMENDMENT TO TRUST INDENTURE 1 EXHIBIT 4 (ii)(a)(11) FIRST AMENDMENT TO TRUST INDENTURE This FIRST AMENDMENT TO TRUST INDENTURE dated as of September 14, 2000 (this "First Amendment") is entered into among (1) GREAT RIVER CRUISE LINE, L.L.C., a Delaware limited liability company ("Mortgagor"), (2) THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF AS LENDERS (the "Lenders"), and (3) THE CHASE MANHATTAN BANK, a New York banking corporation, not in its individual capacity, but as Trustee under the Trust Indenture specified below (the "Trustee"). PRELIMINARY STATEMENTS A. THE DELTA QUEEN STEAMBOAT CO., a Delaware corporation ("Borrower") has previously entered into a Credit Agreement dated as of February 25, 1999, with certain lenders, The Chase Manhattan Bank, as Administrative Agent and Hibernia National Bank, as Documentation Agent (as previously amended, the "Original Credit Agreement"). The Borrower, the Lenders and The Chase Manhattan Bank, as agent, have entered into an Amended and Restated Credit Agreement dated as of September 14, 2000 (as amended, supplemented, modified or restated from time to time (the "Amended and Restated Credit Agreement"). B. The Mortgagor is the sole owner of the whole of the Vessel "Delta Queen", consisting of 3,360 gross tons, 1,160 net tons, bearing official number 225875, documented in the name of the Mortgagor under and pursuant to the laws of the United States of America, having its home port at New Orleans, Louisiana (the "Vessel"). C. The parties hereto have previously entered into a Trust Indenture dated February 25, 1999 (the "Original Trust Indenture"), whereunder the Trustee agreed on behalf of Lenders to hold that certain Preferred Ship Mortgage dated as of February 25, 1999, by Mortgagor in favor of The Chase Manhattan Bank, as Agent and as Trustee under the Original Trust Indenture (the "Original Mortgage"), which Original Mortgage was recorded with the National Vessel Documentation Center of the United States Coast Guard on March 4, 1999 at 2:38 P.M. in Book 99-25, Page 533, and which Original Mortgage affected 100% of the interest of Mortgagor in the vessel "Delta Queen", Official No. 225875. D. In accordance with the Amended and Restated Credit Agreement, Mortgagor has executed a First Amendment to Preferred Ship Mortgage dated as of September 14, 2000 (the "First Amendment to Mortgage") reducing the maximum amount secured under the Original Mortgage, as amended, to $30,000,000 and providing for changes in the Financial Institutions that are parties to the Amended and Restated Credit Agreement. E. In connection with the execution and delivery of the Amended and Restated Credit Agreement and the First Amendment to Mortgage it is necessary to amend the Original Trust Indenture. The Original Trust Indenture, as amended by this First Amendment, is called the "Amended Trust Indenture." Page 1 2 NOW THEREFORE, in consideration of the premises and for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows: SECTION 1. AMENDMENT TO ORIGINAL MORTGAGE. Mortgagor, Lenders and the Trustee hereby acknowledge and consent to the execution and delivery of the First Amendment to Mortgage and the modification and amendments contained therein. The provisions of the First Amendment to Mortgage are hereby incorporated herein by reference with the same force and effect as if said instrument was fully set forth herein. SECTION 2. CHANGES IN LENDERS. Mortgagor, Lenders and the Trustee hereby acknowledge that Bank One, Louisiana, National Association, Credit Agricole Indosuez and The Bank of New York were parties to the Original Trust Indenture but are not parties to the Amended and Restated Credit Agreement. Furthermore, National City Bank of Michigan/Illinois has been added as a new party to the Amended and Restated Credit Agreement. Accordingly, the Original Trust Indenture is hereby modified and amended to reflect the deletion of Bank One, Louisiana, National Association, Credit Agricole Indosuez and The Bank of New York and the addition of National City Bank of Michigan/Illinois as parties to the Amended and Restated Credit Agreement. The parties further acknowledge and agree that, as of the date hereof, the Lenders specified under the Amended Trust Indenture shall be The Chase Manhattan Bank, Hibernia National Bank and National City Bank of Michigan/Illinois. SECTION 3. EFFECTIVENESS. Except as amended and modified by this First Amendment, the Trust Indenture is in all respects ratified, confirmed and carried forward and it shall be and remain in full force and effect. Nothing herein shall constitute a novation, release, termination or reissuance of the Trust Indenture, or a novation of the indebtedness evidenced by the Original Credit Agreement. Terms not otherwise defined herein shall have the meanings provided in the Original Trust Indenture. SECTION 4. COUNTERPARTS. This First Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and such counterparts, added together, shall constitute and be one and the same instrument. [Remainder of Page Intentionally Left Blank] Page 2 3 [Signature Page of Mortgagor] IN WITNESS WHEREOF, Great River Cruise Line, L.L.C. has caused this instrument to be duly executed by an authorized officer as of the date first written above. WITNESSES: GREAT RIVER CRUISE LINE, L.L.C. BY: THE DELTA QUEEN STEAMBOAT CO., A DELAWARE CORPORATION, AS MANAGING MEMBER /s/ Shahem Zenni /s/ JORDAN B. ALLEN - ------------------------- ---------------------------------- NAME: JORDAN B. ALLEN /s/ Pam Stringer TITLE: EXECUTIVE VICE PRESIDENT - ------------------------- ---------------------------- BY: DQSB II, INC. A DELAWARE CORPORATION, AS MANAGING MEMBER /s/ JORDAN B. ALLEN ---------------------------------- NAME: JORDAN B. ALLEN TITLE: EXECUTIVE VICE PRESIDENT ---------------------------- Page 3 4 [Signature Page of Trustee] IN WITNESS WHEREOF, The Chase Manhattan Bank has caused this instrument to be duly executed by an authorized officer as of the date first written above. WITNESSES: THE CHASE MANHATTAN BANK, AS TRUSTEE /s/ Alexander Schneider /s/ JONATHAN E. TWICHELL - -------------------------------- ------------------------------------ NAME: JONATHAN E. TWICHELL /s/ Mary C. Lum TITLE: VICE PRESIDENT - -------------------------------- ------------------------------ Page 4 5 [Signature Page of Lenders] IN WITNESS WHEREOF, The Chase Manhattan Bank has caused this instrument to be duly executed by an authorized officer as of the date first written above. WITNESSES: THE CHASE MANHATTAN BANK /s/ Alexander Schneider /s/ JONATHAN E. TWICHELL - ------------------------------ ------------------------------------ NAME: JONATHAN E. TWICHELL /s/ Mary C. Lum TITLE: VICE PRESIDENT - ------------------------------ ------------------------------ Page 5 6 [Signature Page of Lenders] IN WITNESS WHEREOF, Hibernia National Bank has caused this instrument to be duly executed by an authorized officer as of the date first written above. WITNESSES: HIBERNIA NATIONAL BANK /s/ Vivian Cassesi /s/ CHERYL H. DENENEA - ------------------------------ ------------------------------------ NAME: CHERYL H. DENENEA /s/ Angela Dominguez TITLE: VICE PRESIDENT - ------------------------------ ------------------------------ Page 6 7 [Signature Page of Lenders] IN WITNESS WHEREOF, National City Bank of Michigan/Illinois has caused this instrument to be duly executed by an authorized officer as of the date first written above. WITNESSES: NATIONAL CITY BANK OF MICHIGAN/ILLINOIS /s/ Donna L. Benson /s/ STEPHANIE PASS - ---------------------------- ------------------------------------ NAME: STEPHANIE PASS /s/ L. Schultz TITLE: VICE PRESIDENT - ---------------------------- ------------------------------ Page 7 8 ACKNOWLEDGMENT STATE OF ILLINOIS COUNTY OF COOK BEFORE ME, the undersigned Notary Public, personally came and appeared: Jordan B. Allen, the duly authorized Executive Vice President and representative of The Delta Queen Steamboat Co., which said corporation is a managing member of Great River Cruise Line, L.L.C. ("Great River"), who declared under oath that he is the duly authorized representative of Great River and its aforesaid managing member, and that he signed the foregoing instrument with full authorization under the articles of organization of Great River and the board of directors of the managing members, and that the foregoing Amendment to Trust Indenture is the free and voluntary act and deed of Great River and its managing members, as well as said appearer in his capacity as the representative of Great River, for the uses, purposes and covenants therein expressed. SWORN TO AND SUBSCRIBED BEFORE ME on the 13th day of September, 2000. /s/ Barbara A. Shafer - ------------------------------------- NOTARY PUBLIC My Commission Expires: 11/3/01 ------- Page 8 9 ACKNOWLEDGMENT STATE OF ILLINOIS COUNTY OF COOK BEFORE ME, the undersigned Notary Public, personally came and appeared: Jordan B. Allen, the duly authorized Executive Vice President and representative of DQSB II, Inc., which said corporation is a managing member of Great River Cruise Line, L.L.C. ("Great River"), who declared under oath that he is the duly authorized representative of Great River and its aforesaid managing member, and that he signed the foregoing instrument with full authorization under the articles of organization of Great River and the board of directors of the managing members, and that the foregoing Amendment to Trust Indenture is the free and voluntary act and deed of Great River and its managing members, as well as said appearer in his capacity as the representative of Great River, for the uses, purposes and covenants therein expressed. SWORN TO AND SUBSCRIBED BEFORE ME on the 13th day of September, 2000. /s/ Barbara A. Shafer - ---------------------------------- NOTARY PUBLIC My Commission Expires: 11/3/01 ------- Page 9 10 ACKNOWLEDGMENT STATE OF ILLINOIS COUNTY OF COOK BEFORE ME, the undersigned Notary Public, personally came and appeared: Jonathan E. Twichell, the duly authorized Vice President and representative of The Chase Manhattan Bank, who declared that he/she is the duly authorized representative of The Chase Manhattan Bank and that he/she signed the above instrument on the authorization of such corporation's board of directors and that the same is the free and voluntary act and deed of said corporation, and of himself/herself in his/her capacity as representative thereof, for the uses and purposes therein expressed. SWORN TO AND SUBSCRIBED BEFORE ME on the 12th day of September, 2000. /s/ Deborah K. Welles - -------------------------------------- NOTARY PUBLIC My Commission Expires: 3/10/02 ------- Page 10 11 ACKNOWLEDGMENT STATE OF LOUISIANA PARISH OF ORLEANS BEFORE ME, the undersigned Notary Public, personally came and appeared: Cheryl H. Denenea, the duly authorized Vice President and representative of Hibernia National Bank, who declared that he/she is the duly authorized representative of Hibernia National Bank and that he/she signed the above instrument on the authorization of such corporation's board of directors and that the same is the free and voluntary act and deed of said corporation, and of himself/herself in his/her capacity as representative thereof, for the uses and purposes therein expressed. SWORN TO AND SUBSCRIBED BEFORE ME on the 13th day of September, 2000. /s/ Gary Ryan - -------------------------------------- NOTARY PUBLIC My Commission Expires: at death --------- Page 11 12 ACKNOWLEDGMENT STATE OF ILLINOIS COUNTY OF DUPAGE BEFORE ME, the undersigned Notary Public, personally came and appeared: Stephanie Pass, the duly authorized Vice President and representative of National City Bank of Michigan/Illinois, who declared that he/she is the duly authorized representative of National City Bank of Michigan/Illinois and that he/she signed the above instrument on the authorization of such corporation's board of directors and that the same is the free and voluntary act and deed of said corporation, and of himself/herself in his/her capacity as representative thereof, for the uses and purposes therein expressed. SWORN TO AND SUBSCRIBED BEFORE ME on the 13th day of September, 2000. /s/ Frances S. Griffin - ----------------------------------------- NOTARY PUBLIC My Commission Expires: 12/29/01 -------- Page 12 EX-4.(II)(A)(12) 6 c58427ex4-iia12.txt FIRST AMENDMENT TO PREFERRED SHIP MORTGAGE 1 EXHIBIT 4(ii)(a)(12) ================================================================================ FIRST AMENDMENT TO PREFERRED SHIP MORTGAGE ON 100.000% OF THE VESSEL "DELTA QUEEN" OFFICIAL NUMBER 225875 EXECUTED BY GREAT RIVER CRUISE LINE, L.L.C. IN FAVOR OF THE CHASE MANHATTAN BANK, AS AGENT AND TRUSTEE FOR THE BENEFIT OF THE FINANCIAL INSTITUTIONS DESIGNATED IN THE TRUST INDENTURE DATED AS OF FEBRUARY 25, 1999, AS AMENDED EXECUTED ON THE 14TH DAY OF SEPTEMBER, 2000 OBLIGATIONS SECURED, DIRECT OR CONTINGENT (EXCLUSIVE OF INTEREST, EXPENSES AND FEES) PURSUANT TO 46 U.S.C.A. SS. 31321(B)(3) AND 46 CFR SS. 67.235, MAXIMUM PRINCIPAL BALANCE: $30,000,000 VESSEL NAME: DELTA QUEEN HOME PORT: NEW ORLEANS, LOUISIANA GROSS TONNAGE: 3,360 TONS NET TONNAGE: 1,160 TONS YEAR BUILT: 1926 OWNER AND MORTGAGOR: MORTGAGEE: - -------------------- ---------- GREAT RIVER CRUISE LINE, L.L.C. THE CHASE MANHATTAN BANK, ROBIN STREET WHARF AS AGENT AND TRUSTEE FOR THE BENEFIT 1380 PORT OF NEW ORLEANS PLACE OF THE FINANCIAL INSTITUTIONS DESIGNATED NEW ORLEANS, LOUISIANA 70130-1890 HEREIN (TIN: 13-499-4650) 270 PARK AVENUE NEW YORK, NEW YORK 10017 ================================================================================ 2 FIRST AMENDMENT TO UNITED STATES OF AMERICA PREFERRED SHIP MORTGAGE STATE OF ILLINOIS BY: COUNTY OF COOK GREAT RIVER CRUISE LINE, L.L.C. IN FAVOR OF: THE CHASE MANHATTAN BANK, A NEW YORK BANKING CORPORATION, AS AGENT AND TRUSTEE (IN SUCH CAPACITY, "AGENT") FOR ITSELF AND THE FINANCIAL INSTITUTIONS DESIGNATED IN THE TRUST INDENTURE DATED AS OF FEBRUARY 25, 1999, AS AMENDED BE IT KNOWN, that on the 14th day of September, 2000, in the presence of the undersigned competent witnesses, personally came and appeared: GREAT RIVER CRUISE LINE, L.L.C., a Delaware limited liability company (the "Owner" and "Mortgagor") whose mailing address is Robin Street Wharf, 1380 Port of New Orleans Place, New Orleans, Louisiana 70130, whose taxpayer identification number is 72-1353488, successor by merger to GREAT RIVER CRUISE LINE, INC., a Delaware corporation, as evidenced by Certificate of Merger filed with the Delaware Secretary of State on December 27, 1996, but effective as of December 31, 1996, represented herein by and through The Delta Queen Steamboat Co., a Delaware corporation, a managing member, itself appearing through ____________________________, its executive vice president and duly authorized representative pursuant to a resolution of its board of directors, a certified copy of which is attached hereto, and DQSB II, Inc., a Delaware corporation, a managing member, itself appearing through _____________________, its executive vice president and duly authorized representative pursuant to a resolution of its board of directors, a certified copy of which is attached hereto; which managing members are authorized under the terms of Owner's operating agreement and a unanimous consent resolution of its managing members, a certified copy of which is attached hereto; WHO DECLARED that this First Amendment to Preferred Ship Mortgage (this "First Amendment") is hereby granted, subject to the following premises, terms and conditions: PRELIMINARY STATEMENT: A. Mortgagor has previously granted that certain Preferred Ship Mortgage dated February 25, 1999 (the "Original Mortgage," together with any amendments thereto, including this First Amendment, "Mortgage"), which Original Mortgage was recorded with the National Vessel Documentation Center of the United States Coast Guard on March 4, 1999 at 2:38 P.M. in Book 99-25, Page 533; and Page 2 3 B. The Original Mortgage was granted to secure payment of the Obligations (as defined therein), up to a maximum secured principal amount of $70,000,000.00, together with interest, costs, attorneys' fees and protective advances, which Obligations included all indebtedness of Mortgagor under the Subsidiary Guaranty dated February 25, 1999 (together with any amendments thereto, and renewals and replacements thereof, the "Guaranty"); and C. Such Guaranty guaranteed payment of all of the indebtedness of The Delta Queen Steamboat Co. ("Borrower") under that certain Credit Agreement dated as of February 25, 1999, by and among Borrower, Mortgagee and the other Financial Institutions listed on the signature pages thereof, supplemented or otherwise modified from time to time (the "Credit Agreement"); and D. Borrower and Mortgagor have requested that the principal amount of the credit facility under the Credit Agreement be modified and reduced from a maximum of $70,000,000.00 to a maximum of $30,000,000.00, and to further amend the Credit Agreement with respect to certain other matters, all to be more fully reflected in an Amended and Restated Credit Agreement by and among Borrower, Mortgagee and the other Financial Institutions, dated as of SEPTEMBER 14, 2000 (the "Restated Credit Agreement" or "Credit Agreement"); and E. Mortgagor wishes to provide and confirm that the Obligations secured by the Mortgage include all obligations guaranteed by Mortgagor under the Guaranty, which include, without limitation, all of the indebtedness of Borrower under the Credit Agreement, up to a maximum secured principal amount of $30,000,000.00, together with interest, costs, attorneys' fees and protective advances; NOW THEREFORE, in consideration of the premises and to provide for and evidence the amendment and modification of the Original Mortgage, Mortgagor hereby agrees as follows: SECTION 1. GUARANTEED OBLIGATIONS. Mortgagor hereby acknowledges and confirms that the "Guaranteed Obligations" which are secured by its Guaranty, and which comprise the "Obligations" secured by the Mortgage, were intended to include, and do now and shall hereafter include, any and all Obligations of Borrower under the Credit Agreement (up to the maximum principal limits provided herein), as the same Credit Agreement is amended, restated, supplemented or otherwise modified from time to time, including any amendments to the Credit Agreement that increase the amount of the credit facility thereunder, change the interest rate, change the maturity dates, or that effect other changes of whatever nature and kind whatsoever. In accordance with the foregoing, and without limiting the foregoing, Mortgagor confirms and acknowledges that the "Guaranteed Obligations" secured by the Guaranty, and the "Obligations" secured by the Mortgage, were intended to include, and do now and shall hereafter include, any and all obligations, whether for principal, interest, fees and other amounts, that may now or hereafter be due from Borrower in connection with the Restated Credit Agreement, as amended, restated, supplemented or otherwise modified from time to time, all up to a maximum secured principal amount of $30,000,000.00, together with interest, costs, attorneys' fees and protective advances. Page 3 4 SECTION 2. OBLIGATIONS SECURED BY MORTGAGE. The Mortgage is hereby modified and amended to provide that the maximum principal obligations secured thereunder, whether direct or contingent, exclusive of interest, expenses and fees, pursuant to 46 U.S.C.A.ss.31321(b)(3) and 46 CFR ss.67.235(a)(2)(iii) is reduced from $70,000,000 to $30,000,000.00. SECTION 3. BORROWINGS SECURED. It is the intention of Mortgagor that all Borrowings made under the Original Credit Agreement (including all Borrowings made under the Restated Credit Agreement), together with any and all other "Obligations" as described in the Original Mortgage and confirmed herein, are secured under the Mortgage, as amended, with retroactive priority to the date of the Original Mortgage, in conformance with the provisions of applicable law, up to a maximum principal secured amount of $30,000,000.00, together with interest, costs, attorneys' fees and protective advances. SECTION 4. NOTICE OF MORTGAGE. Section 1.8 of the Original Mortgage is hereby amended, modified and supplemented by deleting the Notice of Preferred Ship Mortgage as set forth therein and replacing it with the following: NOTICE OF PREFERRED SHIP MORTGAGE This Vessel is owned by Great River Cruise Line, L.L.C. and is subject to a Preferred Ship Mortgage, dated February 25, 1999, as amended, in favor of The Chase Manhattan Bank, as Agent and Trustee pursuant to a Trust Indenture dated as of February 25, 1999, as amended, among the aforesaid Agent and Trustee, as Mortgagee, and the financial institutions designated therein, under authority of Title 46 U.S.C.A. ss.31301 et seq. Under the terms of said Mortgage, as amended, neither the Owner, any charterer, the Master, nor any other Person has any right, power or authority to create, incur or permit to be placed or imposed upon this Vessel, its freights, profits or hire, any lien whatsoever, other than the lien of, and liens permitted by, said Mortgage, as amended. SECTION 5. EFFECTIVENESS. Except as amended and modified by this First Amendment, the Mortgage is in all respects ratified, confirmed and carried forward and it shall be and remain in full force and effect. Nothing herein shall constitute a novation, release, termination or reissuance of the Mortgage, or a novation of the indebtedness evidenced by the Original Credit Agreement. Terms not otherwise defined herein shall have the meanings provided in the Original Mortgage. SECTION 6. PROVISION CONCERNING TRUST INDENTURE. This First Amendment and the Mortgage have been executed and delivered to Mortgagee in trust, and are held by Mortgagee in trust, pursuant to that certain Trust Indenture by and among Mortgagor, Mortgagee and the Financial Institutions, dated February 25, 1999, as the same may be amended from time to time, including the First Amendment to Trust Indenture dated of even date herewith. SECTION 7. FILING. Mortgagor hereby authorizes and directs that this First Amendment be filed with the National Vessel Documentation center of the U.S. Coast Guard ("NVDC") and that notation of this First Amendment be made on the official records maintained by NVDC. Furthermore, the Certificate of Ownership with respect to the Vessel shall be supplemented and endorsed to reflect the filing of the First Amendment. Page 4 5 SECTION 8. COUNTERPARTS. This First Amendment may be executed in any number of counterparts, each of which, when so executed, shall be deemed to be an original and such counterparts, added together, shall constitute and be one and the same instrument. [Remainder of Page Intentionally Left Blank] Page 5 6 THUS DONE AND SIGNED, on the day, month and year first written above, in the presence of the undersigned competent witnesses, who hereunto sign their names with Mortgagor after reading of the whole. WITNESSES: MORTGAGOR: GREAT RIVER CRUISE LINE, L.L.C. BY: THE DELTA QUEEN STEAMBOAT CO., A MANAGING MEMBER / s / Shahem Zenni - ------------------------------ BY: / S / JORDAN B. ALLEN --------------------------------- NAME: JORDAN B. ALLEN TITLE: EXECUTIVE VICE PRESIDENT / s / Pam Stringer - ------------------------------ BY: DQSB II, INC., A MANAGING MEMBER BY: / S / JORDAN B. ALLEN --------------------------------- NAME: JORDAN B. ALLEN TITLE: EXECUTIVE VICE PRESIDENT Page 6 7 THUS DONE AND SIGNED on the day, month and year first written above, in the presence of the undersigned competent witnesses, who hereunto sign their names with Mortgagee after reading of the whole. WITNESSES: MORTGAGEE: THE CHASE MANHATTAN BANK, AS TRUSTEE AND AGENT / s / Alexander Schneider / S / JONATHAN E. TWICHELL - ------------------------------ ------------------------------------ BY: JONATHAN E. TWICHELL / s / Mary C. Lum TITLE: VICE PRESIDENT - ------------------------------ Page 7 8 ACKNOWLEDGMENT STATE OF ILLINOIS COUNTY OF COOK BEFORE ME, the undersigned Notary Public, personally came and appeared: Jordan B. Allen, the duly authorized Executive Vice President and representative of The Delta Queen Steamboat Co. and DQSB II, Inc., which said corporations are the sole managing members of Great River Cruise Line, L.L.C. ("Great River"), who declared under oath that he is the duly authorized representative of Great River and its aforesaid managing members, and that he signed the foregoing instrument with full authorization under the articles of organization of Great River and the board of directors of each of the managing members, and that the foregoing Amendment to Preferred Ship Mortgage is the free and voluntary act and deed of Great River and its managing members, as well as said appearer in his capacity as the representative of Great River, for the uses, purposes and covenants therein expressed. SWORN TO AND SUBSCRIBED BEFORE ME on the 13th day of September, 2000. / s / Barbara A. Shafer - --------------------------------------- NOTARY PUBLIC My Commission Expires: 11/3/01 Page 8 9 ACKNOWLEDGMENT STATE OF ILLINOIS COUNTY OF COOK BEFORE ME, the undersigned Notary Public, personally came and appeared: Jonathan E. Twichell the duly authorized Vice President and representative of The Chase Manhattan Bank, who declared that he/she is the duly authorized representative of The Chase Manhattan Bank and that he/she signed the above instrument on the authorization of such corporation's board of directors and that the same is the free and voluntary act and deed of said corporation, and of himself/herself in his/her capacity as representative thereof, for the uses and purposes therein expressed. SWORN TO AND SUBSCRIBED BEFORE ME on the 12th day of September, 2000. / s / Deborah K. Welles - ---------------------------------------- NOTARY PUBLIC My Commission Expires: 3/10/02 Page 9 EX-4.(II)(D)(9) 7 c58427ex4-iid9.txt SECRETARY'S DETERMINATION, DATED 8/10/00 1 4(ii)(d)(9) ---------------------------------------------------------------- SECRETARY'S DETERMINATION BY THE UNITED STATES OF AMERICA ACCEPTED BY PROJECT AMERICA SHIP I, INC. Dated August 10, 2000 ---------------------------------------------------------------- 2 SECRETARY'S DETERMINATION BY THE UNITED STATES OF AMERICA This Secretary's Determination, dated August 10, 2000 (the "Secretary's Determination"), made pursuant to the Commitment to Guarantee Obligations, Contract No. MA-13579, (the "Guarantee Commitment"), dated February 10, 2000, made and entered into by the United States of America ("United States"), represented by the Secretary of Transportation, acting by and through the Maritime Administrator (the "Secretary"), and accepted on said date by Project America Ship I, Inc., a Delaware corporation (the "Shipowner"). RECITALS: Reference is made to the Trust Indenture dated February 10, 2000 (the "Indenture") between the Shipowner and The Bank of New York, a New York banking corporation (the "Indenture Trustee"). The Indenture relates to the issuance and sale on the date hereof of an aggregate of $50,000,000 principal amount of its United States Government Guaranteed Ship Financing Notes 2000 Series B (hereinafter called the "2000 Series B Notes"). Reference is also made to the Note Purchase Agreement, dated the date hereof, relating to the 2000 Series B Notes (the "Note Purchase Agreement") and the 2000 Series B Notes dated the date hereof. The United States of America, represented by the Secretary of Transportation, acting by and through the Maritime Administrator, hereby: (1) Determines (i) pursuant to Section 1104(A)(b)(3) of Title XI ("Title XI") of the Merchant Marine Act, 1936, as amended, that the maturity date of the 2000 Series B Notes is satisfactory, (ii) pursuant to Section 1104(A)(b)(4) of Title XI that the principal payments of the 2000 Series B Notes are satisfactory, (iii) that the rate of interest to be borne by the 2000 Series B Notes is reasonable in accordance with Section 1104(A)(b)(5) of Title XI, and (iv) that the terms of the 2000 Series B Notes are otherwise satisfactory. (2) Approves the forms of the Note Purchase Agreement and the 2000 Series B Notes. (3) Consents to the execution and delivery of the 2000 Series B Notes by the Shipowner. (4) Determines that the aggregate principal amount of such 2000 Series B Notes, together with all other Obligations Outstanding under the Indenture, does not exceed 87 1/2 % of the Actual Cost of the Vessel on the date hereof. 3 IN WITNESS WHEREOF, this Secretary's Determination has been executed by the Secretary as of the day and year first above written. UNITED STATES OF AMERICA, SECRETARY OF TRANSPORTATION BY: MARITIME ADMINISTRATOR (SEAL) By: -------------------------------- Secretary Maritime Administration Attest: - ------------------------------ Assistant Secretary Maritime Administration 4 IN WITNESS WHEREOF, this Secretary's Determination has been accepted by the Shipowner as of the day and year first above written. SHIPOWNER: PROJECT AMERICA SHIP I, INC. (SEAL) By ------------------------------ Its Vice President ATTEST By ---------------------------------- Its Executive Vice President EX-4.(II)(D)(10) 8 c58427ex4-iid10.txt $50,000,000 NOTE PURCHASE AGREEMENT 1 4(ii)(d)(10) PROJECT AMERICA SHIP I, INC. $50,000,000 United States Government Guaranteed Ship Financing Notes -------------------------------------- NOTE PURCHASE AGREEMENT -------------------------------------- Dated August 10, 2000 2 PROJECT AMERICA SHIP I, INC. $ 50,000,000 United States Government Guaranteed Ship Financing Notes Variable Rate Notes due July 31, 2001 NOTE PURCHASE AGREEMENT To each of the respective Purchasers named in Schedule 1 hereto: Dated August 10, 2000 Dear Sirs: The undersigned, Project America Ship I, Inc., a Delaware corporation (the "Shipowner"), hereby agrees with each of you (each, a "Purchaser") as follows: 1. The Notes. The United States Government Guaranteed Ship Financing Notes, due July 31, 2001, referred to above (collectively the "Notes") in the aggregate principal amount set forth above are proposed to be issued and sold by the Shipowner upon fulfillment of the terms and conditions set forth herein. The Notes will be issued and sold to aid in the financing of the construction of Hull No. 7671 (the "Vessel"). The Notes will be in fully registered form only and will bear interest from the date of issuance at LIBOR minus .05%, adjusted quarterly, payable quarterly, on October 31, 2000, January 31, 2001, April 28, 2001 and at maturity, commencing October 31, 2000. The Notes will be issued under a Trust Indenture (the "Indenture") between the Shipowner and The Bank of New York, as Trustee (the "Indenture Trustee"). Payment of the principal of and interest on the Notes will be fully and unconditionally guaranteed by the United States of America pursuant to the guarantee imprinted by the Indenture Trustee pursuant to an Authorization Agreement, on each of the Notes (the "Guarantee") under Title XI of the Merchant Marine Act, 1936, as amended and in effect on the date hereof (the "Act"). Since the Notes are guaranteed with the full faith and credit of the United States of America, it is understood that you will not independently review the financial condition of the Shipowner and will rely completely on the Secretary's Determination regarding the financial resources and maritime ability of the Shipowner. The capitalized terms used herein and not defined herein have the meanings ascribed thereto in Schedule A to the Indenture. The Notes, the Indenture and the Guarantees conform in all material respects to the descriptions thereof contained in the Offering Circular dated August 8, 2000 (the "Offering 3 Circular"), which is being used by the Purchasers, with the consent of the Shipowner, for resales of the Notes to investors. 2. Interest Rate on Notes. The rate of interest to be borne by the Notes shall be determined in accordance with the provisions of the Notes and the Indenture and in each case shall be equal to a per annum rate adjusted quarterly for each Interest Period to LIBOR calculated on the Interest Determination Date for such Interest Period minus .05% which rate is applicable until the next Interest Payment Date provided, however, in no event shall the rate of interest payable thereunder exceed 12% per annum, for any Interest Period. Prior to authorizing the Guarantees, the rate of interest to be borne by the Notes must be determined by the Secretary to be reasonable, taking into account the range of interest rates prevailing in the private market for similar loans and the risks assumed by the Secretary. 3. Agreement to Purchase. Subject to the conditions hereinafter set forth, and the representations and warranties contained herein, the Shipowner agrees to sell to you and you agree to purchase on the Note Closing Date the Notes in the principal amount set forth opposite your name in Schedule 1 hereto at 100% of such principal amount thereof. 4. Closing. Delivery of the Notes shall be made at the office of the Maritime Administration, 400 Seventh Street, S.W., Washington, D.C., at a closing commencing at 9:00a.m., Eastern time, on August 10, 2000 (the "Note Closing Date") or such other place or such later business day as the Shipowner shall designate by at least 3 days' prior written notice to the Indenture Trustee and to you at your address specified in Schedule 1 hereto. Delivery of the Notes shall be made against payment therefor in funds immediately available to the Shipowner in Washington, D.C. Except as you may otherwise direct three (3) business days before the Note Closing Date, a single Note in global form dated the Note Closing Date, authenticated by the Indenture Trustee, guaranteed by the United States of America, and registered in the name of the Depository Trust Company ("DTC") or its nominee and issued in a denomination equal to the aggregate principal amount of the Notes, will be delivered to DTC or its custodian for the account of the Purchaser. For the purposes of this Agreement, a "business day" is a day which is not a Saturday, Sunday or bank holiday under the laws of the United States of America or the State of Illinois. 5. Representations and Warranties by the Shipowner. The Shipowner represents and warrants to you that this Agreement, the Indenture, and the Notes have been duly authorized, executed and delivered by the Shipowner and constitute, each in accordance with their terms, a legal, valid and binding instrument enforceable against the Shipowner, except as limited by bankruptcy, insolvency, or other laws affecting the enforcement of creditors' rights generally. On the Note Closing Date, the Indenture and the Notes will have been duly authorized, executed and delivered by the Shipowner and will constitute legal, valid and binding instruments enforceable against the Shipowner, and the Notes will be entitled to the benefits of the Indenture, the Guarantees and the Authorization Agreement. The Shipowner represents that the Notes, the Indenture, and the Authorization Agreement conform in all material respects to the descriptions thereof contained in the Offering Circular dated August 8, 2000 unless you consent to a change. 2 4 6. Conditions to Purchaser's Obligations. Your obligation under this Agreement to purchase Notes on the Note Closing Date is subject to the accuracy of the representations and warranties of the Shipowner contained in Section 5 hereof on and as of the Note Closing Date and to the following further conditions: (A) Opinion of Counsel for the Shipowner. On the Note Closing Date, the Shipowner shall have furnished an opinion of its counsel addressed to you and satisfactory to you and the Indenture Trustee regarding the representations and warranties set out in Item 4 of this Agreement; (B) Opinion of the Chief Counsel of the Maritime Administration. On the Note Closing Date, your counsel shall have received a copy of a legal opinion from the Maritime Administration addressed to the Purchasers and the Indenture Trustee to the effect that the Guarantees and the Authorization Agreement have been duly authorized, executed and delivered by the United States of America, and constitute the legal, valid and binding obligations of the United States of America; and (C) Certificate of Officer of the Shipowner. On the Note Closing Date, you shall have received a certificate signed by an authorized representative of the Shipowner to the effect that (a) the Shipowner has performed all agreements and satisfied all conditions on its part to be performed or satisfied hereunder on or prior to the Note Closing Date, (b) the representations and warranties of the Shipowner herein contained are true and correct in all material respects to the same extent as if made on and as of the Note Closing Date, and (c) the terms of the Indenture have been complied with by the Shipowner, and as of the Note Closing Date, there shall not exist any condition or event which constitutes, or which after lapse of time or notice or both would constitute, an Indenture Default as defined in the Indenture. If any of the conditions specified in this Section 6 shall not have been fulfilled by the Shipowner when and as required by this Agreement, you may cancel this Agreement and all of your obligations hereunder on, or at any time prior to, the Note Closing Date. Notice of such cancellation shall be given to the Shipowner in writing. 7. Conditions of Shipowner's Obligations. The obligations of the Shipowner to sell and deliver the Notes under this Agreement on the Note Closing Date are subject to all of the following conditions: (A) on the Note Closing Date all the Notes to be delivered by the Shipowner shall have simultaneously been purchased by the Purchasers; and (B) on or before the Note Closing Date (i) the Secretary shall have duly authorized the execution and delivery of the Guarantee of the Notes and shall have duly executed and delivered the Authorization Agreement; and (ii) the Indenture Trustee shall have duly executed and delivered the Indenture and the Authorization Agreement. 8. Expenses. Whether or not the transactions contemplated hereby are consummated, the Shipowner agrees to pay all reasonable fees and expenses incident to the transactions contemplated hereby and by the Offering Circular, including without limitation, reasonable fees and expenses (i) of the Purchaser's special counsel in connection with the transactions contemplated hereby and in connection with any future modifications requested by 3 5 the Shipowner of this Agreement, the Notes or the Indenture or any waiver or consent under or in respect of any thereof; (ii) relating to the preparation, printing and filing of, and the performance by the Shipowner of its obligations under the Offering Circular, this Agreement, and the Indenture (including all instruments constituting exhibits or appendices thereto or annexed thereto); (iii) for payment of necessary stamp and other taxes, if any, in connection with the original issuance of the Notes (the Shipowner hereby agrees to hold the Purchaser harmless in respect thereof, such agreement to survive any disposition or payment of the Notes), (iv) of the Indenture Trustee and its counsel, (v) of the Purchaser, as agreed between such firm and the Shipowner in connection with the sale of the Notes, and (vii) otherwise relating to the issuance and delivery of the Notes. 9. Indemnification. (A) The Shipowner shall indemnify Chase Securities, Inc. ("CSI") and hold CSI and each person, if any, who controls CSI, harmless from and against any loss, claim, damage or liability and any action in respect thereof, joint or several, to which CSI or such controlling person may become subject, under any statute or common law, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, any untrue statement or alleged untrue statement of material fact contained in the Offering Circular dated August 8, 2000 (the "Offering Circular") or any preliminary version thereof given to CSI or arises out of, or is based upon any omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse CSI and such controlling person for any legal and other expenses reasonably incurred by CSI or such controlling person in investigating or defending or preparing to defend against any such loss, claim, damage, liability or action. The foregoing indemnity agreement is in addition to any liability which the Shipowner may otherwise have to CSI or any person who controls CSI. (B) Promptly after receipt by CSI under this Section 9 of notice of any claim or the commencement of any action, CSI shall, if a claim in respect thereof is to be made against the Shipowner under this Section 9, notify the Shipowner in writing of the claim or the commencement of that action, provided that the failure to notify the Shipowner shall not relieve it from any liability that it may have to CSI otherwise than under this Section 9 unless the Shipowner is actually prejudiced by such delay. If any such claim or action shall be brought against CSI, and it shall notify the Shipowner thereof, the Shipowner shall be entitled to participate in or to assume the defense thereof with counsel reasonably satisfactory to CSI unless and until CSI shall elect to employ separate counsel as hereinafter provided. After notice from the Shipowner to CSI of its election to assume the defense of such claim or action, the Shipowner shall not be liable to CSI of its election to assume the defense of such claim or action, the Shipowner shall not be liable to CSI under this Section 9 for any legal or other expenses subsequently incurred by CSI in connection with the defense thereof other than reasonable costs of investigation; provided that CSI shall have the right to employ counsel to represent it if, in its reasonable judgment, it is advisable for it to be represented by separate counsel, and in that event the fees and expenses of such separate counsel shall be paid by the Shipowner. The Shipowner shall not be required to indemnify CSI under this Section 9 for any payment made to any claimant in settlement of any suit or claim unless such payment is approved by the Shipowner. 4 6 10. Entire Agreement Embodied, Changes, etc. This Agreement embodies the entire agreement and understanding among the Shipowner and you relating to the subject matter hereof and supersedes all prior agreements and understandings relating to such subject matter. Neither this Agreement nor any term hereof may be changed, waived, discharged, or terminated orally, but only by an instrument in writing signed by the party against whom enforcement of the change, waiver, discharge or termination is sought and with the written consent of the Secretary. 11. Miscellaneous. (A) Except as otherwise expressly provided in this Agreement, (i) whenever notice is required by the provisions hereof to be given to the Shipowner, such notice shall be in writing addressed to Project America Ship I, Inc., c/o American Classic Voyages Company, 2 North Riverside Plaza, Chicago, Illinois 60606, (ii) whenever notice is required by the provisions hereof to be given to the Guarantor, such notice shall be in writing addressed to Project America, Inc., c/o American Classic Voyages Company, 2 North Riverside Plaza, Chicago, Illinois 60606, and (iii) whenever notice is required by the provisions of this Agreement to be given to you, such notice shall be in writing addressed to you at your address set forth in Schedule 1 hereto or any other address specified in a written notice to the Shipowner; (B) This Agreement is made solely for the benefit of and is binding upon and enforceable by you, the Shipowner, and your respective successors and assigns, and no other person shall acquire or have any right under, or by virtue of, this Agreement; (C) If this Agreement shall be canceled or terminated by you because of nonfulfillment of the conditions set forth in Section 6 hereof or because of the Shipowner's failure to comply on or before the Note Closing Date with the conditions precedent set forth herein, the Shipowner shall have no further obligations or liability hereunder to you except that the Shipowner will reimburse you for out-of-pocket costs and expenses reasonably incurred by you (including without limitation reasonable fees and other charges of your counsel and other experts) in connection with the engagement of the Note Purchaser, the purchase of the Notes, and any of the transactions contemplated therewith; (D) This Agreement shall be governed and construed in accordance with the laws of the State of New York. 5 7 If you are in agreement with the foregoing, please sign the form of acceptance on the accompanying counterparts of this Agreement, retain one counterpart for your records and return the other counterparts to the Shipowner, whereupon this Agreement shall become a binding contract among you, the Shipowner and Purchaser. Very truly yours, PROJECT AMERICA SHIP I, INC. By: ----------------------------- Its Vice President 8 The foregoing Agreement is hereby confirmed and accepted as of the date first above written. Chase Securities Inc. By: -------------------------------- Its 9 SCHEDULE 1 Aggregate Principal Amount of Notes To Purchaser Be Purchased: - --------- ------------------- Chase Securities Inc. $50,000,000 Address for all communications and notices: Chase Securities Inc. 270 Park Avenue 7th Floor New York, NY 10017 EX-4.(II)(D)(11) 9 c58427ex4-iid11.txt $50,000,000 PROMISSORY NOTE 1 4(ii)(d)(11) No. R-1 CUSIP No. 74338EAB3 $50,000,000 U.S. GOVERNMENT GUARANTEED SHIP FINANCING NOTE 2000 SERIES B NOTES VARIABLE RATE NOTE DUE JULY 31, 2001 ISSUED BY PROJECT AMERICA SHIP 1, INC. Project America Ship 1, Inc., a Delaware corporation (herein called the "Shipowner"), FOR VALUE RECEIVED, promises to pay to Cede & Co. or registered assigns, the principal sum of FIFTY MILLION AND NO/100 DOLLARS ($50,000,000) on July 31, 2001, (unless sooner redeemed as herein provided) and to pay interest quarterly on October 31, 2000, January 31, 2001, April 28, 2001, and at maturity, (each, an "Interest Payment Date") commencing October 31 2000, on the unpaid principal amount of this Note at a per annum rate adjusted quarterly for such Interest Period equal to LIBOR minus .05% calculated on the Interest Determination Date for such Interest Period which rate shall be applicable until the next Interest Payment Date provided, however, in no event shall the rate of interest payable hereunder exceed 12% per annum for any Interest Period, from the Interest Payment Date referred to above first preceding the date of this Note to which interest on the Notes has been paid (unless the date hereof is the date to which interest on the Notes has been paid, in which case from the date of this Note), or if no interest has been paid on the Notes since the Original Issue Date (as defined in the Indenture hereinafter mentioned) of this Note, from the Original Issue Date, until payment of said principal sum has been made or duly provided for, and at the same rate per annum on any overdue principal. The interest payable on each Interest Payment Date shall be payable to the Holders in whose names the Notes (including this Note) are registered at the close of business on the fifteenth calendar day preceding each Interest Payment Date; provided, however that interest payable at maturity will be payable to the registered Holder to whom principal is payable. Any interest payable on any Interest Payment Date other than at maturity and not so punctually paid or duly provided for will cease to be payable to the person in whose name the Note is registered at the close of business on the applicable regular record date and will instead be payable to the person in whose name the Note (or one or more predecessor Notes) is registered at the close of business on a special record date for the payment of such interest to be fixed by the Shipowner, notice of which will be given to the registered holder of the Note (or one or more predecessor Notes) not less than 10 days prior to such special record date. The principal of and the interest on this Note are payable to the registered owner hereof at the Corporate Trust Office of the Indenture Trustee, The Bank of New York, a New York banking corporation, (the "Indenture Trustee") or at a Paying Agent maintained for such 2 purposes in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts therein; provided that, payments may be made by check mailed to the address of the registered owner hereof as such address shall appear on the Note Register of said Indenture Trustee, and by such other methods of payment as permitted by the Indenture. The amount of interest payable in respect of each Interest Period will be calculated by applying the applicable per annum rate of interest for such Interest Period to the principal amount of this Note outstanding at the commencement of the Interest Period, multiplying each such amount by the actual number of days in the Interest Period concerned (which actual number of days will include the first day but exclude the last day of such Interest Period) divided by 360. All percentages resulting from any calculation on the Notes will be rounded to the nearest one hundred-thousandth of a percentage point with five one millionths of a percentage point rounded upwards (e.g., 6.876545% (or .06876545) would be rounded to 6.87655% (or .0687655)), and all dollar amounts used in or resulting from such calculation on the Notes will be rounded to the nearest cent (with one-half cent being rounded upward). The determination of the applicable per annum rate of interest for each Interest Period and the amount of each interest payment as determined by the Indenture Trustee will (in the absence of willful default, bad faith or manifest error) be final and binding on the Shipowner and the Holders and no liability will (in the absence of willful default, bad faith or manifest error) attach to the Indenture Trustee in connection with the exercise or non-exercise by it of its powers, duties and discretions. This Note is one of an issue of Obligations of the Shipowner of $534,447,000 aggregate principal amount of Obligations including the Notes, in the aggregate principal amount of $250,000,000 the second tranche of which is designated as its "United States Government Guaranteed Ship Financing Notes 2000 Series B," all issued under a Trust Indenture dated February 10, 2000 (the "Indenture"), between the Shipowner and the Indenture Trustee to aid in financing the cost of the construction by the Shipowner of the Vessel. Reference is hereby made to the Indenture for a definition of the capitalized terms used but not defined herein and a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Shipowner and the Indenture Trustee, the Holders of the Notes, and the Secretary. In accordance with the terms of an Authorization Agreement dated February 10, 2000 between the United States of America, represented by the Secretary of Transportation, acting by and through the Maritime Administrator (the "Secretary") and the Indenture Trustee, and by endorsement of the guarantee of the United States of America (the "Guarantees") on each of the Notes and the authentication and delivery of the Guarantees by the Indenture Trustee, all pursuant to the Act, the Notes are guaranteed by the United States of America as provided in the Authorization Agreement and in the Guarantees endorsed thereon. Reference is hereby made to the Authorization Agreement for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Secretary, the Indenture Trustee, and the Obligees of the Notes. 2 3 Furthermore, it is hereby noted that Section 1103 (d) of Title XI of the Act provides that: "The full faith and credit of the United States is pledged to the payment of all guarantees made under this title with respect to both principal and interest, including interest, as may be provided for in the guarantee, accruing between the date of default under a guaranteed obligation and the payment in full of the guarantee." If an Indenture Default shall have occurred and be continuing, the Indenture Trustee, as provided in the Indenture shall, not later than 60 days from the date of such Indenture Default, demand payment by the Secretary of the Guarantees, whereupon the entire unpaid principal amount of the Outstanding Notes and all unpaid interest thereon shall become due and payable on the first to occur of the date which is 30 days from the date of such demand or the date on which the Secretary pays the Guarantees. If no demand for payment of the Guarantees shall have been made by the Indenture Trustee on or before the 30th day following an Indenture Default, the Obligee of any Outstanding Note may, in the manner provided in the Indenture, make such demand in place of the Indenture Trustee. In the event of an Indenture Default of which the Secretary has actual knowledge, the Secretary, as provided in the Authorization Agreement, will publish notice in the Authorized Newspaper, which shall be The Wall Street Journal, of the occurrence of such Indenture Default within 30 days from the date of such Indenture Default, unless demand for payment under the Guarantees shall previously have been made by the Indenture Trustee, but any failure to publish such notice or any defect therein shall not affect in any way any rights of the Indenture Trustee, the Secretary or any Obligee of a Note. Within 30 days from the date of any demand for payment of the Guarantees, the Secretary shall pay to the Indenture Trustee all the unpaid interest to the date of such payment on, and the unpaid balance of the principal of such Notes in full, in cash; provide that, in the case of a demand made as a result of an Indenture Default, the Secretary shall not be required to make any such payment if (i) within such 30-day period (and prior to any payment of the Guarantees by the Secretary), the Secretary finds either that there was no Payment Default, or that such Payment Default was remedied prior to the demand for payment of the Guarantees, or (ii) the Secretary assumes the Notes prior to such demand and makes all payments then in default in the manner provided in Section 6.09 of the Indenture. In each such event the Guarantees shall continue in full force and effect. The Holder of this Note, by the purchase and acceptance hereof, hereby irrevocably appoints the Indenture Trustee and each other Obligee of any Outstanding Note as agent and attorney-in-fact for the purpose of making any demand for payment of the Guarantees, and (in the case of the Indenture Trustee) of receiving and distributing such payment; provide that, no action or failure to act by the Indenture Trustee shall affect the right of the Holder of this Note to take any action whatsoever permitted by law and not in violation of the terms of this Note or of the Indenture. 3 4 Any amount payable by the Secretary under the Guarantees shall not be subject to any claim or defense of the United States of America, the Secretary, or others, whether by way of counter-claim, set-off, reduction or otherwise. Further, the Holder of this Note shall have no right, title or interest in any collateral or security given by the Shipowner to the Secretary. After payment of the Guarantees by the Secretary to the Indenture Trustee, this Note (1) if it has not then been surrendered for cancellation or canceled, shall represent only the right to receive payment in cash of an amount (less the amount, if any, required to be withheld with respect to transfer or other taxes on payments to the Holder of this Note) equal to the unpaid principal amount hereof and the unpaid interest accrued hereon to the date on which the Secretary shall have paid the Guarantees in full in cash to the Indenture Trustee, (2) shall otherwise no longer constitute or represent an obligation of the Shipowner, and (3) shall not be entitled to any other rights or benefits provided in the Indenture, subject to Section 6.08 of the Indenture. The Notes (including this Note) may be redeemed upon the terms and conditions provided in the Indenture, in whole or in part, at the option of the Shipowner, on any Interest Payment Date upon at least 30 days prior notice given as provided in the Indenture, at a redemption price equal to 100% of the principal amount hereof, together with the interest accrued thereon to the date fixed for redemption. The Obligations (including this Note) are also subject to mandatory redemption without premium, upon the terms and conditions provided in the Indenture, in whole or in part, at 100% of the principal amount thereof, plus interest accrued thereon to the date of redemption, upon at least 40 and not more than 60 days prior notice (a) in the event that Notes must be redeemed so that the principal amount of all Obligations Outstanding after such redemption will not exceed 87.5% of the Depreciated Actual Cost or Actual Cost, as determined by the Secretary, of the Vessel, (b) in the event of an actual, constructive, agreed or compromised total loss of, or requisition of title to, or seizure or forfeiture of, the Vessel, or (c) in the event of termination of a contract relating to the construction of the Vessel. If the principal amount of Outstanding Notes is reduced by reason of any redemption described in this paragraph, the principal amount of Notes subject to Mandatory Sinking Fund Redemptions in the future shall be reduced as provided in the Indenture. The Obligations (including this Note) may also be redeemed without premium upon the terms and conditions provided in the Indenture, in whole or in part, at the option of the Secretary, at any time following an assumption of the Notes and the Indenture by the Secretary, upon at least 40 and not more than 60 days prior notice given as provided in the Indenture, at a Redemption Price equal to 100% of the principal amount to be redeemed, plus interest accrued to the date fixed for redemption. Any optional redemption shall be subject to the receipt of the redemption moneys by the Indenture Trustee or any Paying Agent. Notes called for redemption shall (unless the Shipowner shall cancel the proposed optional redemption) cease to bear interest on and after the date fixed for redemption. 4 5 As provided in the Indenture and to the extent permitted thereby, compliance by the Shipowner with any of the terms of the Indenture may be waived, and the Indenture and the rights and obligations of the Shipowner, and the rights of the Holders of the Notes (including this Note) thereunder may be modified, at any time with the prior consent of the Secretary, and except as otherwise expressly provided in the Indenture, the consent of the Holders of at least 60% in principal amount of the Outstanding Notes affected thereby in the manner and subject to the limitations set forth in the Indenture; provided that, no such waiver or modification shall (1) without the consent of the Holders of each Note affected thereby: (a) change the Stated Maturity or reduce the principal amount of any Note, (b) extend the time of payment of, or reduce the rate of, interest thereon, (c) change the due date of or reduce the amount of any sinking fund payment, (d) reduce any premium payable upon the redemption thereof, or (e) change the coin or currency in which any Note or the interest thereon is payable; or (2) without the consent of all Holders of Notes: (a) terminate or modify any of the Guarantees or the obligations of the United States of America thereunder, (b) reduce the amount of any of the Guarantees, (c) eliminate, modify or condition the duties of the Indenture Trustee to demand payment of the Guarantees, (d) eliminate or reduce the eligibility requirements of the Indenture Trustee, or (e) reduce the percentage of principal amount of Notes the consent of whose Obligees is required for any such modification or waiver. The Indenture provides that the Obligations (including this Note) shall no longer be entitled to any benefit provided therein if the Notes shall have become due and payable at Maturity (whether by redemption or otherwise) and funds sufficient for the payment thereof (including interest to the date fixed for such payment, together with any premium thereon) and available for such payment (1) shall be held by the Indenture Trustee or any Paying Agent, or (2) shall have been so held and shall thereafter have been paid to the Shipowner after having been unclaimed for 6 years after the date of maturity thereof (whether by redemption or otherwise) or the date of payment of the Guarantees, except for the right (if any), of the Obligee to receive payment from the Shipowner of any amounts paid to the Shipowner as provided in (2) above with respect to this Note, all subject to the provisions of Section 6.08 of the Indenture. This Note is transferable by the registered Holder or by his duly authorized attorney, at the Corporate Trust Office of the Indenture Trustee, upon surrender or cancellation of this Note, accompanied by an instrument of transfer in form satisfactory to the Shipowner and the Indenture Trustee, duly executed by the registered Holder hereof or his attorney duly authorized in writing, and thereupon a new, fully registered Note and maturity for the same aggregate principal amount will be issued to the transferee in exchange therefor, subject to the provisions of the Indenture. The Indenture provides that the Shipowner shall not be required to make transfers or exchanges of (1) Notes for a period of 15 days immediately prior to an interest payment date, (2) Notes after demand for payment of the Guarantees and prior to payment thereof or rescission of such demand as provided in Section 6.02(a) of the Indenture, or (3) Notes which have been selected for redemption in whole or in part. The Shipowner, the Secretary, the Indenture Trustee and any Paying Agent for the payment of Notes will treat the person in whose name this Note is registered as the absolute 5 6 owner thereof for all purposes, and this rule may not be altered by any notice to the contrary to any of these entities, whether this Note shall be past due or not. No recourse shall be had for the payment of principal of, or the interest on, this Note, or for any claim based hereon or on the Indenture, against any incorporator or any past, present or future subscriber to the capital stock, stockholder, limited partner, member, officer or director of the Shipowner or of any successor company, either directly or indirectly, and all such liability being expressly waived and released by the acceptance of this Note and by the terms of the Indenture. So long as the Guarantee is in effect, there shall be no recourse against the Shipowner. Neither this Note nor the Guarantee endorsed hereon shall be valid or become obligatory for any purpose until the Indenture Trustee shall have fully signed the authentication certificate endorsed hereon. 6 7 IN WITNESS WHEREOF, the Shipowner has caused this Note to be duly executed by the manual or facsimile signatures of its duly authorized officers under its corporate seal or facsimile thereof. SHIPOWNER: PROJECT AMERICA SHIP 1, INC. By /s/ Robert J. --------------------------------- Its Vice President ATTEST By --------------------------------- Its Executive Vice President 8 GUARANTEE OF THE UNITED STATES OF AMERICA The United States of America, represented by the Secretary of Transportation, acting by and through the Maritime Administrator, pursuant to Title XI of the Merchant Marine Act, 1936, as amended, hereby guarantees to the holder of the Note annexed hereto, upon demand of the holder or his agent, payment of the unpaid interest on, and the unpaid balance of the principal of, such Note, including interest accruing between the date of default under such Note, and the payment in full of the Note under this Guarantee. The full faith and credit of the United States of America is pledged to the payment of this Guarantee. The validity of this Guarantee is incontestable in the hands of any holder of such Note. Payment of this Guarantee will be made in accordance with the provisions of such Note. UNITED STATES OF AMERICA SECRETARY OF TRANSPORTATION [LOGO] By: /s/ John E. Graykowski ------------------------------ JOHN E. GRAYKOWSKI Acting Maritime Administrator TRUSTEE's AUTHENTICATION CERTIFICATE This is one of the Notes described in the Indenture and the foregoing Guarantee is one of the Guarantees described in the Authorization Agreement. INDENTURE TRUSTEE: THE BANK OF NEW YORK By: ------------------------------ Name: Mary LaGumina Title: Vice President EX-4.(II)(E)(1) 10 c58427ex4-iie1.txt COMMITMENT TO GUARANTEE OBLIGATIONS 1 EXHIBIT 4(ii)(e)(1) Contract No. MA-13625 COMMITMENT TO GUARANTEE OBLIGATIONS by THE UNITED STATES OF AMERICA Accepted by CAPE MAY LIGHT, L.L.C., Shipowner (Under Title XI, Merchant Marine Act, 1936, as amended, and in effect on the date of this Guarantee Commitment) Dated October 16, 2000 2 COMMITMENT TO GUARANTEE OBLIGATIONS by THE UNITED STATES OF AMERICA Accepted by CAPE MAY LIGHT, L.L.C., Shipowner (Under Title XI, Merchant Marine Act, 1936, as amended, and in effect on the date of this Guarantee Commitment) -------------------------------- TABLE OF CONTENTS Document Number Document - ------ -------- 1 Commitment to Guarantee Obligations 2 Schedule One -- Form of Opinion of Counsel 3 Appendix I -- Bond Purchase Agreement 4 Appendix II -- Trust Indenture 5 Schedule A -- Schedule of Definitions to Trust Indenture 6 Exhibit 1 -- General Provisions to Trust Indenture 7 Exhibit 2 -- Form of Bond(s), Guarantee and Trustee's Authentication Certificate 8 Exhibit 3 -- Authorization Agreement 9 Appendix III -- Security Agreement 10 Exhibit 1 -- General Provisions Incorporated into the Security Agreement by Reference 11 Schedule X -- Schedule of Definitions 3 12 Exhibit 2 -- Form of Secretary's Note 13 Exhibit 3 -- Form of First Preferred Ship Mortgage 14 Exhibit 4 -- Title XI Reserve Fund and Financial Agreement 15 Exhibit 5 -- Form of Consent of Shipyard 16 Exhibit 6 -- Construction Contract 17 Exhibit 7 -- Depository Agreement 18 Exhibit 8 -- Guaranty Agreement 19 Exhibit 9 -- Funding Agreement 20 Exhibit 10 -- Assignment of Construction Contract 21 Exhibit 11 -- Shipyard Security Agreement ii 4 Document 1 COMMITMENT TO GUARANTEE OBLIGATIONS 5 TABLE OF CONTENTS COMMITMENT TO GUARANTEE OBLIGATIONS ARTICLE HEADINGS PAGE RECITALS......................................................................1 ARTICLE I FINDINGS AND DETERMINATIONS OF SECRETARY.......................2 ARTICLE II COMMITMENT TO GUARANTEE OBLIGATIONS.............................2 ARTICLE III THE OBLIGATIONS.................................................2 ARTICLE IV CONDITIONS TO EXECUTION AND DELIVERY OF THE GUARANTEE...........3 ARTICLE V VARIATION OF GUARANTEE COMMITMENT ..............................4 ARTICLE VI TERMINATION OR ASSIGNMENT OF GUARANTEE COMMITMENT...............5 ARTICLE VII MISCELLANEOUS...................................................5 6 COMMITMENT TO GUARANTEE OBLIGATIONS THIS COMMITMENT TO GUARANTEE OBLIGATIONS, dated October 16, 2000 (the "Guarantee Commitment"), made and entered into by the UNITED STATES OF AMERICA (the "United States"), represented by the SECRETARY OF TRANSPORTATION, acting by and through the MARITIME ADMINISTRATOR (the "Secretary"), and accepted on said date by Cape May Light, L.L.C., a Delaware limited liability company (the "Shipowner"). RECITALS: A. The Shipowner is the sole owner of the 300' passenger vessel cv Cape May Light (the "Vessel") being constructed pursuant to the Construction Contract between Atlantic Marine, Inc. (the "Shipyard") and Delta Queen Coastal Voyages, L.L.C. (the "Guarantor"), dated May 1, 1999, and subsequently assigned to the Shipowner. B. To aid in financing the Construction of the Vessel, the Shipowner will borrow an aggregate principal amount in Obligations not to exceed 87.5% of the Depreciated Actual Cost or Actual Cost of the Vessel, as the case may be, as of the Closing Date. To accomplish such financing, the Shipowner has accepted this Guarantee Commitment subject to the terms and conditions set forth herein. C. The Shipowner has entered into the Bond Purchase Agreement providing for the sale and delivery, on the Closing Date, of bonds in the aggregate principal amount of $37,900,000, to be designated "United States Government Guaranteed Ship Financing Bonds, 2000 Series" (the "Bonds" or the "Obligations") having the maturity dates and interest rates set forth in the Obligations. D. As security for the Guarantees and the Secretary's Note, (i) the Shipowner will execute and deliver the Security Agreement, Contract No. MA-13627, the Indenture, the Authorization Agreement, Contract No. MA-13626, the Secretary's Note, the Financial Agreement, Contract MA-13629, and the Depository Agreement, Contract No. MA-13630; (ii) the Guarantor shall execute and deliver the Guaranty Agreement, Contract No. MA-13631; and (iii) the Shipowner, the Guarantor and the Parent Company shall execute and deliver the Funding Agreement, Contract No. MA-13634. WITNESSETH That under the provisions of Title XI of the Merchant Marine Act, 1936, as amended and in consideration of (i) the covenants of the Shipowner contained herein and (ii) other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Secretary hereby commits itself as herein provided. 7 ARTICLE I FINDINGS AND DETERMINATIONS OF THE SECRETARY Pursuant to Section 1104A(b)(1) of Title XI, the Secretary has approved the Shipowner as responsible and possessing the ability, experience, financial resources and other qualifications necessary to the adequate operation and maintenance of the Vessel. Pursuant to Section 1104A(b)(2) of Title XI, the Secretary has determined that the Depreciated Cost or Actual Cost of the Vessel, as the case may be, is $44,249,278. Prior to the Closing Date, the Secretary, in its discretion, may redetermine the Depreciated Actual Cost or Actual Cost of the Vessel. On the Closing Date, the aggregate principal amount of the Outstanding Obligations will not exceed 87.5% of the Depreciated Actual Cost or the Actual Cost, as the case may be. Pursuant to Sections 1104A(b)(3), 1104A(b)(4) and 1104A(b)(5) of Title XI, the Secretary has determined or will determine that: (1) the maturity date of the Obligations is satisfactory, (2) payments of principal required by the Obligations are satisfactory and (3) the interest rates to be borne by the Obligations to be issued on the Closing Date are reasonable. Pursuant to Section 1104A(d) of Title XI, the Secretary has found that the Shipowner's proposed use of the Vessel will be economically sound. ARTICLE II COMMITMENT TO GUARANTEE OBLIGATIONS The United States, represented by the Secretary, hereby commits itself to guarantee the payment of the unpaid interest on, and the unpaid balance of the principal of, the Obligations, including interest accruing between the date of default under the Obligations and the payment in full of the Guarantees, and, to effect this Guarantee Commitment, hereby commits itself to execute and deliver, the Security Agreement, the Financial Agreement, the Authorization Agreement and the Depository Agreement on the Closing Date, and the Mortgage on the Delivery Date pursuant to the terms of the Guarantee Commitment. ARTICLE III THE OBLIGATIONS The Obligations shall be issued in one or as a series of bonds as provided in the Indenture and in the form of Obligations, annexed to the Indenture as Exhibit 2. The Obligations shall be subject to all of the terms and conditions set forth in the Indenture. 2 8 ARTICLE IV CONDITIONS TO EXECUTION AND DELIVERY OF THE GUARANTEE The obligation of the Secretary to execute and deliver the Guarantee on the Closing Date shall be subject to the following conditions unless waived in writing by the Secretary: (a) the Closing Date shall occur on or prior to March 31, 2001; (b) the Shipowner and the Shipyard shall have executed and delivered to the Secretary a copy of the Construction Contract and the Shipyard shall have executed the Consent of Shipyard; (c) the Shipowner shall have executed and delivered the following documents on the Closing Date in the form attached hereto: the Security Agreement, the Financial Agreement, the Indenture, the Obligation Purchase Agreement, the Secretary's Note, the Depository Agreement, the Authorization Agreement and the Obligations and, on the Delivery Date, the Mortgage; (d) the Indenture Trustee shall have executed, in the form attached hereto, the Indenture and the Authorization Agreement and the Depository shall have executed the Depository Agreement; (e) The Obligation purchaser shall have executed the Obligation Purchase Agreement; (f) the Guarantor shall have executed and delivered, in the form attached hereto, the Guaranty Agreement; (g) the Parent Company shall have executed and delivered, in the form attached hereto, the Funding Agreement; (h) the following documents shall have been delivered to the Secretary: (i) two executed counterparts of the Indenture, (ii) two specimen copies of the Obligations; (iii) two executed originals of the legal opinion issued under section (m) of this Article; (iv) two copies of the legal opinion delivered to the Obligees pursuant to the Obligation Purchase Agreement; and (v) two originals of all other documents delivered by the Shipowner, the Guarantor, the Indenture Trustee or the Depository in connection with this Closing. (i) if the Shipowner intends to operate the Vessel in the U.S. domestic trade, the Shipowner and any bareboat charterers of such Vessel shall have furnished to the Secretary on the Closing Date an affidavit complying with the requirements of 46 CFRss.355, demonstrating U.S. citizenship; (j) the Shipowner shall have executed an Officer's Certificate representing and warranting the truth of the following statements as of the Closing Date: 3 9 (i) each of the representations and warranties set out at Section 2.01 of the General Provisions of the Security Agreement in Appendix III; and (ii) the Shipowner is not in violation of any Federal laws having a substantial adverse effect on the interests of the United States of America and that the consummation of the Commitment complies with non-Title XI Federal law. (k) At the Closing the Shipowner shall pay and the Secretary shall receive the Guarantee Fee based upon the principal amount and maturity of the Obligations to be issued at the Closing; (l) the Shipowner shall have complied in all material respects with its agreements under this Guarantee Commitment; (m) there shall not have occurred any event which constitutes (or after any period of time or any notice, or both, would constitute) a "Default" under the Security Agreement; (n) there shall have been delivered to the Secretary by the Shipowner an opinion of counsel acceptable to the Secretary, in the form annexed hereto as Schedule 1 which shall include, among other things, an opinion to the effect that: (i) by the terms of the Security Agreement, the Shipowner has granted to the Secretary a fully perfected, first priority security interest in each of the assets which constitutes the Security; and (ii) all filings, recordings, notices and other actions required to perfect the Secretary's interests in the Security and to render such security interests valid and enforceable under applicable State law have been duly effected; (o) the Secretary shall have received a letter agreement from the Shipowner to provide the Secretary within a reasonable time after the Closing Date, with five conformed copies of the Guarantee Commitment and each of the Appendices and Exhibits thereto executed on or prior to such date; (p) on the Closing Date, the qualifying requirements set forth in Section 11 of the Financial Agreement shall have been complied with and certified to as required therein; (q) at least ten days prior to the Closing Date, there shall have been delivered to the Secretary, pro forma balance sheets for the Shipowner as of the Closing Date, certified by an officer of the Shipowner showing, among other things, all non-Title XI debt of the Shipowner; (r) on the Closing Date, the Shipowner shall certify that all non-Title XI loans to the Shipowner relating to the Vessel have been discharged or subordinated satisfactorily to the Secretary; (s) at least ten days prior to the Closing Date, the Shipowner shall have provided the Secretary with satisfactory evidence of insurance as required by the Security Agreement; and 4 10 (t) on the Closing Date the Shipowner shall execute a declaration, in conformance with 31 USC 1352, disclosing all lobbying activities. ARTICLE V VARIATION OF GUARANTEE COMMITMENT No variation from the terms and conditions hereof shall be permitted except pursuant to an amendment executed by the Secretary and the Shipowner. ARTICLE VI TERMINATION OR ASSIGNMENT OF GUARANTEE COMMITMENT This Guarantee Commitment may be terminated and the parties hereto shall have no further rights or obligations hereunder, upon written notice by the Secretary of the termination of the obligations of the United States pursuant to the Shipowner's failure to satisfy one or more conditions set forth in Article IV hereof or upon the Secretary's determination, at or before the Closing Date, that (i) the Shipowner is in violation of Federal law and such violation would have a substantial, adverse affect on the interests of the United States of America or (ii) the consummation of the Commitment would violate non-Title XI Federal law. The Shipowner's warranties and representations shall survive the termination of this Agreement and the Secretary's issuance of the Guarantees. This Guarantee Commitment may not be assigned by the Shipowner without the prior written approval of the Secretary and any attempt to do so shall be null and void ab initio. ARTICLE VII MISCELLANEOUS (a) The table of contents and the titles of the Articles are inserted as a matter of convenient reference and shall not be construed as a part of this Guarantee Commitment. This Guarantee Commitment may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument. (b) For all purposes of this Guarantee Commitment, unless otherwise expressly provided or unless the context shall otherwise require, capitalized terms used herein shall have the meaning given in Schedule X to the Security Agreement. 5 11 IN WITNESS WHEREOF, this Commitment to Guarantee Obligations has been executed by the United States and accepted by the Shipowner, all as of the day and year first above written. UNITED STATES OF AMERICA, SECRETARY OF TRANSPORTATION BY: MARITIME ADMINISTRATOR / s / Joel C. Richard --------------------------------- Secretary ATTEST: / s / Sarah J. Washington - --------------------------------- Assistant Secretary 12 SHIPOWNER: CAPE MAY LIGHT, L.L.C. By: DELTA QUEEN COASTAL VOYAGES, L.L.C., its Managing Member By: THE DELTA QUEEN STEAMBOAT CO., its Managing Member By: / S / JORDAN B. ALLEN ---------------------------------- Its Executive Vice President ATTEST: By / s / Pam Stringer ------------------------------------------ Its Assistant Secretary EX-4.(II)(E)(2) 11 c58427ex4-iie2.txt BOND PURCHASE AGREEMENT 1 Exhibit 4(ii)(e)(2) CAPE MAY LIGHT, L.L.C. $37,900,000 United States Government Guaranteed Ship Financing Bonds, 2000 Series -------------------------------------- BOND PURCHASE AGREEMENT -------------------------------------- Dated October 16, 2000 2 -------------------------------------- Cape May Light, L.L.C. $ 37,900,000 United States Government Guaranteed Ship Financing Bonds, 2000 Series 7.25% Sinking Fund Bonds due April 15, 2027 BOND PURCHASE AGREEMENT To each of the respective Purchasers named in Schedule 1 hereto: Dated October 16, 2000 Dear Sirs: The undersigned, Cape May Light, L.L.C., a Delaware limited liability company (the "Shipowner"), hereby agrees with each of you (each, a "Purchaser") as follows: 1. The Obligations. The United States Government Guaranteed Ship Financing Bonds, 2000 Series, due April 15, 2027, referred to above (the "Obligations") in the aggregate principal amount set forth above are proposed to be issued and sold by the Shipowner upon fulfillment of the terms and conditions set forth herein. The Obligations will be issued and sold to aid in the financing of the construction of the cv Cape May Light (the "Vessel"). The Obligations will be in fully registered form only and will bear interest (calculated on the basis of a 360-day year comprised of twelve 30-day months) from the date of issuance at the rate per annum set forth above, payable semi-annually, on April 15 and October 15 of each year until maturity, commencing April 15, 2001 until the Delivery Date, on the Delivery Date and semiannually following the Delivery Date until maturity. The Obligations will be issued under a Trust Indenture (the "Indenture") between the Shipowner and The Bank of New York, as Trustee (the "Indenture Trustee"). Payment of the principal of and interest on the Obligations will be fully and unconditionally guaranteed by the United States of America pursuant to the guarantee imprinted by the Indenture Trustee pursuant to an Authorization Agreement, on each of the Obligations (the "Guarantee") under Title XI of the Merchant Marine Act, 1936, as amended and in effect on the Closing Date (the "Act"). Since the Obligations are guaranteed with the full faith and credit of the United States of America, it is understood that you will not independently review the financial condition of the Shipowner and will rely completely on the Secretary's determination regarding the financial resources and maritime ability of the Shipowner. 2. Agreement to Purchase. Subject to the conditions hereinafter set forth, and the representations and warranties contained herein, the Shipowner agrees to sell to you and you 3 agree to purchase on the Closing Date, the Obligations in the principal amount set forth opposite your name in Schedule 1 hereto (subject to adjustment as set forth in Section 6 hereof) at 100% of such principal amount thereof. 3. Closing. Delivery of the Obligations shall be made at the office of the Maritime Administration, 400 Seventh Street, S.W., Washington, D.C., at a closing commencing at 10:00 a.m., Eastern time, on October 16, 2000 (the "Closing Date") or such other place or such later business day (which shall not be later than October 18, 2000) as the Shipowner shall designate by at least 3 days' prior written notice to the Indenture Trustee and to you at your address specified in Schedule 1 hereto. Delivery of the Obligations shall be made against payment therefor in funds immediately available to the Shipowner in Washington, D.C. Except as you may otherwise direct three (3) business days before the Closing Date, a single Obligation dated the Closing Date, authenticated by the Indenture Trustee, guaranteed by the United States of America, and registered in your name and issued in a denomination equal to the principal amount of Obligations to be purchased by you, will be delivered to you. For the purposes of this Agreement, a "business day" is a day which is not a Saturday, Sunday or bank holiday under the laws of the United States of America or the States of Louisiana and New York. 4. Representations and Warranties by the Shipowner. The Shipowner represents and warrants to you that this Agreement, the Indenture, and the Obligations have been duly authorized, executed and delivered by the Shipowner and constitute, each in accordance with their terms, a legal, valid and binding instrument enforceable against the Shipowner, except as limited by bankruptcy, insolvency, or other laws affecting the enforcement of creditors' rights generally. On the Closing Date, the Indenture and the Obligations will have been duly authorized, executed and delivered by the Shipowner and will constitute legal, valid and binding instruments enforceable against the Shipowner, and the Obligations will be entitled to the benefits of the Indenture, the Guarantees and the Authorization Agreement. The Shipowner represents that the Obligations, the Indenture, and the Authorization Agreement conform in all material respects to the descriptions thereof contained in the Offering Circular dated October 16, 2000 unless you consent to a change. 5. Conditions to Purchaser's Obligations. Your obligation under this Agreement to purchase Obligations on the Closing Date is subject to the accuracy of the representations and warranties of the Shipowner contained in Section 4 hereof on and as of the Closing Date and to the following further conditions: (A) Opinion of Counsel for the Shipowner. On the Closing Date, the Shipowner shall have furnished an opinion of its counsel addressed to you and satisfactory to you and the Indenture Trustee regarding the representations and warranties set out in Item 4 of this Agreement; (B) Opinion of the Chief Counsel of the Maritime Administration. On the Closing Date, your counsel shall have received a copy of a legal opinion from the Maritime Administration addressed to the Purchasers and the Indenture Trustee to the effect that the Guarantees and the Authorization Agreement have been duly authorized, executed and delivered 2 4 by the United States of America, and constitute the legal, valid and binding obligations of the United States of America; and (C) Certificate of Officer of the Shipowner. On the Closing Date, you shall have received a certificate signed by an authorized representative of the Shipowner to the effect that (a) the Shipowner has performed all agreements and satisfied all conditions on its part to be performed or satisfied hereunder on or prior to the Closing Date, (b) the representations and warranties of the Shipowner herein contained are true and correct in all material respects to the same extent as if made on and as of the Closing Date, and (c) the terms of the Indenture have been complied with by the Shipowner, and as of the Closing Date, there shall not exist any condition or event which constitutes, or which after lapse of time or notice or both would constitute, an Indenture Default as defined in the Indenture. If any of the conditions specified in this Section 5 shall not have been fulfilled by the Shipowner when and as required by this Agreement, you may cancel this Agreement and all of your obligations hereunder on, or at any time prior to, the Closing Date. Notice of such cancellation shall be given to the Shipowner in writing. 6. Adjustment of Commitments. In the event that the Secretary determines, pursuant to the Act, that the aggregate principal amount of the Obligations, issued by Shipowner to the purchaser pursuant to the Indenture dated October 16, 2000, eligible for Guarantee under the Act is greater or less than $37,900,000 on the Closing Date, the Shipowner may increase or decrease the total principal amount of Obligations to be issued by not more than 5 percent. 7. Conditions of Shipowner's Obligations. The obligations of the Shipowner to sell and deliver the Obligations under this Agreement on the Closing Date are subject to all of the following conditions: (A) on the Closing Date all the Obligations to be delivered by the Shipowner shall have simultaneously been purchased by the Purchasers; and (B) on or before the Closing Date (i) the Secretary shall have duly authorized the execution and delivery of the Guarantee of the Obligations and shall have duly executed and delivered the Authorization Agreement; and (ii) the Indenture Trustee shall have duly executed and delivered the Indenture and the Authorization Agreement. 8. Entire Agreement Embodied, Changes, etc. This Agreement embodies the entire agreement and understanding between the Shipowner and you relating to the subject matter hereof and supersedes all prior agreements and understandings relating to such subject matter. Neither this Agreement nor any term hereof may be changed, waived, discharged, or terminated orally, but only by an instrument in writing signed by the party against whom enforcement of the change, waiver, discharge or termination is sought and with the written consent of the Secretary. 9. Miscellaneous. (A) Except as otherwise expressly provided in this Agreement, (i) whenever notice is required by the provisions hereof to be given to the Shipowner, such notice shall be in writing addressed to Cape May Light, L.L.C., Robin Street Wharf, 1380 Port of New Orleans Place, New 3 5 Orleans, Louisiana 70130, and (ii) whenever notice is required by the provisions of this Agreement to be given to you, such notice shall be in writing addressed to you at your address set forth in Schedule 1 hereto or any other address specified in a written notice to the Shipowner; (B) This Agreement is made solely for the benefit of and is binding upon and enforceable by you, the Shipowner, and your respective successors and assigns, and no other person shall acquire or have any right under, or by virtue of, this Agreement; (C) If this Agreement shall be canceled or terminated by you because of nonfulfillment of the conditions set forth in Section 5 hereof or because of the Shipowner's failure to comply on or before the Closing Date with the conditions precedent set forth herein, the Shipowner shall have no further obligations or liability hereunder to you except that the Shipowner will reimburse you for out-of-pocket expenses reasonably incurred by you (including reasonable fees and disbursements of your counsel and interest on funds forwarded by you for delivery on the Closing Date to purchase Obligations, such interest to be at the rate borne by the Obligations for the period from the proposed Closing Date to the date on which such funds are returned to you); (D) This Agreement shall be governed and construed in accordance with the laws of the State of New York. 4 6 If you are in agreement with the foregoing, please sign the form of acceptance on the accompanying counterparts of this Agreement, retain one counterpart for your records and return the other counterparts to the Shipowner, whereupon this Agreement shall become a binding contract among you, the Shipowner and Purchaser. Very truly yours, CAPE MAY LIGHT, L.L.C. By: DELTA QUEEN COASTAL VOYAGES, L.L.C., its Managing Member By: THE DELTA QUEEN STEAMBOAT CO., its Managing Member /S/ RANDALL L. TALCOTT By: ---------------------------- Its Vice President 7 The foregoing Agreement is hereby confirmed and accepted as of the date first above written. Chase Securities Inc. /s/ Michael K. Clare By:__________________________________ Michael K. Clare - Managing Director 8 SCHEDULE 1 Aggregate Principal Amount of Obligations To Purchaser Be Purchased: Chase Securities Inc. $37,900,000 All payments on account of the Obligations held by such purchaser shall be made by wire transfer of immediately available funds not later than 12:00 noon on the date payment is due for credit to: Account No. -------------------------------- ABA No. ---------------------------- Each such transfer shall set forth the name of the Shipowner and the coupon rate of the Obligations. Addresses for all communications and notices: 270 Park Avenue, 7th Floor New York, NY 10017-2070 EX-4.(II)(E)(3) 12 c58427ex4-iie3.txt U.S. GOVERNMENT GUARANTEED SHIP FINANCING BONDS 1 EXHIBIT 4(ii)(e)(3) CUSIP NO. 139536 AA4 $ 37,900,000 U.S. GOVERNMENT GUARANTEED SHIP FINANCING BONDS, 2000 SERIES 7.25% SINKING FUND BONDS DUE APRIL 15, 2027 ISSUED BY CAPE MAY LIGHT, L.L.C. Cape May Light, L.L.C., a Delaware limited liability company (herein called the "Shipowner"), FOR VALUE RECEIVED, promises to pay to Cede & Co. or registered assigns, the principal sum of THIRTY SEVEN MILLION NINE HUNDRED THOUSAND AND NO/100 DOLLARS ($37,900,000.00) on the earlier of April 15, 2027, or the twenty-fifth anniversary of the Delivery Date (unless sooner redeemed as herein provided) and to pay interest semiannually on April 15 and October 15 of each year commencing April 15, 2001 until the Delivery Date, on the Delivery Date and semiannually following the Delivery Date until maturity, on the unpaid principal amount of this Obligation at the rate of 7.25% per annum (calculated on the basis of a 360-day year of twelve 30-day months) from the interest payment date referred to above next preceding the date of this Obligation to which interest on the Obligations has been paid (unless the date hereof is the date to which interest on the Obligations has been paid, in which case from the date of this Obligation), or if no interest has been paid on the Obligations since the Original Issue Date (as defined in the Indenture hereinafter mentioned) of this Obligation, from the Original Issue Date, until payment of said principal sum has been made or duly provided for, and at the same rate per annum on any overdue principal. The principal of and the interest on this Obligation, as well as any premium hereon in case of certain redemptions hereof prior to maturity, are payable to the registered owner hereof at the Corporate Trust Office of the Indenture Trustee, The Bank of New York, a New York banking corporation (the "Indenture Trustee") or at a Paying Agent maintained for such purposes in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts therein; provided that, payments may be made by check mailed to the address of the registered owner hereof as such address shall appear on the Obligation Register of said Indenture Trustee, and by such other methods of payment as permitted by the Indenture. This Obligation is one of an issue of Obligations of the Shipowner of $37,900,000 aggregate principal amount of sinking fund Obligations, designated as its "United States Government Guaranteed Ship Financing Bonds, 2000 Series," all issued under a Trust Indenture dated October 16, 2000 (the "Indenture"), between the Shipowner and the Indenture Trustee to aid in financing the cost of the construction by the Shipowner of the Vessel. Reference is hereby made to the Indenture for a definition of the capitalized terms used but not defined herein and a 2 description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Shipowner and the Indenture Trustee, the Obligees of the Obligations, and the Secretary. In accordance with the terms of an Authorization Agreement dated October 16, 2000 between the United States of America, represented by the Secretary of Transportation, acting by and through the Maritime Administrator (the "Secretary") and the Indenture Trustee, and by endorsement of the guarantee of the United States of America (the "Guarantees") on each of the Obligations and the authentication and delivery of the Guarantees by the Indenture Trustee, all pursuant to the Act, the Obligations are guaranteed by the United States of America as provided in the Authorization Agreement and in the Guarantees endorsed thereon. Reference is hereby made to the Authorization Agreement for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Secretary, the Indenture Trustee, and the Obligees of the Obligations. Furthermore, it is hereby noted that Section 1103(d) of Title XI of the Act provides that: "The full faith and credit of the United States is pledged to the payment of all guarantees made under this title with respect to both principal and interest, including interest, as may be provided for in the guarantee, accruing between the date of default under a guaranteed obligation and the payment in full of the guarantee." If an Indenture Default shall have occurred and be continuing, the Indenture Trustee, as provided in the Indenture shall, not later than 60 days from the date of such Indenture Default, demand payment by the Secretary of the Guarantees, whereupon the entire unpaid principal amount of the Outstanding Obligations and all unpaid interest thereon shall become due and payable on the first to occur of the date which is 30 days from the date of such demand or the date on which the Secretary pays the Guarantees. If no demand for payment of the Guarantees shall have been made by the Indenture Trustee on or before the 30th day following an Indenture Default, the Obligee of any Outstanding Obligation may, in the manner provided in the Indenture, make such demand in place of the Indenture Trustee. In the event of an Indenture Default of which the Secretary has actual knowledge, the Secretary, as provided in the Authorization Agreement, will publish notice in the Authorized Newspaper, which shall be The Wall Street Journal, of the occurrence of such Indenture Default within 30 days from the date of such Indenture Default, unless demand for payment under the Guarantees shall previously have been made by the Indenture Trustee, but any failure to publish such notice or any defect therein shall not affect in any way any rights of the Indenture Trustee, the Secretary or any Obligee of a Obligation. Within 30 days from the date of any demand for payment of the Guarantees, the Secretary shall pay to the Indenture Trustee all the unpaid interest to the date of such payment on, and the unpaid balance of the principal of such Obligations in full, in cash; provided that, in the case of a demand made as a result of an Indenture Default, the Secretary shall not be required to make any such payment if (i) within such 30-day period (and prior to any payment of the Guarantees by the Secretary), the Secretary finds either that there was no Payment Default, or that such Payment 3 Default was remedied prior to the demand for payment of the Guarantees, or (ii) the Secretary assumes the Obligations prior to such demand and makes all payments then in default in the manner provided in Section 6.09 of the Indenture. In each such event the Guarantees shall continue in full force and effect. The Obligee of this Obligation, by the purchase and acceptance hereof, hereby irrevocably appoints the Indenture Trustee and each other Obligee of any Outstanding Obligation as agent and attorney-in-fact for the purpose of making any demand for payment of the Guarantees, and (in the case of the Indenture Trustee) of receiving and distributing such payment; provided that, no action or failure to act by the Indenture Trustee shall affect the right of the Obligee of this Obligation to take any action whatsoever permitted by law and not in violation of the terms of this Obligation or of the Indenture. Any amount payable by the Secretary under the Guarantees shall not be subject to any claim or defense of the United States of America, the Secretary, or others, whether by way of counter-claim, set-off, reduction or otherwise. Further, the Obligee of this Obligation shall have no right, title or interest in any collateral or security given by the Shipowner to the Secretary. After payment of the Guarantees by the Secretary to the Indenture Trustee, this Obligation (1) if it has not then been surrendered for cancellation or canceled, shall represent only the right to receive payment in cash of an amount (less the amount, if any, required to be withheld with respect to transfer or other taxes on payments to the Obligee of this Obligation) equal to the unpaid principal amount hereof and the unpaid interest accrued hereon to the date on which the Secretary shall have paid the Guarantees in full in cash to the Indenture Trustee, (2) shall otherwise no longer constitute or represent an obligation of the Shipowner, and (3) shall not be entitled to any other rights or benefits provided in the Indenture, subject to Section 6.08 of the Indenture. The Obligations (including this Obligation) may be redeemed at any time following April 14, 2001, upon the terms and conditions provided in the Indenture, in whole or in part, at the option of the Shipowner, at any time or from time to time upon at least 30 and not more than 60 days prior notice given as provided in the Indenture, at a redemption price equal to 100% of the principal amount hereof, being so redeemed, together with the interest accrued thereon to the date fixed for redemption, plus the Make Whole Premium (as herein after defined). The "Make-Whole Premium" with respect to any optional redemption of Obligations shall be determined by the Indenture Trustee two business days prior to the date fixed for such redemption and shall be equal to the excess, if any, of (i) the sum of the respective Present Values (as defined below) of the amount of such redemption over (ii) 100% of the aggregate principal amount being redeemed on such date; provided that, the Make-Whole Premium shall in no event be less than zero. The "Present Value" of each optional redemption shall be determined by discounting on a semi-annual basis each "Prospective Payment" (as defined below) at the Treasury Rate" (as defined 3 4 below) for the period from the date on which such Prospective Payment was scheduled to be paid to the applicable date of redemption plus 0.25%. "Prospective Payment" means, with respect to any redemption: (i) each scheduled interest payment on the scheduled principal amount being redeemed, excluding any portion of any such interest payment accrued as of the date of redemption, plus (ii) the scheduled principal amount being redeemed. "Treasury Rate" means the rate per annum (expressed as a semi-annual equivalent) determined by the Indenture Trustee to be the per annum rate equal to the semi-annual yields to maturity of the issue of actively traded United States Treasury securities having a maturity equal to the "Weighted Average Life to Final Maturity" (as defined below); provided, however, that if such Weighted Average Life to Final Maturity is not equal to the maturity of an actively traded United States Treasury security (rounded to the nearest one-twelfth of a year), such yield shall be obtained by linear interpolation from the yields of actively traded United States Treasury securities having the greater maturity closest to and the lesser maturity closest to such Weighted Average Life to Final Maturity. The yields shall be determined by reference to the yields as indicated by Telerate Access Service (page 500 or the relevant page at the date of determination indicating such yields) or, if such data cease to be available, any publicly available sources of similar market data selected by the Indenture Trustee as of the applicable time of determination. "Weighted Average Life to Final Maturity" means the number of years (rounded up to the nearest one-twelfth of a year) obtained by dividing: (i) the then "Remaining Dollar Years" (as defined below) by (ii) the total amount of the then remaining aggregate unpaid principal amount of the Obligations without giving effect to such redemption. "Remaining Dollar Years" means the sum of the products obtained by multiplying: (i) the amount of each remaining scheduled payment of principal of the Obligation without giving effect to such redemption by (ii) the number of years (rounded to the nearest one-twelfth of a year) which will elapse between the date of redemption and the applicable mandatory redemption date for the principal amount being redeemed. Obligations optionally redeemed by the Shipowner or purchased or otherwise acquired by the Shipowner and delivered in accordance with terms of the Indenture to the Trustee for cancellation shall be applied at 100% of the principal amount thereof pro rata to succeeding "Mandatory Sinking Fund Redemptions" (as defined below) and at maturity. The Obligations (including this Obligation) are also subject to redemption, upon the terms and conditions provided in the Indenture and upon like notice, through the operation of a mandatory sinking fund providing for the redemption semiannually on each April 15 and October 15, commencing on the earlier of October 15, 2002 or six months after the Delivery Date, at 100% of the principal amount thereof plus interest accrued thereon to such date, of a principal amount of such Obligations equal to $758,000 and on the earlier of April 15, 2027, or the twenty-fifth anniversary of the Delivery Date, the entire unpaid principal amount of the 4 5 Outstanding Obligations shall be paid in full, together with all interest accrued thereon to such date (a "Mandatory Sinking Fund Redemption"). The Obligations (including this Obligation) are also subject to mandatory redemption without premium, upon the terms and conditions provided in the Indenture, in whole or in part, at 100% of the principal amount thereof, plus interest accrued thereon to the date of redemption, upon at least 30 and not more than 60 days prior notice (a) in the event that Obligations must be redeemed so that the principal amount of all Obligations Outstanding after such redemption will not exceed 87.5% of the Depreciated Actual Cost or Actual Cost, as determined by the Secretary, of the Vessel, (b) in the event of an actual, constructive, agreed or compromised total loss of, or requisition of title to, or seizure or forfeiture of, the Vessel, or (c) in the event of termination of a contract relating to the construction of the Vessel. If the principal amount of Outstanding Obligations is reduced by reason of any redemption described in this paragraph, the principal amount of Obligations subject to Mandatory Sinking Fund Redemptions in the future shall be reduced as provided in the Indenture. The Obligations (including this Obligation) may also be redeemed without premium upon the terms and conditions provided in the Indenture, in whole or in part, at the option of the Secretary, at any time following an assumption of the Obligations and the Indenture by the Secretary, upon at least 40 and not more than 60 days prior notice given as provided in the Indenture, at a Redemption Price equal to 100% of the principal amount to be redeemed, plus interest accrued to the date fixed for redemption. Any optional redemption shall be subject to the receipt of the redemption moneys by the Indenture Trustee or any Paying Agent. Obligations called for redemption shall (unless the Shipowner shall cancel the proposed optional redemption) cease to bear interest on and after the date fixed for redemption. As provided in the Indenture and to the extent permitted thereby, compliance by the Shipowner with any of the terms of the Indenture may be waived, and the Indenture and the rights and obligations of the Shipowner, and the rights of the Obligees of the Obligations (including this Obligation) thereunder may be modified, at any time with the prior consent of the Secretary, and except as otherwise expressly provided in the Indenture, the consent of the Obligees of at least 60% in principal amount of the Outstanding Obligations affected thereby in the manner and subject to the limitations set forth in the Indenture; provided that, no such waiver or modification shall (1) without the consent of the Obligee of each Obligation affected thereby: (a) change the Stated Maturity or reduce the principal amount of any Obligation, (b) extend the time of payment of, or reduce the rate of, interest thereon, (c) change the due date of or reduce the amount of any sinking fund payment, (d) reduce any premium payable upon the redemption thereof, or (e) change the coin or currency in which any Obligation or the interest thereon is payable; or (2) without the consent of all Obligees of Obligations: (a) terminate or modify any of the Guarantees or the obligations of the United States of America thereunder, (b) reduce the amount of any of the Guarantees, (c) eliminate, modify or condition the duties of the Indenture Trustee to demand payment of the Guarantees, (d) eliminate or reduce the eligibility 5 6 requirements of the Indenture Trustee, or (e) reduce the percentage of principal amount of Obligations the consent of whose Obligees is required for any such modification or waiver. The Indenture provides that the Obligations (including this Obligation) shall no longer be entitled to any benefit provided therein if the Obligations shall have become due and payable at Maturity (whether by redemption or otherwise) and funds sufficient for the payment thereof (including interest to the date fixed for such payment, together with any premium thereon) and available for such payment (1) shall be held by the Indenture Trustee or any Paying Agent, or (2) shall have been so held and shall thereafter have been paid to the Shipowner after having been unclaimed for 6 years after the date of maturity thereof (whether by redemption or otherwise) or the date of payment of the Guarantees, except for the right (if any), of the Obligee to receive payment from the Shipowner of any amounts paid to the Shipowner as provided in (2) above with respect to this Obligation, all subject to the provisions of Section 6.08 of the Indenture. This Obligation is transferable by the registered Obligee or by his duly authorized attorney, at the Corporate Trust Office of the Indenture Trustee, upon surrender or cancellation of this Obligation, accompanied by an instrument of transfer in form satisfactory to the Shipowner and the Indenture Trustee, duly executed by the registered Obligee hereof or his attorney duly authorized in writing, and thereupon a new, fully registered Obligation or Obligations of like series and maturity for the same aggregate principal amount will be issued to the transferee in exchange therefor, each in the principal amount $1,000 or any integral multiple thereof, subject to the provisions of the Indenture. The Indenture provides that the Shipowner shall not be required to make transfers or exchanges of (1) Obligations for a period of 15 days immediately prior to an interest payment date, (2) Obligations after demand for payment of the Guarantees and prior to payment thereof or rescission of such demand as provided in Section 6.02(a) of the Indenture, or (3) Obligations which have been selected for redemption in whole or in part. The Shipowner, the Secretary, the Indenture Trustee and any Paying Agent for the payment of Obligations will treat the person in whose name this Obligation is registered as the absolute owner thereof for all purposes, and this rule may not be altered by any notice to the contrary to any of these entities, whether this Obligation shall be past due or not. No recourse shall be had for the payment of principal of, or the interest or premium (if any) on, this Obligation, or for any claim based hereon or on the Indenture, against any incorporator or any past, present or future subscriber to the capital stock, stockholder, limited partner, member, officer or director of the Shipowner or of any successor company, either directly or indirectly, and all such liability being expressly waived and released by the acceptance of this Obligation and by the terms of the Indenture. So long as the Guarantee is in effect, there shall be no recourse against the Shipowner. Neither this Obligation nor the Guarantee endorsed hereon shall be valid or become obligatory for any purpose until the Indenture Trustee shall have fully signed the authentication certificate endorsed hereon. 6 7 IN WITNESS WHEREOF, the Shipowner has caused this Obligation to be duly executed by the manual or facsimile signatures of its duly authorized officers. SHIPOWNER: CAPE MAY LIGHT, L.L.C. By: DELTA QUEEN COASTAL VOYAGES, L.L.C., its Managing Member By: THE DELTA QUEEN STEAMBOAT CO., its Managing Member By: /s/ Randall L. Talcott ------------------------------ Name Randall L. Talcott Its Vice President ATTEST By /s/ Jordan B. Allen -------------------------------- Name Jordan B. Allen Its Executive Vice President Dated: October 16, 2000 8 GUARANTEE OF THE UNITED STATES OF AMERICA The United States of America, represented by the Secretary of Transportation, acting by and through the Maritime Administrator, pursuant to Title XI of the Merchant Marine Act, 1936, as amended, hereby guarantees to the holder of the Obligation annexed hereto, upon demand of the holder or his agent, payment of the unpaid interest on, and the unpaid balance of the principal of, such Obligation, including interest accruing between the date of default under such Obligation, and the payment in full of the Obligation under this Guarantee. The full faith and credit of the United States of America is pledged to the payment of this Guarantee. The validity of this Guarantee is incontestable in the hands of any holder of such Obligation. Payment of this Guarantee will be made in accordance with the provisions of such Obligation. [UNITED STATES OF AMERICA SECRETARY OF TRANSPORTATION LOGO] UNITED STATES OF AMERICA SECRETARY OF TRANSPORTATION BY: /s/ John E. Graykowski ------------------------------------- JOHN E. GRAYKOWSKI ACTING MARITIME ADMINISTRATOR TRUSTEE'S AUTHENTICATION CERTIFICATE This is one of the Obligations described in the Indenture and the foregoing Guarantee is one of the Guarantees described in the Authorization Agreement. INDENTURE TRUSTEE: THE BANK OF NEW YORK By: /s/ Mary LaGumina ------------------------------------- Name: Mary LaGumina Title: Vice President 9 PAYMENTS ON ACCOUNT OF PRINCIPAL Amount of Balance of Authorized Payment Date Principal Paid Principal Unpaid Signature ------------ -------------- ---------------- --------- EX-4.(II)(E)(4) 13 c58427ex4-iie4.txt TRUST INDENTURE 1 Exhibit 4(ii)(e)(4) ================================================================================ TRUST INDENTURE Relating to United States Government Guaranteed Ship Financing Obligations Between CAPE MAY LIGHT, L.L.C., Shipowner And THE BANK OF NEW YORK, Indenture Trustee Dated October 16, 2000 ================================================================================ 2 TRUST INDENTURE SPECIAL PROVISIONS THIS TRUST INDENTURE, dated October 16, 2000 (the "Indenture"), between (i) Cape May Light, L.L.C., a Delaware limited liability company (the "Shipowner"), and (ii) The Bank of New York, a New York banking corporation (the "Indenture Trustee"). RECITALS WHEREAS, pursuant to the understandings set forth in the Security Agreement, the Shipowner has authorized the issuance of certain Obligations pursuant to this Indenture, with the aggregate principal amount of the Obligations not to exceed $37,900,000 to finance the cost of construction of the Vessel; and WHEREAS, the Secretary, on behalf of the United States, has agreed to Guarantee the payment of the unpaid interest to the date of such payment on, and the unpaid balance of the principal of, such Obligations under the provisions of Title XI of the Act, and has authorized the Indenture Trustee to cause the Guarantees to be imprinted on the Obligations pursuant to the Authorization Agreement. NOW THEREFORE, in consideration of the premises, of the mutual covenants herein contained, of the purchase of the Obligations by the Holders thereof, and of other good and valuable consideration, the receipt and adequacy of which the parties hereby acknowledge, and for the equal and proportionate benefit of all the present and future Holders of the Obligations, parties hereto agree as follows: 1. Incorporation of General Provisions. This Indenture shall consist of two parts: the Special Provisions and the General Provisions attached hereto as Exhibit 1, and they shall be treated as one instrument. In the event of a conflict, the terms of the Special Provisions shall prevail. 2. The Obligations. (a) The Obligations issued hereunder shall be designated "United States Government Ship Financing Bonds, 2000 Series", shall be in the maximum principal amount of $37,900,000, and shall be issued in the form of the Obligation set forth in Exhibit 2 hereto. (b) The denominations of the Obligations shall be in integral multiples of $1,000. (c) The Shipowner shall at all times cause to be maintained in the City of New Orleans, State of Louisiana, an office or agency for the purposes specified in Section 5.03 of this Indenture. 3 (d) The Indenture Trustee shall at all times have its Corporate Trust Office in the City of New York, State of New York. 3. Additions, Deletions, and Amendments to Exhibit 1. The following additions, deletions, and amendments are hereby made to Exhibit 1 to this Indenture: (a) Concerning Section 2.01. Section 2.01(c) is hereby amended by inserting the words ", holding Obligations in an aggregate principal amount of $1,000,000 or more," on the fourth line after "request of an Obligee" and prior to "received by the Indenture Trustee". (b) Concerning Notice of Stated Maturity and Sinking Fund Payment Dates. Article II of Exhibit 1 hereto is hereby amended by adding a new Section 2.11 as follows: "Section 2.11. Notice of Stated Maturity and Mandatory Sinking Fund Payment Dates. (a) In the event the Delivery Date shall occur prior to April 15, 2002, the interest payment dates, mandatory sinking fund payment dates and State Maturity of the Obligations shall be reset to fall on the semiannual anniversary of the Delivery Date in the case of the interest payment dates and the mandatory sinking fund payment dates and on the twenty-fifth anniversary of the Delivery Date in the case of the Stated Maturity. Not more than 30 days after the Delivery Date, a notice indicating (i) the Delivery Date, (ii) the interest payment dates, (iii) the mandatory sinking fund payment dates, (iv) the date fixed as the Stated Maturity of the Obligations shall be given by or on behalf of the Shipowner or, at the Shipowner's or at the Secretary's written request (provided, that the Indenture Trustee shall have received such request not more than 20 days after the Delivery Date), by the Indenture Trustee in the name and at the expense of the Shipowner by mailing a copy of such notice, by first class mail, postage prepaid, to each Holder of an Outstanding Obligation at his last address appearing on the Obligations Register. (b) Each Obligation issued by the Shipowner and authenticated and delivered by the Indenture Trustee subsequent to the date of any notice referred to in this Section 2.11 shall be appropriately legended by the Indenture Trustee, in the name and at the expense of the Shipowner, to reflect the matters set forth in such notice." (c) Concerning Section 3.02. (i) Section 3.02(b) is hereby amended by deleting the first sentence thereof and substituting it with the following: 2 4 "Obligations optionally redeemed by the Shipowner or purchased or otherwise acquired by the Shipowner and delivered in accordance with terms of the Indenture to the Trustee for cancellation shall be applied at 100% of the principal amount thereof pro rata to succeeding mandatory sinking fund redemptions and at maturity." (ii) Section 3.02(c) is hereby amended by deleting it in its entirety and inserting the following in lieu thereof: "(c) [Intentionally Omitted.]" (d) Concerning Section 3.03. Section 3.03 is hereby amended by deleting it in its entirety and substituting the following therefor: "(a) At its option, the Shipowner may redeem the Obligations, in whole or in part, at any time after April 14, 2001, at a Redemption Price equal to 100% of the principal amount being so redeemed, together with the interest accrued thereon, plus the Make Whole Premium. The Shipowner may redeem such Obligations on a date at least 40 days but not more than 60 days from the Indenture Trustee's receipt of the Request to make such an optional redemption and specifying the Redemption Date and the principal amount of Obligations which the Shipowner intends to redeem. (b) The Shipowner shall bear the costs of the Indenture Trustee directly associated with the calculation of the Make Whole Premium as defined and described in the Obligations." (e) Concerning Section 3.07. Section 3.07 is hereby amended by inserting the words "from each Holder" on the third line after "redeemed" and prior to "by multiplying" and deleting the words "each Holder of an Outstanding Obligation is owed" on the fourth line and substituting in lieu thereof the words "of Outstanding principal amount of Obligations held by such Holder". (f) Concerning Section 7.04. Section 7.04 is hereby deleted in its entirety and replaced with the following: "Section 7.04. Compensation, Expenses and Indemnification of Indenture Trustee. The Shipowner shall (1) pay the Indenture Trustee such compensation as may be agreed upon by the Shipowner and the Indenture Trustee and reimburse it for its reasonable expenses and disbursements (including counsel fees and expenses) incurred in accepting the trusts created hereunder and in connection with the administration of such trusts; and (2) indemnify the Indenture Trustee for, and hold it harmless against, any loss, liability or expense (including counsel fees and expenses) which it may incur or suffer without negligence or bad faith in acting under this Indenture or the Authorization Agreement. The compensation of the Indenture Trustee shall not be limited to the compensation provided by law for a trustee acting under an express trust. The rights of the Indenture Trustee under 3 5 this Section 7.04 shall survive the resignation or removal of such Indenture Trustee or the satisfaction and discharge of the Indenture." (g) Concerning Section 8.01. Section 8.01 is hereby amended by deleting the phrase "on the Proportionate Part of the Outstanding Obligations, as determined by the Secretary," contained on the ninth and tenth lines thereof. (h) Concerning Registered and Beneficial Ownership of the Obligations; Legends. (i) Each issue of Obligations shall be issued initially in the form of one permanent global Obligation, as the case may be, in definitive, fully registered form without interest coupons (the "Global Obligation"). Except as provided in paragraph (iii) below, owners of beneficial interests in the Global Obligation ("Obligation Owners") will not be entitled to receive separate certificated Obligations ("Definitive Obligations") and will not be considered the Holders thereof. The Global Obligation shall be deposited with the Depository Trust Company ("DTC") or the Indenture Trustee, as custodian for DTC, registered in the name of DTC or a nominee of DTC, and duly executed by the Shipowner and authenticated by the Indenture Trustee as provided in the Indenture, and DTC or such nominee of DTC shall be the sole Holder for purposes of this Indenture until the Global Obligation becomes exchangeable for Definitive Obligations in accordance with paragraph (iii)(2) below. The Global Obligation shall bear such legend as DTC may require. (ii) Members of, or participants in, DTC shall have no rights under the Indenture with respect to the Global Obligation held on their behalf by DTC or by the Indenture Trustee as the custodian of DTC or under such Global Obligation, and DTC may be treated by the Shipowner, the Indenture Trustee and any agent of the Shipowner or the Indenture Trustee as the absolute owner of such Global Obligation for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Shipowner, the Indenture Trustee or any agent of the Shipowner or the Indenture Trustee from giving effect to any written certification, proxy or other authorization furnished by DTC or impair, as between DTC and its members and participants, the operation of customary practices of DTC governing the exercise of the rights of an owner of a beneficial interest in the Global Obligation. (iii) (1) The transfer and exchange of the Global Obligation or beneficial interests therein shall be effected through DTC or the Indenture Trustee, as the custodian for DTC, in accordance with the Indenture. (2) The Global Obligation shall be exchangeable for Definitive Obligations registered in the names of Obligation Owners only if any of the following events shall have occurred: (1) DTC notifies the Shipowner that it is unwilling or unable to continue as depositary for such Global Obligation or DTC ceases to be a clearing agency registered under the Securities Exchange Act of 1934, as amended, at a time when DTC is required to be so registered in order to act as depositary, and a successor depositary is not appointed by the Shipowner within 90 days thereafter, (2) the Shipowner or the Indenture Trustee elects to terminate DTC's service or the book entry system, (3) the Secretary assumes the Obligations, or (4) the Secretary instructs the 4 6 Shipowner and the Indenture Trustee to terminate the Letter of Representations dated October 11, 2000, between the Shipowner and the Indenture Trustee and accepted by DTC. (3) Any Global Obligation that is exchangeable for Definitive Obligations registered in the name of the Obligation Owners pursuant to this paragraph (iii) shall be surrendered by DTC to the Indenture Trustee to be so exchanged, without charge, and the Shipowner shall execute and the Indenture Trustee shall authenticate and deliver, upon such exchange of such Global Obligation, an equal aggregate principal amount of Definitive Obligations of authorized denominations. Definitive Obligations issued in exchange for a beneficial interest in a Global Obligation pursuant hereto shall be registered in such names and in such authorized denominations as DTC, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Indenture Trustee in writing. The Indenture Trustee shall deliver such Definitive Obligations to the Obligation Owners in whose names such Obligations are so registered in accordance with the instructions of DTC. (4) The registered Holder of a Global Obligation may grant proxies and otherwise authorize any Obligation Owner, including the DTC's members and participants and Obligation Owners that may hold interests through such members and participants, to take any action which a Holder is entitled to take under the Indenture or the Obligations. (5) In the event of the occurrence of any of the events specified in paragraph (iii)(2), the Shipowner will promptly make available to the Indenture Trustee a reasonable supply of Definitive Obligations. (6) Notwithstanding any other provision of the Indenture, the Global Obligation may not be transferred except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC. (iv) At such time as all beneficial interests in the Global Obligation have either been exchanged for Definitive Obligations, redeemed, repurchased or canceled, such Global Obligation shall be returned to DTC for cancellation or retained and canceled by the Indenture Trustee. (v) The Indenture Trustee shall have no responsibility or obligation to any Obligation Owner, a member of, or a participant in DTC with respect to the accuracy of the records of DTC or its nominee or of any participant or member thereof, with respect to any ownership interest in the Obligations or with respect to the delivery to any participant, member, or other Obligation Owner (other than DTC) of any notice (including any notice of redemption) or the payment of any amount or delivery of any Obligations (or other security or property) under or with respect to such Obligations. All notices and communications to be given to the Holders and all payments to be made to Holders in respect of the Obligations shall be given or made only to or upon the order of the registered Holders (which shall be DTC or its nominee in the case of the Global Obligation). The rights of owners of beneficial interest in the Global Obligation shall be exercised only through DTC subject to the applicable rules and procedures of DTC. The Indenture 5 7 Trustee may rely and shall be fully protected in relying upon information furnished by DTC with respect to its members, participants and any Obligation Owner. 4. Miscellaneous. (a) Concerning Notices. Subject to the provisions of Section 13.01 of Exhibit 1 to this Indenture, any notice, request, demand, direction, consent, waiver, approval or other communication to be given to a party hereto or the Secretary, shall be deemed to have been sufficiently given or made when addressed to: The Indenture Trustee as: The Bank of New York 101 Barclay Street New York, NY 10286 Attention: Corporate Trust Administration The Shipowner as: CAPE MAY LIGHT, L.L.C. Robin Street Wharf 1380 Port of New Orleans Place New Orleans, Louisiana 70130-1890 The Secretary as: SECRETARY OF TRANSPORTATION c/o Maritime Administrator U.S. Department of Transportation 400 Seventh Street, SW Washington, D.C. 20590 (b) Concerning Applicable Law. This Indenture and each Obligation shall be governed by the federal laws of the United State of America, but to the extent that they are inapplicable by the laws of the State of New York. (c) Execution of Counterparts. This Indenture may be executed in any number of counterparts. All such counterparts shall be deemed to be originals, and shall constitute but one and the same instrument. 6 8 IN WITNESS WHEREOF, this Indenture has been duly executed by the parties hereto as of the day and year first above written. SHIPOWNER: CAPE MAY LIGHT, L.L.C. By: DELTA QUEEN COASTAL VOYAGES, L.L.C., its Managing Member By: THE DELTA QUEEN STEAMBOAT CO., its Managing Member By: /S/ JORDAN B. ALLEN -------------------------------- Its Executive Vice President ATTEST: By /S/ PAM STRINGER -------------------------------- Its Assistant Secretary 9 INDENTURE TRUSTEE: THE BANK OF NEW YORK / s / Mary LaGumina By _____________________________________ Its Vice President ATTEST: / s / Remo Reale By _____________________________ 10 SCHEDULE OF DEFINITIONS to TRUST INDENTURE Dated October 16, 2000 "Act" means the Merchant Marine Act, 1936, as amended and in effect on the Closing Date. "Act of Obligees" means any request, demand, authorization, direction, notice, consent, waiver or other action to be given or taken by the Obligees and embodied in one or more documents as required by the Indenture. "Authorization Agreement" means the Authorization Agreement, Contract No. MA-13626, between the Secretary and the Indenture Trustee, whereby the Secretary authorizes the Guarantee of the United States to be endorsed on each of the Obligations, as the same is originally executed, or as modified, amended or supplemented therein. "Authorized Newspaper" means The Wall Street Journal or if it ceases to exist, then in such other newspapers as the Secretary may designate. Bond Purchase Agreement" means the agreement for the purchase of the Obligations, executed by the Shipowner and the purchaser named therein, as originally executed, modified or supplemented. "Business Day" means a day which is not a Saturday, Sunday or a bank holiday under the laws of the United States or the State of Louisiana and the State of New York. "Closing Date" or "Closing" means the date when Obligations are issued by the Shipowner and authenticated by the Indenture Trustee pursuant to the Authorization Agreement. "Corporate Trust Office" means the principal office of the Indenture Trustee at which, at any time, its corporate trust business is administered, which office is currently located at 101 Barclay Street, New York, New York 10286. "Definitive Obligation" has the meaning specified in Article 3(h) of the Special Provisions of the Indenture. "Delivery Date" means the date on which the Vessel is delivered to and accepted by the Shipowner. 11 "Global Obligation" has the meaning specified in Article 3(h) of the Special Provisions of the Indenture. "Guarantee" means each, and the "Guarantees" means every, guarantee of an Obligation by the United States pursuant to Title XI of the Act, as provided in the Authorization Agreement. "Holder" means each, and "Holders" means every, registered holder of an Obligation. "Indenture" means the Trust Indenture dated the Closing Date between the Shipowner and the Indenture Trustee, as originally executed, or as modified, amended or supplemented. "Indenture Default" has the meaning specified in Article VI of the Indenture. "Indenture Trustee" means The Bank of New York, a New York banking corporation, and any successor trustee under the Indenture. "Maturity" when used with respect to any Obligation, means the date on which the principal of such Obligation becomes due and payable as therein provided, whether at the Stated Maturity or by redemption or declaration of acceleration or otherwise. "Mortgage" means the first preferred ship mortgage on the Vessel, Contract No. MA-13628, by the Shipowner to the Secretary, as originally executed, modified, amended or supplemented. "Obligation" means each, and "Obligations" means each and every obligation of the Shipowner bearing a Guarantee that is authenticated and delivered under the Indenture and the Authorization Agreement. "Obligation Owners" has the meaning specified in Section 3(h) of the Special Provisions of the Indenture. "Obligation Register" has the meaning specified in Section 2.07 of the Indenture. "Obligee" means each, and "Obligees" means every, Holder of a Bond. "Officer's Certificate" means a certificate conforming to Section 1.02 of the Indenture. "Original Issue Date" means a date on which an Obligation was initially authenticated by the Indenture Trustee even if the Obligation is subsequently given a later date by reason of transfer, exchange or substitution. "Outstanding" when used with reference to the Obligations, shall mean all Obligations theretofore issued under the Indenture, except: (1) Obligations Retired or Paid; and (2) Obligations in lieu of which other Obligations have been issued under the Indenture. Obligations 12 which are not Outstanding shall not be entitled to any rights or benefits provided in the Indenture. "Parent Company" means The Delta Queen Steamboat Co., a Delaware corporation, and its successors and assigns. "Paying Agent" means any bank or trust company meeting the qualifications in Sections 7.02(a) of the Indenture and appointed by the Shipowner under Section 4.02 of the Indenture to pay the principal of (and premium if any) or interest on the Obligations on behalf of the Shipowner. "Payment Default" has the meaning specified in Section 6.01 of the Indenture. "Person" or "Persons" means any individual, corporation, partnership, joint venture, association, limited liability company, joint-stock company, trust, unincorporated organization, government, or any agency or political subdivision thereof. "Redemption Date" means a date fixed for the redemption of an Obligation by the Indenture. "Redemption Price" means the price at which an Obligation is redeemed under the Indenture. "Request" means a written request from a Person for the action therein specified, signed by a Responsible Officer of the Person making such request. "Responsible Officer" means (1) in the case of any business entity, the chairman of the board of directors, the president, any executive or senior vice president, the secretary, the treasurer, member or partner, (2) in the case of any commercial bank, the chairman or vice-chairman of the executive committee of the board of directors or trustees, the president, any executive or senior vice president, any vice president, any assistant vice president, the secretary, the treasurer, any trust officer, any assistant secretary or any assistant treasurer, and (3) with respect to the signing or authentication of Obligations and Guarantees by the Indenture Trustee, any person specifically authorized by the Indenture Trustee to sign or authenticate Obligations. "Retired or Paid" as applied to Obligations and the indebtedness evidenced thereby, means that such Obligations shall be deemed to have been so retired or paid and shall no longer be entitled to any rights or benefits provided in the Indenture if: (1) such Obligations shall have been paid in full; (2) such Obligations shall have been canceled by the Indenture Trustee and shall have been delivered to the Indenture Trustee for cancellation; or (3) such Obligations shall have become due and payable at Maturity and funds sufficient for the payment of such Obligations (including interest to the date of Maturity, or in the case of a payment after Maturity, to the date of payment, together with any premium thereon) and available for such payment (whether as a result of payment pursuant to the Guarantees or otherwise) shall be held by the Indenture Trustee or any Paying Agent in trust for the purpose, or with irrevocable directions, to 13 apply the same; provided that, the foregoing definition is subject to Section 6.08 of the Indenture. "Secretary" means the Secretary of Transportation. "Secretary's Notice" means a notice from the Secretary to the Indenture Trustee, that a Default, within the meaning of Section 6.01(b) of the Security Agreement has occurred. "Secretary's Supplemental Indenture" means a Supplemental Indenture, pursuant to Section 6.09 of the Indenture, evidencing the succession of the Secretary to the Shipowner, and the Secretary's assumption of the Shipowner's obligations under the Indenture. "Security Agreement" means the security agreement, Contract No. MA-13627, dated the Closing Date, consisting of the special provisions, the general provisions and Schedule X thereto, executed by the Shipowner as security for the Secretary, as originally executed or as modified, amended or supplemented. "Shipowner" means Cape May Light, L.L.C., a Delaware limited liability company, and its successors and assigns. "Stated Maturity" means the date determinable as set forth in any Bond as the final date on which the principal of such Bond is due and payable. "Title XI" means Title XI of the Act. "Vessel" means the cv Cape May Light. 14 TABLE OF CONTENTS GENERAL PROVISIONS INCORPORATED INTO THE TRUST INDENTURE BY REFERENCE EXHIBIT 1 TO TRUST INDENTURE
ARTICLES & SECTIONS HEADINGS PAGE ARTICLE I.........................................................................................................4 DEFINITIONS; OFFICER'S CERTIFICATES AND OPINIONS OF COUNSEL....................................................4 Section 1.01. Definitions..................................................................................4 Section 1.02. Officer's Certificate and Opinions of Counsel................................................4 ARTICLE II........................................................................................................4 THE OBLIGATIONS................................................................................................4 Section 2.01. Issuance of Obligations of Initial Series....................................................4 Section 2.02. Additional Obligations; Obligations of Additional Series.....................................5 Section 2.03. Legends on Obligations.......................................................................5 Section 2.04. Dates of Obligations.........................................................................5 Section 2.05. Execution of Obligations.....................................................................5 Section 2.06. Authentication of Obligations and Guarantees.................................................6 Section 2.07. Registration, Transfer and Exchange..........................................................6 Section 2.08. Who Treated as Owners........................................................................7 Section 2.09. Lost, Stolen, Destroyed or Mutilated Obligations.............................................7 Section 2.10. Reacquired Obligations; Cancellation and Disposition of Obligations..........................7 ARTICLE III.......................................................................................................8 REDEMPTION OF OBLIGATIONS......................................................................................8 Section 3.01. Redemptions Suspended During Default.........................................................8 Section 3.02. Redemptions Without Premium..................................................................8 (a) Mandatory Sinking Fund Redemptions.......................................................8 (b) Credit Against Mandatory Sinking Fund Redemptions........................................8 (c) Optional Sinking Fund Redemptions........................................................9 (d) Mandatory Redemptions Without Premium....................................................9 (e) Adjustments of Redemption Payments.......................................................9 Section 3.03. Optional Redemptions of Obligations at Premium...............................................9 Section 3.04. Redemptions to Comply with Section 1104a(B)(2) of the Act...................................10 Section 3.05. Redemption After Total Loss, Requisition of Title, Seizure or Forfeiture of A Vessel or Termination of Certain Contracts...............................................10 Section 3.06. Redemption After Assumption by the Secretary................................................10
15 Section 3.07. Determination of Obligations to be Redeemed.................................................10 Section 3.08. Notices of Redemption.......................................................................11 Section 3.09. Deposit of Redemption Moneys................................................................11 Section 3.10. Payment of Redemption Price.................................................................11 ARTICLE IV.......................................................................................................12 CASH HELD BY INDENTURE TRUSTEE OR PAYING AGENTS...............................................................12 Section 4.01. Generally...................................................................................12 Section 4.02. Paying Agents...............................................................................12 Section 4.03. Unclaimed Amounts...........................................................................12 Section 4.04. Application of Funds........................................................................13 ARTICLE V........................................................................................................13 SHIPOWNER'S REPRESENTATIONS AND AGREEMENTS....................................................................13 Section 5.01. Authorization, Execution and Delivery of Indenture..........................................13 Section 5.02. Payment.....................................................................................13 Section 5.03. Offices or Agencies of Shipowner............................................................13 ARTICLE VI.......................................................................................................11 INDENTURE DEFAULTS AND REMEDIES...............................................................................13 Section 6.01. What Constitutes "Indenture Defaults........................................................13 Section 6.02. Demand for Payment of Guarantees............................................................14 Section 6.03. Appointment of Indenture Trustee and Holders of Outstanding Obligations as Attorneys-in-Fact.....................................................................14 Section 6.04. Termination and Payment of the Guarantees...................................................15 Section 6.05. Rights of Indenture Trustee After Indenture Default.........................................16 Section 6.06. Obligees' Right to Direct Indenture Trustee After Indenture Default.........................16 Section 6.07. Attorneys' Fees and Costs...................................................................16 Section 6.08. Rescission of Payments......................................................................17 Section 6.09. Assumption of Obligations by Secretary......................................................17 ARTICLE VII......................................................................................................18 THE INDENTURE TRUSTEE.........................................................................................18 Section 7.01. Acceptance of Trusts........................................................................18 Section 7.02. Eligibility of Indenture Trustee............................................................18 Section 7.03. Rights and Duties of Indenture Trustee......................................................18 Section 7.04. Compensation, Expenses and Indemnification of Indenture Trustee..............................3 Section 7.05. Resignation and Removal of Indenture Trustee................................................21 Section 7.06. Appointment of Successor Indenture Trustee..................................................21 Section 7.07. Effect of Appointment of Successor Indenture Trustee........................................21 Section 7.08. Merger, Consolidation or Sale of Indenture Trustee..........................................22
ii 16 ARTICLE VIII.....................................................................................................22 CONSOLIDATION OR MERGER OF SHIPOWNER OR SALE OF VESSEL........................................................22 Section 8.01. Consolidation or Merger of Shipowner or Sale of Vessel......................................22 ARTICLE IX.......................................................................................................23 ACTS OF OBLIGEES..............................................................................................23 Section 9.01. Acts of Obligees............................................................................23 ARTICLE X........................................................................................................23 SUPPLEMENTAL INDENTURES.......................................................................................23 Section 10.01. Permissible Without Action by Obligees......................................................23 Section 10.02. Protection of Indenture Trustee.............................................................24 Section 10.03. Reference in Obligations to Supplemental Indentures.........................................24 Section 10.04. Waivers and Supplemental Indentures with Consent of Obligees................................24 Section 10.05. Consent of Secretary........................................................................25 Section 10.06. Continued Validity of the Guarantees........................................................25 ARTICLE XI.......................................................................................................25 PERFORMANCE OF OBLIGATIONS TO SECRETARY.......................................................................25 Section 11.01. Performance of Obligations to Secretary.....................................................25 ARTICLE XII......................................................................................................25 SATISFACTION AND DISCHARGE OF INDENTURE.......................................................................25 Section 12.01. Satisfaction and Discharge of Indenture.....................................................25 ARTICLE XIII.....................................................................................................26 MISCELLANEOUS.................................................................................................26 Section 13.01. Notices and Demands.........................................................................26 Section 13.02. Waivers of Notice...........................................................................26 Section 13.03. Benefit of Indenture........................................................................26 Section 13.04. Execution of Counterparts...................................................................26 Section 13.05. Table of Contents; Titles and Headings......................................................26 Section 13.06. Immunity of Incorporators, Stockholders, Limited Partners, Members, Officers and Directors..................................................................26
iii 17 GENERAL PROVISIONS INCORPORATED INTO THE TRUST INDENTURE BY REFERENCE ARTICLE I DEFINITIONS; OFFICER'S CERTIFICATES AND OPINIONS OF COUNSEL Section 1.01. Definitions. For the purposes of this Indenture, capitalized terms shall have the meanings specified in Schedule A to the Indenture unless otherwise expressly provided. Section 1.02. Officer's Certificate and Opinions of Counsel. The Responsible Officer of the Person executing an Officer's Certificate with respect to a covenant or condition provided for in this Indenture shall certify that the officer (a) has read such covenant or condition; (b) has made or caused to be made such independent examination or investigation as is necessary to enable him to express an informed opinion with respect to such covenant or condition; and (c) believes to the best of his knowledge that such condition or covenant has been met. A lawyer issuing an Opinion of Counsel shall include the same representations, except that if, in the lawyer's professional opinion, reliance upon a certificate or an Opinion of Counsel signed by such Person or by another counsel is appropriate, the lawyer may so rely upon such certificate or opinion. Each Officer's Certificate and Opinion of Counsel shall set forth the pertinent supporting information and shall be subject to the Secretary's review of its adequacy and accuracy. ARTICLE II THE OBLIGATIONS Section 2.01. Issuance of Obligations of Initial Series. (a) At any time and from time to time after the execution and delivery of this Indenture, the Shipowner may deliver to the Indenture Trustee Obligations of the initial series issuable under this Indenture duly executed by the Shipowner, accompanied by a Request of the Shipowner, and thereupon the Indenture Trustee shall authenticate such Obligations, after endorsing thereon and authenticating the Guarantees of the United States in accordance with the Authorization Agreement, and shall deliver such Obligations and Guarantees in accordance with such Request. Each such Request shall specify the principal amounts, interest rates and Stated Maturities of the Obligations to be authenticated and the names and addresses of the Persons in whose name the Obligations are to be registered. (b) The initial series of Obligations shall set forth their respective principal amounts (in the denominations provided in the Special Provisions), interest rates per annum, and Stated Maturities, and shall be payable as to principal and interest and premium, if any, in any legal coin or currency of the United States and shall be subject to redemption as provided in Article III. (c) The principal and interest and any premium due on the Obligations shall be paid by (i) the Corporate Trust Office, or (ii) a Paying Agent by (x) certified or official bank check 4 18 mailed by first class postage prepaid to the addresses of the Obligees appearing on the Obligation Register or (y) at the request of an Obligee, received by the Indenture Trustee at least three Business Days prior to the date of payment, by wire transfer to a commercial bank in the United States or by credit to an account maintained by the Obligee with the Indenture Trustee without presentment of the Obligation. Prior to any sale, assignment or transfer of such Obligation, the Holder is required to present the Obligation to the Indenture Trustee so that a proper notation of all principal payments under (y) are made on the Obligation. (d) The Indenture Trustee agrees that within 30 days from the date of any payment of principal or interest when the same shall become due and payable by reason of Maturity or redemption, a Responsible Officer in the Corporate Trust Office of the Indenture Trustee shall ascertain to his satisfaction that checks in payment of such amounts have been mailed to the addresses of the Obligees as provided above, if payment is to be made by check, or if payment is to be made by wire transfer, or by credit to an account maintained by the Obligee with the Indenture Trustee, that such funds have been wired or credited, or if payment is to be made at the Corporate Trust Office, that funds were held by the Indenture Trustee for such payment on the date the payment was due. The Indenture Trustee shall have no obligation to determine whether such checks or payments were received by the Obligees. (e) If the Maturity of any Obligation or an Interest Payment Date for any Obligation shall be a day other than a Business Day, then such payment may be made on the next succeeding Business Day, with the same force and effect as if made on the nominal date for such payment, and no interest shall accrue thereon for the period after said nominal date. Section 2.02. Additional Obligations; Obligations of Additional Series. At any time, the Shipowner may, with the approval of the Secretary, issue additional Obligations of any series and Stated Maturity theretofore issued or of one or more additional series, which shall be for the purpose of aiding in financing or refinancing the construction, reconstruction or reconditioning of one or more of the Vessels and shall be (i) in such principal amount, and mature on such dates, bear interest at such rate or rates, be in such form or forms and have such other terms and provisions, as shall be set forth in a Supplemental Indenture providing for the issue thereof and (ii) guaranteed by the United States under the Act pursuant to a supplement to the Authorization Agreement. Section 2.03. Legends on Obligations. Any Obligation may have imprinted or stamped thereon any legend, consistent herewith, which is prescribed by the Shipowner and approved by the Indenture Trustee, and approved by the Secretary. Section 2.04. Dates of Obligations. Each Obligation of any series shall be dated the date of its authentication by the Indenture Trustee. Section 2.05. Execution of Obligations. The Obligations shall from time to time be executed on behalf of the Shipowner by a Responsible Officer thereof (whose signature may be a 5 19 facsimile), and its corporate seal (which may be a facsimile), if any, shall be imprinted thereon and attested by its secretary, assistant secretary or assistant trust officer (whose signature may be a facsimile). If a Shipowner's officer, whose signature appears on any Obligation, shall cease to be such an officer before such Obligation shall have been authenticated by the Indenture Trustee, the Obligation nevertheless may be delivered with the same force and effect as though the person had not ceased to be a Shipowner's officer. Section 2.06. Authentication of Obligations and Guarantees. No Obligation or the Guarantee of the United States thereon shall be valid unless such Obligation shall bear thereon an authentication certificate, executed by the Indenture Trustee in accordance with the terms and conditions of the Authorization Agreement. A duly executed authentication certificate shall be conclusive evidence, and the only competent evidence, that such Obligation and such Guarantee have been duly executed, authenticated and delivered hereunder. Section 2.07. Registration, Transfer and Exchange. (a) The Indenture Trustee shall keep an Obligation Register at the Corporate Trust Office for the registration of ownership, transfers and exchanges of Obligations. (b) A registered Obligee may transfer an Obligation, at the Corporate Trust Office, by surrender of such Obligation for cancellation, accompanied by an instrument of transfer in form satisfactory to the Shipowner and the Indenture Trustee, duly executed by the Obligee or its duly authorized attorney, and thereupon the Shipowner shall execute, and the Indenture Trustee shall authenticate and deliver in the name of the transferee, a new Obligation, and the Guarantee of the United States thereon, in authorized denominations of like series, tenor, interest accrual date and Stated Maturity and for the same aggregate principal amount. (c) The Shipowner shall not be required to register transfers or make exchanges of (1) Obligations for a period of 15 days immediately prior to (A) an Interest Payment Date or (B) any selection of Obligations to be redeemed; (2) Obligations after demand for payment of the Guarantees and prior to the payment thereof or rescission of such demand pursuant to Section 6.02(a); or (3) any Obligation which has been selected for redemption in whole or in part. If any Obligation surrendered for transfer or exchange has been selected for redemption in whole or in part, there may be endorsed on any Obligation issued therefor an appropriate notation of such fact. (d) Any Obligation may be exchanged for a like principal amount of Obligations of the same series, tenor, interest accrual date and Stated Maturity but of different authorized denominations. Obligations to be exchanged shall be surrendered at the Corporate Trust Office, and the Shipowner shall execute, and the Indenture Trustee shall authenticate and deliver in exchange therefor, the Obligation or Obligations, and the Guarantee or Guarantees of the United States thereon, requested by the Obligee in accordance with this paragraph. 6 20 (e) As a condition precedent to any transfer or exchange of Obligations, the Shipowner may require the payment of a sum sufficient to reimburse it for any taxes or other governmental charges that may be imposed with respect thereto and a sum not exceeding $2.00 for each Obligation delivered upon any such transfer or exchange. Section 2.08. Who Treated as Owners. The Shipowner, the Indenture Trustee, the Secretary, and any Paying Agent for the payment of principal of (and premium, if any) or interest on the Obligations may deem the Person in whose name any Obligation is registered in the Obligation Register as the absolute owner of such Obligation for all purposes, and neither the Shipowner, the Indenture Trustee, the Secretary, nor any such Paying Agent shall be affected by any notice to the contrary, whether such Obligation shall be past due or not. All payments of or on account of principal (and premium, if any) or interest, or pursuant to the Guarantee, to such registered Obligee shall be valid and effectual to satisfy and discharge the liability of the Shipowner and the Secretary to the extent of the sum or sums so paid, except as otherwise provided in Section 6.08. Section 2.09. Lost, Stolen, Destroyed or Mutilated Obligations. Upon receipt by the Shipowner and the Indenture Trustee of evidence satisfactory to them of the loss, theft, destruction or mutilation of any Outstanding Obligation ("Lost Obligation"), the Shipowner may execute, and upon request of the Shipowner, the Indenture Trustee shall authenticate and deliver, a new replacement Obligation, with the Guarantee of the United States thereon, of like series, tenor, interest accrual date, principal amount and Stated Maturity (which may bear such notation as may be required by the Indenture Trustee and which shall bear a serial number different from that of the Lost Obligation) and in the event such Lost Obligation has or is about to become due and payable, the Indenture Trustee may deem the applicant with respect thereto to be the owner of said Obligation for the purpose of receiving any payments due on account thereof; provided that (1) the Shipowner, the Indenture Trustee and the Secretary shall receive an indemnity satisfactory to the Shipowner, the Indenture Trustee and the Secretary; (2) the Shipowner shall be reimbursed for all reasonable expenses (including any fees or expenses of the Indenture Trustee) incident thereto; and (3) in the case of a mutilated Obligation, it shall be surrendered. Once the Indenture Trustee has issued a replacement Obligation, the Lost Obligation shall not be enforceable. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of Lost Obligations. Section 2.10. Reacquired Obligations; Cancellation and Disposition of Obligations. In the event the Shipowner shall reacquire any Obligations (whether by purchase or otherwise), such Obligations shall forthwith be delivered to the Indenture Trustee for cancellation. Except as provided in Section 3.10(b), all Obligations surrendered for the purpose of payment, redemption, transfer, exchange, or substitution, or in discharge in whole or in part of any sinking fund payment shall, if surrendered to the Shipowner or any Paying Agent, be delivered to the Indenture Trustee and shall be cancelled by it. No Obligation shall be authenticated in lieu of or 7 21 in exchange for any Obligation cancelled as provided in this Section, except as may be expressly permitted by this Indenture. Obligations cancelled by the Indenture Trustee shall be delivered or disposed of as directed by a Request of the Shipowner. ARTICLE III REDEMPTION OF OBLIGATIONS Section 3.01. Redemptions Suspended During Default. Notwithstanding the following provisions of this Article III, neither the Shipowner nor the Indenture Trustee shall redeem any Obligations, except pursuant to Sections 3.04 or 3.05, during the continuance of any Indenture Default, except that, where the mailing of notice of redemption of any Obligations shall have theretofore been made, the Indenture Trustee shall redeem or cause to be redeemed such Obligations if it shall have received a sum sufficient for such redemption. Except as aforesaid, any moneys received by the Indenture Trustee for the redemption of Obligations which may not be applied to the redemption thereof shall be held in trust by the Indenture Trustee and applied in the following manner: (1) in case such Indenture Default or such event shall no longer be continuing, such moneys shall thereafter be applied to the redemption of Obligations in accordance with the applicable provisions of the Obligations and of this Article III; (2) in the event the Secretary shall have assumed the Obligations pursuant to Section 6.09 or shall have been required to pay the Guarantees, such moneys shall be paid over by the Indenture Trustee to the Secretary; or (3) if no Obligation shall be Outstanding, and the Secretary shall not have been required to pay the Guarantees, such moneys shall be paid to the Shipowner. Section 3.02. Redemptions Without Premium. (a) Mandatory Sinking Fund Redemptions. The Obligations are subject to redemption at a Redemption Price equal to 100% of the principal amount thereof, together with interest accrued thereon to the Redemption Date, through the operation of a mandatory sinking fund providing for semi-annual redemption commencing and continuing on the dates and in the principal amounts specified in the Obligations, plus interest accrued thereon to the applicable sinking fund Redemption Date; provided, however, that in the event of any special redemption pursuant to Sections 3.04, 3.05 or 3.06 below, the principal amount of Obligations to be redeemed on each subsequent mandatory sinking fund Redemption Date shall be reduced by an amount equal to the principal amount of the Obligations retired by reason of such special redemption divided by the number of mandatory sinking fund Redemption Dates (including the Stated Maturity of the Obligations) scheduled thereafter. (b) Credit Against Mandatory Sinking Fund Redemptions. In lieu of making all or any part of any such mandatory sinking fund redemption of the Obligations, the Shipowner may, at its option, receive 100% credit for Obligations that have been (1) redeemed by the Shipowner pursuant to the optional redemption provision provided in subsection (c) below and in Section 3.03 below; or (2) purchased or acquired by the Shipowner (other than by redemption) and delivered to the Indenture Trustee for cancellation pursuant to Section 2.10 above. These Obligations shall be credited by the Indenture Trustee only under the following conditions: at least 40 days but not more than 60 days prior to the due date for such mandatory sinking fund 8 22 redemption, the Shipowner delivers a Request to the Indenture Trustee, (i) specifying the principal amount of Obligations to be credited, (ii) certifying that none of the Obligations have previously been made the basis of any credit and that the Shipowner is not restricted by contract from seeking the requested credit, and (iii) in the case of Obligations purchased or acquired by the Shipowner, if it has not already done so, presenting the uncancelled Obligations to be credited. (c) Optional Sinking Fund Redemptions. At its option, the Shipowner may redeem on any mandatory sinking fund Redemption Date, at a redemption price equal to 100% of the principal amount thereof, an additional principal amount of Obligations up to the principal amount of the Obligations required to be redeemed under subsection (a) above on such date, and before any reduction pursuant to the proviso of that subsection. The right to make any such optional sinking fund redemption shall not be cumulative. If the Shipowner shall elect to make any such optional sinking fund redemption, the Shipowner shall, at least 40 days but not more than 60 days prior to such mandatory sinking fund Redemption Date, deliver to the Indenture Trustee a Request stating that the Shipowner intends to exercise its right as set forth in this subsection to make such optional sinking fund redemption and specifying the additional principal amount of Obligations which the Shipowner intends to redeem on such mandatory sinking fund Redemption Date. (d) Mandatory Redemptions Without Premium. The Obligations of each series shall be subject to redemption without premium when redemption is required by the conditions specified in Sections 3.02, 3.04, 3.05 and 3.06. (e) Adjustments of Redemption Payments. If there is an adjustment in mandatory redemption payments as a result of redemptions under this Section or any other provision of the Indenture, the Shipowner shall recompute the remaining mandatory redemption payments pursuant to such provisions and shall, at least 60 days prior to the next Interest Payment Date, submit to the Secretary for his review of such recomputation to ascertain compliance with the provisions of this Indenture, a table of revised mandatory redemption payments on the Obligations of such series reflecting the adjustments made pursuant to such provisions as a result of such redemption. Upon advice by the Secretary that he finds such recomputation to comply with such provisions, the Shipowner shall submit said table to the Indenture Trustee and the Indenture Trustee shall promptly submit a copy thereof to each Holder of an Obligation of such series. Section 3.03. Optional Redemptions of Obligations at Premium. At its option, the Shipowner may redeem the Obligations, in whole or in part, at any time, at the redemption prices specified in the Obligations, together with the interest accrued thereon; provided that, no such redemption shall be made prior to the date specified in the Special Provisions, directly or indirectly with the proceeds of, or in anticipation of, borrowing by or for the account of the Shipowner if such borrowing has an effective interest cost (calculated in accordance with generally accepted financial practice) of less than the rate of interest borne by the Obligations. 9 23 The Shipowner may redeem such Obligations on a date at least 40 days but not more than 60 days from the Indenture Trustee's receipt of the Request to make such an optional redemption and specifying the Redemption Date and the principal amount of Obligations which the Shipowner intends to redeem. If this Request proposes a redemption prior to the date specified in the Special Provisions, the Shipowner shall include with the Request an Officer's Certificate stating that the redemption complies with the proviso relating to early redemptions. Section 3.04. Redemptions to Comply with Section 1104a(B)(2) of the Act. The Shipowner and the Secretary may Request a Redemption Date, at least 40 days but not more than 60 days from the Indenture Trustee's receipt of the Request, for the redemption of certain Obligations because the principal amount of the Outstanding Obligations are in excess of the amount eligible for guarantee by the United States under Section 1104A(b)(2) of the Act. Upon receipt, the Indenture Trustee shall promptly give notice to the Holders of the Redemption Date as provided in Section 3.08 and on that date shall redeem the principal amount of Obligations specified in the instruction together with the interest accrued thereon. Section 3.05. Redemption After Total Loss, Requisition of Title, Seizure or Forfeiture of A Vessel or Termination of Certain Contracts. The Shipowner and the Secretary may Request a Redemption Date, at least 40 days but not more than 60 days from the Indenture Trustee's receipt of the Request, for the redemption of certain Obligations because of (1) an actual, constructive, agreed or compromised total loss of a Vessel, (2) requisition of title to, or seizure or forfeiture of a Vessel or (3) termination of a primary Construction Contract. Upon receipt, the Indenture Trustee shall promptly give notice to the Holders of the Redemption Date as provided in Section 3.08 and on that date shall redeem such principal amount of Obligations together with the interest accrued thereon. Section 3.06. Redemption After Assumption by the Secretary. At any time after the Secretary has assumed the Obligations under Section 6.09 of the Indenture, the Secretary may Request a Redemption Date, at least 40 days but not more than 60 days from the Indenture Trustee's receipt of the Request, for the redemption of all or part of the Obligations. Upon receipt, the Indenture Trustee shall promptly give notice to the Holders of the Redemption Date as provided in Section 3.08 and on that date shall redeem such principal amount of Obligations together with the interest accrued thereon. Section 3.07. Determination of Obligations to be Redeemed. If less than all the Obligations are to be redeemed pursuant to Sections 3.03, 3.04 or 3.05, the Indenture Trustee shall select the particular Obligations to be redeemed by multiplying the total principal amount to be redeemed by a fraction, the numerator of which is the amount each Holder of an Outstanding Obligation is owed and the denominator is the total principal amount of the Outstanding Obligations, making adjustment so that the principal amount of any Obligation to be redeemed shall be $1,000 or an integral multiple thereof. 10 24 Section 3.08. Notices of Redemption. (a) In case of any redemption of Obligations, whether mandatory or optional, the Indenture Trustee shall send a notice of redemption indicating (1) the Redemption Date, (2) the Redemption Price, (3) if only a part of such Obligations is to be redeemed, the numbers or other identification of the Obligations and the principal amount thereof to be redeemed, (4) the place of payment upon redemption and (5) that interest shall cease to accrue after the Redemption Date if the Indenture Trustee or any Paying Agent shall have in fact received the required moneys. A copy of the notice shall be mailed by first class mail, postage prepaid, at least 30 days prior to the Redemption Date, to each Holder of an Outstanding Obligation that is to be redeemed in whole or in part, at the last address appearing upon the Obligation Register. (b) Any notice of optional redemption of Obligations shall state that the redemption is subject to the receipt of the redemption moneys by the Indenture Trustee or any Paying Agent. Such notice shall be of no effect unless prior to the opening of business on the Redemption Date the Indenture Trustee or such Paying Agent shall receive an amount in cash sufficient for such redemption (after taking into account any amounts then held by the Indenture Trustee or such Paying Agent and available for such redemption). Section 3.09. Deposit of Redemption Moneys. Prior to the opening of business on any Redemption Date, the Shipowner shall cause to be deposited with the Indenture Trustee or with any Paying Agent an amount sufficient for such redemption with irrevocable directions to it to so apply the same. Section 3.10. Payment of Redemption Price. (a) If notice of redemption shall have been given as provided above, the Obligations or portions thereof specified in such notice shall become due and payable on the Redemption Date and at the place of payment and the Redemption Price stated in such notice, and on and after said Redemption Date (unless the Shipowner shall (i) default in payment of the Redemption Price; or (ii) decide to cancel a notice of redemption) interest on the Obligations or portions thereof so called for redemption shall cease to accrue. Upon presentation and surrender of such Obligations in accordance with such notice, such Obligations or the specified portions thereof shall be paid and redeemed at the applicable Redemption Price. (b) Upon presentation of any Obligation redeemed in part only, the Shipowner shall execute and the Indenture Trustee shall authenticate and deliver to the order of the Holder thereof, at the expense of the Shipowner, a new Obligation or Obligations of like series and Stated Maturity, of authorized denominations, having endorsed thereon a Guarantee executed by the Secretary, in principal amount equal to the unredeemed portion of the Obligation so presented, or, at the option of such Holder, there may be noted thereon by the Indenture Trustee or, at its direction, by any Paying Agent the payment of the portion of the principal amount of such Obligation so called for redemption. 11 25 ARTICLE IV CASH HELD BY INDENTURE TRUSTEE OR PAYING AGENTS Section 4.01. Generally. (a) To the extent required by the Obligations, cash received by the Indenture Trustee or a Paying Agent shall be promptly paid to the Holders of the Outstanding Obligations and all other cash shall be held by the Indenture Trustee or a Paying Agent as a special deposit in trust for application in accordance with this Indenture. (b) Cash held by the Indenture Trustee or any Paying Agent (other than the Shipowner) under this Indenture: (1) need not be segregated; (2) shall not be invested; and (3) shall not bear interest except to the extent the Shipowner and the Indenture Trustee or Paying Agent may agree. Section 4.02. Paying Agents. (a) A Paying Agent appointed in writing by the Shipowner shall enter into a contract with the Indenture Trustee, agreeing that the Paying Agent will: (1) hold in trust all sums held by it for the payment of the principal of (and premium, if any) or interest on Obligations for the benefit of the Holders of such Obligations, and for the benefit of the Indenture Trustee; (2) forthwith give written notice to a Responsible Officer in the Corporate Trust Office signed by a Responsible Officer of the Paying Agent of (A) any payment by the Shipowner of the principal of (and premium, if any) or interest on Obligations, specifying the amount paid, segregated as to principal (premium, if any) and interest, and identifying each Obligation on which any payment was made by number, date, series, Stated Maturity and the name of the Obligee, and (B) any failure of the Shipowner to make any such payment when the same shall be due and payable; and (3) promptly, and in no event later than ten days after any payment made by it hereunder, give written notice to a Responsible Officer in the Corporate Trust Office of all payments of Obligations made by it, including and identifying all endorsements of payment made on Obligations by it, signed and containing the specified information as provided in subparagraph (2) above, and deliver for cancellation to the Indenture Trustee all Obligations surrendered to the Paying Agent. (b) The Shipowner may at any time cause to be paid to the Indenture Trustee all sums held in trust by any Paying Agent pursuant to this Section, such sums to be held by the Indenture Trustee upon the same trusts. Section 4.03. Unclaimed Amounts. Subject to applicable law, including State escheat laws, any moneys received by the Indenture Trustee or a Paying Agent, for the payment of Obligations or Guarantees and remaining unclaimed by the Holders thereof for 6 years after the date of the Maturity of said Obligations shall be paid to the Shipowner upon its delivery of a Request to the Indenture Trustee, unless the Secretary has previously paid the Guarantees, in 12 26 which case it shall be paid only upon a request of the Secretary. In such event, such Holders shall thereafter be entitled to look only to the Person that received the unclaimed amounts for the payment thereof, and the Indenture Trustee or such Paying Agent, as the case may be, shall thereupon be relieved from all responsibility to such Holders. No such Request or payment shall be construed to extend any statutory period of limitations which would have been applicable in the absence of such Request or payment. Section 4.04. Application of Funds. If at any time the Indenture Trustee shall hold funds under Section 4.03, the application, distribution or payment of which is not governed by a Request of the Shipowner or the Secretary delivered pursuant to any provision of the Indenture, the Indenture Trustee shall give written notice, in the absence of an Indenture Default, thereof to the Shipowner or to the Secretary if the an Indenture Default exists or the Secretary has paid the Guarantees. The Shipowner or the Secretary, as applicable, shall promptly thereafter deliver to the Indenture Trustee a Request. ARTICLE V SHIPOWNER'S REPRESENTATIONS AND AGREEMENTS The Shipowner hereby represents and agrees, so long as Obligations are Outstanding, as follows: Section 5.01. Authorization, Execution and Delivery of Indenture. The Shipowner has duly authorized the execution and delivery of this Indenture. Section 5.02. Payment. The Shipowner will duly and punctually pay the principal of (and premium, if any) and interest on the Obligations according to the terms thereof and of this Indenture. Section 5.03. Offices or Agencies of Shipowner. The Shipowner shall at all times maintain an office in the location within the United States specified in Article Second of the Special Provisions. Obligations and demands to or upon the Shipowner may be presented for payment, registration of transfer and exchange at this office. The Corporate Trust Office and a Paying Agent shall also be deemed offices for such purpose. Article VI INDENTURE DEFAULTS AND REMEDIES Section 6.01. What Constitutes "Indenture Defaults." (a) Each of the following events shall constitute an "Indenture Default": (1) Default in the payment of the whole or any part of the principal or interest on any of the Outstanding Obligations when the same shall become due and payable, whether by reason of Maturity, redemption, acceleration or otherwise, or any default referred to in Section 6.08, and continuation of any such default for a period of 30 days 13 27 (herein called a "Payment Default"); and (2) The giving of a Secretary's Notice to the Indenture Trustee. (b) The Indenture Trustee shall give to the Obligees, the Secretary and the Shipowner prompt notice in writing of any Indenture Default (unless such default shall have been remedied prior to the giving of such notice); provided that, the Indenture Trustee shall have no duty to give any such notice until a Responsible Officer of the Corporate Trust Office, has actual knowledge of such Indenture Default. The notice of an Indenture Default to the Obligees shall (1) specify the nature of such Indenture Default; (2) state that, by reason thereof, the Indenture Trustee is entitled under the Indenture to demand payment by the Secretary of the Guarantees; (3) set forth the provisions of Section 6.04(b)(3) and (5); and (4) advise the Obligees of the provisions of Section 6.02. Section 6.02. Demand for Payment of Guarantees. (a) If an Indenture Default shall have occurred and be continuing, the Indenture Trustee may not later than 60 days from the date of such Indenture Default demand payment by the Secretary of the unpaid interest to the date of such payment on, and the unpaid balance of the principal of, all Outstanding Obligations, whereupon the entire unpaid principal amount of the Outstanding Obligations and all unpaid interest thereon shall become due and payable no later than 30 days from the date of such demand; provided that, in the case of a demand made as a result of a Payment Default, if, prior to the expiration of 30 days from the date of such demand and prior to any payment of the Guarantees by the Secretary, the Secretary shall find, and give written notice to the Shipowner and the Indenture Trustee to the effect that, there was no Payment Default or that such Payment Default was remedied prior to such demand, such demand and the Indenture Default shall be of no legal effect or consequence. In each such case, the Guarantees shall remain in full force and effect. The Indenture Trustee shall give to each Obligee and to the Shipowner prompt written notice of any demand made by the Indenture Trustee pursuant to this paragraph (a), any such notice to Obligees to be given as provided in Section 13.01. (b) If the Indenture Trustee shall not have made the demand referred to in paragraph (a) of this Section on or before the 30th day following an Indenture Default which shall have occurred and be continuing and if the Holders of all Outstanding Obligations shall not have theretofore elected to terminate the Guarantees as provided in Section 6.04(a)(2), any Holder of an Outstanding Obligation, by an Act of Obligees delivered to the Secretary (with copies thereof to the Indenture Trustee and the Shipowner), may, in place of the Indenture Trustee and on behalf of all Holders of Outstanding Obligations, make such demand, subject to all the provisions of, and with the effect provided in, paragraph (a) of this Section. Section 6.03. Appointment of Indenture Trustee and Holders of Outstanding Obligations as Attorneys-in-Fact. Each Holder of an Outstanding Obligation by the purchase and acceptance of its Obligation, irrevocably appoints the Indenture Trustee and each other Holder of an Outstanding Obligation its agent and attorney-in-fact for the purpose of making the demand 14 28 provided for in Section 6.02 and (in the case of the Indenture Trustee) of receiving and distributing any payment or payments by the Secretary made pursuant to any such demand. Section 6.04. Termination and Payment of the Guarantees. (a) Except as otherwise provided in Section 6.08, the Guarantee with respect to any Obligation shall only terminate in case of the occurrence of one or more of the following events: (1) Such Obligation shall have been Retired or Paid; (2) The Holders of all Outstanding Obligations shall have elected, by Act of Obligees delivered to the Secretary, to terminate the Guarantees; (3) Such Guarantee shall have been paid in full in cash by the Secretary; or (4) The Indenture Trustee and each Obligee shall have failed to demand payment of such Guarantee as provided herein or in such Guarantee or in the Act. (b) Subject to the provisions of Section 6.08, when the Secretary shall pay the Guarantees in full in cash to the Indenture Trustee: (1) The Indenture Trustee shall hold the entire amount thereof in trust for the sole purpose of providing for the payments specified in subparagraph (5) below; (2) No Obligation or Obligations shall thereafter be issued; (3) The Obligations (A) shall represent only the right to receive the payments from the Indenture Trustee specified in subparagraph (5) below; (B) shall otherwise no longer constitute or represent an obligation of the Shipowner; and (C) shall not be entitled to any other rights or benefits under this Indenture; (4) The Indenture Trustee shall forthwith give written notice to the Shipowner and to each of the Obligees, stating that it has received payment of the Guarantees in full in cash from the Secretary and that the same is available for distribution to the Obligees in the manner specified in subparagraph (5) below (and the Indenture Trustee shall give like notice to the Holders of the Obligations at least annually thereafter for a period of 6 years or until all Obligations shall have been cancelled, whichever is earlier); and (5) Upon the surrender for cancellation of any Obligation, the Indenture Trustee shall forthwith pay to the Holder of such Obligation in cash an amount (less the amount, if any, required to be withheld in respect of transfer or other taxes on payment to such Holder) equal to the unpaid principal amount of such Obligation and the unpaid interest accrued thereon to the date on which the Secretary shall have paid the Guarantees in full in cash to the Indenture Trustee. 15 29 (c) If the Secretary shall not have paid the Guarantees in full in cash to the Indenture Trustee within 30 days after any demand therefor pursuant to Section 6.02 (whether or not because the Secretary makes any of the findings or takes the action referred to in the proviso of Section 6.02(a)), the Indenture Trustee shall give prompt written notice of such nonpayment to each Obligee and the Shipowner. If the Indenture Trustee shall have received notice of any of these findings or actions, such notice to each Obligee shall so state. Section 6.05. Rights of Indenture Trustee After Indenture Default. Unless the Guarantees have terminated as provided herein, the Indenture Trustee's sole right shall be to demand and receive payment of the Guarantees from the Secretary and to take all action, on behalf of itself and each Holder, to enforce its rights against the Secretary under the Guarantees, including but not limited to the institution and prosecution of all judicial and other proceedings. If the Guarantees have terminated under Section 6.04(a)(4) without payment by the Secretary, the Indenture Trustee shall have the right on behalf of itself and each Holder to take all action to enforce its rights directly against the Shipowner (but not the Secretary), including but not limited to the institution and prosecution of all judicial and other proceedings. Section 6.06. Obligees' Right to Direct Indenture Trustee After Indenture Default. (a) During the continuance of any Indenture Default, the Holders of a majority in principal amount of the Outstanding Obligations shall have the right, by an Act of Obligees, to direct the Indenture Trustee: (1) to exercise or to refrain from exercising any right or to enforce any remedy granted to it by this Indenture; and (2) to direct the time, method and place of the exercise of any such right or the enforcement of any such remedy; provided that, subject to Section 7.03, the Indenture Trustee shall have the right not to take any such action if it shall determine in good faith that the action would involve it in personal liability, would subject it to expenses against which it has not been offered adequate security and indemnity, or would be unjustly prejudicial to the Obligees not parties to such direction; and provided further that, notwithstanding any other provision of this Indenture to the contrary, the Indenture Trustee shall be obligated to demand payment of the Guarantees as provided in Section 6.02(a) unless the Holders of all the Outstanding Obligations shall have directed him not to make demand. (b) Nothing in paragraph (a) shall affect the right of any Obligee to institute any judicial or other proceeding, if the Indenture Trustee declines to do so, against the Secretary while the Guarantees are in effect or against the Shipowner or the Indenture Trustee if the guarantees have terminated under Section 6.04(a)(4); provided, however, that such action does not seek to obtain priority or preference over any other Obligees or to enforce any right under this Indenture, except for the equal and ratable benefit of all the Obligees. Section 6.07. Attorneys' Fees and Costs. In any proceeding for the enforcement of any right or remedy under this Indenture, or in any proceeding against the Indenture Trustee for any action taken or omitted by it as Indenture Trustee, the court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant, having due 16 30 regard to the merits and good faith of the claims or defense made by such party litigant. The provisions of this Section shall not apply to any proceeding instituted by the Indenture Trustee or any proceeding instituted by any Obligee against the Secretary or the Shipowner for the payment of the principal of (and premium, if any) and interest on the Obligations. Section 6.08. Rescission of Payments. Notwithstanding any other provision of this Indenture, or of the Obligations, in the event that any payment to or on behalf of an Obligee of the principal of or interest due under any Obligation, or any portion of any such payment, shall at any time be repaid by such Obligee in compliance with a final order of a court of competent jurisdiction pursuant to any provision of the Bankruptcy Code or any Federal Law replacing or superseding such Code, or applicable state law, and regardless of whether there has been any previous Indenture Default and any payment pursuant thereto, or whether such Obligation shall theretofore have been acquired by the Shipowner or cancelled, or whether an instrument satisfying and discharging this Indenture shall have been executed and delivered, (1) such Obligation shall not be deemed to have been Retired or Paid and shall be deemed to be Outstanding; (2) the return of such payment in whole or in part in compliance with the order of such court shall constitute a default in payment of such Obligation within the meaning of Section 6.01(a), which default shall be deemed to have occurred on the date of such repayment and which default, if continued for 30 days, will constitute a Payment Default; (3) the Guarantee of such Obligation and (to the extent necessary to enforce such Obligation and Guarantee) this Indenture shall be in full force and effect; and (4) the Person required to return such payment or portion thereof shall be deemed for all purposes to be a Holder of such Obligation and entitled to enforce such Obligation and Guarantee to the extent of such repayment and, if there shall not be any Indenture Trustee hereunder then in office, such Person shall also be entitled to exercise on his own behalf all the rights of the Indenture Trustee hereunder necessary for such enforcement; provided that, in the event the Guarantee of any Obligation shall have terminated for reasons set forth in Section 6.04(a)(2) or (4) of this Indenture prior to the aforesaid date of repayment the provisions of this Section shall not apply to such Obligation. Section 6.09. Assumption of Obligations by Secretary. (a) Notwithstanding anything to the contrary contained herein, in the absence of a demand under Section 6.02 hereof and upon the occurrence of a default in the payment of any principal or interest due under the Obligations which has continued for 25 days or more, or upon the Secretary's giving of a Secretary's notice under this Indenture, the Secretary may, in his sole discretion, assume the rights and obligations of the Shipowner under this Indenture and the Obligations by (i) giving to the Shipowner and Indenture Trustee a signed notice stating that it has assumed the Obligations and the Indenture and (ii) making any payment of principal or interest which is due under the Obligations. (b) The Indenture Trustee and the Shipowner hereby agree that, upon the Indenture Trustee's receipt of the notice and payments referred to in paragraph (a)(i) and (ii) of this section, the Secretary's assumption shall, as of the date of the Secretary's execution of the notice, be effective and binding upon the Indenture Trustee and the Shipowner and their respective successors or assigns without further act or deed. Upon an assumption by the Secretary, the 17 31 Secretary shall succeed to and be substituted for and may exercise every right and power of the Shipowner under this Indenture and the Obligation with the same force and effect as if the Secretary has been named as the Shipowner herein and therein. The Secretary may exercise its rights under this section as often as it deems appropriate in its sole discretion. ARTICLE VII THE INDENTURE TRUSTEE Section 7.01. Acceptance of Trusts. The Indenture Trustee hereby accepts the trusts of this Indenture. Section 7.02. Eligibility of Indenture Trustee. (a) The Indenture Trustee shall at all times be a bank with corporate trust powers or trust company which (1) is organized and doing business under the laws of the United States, any state or territory thereof; (2) has a combined capital and surplus (as set forth in its most recent published report of condition) of at least $25,000,000; and (3) shall not have become incapable of acting or have been adjudged a bankrupt or an insolvent nor have had a receiver appointed for itself or for any of its property, nor have had a public officer take charge or control of it or its property or affairs for the purpose of rehabilitation, conservation or liquidation. (b) Should the Indenture Trustee at any time cease to be eligible, pursuant to this Section, to act as trustee, it shall promptly notify the Obligees, the Shipowner and the Secretary of such fact; and should the Shipowner obtain knowledge of such ineligibility, it shall promptly advise the Indenture Trustee, the Secretary, and the Obligees of all the relevant facts. Section 7.03. Rights and Duties of Indenture Trustee. (a) The Indenture Trustee shall not be responsible for the correctness of the Recitals in the Special Provisions hereof or in the Obligations (except the Indenture Trustee's authentication certificate thereon), all of which Recitals are statements made solely by the Shipowner. (b) The Indenture Trustee shall not be responsible for the validity, execution by other parties thereto, or sufficiency of this Indenture, the Authorization Agreement, the Obligations or the Guarantees. (c) The Indenture Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (d) Except during the continuance of any Indenture Default, the Indenture Trustee shall perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Indenture Trustee. 18 32 (e) No provision of this Indenture shall relieve the Indenture Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct; provided that: (1) Except during the continuance of an Indenture Default, in the absence of bad faith on the part of the Indenture Trustee, the Indenture Trustee may conclusively rely upon certificates or opinions conforming to the requirements of this Indenture as to the truth of the statements and the correctness of the opinions expressed therein; and (2) The Indenture Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with an Act of Obligees relating to the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee. (f) Subject to paragraph (i) of this Section, the Indenture Trustee shall be under a duty to examine certificates and opinions required by this Indenture to be furnished to it to determine whether or not they conform to the requirements hereof. (g) Subject to paragraph (c) of this Section, the Indenture Trustee may rely and shall be protected in acting upon any resolution, certificate, opinion, notice, request, consent, order, appraisal, report, bond, or other paper or document believed by it to be genuine, to have been signed by the proper party or parties and to be in conformity with the provisions of this Indenture. (h) Subject to paragraph (c) of this Section, in all cases where this Indenture does not make express provision as to the evidence on which the Indenture Trustee may act or refrain from acting, the Indenture Trustee shall be protected in acting or refraining from acting hereunder in reliance upon an Officer's Certificate as to the existence or nonexistence of any fact. (i) Subject to paragraph (c) of this Section, the Indenture Trustee may consult with counsel satisfactory to the Indenture Trustee, and an Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such Opinion of Counsel. (j) Whenever it is provided that the Indenture Trustee shall take any action, including the giving of any notice or the making of any demand, or refrain from taking any action upon the happening or continuation of a specified event (including an Indenture Default) or upon the fulfillment of any condition or upon the Request of the Shipowner or of Obligees or upon receipt of any notice, including a Secretary's Notice, the Indenture Trustee shall, subject to paragraph (c) of this Section, have no liability for failure to take such action or for failure to refrain from taking such action until a Responsible Officer in the Corporate Trust Office, has actual knowledge of 19 33 such event or continuation thereof or the fulfillment of such conditions or shall have received such Request. (k) Subject to paragraph (c) of this Section, the Indenture Trustee shall not be under any obligation to exercise any of the trusts or powers hereof at the request, order or direction of any Obligees or the Secretary, unless such Obligees or the Secretary shall have offered to the Indenture Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities to be incurred thereby. (l) The Indenture Trustee, in its individual or any other capacity, may become the owner or pledgee of Obligations with the same rights it would have if it were not Indenture Trustee. (m) Notwithstanding any other provision of this Indenture, the Indenture Trustee shall not take any action contrary to the terms of the Authorization Agreement, and any such purported action or any attempt to take such action shall be void and of no effect. (n) No provision of this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (o) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Indenture Trustee shall be subject to the provisions of this Section. (p) Upon the execution and delivery of an instrument satisfying and discharging this Indenture as provided in Section 12.01 hereof, all duties and obligations of the Indenture Trustee hereunder (except with respect to the application of funds for the payment of Obligations then held by the Indenture Trustee) shall cease and shall not thereafter be revived, whether or not the Indenture shall thereafter be in full force and effect as provided in Section 6.08. (q) Notwithstanding any other provision of this Indenture or the Authorization Agreement, the Indenture Trustee shall have no duty to exercise any of its rights or powers hereunder with respect to a Payment Default by reason of a repayment referred to in Section 6.08 unless and until it shall have received notice of such default and information concerning (1) the date thereof; (2) the Obligation to which such repayment relates; (3) the Person making such repayment; (4) the amounts of such repayment attributable to principal, premium and interest on such Obligation; and (5) the Interest Payment Date or other date on which the Obligee received the moneys to which the court order mentioned in Section 6.08 relates. Section 7.04. Compensation, Expenses and Indemnification of Indenture Trustee. The Shipowner shall (1) pay reasonable compensation to the Indenture Trustee and reimburse it for 20 34 its reasonable expenses and disbursements (including counsel fees and expenses); and (2) indemnify the Indenture Trustee for, and hold it harmless against, any loss, liability or expense which it may incur or suffer without negligence or bad faith in acting under this Indenture or the Authorization Agreement. The compensation of the Indenture Trustee shall not be limited to the compensation provided by law for a trustee acting under an express trust. Section 7.05. Resignation and Removal of Indenture Trustee. (a) The Indenture Trustee may resign at any time by giving written notice to the Shipowner. Within 10 days thereafter, the resigning Indenture Trustee shall give notice of such resignation to the Obligees in the manner provided in Section 13.01. If the resigning Indenture Trustee fails to do so within such 10-day period, within the next succeeding 10 days the Shipowner shall give such notice in the same manner. (b) The Indenture Trustee may at any time be removed by (1) written notice to the Indenture Trustee and the Shipowner by the Holders of a majority in principal amount of the Outstanding Obligations; or (2) written notice to the Indenture Trustee by the Shipowner or the Secretary that the Indenture Trustee has ceased to be eligible under Section 7.02(a). (c) Any resignation or removal of the Indenture Trustee shall be effective only upon appointment of a successor Indenture Trustee approved by the Secretary. Section 7.06. Appointment of Successor Indenture Trustee. (a) If any notice of resignation or of removal shall have been given pursuant to Section 7.05, then a successor Indenture Trustee may be appointed by the Shipowner; provided that, if such successor Indenture Trustee is not so appointed (or has not accepted such appointment) within 15 calendar days after the giving of any such notice, such appointment may be made (1) by the Secretary; or (2) by a court of competent jurisdiction upon the application of the Secretary, the Shipowner, the retiring Indenture Trustee or any Person who then is, and has been, the Holder of an Outstanding Obligation for at least 6 months. (b) No successor Indenture Trustee shall be appointed without the prior written consent of the Secretary and until such successor Indenture Trustee shall enter into an amendment to the Authorization Agreement as provided therein. (c) If a successor Indenture Trustee is appointed, approved by the Secretary and accepts such appointment, the Shipowner shall give notice to the Obligees of such appointment in the manner provided in Section 13.01. The failure of the Shipowner to give such notice shall not affect the validity of any such appointment. Section 7.07. Effect of Appointment of Successor Indenture Trustee. Each successor Indenture Trustee shall forthwith, without further act or deed, succeed to all the rights and duties of its predecessor in trust under this Indenture and the Authorization Agreement. Upon the written request of the successor Indenture Trustee or the Shipowner and upon payment by the 21 35 Shipowner of all amounts due to such predecessor under this Indenture, such predecessor shall promptly deliver to such successor Indenture Trustee all sums held hereunder, together with all records and other documents necessary or appropriate in connection with the performance of the duties of the successor Indenture Trustee under this Indenture and shall transfer, assign and confirm to the successor Indenture Trustee all its rights under this Indenture in such manner as deemed by such successor Indenture Trustee or the Shipowner to be necessary or appropriate in connection therewith. Section 7.08. Merger, Consolidation or Sale of Indenture Trustee. In the event of any merger (including for the purposes of this Section, the conversion of a state bank into a national banking association or vice versa) or consolidation of the Indenture Trustee into any other Person or in the event of the sale of all or substantially all the Indenture Trustee's corporate trust business, the Person resulting from such merger or consolidation, or the transferee in the case of any such sale, shall forthwith notify the Shipowner and, subject to Section 7.02(a) and 7.06(b), shall be the Indenture Trustee under this Indenture and the Authorization Agreement without further act or deed. ARTICLE VIII CONSOLIDATION OR MERGER OF SHIPOWNER OR SALE OF VESSEL Section 8.01. Consolidation or Merger of Shipowner or Sale of Vessel. (a) Nothing in this Indenture shall prevent any lawful consolidation or merger of the Shipowner with or into any other Person, or any sale of a Vessel by the Shipowner, the Secretary or a court of law to any other Person lawfully entitled to acquire and operate such Vessel or any sale by the Shipowner, the Secretary, or a court of law of all or substantially all of its assets to any other Person; provided that, except where the Shipowner shall be the Person surviving a merger or consolidation, either (1) the Person formed by or surviving such consolidation or merger, or the Person to which the sale of such Vessel shall be made, shall expressly assume, by Supplemental Indenture, the payment of the principal of and interest (and premium, if any) on the Proportionate Part of the Outstanding Obligations, as determined by the Secretary, relating to such Vessel and expressly assume the Shipowner's duties under the Indenture; or (2) to the extent that the Secretary determines that the Outstanding Obligations and the duties under the Indenture are not so assumed, the Shipowner shall redeem the principal amount of those unassumed Obligations in accordance with the terms of the Obligations and of the Indenture. (b) When a Person so assumes this Indenture and such Proportionate Part of the Outstanding Obligations, the Supplemental Indenture shall discharge and release the Shipowner from any and all obligations thereunder relating to such Proportionate Part of the Outstanding Obligations. In the event of such an assumption by a Person to whom a Vessel has been sold (1) such Person shall succeed to, and be substituted for, and may exercise every right and power of the original Shipowner with the same effect as if such successor Shipowner had been named as the Shipowner herein; and (2) such Proportionate Part of the Outstanding Obligations shall be surrendered to the Indenture Trustee for appropriate notation or for the issuance of new 22 36 Obligations in exchange for such Proportionate Part of the Outstanding Obligations in the name of the successor Shipowner, as required by the Secretary. The principal amount of the Proportionate Part of the Outstanding Obligations shall be determined by the Secretary. ARTICLE IX ACTS OF OBLIGEES Section 9.01. Acts of Obligees. (a) Except as herein otherwise expressly provided, an Act of Obligees shall become effective when it is delivered to the Indenture Trustee and, where it is expressly required, to the Shipowner and the Secretary. Proof of execution of any instrument appointing an agent or attorney to execute an Act of Obligees made in the manner of subsection (b) below shall be sufficient for any purpose of this Indenture. (b) The fact and date of the execution by any Person of any instrument referred to in paragraph (a) of this Section may be proved by the affidavit of a witness of such execution or by the certificate or acknowledgment of any notary public, stating that the individual signing such instrument acknowledged to him the execution thereof. The fact and date of the execution of any such instrument, or the authority of the Person executing the same, may also be proved in any other manner which the Indenture Trustee (or, if such instrument is addressed to the Secretary, the Secretary) deems sufficient. (c) Any Act of Obligees taken by the Holder of any Obligation shall bind every future Holder of any of the Obligations in respect of anything done or suffered to be done by the Indenture Trustee, any Paying Agent or the Shipowner in reliance thereon, whether or not notation of such action is made upon such Obligation. ARTICLE X SUPPLEMENTAL INDENTURES Section 10.01. Permissible Without Action by Obligees. The Shipowner, the Indenture Trustee, or, where applicable, the Secretary, may at any time, without the consent of or notice to any of the Obligees, subject to Sections 10.02 and 10.05, enter into an indenture or other instrument supplemental hereto and which thereafter shall form a part hereof, for any one or more of the following purposes: (1) to add to the covenants of the Shipowner; (2) to evidence, pursuant to Article VIII, the succession of another corporation or entity to the Shipowner or any assumption of all or part of the Obligations; (3) to eliminate any right reserved to or conferred upon the Shipowner; 23 37 (4) to make such provisions for the purpose of curing any ambiguity or correcting or supplementing any provisions in this Indenture as the Shipowner or the Secretary may deem necessary or desirable, provided such provisions are not inconsistent with this Indenture and shall not adversely affect the interests of the Obligees; (5) to provide for the issuance of additional Obligations of any series and Stated Maturity theretofore issued under this Indenture or to set forth the terms and provisions of any one or more additional series of Obligations in accordance with Section 2.02; or (6) to evidence the assumption pursuant to Section 6.09 by the Secretary of the Shipowner's obligations under this Indenture and the Outstanding Obligations. Section 10.02. Protection of Indenture Trustee. Upon receipt of a Request of the Shipowner that the Indenture Trustee execute any Supplemental Indenture and upon receipt of any Act of Obligees required pursuant to Section 10.04 and the consent of the Secretary required pursuant to Section 10.05, the Indenture Trustee shall enter into such Supplemental Indenture; provided that, the Indenture Trustee shall not be obligated to enter into any Supplemental Indenture which the Indenture Trustee believes adversely affects the Indenture Trustee's own rights, duties or immunities under this Indenture. Section 10.03. Reference in Obligations to Supplemental Indentures. Obligations authenticated and delivered after the execution and delivery of any Supplemental Indenture may, with the consent and approval of the Shipowner and the Indenture Trustee, contain a text modified to conform to such Supplemental Indenture or have imprinted or stamped thereon a legend with respect to such Supplemental Indenture, but no such modification or legend shall be necessary to make such Supplemental Indenture effective. Section 10.04. Waivers and Supplemental Indentures with Consent of Obligees. With the consent of the Holders of not less than 60% in principal amount of the Outstanding Obligations of each series affected thereby, by Act of Obligees delivered to the Shipowner and the Indenture Trustee, (x) compliance by the Shipowner with any of the terms of the Indenture may be waived or (y) the Shipowner and the Indenture Trustee may enter into any Supplemental Indenture for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of the Obligations issued under this Indenture; provided that, no such waiver or Supplemental Indenture shall: (a) Without the consent of all Obligees affected thereby (1) change the Stated Maturity or reduce the principal of any Obligation; (2) extend the time of payment of, or reduce the rate of, interest thereon; (3) change the due date of or reduce the amount of any mandatory sinking fund payment; (4) reduce any premium payable upon the redemption of any Obligation; or (5) change the coin or currency in which any Obligation or the interest thereon is payable; or 24 38 (b) Without the consent of all Obligees (l) terminate or modify any of the Guarantees or the obligations of the Secretary thereunder; (2) reduce the amount of any of the Guarantees; (3) eliminate, modify or condition the duties of the Indenture Trustee to demand payment of the Guarantees or otherwise to comply with the provisions of Sections 6.02 and 6.04; (4) eliminate or reduce any of the eligibility requirements for the Indenture Trustee stated in Section 7.02; or (5) reduce the percentage in principal amount of the Outstanding Obligations of any series, the consent of whose Holders is required for any such Supplemental Indenture, or required for any waiver provided herein or to modify any of the provisions of this Section. It shall not be necessary for any Act of Obligees under this Section to approve the particular form of any proposed Supplemental Indenture, but it shall be sufficient if such Act shall approve the substance thereof. Promptly after the execution of any Supplemental Indenture pursuant to this Section, the Shipowner shall give notice thereof to the Obligees in the manner provided in Section 13.01. Any failure of the Shipowner to give such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such Supplemental Indenture. Section 10.05. Consent of Secretary. Subject to the provisions of Section 11.01, no waiver pursuant to Section 10.04 shall be effective, and neither the Shipowner nor the Indenture Trustee shall enter into any Supplemental Indenture, without the prior written consent of the Secretary, and any purported action or attempt to take such action forbidden to be taken by this Section shall be null and void ab initio and of no legal effect. Section 10.06. Continued Validity of the Guarantees. Notwithstanding anything herein to the contrary, this Indenture, the Guarantees and the Authorization Agreement shall each remain in full force and effect notwithstanding the assumption by the Secretary of the Obligations pursuant to Section 6.09, and pursuant to Section 1103(e) of the Act, the validity of the Guarantee of any Obligation shall be unaffected. ARTICLE XI PERFORMANCE OF OBLIGATIONS TO SECRETARY Section 11.01. Performance of Obligations to Secretary. Notwithstanding any provisions of this Indenture to the contrary, upon termination of the Guarantees pursuant to Section 6.04(a), each of the provisions of the Indenture which refers to the rights and duties of the Secretary shall not be effective and the Sections containing such provisions shall be read as though there were no such rights or duties. ARTICLE XII SATISFACTION AND DISCHARGE OF INDENTURE Section 12.01. Satisfaction and Discharge of Indenture. Whenever all Outstanding Obligations authenticated and delivered hereunder shall have been Retired or Paid the Indenture 25 39 Trustee shall forthwith deliver to the Shipowner and the Secretary a duly executed instrument, in form submitted to it by the Shipowner and reasonably satisfactory to the Secretary, satisfying and discharging this Indenture and, at the time such form of instrument is submitted to the Indenture Trustee the Shipowner shall deliver to the Indenture Trustee an Officer's Certificate and an Opinion of Counsel each stating that all conditions precedent herein provided relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the Obligations of the Shipowner to the Indenture Trustee under Section 7.04 shall survive. ARTICLE XIII MISCELLANEOUS Section 13.01. Notices and Demands. Any communication to, the Indenture Trustee, the Shipowner or the Secretary shall be deemed to have been sufficiently given or made by being mailed, registered or certified mail, postage prepaid, addressed to the Indenture Trustee, the Shipowner or the Secretary at their respective addresses appearing in the Special Provisions of this Indenture or at such other address as any of them may advise the others in writing from time to time. Any communication to, the Obligees shall be deemed to have been sufficiently given or made by being mailed, in the same manner, to the address of each Obligee last appearing on the Obligation Register. Section 13.02. Waivers of Notice. In any case where notice by mail or otherwise is provided herein, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event. Waivers of notice shall be filed with the Indenture Trustee, but such filing shall not be a condition precedent to the validity of any action taken thereon in reliance upon any such waiver. Section 13.03. Benefit of Indenture. This Indenture is for the sole benefit of the Shipowner, the Indenture Trustee, the Holders and (until the obligations to the Secretary shall have terminated as provided in Article XI) the Secretary. Section 13.04. Execution of Counterparts. This Indenture may be executed in any number of counterparts. All such counterparts shall be deemed to be original and shall together constitute but one and the same instrument. Section 13.05. Table of Contents; Titles and Headings. Any table of contents, the titles of the Articles and the headings of the Sections are not a part of this Indenture and shall not be deemed to affect the meaning or construction of any of its provisions. Section 13.06. Immunity of Incorporators, Stockholders, Limited Partners, Members, Officers and Directors. No recourse shall be had for any payment regarding any Obligation, or upon any provision of this Indenture, against any past, present or future incorporator, stockholder, limited 26 40 partner, member, officer or director of the Shipowner or of any successor company, either directly or indirectly. It is expressly agreed that this Indenture and the Obligations 27 EX-4.(II)(E)(5) 14 c58427ex4-iie5.txt AUTHORIZATION AGREEMENT 1 EXHIBIT 4.(II)(E)(5) Contract No. MA-13626 AUTHORIZATION AGREEMENT Between THE UNITED STATES OF AMERICA represented by the Secretary of Transportation and BANK OF NEW YORK as Indenture Trustee under the Trust Indenture dated October 16, 2000 between it and CAPE MAY LIGHT, L.L.C. a Delaware limited liability company Dated October 16, 2000 2 AUTHORIZATION AGREEMENT BETWEEN THE UNITED STATES OF AMERICA AND THE BANK OF NEW YORK, INDENTURE TRUSTEE (Under Title XI, Merchant Marine Act, 1936, as amended) THIS AUTHORIZATION AGREEMENT, dated October 16, 2000 is entered into between (i) the UNITED STATES OF America, represented by the SECRETARY OF TRANSPORTATION, acting by and through the MARITIME ADMINISTRATOR (the "Secretary"), and (ii) The Bank of New York, a New York banking corporation, as the Indenture Trustee under the Trust Indenture dated the date hereof between the Indenture Trustee and Cape May Light, L.L.C., a Delaware limited liability company (the "Shipowner"). RECITALS A. Under the provisions of Title XI of the Merchant Marine Act, 1936, as amended (the "Act"), the Secretary has determined that the requirements of the Act with respect to the Guarantees and the Obligations proposed to be issued under the Indenture have been met; and B. The Secretary and the Indenture Trustee have entered into this Authorization Agreement in order (1) to authorize the Indenture Trustee to endorse and execute by means of a facsimile signature of the Secretary and a facsimile seal of the U.S. Department of Transportation and to authenticate on each of the Obligations the Guarantee of the United States pursuant to the terms of the Indenture, (2) to agree upon the procedures whereby the Indenture Trustee or any Holder of any Outstanding Obligation, as agent and attorney-in-fact for the Holders of all Outstanding Obligations, as provided in the Indenture, will make demand upon the Secretary for payment of the Guarantees, and (3) to provide for the payment of the Guarantees by the Secretary to the Indenture Trustee. NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: 3 ARTICLE I EXECUTION, AUTHENTICATION AND DELIVERY OF THE GUARANTEES Section 1.01. Authorization to Imprint, Authenticate and Deliver. (a) The Secretary hereby authorizes and directs the Indenture Trustee to cause the Guarantees, the facsimile signature of the Maritime Administrator or the Acting Maritime Administrator, and facsimile seal of the U.S. Department of Transportation to be imprinted upon Obligations consisting of the Bonds, attached to the Indenture as Exhibit 2 and issued in accordance with Article II and Article III of the Indenture. The form of the Guarantee to be imprinted on the Obligation is as follows: "The United States of America, represented by the Secretary of Transportation, acting by and through the Maritime Administrator, pursuant to Title XI of the Merchant Marine Act, 1936, as amended, hereby guarantees to the holder of the Obligation, annexed hereto, upon demand of the holder or his agent, payment of the unpaid interest on, and the unpaid balance of the principal of, such Obligation, including interest accruing between the date of default under such Obligation, and the payment in full of the Obligation under this Guarantee. The full faith and credit of the United States of America is pledged to the payment of this Guarantee. The validity of this Guarantee is incontestable in the hands of any holder of such Obligation Payment of this Guarantee will be made in accordance with the provisions of such Obligation. UNITED STATES OF AMERICA SECRETARY OF TRANSPORTATION (SEAL) By -------------------------------------- Maritime Administrator" (b) The Secretary hereby authorizes and directs the Indenture Trustee to authenticate the Obligations and Guarantees thereon, and to deliver such Obligations and Guarantees in accordance with the Indenture and herewith. (c) Once an Obligation has been imprinted with the Guarantees, the requisite facsimile signatures and seals, authenticated by the Trustee and delivered to the Holders, then that Obligation shall bind the United States regardless of the fact that the individual signing as such Maritime Administrator or Acting Maritime Administrator ceased to hold such office prior to the authentication and delivery of the Obligation bearing such Guarantee, or did not hold such office on the date of such Obligation. Section 1.02. Issuance of Obligations. The Indenture Trustee is authorized to execute, authenticate and deliver the Guarantees in the manner set forth in Section 1.01 above, only in accordance with the Obligations issued under Sections 2.01, 2.02, 2.07, 2.09 and 3.10 (b) of the Indenture. 2 4 ARTICLE II DEMAND FOR PAYMENT OF GUARANTEES Section 2.01. Default under the Indenture. (a) In the event of any Indenture Default, the Indenture Trustee or any Holder of an Outstanding Obligation may demand, in accordance with the provisions of Section 6.02 of the Indenture, on behalf of the Holders of all the Obligations then Outstanding, payment by the Secretary of the unpaid principal and interest to the date of payment on all Outstanding Obligations. (b) Within 30 days from the date of any demand for payment made pursuant to paragraph (a) of this Section, the Secretary shall pay to the Indenture Trustee as agent and attorney-in-fact for the Holders of the Outstanding Obligations, all the unpaid interest to the date of such payment on, and the unpaid balance of the principal of, all Outstanding Obligations as aforesaid in full, in cash; provided that, in the case of a demand made as a result of a Payment Default, the Secretary shall not be required to make such payment if (i) prior to such demand the Secretary shall have assumed the Obligations pursuant to Section 6.09 of the Indenture or (ii) prior to the expiration of such 30-day period subsequent to such demand and prior to any payment of the Guarantees by the Secretary, he shall find there was no Payment Default or that such Payment Default had been remedied prior to such demand, and in any such case the Guarantees shall remain in full force and effect. The Secretary shall give prompt written notice to the Shipowner and the Indenture Trustee of each such finding. Section 2.02. Payment of the Guarantees. The Secretary and the Indenture Trustee confirm that, in accordance with the provisions of the Obligations and the Indenture, the payment of the Guarantees as provided in Section 2.01 by the Secretary to the Indenture Trustee, as agent and attorney-in-fact for the Holders of all Outstanding Obligations, shall be made by the Secretary to, and accepted by, the Indenture Trustee, solely for the benefit of the Holders of Outstanding Obligations, as payment in full of the Outstanding Obligations, and that such Obligations will thereupon cease to be Obligations of the Shipowner. ARTICLE III REPRESENTATIONS AND COVENANTS OF THE INDENTURE TRUSTEE Section 3.01. Consent of the Secretary. The Indenture Trustee covenants that it will not, without the written consent of the Secretary, and then only upon such conditions, if any, as may be specified in such consent, (a) take or participate in the taking of any action which, by the terms of the Indenture, may require the consent of the Secretary, or (b) enter into any amendment or supplement to the Indenture, or waive any condition of the Indenture, except in the case of any such waiver as the Indenture may expressly permit. Section 3.02. Authorization, Execution and Delivery. The Indenture Trustee represents and warrants that it has satisfied all requirements of law for its due execution and delivery of this 3 5 Authorization Agreement and upon execution and delivery hereof, this Authorization Agreement will constitute a valid and legally binding obligation of the Indenture Trustee, enforceable in accordance with its terms. Section 3.03. Agreements of Indenture Trustee. The Indenture Trustee agrees that it shall: (a) Furnish to the Secretary a written statement of the principal amount, interest rate, Stated Maturity and date of delivery of any (1) Obligations that are authenticated and delivered in accordance with Sections 2.01 and 2.02 of the Indenture on the date hereof and on each subsequent date of delivery of each tranche; and (2) Obligations that are authenticated and delivered by the Indenture Trustee under Section 1.02 and 1.03 hereof within 15 Business Days after each such delivery. (b) Permit the Secretary, at all reasonable times upon request, to make such reasonable, material and pertinent examinations and audits of its records and books of account and take such information as the Secretary deems reasonable pertaining to the Indenture, the Obligations, the Guarantees and this Authorization Agreement, and all matters related thereto; and (c) Furnish to the Secretary, promptly upon request, such reasonable, material and pertinent reports, evidence, proof or information, in addition to that furnished under other provisions hereof, bearing on matters pertaining to the Indenture, the Obligations, and the Guarantees, and acts performed by the Indenture Trustee with respect thereto, as the Secretary may reasonably deem necessary or appropriate. ARTICLE IV GENERAL PROVISIONS Section 4.01. Definitions. For all purposes of this Authorization Agreement, unless otherwise expressly provided or unless the context otherwise requires, capitalized terms not specifically defined herein shall have the respective meanings given in Schedule A to the Indenture. Section 4.02. Secretary's Agreements. The Secretary agrees that: (a) This Authorization Agreement and the Guarantees of the Obligations are made and entered into pursuant to Title XI of the Act, and conclusively evidence the eligibility of the Obligations for the Guarantees, and the validity of the Guarantees shall be incontestable; (b) The obligations of the United States to pay the Guarantees shall be subject to no conditions whatsoever, express or implied, except that demand shall have been made therefor by the Indenture Trustee or any Holder of an Outstanding Obligation not later than 60 days from the date of an Indenture Default that shall have occurred and be continuing, it being the intent of the 4 6 United States that the Guarantees will be paid under any and all circumstances upon demand duly made therefor; and (c) In the event of an Indenture Default of which the Secretary has actual knowledge, the Secretary will publish notice in the Authorized Newspaper of the occurrence of such Indenture Default within 30 days from the date of such Indenture Default, unless demand for payment under the Guarantees shall previously have been made by the Indenture Trustee, but any failure to publish such notice or any defect therein shall not affect in any way any rights of the Indenture Trustee or any Holder of an Obligation with respect to such Indenture Default, or in any way affect the rights of the Secretary. Section 4.03. Benefits to Holders of Obligations. All authorizations and directions to authenticate and deliver Obligations and Guarantees, and all other agreements of the Secretary herein are made with the Indenture Trustee for, and shall inure to, the benefit of all Holders of the Obligations. The agreements of the Indenture Trustee herein are made with the Secretary for, and shall inure to, the benefit of all Holders of the Obligations. Section 4.04. Successor Indenture Trustee; Amendments and Supplements. The authority and direction granted to the Indenture Trustee hereby, and all rights of the Indenture Trustee hereunder, are granted to and shall accrue to the benefit of any Person who from time to time acts as successor Indenture Trustee, pursuant to the terms of Article VII of the Indenture; provided that, such successor Indenture Trustee and the Secretary shall have entered into an amendment hereto whereby such successor Indenture Trustee agrees to fulfill the obligations of the Indenture Trustee hereunder. Except as provided in the preceding sentence, this Authorization Agreement may not be amended or supplemented in any regard whatever, nor may the rights or obligations of the Indenture Trustee hereunder be assigned to any other Person, except by a writing duly executed by the Indenture Trustee and the Secretary. Section 4.05. Effective Period. This Authorization Agreement and the authorization and direction to authenticate and deliver Guarantees granted to the Indenture Trustee (or any successor Indenture Trustee) shall have effect from the date hereof until termination upon, and only upon, the occurrence of one or both of the following events: (a) When the Indenture shall have been satisfied and discharged in accordance with Section 12.01 thereto; or (b) When the Guarantees of all the Outstanding Obligations shall have been terminated in accordance with Section 6.04(a) of the Indenture. Section 4.06. Payments, Notices or Other Communications. Except as otherwise provided herein, all payments, notices or other communications provided for herein may be made or delivered in person, or by registered or certified mail, postage prepaid, addressed to the party at the address of such party specified below, or at such other address as such party shall advise the other party by written notice, and shall be effective upon mailing or delivery in person. 5 7 The addresses of the Secretary and the Indenture Trustee are as follows: SECRETARY OF TRANSPORTATION c/o Maritime Administrator Department of Transportation 400 Seventh Street, S.W. Washington, D.C. 20590 The Bank of New York 101 Barclay Street New York, NY 10286 Attention: Corporate Trust Administration Section 4.07. Execution of Counterparts. This Authorization Agreement may be executed in any number of counterparts. All such counterparts shall be deemed to be originals, and shall together constitute but one and the same instrument. Section 4.08. Titles and Headings. The titles of the Articles and the headings of the Sections are not a part of this Authorization Agreement, and shall not be deemed to affect the meaning or construction of any of its provisions. Section 4.09. Conformity with Regulations. The Secretary hereby affirms that, with respect to the rights of the Indenture Trustee and the Holders, this Authorization Agreement conforms to its existing regulations governing the issuance of commitments to guarantee and guarantees under Title XI of the Act. 6 8 IN WITNESS WHEREOF, this Authorization Agreement has been duly executed by the parties hereto as of the day and year first above written. UNITED STATES OF AMERICA, SECRETARY OF TRANSPORTATION BY: MARITIME ADMINISTRATOR / s / Joel C. Richard ----------------------------------------- Secretary ATTEST: / S / SARAH J. WASHINGTON - ----------------------------------------- Assistant Secretary 9 INDENTURE TRUSTEE: THE BANK OF NEW YORK / s / Mary LaGumina By -------------------------------- Name: Mary LaGumina Title: Vice President ATTEST: / s / Remo Reale By ----------------------------------------- EX-4.(II)(E)(6) 15 c58427ex4-iie6.txt SECURITY AGREEMENT 1 EXHIBIT 4 (ii)(e)(6) Contract No. MA-13627 SECURITY AGREEMENT Relating to United States Government Guaranteed Ship Financing Obligations Between CAPE MAY LIGHT, L.L.C. And THE UNITED STATES OF AMERICA Dated October 16, 2000 2 SECURITY AGREEMENT SPECIAL PROVISIONS THIS SECURITY AGREEMENT, dated October 16, 2000 (the "Security Agreement"), is between Cape May Light, L.L.C., a Delaware limited liability company (the "Shipowner") and the UNITED STATES OF AMERICA (the "United States"), represented by the Secretary of Transportation, acting by and through the Maritime Administrator (the "Secretary"), pursuant to Title XI of the Act. RECITALS A. Coastal Queen Holdings, L.L.C., predecessor in interest to Delta Queen Coastal Voyages, L.L.C. (the "Guarantor"), entered into the Construction Contract, dated May 1, 1999, with Atlantic Marine, Inc., (the "Shipyard") for the construction of the cv Cape May Light (the "Vessel") and subsequently assigned said contract to the Shipowner. B. On the date hereof, the Secretary entered into, and the Shipowner accepted a Commitment to Guarantee Obligations, Contract No. MA-13625, whereby the United States has committed itself to guarantee the payment in full of all the unpaid interest on, and the unpaid principal balance of, Obligations (as defined herein) in the aggregate principal amount not to exceed 87.5% of the Depreciated Actual Cost or the Actual Cost of the Vessel, as the case may be, on the Closing Date, which amounts are set out in Table A. C. The Shipowner has entered into the Bond Purchase Agreement providing for the issuance of Obligations in the aggregate amount up to $37,900,000 to be designated "United States Government Guaranteed Ship Financing Bonds, 2000 Series" (the "Obligations") having a maturity date and interest rate set forth in the Obligation Purchase Agreement and the Obligations. D. On the date hereof, the Shipowner and Bank of New York, a New York banking corporation, as Indenture Trustee, executed and delivered the Trust Indenture (the "Indenture") pursuant to which the Shipowner will issue the Obligations. E. On the date hereof, the Secretary and the Indenture Trustee will execute the Authorization Agreement, Contract No. MA-13626, which authorizes the Indenture Trustee to endorse, execute, and authenticate the Secretary's Guarantee on each of the Obligations. F. As security for the due and timely payment of the Secretary's Note, issued this day by the Shipowner, and for the Secretary's issuance of the Guarantees, the Shipowner has executed and delivered the Security Agreement, Contract No. MA-13627, and the Financial Agreement, Contract No. MA-13629 granting the Secretary a security interest in, among other things, the Construction Contract, the Vessel and certain other property, tangible and intangible, which the Shipowner now has or hereafter will acquire, and all of the proceeds thereof. 3 G. As further security to the Secretary and in consideration of the Secretary's agreeing to issue the Guarantees, (i) the Shipyard has granted the Secretary a security interest in the Vessel, its hull, component parts, machinery, and equipment during the construction period and has executed on this date the Consent of Shipyard to the assignment of the Construction Contract to the Secretary; (ii) the Guarantor has executed and delivered the Guaranty Agreement; and (iii) the Parent Company has executed and delivered the Funding Agreement. H. In order to implement certain aspects of the transactions contemplated by the Security Agreement and the Financial Agreement, the Secretary, the Shipowner and The Bank of New York, a New York banking corporation (the "Depository") have entered into the Depository Agreement, Contract No. MA-13630, on the date hereof. I. As further security for the due and timely payment of the Secretary's Note issued this day in conjunction with the Closing, Shipowner will execute and deliver the Mortgage, Contract No. MA-13628, on the Delivery Date. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, and of other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and in order to provide security to the Secretary for the Secretary's Note provided for herein, the parties hereto hereby agree as follows: 1. Concerning these Special and General Provisions. This Security Agreement shall consist of two parts: the Special Provisions and the General Provisions attached hereto as Exhibit 1 of the Security Agreement and incorporated herein by reference. In the event of any conflict, or inconsistency between the Special Provisions of this Security Agreement and Exhibit 1, the Special Provisions shall control. 2. Additions, Deletions and Amendments to Exhibit 1. The following additions, deletions and amendments are hereby made to the Security Agreement: (a) Concerning Section 1.03. Section 1.03(a) is amended by deleting it in its entirety and substituting the following therefor: "(a) In order to create a present security interest in the Secretary, the Shipowner does hereby grant, sell, convey, assign, transfer, mortgage, pledge, set over and confirm unto the Secretary continuing security interests in all of the right, title and interest of the Shipowner in and to all of the following, whether now owned or existing or hereafter arising or acquired: (1) The Construction Contract (insofar as it relates to the Construction of the Vessel), together with all other contracts, whether now in existence or hereafter entered into, relating to the Construction of the Vessel. Said right, title and interest in and to the Construction Contract, and the other contracts conveyed to the Secretary by this 2 4 subsection are hereinafter referred to collectively as the "Rights Under the Construction and Related Contracts." (2) The Vessel to be constructed under the Construction Contract and located at the Shipyard's facility at or near 8500 Hechscher Drive, Jacksonville, Florida 32226 and being a 300 foot Coastal Queen Class passenger vessel (cv Cape May Light, Hull No. 4242), as the same has been or may be modified, amended or supplemented from time to time. (3) The Shipowner's rights to receive all moneys which from time to time may become due to the Shipowner with respect to the Construction of the Vessel regardless of the legal theory by which moneys are recovered. Said right, title and interest in and to the moneys, cash, bonds, claims, and securities conveyed by this subsection are herein referred to collectively as the "Moneys Due with Respect to the Construction of the Vessels." The Secretary acknowledges and agrees that the Moneys Due with Respect to the Construction of the Vessel will be paid directly to the Depository for application in accordance with this Security Agreement and the Indenture. (4) Hull No. 4242 and all inventory, materials, machinery, equipment, products, goods, plans, specifications, designs and other property (tangible or intangible) of any description whatsoever, at any time incorporated, installed or affixed, or to be affixed to, or acquired (or otherwise) to be incorporated, installed or affixed to, or to be affixed to the Vessel, in each case wherever located (each such item whether now owned or hereafter acquired), and identifiable proceeds or products thereof; provided, however, that the tools, equipment, and implements of the Shipyard used in the construction of the Vessel are specifically excluded herefrom. (5) All goods, whether equipment or inventory appertaining to or relating to the Vessel, whether or not on board or ashore and not covered by the Mortgage, and any charter hire relating to the Vessel. (6) All rentals of, replacement and substitutes for, and accession, attachment, modifications, additions, or improvements to any property described in paragraphs (1) through (5) of this Section. (7) All rights and claims of Shipowner relating to any of the property described in paragraphs (1) through (6) of this Section. (8) The Title XI Reserve Fund and all moneys, instruments, negotiable documents, chattel paper, and proceeds thereof currently on deposit or hereafter deposited in the Title XI Reserve Fund. (9) The Construction Fund and all moneys, instruments, negotiable documents, chattel paper and proceeds, thereof currently on deposit or hereafter deposited in the Construction Fund. 3 5 (10) All moneys, instruments, negotiable documents, chattel paper and proceeds thereof held by the Depository under the Depository Agreement. (11) Proceeds of Policies of Insurance relating to the Vessel and, whether or not insured, any general average claims or loss of hire claims Shipowner may have with respect to the Vessel. (12) The performance and payment bonds issued by Shipyard through Federal Insurance Company guaranteeing Shipyard's performance relating to the construction of the Vessel and her sister ship, dated July 20, 1999, and all proceeds thereof. (13) The Guaranty Agreement, as the same has been or may be amended or supplemented from time to time, and all proceeds thereof. (14) The Funding Agreement, as the same has been or may be amended or supplemented from time to time, and all proceeds thereof. (15) All proceeds of any and all of the property described in paragraphs (1) through (14) of this Section, including (without limitation) all payments under insurance or in connection with any warranty, indemnity, or guarantee, payable by reason of the loss of or damage to or otherwise with respect to any of the property described in paragraphs (1) through (14) of this Section. The Secretary shall have, upon execution and delivery thereof, as further security, certain right, title and interest in and to the following: (16) The Mortgage, to be executed and delivered by the Shipowner to the Secretary, as mortgagee, on the Delivery Date, covering the Vessel." (b) Article II. Notwithstanding any other provision in Article II of the General Provisions and in the General Provisions as a whole, all references to ownership and title to the Vessel shall mean after the Delivery Date. (c) Concerning Section 2.02. (1) Section 2.02(a) is hereby amended by deleting the words "it lawfully owns" and inserting the word "is" immediately after the word "Vessel" on the second line and inserting "On or after the Delivery Date," prior to the words "The Shipowner shall" at the beginning of the sentence on eighth line thereof. (2) Section 2.02(d)(3) is hereby amended by deleting the words "current operations" located on the fourth line and inserting in lieu thereof the words "Vessel operation upon delivery and acceptance of said Vessel by Shipowner". 4 6 (d) Concerning Section 2.04. (1) Section 2.04(d) is hereby amended by inserting the words "it lawfully owns" on the second line thereof after "certifying that" and prior to "the Vessel" and by inserting "and that the Vessel" after "the Vessel" and before "is free of any" on the second line thereof. (2) Section 2.04(e) is hereby amended by deleting the words "substantially in the form of Exhibit A to the form of the Mortgage" located on the first line and substituting in lieu thereof the words "in form and substance satisfactory to the Secretary evidencing (i) the Vessel is free and clear of any liens and (ii) Secretary has a valid and enforceable first priority mortgage." (e) Concerning Section 2.05. (1) In connection with Sections 2.05(b)(3) and the last paragraph of Section 2.05(e) the maximum amount of self-insurance permitted to the Shipowner under the last paragraph thereof shall be a $500,000 per accident deductible for hull insurance and a $250,000 per accident deductible for protection & indemnity insurance; and (2) In connection with clause (ii) of the initial paragraph of Section 2.05(c), the Secretary shall permit payment of losses up to the amount of $250,000 to be made directly to the Shipowner under the circumstances specified therein. (f) Concerning Section 2.08(c). Section 2.08(c) is hereby amended by deleting the word "FLEET" located on the second line and substituting in lieu thereof the word "SHIP". (g) Concerning Section 2.14. Section 2.14 is hereby amended by deleting the 3rd, 4th and 5th sentences thereof and inserting the following in lieu thereof: "In the event of (i) a default under the Construction Contract, which default results in a payment under any of the Surety Bonds, and (ii) a Default under the Security Agreement, then the Surety Bonds proceeds shall be distributed by the Secretary in accordance with the provisions of Section 6.05 of Exhibit 1. In the absence of a Security Agreement Default, the Secretary shall determine whether to release the funds to the Shipowner or to deposit the funds in an account controlled by the Secretary (but not necessarily the Title XI Reserve Fund). In the event of any default under a Construction Contract, the Shipowner shall have a right to be consulted in any negotiations, agreements, litigations or settlement of any rights related to the Surety Bonds, unless there also exists a Default under the Security Agreement, in which case the Shipowner shall not enjoy these rights." 5 7 (h) Concerning Article V. Notwithstanding any other provision in Article V of the General Provisions to the contrary, each request for withdrawal from the Escrow Fund, excluding design, inspection, owner furnished equipment and interest shall be submitted jointly by the Shipowner and the Shipyard. Any provision of Article V of the General Provisions which is consistent with these Special Provisions shall be given effect. (i) Concerning Section 5.02. The Secretary has determined that a deposit of six months interest on the principal amount deposited in the Escrow Fund is not required. (j) Concerning Section 6.01. (1) The following paragraphs are hereby added immediately after paragraph (9) and prior to the beginning of last paragraph of Section 6.01(b) of Exhibit 1: "(10) Any default under the Funding Agreement or the Guaranty Agreement shall constitute an additional security default; (11) A breach by either the Shipowner or the Shipyard under the terms of the Construction Contract shall constitute an additional security default under this Section 6.01(b)." (2) The following paragraph is hereby added to the end of Section 6.01 of Exhibit 1: "In the event that a Default shall occur, the Secretary shall be entitled, but not be required, to deliver to the Depository a written notice that the Secretary is thereby exercising exclusive control over the Securities Accounts (as such term is defined in the Depository Agreement) ("Notice of Exclusive Control"). As further provided in the Depository Agreement following the Depository's receipt of and pursuant to said Notice of Exclusive Control, the Secretary and the Shipowner hereby acknowledge and agree that (i) the Secretary shall be entitled, but not be required, to issue to the Depository an instruction, notice or any other type of directive that would constitute an "entitlement order" within the meaning of Section 8-102(a)(8) of the New York Uniform Commercial Code (collectively, an "Entitlement Order") concerning the Securities Accounts and (ii) the Depository shall immediately cease complying with any Request, Request for Payment, instruction, notice or any other type of directive that would constitute an Entitlement Order from the Shipowner. In the event that a Default has been cured or waived as provided in Article VI hereof, the Secretary and the Shipowner hereby acknowledge and agree that the Secretary shall deliver a written notice to the Depository that (i) 6 8 the Secretary is no longer exercising exclusive control over the Securities Accounts and that the Notice of Exclusive Control previously delivered is theretofore without effect and (ii) the Depository shall thereafter comply with any Request, Request for Payment, instruction, notice or any other type of directive that would constitute an Entitlement Order from the Shipowner." (k) Concerning Section 6.04(b)(4). Section 6.04(b)(4) is hereby amended by inserting the words "and mailing said notice" between "Authorized Newspapers" and "to the Shipowner" located on the fourth line. (l) Concerning Section 8.01(c). Section 8.01(c) is hereby amended by deleting the from the third line the number "12110(c)(3)" and substituting the number "12111(c)(3) in lieu thereof. (m) Concerning Section 9.01. Subject to Section 9.01 of the Security Agreement, any notice, request, demand, direction, consent, waiver, approval or other communication, when given to a party hereto, shall be addressed to: Secretary as: SECRETARY OF TRANSPORTATION c/o Maritime Administrator U.S. Department of Transportation 400 Seventh Street, S.W. Washington, D.C. 20590 Shipowner as: CAPE MAY LIGHT, L.L.C. Robin Street Wharf 1380 Port of New Orleans Place New Orleans, Louisiana 70130-1890 Indenture Trustee as: The Bank of New York 101 Barclay Street New York, NY 10286 Attention: Corporate Trust Administration (n) Governing Law. This Security Agreement and the rights and obligations of the parties hereto shall be governed by and construed in accordance with U.S. maritime laws, to the extent applicable, and otherwise in accordance with the laws of the State of Louisiana, except that the rights and obligations of the parties with respect to Sections 1.03(a)(4), (5) and (6) shall be governed by the laws of the State of New York. (o) Execution of Counterparts. This Security Agreement may be executed in any number of counterparts. All such counterparts shall be deemed to be originals, and shall constitute but one and the same instrument. 7 9 IN WITNESS WHEREOF, this Security Agreement has been executed by the parties as of the day and year first written. SHIPOWNER: CAPE MAY LIGHT, L.L.C. By: DELTA QUEEN COASTAL VOYAGES, L.L.C., its Managing Member By: THE DELTA QUEEN STEAMBOAT CO., its Managing Member By: / S / JORDAN B. ALLEN ----------------------------- Its Executive Vice President ATTEST: By / S / RANDALL L. TALCOTT ------------------------------------------ Its Vice President 10 UNITED STATES OF AMERICA SECRETARY OF TRANSPORTATION BY: MARITIME ADMINISTRATOR / s / Joel C. Richard ------------------------------------- Secretary ATTEST: / S / SARAH J. WASHINGTON - ------------------------------------- Assistant Secretary 11 EXHIBITS TO THE SECURITY AGREEMENT Exhibit 1 -- General Provisions Incorporated into the Security Agreement by Reference Schedule X -- Schedule of Definitions Exhibit 2 -- Form of Secretary's Note Exhibit 3 -- Form of Mortgage Exhibit 4 -- Financial Agreement Exhibit 5 -- Form of Consent of Shipyard Exhibit 6 -- Construction Contract Exhibit 7 -- Depository Agreement Exhibit 8 -- Guaranty Agreement Exhibit 9 -- Funding Agreement Exhibit 10 -- Assignment of Construction Contract Exhibit 11 -- Shipyard Security Agreement 12 TABLE A Cape May Light The aggregate Actual Cost of the Vessel as of the date hereof as determined by the Secretary, namely, (i) the amounts paid by or for the account of the Shipowner as of the date hereof for the Construction of the Vessel, plus (ii) the amount which the Shipowner was on said date obligated under the Construction Contract or otherwise to pay from time to time thereafter for the Construction of the Vessel less the Depreciation of the Vessel as of the date hereof as determined by the Secretary is $44,249,278 both calculated and itemized for the Vessel as follows:
Amount Amount Obligated Paid To Be Paid Total ---- ---------- ----- Contract Price $30,000,000 $30,000,000 Changes and Extras 3,500,000 3,500,000 Owner Furnished Items 4,000,000 4,000,000 Engineering and Inspection 1,500,000 1,500,000 Net Interest During 2,638,000 2,638,000 Construction Risk Insurance 190,000 190,000 Commitment Fee 155,000 155,000 Guarantee Fee $ 2,266,278 $ 2,266,278 ---------- ----------- ----------- Total Actual Cost $44,249,278 $44,249,278
13 SCHEDULE OF DEFINITIONS TO SECURITY AGREEMENT Dated October 16, 2000 "Act" means the Merchant Marine Act, 1936, as amended and in effect on the Closing Date. "Actual Cost" means the actual cost of the Vessel, as set forth in Table A of the Security Agreement or as subsequently redetermined by the Secretary pursuant to the Security Agreement and the Act. "Adjusted Cash Provided from Operating Activities" means the amount determined by taking `net cash provided from operating activities' from the statement of cash flows and adding back all interest deducted in determining such amount. "Audited Financial Statements" mean the annual audit of the Shipowner's accounts in accordance with generally accepted auditing standards by independent certified public accountants or independent licensed public accountants, certified or licensed by a regulatory authority of a state or other political subdivision of the United States, who may be the Shipowner's regular auditors. "Authorization Agreement" means the Authorization Agreement, Contract No. MA-13626, between the Secretary and the Indenture Trustee, whereby the Secretary authorizes the Guarantee of the United States to be endorsed on the Obligations, as the same is originally executed, or as modified, amended or supplemented therein. "Authorized Newspaper" means The Wall Street Journal or if it ceases to exist, then in such other newspaper as the Secretary may designate. "Business Day" means a day which is not a Saturday, Sunday or a bank holiday under the laws of the United States or the State of Louisiana and the State of New York. "Chapter 313" means the provisions of 46 United States Code Chapter 313, as amended. "Classification Society" means the American Bureau of Shipping. "Closing Date" or "Closing" means the date when the Obligations are issued by the Shipowner and authenticated by the Indenture Trustee pursuant to the Authorization Agreement. "Commitment to Guarantee Obligations" has the same meaning as the term Guarantee Commitment. 14 "Consent of Shipyard" means the document evidencing such Shipyard's consent to the assignment of a Construction Contract to the Secretary under the Security Agreement as originally executed, modified, amended or supplemented. "Construction" means construction of the Vessel, including designing, inspecting, outfitting and equipping thereof. "Construction Contract" means the contract relating to the Construction of the Vessel between the Shipowner and the Shipyard, as originally executed or as modified or supplemented pursuant to the applicable provisions thereof. "Construction Fund" has the meaning specified in Article IV of the Security Agreement. "Default" when used in the Security Agreement has the meaning attributed to it in Article VI thereof. "Delivery Date" means the date on which the Vessel is delivered to and accepted by the Shipowner. "Depository" shall mean the institution designated in the Depository Agreement or any successor. "Depository Agreement" shall mean the Depository Agreement, Contract No. MA-13630 among the Shipowner, the Secretary and the Depository, as originally executed or as modified or supplemented in accordance with the applicable provisions thereof. "Depreciated Actual Cost" means the depreciated actual cost of the Vessel, as set forth in Table A of the Security Agreement or as subsequently redetermined by the Secretary pursuant to the Security Agreement and the Act. "Eligible Investment" has the meaning given by Section 5 of the Financial Agreement. "Escrow Fund" means the account held by the Secretary, established under Section 1108 of the Act and administered pursuant to Article V of the Security Agreement. "Financial Agreement" means the Title XI Reserve Fund and Financial Agreement, Contract No. MA-13629, executed by the Shipowner and the Secretary, as originally executed or as modified, amended or supplemented. "Financial Asset" has the meaning given by Article 8-102(a)(9) of the UCC. "First Calendar Year of Vessel Operation" means the first calendar year of operation of the Vessel provided said calendar year commences no sooner than six months after delivery of the Vessel. 15 "Fourth Calendar Year of Vessel Operation" means the calendar year subsequent to the Third Calendar Year of Vessel Operation. "Funding Agreement" means the funding agreement, Contract No. MA-13634, between the Parent Company, the Guarantor, the Shipowner and the Sister Shipowner relating to payment of the Guarantor's operating expenses. "Government Use" means the use of a Vessel or requisition of its title required by a government or governmental body of the United States of America. "Guarantee" means each, and the "Guarantees" means every, guarantee of an Obligation by the United States pursuant to Title XI of the Act. "Guaranty Agreement" means the guaranty, Contract No. MA 13631, issued by the Guarantor for the Title XI obligations of the Shipowner. "Guarantee Commitment" means the Commitment to Guarantee Obligations, Contract No. MA-13625, dated October 16, 2000 executed by the Secretary and accepted by the Shipowner relating to the Guarantees, as originally executed or as modified, amended or supplemented. "Guarantor" means Delta Queen Coastal Voyages, L.L.C., a Delaware limited liability company, and shall include its successors and assigns. "Holder" means each, and "Holders" means every, registered holder of an Obligation. "Increased Security" means the Secretary's Note, the Security Agreement, the Vessel, the Security, the Escrow Fund, the Title XI Reserve Fund, the Construction Fund, the Parent Guaranty and any other security agreement between the Secretary and the Shipowner relating to any vessels financed under the Act, and the Policies of Insurance, and the proceeds of the foregoing. "Indenture" means the Trust Indenture dated the Closing Date between the Shipowner and the Indenture Trustee, as originally executed, or as modified, amended or supplemented. "Indenture Default" has the meaning specified in Article VI of the Indenture. "Indenture Trustee" means the Bank of New York, a New York banking corporation, and any successor trustee under the Indenture. "Long Term Debt" means, as of any date, bonds, debentures, equipment obligations and other evidence of indebtedness that would be included in long term debt in accordance with generally accepted accounting principles. There shall also be included any guarantee or other liability for the debt of any other Person, not otherwise included on the balance sheet. 16 "Maturity" when used with respect to any Obligation, means the date on which the principal of such Obligation becomes due and payable as therein provided, whether at the Stated Maturity or by redemption, declaration of acceleration or otherwise. "Minimum Cash Flow Ratio" means the ratio of Adjusted Cash Provided from Operating Activities to Total Debt Service. "Moneys Due with Respect to Construction of the Vessels" has the meaning specified in Section 1.03 of the Security Agreement. "Mortgage" means the first preferred ship mortgage on the Vessel, Contract No. MA-13628, by the Shipowner to the Secretary, as originally executed, modified, amended or supplemented. "Mortgagee" means the Secretary, as mortgagee under the Mortgage. "Mortgagor" means the Shipowner, as mortgagor under the Mortgage. "Net Worth" means, as of any date, the total of paid-in capital stock, paid-in surplus, earned surplus and appropriated surplus, and all other amounts that would be included in net worth in accordance with generally accepted accounting principles, but exclusive of (1) any receivables from any stockholder, director, Officer or employee of the Company or from any Related Party (other than current receivables arising out of the ordinary course of business and not outstanding for more than 60 days) and (2) any increment resulting from the reappraisal of assets. "Obligation" means each, and "Obligations" means each and every obligation of the Shipowner bearing a Guarantee that is authenticated and delivered under the Indenture and the Authorization Agreement. "Obligation Purchase Agreement" means each agreement for the purchase of Obligations, executed by the Shipowner and the purchaser named therein, as originally executed, modified or supplemented. "Obligee" means each, and "Obligees" means every, Holder of an Obligation. "Offering Circular" means each offering circular relating to the issuance and sale of the Bonds. "Officer's Certificate" means a certificate conforming to Section 1.02 of the Security Agreement or the Indenture as the context may require. "Original Issue Date" means a date on which an Obligation was initially authenticated by the Indenture Trustee even if the Obligation is subsequently given a later date by reason of transfer, exchange or substitution. 17 "Outstanding" when used with reference to the Obligations, shall mean all Obligations theretofore issued under the Indenture, except: (1) Obligations Retired or Paid; and (2) Obligations in lieu of which other Obligations have been issued under the Indenture. "Parent Company" means The Delta Queen Steamboat Co., a Delaware corporation, and its successors and assigns. "Paying Agent" means any bank or trust company meeting the qualifications in Section 7.02(a) of the Indenture and appointed by the Shipowner under Section 4.02 of the Indenture to pay the principal of (and premium, if any) or interest on the Obligations on behalf of the Shipowner. "Payment Default" has the meaning specified in Section 6.01 of the Security Agreement. "Person" or "Persons" means any individual, corporation, partnership, joint venture, association, limited liability company, joint-stock company, trust, unincorporated organization, government, or any agency or political subdivision thereof. "Policies of Insurance" and "policies" means all cover notes, binders, policies of insurance and certificates of entry in a protection and indemnity association, club or syndicate with respect to the Vessel (including all endorsements and riders thereto), including but not limited to all insurance required under Section 2.05 of the Security Agreement. "Redemption Date" means a date fixed for the redemption of an Obligation by the Indenture. "Related Party" means one that can exercise control or significant influence over the management and/or operating policies of another Person, to the extent that one of the Persons may be prevented from fully pursuing its own separate interests. Related parties consist of all affiliates of an enterprise, including (1) its management and their immediate families, (2) its principal owners and their immediate families, (3) its investments accounted for by the equity method, (4) beneficial employee trusts that are managed by the management of the enterprise, and (5) any Person that may, or does, deal with the enterprise and has ownership of, control over, or can significantly influence the management or operating policies of another Person to the extent that an arm's-length transaction may not be achieved. "Request" means a written request to a Person for the action therein specified, signed by a Responsible Officer of the Person making such request. "Responsible Officer" means (1) in the case of any business entity, the chairman of the board of directors, the president, any executive or senior vice president, the secretary, the treasurer, member or partner, (2) in the case of any commercial bank, the chairman or vice-chairman of the executive committee of the board of directors or trustees, the president, any executive or senior vice president, the secretary, the treasurer, any trust officer, and (3) with 18 respect to the signing or authentication of the Obligations and Guarantees by the Indenture Trustee, any person specifically authorized by the Indenture Trustee to sign or authenticate the Obligations. "Retired or Paid" as applied to (i) Obligations and the indebtedness evidenced thereby, means that such Obligations shall be deemed to have been so retired or paid and shall no longer be entitled to any rights or benefits provided in the Indenture if: (1) such Obligations shall have been paid in full; (2) such Obligations shall have been canceled by the Indenture Trustee; or (3) such Obligations shall have become due and payable at Maturity and funds sufficient for the payment of such Obligations (including interest to the date of Maturity, or in the case of a payment after Maturity, to the date of payment, together with any premium thereon) and available for such payment and are held by the Indenture Trustee or any Paying Agent with irrevocable directions, to pay such Obligations; provided that, the foregoing definition is subject to Section 6.08 of the Indenture. "Rights Under the Construction Contracts and Related Contracts" shall have the meaning specified in Section 1.03 of the Security Agreement. "Second Calendar Year of Vessel Operation" means the calendar year beginning January 1 in the year immediately following the First Calendar Year of Vessel Operation. "Secretary" means the Secretary of Transportation or any officials duly authorized to perform the functions of the Secretary of Transportation under Title XI of the Act. "Secretary's Note" means a promissory note or promissory notes issued and delivered by the Shipowner to the Secretary substantially in the form of Exhibit 2 of the Security Agreement, including any promissory note issued in substitution for, or any endorsement or supplement thereof. "Secretary's Notice" means a notice from the Secretary to the Indenture Trustee, if a Bond that a Default, within the meaning of Section 6.01(b) of the Security Agreement has occurred. "Security" has the meaning specified in Section 1.03 of the Security Agreement. "Securities Account" has the meaning given by Article 8-501 of the UCC. "Securities Intermediary" has the meaning given by Article 8-102(a)(14) of the UCC and also means the Depository. "Security Agreement" means the security agreement, Contract No. MA-13627, dated the Closing Date, consisting of the special provisions, the general provisions and this schedule X, executed by the Shipowner as security for the Secretary, as originally executed or as modified, amended or supplemented. 19 "Security Default" has the meaning specified in Section 6.01 of the Security Agreement. "Shipowner" means Cape May Light, L.L.C., a Delaware limited liability company, and shall include its successors and assigns. "Shipyard" means Atlantic Marine, Inc. "Sister Shipowner" means Cape Cod Light, L.L.C., a Delaware limited liability company, and shall include its successors and assigns. "Stated Maturity" means the date determinable as set forth in any Obligations as the final date on which the principal of such Obligation is due and payable. "Successor" means a Person formed by or surviving a consolidation or merger with the Shipowner or to which the Vessels have been sold. "Third Calendar Year of Vessel Operation" means the calendar year subsequent to the Second Calendar Year of Vessel Operation. "Title XI" means Title XI of the Act. "Title XI Reserve Fund" has the meaning specified in the Financial Agreement. "Title XI Reserve Fund and Financial Agreement" means the Financial Agreement. "Total Debt Service" means the amount determined for each given year as follows: (a) any scheduled payments on the Title XI debt (including principal and interest), plus (b) any scheduled payments (including principal and interest) on all other third party debt of the Shipowner, minus (c) cash used to pay such payments from either non-operating sources or operating sources other than the Shipowner. "UCC" means the Uniform Commercial Code as enacted in the State of Louisiana, except that with respect to the terms "Financial Asset", "Securities Account" and "Securities Intermediary", "UCC" shall mean the Uniform Commercial Code as enacted in the State of New York. "Vessel" means the cv Cape May Light, financed with the Obligations. "Working Capital" shall mean the excess of current assets over current liabilities, both determined in accordance with generally accepted accounting principles and adjusted as follows: (1) In determining current assets, there shall also be deducted: (A) Any securities, obligations or evidence of indebtedness of a Related Party or of any stockholder, director, officer or employee (or any member of his family) of the Company or of such Related Party, except advances to agents required for the normal current operation of the Company's 20 vessels and current receivables arising out of the ordinary course of business and not outstanding for more than 60 days; and (B) An amount equal to any excess of unterminated voyage revenue over unterminated voyage expenses; (2) In determining current liabilities, there shall be deducted any excess of unterminated voyage expenses over unterminated voyage revenue; and (3) In determining current liabilities, there shall be added one half of all annual charter hire and other lease obligations (having a term of more than six months) due and payable within the succeeding fiscal year, other than charter hire and such other lease obligations already included and reported as a current liability on the Company's balance sheet. 21 TABLE OF CONTENTS GENERAL PROVISIONS INCORPORATED INTO THE SECURITY AGREEMENT BY REFERENCE
SECTION HEADING PAGE ARTICLE I..........................................................................................13 DEFINITIONS; OFFICER'S CERTIFICATES; GRANTING CLAUSE............................................13 Section 1.01. Definitions...................................................................13 Section 1.02. Officer's Certificates........................................................13 Section 1.03. Granting Clause...............................................................13 ARTICLE II.........................................................................................15 SHIPOWNER's Representations And Agreements......................................................15 Section 2.01. Shipowner's Representations, Agreements, Organization and Existence...........15 (a) General Representations...................................................15 (b) Shipowner's United States Citizenship.....................................15 (c) Taxes.....................................................................16 Section 2.02. Covenants Concerning the Vessels..............................................16 (a) Title to and Possession of the Vessels....................................16 (b) Sale, Mortgage, Transfer or Charter of the Vessels........................16 (c) Taxes and Governmental Charges............................................16 (d) Liens.....................................................................16 (e) Compliance with Applicable Laws...........................................17 (f) Vessels' Operation........................................................17 (g) Vessels' Condition and Maintenance........................................17 (h) Material Changes in the Vessels...........................................18 (i) Documentation of the Vessels..............................................18 Section 2.03. Maintenance of Construction Contract..........................................18 Section 2.04. Delivery Requirements.........................................................18 Section 2.05. Insurance.....................................................................19 Section 2.06. Inspection of the Vessels; Examination of Shipowner's Records.................25 Section 2.07. Requisition of Title, Termination of Construction Contract or Total Loss of a Vessel..................................................................25 Section 2.08. Notice of Mortgage............................................................26 Section 2.09. Compliance with 46 U.S.C. Chapter 313.........................................26 Section 2.10. Performance of Shipowner's Agreements by the Secretary........................27 Section 2.11. Uniform Commercial Code Filings; Further Assurances...........................27 Section 2.12. Modification of Formation Agreements..........................................27
22 Section 2.13. Members of Limited Liability Companies........................................27 Section 2.14. Concerning the Performance and Payment Bonds..................................28 ARTICLE III........................................................................................16 THE SECRETARY'S NOTE............................................................................16 Section 3.01. Secretary's Note..............................................................28 Section 3.02. Termination of the Guarantees.................................................28 Section 3.03. Execution of Additional Secretary's Note......................................29 ARTICLE IV.........................................................................................29 CONSTRUCTION FUND; MONEYS DUE WITH RESPECT TO...................................................29 Section 4.01. Construction Fund.............................................................29 Section 4.02. Moneys Due with Respect to Construction of the Vessels........................29 ARTICLE V..........................................................................................30 ACTUAL COST; THE ESCROW FUND....................................................................30 Section 5.01. Actual Cost Determinations....................................................30 Section 5.02. Escrow Fund Deposits..........................................................30 Section 5.03. Escrow Fund Withdrawals.......................................................30 Section 5.04. Investment and Liquidation of the Escrow Fund.................................32 Section 5.05. Income on the Escrow Fund.....................................................32 Section 5.06. Termination Date of the Escrow Fund...........................................33 ARTICLE VI.........................................................................................33 DEFAULTS AND REMEDIES...........................................................................33 Section 6.01. What Constitutes "Defaults;" Continuance of Defaults..........................33 Section 6.02. Acceleration of Maturity of the Secretary's Note..............................35 Section 6.03. Waivers of Default............................................................35 Section 6.04. Remedies After Default........................................................36 Section 6.05. Application of Proceeds.......................................................37 Section 6.06. General Powers of the Secretary...............................................38 ARTICLE VII........................................................................................39 AMENDMENTS AND SUPPLEMENTS TO...................................................................39 Section 7.01. Amendments and Supplements to the Security Agreement and the Mortgage.........39 Section 7.02. Amendments and Supplements to the Indenture...................................39 ARTICLE VIII.......................................................................................39 CONSOLIDATION, MERGER OR SALE...................................................................39 Section 8.01. Consolidation, Merger or Sale.................................................39 Section 8.02. Transfer of a General Partner's or a Joint Venturer's Interest................40
23 ARTICLE IX.........................................................................................40 NOTICES.........................................................................................40 Section 9.01. Notices.......................................................................40 Section 9.02. Waivers of Notice.............................................................40 Section 9.03. Shipowner's Name or Address Change............................................40 ARTICLE X..........................................................................................40 DISCHARGE OF SECURITY AGREEMENT AND THE MORTGAGE................................................40 Section 10.01. Discharge of Security Agreement and the Mortgage.............................40 ARTICLE XI.........................................................................................41 MISCELLANEOUS...................................................................................41 Section 11.01. Successors and Assigns........................................................41 Section 11.02. Execution in Counterparts.....................................................41 Section 11.03. Shipowner's Rights in Absence of Default......................................41 Section 11.04. Surrender of Vessels' Documents...............................................41 Section 11.05. Applicable Regulations........................................................41 Section 11.06. Table of Contents, Titles and Headings........................................41
24 GENERAL PROVISIONS INCORPORATED INTO THE SECURITY AGREEMENT BY REFERENCE ARTICLE I DEFINITIONS; OFFICER'S CERTIFICATES; GRANTING CLAUSE Section 1.01. Definitions. All capitalized terms used but, not defined herein, shall have the meaning ascribed in Schedule X. Section 1.02. Officer's Certificates. To satisfy a covenant or condition provided for in this Security Agreement, the Responsible Officer of the Person making such Officer's Certificate shall certify that the officer (a) has read such covenant or condition; (b) has made or caused to be made such examination or investigation as is necessary to enable the Officer to express an informed opinion with respect to such covenant or condition; and (c) believes to the best of the Officer's knowledge that such condition or covenant has been met. An Officer's Certificate shall set forth the pertinent supporting information and shall be subject to the Secretary's review of its adequacy and accuracy. Section 1.03. Granting Clause. (a) In order to create a present security interest in the Secretary, the Shipowner does hereby grant, sell, convey, assign, transfer, mortgage, pledge, set over and confirm unto the Secretary continuing security interests in all of the right, title and interest of the Shipowner in and to all of the following, whether now owned or existing or hereafter arising or acquired: (1) Each Construction Contract (insofar as it relates to the Construction of a Vessel under its related Construction Contract), together with all other contracts, whether now in existence or hereafter entered into, relating to the Construction of each Vessel. Said right, title and interest in and to the Construction Contracts, and the other contracts conveyed to the Secretary by this subsection are hereinafter referred to collectively as the "Rights Under the Construction and Related Contracts." (2) The Shipowner's rights to receive all moneys which from time to time may become due to the Shipowner with respect to the Construction of each Vessel regardless of the legal theory by which moneys are recovered. Said right, title and interest in and to the moneys, cash, bonds, claims, and securities conveyed by this subsection are herein referred to collectively as the "Moneys Due with Respect to the Construction of the Vessels." The Secretary acknowledges and agrees that the Moneys Due with Respect to the Construction of the Vessels will be paid directly to the Depository for application in accordance with this Security Agreement and the Indenture. (3) All goods, whether equipment or inventory appertaining to or relating to each Vessel, whether or not on board or ashore and not covered by the Mortgage, and any charter hire relating to each Vessel. 25 (4) The Title XI Reserve Fund and all moneys, instruments, negotiable documents, chattel paper, and proceeds thereof currently on deposit or hereafter deposited in the Title XI Reserve Fund. (5) The Construction Fund and all moneys, instruments, negotiable documents, chattel paper and proceeds, etc. (6) All moneys, instruments, negotiable documents, chattel paper and proceeds thereof held by the Depository under the Depository Agreement. (7) Proceeds of Policies of Insurance relating to each Vessel and, whether or not insured, any general average claims or loss of hire claims Shipowner may have with respect to each Vessel. (8) All proceeds of the collateral described in paragraphs (1) through (7) of this Section. The Secretary shall have, upon execution and delivery thereof, as further security, certain right, title and interest in and to the following: (9) The Mortgage, to be executed and delivered by the Shipowner to the Secretary, as mortgagee, on the date hereof, covering each Vessel. (b) The right, title and interest of the Secretary pursuant to Section 1.03(a) is herein, collectively, called the "Security." The Secretary shall hold the Security as collateral security for all of the obligations and liabilities of the Shipowner under the Secretary's Note and as collateral security for and with respect to the Guarantees whether now made or hereafter entered into. (c) Notwithstanding paragraphs (a) and (b) of this Section, (1) the Shipowner shall remain liable to perform its obligations under each Construction Contract and the above-mentioned other contracts; (2) the Secretary shall not, by virtue of this Security Agreement, have any obligations under any of the documents referred to in clause (1) or be required to make any payment owing by the Shipowner thereunder; and (3) if there is no existing Default, the Shipowner shall (subject to the rights of the Secretary hereunder) be entitled to exercise all of its rights under each of the documents referred to in this Section and shall be entitled to receive all of the benefits accruing to it thereunder as if paragraphs (a) and (b) of this Section were not applicable. (d) The Shipowner hereby agrees with the Secretary that the Security is to be held by the Secretary subject to the further agreements and conditions set forth herein. 26 ARTICLE II SHIPOWNER's Representations And Agreements The Shipowner hereby represents and agrees, so long as this Security Agreement shall not have been discharged, as follows: Section 2.01. Shipowner's Representations, Agreements, Organization and Existence. (a) General Representations. The Shipowner hereby represents and warrants that the following are true statements as of the date hereof and further warrants that they shall remain true thereafter: (1) The Shipowner is duly organized, validly existing and in good standing under the laws of the jurisdiction designated in the initial paragraph of the Special Provisions hereof and shall maintain such existence. The Shipowner has not failed to qualify to do business in any jurisdiction in the United States in which its business or properties require such qualification, and had and has full legal right, power and authority to own its own properties and assets and conduct its business as it is presently conducted; (2) The Shipowner had and has legal power and authority to enter into and carry out the terms of the Guarantee Commitment, the Construction Contract, the Bond Purchase Agreement, the Obligations, the Indenture, the Security Agreement, the Secretary's Note, the Mortgage, the Financial Agreement, and the Depository Agreement (the "Documents"); (3) Each of the Documents has been duly authorized, executed and delivered by the Shipowner and constitutes, in accordance with its respective terms, legal, valid and binding instruments enforceable against the Shipowner, except to the extent limited by applicable bankruptcy, reorganization, insolvency, moratorium or similar laws of general application relating to or affecting the enforcement of creditors rights as from time to time in effect; (4) The consummation of the transactions contemplated by and compliance by the Shipowner of all the terms and provisions of the Documents will not violate any provisions of the formation documents of the Shipowner and will not result in a breach of the terms and provisions of, or constitute a default under any other agreement or undertaking by the Shipowner or by which the Shipowner is bound or any order of any court or administrative agency entered into in any proceedings to which the Shipowner is or has been a party; and (5) There is no litigation, proceeding or investigation pending or, to the best of the Shipowner's knowledge, threatened, involving the Shipowner or any of its property which could prevent or jeopardize the performance by the Shipowner of its obligations under the Documents; (b) Shipowner's United States Citizenship. The Shipowner is a citizen of the United States within the meaning of Section 2 of the Shipping Act, 1916, as amended, and shall remain such a citizen for operation in the trades in which the Shipowner proposes to operate the Vessels and in the event the Shipowner shall cease to be such a citizen, the Shipowner shall notify the Secretary immediately of such fact. 27 (c) Taxes The Shipowner has paid or caused to be paid all taxes assessed against it, unless the same are being contested in good faith or an authorized extension of time has been granted. Section 2.02. Covenants Concerning the Vessels. (a) Title to and Possession of the Vessels. On the date of this Security Agreement, the Shipowner represents and warrants that it lawfully owns each Vessel free from any liens, encumbrances, security interests, charges, or rights in rem (subject only to (1) the equity of the Shipyard under the Construction Contract, if any; (2) liens on any undelivered Vessel which the Shipyard is obligated to discharge under the Construction Contract; (3) any security interest subordinated to the Secretary's security interest permitted under the Special Provisions hereof; (4) the Secretary's rights hereunder; and (5) the liens permitted by paragraph (d)(3) of this Section). The Shipowner shall, for the Secretary's benefit, warrant and defend the title to, and possession of, each Vessel and every part thereof against the claims and demands of all Persons whomsoever. (b) Sale, Mortgage, Transfer or Charter of the Vessels. (1) The Shipowner shall not, without the Secretary's prior written consent, sell, mortgage, demise charter or transfer any Vessel to any Person (or charter the Vessel to a Related Party under any form of charter). (2) The Shipowner hereby covenants that: (A) it will not enter into any time charter of the Vessels in excess of six months unless the time charter contains the following provision: "This time charter is subject to each of the rights and remedies of the Secretary of Transportation and has been assigned to the Secretary under a Security Agreement and Mortgage, each executed by the Shipowner in favor of the Secretary with respect to the Vessels being chartered." and (B) it shall, within 10 calendar days of entering into any time charter in excess of six months, transmit a copy of the time charter to the Secretary. (c) Taxes and Governmental Charges. The Shipowner shall pay and discharge, or cause to be paid and discharged, on or before the same shall become delinquent, all taxes, assessments, government charges, fines and penalties lawfully imposed upon each Vessel, unless the same are being contested in good faith. (d) Liens. (1) As a condition precedent to each payment by the Shipowner under the Construction Contract, the Shipowner shall require an Officer's Certificate from the Shipyard stating that once the Shipyard receives said payment, there will be no liens or rights in rem against the respective Vessel. At the Delivery Date of each Vessel, the Shipowner and the Shipyard shall provide an Officer's Certificate stating that there are no liens or rights in rem against the respective Vessel except for the Mortgage. (2) After the Delivery Date of each Vessel, the Shipowner shall satisfy, or cause to be satisfied, within 30 days of its knowledge thereof, any lien or encumbrance or right in rem which shall be filed against such Vessel unless the same is being contested in good faith; and (3) Neither the Shipowner, any charterer, the master of any Vessel, nor any other Person has or shall have any right, power or authority, without the Secretary's prior written 28 consent, to create, incur or permit to be placed or imposed on any Vessel any lien, encumbrance, security interest, charge, or rights in rem, and statutory liens incident to current operations unless such statutory liens are subordinate to the Mortgage. (e) Compliance with Applicable Laws. The Shipowner shall at all times be in compliance with all applicable U.S. laws. In addition, each Vessel (1) shall be designed to meet, and on the Delivery Date thereof and at all times thereafter shall meet all requirements of applicable laws, treaties and conventions, and of applicable rules and regulations thereunder; and (2) shall have on board valid certificates showing compliance therewith; provided that the foregoing shall not apply if (A) the Vessel is in Government Use; (B) there has been an actual or constructive total loss or an agreed or compromised total loss of such Vessel; or (C) there has been any other loss with respect to such Vessel and the Shipowner shall not have had a reasonable time to repair the same. (f) Vessels' Operation. Except when the Vessel is in Government Use, the Shipowner shall not (1) cause or permit the Vessels to be operated in any manner contrary to law or to any lawful rules or regulations of the Maritime Administration; (2) remove or attempt to remove the Vessels beyond the limits of the United States without the Secretary's prior written consent except on voyages with the intention of returning to the United States; or (3) abandon such Vessels in any foreign port unless there has been an actual or constructive total loss or an agreed or compromised total loss of any of the Vessels. (g) Vessels' Condition and Maintenance. (1) Each Vessel shall be constructed, maintained and operated so as to meet, at all times, the highest classification, certification, rating and inspection standards for Vessels of the same age and type as my be imposed by the Classification Society; provided that, the foregoing shall not apply if the Vessel has been (i) under Government Use; (ii) an actual or constructive total loss or an agreed or compromised total loss of such Vessel; or (iii) any other loss with respect to such Vessel and the Shipowner shall not have had a reasonable time to repair the same; (2) On the Delivery Date of each Vessel, the Shipowner shall furnish to the Secretary an Interim Class Certificate issued for each such Vessel by the Classification Society and promptly after the Delivery Date of each Vessel, furnish to the Secretary a Certificate of Class with respect to such Vessel issued by the Classification Society. Subsequently, the Shipowner shall annually (A) furnish to the Secretary a Certificate of Confirmation of Class issued by the Classification Society showing that the above-mentioned classification and rating have been retained for each Vessel; and (B) furnish to the Secretary copies of all Classification Society reports, including periodic and damage surveys for each Vessel; provided that, the foregoing shall not apply if the Vessel is in Government Use and the governmental body does not permit classification and rating of the Vessel. (3) Notwithstanding Section 2.02(g)(2), if the Vessel is a barge which is not classed, then the Shipowner shall, at all times, at its own cost and expense maintain and preserve each Vessel, so far as may be practicable, in at least as good order and condition, ordinary wear and tear excepted, as at the Delivery Date of such Vessel, and shall perform or cause to be 29 performed at least once every five years and at any other time reasonably required by the Secretary, a survey and inspection of the Vessels by an independent marine surveyor approved by the Secretary; and provided that, no such surveys will be required within the last three years prior to the final Stated Maturity of the Obligations. The Shipowner shall furnish two copies of the report of such independent marine surveyor to the Secretary within 15 days of such survey and inspection. The Shipowner shall deliver to the Secretary annually an Officer's Certificate stating the condition and maintenance of each Vessel; provided further, that none of this Section shall apply when the Vessel is in Government Use. (h) Material Changes in the Vessels. After the Delivery Date of any undelivered Vessel or the Closing Date of any already delivered Vessel, the Shipowner shall not make, or permit to be made, any material change in the structure, means of propulsion, type or speed of such Vessel or in its rig, without the Secretary's prior written consent. (i) Documentation of the Vessels. Upon the Delivery Date and thereafter, each Vessel shall be and shall remain documented under the laws of the United States of America. Section 2.03. Maintenance of Construction Contract. (a) The Construction Contract shall be maintained in full force and effect insofar as it relates to the due performance by the Shipowner and the Shipyard of all their respective obligations thereunder and the Shipowner shall not, without the Secretary's prior written consent, amend, modify, assign or terminate the Construction Contract or consent to any change in the Construction Contract which releases the Shipyard from its obligations to comply with the provisions of the Construction Contract or any applicable laws, treaties, conventions, rules and regulations; provided that, the Secretary's prior written consent shall not be necessary, but prompt written notice to the Secretary shall be given for (1) any mandatory or regulatory change to the Construction Contract as a result of any requirements of any governmental agency; or (2) any non-mandatory changes that the Shipyard and the Shipowner desire to make which do not, in the aggregate, exceed five (5%) percent of the total Construction Contract price of the Vessels, and which do not cause the total Construction Contract price to be increased by an individual change by more than one (1%) percent or the delivery and completion date of the Vessels to be extended by more than ten (10) days. Notwithstanding the foregoing, no change shall be made in the general dimensions and/or characteristics of the Vessels which changes the capacity of the Vessels to perform as originally intended by the Construction Contract without the Secretary's prior written consent. The Secretary will nonetheless retain its authority to review work done under a change order to ascertain whether the work should be included in Actual Cost and whether the price charged is fair and reasonable. No withdrawals may be made from the Escrow Fund for work that is not determined to be includable in Actual Cost. (b) Notwithstanding anything to the contrary contained in the Construction Contract or herein, no changes to the payment milestones and disbursement schedules shall be made without the Secretary's prior written consent, except to the extent reasonably required to reflect the change orders under paragraph (a) of this Section. Section 2.04. Delivery Requirements. At or prior to the Delivery Date, the Shipowner 30 shall have: (a) documented the Vessel under the laws of the United States with the United States Coast Guard; (b) executed and delivered to the Secretary the Mortgage (or mortgage supplement) substantially in the form of Exhibit 3 annexed hereto; (c) recorded the Mortgage (or, if appropriate, a mortgage supplement) in the National Vessel Documentation Center of the United States Coast Guard, or its successor; (d) delivered to the Secretary an Officer's Certificate (1) from the Shipowner and the Shipyard certifying that the Vessel is free of any claim, lien, charge, mortgage, or other encumbrance of any character except as permitted under Section 2.02(d); (2) certifying that there has not occurred and is not then continuing any event which constitutes (or after any period of time or any notice, or both, would constitute) a default under the Security Agreement; (3) that the marine insurance as required under Section 2.05 will be in full force and effect at the time of Vessel delivery; (4) certifying that the Vessel was constructed substantially in accordance with the plans and specifications of the Construction Contract; (5) certifying that there have been no unusual occurrences (or a full description of such occurrences, if any) which would adversely affect the condition of the delivered Vessel. (e) delivered to the Secretary (1) an opinion of counsel substantially in the form of Exhibit A to the form of Mortgage; and (2) a certificate of delivery and acceptance from the Shipowner and the Shipyard to the Secretary with respect to the delivered Vessel; Section 2.05. Insurance. (a) Prior to the Delivery Date of each Vessel, the Shipowner shall, without cost to the Secretary or, with respect to war risk builder's risk insurance mentioned below, without cost to the Shipyard, cause each Vessel to be insured as provided in the Construction Contract and as contemplated by the Consent of Shipyard; provided that, the insurance required by this Section shall be approved by the Secretary. (b) Upon the Delivery Date of each Vessel and at all times thereafter, the Shipowner shall, without cost to the Secretary, keep such Vessel insured as indicated below and with such additional insurance as may be specified by the Secretary in an amount in U.S. dollars equal to 110% of the unpaid principal amount of the Proportionate Part of the Secretary's Note, or such greater sum, up to and including the full commercial value of such Vessel as may be required by the Secretary. The Shipowner shall provide 30 days prior written notice to the Secretary of all insurance renewals. (1) Marine and war risk hull insurance under the latest (at the time of issue of the policies in question) forms of American Institute of Marine Underwriters' policies approved by the Secretary and/or policies issued by or for the Maritime Administration (or under such other forms of policies as the Secretary may approve in writing) insuring such Vessel against the usual risks covered by such forms (including, at the Shipowner's option, such amounts of increased 31 value and other forms of "total loss only" insurance as are permitted by said hull insurance policies); and (2) While any Vessel is laid up, at the Shipowner's option and in lieu of the above-mentioned marine and war risk hull insurance or marine and war risk hull and increased value insurance, port risk insurance under the latest (at the time of issue of the policies in question) forms of American Institute of Marine Underwriters' policies approved by the Secretary and/or policies issued by or for the Maritime Administration (or under such other forms of policies as the Secretary may approve in writing) insuring such Vessel against the usual risks covered by such forms. (3) Notwithstanding the foregoing, the Shipowner, with the Secretary's prior written consent, shall have the right to self-insure up to the amount specified in the Special Provisions hereof for any loss resulting from any one accident or occurrence (other than an actual or constructive total loss of any Vessel). (c) All policies of insurance under this Section shall provide, so long as this Security Agreement has not been discharged, that payment of all losses shall be made payable to the Secretary for distribution by him to himself, the Shipowner and (in the case of the insurance required by paragraph (a) of this Section) the Shipyard, except that (i) as provided in paragraph (e) of this Section; and (ii) under the policies required by paragraph (b) of this Section, payment of all losses up to the amount specified in the Special Provisions hereof by all insurance underwriters with respect to any one accident, occurrence or event may be made directly to the Shipowner unless there is an existing Default, or if the Secretary shall have assumed the Shipowner's rights and duties under the Indenture and the Obligations and made any payments in default under the terms of Section 6.09 of the Indenture, in which event payment of all losses shall be made payable to the Secretary as aforesaid. Any such insurance recoveries to which the Secretary shall be so entitled shall be applied as follows: (1) In the event that insurance becomes payable under said policies on account of an accident, occurrence or event not resulting in an actual or constructive total loss or an agreed or compromised total loss of any Vessel, the Secretary shall (A) if there is no existing Default and if none of the events described in Section 2.07 has occurred, in accordance with a Shipowner's Request, pay, or consent that the underwriters pay, direct for repairs, liabilities, salvage claims or other charges and expenses (including sue and labor charges due or paid by the Shipowner) covered by the policies, or (to the extent that, as stated in an Officer's Certificate delivered to the Secretary, accompanied by written confirmation by the underwriter or a surveyor or adjuster, the damage shall have been repaired and the cost thereof paid of such liabilities, salvage claims, or other charges and expenses discharged or paid) reimburse, or consent that the underwriters reimburse, the Shipowner therefor and (after all known damage with respect to the particular loss shall have been repaired, except to the extent the Shipowner, with the Secretary's written consent, deems the said repair inadvisable, and all known costs, liabilities, salvage claims, charges and expenses, covered by the policies, with respect to such loss shall have been 32 discharged or paid, as stated in an Officer's Certificate delivered to the Secretary, accompanied by written confirmation by the underwriters or a surveyor or adjuster) pay, or consent that the underwriters pay, any balance to the Shipowner; or (B) if there is an existing Default, in accordance with a Request of Shipowner, pay, or consent that the underwriters pay, direct for the Shipowner's proportion of such repairs, liabilities, salvage claims or other charges and expenses (including sue and labor charges due or paid by the Shipowner) covered by the policies and hold any balance until the same may be paid or applied under clauses A, C or D of this subsection, whichever is applicable; or (C) if the Guarantees shall have terminated pursuant to Section 3.02(c) or if the Secretary shall have assumed the Shipowner's rights and duties under the Indenture and the Obligations and made any payments in default under the terms of Section 6.09 of the Indenture and none of the events described in Section 2.07 has occurred, apply the insurance as provided in Section 6.05; or (D) if the Guarantees shall have terminated pursuant to Section 3.02(b) or (d), pay the insurance to the Shipowner; (2) In the event of an accident, occurrence or event resulting in an actual or constructive total loss of any Vessel prior to the Delivery Date of such Vessel, the Shipowner shall forthwith deposit with the Secretary any insurance moneys which the Shipowner receives on account thereof under policies of insurance required by paragraph (a) of this Section, and any such insurance moneys shall be held by the Secretary for 10 days (or such lesser or further time as the Shipowner and the Secretary may agree upon). Upon the expiration of said period of time, (A) if there is no existing Default and if the Shipowner, the Shipyard and the Secretary shall have elected not to construct such Vessel under the Construction Contract, then said insurance moneys shall be applied, to the extent necessary and required pursuant to Section 2.07; or (B) if there is no existing Default and if the Shipowner, the Shipyard and the Secretary shall not have made the election contemplated by clause (A) of this subsection, then said insurance moneys (together with the Shipowner's funds to the extent, if any, required by the Secretary for deposit on account of interest under clause (ii) below) shall be deposited in the Escrow Fund, in such amount and to the extent available, so that the moneys in the Escrow Fund after such deposit shall be equal to (i) the principal amount of the Proportionate Part of the Outstanding Obligations relating to such Vessel at the time of such deposit and (ii) such interest on said deposit, if any, as may be required by the Secretary (said moneys to be subject to withdrawal in the same manner as moneys originally deposited in said Escrow Fund); and the balance, if any, of such insurance moneys held by the Secretary shall be paid to the Shipowner; and (3) In the event of an accident, occurrence or event resulting in an actual or constructive total loss or an agreed or compromised total loss of any Vessel, whether prior to or after the Delivery Date of such Vessel, and the insurance moneys have not been applied as provided in paragraph (c)(2) of this Section, the Shipowner shall forthwith deposit with the Secretary any insurance moneys which the Shipowner receives on account thereof under policies of insurance required by this Section, and any such insurance moneys received by the Secretary, whether from the Shipowner or otherwise, or held by the Secretary pursuant to paragraph (c)(2) of this Section, shall (A) if there is no existing Default, be applied, to the extent necessary, pursuant to Section 2.07; (B) if there is an existing Security Default, be held until the same may be applied under clauses (A), (C), or (D) of this subsection, whichever is applicable; (C) if the guarantees shall have terminated pursuant to Section 3.02(c) or if the Secretary shall have 33 assumed the Shipowner's rights and duties under the Indenture and the Obligations and made any payments in default under the terms of Section 6.09 of the Indenture, be applied as provided in Section 6.05; provided that, notwithstanding the foregoing clauses (A), (B) and (C) of this subsection, the Shipowner shall not be required to so deposit with the Secretary insurance moneys in an amount which, together with funds otherwise available for the redemption of Obligations is in excess of that required for the redemption of the Proportionate Part of the Outstanding Obligations pursuant to Section 3.05 of the Indenture and for the payment to the Secretary of a Proportionate Part of all other sums that may be secured by this Security Agreement and the Mortgage; or (D) if the Guarantees shall have terminated pursuant to Section 3.02(b) or 3.02(d), be paid to the Shipowner. (d) In the event of an accident, occurrence or event resulting in a constructive total loss of any Vessel, the Secretary shall have the right (with the prior written consent of the Shipowner, unless there is an existing Default, and at any time prior to the Delivery Date of such Vessel also with the prior written consent of the Shipyard) to claim for a constructive total loss of such Vessel. If (1) such claim is accepted by all underwriters under all policies then in force as to such Vessel under which payment is due for total loss; and (2) payment in full is made in cash under such policies to the Secretary, then the Secretary shall have the right to abandon such Vessel to the underwriters of such policies, free from lien of this Security Agreement and the Mortgage. (e) Commencing on the Delivery Date of each Vessel, the Shipowner shall, without cost to the Secretary, keep each such Vessel insured against marine and war risk protection and indemnity risks and liabilities by policies of insurance approved by the Secretary as to form and amount; provided that, (1) the Shipowner shall, as soon as possible before such Delivery Date, present any such policy to the Secretary (who shall promptly approve or disapprove the same); (2) any approval of a policy under this subsection shall be effective until the end of the policy period or until 60 days after the Secretary shall notify the Shipowner of a desired change in the form and/or amount thereof, whichever shall first occur; and (3) war protection and indemnity insurance shall be required unless the Secretary gives written notice to the Shipowner stating that such insurance is not required. Such policies may provide that (1) if the Shipowner shall not have incurred the loss, damage, or expense in question, any loss under such insurance may be paid directly to the Person to whom any liability covered by such policies has been incurred (whether or not a Default then exists), and (2) if the Shipowner shall have incurred the loss, damage or expense in question, any such loss shall be paid to the Shipowner in reimbursement if there is no existing Default of which the underwriter has written notice from the Shipowner or the Secretary, or, if there is such an existing Default, to the Secretary to be held and applied as follows: (A) applied as provided in Section 6.05 in the event the Guarantees shall have terminated pursuant to Section 3.02(c) or if the Secretary shall have assumed the Shipowner's rights and duties under the Indenture and the Obligations and made any payments in default under the terms of Section 6.09 of the Indenture; or (B) to the extent not theretofore applied pursuant to Section 6.05, paid forthwith to the Shipowner upon its Request in the event there is no existing Default or the Guarantees shall have terminated pursuant to Section 3.02(b) or (d) at the date of delivery of such Request; provided 34 that, irrespective of the foregoing, with the Secretary's prior written consent, the Shipowner shall have the right to self-insure in an amount up to the limit specified in the Special Provisions hereof with respect to each accident, occurrence or event, except that, with respect to cargo or property carried, the Shipowner, with the Secretary's prior written consent, shall have the right to self-insure in an amount up to the limit specified in the Special Provisions hereof with respect to each cargo or property carried. (f) All insurance required under this Section shall be placed and kept with the United States Government or with American and/or British (and/or other foreign, if permitted by the Secretary in writing) insurance companies, underwriters' association or underwriting funds approved by the Secretary. All insurance required under this subsection shall be arranged through marine insurance brokers and/or underwriting agents as chosen by the Shipowner and approved by the Secretary. (g) The Secretary shall not have the right to enter into an agreement or compromise providing for an agreed or compromised total loss of any Vessel without prior written consent of (i) the Shipyard (prior to the Delivery Date of such Vessel); and (ii) (unless there is an existing Default) the Shipowner. If (1) the Shipowner shall have given prior consent thereto; or (2) there is an existing Default, the Secretary shall have the right in his discretion, and with the prior written consent of the Shipyard prior to the Delivery Date of such Vessel, to enter into an agreement or compromise providing for an agreed or compromised total loss of such Vessel; provided that, if the aggregate amount payable to the Shipowner and/or the Secretary under such agreement or compromise, together with funds held by the Secretary and available for the redemption of Obligations, is not sufficient to redeem or pay the Proportionate Part of the Outstanding Obligations pursuant to Section 2.07, the Secretary shall not enter into such agreement or compromise without the Shipowner's prior written consent. (h) During the continuance of (1) a taking or requisition of the use of any Vessel by any government or governmental body; or (2) a charter, with the Secretary's prior written consent, of the use of any Vessel by the United States Government or by any governmental body of the United States, or by any other government or governmental body, the provisions of this Section shall be deemed to have been complied with in all respects if such government or governmental body shall have agreed to reimburse, in a manner approved by the Secretary in writing, the Shipowner for loss or damage covered by the insurance required hereunder or resulting from the risks under paragraphs (a), (b), and (e) of this Section or if the Shipowner shall be entitled to just compensation therefor. In addition, the provisions of this Section shall be deemed to have been complied with in all respects during any period after (A) title to any Vessel shall have been taken or requisitioned by any government or governmental body; or (B) there shall have been an actual or constructive total loss or an agreed or compromised total loss of any Vessel. In the event of any taking, requisition, charter or loss contemplated by this paragraph, the Shipowner shall promptly furnish to the Secretary an Officer's Certificate stating that such taking, requisition, charter or loss has occurred and, if there shall have been a taking, requisition or charter of the use of any Vessel, that the government or governmental body in question has agreed to reimburse the Shipowner, in a manner approved by the Secretary, for loss or damage resulting from the risks under paragraphs (a), (b), and (e) of this Section or that the Shipowner is entitled to just 35 compensation therefor. (i) All insurance required (A) under paragraph (a) of this Section shall be taken out in the names of the Shipowner, the United States and the Shipyard as assureds, and (B) under paragraph (b) and (c) of this Section shall be taken out in the names of the Shipowner and the United States as assureds. All policies for such insurance so taken out shall, unless otherwise consented to by the Secretary, provide that (1) there shall be no recourse against the United States for the payment of premiums or commissions; (2) if such policies provide for the payment of club calls, assessments or advances, there shall be no recourse against the United States for the payment thereof; and (3) at least 10 days' prior written notice of any cancellation for the nonpayment of premiums, commissions, club calls, assessments or advances shall be given to the Secretary by the insurance underwriters. (j) The Shipowner shall not, without the Secretary's prior written consent, (1) do any act, nor voluntarily suffer or permit any act to be done, whereby any insurance required by this Section shall or may be suspended, impaired or defeated or (2) suffer or permit any Vessel to engage in any voyage or to carry any cargo not permitted under the policies of insurance then in effect without first covering such Vessel with insurance satisfactory in all respects for such voyage or the carriage of such cargo; provided that, this paragraph shall be subject to the requirements of any military authority of the United States and shall not apply in the case of such Vessel if and so long as the title or use of such Vessel shall have been taken, requisitioned or chartered by any government or governmental body as contemplated by Section 2.07. (k) In the event that any claim or lien is asserted against any Vessel for loss, damage or expense which is covered by insurance hereunder and it is necessary for the Shipowner to obtain a bond or supply other security to prevent arrest of such Vessel or to release such Vessel from arrest on account of said claim or lien, the Secretary, on the Shipowner's Request, may, at the Secretary's sole option, assign to any Person executing a surety or guaranty bond or other agreement to save or release such Vessel from such arrest, all right, title and interest of the Secretary in and to said insurance covering such loss, damage or expense as collateral security to indemnify against liability under said bond or other agreement. (l) Except as the Secretary shall otherwise direct by notice in writing to the Shipowner, the Shipowner shall deliver to the Secretary the original policies evidencing insurance maintained under this Section; provided that, if any such original policy shall have been delivered previously to the Secretary or to a mortgagee by the Shipowner under another ship mortgage of the Shipowner, the Shipowner shall deliver a duplicate or pro forma copy of such policy to the Secretary. The Secretary or any agent thereof (who may also be an agent of the issuer) shall at all times hold the policies delivered as aforesaid; provided that, if one or more of said policies are held by an agent of the Secretary, the Shipowner shall, upon the Secretary's request, deliver a duplicate or pro forma copy thereof to the Secretary, and provided further, that if the Shipowner shall deliver to the Secretary a Request (1) stating that delivery of such policy to the insurer is necessary in connection with the collection, enforcement or settlement of any claim thereunder (including claims for return premiums and any other amounts payable by the insurer); and (2) setting forth the name and address of the Person to whom such policy is to be 36 delivered or mailed for such purpose, and if the Secretary approves such Request, the Secretary shall, at the Shipowner's expense, deliver or mail (by registered or certified mail, postage prepaid) such policy in accordance with such Request, accompanied by a written direction to the recipient to redeliver such policy directly to the Secretary or an agent thereof when it has served the purpose for which so delivered. The Shipowner agrees that, in case it shall at any time so cause the delivery or mailing of any policy to any Person as aforesaid, the Shipowner will cause such policy to be promptly redelivered to the Secretary or an agent thereof as aforesaid. The Secretary shall have no duty to see to the redelivery of such policy, but shall have the duty to request the redelivery thereof at intervals of 60 days thereafter. (m) Nothing in this Section shall limit the insurance coverage which the Secretary may require under any contract or agreement to which the Secretary and the Shipowner are parties. The requirements of this Section are expressly subject to the Special Provisions of this Security Agreement. Section 2.06. Inspection of the Vessels; Examination of Shipowner's Records. The Shipowner will: (a) afford the Secretary, upon reasonable notice, access to the Vessels, their cargoes and papers for the purpose of inspecting the same; (b) maintain records of all amounts paid or obligated to be paid by or for the account of the Shipowner for each Vessel's Construction; and (c) at reasonable times permit the Secretary, upon request, to make reasonable, material and pertinent examination and audit of books, records and accounts maintained by the Shipowner, and to take information therefrom and make transcripts or copies thereof. Section 2.07. Requisition of Title, Termination of Construction Contract or Total Loss of a Vessel. In the event of requisition of title to or seizure or forfeiture of such Vessel, termination of the Construction Contract relating to such Vessel, or the occurrence of the circumstances referred to in Section 2.05(c)(3), then all of the following shall apply: (a) The Shipowner shall promptly give written notice thereof to the Secretary. (b) The Shipowner shall promptly pay all amounts it receives by reason of such requisition, seizure, forfeiture, termination or total loss ("Loss Event") to the Secretary. (c) After the Secretary has received sufficient funds to retire a Proportionate Part of the Outstanding Obligations affected by the Loss Event: (1) if there is no existing Default, (A) the Secretary and the Shipowner shall give notice to the Indenture Trustee of a redemption of Proportionate Part of the Outstanding Obligations pursuant to Section 3.05 of the Indenture; (B) such amount, if any, held by the Secretary, shall be paid by the Secretary to the Indenture Trustee not earlier than 10 days prior to, nor later than the opening of business on, the Redemption Date required by Section 3.05 of the Indenture; (C) the remainder shall next be applied by the Secretary for the payment of a Proportionate Part of all other sums that may be secured hereby; and (D) the balance shall be 37 paid to the Shipowner including any interest earned on the proceeds which are in excess of the amount required to redeem the Obligations; (2) if there is an existing Default and the Guarantees shall not have terminated pursuant to Section 3.02, such amounts shall be held until the same may be applied or paid under paragraphs (1), (3), or (4) of this subsection, whichever is applicable; (3) if the Guarantees shall have terminated pursuant to Section 3.02(c) or if the Secretary shall have assumed the Shipowner's rights and duties under the Indenture and the Obligations and made any payments in default under the terms of Section 6.09 of the Indenture, such amounts shall be applied as provided in Section 6.05; or (4) if the Guarantees shall have terminated pursuant to Section 3.02(b) or 3.02(d) such amounts shall be paid by the Secretary to the Shipowner. Provided that, notwithstanding the foregoing, the Shipowner shall not be required to pay the Secretary any amount which the Secretary agrees is in excess of the amount needed for redemption of the Proportionate Part of the Outstanding Obligations affected by the Loss Event. Section 2.08. Notice of Mortgage. (a) A properly certified copy of the Mortgage shall be carried on board each self-propelled Vessel with that Vessel's documents and shall be exhibited on demand to any Person having business with such Vessel or to any Secretary's representative. (b) A notice printed in plain type of such size that the paragraph of reading matter shall cover a space not less than six inches wide by nine inches high, and framed, shall be placed and kept prominently exhibited in the chart room and in the master's cabin of a self-propelled Vessel. (c) The notice referred to in paragraph (b) of this Section shall read as follows: "NOTICE OF FLEET MORTGAGE" This Vessel is owned by (Insert name of Shipowner), a (Insert jurisdiction) corporation ("Shipowner"), and is covered by a First Preferred Ship Mortgage in favor of the United States of America, under authority of Chapter 313, Title 46 of the United States Code. Under the terms of said Mortgage neither the Shipowner, any charterer, the master or agent of this Vessel nor any other person has any right, power or authority to create, incur or permit to be placed or imposed upon this Vessel any lien other than statutory liens incident to current operations that are subordinate to the Mortgage." Section 2.09. Compliance with 46 U.S.C. Chapter 313. The Shipowner shall comply with and satisfy all of the provisions of Chapter 313, in order to establish and thereafter to maintain the Mortgage as a preferred mortgage upon each Vessel. 38 Section 2.10. Performance of Shipowner's Agreements by the Secretary. If the Shipowner shall fail to perform any of its agreements hereunder or under the Mortgage, the Secretary may, in its discretion, at any time during the continuance of an event which by itself, with the passage of time, or the giving of notice, would constitute a Default, perform all acts and make all necessary expenditures to remedy such failure. Notwithstanding the foregoing, the Secretary shall not be obligated to (and shall not be liable for the failure to) perform such acts and make such expenditures. All funds advanced and expenses and damages incurred by the Secretary relating to such compliance shall constitute a debt due from the Shipowner to the Secretary and shall be secured hereunder and under the Mortgage prior to the Secretary's Note and shall be repaid by the Shipowner upon demand, together with interest at the rate that would have been paid by the Department of Treasury on the expended funds plus 1%. Section 2.11. Uniform Commercial Code Filings; Further Assurances. The Shipowner shall (a) furnish evidence satisfactory to the Secretary that financing statements under the UCC shall have been filed against the Shipowner and/or the Shipyard in all offices in which it may be necessary or advisable in the opinion of the Secretary to perfect the Secretary's security interests, and (b) from time to time execute and deliver such further instruments and take such action as may reasonably be required to more effectively subject the Security to the lien of this Security Agreement and the Mortgage as contemplated thereby, including but not limited to, legal opinions from an independent counsel for the Shipowner to the effect that all UCC Financing Statements have been filed to perfect the Secretary's interests in the Security as valid and enforceable first priority perfected security interests. Section 2.12. Modification of Formation Agreements. (a) If the Shipowner is organized as a general partnership, limited partnership, limited liability company or joint venture, then for so long as there is Outstanding any indebtedness to the United States of America pursuant to the Act, the partnership agreement, operating agreement, limited liability agreement, joint venture agreement (or any agreement constituting such an entity) shall not be amended, modified or voluntarily terminated without the Secretary's prior written consent. (b) In the event where any action by the Shipowner, any member of the Shipowner or the management of the Shipowner results or would result in dissolution of the Shipowner pursuant to its limited liability company agreement or governing law, each member of the Shipowner shall forthwith take all steps necessary to reform and reestablish the Shipowner. Section 2.13. Members of Limited Liability Companies. All existing and future members of a Shipowner which is a limited liability company (each being a "Member"), upon becoming a Member, shall forthwith enter into an agreement with the Secretary, in form and substance satisfactory to the Secretary, whereby each Member agrees: (1) that any amounts owed by the Shipowner to a Member with respect to its interest (as that or the equivalent term is used in the Shipowner's limited liability company agreement) (the "Distributions") shall be subordinated to the Shipowner's payment of the Secretary's Note and debts under the Security Agreement, provided that such Distributions may be paid to the extent the Shipowner is permitted to pay dividends under the Financial Agreement; (2) that in the event of default by the Shipowner under the Security Agreement, the Member shall be subordinated in its rights to receive any 39 Distribution or to be paid any sums whatsoever by the Shipowner until the Secretary has made a full recovery of any and all amounts owed under the Secretary's Note and the Security Agreement. Section 2.14. Concerning the Performance and Payment Bonds. During the Construction, the Shipowner shall cause to be maintained Performance Bonds and Payment Bonds naming the Shipowner and the Secretary as co-obligees (the "Surety Bonds") in form and substance satisfactory to the Secretary, to be obtained by the Shipyard in the amount of the Construction Contract, issued by such surety company or companies as shall be satisfactory to the Secretary (the "Surety"). In the event that the price for the work to be performed under the Construction Contract is increased, then the Surety Bonds shall be increased simultaneously in a corresponding amount. The Shipowner hereby agrees that the Secretary shall be the sole loss payee under the Surety Bonds and the Surety shall pay such amounts directly to the Secretary for distribution to the co-obligees as their interests may appear. The Shipowner hereby agrees that its interest as a co-obligee under each of the Surety Bonds is and shall be, upon the occurrence of a Default under the Security Agreement, fully subject and subordinate to the rights and interests of the Secretary therein. In the event of a default under the Security Agreement, which default results in a payment under any of the Surety Bonds, then the Surety Bonds proceeds shall be distributed by the Secretary in accordance with the provisions of Section 6.05 hereof. The Shipowner hereby irrevocably appoints the Secretary, the true and lawful attorney of the Shipowner, in its name and stead, to execute all consents, approvals, settlements and agreements on behalf of the Shipowner with respect to any rights related to the Surety Bonds. ARTICLE III THE SECRETARY'S NOTE Section 3.01. Secretary's Note. On this date, the Shipowner has duly executed and delivered and the Secretary has accepted the Secretary's Note payable in an amount equal to the principal amount of the Obligations. Section 3.02. Termination of the Guarantees. Except as provided in Section 6.08 of the Indenture, the Guarantee with respect to a particular Obligation, shall terminate only when, one or more of the following events shall occur: (a) Such Obligation shall have been Retired or Paid; (b) The Obligees of all the Obligations then Outstanding shall have elected to terminate the Guarantees, and the Secretary has been so notified by the Indenture Trustee or all Obligees in writing; provided that, such termination shall not prejudice any rights accruing hereunder prior to such termination; (c) Such Guarantee shall have been paid in full in cash by the Secretary; or (d) The Indenture Trustee and each Obligee shall have failed to demand payment of such Guarantee as provided in the Indenture, Guarantee, or the Act. 40 Section 3.03. Execution of Additional Secretary's Note. (a) In the event and when each new issue of Obligations is executed, authenticated and delivered on a date or dates subsequent to the date hereof, as contemplated by, and pursuant to the Indenture, the Shipowner shall, at the time of the issuance of such Obligations, execute and deliver to the Secretary an additional Secretary's Note or, at the Secretary's discretion, an endorsement to the Secretary's Note in an amount equal to the principal amount of, and at the interest rate borne by, such issue of Obligations, on the terms stated in the Secretary's Note. (b) Each Secretary's Note or endorsement executed and delivered in accordance with Section 3.03 shall together with the Secretary's Note be secured by this Security Agreement and the Mortgage. ARTICLE IV CONSTRUCTION FUND; MONEYS DUE WITH RESPECT TO CONSTRUCTION OF THE VESSELS Section 4.01. Construction Fund. (a) The Shipowner has deposited in the Construction Fund with the Depository the amount, if any, indicated in the Depository Agreement from the proceeds of the Obligation to be held by the Depository in a Securities Account in accordance with the terms of the Depository Agreement. This Securities Account together with any future deposits and the proceeds from the investment of the amounts on deposit shall be called the "Construction Fund." (b) The Shipowner may withdraw money from the Construction Fund under the same procedures and conditions as the Shipowner may withdraw money from the Escrow Fund under Section 5.03, except that the Shipowner's Request for withdrawal will not be subject to Section 5.03(a)(2)(A) or 5.03(h). The administration of the Construction Fund shall also be subject to the terms and conditions of Sections 5.04 and 5.05. Section 4.02. Moneys Due with Respect to Construction of the Vessels. (a) In the event that the Shipowner shall receive any moneys from any Person in connection with the Construction of any Vessel, the Shipowner shall give written notice thereof to the Secretary and shall promptly pay the same over to the Depository to be held in the Title XI Reserve Fund. (b) Upon and after a final determination of Actual Cost in accordance with Section 5.01, in the absence of a Default, any moneys held by the Depository which are not to be applied for the redemption of Obligations under Section 3.04 of the Indenture shall be paid to the Shipowner. (c) In the event there is an existing Default, the money shall be held by the Depository in accordance with the provisions of the Depository Agreement. (d) In the event the Secretary assumes the Shipowner's rights and duties under Section 6.09 of the Indenture or pays the Guarantees, the Depository shall promptly pay all moneys 41 including all Moneys Due with Respect to Construction of the Vessels to the Secretary, who will apply it in accordance with Section 6.05. ARTICLE V ACTUAL COST; THE ESCROW FUND Section 5.01. Actual Cost Determinations. (a) The Actual Cost of each Vessel (and the aggregate Actual Cost of all of the Vessels), determined as of the date of this Security Agreement, is as set forth in Table A hereof. (b) The Secretary agrees to: (1) make a final determination of the Actual Cost of each Vessel, limited to amounts paid by or for the account of the Shipowner on account of the items set forth in Table A hereof and, to the extent approved by the Secretary, any other items or any increase in the amounts of such items, such determination to be made as of the time of payment by or for the account of the Shipowner of the full amount of said Actual Cost of such Vessel, excluding any amounts which are not to become due and payable; and (2) promptly give written notice to the Shipowner, of the results of said final determination; provided that, the Shipowner shall have requested such determination not less than 60 days in advance and shall have furnished to the Secretary not less than 30 days in advance of such determination along with a Shipowner's Officer's Certificate and a statement by an independent certified (or, with the Secretary's prior written consent, an independent) public accountant or firm of accountants of the total amounts paid or obligated to be paid by or for the account of the Shipowner for the Construction of such Vessel, together with a breakdown of such totals according to the items for which paid or obligated to be paid. Section 5.02. Escrow Fund Deposits. At the time of the sale of the Obligations, the Shipowner shall deposit with the Secretary in the Escrow Fund all of the proceeds of that sale unless the Shipowner is entitled to withdraw funds under Section 5.03. If the Obligations are issued before the delivery of all of the Vessels, then the Shipowner shall also deposit into the Escrow Fund on the Closing Date an amount equal to six months interest at the rate borne by the Obligations. Section 5.03. Escrow Fund Withdrawals. (a) The Secretary shall, within a reasonable time after written Request from the Shipowner, disburse from the Escrow Fund directly to the Indenture Trustee, any Paying Agent for such Obligations, the Shipyard, or any other Person entitled thereto, any amount which the Shipowner is obligated to pay, or to the Shipowner for any amounts it has paid, on account of the items and amounts or any other items set forth in Table A annexed hereto or subsequently approved by the Secretary, provided that, the Secretary is satisfied with the accuracy and completeness of the information contained in the following submissions: (1) A Responsible Officer of the Shipowner shall deliver an Officer's Certificate, in form and substance satisfactory to the Secretary, stating that (A) there is neither a Default under the Construction Contract nor the Security Agreement; (B) there have been no occurrences which have or would adversely and materially affect the condition of the Vessel, its hull or any 42 of its component parts; (C) the amounts of the Request is in accordance with the Construction Contract including the approved disbursement schedule and each item in these amounts is properly included in the Secretary's approved estimate of Actual Cost; (D) with respect to the Request, once the Contractor is paid there will be no liens or encumbrances on the applicable Vessel, its hull or component parts for which the withdrawal is being requested except for those already approved by the Secretary; and (E) if the Vessel has already been Delivered, it is in class and is being maintained in the highest and best condition. The Shipowner shall also attach an Officer's Certificate of the Shipyard, in form and substance satisfactory to the Secretary, stating that there are no liens or encumbrances as provided in clause (D) of this subsection and attaching the invoices and receipts supporting each proposed withdrawal to the satisfaction of the Secretary. (2) No payment or reimbursement under this Section shall be made (A) to any Person until the Construction Fund, if any, has been exhausted; (B) to any Person until the total amount paid by or for the account of the Shipowner from sources other than the proceeds of such Obligations equals at least 12-l/2% of the Actual Cost of the related Vessel is made; (C) to the Shipowner which would have the effect of reducing the total amounts paid by the Shipowner pursuant to clause (B) of this subsection; or (D) to any Person on account of items, amounts or increases representing changes and extras or owner furnished equipment, if any, set forth in Table A annexed hereto, unless such items, amounts and increases shall have been previously approved by the Secretary; provided, however, that when the amount guaranteed by the Secretary equals 75% or less of the Actual Cost, then after the initial 12 1/2% of Actual Cost has been paid by or on behalf of the Shipowner for such Vessel and up to 37 1/2% of Actual Cost has been withdrawn from the Escrow Fund for such Vessel, the Shipowner shall pay the remaining Shipowner's equity of at least 12 1/2% (as determined by the Secretary) before additional monies can be withdrawn from the Escrow Fund relating to such Vessel. (b) The excess, as determined by the Secretary, of any amount on deposit in the Escrow Fund which represents interest on the principal amount deposited, over and above the amount of interest due on the next Interest Payment Date on the principal amount, as determined by the Secretary, remaining on deposit on such Interest Payment Date, may, unless there is an existing Default, be disbursed by the Secretary upon the Shipowner's Request made not more than 10 Business Days prior to such Interest Payment Date or made within at least 60 days after such Interest Payment Date. (c) The Secretary shall not be required to make any disbursement pursuant to this Section except out of the cash available in the Escrow Fund. If sufficient cash is not available to make the requested disbursement, additional cash shall be provided by the maturity or sale of securities in accordance with instructions pursuant to Section 5.04. If any sale or payment on maturity shall result in a loss in the principal amount of the Escrow Fund invested in securities so sold or matured, the requested disbursement from the Escrow Fund shall be reduced by an amount equal to such loss, and the Shipowner shall, no later than the time for such disbursement, pay to the Indenture Trustee, any Paying Agent, the Shipyard, or any other Person entitled thereto, the balance of the requested disbursement from the Shipowner's funds other than the proceeds of such Obligations. 43 (d) If the Secretary assumes the Shipowner's rights and duties under the Indenture and the Obligations, and makes any payments in default under the Indenture, or the Secretary pays the Guarantees, all amounts in the Escrow Fund (including realized income which has not yet been paid to the Shipowner), shall be paid to the Secretary and be credited against any amounts due or to become due to the Secretary under the Security Agreement and the Secretary's Note. To the extent payment of the Escrow Fund to the Secretary is not required, said amounts or any balance thereof, shall be paid to the Shipowner. (e) At any time the Secretary shall have determined that there has been, for any reason, a disbursement from the Escrow Fund contrary to this Section, the Secretary shall give written notice to the Shipowner of the amount improperly disbursed, the amount to be deposited or redeposited into the Escrow Fund on account thereof, and the reasons for such determination. The Shipowner shall thereafter promptly deposit or redeposit, as appropriate, such amount (with interest, if any) required by the Secretary into the Escrow Fund. (f) Notwithstanding any other provision of this Section, the Shipowner shall not seek or receive reimbursement for any amount paid to the Shipyard or any Person by the Secretary. (g) In the event that one of the events described in Section 2.07 has occurred with respect to one or more of the Vessels or the Secretary shall have paid the Guarantees or shall have assumed the Shipowner's rights and duties under Section 6.09 of the Indenture, the Secretary may direct that moneys remaining on deposit in the Escrow Fund may be withdrawn in whole or in part for one of the following purposes: (1) application as provided in Section 3.05 of the Indenture (but in no event shall any such disbursement for such purpose be in an amount greater than the related Proportionate Part of the Outstanding Obligations); (2) payment to the Shipowner, or its order, in the event all Outstanding Obligations are Retired or Paid, other than by payment of the Guarantees; or (3) application as provided in Section 6.05, if the Secretary shall have paid the Guarantees or shall have assumed the Shipowner's rights and duties under the Indenture and the Obligations. (h) Any amounts remaining in the Escrow Fund on the Termination Date of the Escrow Fund which are in excess of 87 1/2% or 75% of Actual Cost, as the case may be, shall be applied pursuant to Section 3.04 of the Indenture to retire a Proportionate Part of the Outstanding Obligations. Section 5.04. Investment and Liquidation of the Escrow Fund. The Secretary may invest the Escrow Fund in obligations of the United States with such maturities that the Escrow Fund will be available as required for the purposes hereof. The Secretary shall deposit the Escrow Fund into an account with the Treasury Department and upon agreement with the Shipowner, shall deliver to the Treasury Department instructions for the investment, reinvestment and liquidation of the Escrow Fund. The Secretary shall have no liability to the Shipowner for acting in accordance with such instructions. Section 5.05. Income on the Escrow Fund. Except as provided in Section 5.03, any 44 income realized on the Escrow Fund shall, unless there is an existing Default, be paid to the Shipowner upon receipt by the Secretary of such income. For the purpose of this Section, the term "income realized on the Escrow Fund," shall mean with respect to the Escrow Fund (1) the excess of the cash received from the sale of securities over their cost (less any losses from sale not already paid pursuant to Section 5.03(c)) and (2) cash received from the payment of principal and interest on securities. Section 5.06. Termination Date of the Escrow Fund. The Escrow Fund will terminate 90 days after the Delivery Date of the last Vessel covered by this Security Agreement (herein called the "Termination Date of the Escrow Fund"). In the event that on such date the payment by or for the account of the Shipowner of the full amount of the aggregate Actual Cost of all of the Vessels set forth in Table A hereof has not been made or the amounts with respect to such Actual Cost are not then due and payable, then the Shipowner and the Secretary by written agreement shall extend the Termination Date of the Escrow Fund for such period as shall be determined by the Shipowner and the Secretary as sufficient to allow for such contingencies. If the Secretary shall have earlier made a final determination of the aggregate Actual Cost of all of the Vessels in accordance with Section 5.01, the Termination Date of the Escrow Fund shall be deemed to be the date of such final determination; provided that, if as a result of such final determination, a redemption of Obligations is required pursuant to Section 3.04 of the Indenture, the Termination Date shall be the date specified as the Redemption Date in the notice of redemption given pursuant to Section 3.08 of the Indenture. ARTICLE VI DEFAULTS AND REMEDIES Section 6.01. What Constitutes "Defaults;" Continuance of Defaults. Each of the following events shall constitute a "Default" within the meaning of Section 6.01: (a) A default in the payment of the whole or any part of the interest on any of the Outstanding Obligations when the same shall become due and payable; or default in the payment of the whole or any part of the principal of any of the Outstanding Obligations when the same shall become due and payable, whether by reason of Maturity, redemption, acceleration, or otherwise, or any default referred to in Section 6.08 of the Indenture; and continuation of such default for a period of 30 days shall constitute and is herein called a "Payment Default." Any corresponding default with respect to the interest on, or the principal of, the Secretary's Note is also deemed to be a Payment Default; (b) The following shall constitute and each is herein called a "Security Default:" (1) Default by the Shipowner in the due and punctual observance and performance of any provision in Sections 2.01(b), 2.02(b) and (i), 2.03, 2.04, 2.09, 2.11, 2.12, 2.14, 8.01 and 8.02; (2) Default by the Shipowner continued after written notice specifying such failure by certified or registered mail to the Shipowner from the Secretary in the due and 45 punctual observance and performance of any provision in Sections 2.02(a), (d), (e), (f), and (g), 2.05 (except (g) and (k) thereof), 2.07, and 2.13. (3) Default by the Shipowner continued for 30 days after written notice by certified or registered mail to the Shipowner from the Secretary in the due and punctual observance of any other agreement in this Security Agreement or in the Mortgage; (4) The Shipowner shall become insolvent or bankrupt or shall cease paying or providing for the payment of its debts generally, or the Shipowner shall be dissolved or shall, by a court of competent jurisdiction, be adjudged a bankrupt, or shall make a general assignment for the benefit of its creditors, or shall lose its charter by forfeiture or otherwise; or a petition for reorganization of the Shipowner under the Bankruptcy Code shall be filed by the Shipowner, or such petition be filed by creditors and the same shall be approved by such a court of competent jurisdiction; or a reorganization of the Shipowner under said Code shall be approved by a court, whether proposed by a creditor, a stockholder or any other Person whomsoever; or a receiver or receivers of any kind whatsoever, whether appointed in admiralty, bankruptcy, common law or equity proceedings, shall be appointed, by a decree of a court of competent jurisdiction, with respect to any Vessel, or all or substantially all of the Shipowner's property, and such decree shall have continued unstayed, on appeal or otherwise, and in effect for a period of 60 days; (5) Any default in the due and punctual observance and performance of any provision in the Financial Agreement or the Construction Contract; (6) Any representation or warranty made relating to the execution and delivery of this Security Agreement, the Mortgage, the Guarantee Commitment or the Financial Agreement, or in any certificate required to be furnished pursuant thereto, shall prove to be incorrect in any material respect; (7) Any event constituting a Default under any security agreement or preferred mortgage under Chapter 313, relating to any other vessel or vessels owned by the Shipowner and financed under the Act; (8) Any additional Security Default prescribed in the Special Provisions hereof; and (9) Any event constituting a default under any bareboat or time charter or contract of affreightment of the Vessel. At any time following the occurrence of a Security Default, the Secretary may give the Indenture Trustee a Secretary's Notice with respect to such Security Default, after which the Indenture Trustee and the Obligees shall have the right to make demand for payment of the Guarantees in accordance with the Indenture and the Authorization Agreement, unless the Secretary shall have assumed the Shipowner's rights and duties under the Indenture and the Obligations, and made any payments in default under Section 6.09 of the Indenture. 46 Section 6.02. Acceleration of Maturity of the Secretary's Note. The Secretary may, by giving written notice to the Shipowner, declare the principal of the Secretary's Note and interest accrued thereon to be immediately due and payable, at any time after (a) the Secretary shall have been obligated to pay the Guarantees pursuant to the terms of the Indenture and the Authorization Agreement, or (b) the Secretary shall have assumed the Shipowner's rights and duties under the Indenture and the Obligations, and made any payments in default under the terms of Section 6.09 of the Indenture. Thereupon, the principal of and interest on the Secretary's Note shall become immediately due and payable, together with interest at the same rates specified in the Secretary's Note. Section 6.03. Waivers of Default. (a) If the Secretary shall not have assumed the Shipowner's rights and duties under the Indenture and the Obligations, and made any payments in default under the terms of Section 6.09 of the Indenture, and if the Secretary determines that an event which, with the passage of time, would become a Payment Default, has been remedied within 30 days after the occurrence of such event, upon a Request by the Shipowner, the Secretary shall waive the consequences of such event. (b) If the Secretary shall not have assumed the Shipowner's rights and duties under the Indenture and the Obligations, and made any payments in default under the terms of Section 6.09 of the Indenture, and if the Secretary shall have determined prior to payment of the Guarantees that a Payment Default has been remedied after the expiration of the aforesaid 30-day period, but prior to the date of demand by the Indenture Trustee or an Obligee for payment under the Guarantees, upon a Request by the Shipowner, the Secretary shall waive such Default. (c) If the Secretary shall have determined prior to the expiration of the period required for payment of the Guarantees that a Payment Default had not occurred or has been subsequently remedied by the Shipowner (and if the Secretary shall not have assumed the Shipowner's rights and duties under the Indenture and the Obligations, and made any payments in default under the terms of Section 6.09 of the Indenture and prior to any payment of Guarantees), the Secretary shall notify the Indenture Trustee and the Shipowner of such determination, and, the Secretary shall waive such Default. (d) The Secretary, in its sole discretion, may waive any Security Default or any event which by itself, or with the passage of time or the giving of notice, or both, would give rise to a Security Default; provided that, such Default is waived prior to the Secretary giving to the Indenture Trustee the Secretary's Notice. (e) The Secretary shall notify the Shipowner and the Indenture Trustee in writing of any determinations made under paragraphs (a), (b), and (c) of this Section, and the Secretary shall waive the consequences of any such Default, and annul any declaration under Section 6.02, and the consequences thereof. (f) No waiver under this Section shall extend to or affect any subsequent or other Default, nor impair any rights or remedies consequent thereon. 47 (g) No waiver under this Section shall be deemed to have occurred because the Secretary shall have assumed the Shipowner's rights and duties under the Indenture and the Obligations, and made any payments in default under the terms of Section 6.09 of the Indenture. Section 6.04. Remedies After Default. (a) In the event of a Default, and before and after the payment of the Guarantees or the assumption by the Secretary of the Shipowner's rights and duties under the Indenture and the Obligations, and the making of any payments in default under the terms of Section 6.09 of the Indenture, the Secretary shall have the right to take the Vessels without legal process wherever the same may be (and the Shipowner or other Person in possession shall forthwith surrender possession of the Vessels to the Secretary upon demand) and hold, lay up, lease, charter, operate, or otherwise use the Vessels for such time and upon such terms as the Secretary may reasonably deem to be in the Secretary's best interest, accounting only for the net profits, if any, arising from the use of the Vessels, and charging against all receipts from the use of the Vessels, all reasonable charges and expenses relating to such Vessel's use. (b) Upon either (i) payment of the Guarantees or (ii) the Secretary's assumption of the Shipowner's rights and duties under the Indenture and the Obligations, and the making of any payments in default under Section 6.09 of the Indenture, the Secretary shall have the right to: (1) Exercise all the rights and remedies in foreclosure and otherwise given to mortgagees by Chapter 313; (2) Bring suit at law, in equity or in admiralty to recover judgment for any and all amounts due under the Secretary's Note, this Security Agreement and the Mortgage, collect the same out of any and all of Shipowner's property, whether or not the same is subject to the lien of the Mortgage, and in connection therewith, obtain a decree ordering the sale of any Vessel in accordance with paragraph (b)(4) of this Section; (3) Have a receiver of the Vessels appointed as a matter of right in any suit under this Section (and any such receiver may have the rights of the Secretary under paragraph (b)(4) of this Section); (4) Sell any Vessel, free from any claim of the Shipowner, by a public extrajudicial sale, held at such time and place and in such manner as the Secretary may reasonably deem advisable, after twice publishing notice of the time and place of such sale prior to the proposed sale in the Authorized Newspapers to the Shipowner. Such publication and mailing is to be made at least 10 Business Days prior to the date fixed for such sale; provided that, such sale may be adjourned from time to time without further publication or notice (other than announcement at the time and place appointed to such sale or adjourned sale). It shall not be necessary to bring any such Vessel to the place appointed for such sale or adjourned sale; (5) Accept a conveyance of title to, and to take without legal process (and the Shipowner or other Person in possession shall forthwith surrender possession to the Secretary), the whole or any part of any Vessel and the Security wherever the same may be, and to take 48 possession of and to hold the same; (6) In the Secretary's discretion, take any and all action authorized by Sections 1105(c), 1105(e) and 1108(b) of the Act and any and all action provided for, or authorized, or permitted by, or with respect to the Increased Security; (7) Receive, in the event of an actual or constructive total loss, or an agreed or compromised total loss, or a requisition of title to or use of any Vessel, all insurance or other payments therefor to which the Shipowner would otherwise be entitled, such insurance moneys to be applied by the Secretary in accordance with Section 6.05; and (8) Pursue to final collection of all the claims arising under this Security Agreement and to collect such claims from, the Increased Security. (c) The Shipowner hereby irrevocably appoints the Secretary the true and lawful attorney of the Shipowner, in its name and stead, to make all necessary transfers of the whole or any part of the Increased Security in connection with a sale, use or other disposition pursuant to Section 6.04(a) or 6.04(b), and for that purpose to execute all necessary instruments of assignment and transfer. Nevertheless, the Shipowner shall, if so requested by the Secretary in writing, ratify and confirm such sale by executing and delivering to any purchaser of the whole or any part of the Increased Security, such proper bill of sale, conveyance, instrument of transfer, or release as may be designated in such request. (d) No remedy shall be exclusive of any other remedy, and each and every remedy shall be cumulative and in addition to any other remedy. (e) No delay or omission to exercise any right or remedy shall impair any such right or remedy or shall be deemed to be a waiver of any Default. (f) The exercise of any right or remedy shall not constitute an election of remedies by the Secretary. (g) If the Secretary discontinues any proceeding, the rights and remedies of the Secretary and of the Shipowner shall be as though no such proceeding had been taken. Section 6.05. Application of Proceeds. (a) The proceeds (from sale or otherwise) of the whole or any part of the Increased Security and use thereof by the Secretary under any of the foregoing powers, (b) the proceeds of any judgment collected by the Secretary for any default hereunder, (c) the proceeds of any insurance and of any claim for damages to the whole or any part of the Increased Security received by the Secretary while exercising any such power, and (d) all other amounts received by the Secretary, including amounts which are required by Sections 2.05 and 2.07 shall be applied by the Secretary as follows: (1) to the payment of all advances and all reasonable charges by the Secretary pursuant to this Security Agreement; 49 (2) to the payment of the whole amount of the interest then due and unpaid upon the Secretary's Note; (3) to the payment of the whole amount of the principal then due and unpaid upon the Secretary's Note; (4) to the Secretary for application to any other debt of the Shipowner due to the Secretary under any other financing insured or guaranteed by the Secretary under to the Act; (5) to the Indenture Trustee for its reasonable fees and expenses; and (6) any balance thereof remaining shall be paid to the Shipowner. Section 6.06. General Powers of the Secretary. (a) In the event any Vessel shall be arrested or detained by a marshal or other officer of any court of law, equity or admiralty jurisdiction in any country or nation of the world or by any government or other authority, and shall not be released from arrest or detention within 15 days from the date of arrest or detention, the Shipowner hereby authorizes the Secretary, in the name of the Shipowner, to apply for and receive possession of and to take possession of such Vessel with all the rights and powers that the Shipowner might have, possess and exercise in any such event. This authorization is irrevocable. (b) The Shipowner irrevocably authorizes the Secretary or its appointee (with full power of substitution) to appear in the name of the Shipowner in any court of any country or nation of the world where a suit is pending against the whole or any part of the Increased Security because of or on account of any alleged lien or claim against the whole or any part of the Increased Security, from which the whole or said part of the Increased Security has not been released. (c) The following shall constitute a debt due from the Shipowner to the Secretary, and shall be repaid by the Shipowner upon demand: all reasonable expenses incurred pursuant to paragraphs (a) or (b) of this Section and all reasonable expenses incurred incident to the exercise by the Secretary of any remedies pursuant to Section 6.04(b) or the assumption by the Secretary of the rights and duties of the Shipowner under the Indenture and the Obligations, and the making of any payments in default under the terms of Section 6.09 of the Indenture (including, but not limited to, fees paid to the Indenture Trustee for expenses incident to said assumption of the Indenture by the Secretary), together with interest at the rate that would have been paid by the Department of Treasury on the expended funds plus 1%. The Secretary shall not be obligated to (nor be liable for the failure to) take any action provided for in paragraphs (a) and (b) of this Section. 50 ARTICLE VII AMENDMENTS AND SUPPLEMENTS TO THE SECURITY AGREEMENT, MORTGAGE AND INDENTURE Section 7.01. Amendments and Supplements to the Security Agreement and the Mortgage. This Security Agreement and the Mortgage may not be amended or supplemented orally, but may be amended or supplemented from time to time only by an instrument in writing executed by the Shipowner and the Secretary. Section 7.02. Amendments and Supplements to the Indenture. Notwithstanding any provisions in the Indenture, the Shipowner agrees that no amendments or supplements will be made to the Indenture without the Secretary's prior written consent, and any purported action contrary to this Section shall be null and void ab initio and of no force and effect. ARTICLE VIII CONSOLIDATION, MERGER OR SALE Section 8.01. Consolidation, Merger or Sale. (a) Nothing in this Security Agreement or the Mortgage shall prevent any lawful consolidation or merger of the Shipowner with or into any other Person, or any sale of a Vessel or Vessels to any other Person lawfully entitled to acquire and operate such Vessel or Vessels, or any sale by the Shipowner of all or substantially all of its assets to any other Person; provided that, the Secretary shall have given its prior written consent to such succession, merger, consolidation or sale. (b) Any Successor shall (by indenture supplemental to the Indenture, and by instrument amending or supplementing this Security Agreement, and the Mortgage, as may be necessary), expressly assume the payment of the principal of (and premium, if any) and interest on the Outstanding Obligations in accordance with the terms of the Obligations, shall execute and deliver to the Secretary, an endorsement to the Secretary's Note in form satisfactory to the Secretary, shall expressly assume the payment of the principal of and interest on the Secretary's Note, and shall expressly assume the performance of the agreements of the Shipowner in the Indenture, this Security Agreement, the Mortgage and any related document. (c) Upon the assumption of the documents listed in paragraph (b) of this Section, the Secretary shall consent to the surrender of each Vessel's documents pursuant to 46 U.S.C. 12110(c)(3), as amended; provided that, concurrently with such surrender, such Vessel shall be redocumented under the laws of the United States. (d) In the event of any sale of less than all the Vessels, the Secretary shall determine if there will remain adequate security for the Guarantees after discharge of any such Vessel or Vessels from the Security Agreement and Mortgage, and (1) the Shipowner shall redeem, together with any premium and/or accrued interest thereof, the Proportionate Part of the Outstanding Obligations relating to such Vessel or Vessels in accordance with the provisions of Article Third of the Indenture; or (2) the Person to which such sale shall have been made (the "Transferee"), shall assume the documents listed in paragraph (b) of this Section. Upon any 51 such assumption, the Transferee shall succeed to and be substituted for the Shipowner with the same force and effect as if it had been named in the Indenture, the Obligations, this Security Agreement and the Mortgage (and such other documents) to the extent the same relate to such Proportionate Part of the Outstanding Obligations and to such Vessel or Vessels. Section 8.02. Transfer of a General Partner's or a Joint Venturer's Interest. (a) If the Shipowner is organized as a partnership or a joint venture, a general partner or a joint venturer may lawfully transfer its respective interests under the terms of the partnership or joint venture agreement to any Person and may be released from all of their obligations thereunder and under this Security Agreement or the Mortgage; provided that, (i) the Secretary shall have given its prior written consent to the proposed transaction; and (ii) the transferee shall assume in full all of the existing obligations which the transferring general partner or joint venturer has under the applicable partnership or joint venture agreement, this Security Agreement, the Mortgage and any related document. ARTICLE IX NOTICES Section 9.01. Notices. Except as otherwise provided in this Security Agreement or by the Act, all notices, requests, demands, directions, consents, waivers, approvals or other communications may be made or delivered in person or by registered or certified mail, postage prepaid, addressed to the party at the address of such party specified in the Special Provisions hereof, or at such other address as such party shall advise each other party by written notice, and shall be effective upon receipt by the addressee thereof. Section 9.02. Waivers of Notice. In any case where notice by publication, mail or otherwise is provided for by this Security Agreement, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be deemed the equivalent of such notice. Section 9.03. Shipowner's Name or Address Change. The Shipowner shall not change its name or its address without first providing written notice to the Secretary of the new name and/or the change in address. ARTICLE X DISCHARGE OF SECURITY AGREEMENT AND THE MORTGAGE Section 10.01. Discharge of Security Agreement and the Mortgage. (a) If the Obligations and the related Secretary's Note shall have been satisfied and discharged, and if the Shipowner shall pay or cause to be paid all other sums that may have become secured under this Security Agreement and the Mortgage, then this Security Agreement, the Mortgage and the liens, estate and rights and interests hereby and thereby granted, shall cease, determine, and become null and void, and the Secretary, on the Shipowner's Request and at the Shipowner's cost and expense, shall forthwith cause satisfaction and discharge and duly acknowledge such satisfaction and discharge of this Security Agreement and the Mortgage to be entered upon its and other 52 appropriate records, and shall execute and deliver to the Shipowner such instruments as may be necessary, and forthwith the estate, right, title and interest of the Secretary in and to the Security, the Increased Security, and any other securities, cash, and any other property held by it under this Security Agreement and the Mortgage, shall thereupon cease, determine and become null and void, and the Secretary shall transfer, deliver and pay the same to the Shipowner. (b) If all of the Guarantees on the Outstanding Obligations shall have been terminated pursuant to Sections 3.02(b) or 3.02(d), the Secretary shall assign to the Shipowner this Security Agreement, the Mortgage and the liens, estate, rights and interests hereby and thereby granted. ARTICLE XI MISCELLANEOUS Section 11.01. Successors and Assigns. All the covenants, promises, stipulations and agreements of the Secretary and Shipowner in this Security Agreement shall bind the Secretary and Shipowner and its respective successors and assigns. This Security Agreement is for the sole benefit of the Shipowner, the Secretary, and their respective successors and assigns, and no other Person shall have any right hereunder. Section 11.02. Execution in Counterparts. This Security Agreement may be executed in any number of counterparts. All such counterparts shall be deemed to be originals and shall together constitute but one and the same instrument. Section 11.03. Shipowner's Rights in Absence of Default. Except during the existence of a Default, the Shipowner (1) shall be permitted to retain actual possession and use of the Vessel; and (2) shall have the right, from time to time, in its discretion and without the consent of or release by the Secretary, to dispose of, free from the lien hereof and of the Mortgage, any and all engines, machinery, masts, boats, anchors, cables, chains, rigging, tackle, apparel, furniture, capstans, outfit, tools, pumps, pumping and other equipment, and all other appurtenances to the Vessels, and also any and all additions, improvements and replacements in or to the Vessels or said appurtenances, after first or simultaneously replacing the same with items of at least substantially equal value. Section 11.04. Surrender of Vessels' Documents. The Secretary shall consent to the surrender of each Vessel's documents in connection with any redocumentation of such Vessel required on account of alterations to such Vessel which are not prohibited by this Security Agreement and by the Mortgage. Section 11.05. Applicable Regulations. Only the provisions of the regulations issued under Title XI of the Act as in effect on the date hereof (46 C.F.R. 298) shall control the Security Agreement provisions. Section 11.06. Table of Contents, Titles and Headings. The table of contents, and titles of the Articles and the headings of the Sections are not a part of this Security Agreement and shall not be deemed to affect the meaning or construction of any of its provisions. EX-4.(II)(E)(7) 16 c58427ex4-iie7.txt TITLE XI RESERVE FUND AND FINANCIAL AGREEMENT 1 4(ii)(e)(7) Contract No. MA-13629 TITLE XI RESERVE FUND AND FINANCIAL AGREEMENT THIS TITLE XI RESERVE FUND AND FINANCIAL AGREEMENT (the "Financial Agreement") dated October 16, 2000 between Cape May Light, L.L.C., a Delaware limited liability company (the "Company"), and THE UNITED STATES OF AMERICA (the "United States"), represented by the SECRETARY OF TRANSPORTATION, acting by and through the MARITIME ADMINISTRATOR (the "Secretary"). RECITALS Pursuant to the conditions and understandings set forth in the Recitals to the Security Agreement executed on this date, the Company has authorized the issuance of obligations designated "United States Government Guaranteed Ship Financing Bonds, 2000 Series" in an aggregate amount not to exceed $37,900,000 to finance the cost of construction of the cv Cape May Light (the "Vessel"); NOW THEREFORE, in consideration of the premises and mutual covenants herein contained, and of other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereby agree as follows: Section 1. (a) Granting Clause. The Company hereby sells, grants, conveys, mortgages, assigns, transfers, pledges, confirms and sets over to the Secretary a continuing security interest in all of its right, title and interest in and to (1) the Title XI Reserve Fund, and (2) all sums, instruments, moneys, negotiable documents, chattel paper and proceeds thereof currently on deposit, or hereafter deposited in the Title XI Reserve Fund. (b) Definitions. For all purposes of this Financial Agreement, unless otherwise expressly provided or unless the context otherwise requires, the capitalized terms used herein shall have the meaning specified in Schedule X to the Security Agreement entered into on this date. SECTION 2. TITLE XI RESERVE FUND DEPOSITS. (a) Pursuant to the Depository Agreement, the Company shall establish with the Depository a depository account (herein called the "Title XI Reserve Fund"). (b)(1) If for any fiscal year the Company shall fail to meet the financial tests set forth in Section 8(b) hereof including the Proviso; the Company shall, within 105 days after the end of each fiscal year of the Company, compute its net income attributable to the operation of the Vessel ("Title XI Reserve Fund Net Income"). This computation requires the multiplication of 2 the Company's total net income after taxes by a fraction with a numerator composed of the total original capitalized cost of the Vessel and a denominator composed of the total original capitalized cost of all the Company's fixed assets. The net income after taxes, computed in accordance with generally accepted accounting principles, shall be adjusted as follows: (A) The depreciation expense applicable to the fiscal year shall be added back. (B) There shall be subtracted an amount equal to the principal amount of debt required to be paid or redeemed, and actually paid or redeemed by the Company during the fiscal year; and the principal amount of Obligations Retired or Paid, prepaid or redeemed, in excess of the required Redemptions or payments which may be used by the Company as a credit against future required Redemptions or other required payments with respect to the Obligations, but excluding payments from the Title XI Reserve Fund and the Title XI Escrow Fund. (2) Promptly after the computation of the Title XI Reserve Fund Net Income by the Company: (A) If the Vessel is owned by the Company, then from the Title XI Reserve Fund Net Income for the Vessel there shall be deducted, annually, an amount (pro rated for a period of less than a full fiscal year) which is 10% of the Company's aggregate original equity investment in said Vessel, as specified in Attachment A. (B) The Company shall, unless otherwise approved by the Secretary in writing, deposit into the Title XI Reserve Fund an amount equal to 50 percent of the balance of the Title XI Reserve Fund Net income remaining after the above deduction. (C) Irrespective of the requirements that the Company make deposits into the Title XI Reserve Fund, the Company shall not be required to make any deposits into the Title XI Reserve Fund if (i) the Obligations and the related Secretary's Note with respect to the Vessel shall have been satisfied and discharged and if the Company shall have paid or caused to be paid all other sums secured under the Security Agreement and the Mortgage, (ii) all of the Guarantees on the Outstanding Obligations shall have been terminated pursuant to the Security Agreement, or (iii) the amount (including any securities at current market value) in the Title XI Reserve Fund is equal to, or in excess of 50% of the aggregate principal amount of the Outstanding Obligations; (D) The Company shall deliver to the Secretary (with a copy to the Depository) at the time of each deposit into the Title XI Reserve Fund pursuant to Section 2(b)(2)(B), and any deposits required under the Security Agreement, a statement of an independent certified public accountant (who may be the regular auditors for the Company) stating that such deposit has been computed in accordance with Section 2(b)(2)(B), (and the Security Agreement, if applicable) and showing the pertinent calculations. (E) In addition, the Company shall deliver to the Secretary (with a copy to the Depository), within 105 days after the end of each fiscal year of the Company, a statement by 2 3 such certified public accountant stating (i) the total amount of all deposits which were required to be so deposited into the Title XI Reserve Fund for such fiscal year (and showing the pertinent calculations), or (ii) that no such deposit was required to be made for such fiscal year (and showing the pertinent calculations) and that at the end of such fiscal year no adjustments pursuant to Section 2(b)(2)(G) were required to be made (and, if such adjustments were required to be made, stating the reasons therefor). (F) The computation of all deposits required by this Section 2 shall be made on the basis of information available to the Company at the time of each such deposit. Each such deposit shall be subject to adjustments from time to time in the event and to the extent that the same would be required or permitted by mistakes or omissions, additional information becoming available to the Company, or judicial or administrative determinations made subsequent to the making of such deposits. Section 3. Withdrawals from the Title XI Reserve Fund. (a) From time to time, moneys in the Title XI Reserve Fund shall be subject to withdrawal by delivery by the Company to the Secretary of a Request for Payment (specifying the Person or Persons to be paid and the amount of such payment) executed by the Company, together with an Officer's Certificate of the Company stating the reasons and the purpose for the withdrawal. (b) Upon approval by the Secretary of the Request for Payment evidenced by the countersignature thereon of the Secretary, the Secretary shall cause the Request for Payment to be delivered to the Depository, which shall promptly make payment to such Person or Persons in accordance with the terms of such Request for Payment. Section 4. Termination of the Title XI Reserve Fund. (a) The Title XI Reserve Fund shall terminate at such time as the Secretary's Note shall have been satisfied and discharged and the Company shall have paid or caused to be paid all sums secured under the Security Agreement or the Mortgage. (b) Upon the termination of the Title XI Reserve Fund, pursuant to Section 4(a), the moneys remaining in the Title XI Reserve Fund shall be subject to withdrawal and payment into the general funds of the Company. (c) Upon payment by the Secretary to the Indenture Trustee of the Guarantees pursuant to the Indenture, the Title XI Reserve Fund shall, upon written instructions of the Secretary, be terminated and the balance remaining in the Title XI Reserve Fund shall be paid to the Secretary and the Company as determined by the Secretary. (d) Any withdrawal from the Title XI Reserve Fund pursuant to this Section 4 shall not effect a discharge of or diminish any obligations of the Company under the Security Agreement, Mortgage or any other agreement as the case may be except to the extent that the 3 4 amount withdrawn is applied to payments required to be made by the Company under the Security Agreement, Mortgage or any other agreement. Section 5. Eligible Investments; Form of Deposits. (a) Moneys held in the Title XI Reserve Fund shall, if so directed by a Request of the Company delivered to the Depository (with a copy to the Secretary), be invested by the Depository in the following Eligible Investments: (1) time deposits, negotiable certificates of deposit, or similar instruments of deposit with a bank or trust company organized as a corporation under the laws of the United States or any State thereof, or of the District of Columbia, subject to supervision or examination by Federal or State authority or authority of the District of Columbia, and having a combined capital and surplus of at least $3,000,000; provided that, the aggregate of all such time deposits and certificates of deposit with any one bank or trust company shall not exceed 10% of the combined capital and surplus of such bank or trust company; (2) short term commercial paper having either of the two highest ratings for short term commercial paper assigned by any two nationally recognized organizations regularly engaged in rating the investment quality of such commercial paper; and (3) securities (designated by the Company in such Request) which at the date of such investment are: (A) direct obligations of, or obligations (other than the Obligations or Obligations related to the Company) fully guaranteed or insured by, the United States or any agency of the United States or with the Secretary's prior written consent and subject to such conditions imposed by him, obligations or securities fully insured by an instrumentality of the United States; (B) bonds, not in default as to principal or interest of any county, municipality or state of the United States and having either of the two highest ratings for bonds assigned by any two nationally recognized organizations regularly engaged in rating the investment quality of such bonds; (C) bonds, not in default as to principal or interest, of corporations organized and existing under the laws of the United States or of the District of Columbia or of any state of the United States and having one of the three highest ratings for bonds assigned by any two nationally recognized organizations regularly engaged in rating the investment quality of such bonds; provided that, no investment under this subsection (5)(a)(3)(C) shall be made in any obligations of the Company or a Related Party; (D) capital stock, but limited at the time of acquisition to any amounts in the Title XI Reserve Fund in excess of the principal amount of Obligations to be redeemed pursuant to the mandatory sinking fund provisions of the Indenture, during the next succeeding 12 months 4 5 of (i) corporations organized and existing under the laws of the United States or the District of Columbia or of any state of the United States if such stock is currently fully listed and registered upon an exchange registered with the Securities and Exchange Commission as a national securities exchange and permitted for investment by a savings bank under the laws of the State of New York without regard to the provisions therein limiting such investments to a percentage of the assets or surplus of such savings bank, (ii) banks either regulated by the Comptroller of the Currency of the United States or subject to the Banking Law of the State of New York, or (iii) insurance companies licensed to do business in such state; provided that, no investment under this subsection shall be made in stock of the Company or a Related Party; provided further that, any request under this subsection shall be accompanied by an opinion of counsel satisfactory to the Secretary as to the qualification of such securities under this clause and provided further, that the Company shall cause to be sold, within 60 days, or at any time if the Secretary so directs the Company in writing, any securities which cease to qualify under this subsection. (b) In any case where the Company is required to deposit or redeposit sums into the Title XI Reserve Fund, the Company shall make the required deposit in cash or, in lieu thereof, with the Secretary's prior written approval, may deposit into the Title XI Reserve Fund, negotiable certificates of deposit, short term commercial paper or securities which are (1) Eligible Investments (2) owned by the Company and (3) of an equivalent current market value (based upon the last sales price thereof on the Business Day immediately preceding such deposit or, if there shall have been no sale thereof on such day, the average of the last known bid and asked prices). With the Secretary's prior written approval, the Company may exchange Eligible Investments in the Title XI Reserve Fund at current market value (determined as above provided) for an equivalent amount of cash. (c) Cash held in the Title XI Reserve Fund will be held by the Depository pursuant to the Depository Agreement. Section 6. Company's Rights with Respect to Securities Held in the Title XI Reserve Fund. Unless there is an existing Default under the Security Agreement, the Company shall have: (a) the right to vote (or direct the vote of) securities held in the Title XI Reserve Fund as to (1) the sale of all or any part of the assets of the issuer or obligor thereof, (2) the increase or reduction of the capital of such issuer or obligor, (3) the liquidation, dissolution, merger or consolidation of such issuer or obligor, or (4) any purpose which would not then impair the lien of, or the security interest granted to the Secretary; and (b) the right to exercise (or direct the exercise of) any and all rights of ownership of such securities, including the right to consent or object to the extension, modification or renewal of any thereof, the right to consent or object to any plan or reorganization, or readjustment, and the right to exercise any right, privilege or option pertaining thereto. Section 7. Annual Statement of Company with Respect to the Title XI Reserve Fund. Within 105 days after the close of each fiscal year of the Company at the end of which there are 5 6 funds in the Title XI Reserve Fund (and at such other times as the Secretary may request in writing), the Company shall submit to the Secretary (with a copy to the Depository) (a) an opinion of counsel satisfactory to the Secretary as to the qualification, under Section 5(a)(3)(D), of securities acquired pursuant to that subparagraph and then held in the Title XI Reserve Fund and (b) a list of the Eligible Investments held in the Title XI Reserve Fund at the close of said fiscal year (or at the time of the Secretary's request as aforesaid). Section 8. Financial Requirement of the Company. (a) Primary Covenants. The Company shall not without the Secretary's prior written consent: Except as hereinafter provided, make any distribution of earnings, except as may be permitted by (A) or (B) below: (A) From retained earnings in an amount specified in subsection (C) below, provided that, in the fiscal year in which the distribution of earnings is made there is no operating loss to the date of such payment of such distribution of earnings, and (i) there was no operating loss in the immediately preceding three fiscal years, or (ii) there was a one-year operating loss during the immediately preceding three fiscal years, but (a) such loss was not in the immediately preceding fiscal year, and (b) there was positive net income for the three year period; (B) If distributions of earnings may not be made under (A) above, a distribution can be made in an amount equal to the total operating net income for the immediately preceding three fiscal year period, provided that, (i) there were no two successive years of operating losses, (ii) in the fiscal year in which such distribution is made, there is no operating loss to the date of such distribution, and (iii) the distribution or earnings made would not exceed an amount specified in Section 8(a)(1)(C) below; (C) Distributions of earnings may be made from earnings of prior years in an aggregate amount equal to (i) 40 percent of the Company's total net income after tax for each of the prior years, less any distributions that were made in such years; or (ii) the aggregate of the Company's total net income after tax for such prior years, provided that, after making such distribution, the Company's Long Term Debt does not exceed its Net Worth. In computing net income for the purposes of this Section, extraordinary gains, such as gains from the sale of assets, shall be excluded. (1) Enter into any service, management or operating agreement for the operation of the Vessel (excluding husbanding type agreements), or appoint or designate a managing or operating agent for the operation of the Vessel (excluding husbanding agents) unless approved by the Secretary; 6 7 (2)(A) Sell, mortgage, transfer, or demise charter the Vessel or any assets to any non-Related Party except as permitted in subsection 8(a)(6) below, or (B) sell, mortgage, transfer, or demise charger the Vessel or any assets to a Related Party, unless such transaction is (i) at a fair market value as determined by an independent appraiser acceptable to the Secretary, and (ii) a total cash transaction or, in the case of demise charter, the charter payments are cash payments. (3) Enter into any agreement for both (A) sale and (B) leaseback of the same assets so sold unless the proceeds from such sale are at least equal to the fair market value of the property sold; (4) Guarantee, or otherwise become liable for the obligations of any Person, except in respect of any undertakings as to the fees and expenses of the Indenture Trustee, except endorsement for deposit of checks and other negotiable instruments acquired in the ordinary course of business and except as otherwise permitted in Section 8(b); (5) Directly or indirectly embark on any new enterprise or business activity not directly connected with the business of shipping or other activity in which the Company is actively engaged; (6) Enter into any merger or consolidation or convey, sell, demise charter, or otherwise transfer, or dispose of any portion of its properties or assets (any and all of which acts are encompassed within the words "sale" or "sold" as used herein), provided that, the Company shall not be deemed to have sold such properties or assets if (A) the Net Book Value (defined as the original book value of an asset less depreciation calculated on a straight line basis over its useful life) of the aggregate of all the assets sold by the Company during any period of 12 consecutive calendar months does not exceed 10% of the total Net Book Value of all the Company's assets (the assets which are the basis for the calculation of the 10% of the Net Book Value are those indicated on the most recent audited annual financial statement required to be submitted pursuant to Section 9 hereof prior to the date of the sale); (b) the Company retains the proceeds of the sale of assets for use in accordance with the Company's regular business activities; and (C) the sale is not otherwise prohibited by subsection 8(a)(3) above. Notwithstanding any other provision of this subsection, the Company may not consummate such sale without the Secretary's prior written consent if the Company has not, prior to the time of such sale, submitted to the Secretary the financial statement in clause (A) of this subsection, and any attempt to consummate a sale absent such approval shall be null and void ab initio. (b) Supplemental Covenants. Commencing with the First Calendar Year of Vessel Operations and continuing thereafter unless, after giving effect to such transaction or transactions during any fiscal year: (i) the Company's debt-to-equity ratio does not exceed 2:1; (ii) upon completion of construction of the Vessel and the First Calendar Year of Vessel Operation, the Company's Minimum Cash Flow Ratio is not less than 1.0 to 1.0; and (iii) the Company has a positive cash balance at all times, the Company shall not, without the Secretary's prior written consent during any fiscal year of the Company after completion of construction of the Vessel: (1) Withdraw any capital; 7 8 (2) Redeem any share capital or convert any of the same into debt; (3) Pay any dividend (except dividends payable in capital stock of the Company); (4) Make any loan or advance (except advances to cover current expenses of the Company), either directly or indirectly, to any stockholder, director, officer, or employee of the Company, or to any Related Party; (5) Make any investments in the securities of any Related Party; (6) Prepay in whole or in part any indebtedness to any stockholder, director, officer or employee of the Company, or to any Related Party; (7) Increase any direct employee compensation (as hereinafter defined) paid to any employee in excess of $100,000 per annum; nor increase any direct employee compensation which is already in excess of $100,000 per annum; nor initially employ or re-employ any person at a direct employee compensation rate in excess of $100,000 per annum; provided, however, that beginning with January 1, 2000, the $100,000 limit may be increased annually based on the previous year's closing CPI-U (Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics). For the purpose of this section the term "direct employee compensation" is the total amount of any wage, salary, bonus, commission, or other form of direct payment to any employee from all companies with guarantees under Title XI of the Act as reported to the Internal Revenue Service for any fiscal year; (8) Acquire any fixed assets other than those required for the maintenance of the Company's existing assets, including the normal maintenance and operation of any vessel or vessels owned or chartered by the Company; (9) Either enter into or become liable (directly or indirectly) under charters and leases (having a term of six months or more) for the payment of charter hire and rent on all such charters and leases which have annual payments aggregating in excess of $3,000,000; (10) Pay any indebtedness subordinated to the Obligations or to any other Title XI obligations; (11) Create, assume, incur, or in any manner become liable for any indebtedness, except current liabilities, or short term loans, incurred or assumed in the ordinary course of business as such business presently exists; (12) Make any investment, whether by acquisition of stock or indebtedness, or by loan, advance, transfer of property, capital contribution, guarantee of indebtedness or otherwise, in any Person, other than obligations of the United States, bank deposits or investments in securities of the character permitted for moneys in the Title XI Reserve Fund; or 8 9 (13) Create, assume, permit or suffer to exist or continue any mortgage, lien, charge or encumbrance upon, or pledge of, or subject to the prior payment of any indebtedness, any of its property or assets, real or personal, tangible or intangible, whether now owned or hereafter acquired, or own or acquire, or agree to acquire, title to any property of any kind subject to or upon a chattel mortgage or conditional sales agreement or other title retention agreement, except (i) loans, mortgages and indebtedness guaranteed by the Secretary under Title XI of the Act or related to the construction of a vessel approved for Title XI by the Secretary and (ii) liens incurred in the ordinary course of business as such business presently exists. Notwithstanding the requirements set forth in Section 8(b)(i) above, so long as the Company is not in Default under the Security Agreement and Guarantor's guarantee is in full force and effect, the Company will not be required to make any Title XI Reserve Fund Deposits during the First Calendar Year of Vessel Operation and the Second Calendar Year of Vessel Operation regardless of its debt-to-equity ratio and, in the Third Calendar Year of Vessel Operation and the Fourth Year of Vessel Operation unless its debt-to-equity ratio is in excess of 4.0 to 1.0. Notwithstanding the requirements in Section 8(b) above, so long as the Shipowner is not in Default under the Security Agreement and the Guarantor's guarantee is in full force and effect, the Shipowner may: (1) Make advances, loans or other distributions to the Sister Shipowner if the Sister Shipowner issues a guarantee of the Company's debt that is in form and substance acceptable to the Secretary and said guarantee is in full force and effect and the Sister Shipowner has not defaulted on its Security Agreement; (2) Make reimbursement or payments to the Guarantor and/ or Ocean Development Co. with respect to administrative, operational and/or management expenses incurred with respect to the Vessel; (3) Make a distribution in form and substance satisfactory to the Secretary to the Guarantor to be used for equity on an option vessel as provided for in the shipbuilding contract relating to the Vessel, and the vessel being constructed by the Sister Shipowner provided the Company has met its cash flow test for the most recent reporting period, has a debt-to-equity ratio not in excess of 4.0 to 1.0 until the sixth calendar year of vessel operation, and is not in default on its Security Agreement; and (4) Make advances to the Guarantor in accordance with the Guarantor's cash management program provided such program has been approved by the Secretary and any such advances are evidenced by a receivable from the Guarantor, which receivable is due and payable to the Company at any time the Company does not have adequate funds to meet its current obligations including but limited to current obligations with respect to the Title XI debt. 9 10 Section 9. (a) Annual Financial Statements. The Company shall furnish to the Secretary, in duplicate, (1) within 105 days after the end of each fiscal year of the Company commencing with the first fiscal year ending after the date of the Security Agreement, the Company's Audited Financial Statements including balance sheet and income statement for such fiscal year along with a completed M.A. Form 172 or such other form approved by the Secretary, and (2) within 90 days after the expiration of each semi-annual period of each fiscal year commencing with the first such semi-annual period ending after the date of the Security Agreement, a completed M.A. Form 172 or such other form approved by the Secretary for such semi-annual period along with an Officer's Certificate certifying its accuracy. (b) Annual No Default Certificates. Within 105 days after the end of each fiscal year of the Company, the Company shall furnish to the Secretary, an Officer's Certificate dated as of the close of such fiscal year stating whether or not, the Company is in default in the performance of or in default in the compliance with any covenant, agreement or condition contained herein or in the Mortgage, Security Agreement or charter relating to the Vessel listed in Attachment A hereto, and if so, specifying each such default and stating the nature thereof. Section 10. Qualifying Financial Requirements of the Company. The Company shall furnish an Officer's Certificate, dated the date hereof, certifying that the Company has equity at least equal to the difference between the Vessel's capitalizable cost and the Vessel's Title XI guaranteed amount, that any other costs related to the Vessel are funded in the manner established by the Funding Agreement, and that the Guaranty Agreement is in full force and effect. Section 11. Notices. Except as otherwise provided in this Agreement, notices, requests, directions, instructions, waivers, approvals or other communication may be made or delivered in person or by registered or certified mail, postage prepaid, addressed to the party as provided below, or to such other address as such party may hereafter specify in a written notice to the other parties named herein, and all notices or other communications shall be in writing so addressed and shall be effective upon receipt by the addressee thereof: The Secretary as: SECRETARY OF TRANSPORTATION c/o Maritime Administrator Maritime Administration 400 Seventh Street, S.W. Washington, D.C. 20590 The Title XI Reserve Fund Depository as: The Bank of New York 101 Barclay Street New York, NY 10286 Attention: Corporate Trust Administration 10 11 The Company as: Cape May Light, L.L.C. Robin Street Wharf 1380 Port of New Orleans Place New Orleans, Louisiana 70130-1890 Section 12. Amendments and Supplements. No agreement shall be effective to amend, supplement, or discharge in whole or in part this Financial Agreement unless such agreement is in writing signed by the parties hereto. Any amendments, additions, deletions, substitutions or other changes no made in accordance with this provision shall be invalid and of no effect. Section 13. Counterparts. This Financial Agreement may be executed in any number of counterparts. All such counterparts shall be deemed to be originals, and shall together constitute but one and the same instrument. Section 14. Governing Law. This Financial Agreement and the rights and obligations of the parties hereto shall be governed by and construed in accordance with U.S. maritime laws, to the extent applicable, and otherwise in accordance with the laws of the State of New York. 11 12 IN WITNESS WHEREOF, this Financial Agreement has been executed by the parties hereto as of the day and year first above written. UNITED STATES OF AMERICA SECRETARY OF TRANSPORTATION BY: MARITIME ADMINISTRATOR / s / Joel C. Richard ------------------------------ Secretary ATTEST: / s / Sarah J. Washington - ---------------------------- Assistant Secretary 13 Shipowner: Cape May Light, L.L.C. By: DELTA QUEEN COASTAL VOYAGES, L.L.C., its Managing Member By: THE DELTA QUEEN STEAMBOAT CO., its Managing Member By: / S / JORDAN B. ALLEN ------------------------------ Its Executive Vice President ATTEST: By / s / Pam Stringer ---------------------------- Assistant Secretary 14 ATTACHMENT A TITLE XI RESERVE FUND AND FINANCIAL AGREEMENT (Contract No. MA-13629) 1. This Financial Agreement shall apply to the Cape May Light. 2. The Company's aggregate original equity investment for use in Section 2 for the Cape May Light is $6,349,278. EX-4.(II)(E)(8) 17 c58427ex4-iie8.txt GUARANTY AGREEMENT 1 EXHIBIT 4(ii)(e)(8) Document 18 GUARANTY AGREEMENT Exhibit 8 to Security Agreement 2 TABLE OF CONTENTS GUARANTY AGREEMENT
SECTION HEADING PAGE 1. Definitions..............................................................................................1 2. Guarantee................................................................................................2 3. Secretary's Rights.......................................................................................3 4. Primary Liability........................................................................................3 5. Representations and Warranties...........................................................................3 6. Continuing Guarantee.....................................................................................4 7. Default..................................................................................................4 8. Notices..................................................................................................4 9. Amendments and Supplements...............................................................................5 10. Governing Law............................................................................................5 11. Counterparts.............................................................................................5
3 GUARANTY AGREEMENT IN FAVOR OF THE UNITED STATES OF AMERICA THIS GUARANTY (this "Guaranty Agreement"), dated this October 16, 2000, is by and between DELTA QUEEN COASTAL VOYAGES, L.L.C., a Delaware limited liability company (the "Guarantor"), TO THE UNITED STATES OF AMERICA (the "United States"), represented by the SECRETARY OF TRANSPORTATION, acting by and through the MARITIME ADMINISTRATOR (the "Secretary"). WITNESSETH: A. WHEREAS, the Guarantor owns 99 percent of the membership interest of Cape May Light, L.L.C., a Delaware limited liability company (the "Shipowner"); B. WHEREAS, the Shipowner, in connection with the financing of the cost of construction of the Vessel on the date hereof borrowed certain funds and created and authorized the issuance of obligations designated "United States Government Guaranteed Ship Financing Bonds, 2000 Series" in the aggregate principal amount of $37,900,000 (the "Obligations") bearing interest at the rate specified therein; C. WHEREAS, the Shipowner, on the date hereof, accepted the Secretary's Commitment to Guarantee Obligations (the "Commitment") pursuant to Title XI of the Merchant Marine Act, 1936, as amended (the "Act"), whereby the Secretary authorized a guarantee to be endorsed upon each of the Obligations (the "Guarantees"); D. WHEREAS, the Shipowner has, in consideration of the issuance of the Guarantees by the Secretary of the payment of the unpaid interest on, and the unpaid balance of the principal of the Obligations, pursuant to the terms and provisions of the Security Agreement, Contract No. MA-13627, dated the date hereof between the Shipowner and the Secretary (the "Security Agreement"), issued and delivered to the Secretary a promissory note in the principal amount of $37,900,000 (said promissory note, as originally executed and as the same may hereafter be amended, modified, supplemented or endorsed, herein called the "Secretary's Note"); E. WHEREAS, the Secretary required this Guaranty Agreement from the Guarantor as an integral part of the consideration offered by or on behalf of the Shipowner as a condition of the Secretary entering into the Commitment and issuing the Guarantees, and the Guarantor is entering into this Guaranty Agreement for the purpose of guaranteeing the Shipowner's obligations to the Secretary under the Secretary's Note. NOW, THEREFORE, in consideration of the premises and of other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Guarantor hereby agrees as follows: 1. Definitions. Unless otherwise specifically defined herein, the capitalized terms used herein are defined in Schedule X to the Security Agreement and any reference therein to other instruments shall have the respective meaning stated in Schedule X of the Security Agreement or such other instruments. 4 2. Guarantee. (a) The Guarantor hereby absolutely, irrevocably, and unconditionally guarantees the due and punctual payment of the principal and interest on the Secretary's Note. The Guarantor shall be required to make said payments under this Guaranty Agreement upon receipt of a written notice from the Secretary which states that the Shipowner has not promptly, completely or effectively made said payments. The failure of Guarantor to receive such a written notice or the failure of the Secretary to send said notice shall not relieve the Guarantor of its obligations under this Guaranty Agreement. This Guaranty Agreement shall be enforceable and exercisable by the Secretary from the first day of any failure by the Shipowner to make payment or mandatory prepayment of the principal of and the interest on the Secretary's Note when the same shall be due. The Guarantor shall immediately pay to the Secretary or its designee in immediately available funds, such payments guaranteed herein. (b) The Guarantor hereby consents and agrees that its obligations under this Guaranty Agreement will not be discharged by any act or omission to act of any kind by the Secretary or any other person or any other circumstances whatsoever (including, but not limited to, any extension, rearrangement, or renewal with respect to any indebtedness or other obligation of the Shipowner with or without notice to the Guarantor, any waiver of any right of the Secretary under the terms of the Secretary's Note, the Security Agreement, the Mortgage, or this Guaranty Agreement, any release of security, any transfer or assignment of rights or obligations accruing to the Secretary under the Secretary's Note, the Security Agreement, the Mortgage, or this Guaranty Agreement, any corporate reorganization, dissolution, merger, acquisition of or by or other alteration of the corporate existence or structure of the Shipowner or the Guarantor, discharge of the Shipowner in bankruptcy, the invalidity, illegality, or unenforceability of the Secretary's Note, the Security Agreement, the Mortgage, or this Guaranty Agreement or the absence of any action to enforce the obligations of the Shipowner) which might constitute a legal or equitable discharge of the Guarantor; it being the intention of the Guarantor that this Guaranty Agreement be absolute, continuing, and unconditional and the guarantee hereunder shall only be discharged by the payment in full of all sums so guaranteed hereunder. (c) The Guarantor hereby irrevocably and unconditionally waives: (1) notice of any of the matters referred to in this Guaranty Agreement and any action by the Secretary in reliance thereon; (2) all notices which may be required by statute, rule of law, or otherwise to preserve any rights against the Guarantor hereunder, including without limitations, any demand, protest, proof of notice of non-payment of all sums payable under the Secretary's Note or any notice of any failure on the part of the Shipowner to perform or comply with any covenant, term, or obligations of any agreement to which it is a party; (3) any requirement for the enforcement, assertion, or exercise of any right, remedy, power, or privilege under or with respect to the Mortgage, the Security Agreement, or the Secretary's Note; (4) any requirement of diligence; (5) any requirement that the Shipowner be joined as a party to any proceedings for the enforcement of any provision of this Guaranty Agreement, or that the Secretary proceed against any other guarantor executing this Guaranty Agreement or any other guaranty agreement; (6) any and all defenses to payment hereunder, except the defense of payment already made, and agrees to confess without contesting liability hereunder for any judgment entered hereon; (7) presentment, demand, 2 5 protest, notice of protest and dishonor, notice of intent to accelerate, and notice of acceptance; or (8) the right to require the Secretary to pursue any remedy in the Secretary's power whatsoever. (d) The Guarantor hereby agrees that this Guaranty Agreement shall continue to be effective or shall be reinstated, as the case may be, if at any time payment of any sum hereby guaranteed is rescinded or must be otherwise restored or returned by the Secretary, upon the insolvency, bankruptcy, or reorganization of the Shipowner, or otherwise, all as though such payment had not been made. The Guarantor further agrees that if the maturity of any obligations guaranteed herein be accelerated by bankruptcy or otherwise, such maturity shall also be deemed accelerated for the purpose of this Guaranty Agreement without demand or notice to the Guarantor. (e) Any amount payable hereunder shall not be subject to any reduction by reason of any counterclaim, set-off, deduction, abatement, or otherwise. (f) The Guarantor shall pay all reasonable costs and expenses (including, without limitation, attorneys' fees and expenses) incurred in connection with the enforcement of the obligations of the Guarantor under this Guaranty Agreement. (g) The Secretary's Note may be amended, modified, or endorsed without the consent of the Guarantor. (h) The Secretary may enforce the Guarantor's obligations hereunder without in any way first pursuing or exhausting any other rights or remedies which the Secretary may have against the Shipowner or any other person, firm, or corporation or against any security the Secretary may hold. 3. Secretary's Rights. The Guarantor authorizes the Secretary, without notice or demand and without affecting the Guarantor's liability hereunder, to take and hold security for the payment of this Guaranty Agreement and/or any of the obligations guaranteed herein and exchange, enforce, waive, and release any such security; and to apply such security and direct the order or manner of sale thereof as the Secretary in his discretion may determine; and to obtain a guarantee of any of the obligations guaranteed herein from any one or more persons, corporations, or entities whomsoever and at any time or times to enforce, waive, rearrange, modify, limit or release such other persons, corporations, or entities from their obligations under such guarantees. 4. Primary Liability. It is expressly agreed that the liability of the Guarantor for the payment of the obligations guaranteed herein shall be primary and not secondary. 5. Representations and Warranties. The Guarantor represents and warrants as follows: (a) It is a limited liability company duly organized, validly existing, and in good standing under the laws of the state of Delaware and has full power and authority (legal and other) to execute, deliver, and carry out the terms of this Guaranty Agreement; 3 6 (b) This Guaranty Agreement has been duly authorized, executed, and delivered by the Guarantor and constitutes the legal, valid, and binding obligation of the Guarantor enforceable against the Guarantor in accordance with its terms; (c) The execution, delivery, and performance by the Guarantor of this Guaranty Agreement does not require the approval or consent of its shareholders or of any governmental authority and does not contravene the Guarantor's Limited Liability Company Agreement, or any mortgage, indenture, or other agreement binding upon it, or any law, regulation, order, judgment, or decree applicable to the Guarantor; (d) The Guarantor's guarantee pursuant to this Guaranty Agreement may be expected to benefit, directly or indirectly, the Guarantor; and (e) The Guarantor has fully adequate financial resources, funds, and assets to satisfy its obligations under this Guaranty Agreement and the Guarantor will in the future retain sufficient financial resources, funds, and assets to fully satisfy its obligations under this Guaranty Agreement. 6. Continuing Guarantee. This Guaranty Agreement is a continuing guarantee of payment and collectability and shall: (a) Remain in full force and effect so long as any obligation of the Shipowner to the Secretary referred to herein exists; (b) Be binding upon the Guarantor, its successors and assigns; (c) Be executed and issued for the sole and exclusive benefit of the United States, and no other party shall be permitted to claim any benefit, direct or indirect, therefrom. This Guaranty Agreement is nonassignable, any assignment thereof shall be null and void and have no legal effect whatsoever; and (d) Inure to the benefit of, and be enforceable by the Secretary, his successors and assigns. 7. Default. A default under the terms of this Guaranty Agreement shall be deemed to occur if the Guarantor fails to make any payment guaranteed hereunder. 8. Notices. All communications may be made or delivered in person or by certified or registered mail, postage prepaid, addressed to the Guarantor or the Secretary as provided below or to such other address as the Guarantor or the Secretary may hereafter specify in a written notice to the other and all notices or other communications shall be in writing so addressed and shall be effective upon receipt by the addressee thereof: 4 7 Guarantor: DELTA QUEEN COASTAL VOYAGES, L.L.C. Robin Street Wharf 1380 Port of New Orleans Place New Orleans, Louisiana 70130-1890 Attn: Executive Vice President and General Counsel Secretary: SECRETARY OF TRANSPORTATION c/o Maritime Administration U.S. Department of Transportation Washington, DC 20590 Attn: Chief, Division of Ship Financing Contracts 9. Amendments and Supplements. No agreement shall be effective to change or modify, supplement, amend, or discharge in whole or in part this Guaranty Agreement unless such agreement is in writing, signed by the Guarantor and the Secretary. 10. Governing Law. This Guaranty Agreement shall be governed by federal law of the United States of America or in the absence of applicable federal law by the laws of the State of Louisiana. 11. Counterparts. This Guaranty Agreement may be executed in one or more counterparts. All such counterparts shall be deemed to be originals and shall together constitute but one and the same instrument. 5 8 IN WITNESS WHEREOF, this Guaranty Agreement has been executed by the Guarantor as of the day and year first above written. GUARANTOR: DELTA QUEEN COASTAL VOYAGES, L.L.C. BY: THE DELTA QUEEN STEAMBOAT CO., its Managing Member By: /S/ JORDAN B. ALLEN ------------------------------------ Its Executive Vice President ATTEST: By /s/ Pam Stringer ----------------------------------- Its Assistant Secretary 9 ACKNOWLEDGED BY: UNITED STATES OF AMERICA, SECRETARY OF TRANSPORTATION MARITIME ADMINISTRATOR By /S/ JOEL C. RICHARD ------------------------------------- Its Secretary ATTEST: By /s/ Sarah J. Washington ------------------------------------------- Its Assistant Secretary EX-4.(II)(F)(1) 18 c58427ex4-iif1.txt COMMITMENT TO GUARANTEE OBLIGATIONS 1 EXHIBIT 4(ii)(f)(1) Contract No. MA-13635 COMMITMENT TO GUARANTEE OBLIGATIONS by THE UNITED STATES OF AMERICA Accepted by CAPE COD LIGHT, L.L.C., Shipowner (Under Title XI, Merchant Marine Act, 1936, as amended, and in effect on the date of this Guarantee Commitment) Dated October 16, 2000 2 COMMITMENT TO GUARANTEE OBLIGATIONS by THE UNITED STATES OF AMERICA Accepted by CAPE COD LIGHT, L.L.C., Shipowner (Under Title XI, Merchant Marine Act, 1936, as amended, and in effect on the date of this Guarantee Commitment) -------------------------------- TABLE OF CONTENTS Document Number Document - ------ -------- 1 Commitment to Guarantee Obligations 2 Schedule One -- Form of Opinion of Counsel 3 Appendix I -- Bond Purchase Agreement 4 Appendix II -- Trust Indenture 5 Schedule A -- Schedule of Definitions to Trust Indenture 6 Exhibit 1 -- General Provisions to Trust Indenture 7 Exhibit 2 -- Form of Bond(s), Guarantee and Trustee's Authentication Certificate 8 Exhibit 3 -- Authorization Agreement 9 Appendix III -- Security Agreement 10 Exhibit 1 -- General Provisions Incorporated into the Security Agreement by Reference 11 Schedule X -- Schedule of Definitions 3 12 Exhibit 2 -- Form of Secretary's Note 13 Exhibit 3 -- Form of First Preferred Ship Mortgage 14 Exhibit 4 -- Title XI Reserve Fund and Financial Agreement 15 Exhibit 5 -- Form of Consent of Shipyard 16 Exhibit 6 -- Construction Contract 17 Exhibit 7 -- Depository Agreement 18 Exhibit 8 -- Guaranty Agreement 19 Exhibit 9 -- Funding Agreement 20 Exhibit 10 -- Assignment of Construction Contract 21 Exhibit 11 -- Shipyard Security Agreement ii 4 Document 1 COMMITMENT TO GUARANTEE OBLIGATIONS 5 TABLE OF CONTENTS COMMITMENT TO GUARANTEE OBLIGATIONS ARTICLE HEADINGS PAGE RECITALS.....................................................................1 ARTICLE I FINDINGS AND DETERMINATIONS OF SECRETARY......................2 ARTICLE II COMMITMENT TO GUARANTEE OBLIGATIONS...........................2 ARTICLE III THE OBLIGATIONS...............................................2 ARTICLE IV CONDITIONS TO EXECUTION AND DELIVERY OF THE GUARANTEE.........3 ARTICLE V VARIATION OF GUARANTEE COMMITMENT ............................4 ARTICLE VI TERMINATION OR ASSIGNMENT OF GUARANTEE COMMITMENT.............5 ARTICLE VII MISCELLANEOUS.................................................5 6 COMMITMENT TO GUARANTEE OBLIGATIONS THIS COMMITMENT TO GUARANTEE OBLIGATIONS, dated October 16, 2000 (the "Guarantee Commitment"), made and entered into by the UNITED STATES OF AMERICA (the "United States"), represented by the SECRETARY OF TRANSPORTATION, acting by and through the MARITIME ADMINISTRATOR (the "Secretary"), and accepted on said date by Cape Cod Light, L.L.C., a Delaware limited liability company (the "Shipowner"). RECITALS: A. The Shipowner is the sole owner of the 300' passenger vessel cv Cape Cod Light (the "Vessel") being constructed pursuant to the Construction Contract between Atlantic Marine, Inc. (the "Shipyard") and Delta Queen Coastal Voyages, L.L.C. (the "Guarantor"), dated May 1, 1999, and subsequently assigned to the Shipowner. B. To aid in financing the Construction of the Vessel, the Shipowner will borrow an aggregate principal amount in Obligations not to exceed 87.5% of the Depreciated Actual Cost or Actual Cost of the Vessel, as the case may be, as of the Closing Date. To accomplish such financing, the Shipowner has accepted this Guarantee Commitment subject to the terms and conditions set forth herein. C. The Shipowner has entered into the Bond Purchase Agreement providing for the sale and delivery, on the Closing Date, of bonds in the aggregate principal amount of $38,500,000, to be designated "United States Government Guaranteed Ship Financing Bonds, 2000 Series" (the "Bonds" or the "Obligations") having the maturity dates and interest rates set forth in the Obligations. D. As security for the Guarantees and the Secretary's Note, (i) the Shipowner will execute and deliver the Security Agreement, Contract No. MA-13637, the Indenture, the Authorization Agreement, Contract No. MA-13636, the Secretary's Note, the Financial Agreement, Contract MA-13639, and the Depository Agreement, Contract No. MA-13640; (ii) the Guarantor shall execute and deliver the Guaranty Agreement, Contract No. MA-13641; and (iii) the Shipowner, the Guarantor and the Parent Company shall execute and deliver the Funding Agreement, Contract No. MA-13642. WITNESSETH That under the provisions of Title XI of the Merchant Marine Act, 1936, as amended and in consideration of (i) the covenants of the Shipowner contained herein and (ii) other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Secretary hereby commits itself as herein provided. 7 ARTICLE I FINDINGS AND DETERMINATIONS OF THE SECRETARY Pursuant to Section 1104A(b)(1) of Title XI, the Secretary has approved the Shipowner as responsible and possessing the ability, experience, financial resources and other qualifications necessary to the adequate operation and maintenance of the Vessel. Pursuant to Section 1104A(b)(2) of Title XI, the Secretary has determined that the Depreciated Cost or Actual Cost of the Vessel, as the case may be, is $44,204,526. Prior to the Closing Date, the Secretary, in its discretion, may redetermine the Depreciated Actual Cost or Actual Cost of the Vessel. On the Closing Date, the aggregate principal amount of the Outstanding Obligations will not exceed 87.5% of the Depreciated Actual Cost or the Actual Cost, as the case may be. Pursuant to Sections 1104A(b)(3), 1104A(b)(4) and 1104A(b)(5) of Title XI, the Secretary has determined or will determine that: (1) the maturity date of the Obligations is satisfactory, (2) payments of principal required by the Obligations are satisfactory and (3) the interest rates to be borne by the Obligations to be issued on the Closing Date are reasonable. Pursuant to Section 1104A(d) of Title XI, the Secretary has found that the Shipowner's proposed use of the Vessel will be economically sound. ARTICLE II COMMITMENT TO GUARANTEE OBLIGATIONS The United States, represented by the Secretary, hereby commits itself to guarantee the payment of the unpaid interest on, and the unpaid balance of the principal of, the Obligations, including interest accruing between the date of default under the Obligations and the payment in full of the Guarantees, and, to effect this Guarantee Commitment, hereby commits itself to execute and deliver, the Security Agreement, the Financial Agreement, the Authorization Agreement and the Depository Agreement on the Closing Date, and the Mortgage on the Delivery Date pursuant to the terms of the Guarantee Commitment. ARTICLE III THE OBLIGATIONS The Obligations shall be issued in one or as a series of bonds as provided in the Indenture and in the form of Obligations, annexed to the Indenture as Exhibit 2. The Obligations shall be subject to all of the terms and conditions set forth in the Indenture. 2 8 ARTICLE IV CONDITIONS TO EXECUTION AND DELIVERY OF THE GUARANTEE The obligation of the Secretary to execute and deliver the Guarantee on the Closing Date shall be subject to the following conditions unless waived in writing by the Secretary: (a) the Closing Date shall occur on or prior to March 31, 2001; (b) the Shipowner and the Shipyard shall have executed and delivered to the Secretary a copy of the Construction Contract and the Shipyard shall have executed the Consent of Shipyard; (c) the Shipowner shall have executed and delivered the following documents on the Closing Date in the form attached hereto: the Security Agreement, the Financial Agreement, the Indenture, the Obligation Purchase Agreement, the Secretary's Note, the Depository Agreement, the Authorization Agreement and the Obligations and, on the Delivery Date, the Mortgage; (d) the Indenture Trustee shall have executed, in the form attached hereto, the Indenture and the Authorization Agreement and the Depository shall have executed the Depository Agreement; (e) the Obligation purchaser shall have executed the Obligation Purchase Agreement; (f) the Guarantor shall have executed and delivered, in the form attached hereto, the Guaranty Agreement; (g) the Parent Company shall have executed and delivered, in the form attached hereto, the Funding Agreement; (h) the following documents shall have been delivered to the Secretary: (i) two executed counterparts of the Indenture, (ii) two specimen copies of the Obligations; (iii) two executed originals of the legal opinion issued under section (m) of this Article; (iv) two copies of the legal opinion delivered to the Obligees pursuant to the Obligation Purchase Agreement; and (v) two originals of all other documents delivered by the Shipowner, the Guarantor, the Indenture Trustee or the Depository in connection with this Closing. (i) if the Shipowner intends to operate the Vessel in the U.S. domestic trade, the Shipowner and any bareboat charterers of such Vessel shall have furnished to the Secretary on the Closing Date an affidavit complying with the requirements of 46 CFR ss.355, demonstrating U.S. citizenship; (j) the Shipowner shall have executed an Officer's Certificate representing and warranting the truth of the following statements as of the Closing Date: 3 9 (i) each of the representations and warranties set out at Section 2.01 of the General Provisions of the Security Agreement in Appendix III; and (ii) the Shipowner is not in violation of any Federal laws having a substantial adverse effect on the interests of the United States of America and that the consummation of the Commitment complies with non-Title XI Federal law. (k) At the Closing the Shipowner shall pay and the Secretary shall receive the Guarantee Fee based upon the principal amount and maturity of the Obligations to be issued at the Closing; (l) the Shipowner shall have complied in all material respects with its agreements under this Guarantee Commitment; (m) there shall not have occurred any event which constitutes (or after any period of time or any notice, or both, would constitute) a "Default" under the Security Agreement; (n) there shall have been delivered to the Secretary by the Shipowner an opinion of counsel acceptable to the Secretary, in the form annexed hereto as Schedule 1 which shall include, among other things, an opinion to the effect that: (i) by the terms of the Security Agreement, the Shipowner has granted to the Secretary a fully perfected, first priority security interest in each of the assets which constitutes the Security; and (ii) all filings, recordings, notices and other actions required to perfect the Secretary's interests in the Security and to render such security interests valid and enforceable under applicable State law have been duly effected; (o) the Secretary shall have received a letter agreement from the Shipowner to provide the Secretary within a reasonable time after the Closing Date, with five conformed copies of the Guarantee Commitment and each of the Appendices and Exhibits thereto executed on or prior to such date; (p) on the Closing Date, the qualifying requirements set forth in Section 11 of the Financial Agreement shall have been complied with and certified to as required therein; (q) at least ten days prior to the Closing Date, there shall have been delivered to the Secretary, pro forma balance sheets for the Shipowner as of the Closing Date, certified by an officer of the Shipowner showing, among other things, all non-Title XI debt of the Shipowner; (r) on the Closing Date, the Shipowner shall certify that all non-Title XI loans to the Shipowner relating to the Vessel have been discharged or subordinated satisfactorily to the Secretary; (s) at least ten days prior to the Closing Date, the Shipowner shall have provided the Secretary with satisfactory evidence of insurance as required by the Security Agreement; and 4 10 (t) on the Closing Date the Shipowner shall execute a declaration, in conformance with 31 USC 1352, disclosing all lobbying activities. ARTICLE V VARIATION OF GUARANTEE COMMITMENT No variation from the terms and conditions hereof shall be permitted except pursuant to an amendment executed by the Secretary and the Shipowner. ARTICLE VI TERMINATION OR ASSIGNMENT OF GUARANTEE COMMITMENT This Guarantee Commitment may be terminated and the parties hereto shall have no further rights or obligations hereunder, upon written notice by the Secretary of the termination of the obligations of the United States pursuant to the Shipowner's failure to satisfy one or more conditions set forth in Article IV hereof or upon the Secretary's determination, at or before the Closing Date, that (i) the Shipowner is in violation of Federal law and such violation would have a substantial, adverse affect on the interests of the United States of America or (ii) the consummation of the Commitment would violate non-Title XI Federal law. The Shipowner's warranties and representations shall survive the termination of this Agreement and the Secretary's issuance of the Guarantees. This Guarantee Commitment may not be assigned by the Shipowner without the prior written approval of the Secretary and any attempt to do so shall be null and void ab initio. ARTICLE VII MISCELLANEOUS (a) The table of contents and the titles of the Articles are inserted as a matter of convenient reference and shall not be construed as a part of this Guarantee Commitment. This Guarantee Commitment may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument. (b) For all purposes of this Guarantee Commitment, unless otherwise expressly provided or unless the context shall otherwise require, capitalized terms used herein shall have the meaning given in Schedule X to the Security Agreement. 5 11 IN WITNESS WHEREOF, this Commitment to Guarantee Obligations has been executed by the United States and accepted by the Shipowner, all as of the day and year first above written. UNITED STATES OF AMERICA, SECRETARY OF TRANSPORTATION BY: MARITIME ADMINISTRATOR / s / Joel C. Richard --------------------------------------- Secretary ATTEST: / s / Sarah J. Washington - ---------------------------- Assistant Secretary 12 SHIPOWNER: CAPE COD LIGHT, L.L.C. By: DELTA QUEEN COASTAL VOYAGES, L.L.C., its Managing Member By: THE DELTA QUEEN STEAMBOAT CO., its Managing Member By: /s/ JORDAN B. ALLEN -------------------------------- Its Executive Vice President ATTEST: By /s/ Pam Stringer ------------------------------------------ Its Assistant Secretary EX-4.(II)(F)(2) 19 c58427ex4-iif2.txt BOND PURCHASE AGREEMENT 1 EXHIBIT 4(ii)(f)(2) CAPE COD LIGHT, L.L.C. $38,500,000 United States Government Guaranteed Ship Financing Bonds, 2000 Series ______________________________________ BOND PURCHASE AGREEMENT ______________________________________ Dated October 16, 2000 2 Cape Cod Light, L.L.C. $ 38,500,000 United States Government Guaranteed Ship Financing Bonds, 2000 Series 7.25% Sinking Fund Bonds due April 15, 2027 BOND PURCHASE AGREEMENT To each of the respective Purchasers named in Schedule 1 hereto: Dated October 16, 2000 Dear Sirs: The undersigned, Cape Cod Light, L.L.C., a Delaware limited liability company (the "Shipowner"), hereby agrees with each of you (each, a "Purchaser") as follows: 1. The Obligations. The United States Government Guaranteed Ship Financing Bonds, 2000 Series, due April 15, 2027, referred to above (the "Obligations") in the aggregate principal amount set forth above are proposed to be issued and sold by the Shipowner upon fulfillment of the terms and conditions set forth herein. The Obligations will be issued and sold to aid in the financing of the construction of the cv Cape Cod Light (the "Vessel"). The Obligations will be in fully registered form only and will bear interest (calculated on the basis of a 360-day year comprised of twelve 30-day months) from the date of issuance at the rate per annum set forth above, payable semi-annually, on April 15 and October 15 of each year until maturity, commencing April 15, 2001 until the Delivery Date, on the Delivery Date and semiannually after the Delivery Date until maturity. The Obligations will be issued under a Trust Indenture (the "Indenture") between the Shipowner and The Bank of New York, as Trustee (the "Indenture Trustee"). Payment of the principal of and interest on the Obligations will be fully and unconditionally guaranteed by the United States of America pursuant to the guarantee imprinted by the Indenture Trustee pursuant to an Authorization Agreement, on each of the Obligations (the "Guarantee") under Title XI of the Merchant Marine Act, 1936, as amended and in effect on the Closing Date (the "Act"). Since the Obligations are guaranteed with the full faith and credit of the United States of America, it is understood that you will not independently review the financial condition of the Shipowner and will rely completely on the Secretary's determination regarding the financial resources and maritime ability of the Shipowner. 2. Agreement to Purchase. Subject to the conditions hereinafter set forth, and the representations and warranties contained herein, the Shipowner agrees to sell to you and you 3 agree to purchase on the Closing Date, the Obligations in the principal amount set forth opposite your name in Schedule 1 hereto (subject to adjustment as set forth in Section 6 hereof) at 100% of such principal amount thereof. 3. Closing. Delivery of the Obligations shall be made at the office of the Maritime Administration, 400 Seventh Street, S.W., Washington, D.C., at a closing commencing at 10:00 a.m., Eastern time, on October 16, 2000 (the "Closing Date") or such other place or such later business day (which shall not be later than October 18, 2000) as the Shipowner shall designate by at least 3 days' prior written notice to the Indenture Trustee and to you at your address specified in Schedule 1 hereto. Delivery of the Obligations shall be made against payment therefor in funds immediately available to the Shipowner in Washington, D.C. Except as you may otherwise direct three (3) business days before the Closing Date, a single Obligation dated the Closing Date, authenticated by the Indenture Trustee, guaranteed by the United States of America, and registered in your name and issued in a denomination equal to the principal amount of Obligations to be purchased by you, will be delivered to you. For the purposes of this Agreement, a "business day" is a day which is not a Saturday, Sunday or bank holiday under the laws of the United States of America or the States of Louisiana and New York. 4. Representations and Warranties by the Shipowner. The Shipowner represents and warrants to you that this Agreement, the Indenture, and the Obligations have been duly authorized, executed and delivered by the Shipowner and constitute, each in accordance with their terms, a legal, valid and binding instrument enforceable against the Shipowner, except as limited by bankruptcy, insolvency, or other laws affecting the enforcement of creditors' rights generally. On the Closing Date, the Indenture and the Obligations will have been duly authorized, executed and delivered by the Shipowner and will constitute legal, valid and binding instruments enforceable against the Shipowner, and the Obligations will be entitled to the benefits of the Indenture, the Guarantees and the Authorization Agreement. The Shipowner represents that the Obligations, the Indenture, and the Authorization Agreement conform in all material respects to the descriptions thereof contained in the Offering Circular dated October 16, 2000 unless you consent to a change. 5. Conditions to Purchaser's Obligations. Your obligation under this Agreement to purchase Obligations on the Closing Date is subject to the accuracy of the representations and warranties of the Shipowner contained in Section 4 hereof on and as of the Closing Date and to the following further conditions: (A) Opinion of Counsel for the Shipowner. On the Closing Date, the Shipowner shall have furnished an opinion of its counsel addressed to you and satisfactory to you and the Indenture Trustee regarding the representations and warranties set out in Item 4 of this Agreement; (B) Opinion of the Chief Counsel of the Maritime Administration. On the Closing Date, your counsel shall have received a copy of a legal opinion from the Maritime Administration addressed to the Purchasers and the Indenture Trustee to the effect that the Guarantees and the Authorization Agreement have been duly authorized, executed and delivered 2 4 by the United States of America, and constitute the legal, valid and binding obligations of the United States of America; and (C) Certificate of Officer of the Shipowner. On the Closing Date, you shall have received a certificate signed by an authorized representative of the Shipowner to the effect that (a) the Shipowner has performed all agreements and satisfied all conditions on its part to be performed or satisfied hereunder on or prior to the Closing Date, (b) the representations and warranties of the Shipowner herein contained are true and correct in all material respects to the same extent as if made on and as of the Closing Date, and (c) the terms of the Indenture have been complied with by the Shipowner, and as of the Closing Date, there shall not exist any condition or event which constitutes, or which after lapse of time or notice or both would constitute, an Indenture Default as defined in the Indenture. If any of the conditions specified in this Section 5 shall not have been fulfilled by the Shipowner when and as required by this Agreement, you may cancel this Agreement and all of your obligations hereunder on, or at any time prior to, the Closing Date. Notice of such cancellation shall be given to the Shipowner in writing. 6. Adjustment of Commitments. In the event that the Secretary determines, pursuant to the Act, that the aggregate principal amount of the Obligations, issued by Shipowner to the purchaser pursuant to the Indenture dated October 16, 2000, eligible for Guarantee under the Act is greater or less than $38,500,000 on the Closing Date, the Shipowner may increase or decrease the total principal amount of Obligations to be issued by not more than 5 percent. 7. Conditions of Shipowner's Obligations. The obligations of the Shipowner to sell and deliver the Obligations under this Agreement on the Closing Date are subject to all of the following conditions: (A) on the Closing Date all the Obligations to be delivered by the Shipowner shall have simultaneously been purchased by the Purchasers; and (B) on or before the Closing Date (i) the Secretary shall have duly authorized the execution and delivery of the Guarantee of the Obligations and shall have duly executed and delivered the Authorization Agreement; and (ii) the Indenture Trustee shall have duly executed and delivered the Indenture and the Authorization Agreement. 8. Entire Agreement Embodied, Changes, etc. This Agreement embodies the entire agreement and understanding between the Shipowner and you relating to the subject matter hereof and supersedes all prior agreements and understandings relating to such subject matter. Neither this Agreement nor any term hereof may be changed, waived, discharged, or terminated orally, but only by an instrument in writing signed by the party against whom enforcement of the change, waiver, discharge or termination is sought and with the written consent of the Secretary. 9. Miscellaneous. (A) Except as otherwise expressly provided in this Agreement, (i) whenever notice is required by the provisions hereof to be given to the Shipowner, such notice shall be in writing addressed to Cape Cod Light, L.L.C., Robin Street Wharf, 1380 Port of New Orleans Place, New 3 5 Orleans, Louisiana 70130, and (ii) whenever notice is required by the provisions of this Agreement to be given to you, such notice shall be in writing addressed to you at your address set forth in Schedule 1 hereto or any other address specified in a written notice to the Shipowner; (B) This Agreement is made solely for the benefit of and is binding upon and enforceable by you, the Shipowner, and your respective successors and assigns, and no other person shall acquire or have any right under, or by virtue of, this Agreement; (C) If this Agreement shall be canceled or terminated by you because of nonfulfillment of the conditions set forth in Section 5 hereof or because of the Shipowner's failure to comply on or before the Closing Date with the conditions precedent set forth herein, the Shipowner shall have no further obligations or liability hereunder to you except that the Shipowner will reimburse you for out-of-pocket expenses reasonably incurred by you (including reasonable fees and disbursements of your counsel and interest on funds forwarded by you for delivery on the Closing Date to purchase Obligations, such interest to be at the rate borne by the Obligations for the period from the proposed Closing Date to the date on which such funds are returned to you); (D) This Agreement shall be governed and construed in accordance with the laws of the State of New York. 4 6 If you are in agreement with the foregoing, please sign the form of acceptance on the accompanying counterparts of this Agreement, retain one counterpart for your records and return the other counterparts to the Shipowner, whereupon this Agreement shall become a binding contract among you, the Shipowner and Purchaser. Very truly yours, CAPE COD LIGHT, L.L.C. By: DELTA QUEEN COASTAL VOYAGES, L.L.C., its Managing Member By: THE DELTA QUEEN STEAMBOAT CO., its Managing Member By: /S/ RANDALL L. TALCOTT ------------------------------ Its Vice President 7 The foregoing Agreement is hereby confirmed and accepted as of the date first above written. Chase Securities Inc. By: /s/ Michael K. Clare ---------------------------------- Michael K. Clare - Managing Director 8 SCHEDULE 1 Aggregate Principal Amount of Obligations To Purchaser Be Purchased: Chase Securities Inc. $38,500,000 All payments on account of the Obligations held by such purchaser shall be made by wire transfer of immediately available funds not later than 12:00 noon on the date payment is due for credit to: Account No. ___________________________ ABA No. _______________________________ Each such transfer shall set forth the name of the Shipowner and the coupon rate of the Obligations. Addresses for all communications and notices: 270 Park Avenue, 7th Floor New York, NY 10017-2070 EX-4.(II)(F)(3) 20 c58427ex4-iif3.txt U.S. GOV'T GUARANTEE SHIP FINANCING BONDS 1 EXHIBIT 4(ii)(f)(3) NO. R-1 CUSIP NO. 139541 AA9 $ 38,500,000 U.S. GOVERNMENT GUARANTEED SHIP FINANCING BONDS, 2000 SERIES 7.25% SINKING FUND BONDS DUE APRIL 15, 2027 ISSUED BY CAPE COD LIGHT, L.L.C. Cape Cod Light, L.L.C., a Delaware limited liability company (herein called the "Shipowner"), FOR VALUE RECEIVED, promises to pay to Cede & Co. or registered assigns, the principal sum of THIRTY EIGHT MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($38,500,000.00) on the earlier of April 15, 2027, or the twenty-fifth anniversary of the Delivery Date (unless sooner redeemed as herein provided) and to pay interest semiannually on April 15 and October 15 of each year commencing April 15, 2001 until the Delivery Date, on the Delivery Date and semiannually following the Delivery Date until maturity, on the unpaid principal amount of this Obligation at the rate of 7.25% per annum (calculated on the basis of a 360-day year of twelve 30-day months) from the interest payment date referred to above next preceding the date of this Obligation to which interest on the Obligations has been paid (unless the date hereof is the date to which interest on the Obligations has been paid, in which case from the date of this Obligation), or if no interest has been paid on the Obligations since the Original Issue Date (as defined in the Indenture hereinafter mentioned) of this Obligation, from the Original Issue Date, until payment of said principal sum has been made or duly provided for, and at the same rate per annum on any overdue principal. The principal of and the interest on this Obligation, as well as any premium hereon in case of certain redemptions hereof prior to maturity, are payable to the registered owner hereof at the Corporate Trust Office of the Indenture Trustee, The Bank of New York, a New York banking corporation (the "Indenture Trustee") or at a Paying Agent maintained for such purposes in any coin or currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts therein; provided that, payments may be made by check mailed to the address of the registered owner hereof as such address shall appear on the Obligation Register of said Indenture Trustee, and by such other methods of payment as permitted by the Indenture. This Obligation is one of an issue of Obligations of the Shipowner of $38,500,000 aggregate principal amount of sinking fund Obligations, designated as its "United States Government Guaranteed Ship Financing Bonds, 2000 Series," all issued under a Trust Indenture dated October 16, 2000 (the "Indenture"), between the Shipowner and the Indenture Trustee to aid in financing the cost of the construction by the Shipowner of the Vessel. Reference is hereby made to the Indenture for a definition of the capitalized terms used but not defined herein and a 2 description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Shipowner and the Indenture Trustee, the Obligees of the Obligations, and the Secretary. In accordance with the terms of an Authorization Agreement dated October 16, 2000 between the United States of America, represented by the Secretary of Transportation, acting by and through the Maritime Administrator (the "Secretary") and the Indenture Trustee, and by endorsement of the guarantee of the United States of America (the "Guarantees") on each of the Obligations and the authentication and delivery of the Guarantees by the Indenture Trustee, all pursuant to the Act, the Obligations are guaranteed by the United States of America as provided in the Authorization Agreement and in the Guarantees endorsed thereon. Reference is hereby made to the Authorization Agreement for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Secretary, the Indenture Trustee, and the Obligees of the Obligations. Furthermore, it is hereby noted that Section 1103(d) of Title XI of the Act provides that: "The full faith and credit of the United States is pledged to the payment of all guarantees made under this title with respect to both principal and interest, including interest, as may be provided for in the guarantee, accruing between the date of default under a guaranteed obligation and the payment in full of the guarantee." If an Indenture Default shall have occurred and be continuing, the Indenture Trustee, as provided in the Indenture shall, not later than 60 days from the date of such Indenture Default, demand payment by the Secretary of the Guarantees, whereupon the entire unpaid principal amount of the Outstanding Obligations and all unpaid interest thereon shall become due and payable on the first to occur of the date which is 30 days from the date of such demand or the date on which the Secretary pays the Guarantees. If no demand for payment of the Guarantees shall have been made by the Indenture Trustee on or before the 30th day following an Indenture Default, the Obligee of any Outstanding Obligation may, in the manner provided in the Indenture, make such demand in place of the Indenture Trustee. In the event of an Indenture Default of which the Secretary has actual knowledge, the Secretary, as provided in the Authorization Agreement, will publish notice in the Authorized Newspaper, which shall be The Wall Street Journal, of the occurrence of such Indenture Default within 30 days from the date of such Indenture Default, unless demand for payment under the Guarantees shall previously have been made by the Indenture Trustee, but any failure to publish such notice or any defect therein shall not affect in any way any rights of the Indenture Trustee, the Secretary or any Obligee of a Obligation. Within 30 days from the date of any demand for payment of the Guarantees, the Secretary shall pay to the Indenture Trustee all the unpaid interest to the date of such payment on, and the unpaid balance of the principal of such Obligations in full, in cash; provided that, in the case of a demand made as a result of an Indenture Default, the Secretary shall not be required to make any such payment if (i) within such 30-day period (and prior to any payment of the Guarantees by the Secretary), the Secretary finds either that there was no Payment Default, or that such Payment 2 3 Default was remedied prior to the demand for payment of the Guarantees, or (ii) the Secretary assumes the Obligations prior to such demand and makes all payments then in default in the manner provided in Section 6.09 of the Indenture. In each such event the Guarantees shall continue in full force and effect. The Obligee of this Obligation, by the purchase and acceptance hereof, hereby irrevocably appoints the Indenture Trustee and each other Obligee of any Outstanding Obligation as agent and attorney-in-fact for the purpose of making any demand for payment of the Guarantees, and (in the case of the Indenture Trustee) of receiving and distributing such payment; provided that, no action or failure to act by the Indenture Trustee shall affect the right of the Obligee of this Obligation to take any action whatsoever permitted by law and not in violation of the terms of this Obligation or of the Indenture. Any amount payable by the Secretary under the Guarantees shall not be subject to any claim or defense of the United States of America, the Secretary, or others, whether by way of counter-claim, set-off, reduction or otherwise. Further, the Obligee of this Obligation shall have no right, title or interest in any collateral or security given by the Shipowner to the Secretary. After payment of the Guarantees by the Secretary to the Indenture Trustee, this Obligation (1) if it has not then been surrendered for cancellation or canceled, shall represent only the right to receive payment in cash of an amount (less the amount, if any, required to be withheld with respect to transfer or other taxes on payments to the Obligee of this Obligation) equal to the unpaid principal amount hereof and the unpaid interest accrued hereon to the date on which the Secretary shall have paid the Guarantees in full in cash to the Indenture Trustee, (2) shall otherwise no longer constitute or represent an obligation of the Shipowner, and (3) shall not be entitled to any other rights or benefits provided in the Indenture, subject to Section 6.08 of the Indenture. The Obligations (including this Obligation) may be redeemed at any time following April 14, 2001, upon the terms and conditions provided in the Indenture, in whole or in part, at the option of the Shipowner, at any time or from time to time upon at least 30 and not more than 60 days prior notice given as provided in the Indenture, at a redemption price equal to 100% of the principal amount hereof, being so redeemed, together with the interest accrued thereon to the date fixed for redemption, plus the Make Whole Premium (as herein after defined). The "Make-Whole Premium" with respect to any optional redemption of Obligations shall be determined by the Indenture Trustee two business days prior to the date fixed for such redemption and shall be equal to the excess, if any, of (i) the sum of the respective Present Values (as defined below) of the amount of such redemption over (ii) 100% of the aggregate principal amount being redeemed on such date; provided that, the Make-Whole Premium shall in no event be less than zero. The "Present Value" of each optional redemption shall be determined by discounting on a semi-annual basis each "Prospective Payment" (as defined 3 4 below) at the Treasury Rate" (as defined below) for the period from the date on which such Prospective Payment was scheduled to be paid to the applicable date of redemption plus 0.25%. "Prospective Payment" means, with respect to any redemption: (i) each scheduled interest payment on the scheduled principal amount being redeemed, excluding any portion of any such interest payment accrued as of the date of redemption, plus (ii) the scheduled principal amount being redeemed. "Treasury Rate" means the rate per annum (expressed as a semi-annual equivalent) determined by the Indenture Trustee to be the per annum rate equal to the semi-annual yields to maturity of the issue of actively traded United States Treasury securities having a maturity equal to the "Weighted Average Life to Final Maturity" (as defined below); provided, however, that if such Weighted Average Life to Final Maturity is not equal to the maturity of an actively traded United States Treasury security (rounded to the nearest one-twelfth of a year), such yield shall be obtained by linear interpolation from the yields of actively traded United States Treasury securities having the greater maturity closest to and the lesser maturity closest to such Weighted Average Life to Final Maturity. The yields shall be determined by reference to the yields as indicated by Telerate Access Service (page 500 or the relevant page at the date of determination indicating such yields) or, if such data cease to be available, any publicly available sources of similar market data selected by the Indenture Trustee as of the applicable time of determination. "Weighted Average Life to Final Maturity" means the number of years (rounded up to the nearest one-twelfth of a year) obtained by dividing: (i) the then "Remaining Dollar Years" (as defined below) by (ii) the total amount of the then remaining aggregate unpaid principal amount of the Obligations without giving effect to such redemption. "Remaining Dollar Years" means the sum of the products obtained by multiplying: (i) the amount of each remaining scheduled payment of principal of the Obligation without giving effect to such redemption by (ii) the number of years (rounded to the nearest one-twelfth of a year) which will elapse between the date of redemption and the applicable mandatory redemption date for the principal amount being redeemed. Obligations optionally redeemed by the Shipowner or purchased or otherwise acquired by the Shipowner and delivered in accordance with terms of the Indenture to the Trustee for cancellation shall be applied at 100% of the principal amount thereof pro rata to succeeding "Mandatory Sinking Fund Redemptions" (as defined below) and at maturity. The Obligations (including this Obligation) are also subject to redemption, upon the terms and conditions provided in the Indenture and upon like notice, through the operation of a mandatory sinking fund providing for the redemption semiannually on each April 15 and October 15, commencing on the earlier of October 15, 2002 or six months after the Delivery Date, at 100% of the principal amount thereof plus interest accrued thereon to such date, of a principal amount of such Obligations equal to $770,000 and on the earlier of April 15, 2027, or the twenty-fifth anniversary of the Delivery Date, the entire unpaid principal amount of the 4 5 Outstanding Obligations shall be paid in full, together with all interest accrued thereon to such date (a "Mandatory Sinking Fund Redemption"). The Obligations (including this Obligation) are also subject to mandatory redemption without premium, upon the terms and conditions provided in the Indenture, in whole or in part, at 100% of the principal amount thereof, plus interest accrued thereon to the date of redemption, upon at least 30 and not more than 60 days prior notice (a) in the event that Obligations must be redeemed so that the principal amount of all Obligations Outstanding after such redemption will not exceed 87.5% of the Depreciated Actual Cost or Actual Cost, as determined by the Secretary, of the Vessel, (b) in the event of an actual, constructive, agreed or compromised total loss of, or requisition of title to, or seizure or forfeiture of, the Vessel, or (c) in the event of termination of a contract relating to the construction of the Vessel. If the principal amount of Outstanding Obligations is reduced by reason of any redemption described in this paragraph, the principal amount of Obligations subject to Mandatory Sinking Fund Redemptions in the future shall be reduced as provided in the Indenture. The Obligations (including this Obligation) may also be redeemed without premium upon the terms and conditions provided in the Indenture, in whole or in part, at the option of the Secretary, at any time following an assumption of the Obligations and the Indenture by the Secretary, upon at least 40 and not more than 60 days prior notice given as provided in the Indenture, at a Redemption Price equal to 100% of the principal amount to be redeemed, plus interest accrued to the date fixed for redemption. Any optional redemption shall be subject to the receipt of the redemption moneys by the Indenture Trustee or any Paying Agent. Obligations called for redemption shall (unless the Shipowner shall cancel the proposed optional redemption) cease to bear interest on and after the date fixed for redemption. As provided in the Indenture and to the extent permitted thereby, compliance by the Shipowner with any of the terms of the Indenture may be waived, and the Indenture and the rights and obligations of the Shipowner, and the rights of the Obligees of the Obligations (including this Obligation) thereunder may be modified, at any time with the prior consent of the Secretary, and except as otherwise expressly provided in the Indenture, the consent of the Obligees of at least 60% in principal amount of the Outstanding Obligations affected thereby in the manner and subject to the limitations set forth in the Indenture; provided that, no such waiver or modification shall (1) without the consent of the Obligee of each Obligation affected thereby: (a) change the Stated Maturity or reduce the principal amount of any Obligation, (b) extend the time of payment of, or reduce the rate of, interest thereon, (c) change the due date of or reduce the amount of any sinking fund payment, (d) reduce any premium payable upon the redemption thereof, or (e) change the coin or currency in which any Obligation or the interest thereon is payable; or (2) without the consent of all Obligees of Obligations: (a) terminate or modify any of the Guarantees or the obligations of the United States of America thereunder, (b) reduce the amount of any of the Guarantees, (c) eliminate, modify or condition the duties of the Indenture Trustee to demand payment of the Guarantees, (d) eliminate or reduce the eligibility 5 6 requirements of the Indenture Trustee, or (e) reduce the percentage of principal amount of Obligations the consent of whose Obligees is required for any such modification or waiver. The Indenture provides that the Obligations (including this Obligation) shall no longer be entitled to any benefit provided therein if the Obligations shall have become due and payable at Maturity (whether by redemption or otherwise) and funds sufficient for the payment thereof (including interest to the date fixed for such payment, together with any premium thereon) and available for such payment (1) shall be held by the Indenture Trustee or any Paying Agent, or (2) shall have been so held and shall thereafter have been paid to the Shipowner after having been unclaimed for 6 years after the date of maturity thereof (whether by redemption or otherwise) or the date of payment of the Guarantees, except for the right (if any), of the Obligee to receive payment from the Shipowner of any amounts paid to the Shipowner as provided in (2) above with respect to this Obligation, all subject to the provisions of Section 6.08 of the Indenture. This Obligation is transferable by the registered Obligee or by his duly authorized attorney, at the Corporate Trust Office of the Indenture Trustee, upon surrender or cancellation of this Obligation, accompanied by an instrument of transfer in form satisfactory to the Shipowner and the Indenture Trustee, duly executed by the registered Obligee hereof or his attorney duly authorized in writing, and thereupon a new, fully registered Obligation or Obligations of like series and maturity for the same aggregate principal amount will be issued to the transferee in exchange therefor, each in the principal amount $1,000 or any integral multiple thereof, subject to the provisions of the Indenture. The Indenture provides that the Shipowner shall not be required to make transfers or exchanges of (1) Obligations for a period of 15 days immediately prior to an interest payment date, (2) Obligations after demand for payment of the Guarantees and prior to payment thereof or rescission of such demand as provided in Section 6.02(a) of the Indenture, or (3) Obligations which have been selected for redemption in whole or in part. The Shipowner, the Secretary, the Indenture Trustee and any Paying Agent for the payment of Obligations will treat the person in whose name this Obligation is registered as the absolute owner thereof for all purposes, and this rule may not be altered by any notice to the contrary to any of these entities, whether this Obligation shall be past due or not. No recourse shall be had for the payment of principal of, or the interest or premium (if any) on, this Obligation, or for any claim based hereon or on the Indenture, against any incorporator or any past, present or future subscriber to the capital stock, stockholder, limited partner, member, officer or director of the Shipowner or of any successor company, either directly or indirectly, and all such liability being expressly waived and released by the acceptance of this Obligation and by the terms of the Indenture. So long as the Guarantee is in effect, there shall be no recourse against the Shipowner. Neither this Obligation nor the Guarantee endorsed hereon shall be valid or become obligatory for any purpose until the Indenture Trustee shall have fully signed the authentication certificate endorsed hereon. 6 7 IN WITNESS WHEREOF, the Shipowner has caused this Obligation to be duly executed by the manual or facsimile signatures of its duly authorized officers. SHIPOWNER: CAPE COD LIGHT, L.L.C. By: DELTA QUEEN COASTAL VOYAGES, L.L.C., its Managing Member By: THE DELTA QUEEN STEAMBOAT CO., its Managing Member By: /s/ Randall L. Talcott --------------------------- Name Randall L. Talcott Its Vice President ATTEST By /s/ Jordan B. Allen ------------------------------- Name Jordan B. Allen Its Executive Vice President Dated: October 16, 2000 8 GUARANTEE OF THE UNITED STATES OF AMERICA The United States of America, represented by the Secretary of Transportation, acting by and through the Maritime Administrator, pursuant to Title XI of the Merchant Marine Act, 1936, as amended, hereby guarantees to the holder of the Obligation annexed hereto, upon demand of the holder or his agent, payment of the unpaid interest on, and the unpaid balance of the principal of, such Obligation, including interest accruing between the date of default under such Obligation, and the payment in full of the Obligation under this Guarantee. The full faith and credit of the United States of America is pledged to the payment of this Guarantee. The validity of this Guarantee is incontestable in the hands of any holder of such Obligation. Payment of this Guarantee will be made in accordance with the provisions of such Obligation. UNITED STATES OF AMERICA [UNITED STATES OF AMERICA DEPARTMENT SECRETARY OF TRANSPORTATION OF TRANSPORTATION LOGO] BY: /S/ JOHN E. GRAYKOWSKI ---------------------------- JOHN E. GRAYKOWSKI ACTING MARITIME ADMINISTRATOR TRUSTEE'S AUTHENTICATION CERTIFICATE This is one of the Obligations described in the Indenture and the foregoing Guarantee is one of the Guarantees described in the Authorization Agreement. INDENTURE TRUSTEE: THE BANK OF NEW YORK By: /s/ Mary LaGumina -------------------------------- Name: Mary LaGumina Title: Vice President 9 PAYMENTS ON ACCOUNT OF PRINCIPAL
Amount of Balance of Authorized Payment Date Principal Paid Principal Unpaid Signature ------------ -------------- ---------------- ---------
EX-4.(II)(F)(4) 21 c58427ex4-iif4.txt TRUST INDENTURE 1 EXHIBIT 4(ii)(f)(4) ================================================================================ TRUST INDENTURE Relating to United States Government Guaranteed Ship Financing Obligations Between CAPE COD LIGHT, L.L.C., Shipowner And THE BANK OF NEW YORK, Indenture Trustee Dated October 16, 2000 ================================================================================ 2 TRUST INDENTURE SPECIAL PROVISIONS THIS TRUST INDENTURE, dated October 16, 2000 (the "Indenture"), between (i) Cape Cod Light, L.L.C., a Delaware limited liability company (the "Shipowner"), and (ii) The Bank of New York, a New York banking corporation (the "Indenture Trustee"). RECITALS WHEREAS, pursuant to the understandings set forth in the Security Agreement, the Shipowner has authorized the issuance of certain Obligations pursuant to this Indenture, with the aggregate principal amount of the Obligations not to exceed $38,500,000 to finance the cost of construction of the Vessel; and WHEREAS, the Secretary, on behalf of the United States, has agreed to Guarantee the payment of the unpaid interest to the date of such payment on, and the unpaid balance of the principal of, such Obligations under the provisions of Title XI of the Act, and has authorized the Indenture Trustee to cause the Guarantees to be imprinted on the Obligations pursuant to the Authorization Agreement. NOW THEREFORE, in consideration of the premises, of the mutual covenants herein contained, of the purchase of the Obligations by the Holders thereof, and of other good and valuable consideration, the receipt and adequacy of which the parties hereby acknowledge, and for the equal and proportionate benefit of all the present and future Holders of the Obligations, parties hereto agree as follows: 1. Incorporation of General Provisions. This Indenture shall consist of two parts: the Special Provisions and the General Provisions attached hereto as Exhibit 1, and they shall be treated as one instrument. In the event of a conflict, the terms of the Special Provisions shall prevail. 2. The Obligations. (a) The Obligations issued hereunder shall be designated "United States Government Ship Financing Bonds, 2000 Series", shall be in the maximum principal amount of $38,500,000, and shall be issued in the form of the Obligation set forth in Exhibit 2 hereto. (b) The denominations of the Obligations shall be in integral multiples of $1,000. (c) The Shipowner shall at all times cause to be maintained in the City of New Orleans, State of Louisiana, an office or agency for the purposes specified in Section 5.03 of this Indenture. 3 (d) The Indenture Trustee shall at all times have its Corporate Trust Office in the City of New York, State of New York. 3. Additions, Deletions, and Amendments to Exhibit 1. The following additions, deletions, and amendments are hereby made to Exhibit 1 to this Indenture: (a) Concerning Section 2.01. Section 2.01(c) is hereby amended by inserting the words, "holding Obligations in an aggregate principal amount of $1,000,000 or more," on the fourth line after "request of an Obligee" and prior to "received by the Indenture Trustee". (b) Concerning Notice of Stated Maturity and Sinking Fund Payment Dates. Article II of Exhibit 1 hereto is hereby amended by adding a new Section 2.11 as follows: "Section 2.11. Notice of Stated Maturity and Mandatory Sinking Fund Payment Dates. (a) In the event the Delivery Date shall occur prior to April 15, 2002, the interest payment dates, mandatory sinking fund payment dates and State Maturity of the Obligations shall be reset to fall on the semiannual anniversary of the Delivery Date in the case of the interest payment dates and the mandatory sinking fund payment dates and on the twenty-fifth anniversary of the Delivery Date in the case of the Stated Maturity. Not more than 30 days after the Delivery Date, a notice indicating (i) the Delivery Date, (ii) the interest payment dates, (iii) the mandatory sinking fund payment dates, (iv) the date fixed as the Stated Maturity of the Obligations shall be given by or on behalf of the Shipowner or, at the Shipowner's or at the Secretary's written request (provided, that the Indenture Trustee shall have received such request not more than 20 days after the Delivery Date), by the Indenture Trustee in the name and at the expense of the Shipowner by mailing a copy of such notice, by first class mail, postage prepaid, to each Holder of an Outstanding Obligation at his last address appearing on the Obligations Register. (b) Each Obligation issued by the Shipowner and authenticated and delivered by the Indenture Trustee subsequent to the date of any notice referred to in this Section 2.11 shall be appropriately legended by the Indenture Trustee, in the name and at the expense of the Shipowner, to reflect the matters set forth in such notice." (c) Concerning Section 3.02. (i) Section 3.02(b) is hereby amended by deleting the first sentence thereof and substituting it with the following: 2 4 "Obligations optionally redeemed by the Shipowner or purchased or otherwise acquired by the Shipowner and delivered in accordance with terms of the Indenture to the Trustee for cancellation shall be applied at 100% of the principal amount thereof pro rata to succeeding mandatory sinking fund redemptions and at maturity." (ii) Section 3.02(c) is hereby amended by deleting it in its entirety and inserting the following in lieu thereof: "(c) [Intentionally Omitted.]" (d) Concerning Section 3.03. Section 3.03 is hereby amended by deleting it in its entirety and substituting the following therefor: "(a) At its option, the Shipowner may redeem the Obligations, in whole or in part, at any time after April 14, 2001, at a Redemption Price equal to 100% of the principal amount being so redeemed, together with the interest accrued thereon, plus the Make Whole Premium. The Shipowner may redeem such Obligations on a date at least 40 days but not more than 60 days from the Indenture Trustee's receipt of the Request to make such an optional redemption and specifying the Redemption Date and the principal amount of Obligations which the Shipowner intends to redeem. (b) The Shipowner shall bear the costs of the Indenture Trustee directly associated with the calculation of the Make Whole Premium as defined and described in the Obligations." (e) Concerning Section 3.07. Section 3.07 is hereby amended by inserting the words "from each Holder" on the third line after "redeemed" and prior to "by multiplying" and deleting the words "each Holder of an Outstanding Obligation is owed" on the fourth line and substituting in lieu thereof the words "of Outstanding principal amount of Obligations held by such Holder". (f) Concerning Section 7.04. Section 7.04 is hereby deleted in its entirety and replaced with the following: "Section 7.04. Compensation, Expenses and Indemnification of Indenture Trustee. The Shipowner shall (1) pay the Indenture Trustee such compensation as may be agreed upon by the Shipowner and the Indenture Trustee and reimburse it for its reasonable expenses and disbursements (including counsel fees and expenses) incurred in accepting the trusts created hereunder and in connection with the administration of such trusts; and (2) indemnify the Indenture Trustee for, and hold it harmless against, any loss, liability or expense (including counsel fees and expenses) which it may incur or suffer without negligence or bad faith in acting under this Indenture or the Authorization Agreement. The compensation of the Indenture Trustee shall not be limited to the compensation provided by law for a trustee acting under an express trust. The rights of the Indenture Trustee under 3 5 this Section 7.04 shall survive the resignation or removal of such Indenture Trustee or the satisfaction and discharge of the Indenture." (g) Concerning Section 8.01. Section 8.01 is hereby amended by deleting the phrase "on the Proportionate Part of the Outstanding Obligations, as determined by the Secretary," contained on the ninth and tenth lines thereof. (h) Concerning Registered and Beneficial Ownership of the Obligations; Legends. (i) Each issue of Obligations shall be issued initially in the form of one permanent global Obligation, as the case may be, in definitive, fully registered form without interest coupons (the "Global Obligation"). Except as provided in paragraph (iii) below, owners of beneficial interests in the Global Obligation ("Obligation Owners") will not be entitled to receive separate certificated Obligations ("Definitive Obligations") and will not be considered the Holders thereof. The Global Obligation shall be deposited with the Depository Trust Company ("DTC") or the Indenture Trustee, as custodian for DTC, registered in the name of DTC or a nominee of DTC, and duly executed by the Shipowner and authenticated by the Indenture Trustee as provided in the Indenture, and DTC or such nominee of DTC shall be the sole Holder for purposes of this Indenture until the Global Obligation becomes exchangeable for Definitive Obligations in accordance with paragraph (iii)(2) below. The Global Obligation shall bear such legend as DTC may require. (ii) Members of, or participants in, DTC shall have no rights under the Indenture with respect to the Global Obligation held on their behalf by DTC or by the Indenture Trustee as the custodian of DTC or under such Global Obligation, and DTC may be treated by the Shipowner, the Indenture Trustee and any agent of the Shipowner or the Indenture Trustee as the absolute owner of such Global Obligation for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Shipowner, the Indenture Trustee or any agent of the Shipowner or the Indenture Trustee from giving effect to any written certification, proxy or other authorization furnished by DTC or impair, as between DTC and its members and participants, the operation of customary practices of DTC governing the exercise of the rights of an owner of a beneficial interest in the Global Obligation. (iii) (1) The transfer and exchange of the Global Obligation or beneficial interests therein shall be effected through DTC or the Indenture Trustee, as the custodian for DTC, in accordance with the Indenture. (2) The Global Obligation shall be exchangeable for Definitive Obligations registered in the names of Obligation Owners only if any of the following events shall have occurred: (1) DTC notifies the Shipowner that it is unwilling or unable to continue as depositary for such Global Obligation or DTC ceases to be a clearing agency registered under the Securities Exchange Act of 1934, as amended, at a time when DTC is required to be so registered in order to act as depositary, and a successor depositary is not appointed by the Shipowner within 90 days thereafter, (2) the Shipowner or the Indenture Trustee elects to terminate DTC's service or the book entry system, (3) the Secretary assumes the Obligations, or (4) the Secretary instructs the 4 6 Shipowner and the Indenture Trustee to terminate the Letter of Representations dated October 11, 2000, between the Shipowner and the Indenture Trustee and accepted by DTC. (3) Any Global Obligation that is exchangeable for Definitive Obligations registered in the name of the Obligation Owners pursuant to this paragraph (iii) shall be surrendered by DTC to the Indenture Trustee to be so exchanged, without charge, and the Shipowner shall execute and the Indenture Trustee shall authenticate and deliver, upon such exchange of such Global Obligation, an equal aggregate principal amount of Definitive Obligations of authorized denominations. Definitive Obligations issued in exchange for a beneficial interest in a Global Obligation pursuant hereto shall be registered in such names and in such authorized denominations as DTC, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Indenture Trustee in writing. The Indenture Trustee shall deliver such Definitive Obligations to the Obligation Owners in whose names such Obligations are so registered in accordance with the instructions of DTC. (4) The registered Holder of a Global Obligation may grant proxies and otherwise authorize any Obligation Owner, including the DTC's members and participants and Obligation Owners that may hold interests through such members and participants, to take any action which a Holder is entitled to take under the Indenture or the Obligations. (5) In the event of the occurrence of any of the events specified in paragraph (iii)(2), the Shipowner will promptly make available to the Indenture Trustee a reasonable supply of Definitive Obligations. (6) Notwithstanding any other provision of the Indenture, the Global Obligation may not be transferred except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC. (iv) At such time as all beneficial interests in the Global Obligation have either been exchanged for Definitive Obligations, redeemed, repurchased or canceled, such Global Obligation shall be returned to DTC for cancellation or retained and canceled by the Indenture Trustee. (v) The Indenture Trustee shall have no responsibility or obligation to any Obligation Owner, a member of, or a participant in DTC with respect to the accuracy of the records of DTC or its nominee or of any participant or member thereof, with respect to any ownership interest in the Obligations or with respect to the delivery to any participant, member, or other Obligation Owner (other than DTC) of any notice (including any notice of redemption) or the payment of any amount or delivery of any Obligations (or other security or property) under or with respect to such Obligations. All notices and communications to be given to the Holders and all payments to be made to Holders in respect of the Obligations shall be given or made only to or upon the order of the registered Holders (which shall be DTC or its nominee in the case of the Global Obligation). The rights of owners of beneficial interest in the Global Obligation shall be exercised only through DTC subject to the applicable rules and procedures of DTC. The Indenture 5 7 Trustee may rely and shall be fully protected in relying upon information furnished by DTC with respect to its members, participants and any Obligation Owner. 4. Miscellaneous. (a) Concerning Notices. Subject to the provisions of Section 13.01 of Exhibit 1 to this Indenture, any notice, request, demand, direction, consent, waiver, approval or other communication to be given to a party hereto or the Secretary, shall be deemed to have been sufficiently given or made when addressed to: The Indenture Trustee as: The Bank of New York 101 Barclay Street New York, NY 10286 Attention: Corporate Trust Administration The Shipowner as: CAPE COD LIGHT, L.L.C. Robin Street Wharf 1380 Port of New Orleans Place New Orleans, Louisiana 70130-1890 The Secretary as: SECRETARY OF TRANSPORTATION c/o Maritime Administrator U.S. Department of Transportation 400 Seventh Street, SW Washington, D.C. 20590 (b) Concerning Applicable Law. This Indenture and each Obligation shall be governed by the federal laws of the United State of America, but to the extent that they are inapplicable by the laws of the State of New York. (c) Execution of Counterparts. This Indenture may be executed in any number of counterparts. All such counterparts shall be deemed to be originals, and shall constitute but one and the same instrument. 6 8 IN WITNESS WHEREOF, this Indenture has been duly executed by the parties hereto as of the day and year first above written. SHIPOWNER: CAPE COD LIGHT, L.L.C. By: DELTA QUEEN COASTAL VOYAGES, L.L.C., its Managing Member By: THE DELTA QUEEN STEAMBOAT CO., its Managing Member By: / S / JORDAN B. ALLEN ---------------------------- Its Executive Vice President ATTEST: By / S / PAM STRINGER -------------------------- Its Assistant Secretary INDENTURE TRUSTEE: THE BANK OF NEW YORK By / s / Mary LaGumina ------------------------------------- Its Vice President ATTEST: By / s / Remo Reale ------------------------------ 9 SCHEDULE OF DEFINITIONS to TRUST INDENTURE Dated October 16, 2000 "Act" means the Merchant Marine Act, 1936, as amended and in effect on the Closing Date. "Act of Obligees" means any request, demand, authorization, direction, notice, consent, waiver or other action to be given or taken by the Obligees and embodied in one or more documents as required by the Indenture. "Authorization Agreement" means the Authorization Agreement, Contract No. MA-13636, between the Secretary and the Indenture Trustee, whereby the Secretary authorizes the Guarantee of the United States to be endorsed on each of the Obligations, as the same is originally executed, or as modified, amended or supplemented therein. "Authorized Newspaper" means The Wall Street Journal or if it ceases to exist, then in such other newspapers as the Secretary may designate. "Bond Purchase Agreement" means the agreement for the purchase of the Obligations, executed by the Shipowner and the purchaser named therein, as originally executed, modified or supplemented. "Business Day" means a day which is not a Saturday, Sunday or a bank holiday under the laws of the United States or the State of Louisiana and the State of New York. "Closing Date" or "Closing" means the date when Obligations are issued by the Shipowner and authenticated by the Indenture Trustee pursuant to the Authorization Agreement. "Corporate Trust Office" means the principal office of the Indenture Trustee at which, at any time, its corporate trust business is administered, which office is currently located at 101 Barclay Street, New York, New York 10286. "Definitive Obligation" has the meaning specified in Article 3(h) of the Special Provisions of the Indenture. "Delivery Date" means the date on which the Vessel is delivered to and accepted by the Shipowner. ii 10 "Global Obligation" has the meaning specified in Article 3(h) of the Special Provisions of the Indenture. "Guarantee" means each, and the "Guarantees" means every, guarantee of an Obligation by the United States pursuant to Title XI of the Act, as provided in the Authorization Agreement. "Holder" means each, and "Holders" means every, registered holder of an Obligation. "Indenture" means the Trust Indenture dated the Closing Date between the Shipowner and the Indenture Trustee, as originally executed, or as modified, amended or supplemented. "Indenture Default" has the meaning specified in Article VI of the Indenture. "Indenture Trustee" means The Bank of New York, a New York banking corporation, and any successor trustee under the Indenture. "Maturity" when used with respect to any Obligation, means the date on which the principal of such Obligation becomes due and payable as therein provided, whether at the Stated Maturity or by redemption or declaration of acceleration or otherwise. "Mortgage" means the first preferred ship mortgage on the Vessel, Contract No. MA-13638, by the Shipowner to the Secretary, as originally executed, modified, amended or supplemented. "Obligation" means each, and "Obligations" means each and every obligation of the Shipowner bearing a Guarantee that is authenticated and delivered under the Indenture and the Authorization Agreement. "Obligation Owners" has the meaning specified in Section 3(h) of the Special Provisions of the Indenture. "Obligation Register" has the meaning specified in Section 2.07 of the Indenture. "Obligee" means each, and "Obligees" means every, Holder of a Bond. "Officer's Certificate" means a certificate conforming to Section 1.02 of the Indenture. "Original Issue Date" means a date on which an Obligation was initially authenticated by the Indenture Trustee even if the Obligation is subsequently given a later date by reason of transfer, exchange or substitution. iii 11 "Outstanding" when used with reference to the Obligations, shall mean all Obligations theretofore issued under the Indenture, except: (1) Obligations Retired or Paid; and (2) Obligations in lieu of which other Obligations have been issued under the Indenture. Obligations which are not Outstanding shall not be entitled to any rights or benefits provided in the Indenture. "Parent Company" means The Delta Queen Steamboat Co., a Delaware corporation, and its successors and assigns. "Paying Agent" means any bank or trust company meeting the qualifications in Sections 7.02(a) of the Indenture and appointed by the Shipowner under Section 4.02 of the Indenture to pay the principal of (and premium if any) or interest on the Obligations on behalf of the Shipowner. "Payment Default" has the meaning specified in Section 6.01 of the Indenture. "Person" or "Persons" means any individual, corporation, partnership, joint venture, association, limited liability company, joint-stock company, trust, unincorporated organization, government, or any agency or political subdivision thereof. "Redemption Date" means a date fixed for the redemption of an Obligation by the Indenture. "Redemption Price" means the price at which an Obligation is redeemed under the Indenture. "Request" means a written request from a Person for the action therein specified, signed by a Responsible Officer of the Person making such request. "Responsible Officer" means (1) in the case of any business entity, the chairman of the board of directors, the president, any executive or senior vice president, the secretary, the treasurer, member or partner, (2) in the case of any commercial bank, the chairman or vice-chairman of the executive committee of the board of directors or trustees, the president, any executive or senior vice president, any vice president, any assistant vice president, the secretary, the treasurer, any trust officer, any assistant secretary or any assistant treasurer, and (3) with respect to the signing or authentication of Obligations and Guarantees by the Indenture Trustee, any person specifically authorized by the Indenture Trustee to sign or authenticate Obligations. "Retired or Paid" as applied to Obligations and the indebtedness evidenced thereby, means that such Obligations shall be deemed to have been so retired or paid and shall no longer be entitled to any rights or benefits provided in the Indenture if: (1) such Obligations shall have been paid in full; (2) such Obligations shall have been canceled by the Indenture Trustee and iv 12 shall have been delivered to the Indenture Trustee for cancellation; or (3) such Obligations shall have become due and payable at Maturity and funds sufficient for the payment of such Obligations (including interest to the date of Maturity, or in the case of a payment after Maturity, to the date of payment, together with any premium thereon) and available for such payment (whether as a result of payment pursuant to the Guarantees or otherwise) shall be held by the Indenture Trustee or any Paying Agent in trust for the purpose, or with irrevocable directions, to apply the same; provided that, the foregoing definition is subject to Section 6.08 of the Indenture. "Secretary" means the Secretary of Transportation. "Secretary's Notice" means a notice from the Secretary to the Indenture Trustee, that a Default, within the meaning of Section 6.01(b) of the Security Agreement has occurred. "Secretary's Supplemental Indenture" means a Supplemental Indenture, pursuant to Section 6.09 of the Indenture, evidencing the succession of the Secretary to the Shipowner, and the Secretary's assumption of the Shipowner's obligations under the Indenture. "Security Agreement" means the security agreement, Contract No. MA-13637, dated the Closing Date, consisting of the special provisions, the general provisions and Schedule X thereto, executed by the Shipowner as security for the Secretary, as originally executed or as modified, amended or supplemented. "Shipowner" means Cape Cod Light, L.L.C., a Delaware limited liability company, and its successors and assigns. "Stated Maturity" means the date determinable as set forth in any Bond as the final date on which the principal of such Bond is due and payable. "Title XI" means Title XI of the Act. "Vessel" means the cv Cape Cod Light. v 13 TABLE OF CONTENTS GENERAL PROVISIONS INCORPORATED INTO THE TRUST INDENTURE BY REFERENCE EXHIBIT 1 TO TRUST INDENTURE
ARTICLES & SECTIONS HEADINGS PAGE ARTICLE I..............................................................................................9 DEFINITIONS; OFFICER'S CERTIFICATES AND OPINIONS OF COUNSEL.........................................9 Section 1.01. Definitions.......................................................................9 Section 1.02. Officer's Certificate and Opinions of Counsel.....................................9 ARTICLE II.............................................................................................9 THE OBLIGATIONS.....................................................................................9 Section 2.01. Issuance of Obligations of Initial Series.........................................9 Section 2.02. Additional Obligations; Obligations of Additional Series.........................10 Section 2.03. Legends on Obligations...........................................................10 Section 2.04. Dates of Obligations.............................................................10 Section 2.05. Execution of Obligations.........................................................10 Section 2.06. Authentication of Obligations and Guarantees.....................................11 Section 2.07. Registration, Transfer and Exchange..............................................11 Section 2.08. Who Treated as Owners............................................................12 Section 2.09. Lost, Stolen, Destroyed or Mutilated Obligations.................................12 Section 2.10. Reacquired Obligations; Cancellation and Disposition of Obligations..............12 ARTICLE III...........................................................................................13 REDEMPTION OF OBLIGATIONS..........................................................................13 Section 3.01. Redemptions Suspended During Default.............................................13 Section 3.02. Redemptions Without Premium......................................................13 (a) Mandatory Sinking Fund Redemptions...........................................13 (b) Credit Against Mandatory Sinking Fund Redemptions............................13 (c) Optional Sinking Fund Redemptions............................................14 (d) Mandatory Redemptions Without Premium........................................14 (e) Adjustments of Redemption Payments...........................................14 Section 3.03. Optional Redemptions of Obligations at Premium...................................14 Section 3.04. Redemptions to Comply with Section 1104a(B)(2) of the Act........................15 Section 3.05. Redemption After Total Loss, Requisition of Title, Seizure or Forfeiture of A Vessel or Termination of Certain Contracts.......................................15
vi 14 Section 3.06. Redemption After Assumption by the Secretary.....................................15 Section 3.07. Determination of Obligations to be Redeemed......................................15 Section 3.08. Notices of Redemption............................................................16 Section 3.09. Deposit of Redemption Moneys.....................................................16 Section 3.10. Payment of Redemption Price......................................................16 ARTICLE IV............................................................................................17 CASH HELD BY INDENTURE TRUSTEE OR PAYING AGENTS....................................................17 Section 4.01. Generally........................................................................17 Section 4.02. Paying Agents....................................................................17 Section 4.03. Unclaimed Amounts................................................................17 Section 4.04. Application of Funds.............................................................18 ARTICLE V.............................................................................................18 SHIPOWNER'S REPRESENTATIONS AND AGREEMENTS.........................................................18 Section 5.01. Authorization, Execution and Delivery of Indenture...............................18 Section 5.02. Payment..........................................................................18 Section 5.03. Offices or Agencies of Shipowner.................................................18 ARTICLE VI............................................................................................11 INDENTURE DEFAULTS AND REMEDIES....................................................................18 Section 6.01. What Constitutes "Indenture Defaults.............................................18 Section 6.02. Demand for Payment of Guarantees.................................................19 Section 6.03. Appointment of Indenture Trustee and Holders of Outstanding Obligations as Attorneys-in-Fact..........................................................19 Section 6.04. Termination and Payment of the Guarantees........................................20 Section 6.05. Rights of Indenture Trustee After Indenture Default..............................21 Section 6.06. Obligees' Right to Direct Indenture Trustee After Indenture Default..............21 Section 6.07. Attorneys' Fees and Costs........................................................21 Section 6.08. Rescission of Payments...........................................................22 Section 6.09. Assumption of Obligations by Secretary...........................................22 ARTICLE VII...........................................................................................23 THE INDENTURE TRUSTEE..............................................................................23 Section 7.01. Acceptance of Trusts.............................................................23 Section 7.02. Eligibility of Indenture Trustee.................................................23 Section 7.03. Rights and Duties of Indenture Trustee...........................................23 Section 7.04. Compensation, Expenses and Indemnification of Indenture Trustee...................3 Section 7.05. Resignation and Removal of Indenture Trustee.....................................26 Section 7.06. Appointment of Successor Indenture Trustee.......................................26 Section 7.07. Effect of Appointment of Successor Indenture Trustee.............................26 Section 7.08. Merger, Consolidation or Sale of Indenture Trustee...............................27
vii 15 ARTICLE VIII..........................................................................................27 CONSOLIDATION OR MERGER OF SHIPOWNER OR SALE OF VESSEL.............................................27 Section 8.01. Consolidation or Merger of Shipowner or Sale of Vessel...........................27 ARTICLE IX............................................................................................28 ACTS OF OBLIGEES...................................................................................28 Section 9.01. Acts of Obligees.................................................................28 ARTICLE X.............................................................................................28 SUPPLEMENTAL INDENTURES............................................................................28 Section 10.01. Permissible Without Action by Obligees...........................................28 Section 10.02. Protection of Indenture Trustee..................................................29 Section 10.03. Reference in Obligations to Supplemental Indentures..............................29 Section 10.04. Waivers and Supplemental Indentures with Consent of Obligees.....................29 Section 10.05. Consent of Secretary.............................................................30 Section 10.06. Continued Validity of the Guarantees.............................................30 ARTICLE XI............................................................................................30 PERFORMANCE OF OBLIGATIONS TO SECRETARY............................................................30 Section 11.01. Performance of Obligations to Secretary..........................................30 ARTICLE XII...........................................................................................30 SATISFACTION AND DISCHARGE OF INDENTURE............................................................30 Section 12.01. Satisfaction and Discharge of Indenture..........................................30 ARTICLE XIII..........................................................................................31 MISCELLANEOUS......................................................................................31 Section 13.01. Notices and Demands..............................................................31 Section 13.02. Waivers of Notice................................................................31 Section 13.03. Benefit of Indenture.............................................................31 Section 13.04. Execution of Counterparts........................................................31 Section 13.05. Table of Contents; Titles and Headings...........................................31 Section 13.06. Immunity of Incorporators, Stockholders, Limited Partners, Members, Officers and Directors.......................................................31
viii 16 GENERAL PROVISIONS INCORPORATED INTO THE TRUST INDENTURE BY REFERENCE ARTICLE I DEFINITIONS; OFFICER'S CERTIFICATES AND OPINIONS OF COUNSEL Section 1.01. Definitions. For the purposes of this Indenture, capitalized terms shall have the meanings specified in Schedule A to the Indenture unless otherwise expressly provided. Section 1.02. Officer's Certificate and Opinions of Counsel. The Responsible Officer of the Person executing an Officer's Certificate with respect to a covenant or condition provided for in this Indenture shall certify that the officer (a) has read such covenant or condition; (b) has made or caused to be made such independent examination or investigation as is necessary to enable him to express an informed opinion with respect to such covenant or condition; and (c) believes to the best of his knowledge that such condition or covenant has been met. A lawyer issuing an Opinion of Counsel shall include the same representations, except that if, in the lawyer's professional opinion, reliance upon a certificate or an Opinion of Counsel signed by such Person or by another counsel is appropriate, the lawyer may so rely upon such certificate or opinion. Each Officer's Certificate and Opinion of Counsel shall set forth the pertinent supporting information and shall be subject to the Secretary's review of its adequacy and accuracy. ARTICLE II THE OBLIGATIONS Section 2.01. Issuance of Obligations of Initial Series. (a) At any time and from time to time after the execution and delivery of this Indenture, the Shipowner may deliver to the Indenture Trustee Obligations of the initial series issuable under this Indenture duly executed by the Shipowner, accompanied by a Request of the Shipowner, and thereupon the Indenture Trustee shall authenticate such Obligations, after endorsing thereon and authenticating the Guarantees of the United States in accordance with the Authorization Agreement, and shall deliver such Obligations and Guarantees in accordance with such Request. Each such Request shall specify the principal amounts, interest rates and Stated Maturities of the Obligations to be authenticated and the names and addresses of the Persons in whose name the Obligations are to be registered. (b) The initial series of Obligations shall set forth their respective principal amounts (in the denominations provided in the Special Provisions), interest rates per annum, and Stated Maturities, and shall be payable as to principal and interest and premium, if any, in any legal coin or currency of the United States and shall be subject to redemption as provided in Article III. (c) The principal and interest and any premium due on the Obligations shall be paid by (i) the Corporate Trust Office, or (ii) a Paying Agent by (x) certified or official bank check 17 mailed by first class postage prepaid to the addresses of the Obligees appearing on the Obligation Register or (y) at the request of an Obligee, received by the Indenture Trustee at least three Business Days prior to the date of payment, by wire transfer to a commercial bank in the United States or by credit to an account maintained by the Obligee with the Indenture Trustee without presentment of the Obligation. Prior to any sale, assignment or transfer of such Obligation, the Holder is required to present the Obligation to the Indenture Trustee so that a proper notation of all principal payments under (y) are made on the Obligation. (d) The Indenture Trustee agrees that within 30 days from the date of any payment of principal or interest when the same shall become due and payable by reason of Maturity or redemption, a Responsible Officer in the Corporate Trust Office of the Indenture Trustee shall ascertain to his satisfaction that checks in payment of such amounts have been mailed to the addresses of the Obligees as provided above, if payment is to be made by check, or if payment is to be made by wire transfer, or by credit to an account maintained by the Obligee with the Indenture Trustee, that such funds have been wired or credited, or if payment is to be made at the Corporate Trust Office, that funds were held by the Indenture Trustee for such payment on the date the payment was due. The Indenture Trustee shall have no obligation to determine whether such checks or payments were received by the Obligees. (e) If the Maturity of any Obligation or an Interest Payment Date for any Obligation shall be a day other than a Business Day, then such payment may be made on the next succeeding Business Day, with the same force and effect as if made on the nominal date for such payment, and no interest shall accrue thereon for the period after said nominal date. Section 2.02. Additional Obligations; Obligations of Additional Series. At any time, the Shipowner may, with the approval of the Secretary, issue additional Obligations of any series and Stated Maturity theretofore issued or of one or more additional series, which shall be for the purpose of aiding in financing or refinancing the construction, reconstruction or reconditioning of one or more of the Vessels and shall be (i) in such principal amount, and mature on such dates, bear interest at such rate or rates, be in such form or forms and have such other terms and provisions, as shall be set forth in a Supplemental Indenture providing for the issue thereof and (ii) guaranteed by the United States under the Act pursuant to a supplement to the Authorization Agreement. Section 2.03. Legends on Obligations. Any Obligation may have imprinted or stamped thereon any legend, consistent herewith, which is prescribed by the Shipowner and approved by the Indenture Trustee, and approved by the Secretary. Section 2.04. Dates of Obligations. Each Obligation of any series shall be dated the date of its authentication by the Indenture Trustee. Section 2.05. Execution of Obligations. The Obligations shall from time to time be executed on behalf of the Shipowner by a Responsible Officer thereof (whose signature may be a 10 18 facsimile), and its corporate seal (which may be a facsimile), if any, shall be imprinted thereon and attested by its secretary, assistant secretary or assistant trust officer (whose signature may be a facsimile). If a Shipowner's officer, whose signature appears on any Obligation, shall cease to be such an officer before such Obligation shall have been authenticated by the Indenture Trustee, the Obligation nevertheless may be delivered with the same force and effect as though the person had not ceased to be a Shipowner's officer. Section 2.06. Authentication of Obligations and Guarantees. No Obligation or the Guarantee of the United States thereon shall be valid unless such Obligation shall bear thereon an authentication certificate, executed by the Indenture Trustee in accordance with the terms and conditions of the Authorization Agreement. A duly executed authentication certificate shall be conclusive evidence, and the only competent evidence, that such Obligation and such Guarantee have been duly executed, authenticated and delivered hereunder. Section 2.07. Registration, Transfer and Exchange. (a) The Indenture Trustee shall keep an Obligation Register at the Corporate Trust Office for the registration of ownership, transfers and exchanges of Obligations. (b) A registered Obligee may transfer an Obligation, at the Corporate Trust Office, by surrender of such Obligation for cancellation, accompanied by an instrument of transfer in form satisfactory to the Shipowner and the Indenture Trustee, duly executed by the Obligee or its duly authorized attorney, and thereupon the Shipowner shall execute, and the Indenture Trustee shall authenticate and deliver in the name of the transferee, a new Obligation, and the Guarantee of the United States thereon, in authorized denominations of like series, tenor, interest accrual date and Stated Maturity and for the same aggregate principal amount. (c) The Shipowner shall not be required to register transfers or make exchanges of (1) Obligations for a period of 15 days immediately prior to (A) an Interest Payment Date or (B) any selection of Obligations to be redeemed; (2) Obligations after demand for payment of the Guarantees and prior to the payment thereof or rescission of such demand pursuant to Section 6.02(a); or (3) any Obligation which has been selected for redemption in whole or in part. If any Obligation surrendered for transfer or exchange has been selected for redemption in whole or in part, there may be endorsed on any Obligation issued therefor an appropriate notation of such fact. (d) Any Obligation may be exchanged for a like principal amount of Obligations of the same series, tenor, interest accrual date and Stated Maturity but of different authorized denominations. Obligations to be exchanged shall be surrendered at the Corporate Trust Office, and the Shipowner shall execute, and the Indenture Trustee shall authenticate and deliver in exchange therefor, the Obligation or Obligations, and the Guarantee or Guarantees of the United States thereon, requested by the Obligee in accordance with this paragraph. 11 19 (e) As a condition precedent to any transfer or exchange of Obligations, the Shipowner may require the payment of a sum sufficient to reimburse it for any taxes or other governmental charges that may be imposed with respect thereto and a sum not exceeding $2.00 for each Obligation delivered upon any such transfer or exchange. Section 2.08. Who Treated as Owners. The Shipowner, the Indenture Trustee, the Secretary, and any Paying Agent for the payment of principal of (and premium, if any) or interest on the Obligations may deem the Person in whose name any Obligation is registered in the Obligation Register as the absolute owner of such Obligation for all purposes, and neither the Shipowner, the Indenture Trustee, the Secretary, nor any such Paying Agent shall be affected by any notice to the contrary, whether such Obligation shall be past due or not. All payments of or on account of principal (and premium, if any) or interest, or pursuant to the Guarantee, to such registered Obligee shall be valid and effectual to satisfy and discharge the liability of the Shipowner and the Secretary to the extent of the sum or sums so paid, except as otherwise provided in Section 6.08. Section 2.09. Lost, Stolen, Destroyed or Mutilated Obligations. Upon receipt by the Shipowner and the Indenture Trustee of evidence satisfactory to them of the loss, theft, destruction or mutilation of any Outstanding Obligation ("Lost Obligation"), the Shipowner may execute, and upon request of the Shipowner, the Indenture Trustee shall authenticate and deliver, a new replacement Obligation, with the Guarantee of the United States thereon, of like series, tenor, interest accrual date, principal amount and Stated Maturity (which may bear such notation as may be required by the Indenture Trustee and which shall bear a serial number different from that of the Lost Obligation) and in the event such Lost Obligation has or is about to become due and payable, the Indenture Trustee may deem the applicant with respect thereto to be the owner of said Obligation for the purpose of receiving any payments due on account thereof; provided that (1) the Shipowner, the Indenture Trustee and the Secretary shall receive an indemnity satisfactory to the Shipowner, the Indenture Trustee and the Secretary; (2) the Shipowner shall be reimbursed for all reasonable expenses (including any fees or expenses of the Indenture Trustee) incident thereto; and (3) in the case of a mutilated Obligation, it shall be surrendered. Once the Indenture Trustee has issued a replacement Obligation, the Lost Obligation shall not be enforceable. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of Lost Obligations. Section 2.10. Reacquired Obligations; Cancellation and Disposition of Obligations. In the event the Shipowner shall reacquire any Obligations (whether by purchase or otherwise), such Obligations shall forthwith be delivered to the Indenture Trustee for cancellation. Except as provided in Section 3.10(b), all Obligations surrendered for the purpose of payment, redemption, transfer, exchange, or substitution, or in discharge in whole or in part of any sinking fund payment shall, if surrendered to the Shipowner or any Paying Agent, be delivered to the Indenture Trustee and shall be cancelled by it. No Obligation shall be authenticated in lieu of or 12 20 in exchange for any Obligation cancelled as provided in this Section, except as may be expressly permitted by this Indenture. Obligations cancelled by the Indenture Trustee shall be delivered or disposed of as directed by a Request of the Shipowner. ARTICLE III REDEMPTION OF OBLIGATIONS Section 3.01. Redemptions Suspended During Default. Notwithstanding the following provisions of this Article III, neither the Shipowner nor the Indenture Trustee shall redeem any Obligations, except pursuant to Sections 3.04 or 3.05, during the continuance of any Indenture Default, except that, where the mailing of notice of redemption of any Obligations shall have theretofore been made, the Indenture Trustee shall redeem or cause to be redeemed such Obligations if it shall have received a sum sufficient for such redemption. Except as aforesaid, any moneys received by the Indenture Trustee for the redemption of Obligations which may not be applied to the redemption thereof shall be held in trust by the Indenture Trustee and applied in the following manner: (1) in case such Indenture Default or such event shall no longer be continuing, such moneys shall thereafter be applied to the redemption of Obligations in accordance with the applicable provisions of the Obligations and of this Article III; (2) in the event the Secretary shall have assumed the Obligations pursuant to Section 6.09 or shall have been required to pay the Guarantees, such moneys shall be paid over by the Indenture Trustee to the Secretary; or (3) if no Obligation shall be Outstanding, and the Secretary shall not have been required to pay the Guarantees, such moneys shall be paid to the Shipowner. Section 3.02. Redemptions Without Premium. (a) Mandatory Sinking Fund Redemptions. The Obligations are subject to redemption at a Redemption Price equal to 100% of the principal amount thereof, together with interest accrued thereon to the Redemption Date, through the operation of a mandatory sinking fund providing for semi-annual redemption commencing and continuing on the dates and in the principal amounts specified in the Obligations, plus interest accrued thereon to the applicable sinking fund Redemption Date; provided, however, that in the event of any special redemption pursuant to Sections 3.04, 3.05 or 3.06 below, the principal amount of Obligations to be redeemed on each subsequent mandatory sinking fund Redemption Date shall be reduced by an amount equal to the principal amount of the Obligations retired by reason of such special redemption divided by the number of mandatory sinking fund Redemption Dates (including the Stated Maturity of the Obligations) scheduled thereafter. (b) Credit Against Mandatory Sinking Fund Redemptions. In lieu of making all or any part of any such mandatory sinking fund redemption of the Obligations, the Shipowner may, at its option, receive 100% credit for Obligations that have been (1) redeemed by the Shipowner pursuant to the optional redemption provision provided in subsection (c) below and in Section 3.03 below; or (2) purchased or acquired by the Shipowner (other than by redemption) and delivered to the Indenture Trustee for cancellation pursuant to Section 2.10 above. These Obligations shall be credited by the Indenture Trustee only under the following conditions: at least 40 days but not more than 60 days prior to the due date for such mandatory sinking fund 13 21 redemption, the Shipowner delivers a Request to the Indenture Trustee, (i) specifying the principal amount of Obligations to be credited, (ii) certifying that none of the Obligations have previously been made the basis of any credit and that the Shipowner is not restricted by contract from seeking the requested credit, and (iii) in the case of Obligations purchased or acquired by the Shipowner, if it has not already done so, presenting the uncancelled Obligations to be credited. (c) Optional Sinking Fund Redemptions. At its option, the Shipowner may redeem on any mandatory sinking fund Redemption Date, at a redemption price equal to 100% of the principal amount thereof, an additional principal amount of Obligations up to the principal amount of the Obligations required to be redeemed under subsection (a) above on such date, and before any reduction pursuant to the proviso of that subsection. The right to make any such optional sinking fund redemption shall not be cumulative. If the Shipowner shall elect to make any such optional sinking fund redemption, the Shipowner shall, at least 40 days but not more than 60 days prior to such mandatory sinking fund Redemption Date, deliver to the Indenture Trustee a Request stating that the Shipowner intends to exercise its right as set forth in this subsection to make such optional sinking fund redemption and specifying the additional principal amount of Obligations which the Shipowner intends to redeem on such mandatory sinking fund Redemption Date. (d) Mandatory Redemptions Without Premium. The Obligations of each series shall be subject to redemption without premium when redemption is required by the conditions specified in Sections 3.02, 3.04, 3.05 and 3.06. (e) Adjustments of Redemption Payments. If there is an adjustment in mandatory redemption payments as a result of redemptions under this Section or any other provision of the Indenture, the Shipowner shall recompute the remaining mandatory redemption payments pursuant to such provisions and shall, at least 60 days prior to the next Interest Payment Date, submit to the Secretary for his review of such recomputation to ascertain compliance with the provisions of this Indenture, a table of revised mandatory redemption payments on the Obligations of such series reflecting the adjustments made pursuant to such provisions as a result of such redemption. Upon advice by the Secretary that he finds such recomputation to comply with such provisions, the Shipowner shall submit said table to the Indenture Trustee and the Indenture Trustee shall promptly submit a copy thereof to each Holder of an Obligation of such series. Section 3.03. Optional Redemptions of Obligations at Premium. At its option, the Shipowner may redeem the Obligations, in whole or in part, at any time, at the redemption prices specified in the Obligations, together with the interest accrued thereon; provided that, no such redemption shall be made prior to the date specified in the Special Provisions, directly or indirectly with the proceeds of, or in anticipation of, borrowing by or for the account of the Shipowner if such borrowing has an effective interest cost (calculated in accordance with generally accepted financial practice) of less than the rate of interest borne by the Obligations. 14 22 The Shipowner may redeem such Obligations on a date at least 40 days but not more than 60 days from the Indenture Trustee's receipt of the Request to make such an optional redemption and specifying the Redemption Date and the principal amount of Obligations which the Shipowner intends to redeem. If this Request proposes a redemption prior to the date specified in the Special Provisions, the Shipowner shall include with the Request an Officer's Certificate stating that the redemption complies with the proviso relating to early redemptions. Section 3.04. Redemptions to Comply with Section 1104a(B)(2) of the Act. The Shipowner and the Secretary may Request a Redemption Date, at least 40 days but not more than 60 days from the Indenture Trustee's receipt of the Request, for the redemption of certain Obligations because the principal amount of the Outstanding Obligations are in excess of the amount eligible for guarantee by the United States under Section 1104A(b)(2) of the Act. Upon receipt, the Indenture Trustee shall promptly give notice to the Holders of the Redemption Date as provided in Section 3.08 and on that date shall redeem the principal amount of Obligations specified in the instruction together with the interest accrued thereon. Section 3.05. Redemption After Total Loss, Requisition of Title, Seizure or Forfeiture of A Vessel or Termination of Certain Contracts. The Shipowner and the Secretary may Request a Redemption Date, at least 40 days but not more than 60 days from the Indenture Trustee's receipt of the Request, for the redemption of certain Obligations because of (1) an actual, constructive, agreed or compromised total loss of a Vessel, (2) requisition of title to, or seizure or forfeiture of a Vessel or (3) termination of a primary Construction Contract. Upon receipt, the Indenture Trustee shall promptly give notice to the Holders of the Redemption Date as provided in Section 3.08 and on that date shall redeem such principal amount of Obligations together with the interest accrued thereon. Section 3.06. Redemption After Assumption by the Secretary. At any time after the Secretary has assumed the Obligations under Section 6.09 of the Indenture, the Secretary may Request a Redemption Date, at least 40 days but not more than 60 days from the Indenture Trustee's receipt of the Request, for the redemption of all or part of the Obligations. Upon receipt, the Indenture Trustee shall promptly give notice to the Holders of the Redemption Date as provided in Section 3.08 and on that date shall redeem such principal amount of Obligations together with the interest accrued thereon. Section 3.07. Determination of Obligations to be Redeemed. If less than all the Obligations are to be redeemed pursuant to Sections 3.03, 3.04 or 3.05, the Indenture Trustee shall select the particular Obligations to be redeemed by multiplying the total principal amount to be redeemed by a fraction, the numerator of which is the amount each Holder of an Outstanding Obligation is owed and the denominator is the total principal amount of the Outstanding Obligations, making adjustment so that the principal amount of any Obligation to be redeemed shall be $1,000 or an integral multiple thereof. 15 23 Section 3.08. Notices of Redemption. (a) In case of any redemption of Obligations, whether mandatory or optional, the Indenture Trustee shall send a notice of redemption indicating (1) the Redemption Date, (2) the Redemption Price, (3) if only a part of such Obligations is to be redeemed, the numbers or other identification of the Obligations and the principal amount thereof to be redeemed, (4) the place of payment upon redemption and (5) that interest shall cease to accrue after the Redemption Date if the Indenture Trustee or any Paying Agent shall have in fact received the required moneys. A copy of the notice shall be mailed by first class mail, postage prepaid, at least 30 days prior to the Redemption Date, to each Holder of an Outstanding Obligation that is to be redeemed in whole or in part, at the last address appearing upon the Obligation Register. (b) Any notice of optional redemption of Obligations shall state that the redemption is subject to the receipt of the redemption moneys by the Indenture Trustee or any Paying Agent. Such notice shall be of no effect unless prior to the opening of business on the Redemption Date the Indenture Trustee or such Paying Agent shall receive an amount in cash sufficient for such redemption (after taking into account any amounts then held by the Indenture Trustee or such Paying Agent and available for such redemption). Section 3.09. Deposit of Redemption Moneys. Prior to the opening of business on any Redemption Date, the Shipowner shall cause to be deposited with the Indenture Trustee or with any Paying Agent an amount sufficient for such redemption with irrevocable directions to it to so apply the same. Section 3.10. Payment of Redemption Price. (a) If notice of redemption shall have been given as provided above, the Obligations or portions thereof specified in such notice shall become due and payable on the Redemption Date and at the place of payment and the Redemption Price stated in such notice, and on and after said Redemption Date (unless the Shipowner shall (i) default in payment of the Redemption Price; or (ii) decide to cancel a notice of redemption) interest on the Obligations or portions thereof so called for redemption shall cease to accrue. Upon presentation and surrender of such Obligations in accordance with such notice, such Obligations or the specified portions thereof shall be paid and redeemed at the applicable Redemption Price. (b) Upon presentation of any Obligation redeemed in part only, the Shipowner shall execute and the Indenture Trustee shall authenticate and deliver to the order of the Holder thereof, at the expense of the Shipowner, a new Obligation or Obligations of like series and Stated Maturity, of authorized denominations, having endorsed thereon a Guarantee executed by the Secretary, in principal amount equal to the unredeemed portion of the Obligation so presented, or, at the option of such Holder, there may be noted thereon by the Indenture Trustee or, at its direction, by any Paying Agent the payment of the portion of the principal amount of such Obligation so called for redemption. 16 24 ARTICLE IV CASH HELD BY INDENTURE TRUSTEE OR PAYING AGENTS Section 4.01. Generally. (a) To the extent required by the Obligations, cash received by the Indenture Trustee or a Paying Agent shall be promptly paid to the Holders of the Outstanding Obligations and all other cash shall be held by the Indenture Trustee or a Paying Agent as a special deposit in trust for application in accordance with this Indenture. (b) Cash held by the Indenture Trustee or any Paying Agent (other than the Shipowner) under this Indenture: (1) need not be segregated; (2) shall not be invested; and (3) shall not bear interest except to the extent the Shipowner and the Indenture Trustee or Paying Agent may agree. Section 4.02. Paying Agents. (a) A Paying Agent appointed in writing by the Shipowner shall enter into a contract with the Indenture Trustee, agreeing that the Paying Agent will: (1) hold in trust all sums held by it for the payment of the principal of (and premium, if any) or interest on Obligations for the benefit of the Holders of such Obligations, and for the benefit of the Indenture Trustee; (2) forthwith give written notice to a Responsible Officer in the Corporate Trust Office signed by a Responsible Officer of the Paying Agent of (A) any payment by the Shipowner of the principal of (and premium, if any) or interest on Obligations, specifying the amount paid, segregated as to principal (premium, if any) and interest, and identifying each Obligation on which any payment was made by number, date, series, Stated Maturity and the name of the Obligee, and (B) any failure of the Shipowner to make any such payment when the same shall be due and payable; and (3) promptly, and in no event later than ten days after any payment made by it hereunder, give written notice to a Responsible Officer in the Corporate Trust Office of all payments of Obligations made by it, including and identifying all endorsements of payment made on Obligations by it, signed and containing the specified information as provided in subparagraph (2) above, and deliver for cancellation to the Indenture Trustee all Obligations surrendered to the Paying Agent. (b) The Shipowner may at any time cause to be paid to the Indenture Trustee all sums held in trust by any Paying Agent pursuant to this Section, such sums to be held by the Indenture Trustee upon the same trusts. Section 4.03. Unclaimed Amounts. Subject to applicable law, including State escheat laws, any moneys received by the Indenture Trustee or a Paying Agent, for the payment of Obligations or Guarantees and remaining unclaimed by the Holders thereof for 6 years after the date of the Maturity of said Obligations shall be paid to the Shipowner upon its delivery of a Request to the Indenture Trustee, unless the Secretary has previously paid the Guarantees, in 17 25 which case it shall be paid only upon a request of the Secretary. In such event, such Holders shall thereafter be entitled to look only to the Person that received the unclaimed amounts for the payment thereof, and the Indenture Trustee or such Paying Agent, as the case may be, shall thereupon be relieved from all responsibility to such Holders. No such Request or payment shall be construed to extend any statutory period of limitations which would have been applicable in the absence of such Request or payment. Section 4.04. Application of Funds. If at any time the Indenture Trustee shall hold funds under Section 4.03, the application, distribution or payment of which is not governed by a Request of the Shipowner or the Secretary delivered pursuant to any provision of the Indenture, the Indenture Trustee shall give written notice, in the absence of an Indenture Default, thereof to the Shipowner or to the Secretary if the an Indenture Default exists or the Secretary has paid the Guarantees. The Shipowner or the Secretary, as applicable, shall promptly thereafter deliver to the Indenture Trustee a Request. ARTICLE V SHIPOWNER'S REPRESENTATIONS AND AGREEMENTS The Shipowner hereby represents and agrees, so long as Obligations are Outstanding, as follows: Section 5.01. Authorization, Execution and Delivery of Indenture. The Shipowner has duly authorized the execution and delivery of this Indenture. Section 5.02. Payment. The Shipowner will duly and punctually pay the principal of (and premium, if any) and interest on the Obligations according to the terms thereof and of this Indenture. Section 5.03. Offices or Agencies of Shipowner. The Shipowner shall at all times maintain an office in the location within the United States specified in Article Second of the Special Provisions. Obligations and demands to or upon the Shipowner may be presented for payment, registration of transfer and exchange at this office. The Corporate Trust Office and a Paying Agent shall also be deemed offices for such purpose. ARTICLE VI INDENTURE DEFAULTS AND REMEDIES Section 6.01. What Constitutes "Indenture Defaults." (a) Each of the following events shall constitute an "Indenture Default": (1) Default in the payment of the whole or any part of the principal or interest on any of the Outstanding Obligations when the same shall become due and payable, whether by reason of Maturity, redemption, acceleration or otherwise, or any default referred to in Section 6.08, and continuation of any such default for a period of 30 days 18 26 (herein called a "Payment Default"); and (2) The giving of a Secretary's Notice to the Indenture Trustee. (b) The Indenture Trustee shall give to the Obligees, the Secretary and the Shipowner prompt notice in writing of any Indenture Default (unless such default shall have been remedied prior to the giving of such notice); provided that, the Indenture Trustee shall have no duty to give any such notice until a Responsible Officer of the Corporate Trust Office, has actual knowledge of such Indenture Default. The notice of an Indenture Default to the Obligees shall (1) specify the nature of such Indenture Default; (2) state that, by reason thereof, the Indenture Trustee is entitled under the Indenture to demand payment by the Secretary of the Guarantees; (3) set forth the provisions of Section 6.04(b)(3) and (5); and (4) advise the Obligees of the provisions of Section 6.02. Section 6.02. Demand for Payment of Guarantees. (a) If an Indenture Default shall have occurred and be continuing, the Indenture Trustee may not later than 60 days from the date of such Indenture Default demand payment by the Secretary of the unpaid interest to the date of such payment on, and the unpaid balance of the principal of, all Outstanding Obligations, whereupon the entire unpaid principal amount of the Outstanding Obligations and all unpaid interest thereon shall become due and payable no later than 30 days from the date of such demand; provided that, in the case of a demand made as a result of a Payment Default, if, prior to the expiration of 30 days from the date of such demand and prior to any payment of the Guarantees by the Secretary, the Secretary shall find, and give written notice to the Shipowner and the Indenture Trustee to the effect that, there was no Payment Default or that such Payment Default was remedied prior to such demand, such demand and the Indenture Default shall be of no legal effect or consequence. In each such case, the Guarantees shall remain in full force and effect. The Indenture Trustee shall give to each Obligee and to the Shipowner prompt written notice of any demand made by the Indenture Trustee pursuant to this paragraph (a), any such notice to Obligees to be given as provided in Section 13.01. (b) If the Indenture Trustee shall not have made the demand referred to in paragraph (a) of this Section on or before the 30th day following an Indenture Default which shall have occurred and be continuing and if the Holders of all Outstanding Obligations shall not have theretofore elected to terminate the Guarantees as provided in Section 6.04(a)(2), any Holder of an Outstanding Obligation, by an Act of Obligees delivered to the Secretary (with copies thereof to the Indenture Trustee and the Shipowner), may, in place of the Indenture Trustee and on behalf of all Holders of Outstanding Obligations, make such demand, subject to all the provisions of, and with the effect provided in, paragraph (a) of this Section. Section 6.03. Appointment of Indenture Trustee and Holders of Outstanding Obligations as Attorneys-in-Fact. Each Holder of an Outstanding Obligation by the purchase and acceptance of its Obligation, irrevocably appoints the Indenture Trustee and each other Holder of an Outstanding Obligation its agent and attorney-in-fact for the purpose of making the demand 19 27 provided for in Section 6.02 and (in the case of the Indenture Trustee) of receiving and distributing any payment or payments by the Secretary made pursuant to any such demand. Section 6.04. Termination and Payment of the Guarantees. (a) Except as otherwise provided in Section 6.08, the Guarantee with respect to any Obligation shall only terminate in case of the occurrence of one or more of the following events: (1) Such Obligation shall have been Retired or Paid; (2) The Holders of all Outstanding Obligations shall have elected, by Act of Obligees delivered to the Secretary, to terminate the Guarantees; (3) Such Guarantee shall have been paid in full in cash by the Secretary; or (4) The Indenture Trustee and each Obligee shall have failed to demand payment of such Guarantee as provided herein or in such Guarantee or in the Act. (b) Subject to the provisions of Section 6.08, when the Secretary shall pay the Guarantees in full in cash to the Indenture Trustee: (1) The Indenture Trustee shall hold the entire amount thereof in trust for the sole purpose of providing for the payments specified in subparagraph (5) below; (2) No Obligation or Obligations shall thereafter be issued; (3) The Obligations (A) shall represent only the right to receive the payments from the Indenture Trustee specified in subparagraph (5) below; (B) shall otherwise no longer constitute or represent an obligation of the Shipowner; and (C) shall not be entitled to any other rights or benefits under this Indenture; (4) The Indenture Trustee shall forthwith give written notice to the Shipowner and to each of the Obligees, stating that it has received payment of the Guarantees in full in cash from the Secretary and that the same is available for distribution to the Obligees in the manner specified in subparagraph (5) below (and the Indenture Trustee shall give like notice to the Holders of the Obligations at least annually thereafter for a period of 6 years or until all Obligations shall have been cancelled, whichever is earlier); and (5) Upon the surrender for cancellation of any Obligation, the Indenture Trustee shall forthwith pay to the Holder of such Obligation in cash an amount (less the amount, if any, required to be withheld in respect of transfer or other taxes on payment to such Holder) equal to the unpaid principal amount of such Obligation and the unpaid interest accrued thereon to the date on which the Secretary shall have paid the Guarantees in full in cash to the Indenture Trustee. 20 28 (c) If the Secretary shall not have paid the Guarantees in full in cash to the Indenture Trustee within 30 days after any demand therefor pursuant to Section 6.02 (whether or not because the Secretary makes any of the findings or takes the action referred to in the proviso of Section 6.02(a)), the Indenture Trustee shall give prompt written notice of such nonpayment to each Obligee and the Shipowner. If the Indenture Trustee shall have received notice of any of these findings or actions, such notice to each Obligee shall so state. Section 6.05. Rights of Indenture Trustee After Indenture Default. Unless the Guarantees have terminated as provided herein, the Indenture Trustee's sole right shall be to demand and receive payment of the Guarantees from the Secretary and to take all action, on behalf of itself and each Holder, to enforce its rights against the Secretary under the Guarantees, including but not limited to the institution and prosecution of all judicial and other proceedings. If the Guarantees have terminated under Section 6.04(a)(4) without payment by the Secretary, the Indenture Trustee shall have the right on behalf of itself and each Holder to take all action to enforce its rights directly against the Shipowner (but not the Secretary), including but not limited to the institution and prosecution of all judicial and other proceedings. Section 6.06. Obligees' Right to Direct Indenture Trustee After Indenture Default. (a) During the continuance of any Indenture Default, the Holders of a majority in principal amount of the Outstanding Obligations shall have the right, by an Act of Obligees, to direct the Indenture Trustee: (1) to exercise or to refrain from exercising any right or to enforce any remedy granted to it by this Indenture; and (2) to direct the time, method and place of the exercise of any such right or the enforcement of any such remedy; provided that, subject to Section 7.03, the Indenture Trustee shall have the right not to take any such action if it shall determine in good faith that the action would involve it in personal liability, would subject it to expenses against which it has not been offered adequate security and indemnity, or would be unjustly prejudicial to the Obligees not parties to such direction; and provided further that, notwithstanding any other provision of this Indenture to the contrary, the Indenture Trustee shall be obligated to demand payment of the Guarantees as provided in Section 6.02(a) unless the Holders of all the Outstanding Obligations shall have directed him not to make demand. (b) Nothing in paragraph (a) shall affect the right of any Obligee to institute any judicial or other proceeding, if the Indenture Trustee declines to do so, against the Secretary while the Guarantees are in effect or against the Shipowner or the Indenture Trustee if the guarantees have terminated under Section 6.04(a)(4); provided, however, that such action does not seek to obtain priority or preference over any other Obligees or to enforce any right under this Indenture, except for the equal and ratable benefit of all the Obligees. Section 6.07. Attorneys' Fees and Costs. In any proceeding for the enforcement of any right or remedy under this Indenture, or in any proceeding against the Indenture Trustee for any action taken or omitted by it as Indenture Trustee, the court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant, having due 21 29 regard to the merits and good faith of the claims or defense made by such party litigant. The provisions of this Section shall not apply to any proceeding instituted by the Indenture Trustee or any proceeding instituted by any Obligee against the Secretary or the Shipowner for the payment of the principal of (and premium, if any) and interest on the Obligations. Section 6.08. Rescission of Payments. Notwithstanding any other provision of this Indenture, or of the Obligations, in the event that any payment to or on behalf of an Obligee of the principal of or interest due under any Obligation, or any portion of any such payment, shall at any time be repaid by such Obligee in compliance with a final order of a court of competent jurisdiction pursuant to any provision of the Bankruptcy Code or any Federal Law replacing or superseding such Code, or applicable state law, and regardless of whether there has been any previous Indenture Default and any payment pursuant thereto, or whether such Obligation shall theretofore have been acquired by the Shipowner or cancelled, or whether an instrument satisfying and discharging this Indenture shall have been executed and delivered, (1) such Obligation shall not be deemed to have been Retired or Paid and shall be deemed to be Outstanding; (2) the return of such payment in whole or in part in compliance with the order of such court shall constitute a default in payment of such Obligation within the meaning of Section 6.01(a), which default shall be deemed to have occurred on the date of such repayment and which default, if continued for 30 days, will constitute a Payment Default; (3) the Guarantee of such Obligation and (to the extent necessary to enforce such Obligation and Guarantee) this Indenture shall be in full force and effect; and (4) the Person required to return such payment or portion thereof shall be deemed for all purposes to be a Holder of such Obligation and entitled to enforce such Obligation and Guarantee to the extent of such repayment and, if there shall not be any Indenture Trustee hereunder then in office, such Person shall also be entitled to exercise on his own behalf all the rights of the Indenture Trustee hereunder necessary for such enforcement; provided that, in the event the Guarantee of any Obligation shall have terminated for reasons set forth in Section 6.04(a)(2) or (4) of this Indenture prior to the aforesaid date of repayment the provisions of this Section shall not apply to such Obligation. Section 6.09. Assumption of Obligations by Secretary. (a) Notwithstanding anything to the contrary contained herein, in the absence of a demand under Section 6.02 hereof and upon the occurrence of a default in the payment of any principal or interest due under the Obligations which has continued for 25 days or more, or upon the Secretary's giving of a Secretary's notice under this Indenture, the Secretary may, in his sole discretion, assume the rights and obligations of the Shipowner under this Indenture and the Obligations by (i) giving to the Shipowner and Indenture Trustee a signed notice stating that it has assumed the Obligations and the Indenture and (ii) making any payment of principal or interest which is due under the Obligations. (b) The Indenture Trustee and the Shipowner hereby agree that, upon the Indenture Trustee's receipt of the notice and payments referred to in paragraph (a)(i) and (ii) of this section, the Secretary's assumption shall, as of the date of the Secretary's execution of the notice, be effective and binding upon the Indenture Trustee and the Shipowner and their respective successors or assigns without further act or deed. Upon an assumption by the Secretary, the 22 30 Secretary shall succeed to and be substituted for and may exercise every right and power of the Shipowner under this Indenture and the Obligation with the same force and effect as if the Secretary has been named as the Shipowner herein and therein. The Secretary may exercise its rights under this section as often as it deems appropriate in its sole discretion. ARTICLE VII THE INDENTURE TRUSTEE Section 7.01. Acceptance of Trusts. The Indenture Trustee hereby accepts the trusts of this Indenture. Section 7.02. Eligibility of Indenture Trustee. (a) The Indenture Trustee shall at all times be a bank with corporate trust powers or trust company which (1) is organized and doing business under the laws of the United States, any state or territory thereof; (2) has a combined capital and surplus (as set forth in its most recent published report of condition) of at least $25,000,000; and (3) shall not have become incapable of acting or have been adjudged a bankrupt or an insolvent nor have had a receiver appointed for itself or for any of its property, nor have had a public officer take charge or control of it or its property or affairs for the purpose of rehabilitation, conservation or liquidation. (b) Should the Indenture Trustee at any time cease to be eligible, pursuant to this Section, to act as trustee, it shall promptly notify the Obligees, the Shipowner and the Secretary of such fact; and should the Shipowner obtain knowledge of such ineligibility, it shall promptly advise the Indenture Trustee, the Secretary, and the Obligees of all the relevant facts. Section 7.03. Rights and Duties of Indenture Trustee. (a) The Indenture Trustee shall not be responsible for the correctness of the Recitals in the Special Provisions hereof or in the Obligations (except the Indenture Trustee's authentication certificate thereon), all of which Recitals are statements made solely by the Shipowner. (b) The Indenture Trustee shall not be responsible for the validity, execution by other parties thereto, or sufficiency of this Indenture, the Authorization Agreement, the Obligations or the Guarantees. (c) The Indenture Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (d) Except during the continuance of any Indenture Default, the Indenture Trustee shall perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Indenture Trustee. 23 31 (e) No provision of this Indenture shall relieve the Indenture Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct; provided that: (1) Except during the continuance of an Indenture Default, in the absence of bad faith on the part of the Indenture Trustee, the Indenture Trustee may conclusively rely upon certificates or opinions conforming to the requirements of this Indenture as to the truth of the statements and the correctness of the opinions expressed therein; and (2) The Indenture Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with an Act of Obligees relating to the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee. (f) Subject to paragraph (i) of this Section, the Indenture Trustee shall be under a duty to examine certificates and opinions required by this Indenture to be furnished to it to determine whether or not they conform to the requirements hereof. (g) Subject to paragraph (c) of this Section, the Indenture Trustee may rely and shall be protected in acting upon any resolution, certificate, opinion, notice, request, consent, order, appraisal, report, bond, or other paper or document believed by it to be genuine, to have been signed by the proper party or parties and to be in conformity with the provisions of this Indenture. (h) Subject to paragraph (c) of this Section, in all cases where this Indenture does not make express provision as to the evidence on which the Indenture Trustee may act or refrain from acting, the Indenture Trustee shall be protected in acting or refraining from acting hereunder in reliance upon an Officer's Certificate as to the existence or nonexistence of any fact. (i) Subject to paragraph (c) of this Section, the Indenture Trustee may consult with counsel satisfactory to the Indenture Trustee, and an Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such Opinion of Counsel. (j) Whenever it is provided that the Indenture Trustee shall take any action, including the giving of any notice or the making of any demand, or refrain from taking any action upon the happening or continuation of a specified event (including an Indenture Default) or upon the fulfillment of any condition or upon the Request of the Shipowner or of Obligees or upon receipt of any notice, including a Secretary's Notice, the Indenture Trustee shall, subject to paragraph (c) of this Section, have no liability for failure to take such action or for failure to refrain from taking such action until a Responsible Officer in the Corporate Trust Office, has actual knowledge of 24 32 such event or continuation thereof or the fulfillment of such conditions or shall have received such Request. (k) Subject to paragraph (c) of this Section, the Indenture Trustee shall not be under any obligation to exercise any of the trusts or powers hereof at the request, order or direction of any Obligees or the Secretary, unless such Obligees or the Secretary shall have offered to the Indenture Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities to be incurred thereby. (l) The Indenture Trustee, in its individual or any other capacity, may become the owner or pledgee of Obligations with the same rights it would have if it were not Indenture Trustee. (m) Notwithstanding any other provision of this Indenture, the Indenture Trustee shall not take any action contrary to the terms of the Authorization Agreement, and any such purported action or any attempt to take such action shall be void and of no effect. (n) No provision of this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (o) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Indenture Trustee shall be subject to the provisions of this Section. (p) Upon the execution and delivery of an instrument satisfying and discharging this Indenture as provided in Section 12.01 hereof, all duties and obligations of the Indenture Trustee hereunder (except with respect to the application of funds for the payment of Obligations then held by the Indenture Trustee) shall cease and shall not thereafter be revived, whether or not the Indenture shall thereafter be in full force and effect as provided in Section 6.08. (q) Notwithstanding any other provision of this Indenture or the Authorization Agreement, the Indenture Trustee shall have no duty to exercise any of its rights or powers hereunder with respect to a Payment Default by reason of a repayment referred to in Section 6.08 unless and until it shall have received notice of such default and information concerning (1) the date thereof; (2) the Obligation to which such repayment relates; (3) the Person making such repayment; (4) the amounts of such repayment attributable to principal, premium and interest on such Obligation; and (5) the Interest Payment Date or other date on which the Obligee received the moneys to which the court order mentioned in Section 6.08 relates. Section 7.04. Compensation, Expenses and Indemnification of Indenture Trustee. The Shipowner shall (1) pay reasonable compensation to the Indenture Trustee and reimburse it for 25 33 its reasonable expenses and disbursements (including counsel fees and expenses); and (2) indemnify the Indenture Trustee for, and hold it harmless against, any loss, liability or expense which it may incur or suffer without negligence or bad faith in acting under this Indenture or the Authorization Agreement. The compensation of the Indenture Trustee shall not be limited to the compensation provided by law for a trustee acting under an express trust. Section 7.05. Resignation and Removal of Indenture Trustee. (a) The Indenture Trustee may resign at any time by giving written notice to the Shipowner. Within 10 days thereafter, the resigning Indenture Trustee shall give notice of such resignation to the Obligees in the manner provided in Section 13.01. If the resigning Indenture Trustee fails to do so within such 10-day period, within the next succeeding 10 days the Shipowner shall give such notice in the same manner. (b) The Indenture Trustee may at any time be removed by (1) written notice to the Indenture Trustee and the Shipowner by the Holders of a majority in principal amount of the Outstanding Obligations; or (2) written notice to the Indenture Trustee by the Shipowner or the Secretary that the Indenture Trustee has ceased to be eligible under Section 7.02(a). (c) Any resignation or removal of the Indenture Trustee shall be effective only upon appointment of a successor Indenture Trustee approved by the Secretary. Section 7.06. Appointment of Successor Indenture Trustee. (a) If any notice of resignation or of removal shall have been given pursuant to Section 7.05, then a successor Indenture Trustee may be appointed by the Shipowner; provided that, if such successor Indenture Trustee is not so appointed (or has not accepted such appointment) within 15 calendar days after the giving of any such notice, such appointment may be made (1) by the Secretary; or (2) by a court of competent jurisdiction upon the application of the Secretary, the Shipowner, the retiring Indenture Trustee or any Person who then is, and has been, the Holder of an Outstanding Obligation for at least 6 months. (b) No successor Indenture Trustee shall be appointed without the prior written consent of the Secretary and until such successor Indenture Trustee shall enter into an amendment to the Authorization Agreement as provided therein. (c) If a successor Indenture Trustee is appointed, approved by the Secretary and accepts such appointment, the Shipowner shall give notice to the Obligees of such appointment in the manner provided in Section 13.01. The failure of the Shipowner to give such notice shall not affect the validity of any such appointment. Section 7.07. Effect of Appointment of Successor Indenture Trustee. Each successor Indenture Trustee shall forthwith, without further act or deed, succeed to all the rights and duties of its predecessor in trust under this Indenture and the Authorization Agreement. Upon the written request of the successor Indenture Trustee or the Shipowner and upon payment by the 26 34 Shipowner of all amounts due to such predecessor under this Indenture, such predecessor shall promptly deliver to such successor Indenture Trustee all sums held hereunder, together with all records and other documents necessary or appropriate in connection with the performance of the duties of the successor Indenture Trustee under this Indenture and shall transfer, assign and confirm to the successor Indenture Trustee all its rights under this Indenture in such manner as deemed by such successor Indenture Trustee or the Shipowner to be necessary or appropriate in connection therewith. Section 7.08. Merger, Consolidation or Sale of Indenture Trustee. In the event of any merger (including for the purposes of this Section, the conversion of a state bank into a national banking association or vice versa) or consolidation of the Indenture Trustee into any other Person or in the event of the sale of all or substantially all the Indenture Trustee's corporate trust business, the Person resulting from such merger or consolidation, or the transferee in the case of any such sale, shall forthwith notify the Shipowner and, subject to Section 7.02(a) and 7.06(b), shall be the Indenture Trustee under this Indenture and the Authorization Agreement without further act or deed. ARTICLE VIII CONSOLIDATION OR MERGER OF SHIPOWNER OR SALE OF VESSEL Section 8.01. Consolidation or Merger of Shipowner or Sale of Vessel. (a) Nothing in this Indenture shall prevent any lawful consolidation or merger of the Shipowner with or into any other Person, or any sale of a Vessel by the Shipowner, the Secretary or a court of law to any other Person lawfully entitled to acquire and operate such Vessel or any sale by the Shipowner, the Secretary, or a court of law of all or substantially all of its assets to any other Person; provided that, except where the Shipowner shall be the Person surviving a merger or consolidation, either (1) the Person formed by or surviving such consolidation or merger, or the Person to which the sale of such Vessel shall be made, shall expressly assume, by Supplemental Indenture, the payment of the principal of and interest (and premium, if any) on the Proportionate Part of the Outstanding Obligations, as determined by the Secretary, relating to such Vessel and expressly assume the Shipowner's duties under the Indenture; or (2) to the extent that the Secretary determines that the Outstanding Obligations and the duties under the Indenture are not so assumed, the Shipowner shall redeem the principal amount of those unassumed Obligations in accordance with the terms of the Obligations and of the Indenture. (b) When a Person so assumes this Indenture and such Proportionate Part of the Outstanding Obligations, the Supplemental Indenture shall discharge and release the Shipowner from any and all obligations thereunder relating to such Proportionate Part of the Outstanding Obligations. In the event of such an assumption by a Person to whom a Vessel has been sold (1) such Person shall succeed to, and be substituted for, and may exercise every right and power of the original Shipowner with the same effect as if such successor Shipowner had been named as the Shipowner herein; and (2) such Proportionate Part of the Outstanding Obligations shall be surrendered to the Indenture Trustee for appropriate notation or for the issuance of new 27 35 Obligations in exchange for such Proportionate Part of the Outstanding Obligations in the name of the successor Shipowner, as required by the Secretary. The principal amount of the Proportionate Part of the Outstanding Obligations shall be determined by the Secretary. ARTICLE IX ACTS OF OBLIGEES Section 9.01. Acts of Obligees. (a) Except as herein otherwise expressly provided, an Act of Obligees shall become effective when it is delivered to the Indenture Trustee and, where it is expressly required, to the Shipowner and the Secretary. Proof of execution of any instrument appointing an agent or attorney to execute an Act of Obligees made in the manner of subsection (b) below shall be sufficient for any purpose of this Indenture. (b) The fact and date of the execution by any Person of any instrument referred to in paragraph (a) of this Section may be proved by the affidavit of a witness of such execution or by the certificate or acknowledgment of any notary public, stating that the individual signing such instrument acknowledged to him the execution thereof. The fact and date of the execution of any such instrument, or the authority of the Person executing the same, may also be proved in any other manner which the Indenture Trustee (or, if such instrument is addressed to the Secretary, the Secretary) deems sufficient. (c) Any Act of Obligees taken by the Holder of any Obligation shall bind every future Holder of any of the Obligations in respect of anything done or suffered to be done by the Indenture Trustee, any Paying Agent or the Shipowner in reliance thereon, whether or not notation of such action is made upon such Obligation. ARTICLE X SUPPLEMENTAL INDENTURES Section 10.01. Permissible Without Action by Obligees. The Shipowner, the Indenture Trustee, or, where applicable, the Secretary, may at any time, without the consent of or notice to any of the Obligees, subject to Sections 10.02 and 10.05, enter into an indenture or other instrument supplemental hereto and which thereafter shall form a part hereof, for any one or more of the following purposes: (1) to add to the covenants of the Shipowner; (2) to evidence, pursuant to Article VIII, the succession of another corporation or entity to the Shipowner or any assumption of all or part of the Obligations; (3) to eliminate any right reserved to or conferred upon the Shipowner; 28 36 (4) to make such provisions for the purpose of curing any ambiguity or correcting or supplementing any provisions in this Indenture as the Shipowner or the Secretary may deem necessary or desirable, provided such provisions are not inconsistent with this Indenture and shall not adversely affect the interests of the Obligees; (5) to provide for the issuance of additional Obligations of any series and Stated Maturity theretofore issued under this Indenture or to set forth the terms and provisions of any one or more additional series of Obligations in accordance with Section 2.02; or (6) to evidence the assumption pursuant to Section 6.09 by the Secretary of the Shipowner's obligations under this Indenture and the Outstanding Obligations. Section 10.02. Protection of Indenture Trustee. Upon receipt of a Request of the Shipowner that the Indenture Trustee execute any Supplemental Indenture and upon receipt of any Act of Obligees required pursuant to Section 10.04 and the consent of the Secretary required pursuant to Section 10.05, the Indenture Trustee shall enter into such Supplemental Indenture; provided that, the Indenture Trustee shall not be obligated to enter into any Supplemental Indenture which the Indenture Trustee believes adversely affects the Indenture Trustee's own rights, duties or immunities under this Indenture. Section 10.03. Reference in Obligations to Supplemental Indentures. Obligations authenticated and delivered after the execution and delivery of any Supplemental Indenture may, with the consent and approval of the Shipowner and the Indenture Trustee, contain a text modified to conform to such Supplemental Indenture or have imprinted or stamped thereon a legend with respect to such Supplemental Indenture, but no such modification or legend shall be necessary to make such Supplemental Indenture effective. Section 10.04. Waivers and Supplemental Indentures with Consent of Obligees. With the consent of the Holders of not less than 60% in principal amount of the Outstanding Obligations of each series affected thereby, by Act of Obligees delivered to the Shipowner and the Indenture Trustee, (x) compliance by the Shipowner with any of the terms of the Indenture may be waived or (y) the Shipowner and the Indenture Trustee may enter into any Supplemental Indenture for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of the Obligations issued under this Indenture; provided that, no such waiver or Supplemental Indenture shall: (a) Without the consent of all Obligees affected thereby (1) change the Stated Maturity or reduce the principal of any Obligation; (2) extend the time of payment of, or reduce the rate of, interest thereon; (3) change the due date of or reduce the amount of any mandatory sinking fund payment; (4) reduce any premium payable upon the redemption of any Obligation; or (5) change the coin or currency in which any Obligation or the interest thereon is payable; or 29 37 (b) Without the consent of all Obligees (l) terminate or modify any of the Guarantees or the obligations of the Secretary thereunder; (2) reduce the amount of any of the Guarantees; (3) eliminate, modify or condition the duties of the Indenture Trustee to demand payment of the Guarantees or otherwise to comply with the provisions of Sections 6.02 and 6.04; (4) eliminate or reduce any of the eligibility requirements for the Indenture Trustee stated in Section 7.02; or (5) reduce the percentage in principal amount of the Outstanding Obligations of any series, the consent of whose Holders is required for any such Supplemental Indenture, or required for any waiver provided herein or to modify any of the provisions of this Section. It shall not be necessary for any Act of Obligees under this Section to approve the particular form of any proposed Supplemental Indenture, but it shall be sufficient if such Act shall approve the substance thereof. Promptly after the execution of any Supplemental Indenture pursuant to this Section, the Shipowner shall give notice thereof to the Obligees in the manner provided in Section 13.01. Any failure of the Shipowner to give such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such Supplemental Indenture. Section 10.05. Consent of Secretary. Subject to the provisions of Section 11.01, no waiver pursuant to Section 10.04 shall be effective, and neither the Shipowner nor the Indenture Trustee shall enter into any Supplemental Indenture, without the prior written consent of the Secretary, and any purported action or attempt to take such action forbidden to be taken by this Section shall be null and void ab initio and of no legal effect. Section 10.06. Continued Validity of the Guarantees. Notwithstanding anything herein to the contrary, this Indenture, the Guarantees and the Authorization Agreement shall each remain in full force and effect notwithstanding the assumption by the Secretary of the Obligations pursuant to Section 6.09, and pursuant to Section 1103(e) of the Act, the validity of the Guarantee of any Obligation shall be unaffected. ARTICLE XI PERFORMANCE OF OBLIGATIONS TO SECRETARY Section 11.01. Performance of Obligations to Secretary. Notwithstanding any provisions of this Indenture to the contrary, upon termination of the Guarantees pursuant to Section 6.04(a), each of the provisions of the Indenture which refers to the rights and duties of the Secretary shall not be effective and the Sections containing such provisions shall be read as though there were no such rights or duties. ARTICLE XII SATISFACTION AND DISCHARGE OF INDENTURE Section 12.01. Satisfaction and Discharge of Indenture. Whenever all Outstanding Obligations authenticated and delivered hereunder shall have been Retired or Paid the Indenture 30 38 Trustee shall forthwith deliver to the Shipowner and the Secretary a duly executed instrument, in form submitted to it by the Shipowner and reasonably satisfactory to the Secretary, satisfying and discharging this Indenture and, at the time such form of instrument is submitted to the Indenture Trustee the Shipowner shall deliver to the Indenture Trustee an Officer's Certificate and an Opinion of Counsel each stating that all conditions precedent herein provided relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the Obligations of the Shipowner to the Indenture Trustee under Section 7.04 shall survive. ARTICLE XIII MISCELLANEOUS Section 13.01. Notices and Demands. Any communication to, the Indenture Trustee, the Shipowner or the Secretary shall be deemed to have been sufficiently given or made by being mailed, registered or certified mail, postage prepaid, addressed to the Indenture Trustee, the Shipowner or the Secretary at their respective addresses appearing in the Special Provisions of this Indenture or at such other address as any of them may advise the others in writing from time to time. Any communication to, the Obligees shall be deemed to have been sufficiently given or made by being mailed, in the same manner, to the address of each Obligee last appearing on the Obligation Register. Section 13.02. Waivers of Notice. In any case where notice by mail or otherwise is provided herein, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event. Waivers of notice shall be filed with the Indenture Trustee, but such filing shall not be a condition precedent to the validity of any action taken thereon in reliance upon any such waiver. Section 13.03. Benefit of Indenture. This Indenture is for the sole benefit of the Shipowner, the Indenture Trustee, the Holders and (until the obligations to the Secretary shall have terminated as provided in Article XI) the Secretary. Section 13.04. Execution of Counterparts. This Indenture may be executed in any number of counterparts. All such counterparts shall be deemed to be original and shall together constitute but one and the same instrument. Section 13.05. Table of Contents; Titles and Headings. Any table of contents, the titles of the Articles and the headings of the Sections are not a part of this Indenture and shall not be deemed to affect the meaning or construction of any of its provisions. Section 13.06. Immunity of Incorporators, Stockholders, Limited Partners, Members, Officers and Directors. No recourse shall be had for any payment regarding any Obligation, or upon any provision of this Indenture, against any past, present or future incorporator, stockholder, limited partner, member, officer or director of the Shipowner or of any successor 31 39 company, either directly or indirectly. It is expressly agreed that this Indenture and the Obligations are solely the obligations of the Shipowner. 32 EX-4.(II)(F)(5) 22 c58427ex4-iif5.txt AUTHORIZATION AGREEMENT 1 4(ii)(f)(5) Contract No. MA-13636 AUTHORIZATION AGREEMENT Between THE UNITED STATES OF AMERICA represented by the Secretary of Transportation and BANK OF NEW YORK as Indenture Trustee under the Trust Indenture dated October 16, 2000 between it and CAPE COD LIGHT, L.L.C. a Delaware limited liability company Dated October 16, 2000 2 AUTHORIZATION AGREEMENT BETWEEN THE UNITED STATES OF AMERICA AND THE BANK OF NEW YORK, INDENTURE TRUSTEE (Under Title XI, Merchant Marine Act, 1936, as amended) THIS AUTHORIZATION AGREEMENT, dated October 16, 2000 is entered into between (i) the UNITED STATES OF AMERICA, represented by the SECRETARY OF TRANSPORTATION, acting by and through the MARITIME ADMINISTRATOR (the "Secretary"), and (ii) The Bank of New York, a New York banking corporation, as the Indenture Trustee under the Trust Indenture dated the date hereof between the Indenture Trustee and Cape Cod Light, L.L.C., a Delaware limited liability company (the "Shipowner"). RECITALS A. Under the provisions of Title XI of the Merchant Marine Act, 1936, as amended (the "Act"), the Secretary has determined that the requirements of the Act with respect to the Guarantees and the Obligations proposed to be issued under the Indenture have been met; and B. The Secretary and the Indenture Trustee have entered into this Authorization Agreement in order (1) to authorize the Indenture Trustee to endorse and execute by means of a facsimile signature of the Secretary and a facsimile seal of the U.S. Department of Transportation and to authenticate on each of the Obligations the Guarantee of the United States pursuant to the terms of the Indenture, (2) to agree upon the procedures whereby the Indenture Trustee or any Holder of any Outstanding Obligation, as agent and attorney-in-fact for the Holders of all Outstanding Obligations, as provided in the Indenture, will make demand upon the Secretary for payment of the Guarantees, and (3) to provide for the payment of the Guarantees by the Secretary to the Indenture Trustee. NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: 3 ARTICLE I EXECUTION, AUTHENTICATION AND DELIVERY OF THE GUARANTEES Section 1.01. Authorization to Imprint, Authenticate and Deliver. (a) The Secretary hereby authorizes and directs the Indenture Trustee to cause the Guarantees, the facsimile signature of the Maritime Administrator or the Acting Maritime Administrator, and facsimile seal of the U.S. Department of Transportation to be imprinted upon Obligations consisting of the Bonds, attached to the Indenture as Exhibit 2 and issued in accordance with Article II and Article III of the Indenture. The form of the Guarantee to be imprinted on the Obligation is as follows: "The United States of America, represented by the Secretary of Transportation, acting by and through the Maritime Administrator, pursuant to Title XI of the Merchant Marine Act, 1936, as amended, hereby guarantees to the holder of the Obligation, annexed hereto, upon demand of the holder or his agent, payment of the unpaid interest on, and the unpaid balance of the principal of, such Obligation, including interest accruing between the date of default under such Obligation, and the payment in full of the Obligation under this Guarantee. The full faith and credit of the United States of America is pledged to the payment of this Guarantee. The validity of this Guarantee is incontestable in the hands of any holder of such Obligation Payment of this Guarantee will be made in accordance with the provisions of such Obligation. UNITED STATES OF AMERICA SECRETARY OF TRANSPORTATION (SEAL) By ---------------------------- Maritime Administrator" (b) The Secretary hereby authorizes and directs the Indenture Trustee to authenticate the Obligations and Guarantees thereon, and to deliver such Obligations and Guarantees in accordance with the Indenture and herewith. (c) Once an Obligation has been imprinted with the Guarantees, the requisite facsimile signatures and seals, authenticated by the Trustee and delivered to the Holders, then that Obligation shall bind the United States regardless of the fact that the individual signing as such Maritime Administrator or Acting Maritime Administrator ceased to hold such office prior to the authentication and delivery of the Obligation bearing such Guarantee, or did not hold such office on the date of such Obligation. Section 1.02. Issuance of Obligations. The Indenture Trustee is authorized to execute, authenticate and deliver the Guarantees in the manner set forth in Section 1.01 above, only in accordance with the Obligations issued under Sections 2.01, 2.02, 2.07, 2.09 and 3.10 (b) of the Indenture. 2 4 ARTICLE II DEMAND FOR PAYMENT OF GUARANTEES Section 2.01. Default under the Indenture. (a) In the event of any Indenture Default, the Indenture Trustee or any Holder of an Outstanding Obligation may demand, in accordance with the provisions of Section 6.02 of the Indenture, on behalf of the Holders of all the Obligations then Outstanding, payment by the Secretary of the unpaid principal and interest to the date of payment on all Outstanding Obligations. (b) Within 30 days from the date of any demand for payment made pursuant to paragraph (a) of this Section, the Secretary shall pay to the Indenture Trustee as agent and attorney-in-fact for the Holders of the Outstanding Obligations, all the unpaid interest to the date of such payment on, and the unpaid balance of the principal of, all Outstanding Obligations as aforesaid in full, in cash; provided that, in the case of a demand made as a result of a Payment Default, the Secretary shall not be required to make such payment if (i) prior to such demand the Secretary shall have assumed the Obligations pursuant to Section 6.09 of the Indenture or (ii) prior to the expiration of such 30-day period subsequent to such demand and prior to any payment of the Guarantees by the Secretary, he shall find there was no Payment Default or that such Payment Default had been remedied prior to such demand, and in any such case the Guarantees shall remain in full force and effect. The Secretary shall give prompt written notice to the Shipowner and the Indenture Trustee of each such finding. Section 2.02. Payment of the Guarantees. The Secretary and the Indenture Trustee confirm that, in accordance with the provisions of the Obligations and the Indenture, the payment of the Guarantees as provided in Section 2.01 by the Secretary to the Indenture Trustee, as agent and attorney-in-fact for the Holders of all Outstanding Obligations, shall be made by the Secretary to, and accepted by, the Indenture Trustee, solely for the benefit of the Holders of Outstanding Obligations, as payment in full of the Outstanding Obligations, and that such Obligations will thereupon cease to be Obligations of the Shipowner. ARTICLE III REPRESENTATIONS AND COVENANTS OF THE INDENTURE TRUSTEE Section 3.01. Consent of the Secretary. The Indenture Trustee covenants that it will not, without the written consent of the Secretary, and then only upon such conditions, if any, as may be specified in such consent, (a) take or participate in the taking of any action which, by the terms of the Indenture, may require the consent of the Secretary, or (b) enter into any amendment or supplement to the Indenture, or waive any condition of the Indenture, except in the case of any such waiver as the Indenture may expressly permit. Section 3.02. Authorization, Execution and Delivery. The Indenture Trustee represents and warrants that it has satisfied all requirements of law for its due execution and delivery of this 3 5 Authorization Agreement and upon execution and delivery hereof, this Authorization Agreement will constitute a valid and legally binding obligation of the Indenture Trustee, enforceable in accordance with its terms. Section 3.03. Agreements of Indenture Trustee. The Indenture Trustee agrees that it shall: (a) Furnish to the Secretary a written statement of the principal amount, interest rate, Stated Maturity and date of delivery of any (1) Obligations that are authenticated and delivered in accordance with Sections 2.01 and 2.02 of the Indenture on the date hereof and on each subsequent date of delivery of each tranche; and (2) Obligations that are authenticated and delivered by the Indenture Trustee under Section 1.02 and 1.03 hereof within 15 Business Days after each such delivery. (b) Permit the Secretary, at all reasonable times upon request, to make such reasonable, material and pertinent examinations and audits of its records and books of account and take such information as the Secretary deems reasonable pertaining to the Indenture, the Obligations, the Guarantees and this Authorization Agreement, and all matters related thereto; and (c) Furnish to the Secretary, promptly upon request, such reasonable, material and pertinent reports, evidence, proof or information, in addition to that furnished under other provisions hereof, bearing on matters pertaining to the Indenture, the Obligations, and the Guarantees, and acts performed by the Indenture Trustee with respect thereto, as the Secretary may reasonably deem necessary or appropriate. ARTICLE IV GENERAL PROVISIONS Section 4.01. Definitions. For all purposes of this Authorization Agreement, unless otherwise expressly provided or unless the context otherwise requires, capitalized terms not specifically defined herein shall have the respective meanings given in Schedule A to the Indenture. Section 4.02. Secretary's Agreements. The Secretary agrees that: (a) This Authorization Agreement and the Guarantees of the Obligations are made and entered into pursuant to Title XI of the Act, and conclusively evidence the eligibility of the Obligations for the Guarantees, and the validity of the Guarantees shall be incontestable; (b) The obligations of the United States to pay the Guarantees shall be subject to no conditions whatsoever, express or implied, except that demand shall have been made therefor by the Indenture Trustee or any Holder of an Outstanding Obligation not later than 60 days from the date of an Indenture Default that shall have occurred and be continuing, it being the intent of the 4 6 United States that the Guarantees will be paid under any and all circumstances upon demand duly made therefor; and (c) In the event of an Indenture Default of which the Secretary has actual knowledge, the Secretary will publish notice in the Authorized Newspaper of the occurrence of such Indenture Default within 30 days from the date of such Indenture Default, unless demand for payment under the Guarantees shall previously have been made by the Indenture Trustee, but any failure to publish such notice or any defect therein shall not affect in any way any rights of the Indenture Trustee or any Holder of an Obligation with respect to such Indenture Default, or in any way affect the rights of the Secretary. Section 4.03. Benefits to Holders of Obligations. All authorizations and directions to authenticate and deliver Obligations and Guarantees, and all other agreements of the Secretary herein are made with the Indenture Trustee for, and shall inure to, the benefit of all Holders of the Obligations. The agreements of the Indenture Trustee herein are made with the Secretary for, and shall inure to, the benefit of all Holders of the Obligations. Section 4.04. Successor Indenture Trustee; Amendments and Supplements. The authority and direction granted to the Indenture Trustee hereby, and all rights of the Indenture Trustee hereunder, are granted to and shall accrue to the benefit of any Person who from time to time acts as successor Indenture Trustee, pursuant to the terms of Article VII of the Indenture; provided that, such successor Indenture Trustee and the Secretary shall have entered into an amendment hereto whereby such successor Indenture Trustee agrees to fulfill the obligations of the Indenture Trustee hereunder. Except as provided in the preceding sentence, this Authorization Agreement may not be amended or supplemented in any regard whatever, nor may the rights or obligations of the Indenture Trustee hereunder be assigned to any other Person, except by a writing duly executed by the Indenture Trustee and the Secretary. Section 4.05. Effective Period. This Authorization Agreement and the authorization and direction to authenticate and deliver Guarantees granted to the Indenture Trustee (or any successor Indenture Trustee) shall have effect from the date hereof until termination upon, and only upon, the occurrence of one or both of the following events: (a) When the Indenture shall have been satisfied and discharged in accordance with Section 12.01 thereto; or (b) When the Guarantees of all the Outstanding Obligations shall have been terminated in accordance with Section 6.04(a) of the Indenture. Section 4.06. Payments, Notices or Other Communications. Except as otherwise provided herein, all payments, notices or other communications provided for herein may be made or delivered in person, or by registered or certified mail, postage prepaid, addressed to the party at the address of such party specified below, or at such other address as such party shall advise the other party by written notice, and shall be effective upon mailing or delivery in person. 5 7 The addresses of the Secretary and the Indenture Trustee are as follows: SECRETARY OF TRANSPORTATION c/o Maritime Administrator Department of Transportation 400 Seventh Street, S.W. Washington, D.C. 20590 The Bank of New York 101 Barclay Street New York, NY 10286 Attention: Corporate Trust Administration Section 4.07. Execution of Counterparts. This Authorization Agreement may be executed in any number of counterparts. All such counterparts shall be deemed to be originals, and shall together constitute but one and the same instrument. Section 4.08. Titles and Headings. The titles of the Articles and the headings of the Sections are not a part of this Authorization Agreement, and shall not be deemed to affect the meaning or construction of any of its provisions. Section 4.09. Conformity with Regulations. The Secretary hereby affirms that, with respect to the rights of the Indenture Trustee and the Holders, this Authorization Agreement conforms to its existing regulations governing the issuance of commitments to guarantee and guarantees under Title XI of the Act. 6 8 IN WITNESS WHEREOF, this Authorization Agreement has been duly executed by the parties hereto as of the day and year first above written. UNITED STATES OF AMERICA, SECRETARY OF TRANSPORTATION BY: MARITIME ADMINISTRATOR /s/ Joel C. Richard --------------------------------- Secretary ATTEST: /s/ SARAH J. WASHINGTON - ----------------------------- Assistant Secretary 9 INDENTURE TRUSTEE: THE BANK OF NEW YORK By /s/ Mary LaGumina ----------------------------- Name: Mary LaGumina Title: Vice President ATTEST: By /s/ Remo Reale ------------------------- EX-4.(II)(F)(6) 23 c58427ex4-iif6.txt SECURITY AGREEMENT 1 EXHIBIT 4(ii)(f)(6) Contract No. MA-13637 SECURITY AGREEMENT Relating to United States Government Guaranteed Ship Financing Obligations Between CAPE COD LIGHT, L.L.C. And THE UNITED STATES OF AMERICA Dated October 16, 2000 2 SECURITY AGREEMENT SPECIAL PROVISIONS THIS SECURITY AGREEMENT, dated October 16, 2000 (the "Security Agreement"), is between Cape Cod Light, L.L.C., a Delaware limited liability company (the "Shipowner") and the UNITED STATES OF AMERICA (the "United States"), represented by the Secretary of Transportation, acting by and through the Maritime Administrator (the "Secretary"), pursuant to Title XI of the Act. RECITALS A. Coastal Queen Holdings, L.L.C., predecessor in interest to Delta Queen Coastal Voyages, L.L.C. (the "Guarantor"), entered into the Construction Contract, dated May 1, 1999, with Atlantic Marine, Inc., (the "Shipyard") for the construction of the cv Cape Cod Light (the "Vessel") and subsequently assigned said contract to the Shipowner. B. On the date hereof, the Secretary entered into, and the Shipowner accepted a Commitment to Guarantee Obligations, Contract No. MA-13635, whereby the United States has committed itself to guarantee the payment in full of all the unpaid interest on, and the unpaid principal balance of, Obligations (as defined herein) in the aggregate principal amount not to exceed 87.5% of the Depreciated Actual Cost or the Actual Cost of the Vessel, as the case may be, on the Closing Date, which amounts are set out in Table A. C. The Shipowner has entered into the Bond Purchase Agreement providing for the issuance of Obligations in the aggregate amount up to $38,500,000 to be designated "United States Government Guaranteed Ship Financing Bonds, 2000 Series" (the "Obligations") having a maturity date and interest rate set forth in the Obligation Purchase Agreement and the Obligations. D. On the date hereof, the Shipowner and Bank of New York, a New York banking corporation, as Indenture Trustee, executed and delivered the Trust Indenture (the "Indenture") pursuant to which the Shipowner will issue the Obligations. E. On the date hereof, the Secretary and the Indenture Trustee will execute the Authorization Agreement, Contract No. MA-13636, which authorizes the Indenture Trustee to endorse, execute, and authenticate the Secretary's Guarantee on each of the Obligations. F. As security for the due and timely payment of the Secretary's Note, issued this day by the Shipowner, and for the Secretary's issuance of the Guarantees, the Shipowner has executed and delivered the Security Agreement, Contract No. MA-13637, and the Financial Agreement, Contract No. MA-13639 granting the Secretary a security interest in, among other things, the Construction Contract, the Vessel and certain other property, tangible and intangible, which the Shipowner now has or hereafter will acquire, and all of the proceeds thereof. 3 G. As further security to the Secretary and in consideration of the Secretary's agreeing to issue the Guarantees, (i) the Shipyard has granted the Secretary a security interest in the Vessel, its hull, component parts, machinery, and equipment during the construction period and has executed on this date the Consent of Shipyard to the assignment of the Construction Contract to the Secretary; (ii) the Guarantor has executed and delivered the Guaranty Agreement; and (iii) the Parent Company has executed and delivered the Funding Agreement. H. In order to implement certain aspects of the transactions contemplated by the Security Agreement and the Financial Agreement, the Secretary, the Shipowner and The Bank of New York, a New York banking corporation (the "Depository") have entered into the Depository Agreement, Contract No. MA-13640, on the date hereof. I. As further security for the due and timely payment of the Secretary's Note issued this day in conjunction with the Closing, Shipowner will execute and deliver the Mortgage, Contract No. MA-13638, on the Delivery Date. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, and of other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and in order to provide security to the Secretary for the Secretary's Note provided for herein, the parties hereto hereby agree as follows: 1. Concerning these Special and General Provisions. This Security Agreement shall consist of two parts: the Special Provisions and the General Provisions attached hereto as Exhibit 1 of the Security Agreement and incorporated herein by reference. In the event of any conflict, or inconsistency between the Special Provisions of this Security Agreement and Exhibit 1, the Special Provisions shall control. 2. Additions, Deletions and Amendments to Exhibit 1. The following additions, deletions and amendments are hereby made to the Security Agreement: (a) Concerning Section 1.03. Section 1.03(a) is amended by deleting it in its entirety and substituting the following therefor: "(a) In order to create a present security interest in the Secretary, the Shipowner does hereby grant, sell, convey, assign, transfer, mortgage, pledge, set over and confirm unto the Secretary continuing security interests in all of the right, title and interest of the Shipowner in and to all of the following, whether now owned or existing or hereafter arising or acquired: (1) The Construction Contract (insofar as it relates to the Construction of the Vessel), together with all other contracts, whether now in existence or hereafter entered into, relating to the Construction of the Vessel. Said right, title and interest in and to the Construction Contract, and the other contracts conveyed to the Secretary by this 2 4 subsection are hereinafter referred to collectively as the "Rights Under the Construction and Related Contracts." (2) The Vessel to be constructed under the Construction Contract and located at the Shipyard's facility at or near 8500 Hechscher Drive, Jacksonville, Florida 32226 and being a 300 foot Coastal Queen Class passenger vessel (cv Cape Cod Light, Hull No. 4243), as the same has been or may be modified, amended or supplemented from time to time. (3) The Shipowner's rights to receive all moneys which from time to time may become due to the Shipowner with respect to the Construction of the Vessel regardless of the legal theory by which moneys are recovered. Said right, title and interest in and to the moneys, cash, bonds, claims, and securities conveyed by this subsection are herein referred to collectively as the "Moneys Due with Respect to the Construction of the Vessels." The Secretary acknowledges and agrees that the Moneys Due with Respect to the Construction of the Vessel will be paid directly to the Depository for application in accordance with this Security Agreement and the Indenture. (4) Hull No. 4243 and all inventory, materials, machinery, equipment, products, goods, plans, specifications, designs and other property (tangible or intangible) of any description whatsoever, at any time incorporated, installed or affixed, or to be affixed to, or acquired (or otherwise) to be incorporated, installed or affixed to, or to be affixed to the Vessel, in each case wherever located (each such item whether now owned or hereafter acquired), and identifiable proceeds or products thereof; provided, however, that the tools, equipment, and implements of the Shipyard used in the construction of the Vessel are specifically excluded herefrom. (5) All goods, whether equipment or inventory appertaining to or relating to the Vessel, whether or not on board or ashore and not covered by the Mortgage, and any charter hire relating to the Vessel. (6) All rentals of, replacement and substitutes for, and accession, attachment, modifications, additions, or improvements to any property described in paragraphs (1) through (5) of this Section. (7) All rights and claims of Shipowner relating to any of the property described in paragraphs (1) through (6) of this Section. (8) The Title XI Reserve Fund and all moneys, instruments, negotiable documents, chattel paper, and proceeds thereof currently on deposit or hereafter deposited in the Title XI Reserve Fund. (9) The Construction Fund and all moneys, instruments, negotiable documents, chattel paper and proceeds, thereof currently on deposit or hereafter deposited in the Construction Fund. 3 5 (10) All moneys, instruments, negotiable documents, chattel paper and proceeds thereof held by the Depository under the Depository Agreement. (11) Proceeds of Policies of Insurance relating to the Vessel and, whether or not insured, any general average claims or loss of hire claims Shipowner may have with respect to the Vessel. (12) The performance and payment bonds issued by Shipyard through Federal Insurance Company guaranteeing Shipyard's performance relating to the construction of the Vessel and her sister ship, dated July 20, 1999, and all proceeds thereof. (13) The Guaranty Agreement, as the same has been or may be amended or supplemented from time to time, and all proceeds thereof. (14) The Funding Agreement, as the same has been or may be amended or supplemented from time to time, and all proceeds thereof. (15) All proceeds of any and all of the property described in paragraphs (1) through (14) of this Section, including (without limitation) all payments under insurance or in connection with any warranty, indemnity, or guarantee, payable by reason of the loss of or damage to or otherwise with respect to any of the property described in paragraphs (1) through (14) of this Section. The Secretary shall have, upon execution and delivery thereof, as further security, certain right, title and interest in and to the following: (16) The Mortgage, to be executed and delivered by the Shipowner to the Secretary, as mortgagee, on the Delivery Date, covering the Vessel." (b) Article II. Notwithstanding any other provision in Article II of the General Provisions and in the General Provisions as a whole, all references to ownership and title to the Vessel shall mean after the Delivery Date. (c) Concerning Section 2.02. (1) Section 2.02(a) is hereby amended by deleting the words "it lawfully owns" and inserting the word "is" immediately after the word "Vessel" on the second line and inserting "On or after the Delivery Date," prior to the words "The Shipowner shall" at the beginning of the sentence on eighth line thereof. (2) Section 2.02(d)(3) is hereby amended by deleting the words "current operations" located on the fourth line and inserting in lieu thereof the words "Vessel operation upon delivery and acceptance of said Vessel by Shipowner". 4 6 (d) Concerning Section 2.04. (1) Section 2.04(d) is hereby amended by inserting the words "it lawfully owns" on the second line thereof after "certifying that" and prior to "the Vessel" and by inserting "and that the Vessel" after "the Vessel" and before "is free of any" on the second line thereof. (2) Section 2.04(e) is hereby amended by deleting the words "substantially in the form of Exhibit A to the form of the Mortgage" located on the first line and substituting in lieu thereof the words "in form and substance satisfactory to the Secretary evidencing (i) the Vessel is free and clear of any liens and (ii) Secretary has a valid and enforceable first priority mortgage." (e) Concerning Section 2.05. (1) In connection with Sections 2.05(b)(3) and the last paragraph of Section 2.05(e) the maximum amount of self-insurance permitted to the Shipowner under the last paragraph thereof shall be a $500,000 per accident deductible for hull insurance and a $250,000 per accident deductible for protection & indemnity insurance; and (2) In connection with clause (ii) of the initial paragraph of Section 2.05(c), the Secretary shall permit payment of losses up to the amount of $250,000 to be made directly to the Shipowner under the circumstances specified therein. (f) Concerning Section 2.08(c). Section 2.08(c) is hereby amended by deleting the word "FLEET" located on the second line and substituting in lieu thereof the word "SHIP". (g) Concerning Section 2.14. Section 2.14 is hereby amended by deleting the 3rd, 4th and 5th sentences thereof and inserting the following in lieu thereof: "In the event of (i) a default under the Construction Contract, which default results in a payment under any of the Surety Bonds, and (ii) a Default under the Security Agreement, then the Surety Bonds proceeds shall be distributed by the Secretary in accordance with the provisions of Section 6.05 of Exhibit 1. In the absence of a Security Agreement Default, the Secretary shall determine whether to release the funds to the Shipowner or to deposit the funds in an account controlled by the Secretary (but not necessarily the Title XI Reserve Fund). In the event of any default under a Construction Contract, the Shipowner shall have a right to be consulted in any negotiations, agreements, litigations or settlement of any rights related to the Surety Bonds, unless there also exists a Default under the Security Agreement, in which case the Shipowner shall not enjoy these rights." 5 7 (h) Concerning Article V. Notwithstanding any other provision in Article V of the General Provisions to the contrary, each request for withdrawal from the Escrow Fund, excluding design, inspection, owner furnished equipment and interest shall be submitted jointly by the Shipowner and the Shipyard. Any provision of Article V of the General Provisions which is consistent with these Special Provisions shall be given effect. (i) Concerning Section 5.02. The Secretary has determined that a deposit of six months interest on the principal amount deposited in the Escrow Fund is not required. (j) Concerning Section 6.01. (1) The following paragraphs are hereby added immediately after paragraph (9) and prior to the beginning of last paragraph of Section 6.01(b) of Exhibit 1: "(10) Any default under the Funding Agreement or the Guaranty Agreement shall constitute an additional security default; (11) A breach by either the Shipowner or the Shipyard under the terms of the Construction Contract shall constitute an additional security default under this Section 6.01(b)." (2) The following paragraph is hereby added to the end of Section 6.01 of Exhibit 1: "In the event that a Default shall occur, the Secretary shall be entitled, but not be required, to deliver to the Depository a written notice that the Secretary is thereby exercising exclusive control over the Securities Accounts (as such term is defined in the Depository Agreement) ("Notice of Exclusive Control"). As further provided in the Depository Agreement following the Depository's receipt of and pursuant to said Notice of Exclusive Control, the Secretary and the Shipowner hereby acknowledge and agree that (i) the Secretary shall be entitled, but not be required, to issue to the Depository an instruction, notice or any other type of directive that would constitute an "entitlement order" within the meaning of Section 8-102(a)(8) of the New York Uniform Commercial Code (collectively, an "Entitlement Order") concerning the Securities Accounts and (ii) the Depository shall immediately cease complying with any Request, Request for Payment, instruction, notice or any other type of directive that would constitute an Entitlement Order from the Shipowner. In the event that a Default has been cured or waived as provided in Article VI hereof, the Secretary and the Shipowner hereby acknowledge and agree that the Secretary shall deliver a written notice to the Depository that (i) 6 8 the Secretary is no longer exercising exclusive control over the Securities Accounts and that the Notice of Exclusive Control previously delivered is theretofore without effect and (ii) the Depository shall thereafter comply with any Request, Request for Payment, instruction, notice or any other type of directive that would constitute an Entitlement Order from the Shipowner." (k) Concerning Section 6.04(b)(4). Section 6.04(b)(4) is hereby amended by inserting the words "and mailing said notice" between "Authorized Newspapers" and "to the Shipowner" located on the fourth line. (l) Concerning Section 8.01(c). Section 8.01(c) is hereby amended by deleting the from the third line the number "12110(c)(3)" and substituting the number "12111(c)(3) in lieu thereof. (m) Concerning Section 9.01. Subject to Section 9.01 of the Security Agreement, any notice, request, demand, direction, consent, waiver, approval or other communication, when given to a party hereto, shall be addressed to: Secretary as: SECRETARY OF TRANSPORTATION c/o Maritime Administrator U.S. Department of Transportation 400 Seventh Street, S.W. Washington, D.C. 20590 Shipowner as: CAPE COD LIGHT, L.L.C. Robin Street Wharf 1380 Port of New Orleans Place New Orleans, Louisiana 70130-1890 Indenture Trustee as: The Bank of New York 101 Barclay Street New York, NY 10286 Attention: Corporate Trust Administration (n) Governing Law. This Security Agreement and the rights and obligations of the parties hereto shall be governed by and construed in accordance with U.S. maritime laws, to the extent applicable, and otherwise in accordance with the laws of the State of Louisiana, except that the rights and obligations of the parties with respect to Sections 1.03(a)(4), (5) and (6) shall be governed by the laws of the State of New York. (o) Execution of Counterparts. This Security Agreement may be executed in any number of counterparts. All such counterparts shall be deemed to be originals, and shall constitute but one and the same instrument. 7 9 IN WITNESS WHEREOF, this Security Agreement has been executed by the parties as of the day and year first written. SHIPOWNER: CAPE COD LIGHT, L.L.C. By: DELTA QUEEN COASTAL VOYAGES, L.L.C., its Managing Member By: THE DELTA QUEEN STEAMBOAT CO., its Managing Member By: /S/ JORDAN B. ALLEN ---------------------------- Its Executive Vice President ATTEST: By /S/ RANDALL L. TALCOTT ----------------------------- Its Vice President 10 UNITED STATES OF AMERICA SECRETARY OF TRANSPORTATION BY: MARITIME ADMINISTRATOR /s/ Joel C. Richard ----------------------------- Secretary ATTEST: /s/ SARAH J. WASHINGTON - ----------------------------- Assistant Secretary 11 EXHIBITS TO THE SECURITY AGREEMENT Exhibit 1 -- General Provisions Incorporated into the Security Agreement by Reference Schedule X -- Schedule of Definitions Exhibit 2 -- Form of Secretary's Note Exhibit 3 -- Form of Mortgage Exhibit 4 -- Financial Agreement Exhibit 5 -- Form of Consent of Shipyard Exhibit 6 -- Construction Contract Exhibit 7 -- Depository Agreement Exhibit 8 -- Guaranty Agreement Exhibit 9 -- Funding Agreement Exhibit 10 -- Assignment of Construction Contract Exhibit 11 -- Shipyard Security Agreement 12 TABLE A Cape Cod Light The aggregate Actual Cost of the Vessel as of the date hereof as determined by the Secretary, namely, (i) the amounts paid by or for the account of the Shipowner as of the date hereof for the Construction of the Vessel, plus (ii) the amount which the Shipowner was on said date obligated under the Construction Contract or otherwise to pay from time to time thereafter for the Construction of the Vessel less the Depreciation of the Vessel as of the date hereof as determined by the Secretary is $44,204,526 both calculated and itemized for the Vessel as follows:
Amount Amount Obligated Paid To Be Paid Total ---- ---------- ----- Contract Price $30,000,000 $30,000,000 Changes and Extras 3,500,000 3,500,000 Owner Furnished Items 4,000,000 4,000,000 Engineering and Inspection 1,500,000 1,500,000 Net Interest During Construction 2,525,000 2,525,000 Risk Insurance 190,000 190,000 Commitment Fee 132,000 132,000 Guarantee Fee 2,357,526 2,357,526 ---------- --------- --------- Total Actual Cost $44,204,526 $44,204,526
13 SCHEDULE OF DEFINITIONS TO SECURITY AGREEMENT Dated October 16, 2000 "Act" means the Merchant Marine Act, 1936, as amended and in effect on the Closing Date. "Actual Cost" means the actual cost of the Vessel, as set forth in Table A of the Security Agreement or as subsequently redetermined by the Secretary pursuant to the Security Agreement and the Act. "Adjusted Cash Provided from Operating Activities" means the amount determined by taking `net cash provided from operating activities' from the statement of cash flows and adding back all interest deducted in determining such amount. "Audited Financial Statements" mean the annual audit of the Shipowner's accounts in accordance with generally accepted auditing standards by independent certified public accountants or independent licensed public accountants, certified or licensed by a regulatory authority of a state or other political subdivision of the United States, who may be the Shipowner's regular auditors. "Authorization Agreement" means the Authorization Agreement, Contract No. MA-13636, between the Secretary and the Indenture Trustee, whereby the Secretary authorizes the Guarantee of the United States to be endorsed on the Obligations, as the same is originally executed, or as modified, amended or supplemented therein. "Authorized Newspaper" means The Wall Street Journal or if it ceases to exist, then in such other newspaper as the Secretary may designate. "Business Day" means a day which is not a Saturday, Sunday or a bank holiday under the laws of the United States or the State of Louisiana and the State of New York. "Chapter 313" means the provisions of 46 United States Code Chapter 313, as amended. "Classification Society" means the American Bureau of Shipping. "Closing Date" or "Closing" means the date when the Obligations are issued by the Shipowner and authenticated by the Indenture Trustee pursuant to the Authorization Agreement. "Commitment to Guarantee Obligations" has the same meaning as the term Guarantee Commitment. 14 "Consent of Shipyard" means the document evidencing such Shipyard's consent to the assignment of a Construction Contract to the Secretary under the Security Agreement as originally executed, modified, amended or supplemented. "Construction" means construction of the Vessel, including designing, inspecting, outfitting and equipping thereof. "Construction Contract" means the contract relating to the Construction of the Vessel between the Shipowner and the Shipyard, as originally executed or as modified or supplemented pursuant to the applicable provisions thereof. "Construction Fund" has the meaning specified in Article IV of the Security Agreement. "Default" when used in the Security Agreement has the meaning attributed to it in Article VI thereof. "Delivery Date" means the date on which the Vessel is delivered to and accepted by the Shipowner. "Depository" shall mean the institution designated in the Depository Agreement or any successor. "Depository Agreement" shall mean the Depository Agreement, Contract No. MA-13640 among the Shipowner, the Secretary and the Depository, as originally executed or as modified or supplemented in accordance with the applicable provisions thereof. "Depreciated Actual Cost" means the depreciated actual cost of the Vessel, as set forth in Table A of the Security Agreement or as subsequently redetermined by the Secretary pursuant to the Security Agreement and the Act. "Eligible Investment" has the meaning given by Section 5 of the Financial Agreement. "Escrow Fund" means the account held by the Secretary, established under Section 1108 of the Act and administered pursuant to Article V of the Security Agreement. "Financial Agreement" means the Title XI Reserve Fund and Financial Agreement, Contract No. MA-13639, executed by the Shipowner and the Secretary, as originally executed or as modified, amended or supplemented. "Financial Asset" has the meaning given by Article 8-102(a)(9) of the UCC. "First Calendar Year of Vessel Operation" means the first calendar year of operation of the Vessel provided said calendar year commences no sooner than six months after delivery of the Vessel. 15 "Fourth Calendar Year of Vessel Operation" means the calendar year subsequent to the Third Calendar Year of Vessel Operation. "Funding Agreement" means the funding agreement, Contract No. MA-13642, between the Parent Company, the Guarantor, the Shipowner and the Sister Shipowner relating to payment of the Guarantor's operating expenses. "Government Use" means the use of a Vessel or requisition of its title required by a government or governmental body of the United States of America. "Guarantee" means each, and the "Guarantees" means every, guarantee of an Obligation by the United States pursuant to Title XI of the Act. "Guaranty Agreement" means the guaranty, Contract No. MA 13641, issued by the Guarantor for the Title XI obligations of the Shipowner. "Guarantee Commitment" means the Commitment to Guarantee Obligations, Contract No. MA-13635, dated October 16, 2000 executed by the Secretary and accepted by the Shipowner relating to the Guarantees, as originally executed or as modified, amended or supplemented. "Guarantor" means Delta Queen Coastal Voyages, L.L.C., a Delaware limited liability company, and shall include its successors and assigns. "Holder" means each, and "Holders" means every, registered holder of an Obligation. "Increased Security" means the Secretary's Note, the Security Agreement, the Vessel, the Security, the Escrow Fund, the Title XI Reserve Fund, the Construction Fund, the Parent Guaranty and any other security agreement between the Secretary and the Shipowner relating to any vessels financed under the Act, and the Policies of Insurance, and the proceeds of the foregoing. "Indenture" means the Trust Indenture dated the Closing Date between the Shipowner and the Indenture Trustee, as originally executed, or as modified, amended or supplemented. "Indenture Default" has the meaning specified in Article VI of the Indenture. "Indenture Trustee" means the Bank of New York, a New York banking corporation, and any successor trustee under the Indenture. "Long Term Debt" means, as of any date, bonds, debentures, equipment obligations and other evidence of indebtedness that would be included in long term debt in accordance with generally accepted accounting principles. There shall also be included any guarantee or other liability for the debt of any other Person, not otherwise included on the balance sheet. 16 "Maturity" when used with respect to any Obligation, means the date on which the principal of such Obligation becomes due and payable as therein provided, whether at the Stated Maturity or by redemption, declaration of acceleration or otherwise. "Minimum Cash Flow Ratio" means the ratio of Adjusted Cash Provided from Operating Activities to Total Debt Service. "Moneys Due with Respect to Construction of the Vessels" has the meaning specified in Section 1.03 of the Security Agreement. "Mortgage" means the first preferred ship mortgage on the Vessel, Contract No. MA-13638, by the Shipowner to the Secretary, as originally executed, modified, amended or supplemented. "Mortgagee" means the Secretary, as mortgagee under the Mortgage. "Mortgagor" means the Shipowner, as mortgagor under the Mortgage. "Net Worth" means, as of any date, the total of paid-in capital stock, paid-in surplus, earned surplus and appropriated surplus, and all other amounts that would be included in net worth in accordance with generally accepted accounting principles, but exclusive of (1) any receivables from any stockholder, director, Officer or employee of the Company or from any Related Party (other than current receivables arising out of the ordinary course of business and not outstanding for more than 60 days) and (2) any increment resulting from the reappraisal of assets. "Obligation" means each, and "Obligations" means each and every obligation of the Shipowner bearing a Guarantee that is authenticated and delivered under the Indenture and the Authorization Agreement. "Obligation Purchase Agreement" means each agreement for the purchase of Obligations, executed by the Shipowner and the purchaser named therein, as originally executed, modified or supplemented. "Obligee" means each, and "Obligees" means every, Holder of an Obligation. "Offering Circular" means each offering circular relating to the issuance and sale of the Bonds. "Officer's Certificate" means a certificate conforming to Section 1.02 of the Security Agreement or the Indenture as the context may require. "Original Issue Date" means a date on which an Obligation was initially authenticated by the Indenture Trustee even if the Obligation is subsequently given a later date by reason of transfer, exchange or substitution. 17 "Outstanding" when used with reference to the Obligations, shall mean all Obligations theretofore issued under the Indenture, except: (1) Obligations Retired or Paid; and (2) Obligations in lieu of which other Obligations have been issued under the Indenture. "Parent Company" means The Delta Queen Steamboat Co., a Delaware corporation, and its successors and assigns. "Paying Agent" means any bank or trust company meeting the qualifications in Section 7.02(a) of the Indenture and appointed by the Shipowner under Section 4.02 of the Indenture to pay the principal of (and premium, if any) or interest on the Obligations on behalf of the Shipowner. "Payment Default" has the meaning specified in Section 6.01 of the Security Agreement. "Person" or "Persons" means any individual, corporation, partnership, joint venture, association, limited liability company, joint-stock company, trust, unincorporated organization, government, or any agency or political subdivision thereof. "Policies of Insurance" and "policies" means all cover notes, binders, policies of insurance and certificates of entry in a protection and indemnity association, club or syndicate with respect to the Vessel (including all endorsements and riders thereto), including but not limited to all insurance required under Section 2.05 of the Security Agreement. "Redemption Date" means a date fixed for the redemption of an Obligation by the Indenture. "Related Party" means one that can exercise control or significant influence over the management and/or operating policies of another Person, to the extent that one of the Persons may be prevented from fully pursuing its own separate interests. Related parties consist of all affiliates of an enterprise, including (1) its management and their immediate families, (2) its principal owners and their immediate families, (3) its investments accounted for by the equity method, (4) beneficial employee trusts that are managed by the management of the enterprise, and (5) any Person that may, or does, deal with the enterprise and has ownership of, control over, or can significantly influence the management or operating policies of another Person to the extent that an arm's-length transaction may not be achieved. "Request" means a written request to a Person for the action therein specified, signed by a Responsible Officer of the Person making such request. "Responsible Officer" means (1) in the case of any business entity, the chairman of the board of directors, the president, any executive or senior vice president, the secretary, the treasurer, member or partner, (2) in the case of any commercial bank, the chairman or vice-chairman of the executive committee of the board of directors or trustees, the president, any executive or senior vice president, the secretary, the treasurer, any trust officer, and (3) with 18 respect to the signing or authentication of the Obligations and Guarantees by the Indenture Trustee, any person specifically authorized by the Indenture Trustee to sign or authenticate the Obligations. "Retired or Paid" as applied to (i) Obligations and the indebtedness evidenced thereby, means that such Obligations shall be deemed to have been so retired or paid and shall no longer be entitled to any rights or benefits provided in the Indenture if: (1) such Obligations shall have been paid in full; (2) such Obligations shall have been canceled by the Indenture Trustee; or (3) such Obligations shall have become due and payable at Maturity and funds sufficient for the payment of such Obligations (including interest to the date of Maturity, or in the case of a payment after Maturity, to the date of payment, together with any premium thereon) and available for such payment and are held by the Indenture Trustee or any Paying Agent with irrevocable directions, to pay such Obligations; provided that, the foregoing definition is subject to Section 6.08 of the Indenture. "Rights Under the Construction Contracts and Related Contracts" shall have the meaning specified in Section 1.03 of the Security Agreement. "Second Calendar Year of Vessel Operation" means the calendar year beginning January 1 in the year immediately following the First Calendar Year of Vessel Operation. "Secretary" means the Secretary of Transportation or any officials duly authorized to perform the functions of the Secretary of Transportation under Title XI of the Act. "Secretary's Note" means a promissory note or promissory notes issued and delivered by the Shipowner to the Secretary substantially in the form of Exhibit 2 of the Security Agreement, including any promissory note issued in substitution for, or any endorsement or supplement thereof. "Secretary's Notice" means a notice from the Secretary to the Indenture Trustee, if a Bond that a Default, within the meaning of Section 6.01(b) of the Security Agreement has occurred. "Security" has the meaning specified in Section 1.03 of the Security Agreement. "Securities Account" has the meaning given by Article 8-501 of the UCC. "Securities Intermediary" has the meaning given by Article 8-102(a)(14) of the UCC and also means the Depository. "Security Agreement" means the security agreement, Contract No. MA-13637, dated the Closing Date, consisting of the special provisions, the general provisions and this schedule X, executed by the Shipowner as security for the Secretary, as originally executed or as modified, amended or supplemented. 19 "Security Default" has the meaning specified in Section 6.01 of the Security Agreement. "Shipowner" means Cape Cod Light, L.L.C., a Delaware limited liability company, and shall include its successors and assigns. "Shipyard" means Atlantic Marine, Inc. "Sister Shipowner" means Cape May Light, L.L.C., a Delaware limited liability company, and shall include its successors and assigns. "Stated Maturity" means the date determinable as set forth in any Obligations as the final date on which the principal of such Obligation is due and payable. "Successor" means a Person formed by or surviving a consolidation or merger with the Shipowner or to which the Vessels have been sold. "Third Calendar Year of Vessel Operation" means the calendar year subsequent to the Second Calendar Year of Vessel Operation. "Title XI" means Title XI of the Act. "Title XI Reserve Fund" has the meaning specified in the Financial Agreement. "Title XI Reserve Fund and Financial Agreement" means the Financial Agreement. "Total Debt Service" means the amount determined for each given year as follows: (a) any scheduled payments on the Title XI debt (including principal and interest), plus (b) any scheduled payments (including principal and interest) on all other third party debt of the Shipowner, minus (c) cash used to pay such payments from either non-operating sources or operating sources other than the Shipowner. "UCC" means the Uniform Commercial Code as enacted in the State of Louisiana, except that with respect to the terms "Financial Asset", "Securities Account" and "Securities Intermediary", "UCC" shall mean the Uniform Commercial Code as enacted in the State of New York. "Vessel" means the cv Cape Cod Light, financed with the Obligations. "Working Capital" shall mean the excess of current assets over current liabilities, both determined in accordance with generally accepted accounting principles and adjusted as follows: (1) In determining current assets, there shall also be deducted: (A) Any securities, obligations or evidence of indebtedness of a Related Party or of any stockholder, director, officer or employee (or any member of his family) of the Company or of such Related Party, except advances to agents required for the normal current operation of the Company's 20 vessels and current receivables arising out of the ordinary course of business and not outstanding for more than 60 days; and (B) An amount equal to any excess of unterminated voyage revenue over unterminated voyage expenses; (2) In determining current liabilities, there shall be deducted any excess of unterminated voyage expenses over unterminated voyage revenue; and (3) In determining current liabilities, there shall be added one half of all annual charter hire and other lease obligations (having a term of more than six months) due and payable within the succeeding fiscal year, other than charter hire and such other lease obligations already included and reported as a current liability on the Company's balance sheet. 21 TABLE OF CONTENTS GENERAL PROVISIONS INCORPORATED INTO THE SECURITY AGREEMENT BY REFERENCE
SECTION HEADING PAGE ARTICLE I........................................................................................................13 DEFINITIONS; OFFICER'S CERTIFICATES; GRANTING CLAUSE..........................................................13 Section 1.01. Definitions.................................................................................13 Section 1.02. Officer's Certificates......................................................................13 Section 1.03. Granting Clause.............................................................................13 ARTICLE II.......................................................................................................15 SHIPOWNER'S REPRESENTATIONS AND AGREEMENTS....................................................................15 Section 2.01. Shipowner's Representations, Agreements, Organization and Existence.........................15 (a) General Representations.................................................................15 (b) Shipowner's United States Citizenship...................................................15 (c) Taxes...................................................................................16 Section 2.02. Covenants Concerning the Vessels............................................................16 (a) Title to and Possession of the Vessels..................................................16 (b) Sale, Mortgage, Transfer or Charter of the Vessels......................................16 (c) Taxes and Governmental Charges..........................................................16 (d) Liens...................................................................................16 (e) Compliance with Applicable Laws.........................................................17 (f) Vessels' Operation......................................................................17 (g) Vessels' Condition and Maintenance......................................................17 (h) Material Changes in the Vessels.........................................................18 (i) Documentation of the Vessels............................................................18 Section 2.03. Maintenance of Construction Contract........................................................18 Section 2.04. Delivery Requirements.......................................................................18 Section 2.05. Insurance...................................................................................19 Section 2.06. Inspection of the Vessels; Examination of Shipowner's Records...............................25 Section 2.07. Requisition of Title, Termination of Construction Contract or Total Loss of a Vessel.................................................................................25 Section 2.08. Notice of Mortgage..........................................................................26 Section 2.09. Compliance with 46 U.S.C. Chapter 313.......................................................26 Section 2.10. Performance of Shipowner's Agreements by the Secretary......................................27 Section 2.11. Uniform Commercial Code Filings; Further Assurances.........................................27 Section 2.12. Modification of Formation Agreements........................................................27
22 Section 2.13. Members of Limited Liability Companies......................................................27 Section 2.14. Concerning the Performance and Payment Bonds................................................28 ARTICLE III......................................................................................................16 THE SECRETARY'S NOTE..........................................................................................16 Section 3.01. Secretary's Note............................................................................28 Section 3.02. Termination of the Guarantees...............................................................28 Section 3.03. Execution of Additional Secretary's Note....................................................29 ARTICLE IV.......................................................................................................29 CONSTRUCTION FUND; MONEYS DUE WITH RESPECT TO.................................................................29 Section 4.01. Construction Fund...........................................................................29 Section 4.02. Moneys Due with Respect to Construction of the Vessels......................................29 ARTICLE V........................................................................................................30 ACTUAL COST; THE ESCROW FUND..................................................................................30 Section 5.01. Actual Cost Determinations..................................................................30 Section 5.02. Escrow Fund Deposits........................................................................30 Section 5.03. Escrow Fund Withdrawals.....................................................................30 Section 5.04. Investment and Liquidation of the Escrow Fund...............................................32 Section 5.05. Income on the Escrow Fund...................................................................32 Section 5.06. Termination Date of the Escrow Fund.........................................................33 ARTICLE VI.......................................................................................................33 DEFAULTS AND REMEDIES.........................................................................................33 Section 6.01. What Constitutes "Defaults;" Continuance of Defaults........................................33 Section 6.02. Acceleration of Maturity of the Secretary's Note............................................35 Section 6.03. Waivers of Default..........................................................................35 Section 6.04. Remedies After Default......................................................................36 Section 6.05. Application of Proceeds.....................................................................37 Section 6.06. General Powers of the Secretary.............................................................38 ARTICLE VII......................................................................................................39 AMENDMENTS AND SUPPLEMENTS TO.................................................................................39 Section 7.01. Amendments and Supplements to the Security Agreement and the Mortgage.......................39 Section 7.02. Amendments and Supplements to the Indenture.................................................39 ARTICLE VIII.....................................................................................................39 CONSOLIDATION, MERGER OR SALE.................................................................................39 Section 8.01. Consolidation, Merger or Sale...............................................................39 Section 8.02. Transfer of a General Partner's or a Joint Venturer's Interest..............................40
23 ARTICLE IX.......................................................................................................40 NOTICES.......................................................................................................40 Section 9.01. Notices.....................................................................................40 Section 9.02. Waivers of Notice...........................................................................40 Section 9.03. Shipowner's Name or Address Change..........................................................40 ARTICLE X........................................................................................................40 DISCHARGE OF SECURITY AGREEMENT AND THE MORTGAGE..............................................................40 Section 10.01. Discharge of Security Agreement and the Mortgage...........................................40 ARTICLE XI.......................................................................................................41 MISCELLANEOUS.................................................................................................41 Section 11.01. Successors and Assigns.....................................................................41 Section 11.02. Execution in Counterparts..................................................................41 Section 11.03. Shipowner's Rights in Absence of Default...................................................41 Section 11.04. Surrender of Vessels' Documents............................................................41 Section 11.05. Applicable Regulations.....................................................................41 Section 11.06. Table of Contents, Titles and Headings.....................................................41
24 GENERAL PROVISIONS INCORPORATED INTO THE SECURITY AGREEMENT BY REFERENCE ARTICLE I DEFINITIONS; OFFICER'S CERTIFICATES; GRANTING CLAUSE Section 1.01. Definitions. All capitalized terms used but, not defined herein, shall have the meaning ascribed in Schedule X. Section 1.02. Officer's Certificates. To satisfy a covenant or condition provided for in this Security Agreement, the Responsible Officer of the Person making such Officer's Certificate shall certify that the officer (a) has read such covenant or condition; (b) has made or caused to be made such examination or investigation as is necessary to enable the Officer to express an informed opinion with respect to such covenant or condition; and (c) believes to the best of the Officer's knowledge that such condition or covenant has been met. An Officer's Certificate shall set forth the pertinent supporting information and shall be subject to the Secretary's review of its adequacy and accuracy. Section 1.03. Granting Clause. (a) In order to create a present security interest in the Secretary, the Shipowner does hereby grant, sell, convey, assign, transfer, mortgage, pledge, set over and confirm unto the Secretary continuing security interests in all of the right, title and interest of the Shipowner in and to all of the following, whether now owned or existing or hereafter arising or acquired: (1) Each Construction Contract (insofar as it relates to the Construction of a Vessel under its related Construction Contract), together with all other contracts, whether now in existence or hereafter entered into, relating to the Construction of each Vessel. Said right, title and interest in and to the Construction Contracts, and the other contracts conveyed to the Secretary by this subsection are hereinafter referred to collectively as the "Rights Under the Construction and Related Contracts." (2) The Shipowner's rights to receive all moneys which from time to time may become due to the Shipowner with respect to the Construction of each Vessel regardless of the legal theory by which moneys are recovered. Said right, title and interest in and to the moneys, cash, bonds, claims, and securities conveyed by this subsection are herein referred to collectively as the "Moneys Due with Respect to the Construction of the Vessels." The Secretary acknowledges and agrees that the Moneys Due with Respect to the Construction of the Vessels will be paid directly to the Depository for application in accordance with this Security Agreement and the Indenture. (3) All goods, whether equipment or inventory appertaining to or relating to each Vessel, whether or not on board or ashore and not covered by the Mortgage, and any charter hire relating to each Vessel. 25 (4) The Title XI Reserve Fund and all moneys, instruments, negotiable documents, chattel paper, and proceeds thereof currently on deposit or hereafter deposited in the Title XI Reserve Fund. (5) The Construction Fund and all moneys, instruments, negotiable documents, chattel paper and proceeds, etc. (6) All moneys, instruments, negotiable documents, chattel paper and proceeds thereof held by the Depository under the Depository Agreement. (7) Proceeds of Policies of Insurance relating to each Vessel and, whether or not insured, any general average claims or loss of hire claims Shipowner may have with respect to each Vessel. (8) All proceeds of the collateral described in paragraphs (1) through (7) of this Section. The Secretary shall have, upon execution and delivery thereof, as further security, certain right, title and interest in and to the following: (9) The Mortgage, to be executed and delivered by the Shipowner to the Secretary, as mortgagee, on the date hereof, covering each Vessel. (b) The right, title and interest of the Secretary pursuant to Section 1.03(a) is herein, collectively, called the "Security." The Secretary shall hold the Security as collateral security for all of the obligations and liabilities of the Shipowner under the Secretary's Note and as collateral security for and with respect to the Guarantees whether now made or hereafter entered into. (c) Notwithstanding paragraphs (a) and (b) of this Section, (1) the Shipowner shall remain liable to perform its obligations under each Construction Contract and the above-mentioned other contracts; (2) the Secretary shall not, by virtue of this Security Agreement, have any obligations under any of the documents referred to in clause (1) or be required to make any payment owing by the Shipowner thereunder; and (3) if there is no existing Default, the Shipowner shall (subject to the rights of the Secretary hereunder) be entitled to exercise all of its rights under each of the documents referred to in this Section and shall be entitled to receive all of the benefits accruing to it thereunder as if paragraphs (a) and (b) of this Section were not applicable. (d) The Shipowner hereby agrees with the Secretary that the Security is to be held by the Secretary subject to the further agreements and conditions set forth herein. 26 ARTICLE II SHIPOWNER'S REPRESENTATIONS AND AGREEMENTS The Shipowner hereby represents and agrees, so long as this Security Agreement shall not have been discharged, as follows: Section 2.01. Shipowner's Representations, Agreements, Organization and Existence. (a) General Representations. The Shipowner hereby represents and warrants that the following are true statements as of the date hereof and further warrants that they shall remain true thereafter: (1) The Shipowner is duly organized, validly existing and in good standing under the laws of the jurisdiction designated in the initial paragraph of the Special Provisions hereof and shall maintain such existence. The Shipowner has not failed to qualify to do business in any jurisdiction in the United States in which its business or properties require such qualification, and had and has full legal right, power and authority to own its own properties and assets and conduct its business as it is presently conducted; (2) The Shipowner had and has legal power and authority to enter into and carry out the terms of the Guarantee Commitment, the Construction Contract, the Bond Purchase Agreement, the Obligations, the Indenture, the Security Agreement, the Secretary's Note, the Mortgage, the Financial Agreement, and the Depository Agreement (the "Documents"); (3) Each of the Documents has been duly authorized, executed and delivered by the Shipowner and constitutes, in accordance with its respective terms, legal, valid and binding instruments enforceable against the Shipowner, except to the extent limited by applicable bankruptcy, reorganization, insolvency, moratorium or similar laws of general application relating to or affecting the enforcement of creditors rights as from time to time in effect; (4) The consummation of the transactions contemplated by and compliance by the Shipowner of all the terms and provisions of the Documents will not violate any provisions of the formation documents of the Shipowner and will not result in a breach of the terms and provisions of, or constitute a default under any other agreement or undertaking by the Shipowner or by which the Shipowner is bound or any order of any court or administrative agency entered into in any proceedings to which the Shipowner is or has been a party; and (5) There is no litigation, proceeding or investigation pending or, to the best of the Shipowner's knowledge, threatened, involving the Shipowner or any of its property which could prevent or jeopardize the performance by the Shipowner of its obligations under the Documents; (b) Shipowner's United States Citizenship. The Shipowner is a citizen of the United States within the meaning of Section 2 of the Shipping Act, 1916, as amended, and shall remain such a citizen for operation in the trades in which the Shipowner proposes to operate the Vessels and in the event the Shipowner shall cease to be such a citizen, the Shipowner shall notify the Secretary immediately of such fact. 27 (c) Taxes. The Shipowner has paid or caused to be paid all taxes assessed against it, unless the same are being contested in good faith or an authorized extension of time has been granted. Section 2.02. Covenants Concerning the Vessels. (a) Title to and Possession of the Vessels. On the date of this Security Agreement, the Shipowner represents and warrants that it lawfully owns each Vessel free from any liens, encumbrances, security interests, charges, or rights in rem (subject only to (1) the equity of the Shipyard under the Construction Contract, if any; (2) liens on any undelivered Vessel which the Shipyard is obligated to discharge under the Construction Contract; (3) any security interest subordinated to the Secretary's security interest permitted under the Special Provisions hereof; (4) the Secretary's rights hereunder; and (5) the liens permitted by paragraph (d)(3) of this Section). The Shipowner shall, for the Secretary's benefit, warrant and defend the title to, and possession of, each Vessel and every part thereof against the claims and demands of all Persons whomsoever. (b) Sale, Mortgage, Transfer or Charter of the Vessels. (1) The Shipowner shall not, without the Secretary's prior written consent, sell, mortgage, demise charter or transfer any Vessel to any Person (or charter the Vessel to a Related Party under any form of charter). (2) The Shipowner hereby covenants that: (A) it will not enter into any time charter of the Vessels in excess of six months unless the time charter contains the following provision: "This time charter is subject to each of the rights and remedies of the Secretary of Transportation and has been assigned to the Secretary under a Security Agreement and Mortgage, each executed by the Shipowner in favor of the Secretary with respect to the Vessels being chartered." and (B) it shall, within 10 calendar days of entering into any time charter in excess of six months, transmit a copy of the time charter to the Secretary. (c) Taxes and Governmental Charges. The Shipowner shall pay and discharge, or cause to be paid and discharged, on or before the same shall become delinquent, all taxes, assessments, government charges, fines and penalties lawfully imposed upon each Vessel, unless the same are being contested in good faith. (d) Liens. (1) As a condition precedent to each payment by the Shipowner under the Construction Contract, the Shipowner shall require an Officer's Certificate from the Shipyard stating that once the Shipyard receives said payment, there will be no liens or rights in rem against the respective Vessel. At the Delivery Date of each Vessel, the Shipowner and the Shipyard shall provide an Officer's Certificate stating that there are no liens or rights in rem against the respective Vessel except for the Mortgage. (2) After the Delivery Date of each Vessel, the Shipowner shall satisfy, or cause to be satisfied, within 30 days of its knowledge thereof, any lien or encumbrance or right in rem which shall be filed against such Vessel unless the same is being contested in good faith; and (3) Neither the Shipowner, any charterer, the master of any Vessel, nor any other Person has or shall have any right, power or authority, without the Secretary's prior written 28 consent, to create, incur or permit to be placed or imposed on any Vessel any lien, encumbrance, security interest, charge, or rights in rem, and statutory liens incident to current operations unless such statutory liens are subordinate to the Mortgage. (e) Compliance with Applicable Laws. The Shipowner shall at all times be in compliance with all applicable U.S. laws. In addition, each Vessel (1) shall be designed to meet, and on the Delivery Date thereof and at all times thereafter shall meet all requirements of applicable laws, treaties and conventions, and of applicable rules and regulations thereunder; and (2) shall have on board valid certificates showing compliance therewith; provided that the foregoing shall not apply if (A) the Vessel is in Government Use; (B) there has been an actual or constructive total loss or an agreed or compromised total loss of such Vessel; or (C) there has been any other loss with respect to such Vessel and the Shipowner shall not have had a reasonable time to repair the same. (f) Vessels' Operation. Except when the Vessel is in Government Use, the Shipowner shall not (1) cause or permit the Vessels to be operated in any manner contrary to law or to any lawful rules or regulations of the Maritime Administration; (2) remove or attempt to remove the Vessels beyond the limits of the United States without the Secretary's prior written consent except on voyages with the intention of returning to the United States; or (3) abandon such Vessels in any foreign port unless there has been an actual or constructive total loss or an agreed or compromised total loss of any of the Vessels. (g) Vessels' Condition and Maintenance. (1) Each Vessel shall be constructed, maintained and operated so as to meet, at all times, the highest classification, certification, rating and inspection standards for Vessels of the same age and type as my be imposed by the Classification Society; provided that, the foregoing shall not apply if the Vessel has been (i) under Government Use; (ii) an actual or constructive total loss or an agreed or compromised total loss of such Vessel; or (iii) any other loss with respect to such Vessel and the Shipowner shall not have had a reasonable time to repair the same; (2) On the Delivery Date of each Vessel, the Shipowner shall furnish to the Secretary an Interim Class Certificate issued for each such Vessel by the Classification Society and promptly after the Delivery Date of each Vessel, furnish to the Secretary a Certificate of Class with respect to such Vessel issued by the Classification Society. Subsequently, the Shipowner shall annually (A) furnish to the Secretary a Certificate of Confirmation of Class issued by the Classification Society showing that the above-mentioned classification and rating have been retained for each Vessel; and (B) furnish to the Secretary copies of all Classification Society reports, including periodic and damage surveys for each Vessel; provided that, the foregoing shall not apply if the Vessel is in Government Use and the governmental body does not permit classification and rating of the Vessel. (3) Notwithstanding Section 2.02(g)(2), if the Vessel is a barge which is not classed, then the Shipowner shall, at all times, at its own cost and expense maintain and preserve each Vessel, so far as may be practicable, in at least as good order and condition, ordinary wear and tear excepted, as at the Delivery Date of such Vessel, and shall perform or cause to be 29 performed at least once every five years and at any other time reasonably required by the Secretary, a survey and inspection of the Vessels by an independent marine surveyor approved by the Secretary; and provided that, no such surveys will be required within the last three years prior to the final Stated Maturity of the Obligations. The Shipowner shall furnish two copies of the report of such independent marine surveyor to the Secretary within 15 days of such survey and inspection. The Shipowner shall deliver to the Secretary annually an Officer's Certificate stating the condition and maintenance of each Vessel; provided further, that none of this Section shall apply when the Vessel is in Government Use. (h) Material Changes in the Vessels. After the Delivery Date of any undelivered Vessel or the Closing Date of any already delivered Vessel, the Shipowner shall not make, or permit to be made, any material change in the structure, means of propulsion, type or speed of such Vessel or in its rig, without the Secretary's prior written consent. (i) Documentation of the Vessels. Upon the Delivery Date and thereafter, each Vessel shall be and shall remain documented under the laws of the United States of America. Section 2.03. Maintenance of Construction Contract. (a) The Construction Contract shall be maintained in full force and effect insofar as it relates to the due performance by the Shipowner and the Shipyard of all their respective obligations thereunder and the Shipowner shall not, without the Secretary's prior written consent, amend, modify, assign or terminate the Construction Contract or consent to any change in the Construction Contract which releases the Shipyard from its obligations to comply with the provisions of the Construction Contract or any applicable laws, treaties, conventions, rules and regulations; provided that, the Secretary's prior written consent shall not be necessary, but prompt written notice to the Secretary shall be given for (1) any mandatory or regulatory change to the Construction Contract as a result of any requirements of any governmental agency; or (2) any non-mandatory changes that the Shipyard and the Shipowner desire to make which do not, in the aggregate, exceed five (5%) percent of the total Construction Contract price of the Vessels, and which do not cause the total Construction Contract price to be increased by an individual change by more than one (1%) percent or the delivery and completion date of the Vessels to be extended by more than ten (10) days. Notwithstanding the foregoing, no change shall be made in the general dimensions and/or characteristics of the Vessels which changes the capacity of the Vessels to perform as originally intended by the Construction Contract without the Secretary's prior written consent. The Secretary will nonetheless retain its authority to review work done under a change order to ascertain whether the work should be included in Actual Cost and whether the price charged is fair and reasonable. No withdrawals may be made from the Escrow Fund for work that is not determined to be includable in Actual Cost. (b) Notwithstanding anything to the contrary contained in the Construction Contract or herein, no changes to the payment milestones and disbursement schedules shall be made without the Secretary's prior written consent, except to the extent reasonably required to reflect the change orders under paragraph (a) of this Section. Section 2.04. Delivery Requirements. At or prior to the Delivery Date, the Shipowner 30 shall have: (a) documented the Vessel under the laws of the United States with the United States Coast Guard; (b) executed and delivered to the Secretary the Mortgage (or mortgage supplement) substantially in the form of Exhibit 3 annexed hereto; (c) recorded the Mortgage (or, if appropriate, a mortgage supplement) in the National Vessel Documentation Center of the United States Coast Guard, or its successor; (d) delivered to the Secretary an Officer's Certificate (1) from the Shipowner and the Shipyard certifying that the Vessel is free of any claim, lien, charge, mortgage, or other encumbrance of any character except as permitted under Section 2.02(d); (2) certifying that there has not occurred and is not then continuing any event which constitutes (or after any period of time or any notice, or both, would constitute) a default under the Security Agreement; (3) that the marine insurance as required under Section 2.05 will be in full force and effect at the time of Vessel delivery; (4) certifying that the Vessel was constructed substantially in accordance with the plans and specifications of the Construction Contract; (5) certifying that there have been no unusual occurrences (or a full description of such occurrences, if any) which would adversely affect the condition of the delivered Vessel. (e) delivered to the Secretary (1) an opinion of counsel substantially in the form of Exhibit A to the form of Mortgage; and (2) a certificate of delivery and acceptance from the Shipowner and the Shipyard to the Secretary with respect to the delivered Vessel; Section 2.05. Insurance. (a) Prior to the Delivery Date of each Vessel, the Shipowner shall, without cost to the Secretary or, with respect to war risk builder's risk insurance mentioned below, without cost to the Shipyard, cause each Vessel to be insured as provided in the Construction Contract and as contemplated by the Consent of Shipyard; provided that, the insurance required by this Section shall be approved by the Secretary. (b) Upon the Delivery Date of each Vessel and at all times thereafter, the Shipowner shall, without cost to the Secretary, keep such Vessel insured as indicated below and with such additional insurance as may be specified by the Secretary in an amount in U.S. dollars equal to 110% of the unpaid principal amount of the Proportionate Part of the Secretary's Note, or such greater sum, up to and including the full commercial value of such Vessel as may be required by the Secretary. The Shipowner shall provide 30 days prior written notice to the Secretary of all insurance renewals. (1) Marine and war risk hull insurance under the latest (at the time of issue of the policies in question) forms of American Institute of Marine Underwriters' policies approved by the Secretary and/or policies issued by or for the Maritime Administration (or under such other forms of policies as the Secretary may approve in writing) insuring such Vessel against the usual risks covered by such forms (including, at the Shipowner's option, such amounts of increased 31 value and other forms of "total loss only" insurance as are permitted by said hull insurance policies); and (2) While any Vessel is laid up, at the Shipowner's option and in lieu of the above-mentioned marine and war risk hull insurance or marine and war risk hull and increased value insurance, port risk insurance under the latest (at the time of issue of the policies in question) forms of American Institute of Marine Underwriters' policies approved by the Secretary and/or policies issued by or for the Maritime Administration (or under such other forms of policies as the Secretary may approve in writing) insuring such Vessel against the usual risks covered by such forms. (3) Notwithstanding the foregoing, the Shipowner, with the Secretary's prior written consent, shall have the right to self-insure up to the amount specified in the Special Provisions hereof for any loss resulting from any one accident or occurrence (other than an actual or constructive total loss of any Vessel). (c) All policies of insurance under this Section shall provide, so long as this Security Agreement has not been discharged, that payment of all losses shall be made payable to the Secretary for distribution by him to himself, the Shipowner and (in the case of the insurance required by paragraph (a) of this Section) the Shipyard, except that (i) as provided in paragraph (e) of this Section; and (ii) under the policies required by paragraph (b) of this Section, payment of all losses up to the amount specified in the Special Provisions hereof by all insurance underwriters with respect to any one accident, occurrence or event may be made directly to the Shipowner unless there is an existing Default, or if the Secretary shall have assumed the Shipowner's rights and duties under the Indenture and the Obligations and made any payments in default under the terms of Section 6.09 of the Indenture, in which event payment of all losses shall be made payable to the Secretary as aforesaid. Any such insurance recoveries to which the Secretary shall be so entitled shall be applied as follows: (1) In the event that insurance becomes payable under said policies on account of an accident, occurrence or event not resulting in an actual or constructive total loss or an agreed or compromised total loss of any Vessel, the Secretary shall (A) if there is no existing Default and if none of the events described in Section 2.07 has occurred, in accordance with a Shipowner's Request, pay, or consent that the underwriters pay, direct for repairs, liabilities, salvage claims or other charges and expenses (including sue and labor charges due or paid by the Shipowner) covered by the policies, or (to the extent that, as stated in an Officer's Certificate delivered to the Secretary, accompanied by written confirmation by the underwriter or a surveyor or adjuster, the damage shall have been repaired and the cost thereof paid of such liabilities, salvage claims, or other charges and expenses discharged or paid) reimburse, or consent that the underwriters reimburse, the Shipowner therefor and (after all known damage with respect to the particular loss shall have been repaired, except to the extent the Shipowner, with the Secretary's written consent, deems the said repair inadvisable, and all known costs, liabilities, salvage claims, charges and expenses, covered by the policies, with respect to such loss shall have been 32 discharged or paid, as stated in an Officer's Certificate delivered to the Secretary, accompanied by written confirmation by the underwriters or a surveyor or adjuster) pay, or consent that the underwriters pay, any balance to the Shipowner; or (B) if there is an existing Default, in accordance with a Request of Shipowner, pay, or consent that the underwriters pay, direct for the Shipowner's proportion of such repairs, liabilities, salvage claims or other charges and expenses (including sue and labor charges due or paid by the Shipowner) covered by the policies and hold any balance until the same may be paid or applied under clauses A, C or D of this subsection, whichever is applicable; or (C) if the Guarantees shall have terminated pursuant to Section 3.02(c) or if the Secretary shall have assumed the Shipowner's rights and duties under the Indenture and the Obligations and made any payments in default under the terms of Section 6.09 of the Indenture and none of the events described in Section 2.07 has occurred, apply the insurance as provided in Section 6.05; or (D) if the Guarantees shall have terminated pursuant to Section 3.02(b) or (d), pay the insurance to the Shipowner; (2) In the event of an accident, occurrence or event resulting in an actual or constructive total loss of any Vessel prior to the Delivery Date of such Vessel, the Shipowner shall forthwith deposit with the Secretary any insurance moneys which the Shipowner receives on account thereof under policies of insurance required by paragraph (a) of this Section, and any such insurance moneys shall be held by the Secretary for 10 days (or such lesser or further time as the Shipowner and the Secretary may agree upon). Upon the expiration of said period of time, (A) if there is no existing Default and if the Shipowner, the Shipyard and the Secretary shall have elected not to construct such Vessel under the Construction Contract, then said insurance moneys shall be applied, to the extent necessary and required pursuant to Section 2.07; or (B) if there is no existing Default and if the Shipowner, the Shipyard and the Secretary shall not have made the election contemplated by clause (A) of this subsection, then said insurance moneys (together with the Shipowner's funds to the extent, if any, required by the Secretary for deposit on account of interest under clause (ii) below) shall be deposited in the Escrow Fund, in such amount and to the extent available, so that the moneys in the Escrow Fund after such deposit shall be equal to (i) the principal amount of the Proportionate Part of the Outstanding Obligations relating to such Vessel at the time of such deposit and (ii) such interest on said deposit, if any, as may be required by the Secretary (said moneys to be subject to withdrawal in the same manner as moneys originally deposited in said Escrow Fund); and the balance, if any, of such insurance moneys held by the Secretary shall be paid to the Shipowner; and (3) In the event of an accident, occurrence or event resulting in an actual or constructive total loss or an agreed or compromised total loss of any Vessel, whether prior to or after the Delivery Date of such Vessel, and the insurance moneys have not been applied as provided in paragraph (c)(2) of this Section, the Shipowner shall forthwith deposit with the Secretary any insurance moneys which the Shipowner receives on account thereof under policies of insurance required by this Section, and any such insurance moneys received by the Secretary, whether from the Shipowner or otherwise, or held by the Secretary pursuant to paragraph (c)(2) of this Section, shall (A) if there is no existing Default, be applied, to the extent necessary, pursuant to Section 2.07; (B) if there is an existing Security Default, be held until the same may be applied under clauses (A), (C), or (D) of this subsection, whichever is applicable; (C) if the guarantees shall have terminated pursuant to Section 3.02(c) or if the Secretary shall have 33 assumed the Shipowner's rights and duties under the Indenture and the Obligations and made any payments in default under the terms of Section 6.09 of the Indenture, be applied as provided in Section 6.05; provided that, notwithstanding the foregoing clauses (A), (B) and (C) of this subsection, the Shipowner shall not be required to so deposit with the Secretary insurance moneys in an amount which, together with funds otherwise available for the redemption of Obligations is in excess of that required for the redemption of the Proportionate Part of the Outstanding Obligations pursuant to Section 3.05 of the Indenture and for the payment to the Secretary of a Proportionate Part of all other sums that may be secured by this Security Agreement and the Mortgage; or (D) if the Guarantees shall have terminated pursuant to Section 3.02(b) or 3.02(d), be paid to the Shipowner. (d) In the event of an accident, occurrence or event resulting in a constructive total loss of any Vessel, the Secretary shall have the right (with the prior written consent of the Shipowner, unless there is an existing Default, and at any time prior to the Delivery Date of such Vessel also with the prior written consent of the Shipyard) to claim for a constructive total loss of such Vessel. If (1) such claim is accepted by all underwriters under all policies then in force as to such Vessel under which payment is due for total loss; and (2) payment in full is made in cash under such policies to the Secretary, then the Secretary shall have the right to abandon such Vessel to the underwriters of such policies, free from lien of this Security Agreement and the Mortgage. (e) Commencing on the Delivery Date of each Vessel, the Shipowner shall, without cost to the Secretary, keep each such Vessel insured against marine and war risk protection and indemnity risks and liabilities by policies of insurance approved by the Secretary as to form and amount; provided that, (1) the Shipowner shall, as soon as possible before such Delivery Date, present any such policy to the Secretary (who shall promptly approve or disapprove the same); (2) any approval of a policy under this subsection shall be effective until the end of the policy period or until 60 days after the Secretary shall notify the Shipowner of a desired change in the form and/or amount thereof, whichever shall first occur; and (3) war protection and indemnity insurance shall be required unless the Secretary gives written notice to the Shipowner stating that such insurance is not required. Such policies may provide that (1) if the Shipowner shall not have incurred the loss, damage, or expense in question, any loss under such insurance may be paid directly to the Person to whom any liability covered by such policies has been incurred (whether or not a Default then exists), and (2) if the Shipowner shall have incurred the loss, damage or expense in question, any such loss shall be paid to the Shipowner in reimbursement if there is no existing Default of which the underwriter has written notice from the Shipowner or the Secretary, or, if there is such an existing Default, to the Secretary to be held and applied as follows: (A) applied as provided in Section 6.05 in the event the Guarantees shall have terminated pursuant to Section 3.02(c) or if the Secretary shall have assumed the Shipowner's rights and duties under the Indenture and the Obligations and made any payments in default under the terms of Section 6.09 of the Indenture; or (B) to the extent not theretofore applied pursuant to Section 6.05, paid forthwith to the Shipowner upon its Request in the event there is no existing Default or the Guarantees shall have terminated pursuant to Section 3.02(b) or (d) at the date of delivery of such Request; provided 34 that, irrespective of the foregoing, with the Secretary's prior written consent, the Shipowner shall have the right to self-insure in an amount up to the limit specified in the Special Provisions hereof with respect to each accident, occurrence or event, except that, with respect to cargo or property carried, the Shipowner, with the Secretary's prior written consent, shall have the right to self-insure in an amount up to the limit specified in the Special Provisions hereof with respect to each cargo or property carried. (f) All insurance required under this Section shall be placed and kept with the United States Government or with American and/or British (and/or other foreign, if permitted by the Secretary in writing) insurance companies, underwriters' association or underwriting funds approved by the Secretary. All insurance required under this subsection shall be arranged through marine insurance brokers and/or underwriting agents as chosen by the Shipowner and approved by the Secretary. (g) The Secretary shall not have the right to enter into an agreement or compromise providing for an agreed or compromised total loss of any Vessel without prior written consent of (i) the Shipyard (prior to the Delivery Date of such Vessel); and (ii) (unless there is an existing Default) the Shipowner. If (1) the Shipowner shall have given prior consent thereto; or (2) there is an existing Default, the Secretary shall have the right in his discretion, and with the prior written consent of the Shipyard prior to the Delivery Date of such Vessel, to enter into an agreement or compromise providing for an agreed or compromised total loss of such Vessel; provided that, if the aggregate amount payable to the Shipowner and/or the Secretary under such agreement or compromise, together with funds held by the Secretary and available for the redemption of Obligations, is not sufficient to redeem or pay the Proportionate Part of the Outstanding Obligations pursuant to Section 2.07, the Secretary shall not enter into such agreement or compromise without the Shipowner's prior written consent. (h) During the continuance of (1) a taking or requisition of the use of any Vessel by any government or governmental body; or (2) a charter, with the Secretary's prior written consent, of the use of any Vessel by the United States Government or by any governmental body of the United States, or by any other government or governmental body, the provisions of this Section shall be deemed to have been complied with in all respects if such government or governmental body shall have agreed to reimburse, in a manner approved by the Secretary in writing, the Shipowner for loss or damage covered by the insurance required hereunder or resulting from the risks under paragraphs (a), (b), and (e) of this Section or if the Shipowner shall be entitled to just compensation therefor. In addition, the provisions of this Section shall be deemed to have been complied with in all respects during any period after (A) title to any Vessel shall have been taken or requisitioned by any government or governmental body; or (B) there shall have been an actual or constructive total loss or an agreed or compromised total loss of any Vessel. In the event of any taking, requisition, charter or loss contemplated by this paragraph, the Shipowner shall promptly furnish to the Secretary an Officer's Certificate stating that such taking, requisition, charter or loss has occurred and, if there shall have been a taking, requisition or charter of the use of any Vessel, that the government or governmental body in question has agreed to reimburse the Shipowner, in a manner approved by the Secretary, for loss or damage resulting from the risks under paragraphs (a), (b), and (e) of this Section or that the Shipowner is entitled to just 35 compensation therefor. (i) All insurance required (A) under paragraph (a) of this Section shall be taken out in the names of the Shipowner, the United States and the Shipyard as assureds, and (B) under paragraph (b) and (c) of this Section shall be taken out in the names of the Shipowner and the United States as assureds. All policies for such insurance so taken out shall, unless otherwise consented to by the Secretary, provide that (1) there shall be no recourse against the United States for the payment of premiums or commissions; (2) if such policies provide for the payment of club calls, assessments or advances, there shall be no recourse against the United States for the payment thereof; and (3) at least 10 days' prior written notice of any cancellation for the nonpayment of premiums, commissions, club calls, assessments or advances shall be given to the Secretary by the insurance underwriters. (j) The Shipowner shall not, without the Secretary's prior written consent, (1) do any act, nor voluntarily suffer or permit any act to be done, whereby any insurance required by this Section shall or may be suspended, impaired or defeated or (2) suffer or permit any Vessel to engage in any voyage or to carry any cargo not permitted under the policies of insurance then in effect without first covering such Vessel with insurance satisfactory in all respects for such voyage or the carriage of such cargo; provided that, this paragraph shall be subject to the requirements of any military authority of the United States and shall not apply in the case of such Vessel if and so long as the title or use of such Vessel shall have been taken, requisitioned or chartered by any government or governmental body as contemplated by Section 2.07. (k) In the event that any claim or lien is asserted against any Vessel for loss, damage or expense which is covered by insurance hereunder and it is necessary for the Shipowner to obtain a bond or supply other security to prevent arrest of such Vessel or to release such Vessel from arrest on account of said claim or lien, the Secretary, on the Shipowner's Request, may, at the Secretary's sole option, assign to any Person executing a surety or guaranty bond or other agreement to save or release such Vessel from such arrest, all right, title and interest of the Secretary in and to said insurance covering such loss, damage or expense as collateral security to indemnify against liability under said bond or other agreement. (l) Except as the Secretary shall otherwise direct by notice in writing to the Shipowner, the Shipowner shall deliver to the Secretary the original policies evidencing insurance maintained under this Section; provided that, if any such original policy shall have been delivered previously to the Secretary or to a mortgagee by the Shipowner under another ship mortgage of the Shipowner, the Shipowner shall deliver a duplicate or pro forma copy of such policy to the Secretary. The Secretary or any agent thereof (who may also be an agent of the issuer) shall at all times hold the policies delivered as aforesaid; provided that, if one or more of said policies are held by an agent of the Secretary, the Shipowner shall, upon the Secretary's request, deliver a duplicate or pro forma copy thereof to the Secretary, and provided further, that if the Shipowner shall deliver to the Secretary a Request (1) stating that delivery of such policy to the insurer is necessary in connection with the collection, enforcement or settlement of any claim thereunder (including claims for return premiums and any other amounts payable by the insurer); and (2) setting forth the name and address of the Person to whom such policy is to be 36 delivered or mailed for such purpose, and if the Secretary approves such Request, the Secretary shall, at the Shipowner's expense, deliver or mail (by registered or certified mail, postage prepaid) such policy in accordance with such Request, accompanied by a written direction to the recipient to redeliver such policy directly to the Secretary or an agent thereof when it has served the purpose for which so delivered. The Shipowner agrees that, in case it shall at any time so cause the delivery or mailing of any policy to any Person as aforesaid, the Shipowner will cause such policy to be promptly redelivered to the Secretary or an agent thereof as aforesaid. The Secretary shall have no duty to see to the redelivery of such policy, but shall have the duty to request the redelivery thereof at intervals of 60 days thereafter. (m) Nothing in this Section shall limit the insurance coverage which the Secretary may require under any contract or agreement to which the Secretary and the Shipowner are parties. The requirements of this Section are expressly subject to the Special Provisions of this Security Agreement. Section 2.06. Inspection of the Vessels; Examination of Shipowner's Records. The Shipowner will: (a) afford the Secretary, upon reasonable notice, access to the Vessels, their cargoes and papers for the purpose of inspecting the same; (b) maintain records of all amounts paid or obligated to be paid by or for the account of the Shipowner for each Vessel's Construction; and (c) at reasonable times permit the Secretary, upon request, to make reasonable, material and pertinent examination and audit of books, records and accounts maintained by the Shipowner, and to take information therefrom and make transcripts or copies thereof. Section 2.07. Requisition of Title, Termination of Construction Contract or Total Loss of a Vessel. In the event of requisition of title to or seizure or forfeiture of such Vessel, termination of the Construction Contract relating to such Vessel, or the occurrence of the circumstances referred to in Section 2.05(c)(3), then all of the following shall apply: (a) The Shipowner shall promptly give written notice thereof to the Secretary. (b) The Shipowner shall promptly pay all amounts it receives by reason of such requisition, seizure, forfeiture, termination or total loss ("Loss Event") to the Secretary. (c) After the Secretary has received sufficient funds to retire a Proportionate Part of the Outstanding Obligations affected by the Loss Event: (1) if there is no existing Default, (A) the Secretary and the Shipowner shall give notice to the Indenture Trustee of a redemption of Proportionate Part of the Outstanding Obligations pursuant to Section 3.05 of the Indenture; (B) such amount, if any, held by the Secretary, shall be paid by the Secretary to the Indenture Trustee not earlier than 10 days prior to, nor later than the opening of business on, the Redemption Date required by Section 3.05 of the Indenture; (C) the remainder shall next be applied by the Secretary for the payment of a Proportionate Part of all other sums that may be secured hereby; and (D) the balance shall be 37 paid to the Shipowner including any interest earned on the proceeds which are in excess of the amount required to redeem the Obligations; (2) if there is an existing Default and the Guarantees shall not have terminated pursuant to Section 3.02, such amounts shall be held until the same may be applied or paid under paragraphs (1), (3), or (4) of this subsection, whichever is applicable; (3) if the Guarantees shall have terminated pursuant to Section 3.02(c) or if the Secretary shall have assumed the Shipowner's rights and duties under the Indenture and the Obligations and made any payments in default under the terms of Section 6.09 of the Indenture, such amounts shall be applied as provided in Section 6.05; or (4) if the Guarantees shall have terminated pursuant to Section 3.02(b) or 3.02(d) such amounts shall be paid by the Secretary to the Shipowner. Provided that, notwithstanding the foregoing, the Shipowner shall not be required to pay the Secretary any amount which the Secretary agrees is in excess of the amount needed for redemption of the Proportionate Part of the Outstanding Obligations affected by the Loss Event. Section 2.08. Notice of Mortgage. (a) A properly certified copy of the Mortgage shall be carried on board each self-propelled Vessel with that Vessel's documents and shall be exhibited on demand to any Person having business with such Vessel or to any Secretary's representative. (b) A notice printed in plain type of such size that the paragraph of reading matter shall cover a space not less than six inches wide by nine inches high, and framed, shall be placed and kept prominently exhibited in the chart room and in the master's cabin of a self-propelled Vessel. (c) The notice referred to in paragraph (b) of this Section shall read as follows: "NOTICE OF FLEET MORTGAGE" This Vessel is owned by (Insert name of Shipowner) , a (Insert jurisdiction) corporation ("Shipowner"), and is covered by a First Preferred Ship Mortgage in favor of the United States of America, under authority of Chapter 313, Title 46 of the United States Code. Under the terms of said Mortgage neither the Shipowner, any charterer, the master or agent of this Vessel nor any other person has any right, power or authority to create, incur or permit to be placed or imposed upon this Vessel any lien other than statutory liens incident to current operations that are subordinate to the Mortgage." Section 2.09. Compliance with 46 U.S.C. Chapter 313. The Shipowner shall comply with and satisfy all of the provisions of Chapter 313, in order to establish and thereafter to maintain the Mortgage as a preferred mortgage upon each Vessel. 38 Section 2.10. Performance of Shipowner's Agreements by the Secretary. If the Shipowner shall fail to perform any of its agreements hereunder or under the Mortgage, the Secretary may, in its discretion, at any time during the continuance of an event which by itself, with the passage of time, or the giving of notice, would constitute a Default, perform all acts and make all necessary expenditures to remedy such failure. Notwithstanding the foregoing, the Secretary shall not be obligated to (and shall not be liable for the failure to) perform such acts and make such expenditures. All funds advanced and expenses and damages incurred by the Secretary relating to such compliance shall constitute a debt due from the Shipowner to the Secretary and shall be secured hereunder and under the Mortgage prior to the Secretary's Note and shall be repaid by the Shipowner upon demand, together with interest at the rate that would have been paid by the Department of Treasury on the expended funds plus 1%. Section 2.11. Uniform Commercial Code Filings; Further Assurances. The Shipowner shall (a) furnish evidence satisfactory to the Secretary that financing statements under the UCC shall have been filed against the Shipowner and/or the Shipyard in all offices in which it may be necessary or advisable in the opinion of the Secretary to perfect the Secretary's security interests, and (b) from time to time execute and deliver such further instruments and take such action as may reasonably be required to more effectively subject the Security to the lien of this Security Agreement and the Mortgage as contemplated thereby, including but not limited to, legal opinions from an independent counsel for the Shipowner to the effect that all UCC Financing Statements have been filed to perfect the Secretary's interests in the Security as valid and enforceable first priority perfected security interests. Section 2.12. Modification of Formation Agreements. (a) If the Shipowner is organized as a general partnership, limited partnership, limited liability company or joint venture, then for so long as there is Outstanding any indebtedness to the United States of America pursuant to the Act, the partnership agreement, operating agreement, limited liability agreement, joint venture agreement (or any agreement constituting such an entity) shall not be amended, modified or voluntarily terminated without the Secretary's prior written consent. (b) In the event where any action by the Shipowner, any member of the Shipowner or the management of the Shipowner results or would result in dissolution of the Shipowner pursuant to its limited liability company agreement or governing law, each member of the Shipowner shall forthwith take all steps necessary to reform and reestablish the Shipowner. Section 2.13. Members of Limited Liability Companies. All existing and future members of a Shipowner which is a limited liability company (each being a "Member"), upon becoming a Member, shall forthwith enter into an agreement with the Secretary, in form and substance satisfactory to the Secretary, whereby each Member agrees: (1) that any amounts owed by the Shipowner to a Member with respect to its interest (as that or the equivalent term is used in the Shipowner's limited liability company agreement) (the "Distributions") shall be subordinated to the Shipowner's payment of the Secretary's Note and debts under the Security Agreement, provided that such Distributions may be paid to the extent the Shipowner is permitted to pay dividends under the Financial Agreement; (2) that in the event of default by the Shipowner under the Security Agreement, the Member shall be subordinated in its rights to receive any 39 Distribution or to be paid any sums whatsoever by the Shipowner until the Secretary has made a full recovery of any and all amounts owed under the Secretary's Note and the Security Agreement. Section 2.14. Concerning the Performance and Payment Bonds. During the Construction, the Shipowner shall cause to be maintained Performance Bonds and Payment Bonds naming the Shipowner and the Secretary as co-obligees (the "Surety Bonds") in form and substance satisfactory to the Secretary, to be obtained by the Shipyard in the amount of the Construction Contract, issued by such surety company or companies as shall be satisfactory to the Secretary (the "Surety"). In the event that the price for the work to be performed under the Construction Contract is increased, then the Surety Bonds shall be increased simultaneously in a corresponding amount. The Shipowner hereby agrees that the Secretary shall be the sole loss payee under the Surety Bonds and the Surety shall pay such amounts directly to the Secretary for distribution to the co-obligees as their interests may appear. The Shipowner hereby agrees that its interest as a co-obligee under each of the Surety Bonds is and shall be, upon the occurrence of a Default under the Security Agreement, fully subject and subordinate to the rights and interests of the Secretary therein. In the event of a default under the Security Agreement, which default results in a payment under any of the Surety Bonds, then the Surety Bonds proceeds shall be distributed by the Secretary in accordance with the provisions of Section 6.05 hereof. The Shipowner hereby irrevocably appoints the Secretary, the true and lawful attorney of the Shipowner, in its name and stead, to execute all consents, approvals, settlements and agreements on behalf of the Shipowner with respect to any rights related to the Surety Bonds. ARTICLE III THE SECRETARY'S NOTE Section 3.01. Secretary's Note. On this date, the Shipowner has duly executed and delivered and the Secretary has accepted the Secretary's Note payable in an amount equal to the principal amount of the Obligations. Section 3.02. Termination of the Guarantees. Except as provided in Section 6.08 of the Indenture, the Guarantee with respect to a particular Obligation, shall terminate only when, one or more of the following events shall occur: (a) Such Obligation shall have been Retired or Paid; (b) The Obligees of all the Obligations then Outstanding shall have elected to terminate the Guarantees, and the Secretary has been so notified by the Indenture Trustee or all Obligees in writing; provided that, such termination shall not prejudice any rights accruing hereunder prior to such termination; (c) Such Guarantee shall have been paid in full in cash by the Secretary; or (d) The Indenture Trustee and each Obligee shall have failed to demand payment of such Guarantee as provided in the Indenture, Guarantee, or the Act. 40 Section 3.03. Execution of Additional Secretary's Note. (a) In the event and when each new issue of Obligations is executed, authenticated and delivered on a date or dates subsequent to the date hereof, as contemplated by, and pursuant to the Indenture, the Shipowner shall, at the time of the issuance of such Obligations, execute and deliver to the Secretary an additional Secretary's Note or, at the Secretary's discretion, an endorsement to the Secretary's Note in an amount equal to the principal amount of, and at the interest rate borne by, such issue of Obligations, on the terms stated in the Secretary's Note. (b) Each Secretary's Note or endorsement executed and delivered in accordance with Section 3.03 shall together with the Secretary's Note be secured by this Security Agreement and the Mortgage. ARTICLE IV CONSTRUCTION FUND; MONEYS DUE WITH RESPECT TO CONSTRUCTION OF THE VESSELS Section 4.01. Construction Fund. (a) The Shipowner has deposited in the Construction Fund with the Depository the amount, if any, indicated in the Depository Agreement from the proceeds of the Obligation to be held by the Depository in a Securities Account in accordance with the terms of the Depository Agreement. This Securities Account together with any future deposits and the proceeds from the investment of the amounts on deposit shall be called the "Construction Fund." (b) The Shipowner may withdraw money from the Construction Fund under the same procedures and conditions as the Shipowner may withdraw money from the Escrow Fund under Section 5.03, except that the Shipowner's Request for withdrawal will not be subject to Section 5.03(a)(2)(A) or 5.03(h). The administration of the Construction Fund shall also be subject to the terms and conditions of Sections 5.04 and 5.05. Section 4.02. Moneys Due with Respect to Construction of the Vessels. (a) In the event that the Shipowner shall receive any moneys from any Person in connection with the Construction of any Vessel, the Shipowner shall give written notice thereof to the Secretary and shall promptly pay the same over to the Depository to be held in the Title XI Reserve Fund. (b) Upon and after a final determination of Actual Cost in accordance with Section 5.01, in the absence of a Default, any moneys held by the Depository which are not to be applied for the redemption of Obligations under Section 3.04 of the Indenture shall be paid to the Shipowner. (c) In the event there is an existing Default, the money shall be held by the Depository in accordance with the provisions of the Depository Agreement. (d) In the event the Secretary assumes the Shipowner's rights and duties under Section 6.09 of the Indenture or pays the Guarantees, the Depository shall promptly pay all moneys 41 including all Moneys Due with Respect to Construction of the Vessels to the Secretary, who will apply it in accordance with Section 6.05. ARTICLE V ACTUAL COST; THE ESCROW FUND Section 5.01. Actual Cost Determinations. (a) The Actual Cost of each Vessel (and the aggregate Actual Cost of all of the Vessels), determined as of the date of this Security Agreement, is as set forth in Table A hereof. (b) The Secretary agrees to: (1) make a final determination of the Actual Cost of each Vessel, limited to amounts paid by or for the account of the Shipowner on account of the items set forth in Table A hereof and, to the extent approved by the Secretary, any other items or any increase in the amounts of such items, such determination to be made as of the time of payment by or for the account of the Shipowner of the full amount of said Actual Cost of such Vessel, excluding any amounts which are not to become due and payable; and (2) promptly give written notice to the Shipowner, of the results of said final determination; provided that, the Shipowner shall have requested such determination not less than 60 days in advance and shall have furnished to the Secretary not less than 30 days in advance of such determination along with a Shipowner's Officer's Certificate and a statement by an independent certified (or, with the Secretary's prior written consent, an independent) public accountant or firm of accountants of the total amounts paid or obligated to be paid by or for the account of the Shipowner for the Construction of such Vessel, together with a breakdown of such totals according to the items for which paid or obligated to be paid. Section 5.02. Escrow Fund Deposits. At the time of the sale of the Obligations, the Shipowner shall deposit with the Secretary in the Escrow Fund all of the proceeds of that sale unless the Shipowner is entitled to withdraw funds under Section 5.03. If the Obligations are issued before the delivery of all of the Vessels, then the Shipowner shall also deposit into the Escrow Fund on the Closing Date an amount equal to six months interest at the rate borne by the Obligations. Section 5.03. Escrow Fund Withdrawals. (a) The Secretary shall, within a reasonable time after written Request from the Shipowner, disburse from the Escrow Fund directly to the Indenture Trustee, any Paying Agent for such Obligations, the Shipyard, or any other Person entitled thereto, any amount which the Shipowner is obligated to pay, or to the Shipowner for any amounts it has paid, on account of the items and amounts or any other items set forth in Table A annexed hereto or subsequently approved by the Secretary, provided that, the Secretary is satisfied with the accuracy and completeness of the information contained in the following submissions: (1) A Responsible Officer of the Shipowner shall deliver an Officer's Certificate, in form and substance satisfactory to the Secretary, stating that (A) there is neither a Default under the Construction Contract nor the Security Agreement; (B) there have been no occurrences which have or would adversely and materially affect the condition of the Vessel, its hull or any 42 of its component parts; (C) the amounts of the Request is in accordance with the Construction Contract including the approved disbursement schedule and each item in these amounts is properly included in the Secretary's approved estimate of Actual Cost; (D) with respect to the Request, once the Contractor is paid there will be no liens or encumbrances on the applicable Vessel, its hull or component parts for which the withdrawal is being requested except for those already approved by the Secretary; and (E) if the Vessel has already been Delivered, it is in class and is being maintained in the highest and best condition. The Shipowner shall also attach an Officer's Certificate of the Shipyard, in form and substance satisfactory to the Secretary, stating that there are no liens or encumbrances as provided in clause (D) of this subsection and attaching the invoices and receipts supporting each proposed withdrawal to the satisfaction of the Secretary. (2) No payment or reimbursement under this Section shall be made (A) to any Person until the Construction Fund, if any, has been exhausted; (B) to any Person until the total amount paid by or for the account of the Shipowner from sources other than the proceeds of such Obligations equals at least 12-l/2% of the Actual Cost of the related Vessel is made; (C) to the Shipowner which would have the effect of reducing the total amounts paid by the Shipowner pursuant to clause (B) of this subsection; or (D) to any Person on account of items, amounts or increases representing changes and extras or owner furnished equipment, if any, set forth in Table A annexed hereto, unless such items, amounts and increases shall have been previously approved by the Secretary; provided, however, that when the amount guaranteed by the Secretary equals 75% or less of the Actual Cost, then after the initial 12 1/2% of Actual Cost has been paid by or on behalf of the Shipowner for such Vessel and up to 37 1/2% of Actual Cost has been withdrawn from the Escrow Fund for such Vessel, the Shipowner shall pay the remaining Shipowner's equity of at least 12 1/2% (as determined by the Secretary) before additional monies can be withdrawn from the Escrow Fund relating to such Vessel. (b) The excess, as determined by the Secretary, of any amount on deposit in the Escrow Fund which represents interest on the principal amount deposited, over and above the amount of interest due on the next Interest Payment Date on the principal amount, as determined by the Secretary, remaining on deposit on such Interest Payment Date, may, unless there is an existing Default, be disbursed by the Secretary upon the Shipowner's Request made not more than 10 Business Days prior to such Interest Payment Date or made within at least 60 days after such Interest Payment Date. (c) The Secretary shall not be required to make any disbursement pursuant to this Section except out of the cash available in the Escrow Fund. If sufficient cash is not available to make the requested disbursement, additional cash shall be provided by the maturity or sale of securities in accordance with instructions pursuant to Section 5.04. If any sale or payment on maturity shall result in a loss in the principal amount of the Escrow Fund invested in securities so sold or matured, the requested disbursement from the Escrow Fund shall be reduced by an amount equal to such loss, and the Shipowner shall, no later than the time for such disbursement, pay to the Indenture Trustee, any Paying Agent, the Shipyard, or any other Person entitled thereto, the balance of the requested disbursement from the Shipowner's funds other than the proceeds of such Obligations. 43 (d) If the Secretary assumes the Shipowner's rights and duties under the Indenture and the Obligations, and makes any payments in default under the Indenture, or the Secretary pays the Guarantees, all amounts in the Escrow Fund (including realized income which has not yet been paid to the Shipowner), shall be paid to the Secretary and be credited against any amounts due or to become due to the Secretary under the Security Agreement and the Secretary's Note. To the extent payment of the Escrow Fund to the Secretary is not required, said amounts or any balance thereof, shall be paid to the Shipowner. (e) At any time the Secretary shall have determined that there has been, for any reason, a disbursement from the Escrow Fund contrary to this Section, the Secretary shall give written notice to the Shipowner of the amount improperly disbursed, the amount to be deposited or redeposited into the Escrow Fund on account thereof, and the reasons for such determination. The Shipowner shall thereafter promptly deposit or redeposit, as appropriate, such amount (with interest, if any) required by the Secretary into the Escrow Fund. (f) Notwithstanding any other provision of this Section, the Shipowner shall not seek or receive reimbursement for any amount paid to the Shipyard or any Person by the Secretary. (g) In the event that one of the events described in Section 2.07 has occurred with respect to one or more of the Vessels or the Secretary shall have paid the Guarantees or shall have assumed the Shipowner's rights and duties under Section 6.09 of the Indenture, the Secretary may direct that moneys remaining on deposit in the Escrow Fund may be withdrawn in whole or in part for one of the following purposes: (1) application as provided in Section 3.05 of the Indenture (but in no event shall any such disbursement for such purpose be in an amount greater than the related Proportionate Part of the Outstanding Obligations); (2) payment to the Shipowner, or its order, in the event all Outstanding Obligations are Retired or Paid, other than by payment of the Guarantees; or (3) application as provided in Section 6.05, if the Secretary shall have paid the Guarantees or shall have assumed the Shipowner's rights and duties under the Indenture and the Obligations. (h) Any amounts remaining in the Escrow Fund on the Termination Date of the Escrow Fund which are in excess of 87 1/2% or 75% of Actual Cost, as the case may be, shall be applied pursuant to Section 3.04 of the Indenture to retire a Proportionate Part of the Outstanding Obligations. Section 5.04. Investment and Liquidation of the Escrow Fund. The Secretary may invest the Escrow Fund in obligations of the United States with such maturities that the Escrow Fund will be available as required for the purposes hereof. The Secretary shall deposit the Escrow Fund into an account with the Treasury Department and upon agreement with the Shipowner, shall deliver to the Treasury Department instructions for the investment, reinvestment and liquidation of the Escrow Fund. The Secretary shall have no liability to the Shipowner for acting in accordance with such instructions. Section 5.05. Income on the Escrow Fund. Except as provided in Section 5.03, any 44 income realized on the Escrow Fund shall, unless there is an existing Default, be paid to the Shipowner upon receipt by the Secretary of such income. For the purpose of this Section, the term "income realized on the Escrow Fund," shall mean with respect to the Escrow Fund (1) the excess of the cash received from the sale of securities over their cost (less any losses from sale not already paid pursuant to Section 5.03(c)) and (2) cash received from the payment of principal and interest on securities. Section 5.06. Termination Date of the Escrow Fund. The Escrow Fund will terminate 90 days after the Delivery Date of the last Vessel covered by this Security Agreement (herein called the "Termination Date of the Escrow Fund"). In the event that on such date the payment by or for the account of the Shipowner of the full amount of the aggregate Actual Cost of all of the Vessels set forth in Table A hereof has not been made or the amounts with respect to such Actual Cost are not then due and payable, then the Shipowner and the Secretary by written agreement shall extend the Termination Date of the Escrow Fund for such period as shall be determined by the Shipowner and the Secretary as sufficient to allow for such contingencies. If the Secretary shall have earlier made a final determination of the aggregate Actual Cost of all of the Vessels in accordance with Section 5.01, the Termination Date of the Escrow Fund shall be deemed to be the date of such final determination; provided that, if as a result of such final determination, a redemption of Obligations is required pursuant to Section 3.04 of the Indenture, the Termination Date shall be the date specified as the Redemption Date in the notice of redemption given pursuant to Section 3.08 of the Indenture. ARTICLE VI DEFAULTS AND REMEDIES Section 6.01. What Constitutes "Defaults;" Continuance of Defaults. Each of the following events shall constitute a "Default" within the meaning of Section 6.01: (a) A default in the payment of the whole or any part of the interest on any of the Outstanding Obligations when the same shall become due and payable; or default in the payment of the whole or any part of the principal of any of the Outstanding Obligations when the same shall become due and payable, whether by reason of Maturity, redemption, acceleration, or otherwise, or any default referred to in Section 6.08 of the Indenture; and continuation of such default for a period of 30 days shall constitute and is herein called a "Payment Default." Any corresponding default with respect to the interest on, or the principal of, the Secretary's Note is also deemed to be a Payment Default; (b) The following shall constitute and each is herein called a "Security Default:" (1) Default by the Shipowner in the due and punctual observance and performance of any provision in Sections 2.01(b), 2.02(b) and (i), 2.03, 2.04, 2.09, 2.11, 2.12, 2.14, 8.01 and 8.02; (2) Default by the Shipowner continued after written notice specifying such failure by certified or registered mail to the Shipowner from the Secretary in the due and 45 punctual observance and performance of any provision in Sections 2.02(a), (d), (e), (f), and (g), 2.05 (except (g) and (k) thereof), 2.07, and 2.13. (3) Default by the Shipowner continued for 30 days after written notice by certified or registered mail to the Shipowner from the Secretary in the due and punctual observance of any other agreement in this Security Agreement or in the Mortgage; (4) The Shipowner shall become insolvent or bankrupt or shall cease paying or providing for the payment of its debts generally, or the Shipowner shall be dissolved or shall, by a court of competent jurisdiction, be adjudged a bankrupt, or shall make a general assignment for the benefit of its creditors, or shall lose its charter by forfeiture or otherwise; or a petition for reorganization of the Shipowner under the Bankruptcy Code shall be filed by the Shipowner, or such petition be filed by creditors and the same shall be approved by such a court of competent jurisdiction; or a reorganization of the Shipowner under said Code shall be approved by a court, whether proposed by a creditor, a stockholder or any other Person whomsoever; or a receiver or receivers of any kind whatsoever, whether appointed in admiralty, bankruptcy, common law or equity proceedings, shall be appointed, by a decree of a court of competent jurisdiction, with respect to any Vessel, or all or substantially all of the Shipowner's property, and such decree shall have continued unstayed, on appeal or otherwise, and in effect for a period of 60 days; (5) Any default in the due and punctual observance and performance of any provision in the Financial Agreement or the Construction Contract; (6) Any representation or warranty made relating to the execution and delivery of this Security Agreement, the Mortgage, the Guarantee Commitment or the Financial Agreement, or in any certificate required to be furnished pursuant thereto, shall prove to be incorrect in any material respect; (7) Any event constituting a Default under any security agreement or preferred mortgage under Chapter 313, relating to any other vessel or vessels owned by the Shipowner and financed under the Act; (8) Any additional Security Default prescribed in the Special Provisions hereof; and (9) Any event constituting a default under any bareboat or time charter or contract of affreightment of the Vessel. At any time following the occurrence of a Security Default, the Secretary may give the Indenture Trustee a Secretary's Notice with respect to such Security Default, after which the Indenture Trustee and the Obligees shall have the right to make demand for payment of the Guarantees in accordance with the Indenture and the Authorization Agreement, unless the Secretary shall have assumed the Shipowner's rights and duties under the Indenture and the Obligations, and made any payments in default under Section 6.09 of the Indenture. 46 Section 6.02. Acceleration of Maturity of the Secretary's Note. The Secretary may, by giving written notice to the Shipowner, declare the principal of the Secretary's Note and interest accrued thereon to be immediately due and payable, at any time after (a) the Secretary shall have been obligated to pay the Guarantees pursuant to the terms of the Indenture and the Authorization Agreement, or (b) the Secretary shall have assumed the Shipowner's rights and duties under the Indenture and the Obligations, and made any payments in default under the terms of Section 6.09 of the Indenture. Thereupon, the principal of and interest on the Secretary's Note shall become immediately due and payable, together with interest at the same rates specified in the Secretary's Note. Section 6.03. Waivers of Default. (a) If the Secretary shall not have assumed the Shipowner's rights and duties under the Indenture and the Obligations, and made any payments in default under the terms of Section 6.09 of the Indenture, and if the Secretary determines that an event which, with the passage of time, would become a Payment Default, has been remedied within 30 days after the occurrence of such event, upon a Request by the Shipowner, the Secretary shall waive the consequences of such event. (b) If the Secretary shall not have assumed the Shipowner's rights and duties under the Indenture and the Obligations, and made any payments in default under the terms of Section 6.09 of the Indenture, and if the Secretary shall have determined prior to payment of the Guarantees that a Payment Default has been remedied after the expiration of the aforesaid 30-day period, but prior to the date of demand by the Indenture Trustee or an Obligee for payment under the Guarantees, upon a Request by the Shipowner, the Secretary shall waive such Default. (c) If the Secretary shall have determined prior to the expiration of the period required for payment of the Guarantees that a Payment Default had not occurred or has been subsequently remedied by the Shipowner (and if the Secretary shall not have assumed the Shipowner's rights and duties under the Indenture and the Obligations, and made any payments in default under the terms of Section 6.09 of the Indenture and prior to any payment of Guarantees), the Secretary shall notify the Indenture Trustee and the Shipowner of such determination, and, the Secretary shall waive such Default. (d) The Secretary, in its sole discretion, may waive any Security Default or any event which by itself, or with the passage of time or the giving of notice, or both, would give rise to a Security Default; provided that, such Default is waived prior to the Secretary giving to the Indenture Trustee the Secretary's Notice. (e) The Secretary shall notify the Shipowner and the Indenture Trustee in writing of any determinations made under paragraphs (a), (b), and (c) of this Section, and the Secretary shall waive the consequences of any such Default, and annul any declaration under Section 6.02, and the consequences thereof. (f) No waiver under this Section shall extend to or affect any subsequent or other Default, nor impair any rights or remedies consequent thereon. 47 (g) No waiver under this Section shall be deemed to have occurred because the Secretary shall have assumed the Shipowner's rights and duties under the Indenture and the Obligations, and made any payments in default under the terms of Section 6.09 of the Indenture. Section 6.04. Remedies After Default. (a) In the event of a Default, and before and after the payment of the Guarantees or the assumption by the Secretary of the Shipowner's rights and duties under the Indenture and the Obligations, and the making of any payments in default under the terms of Section 6.09 of the Indenture, the Secretary shall have the right to take the Vessels without legal process wherever the same may be (and the Shipowner or other Person in possession shall forthwith surrender possession of the Vessels to the Secretary upon demand) and hold, lay up, lease, charter, operate, or otherwise use the Vessels for such time and upon such terms as the Secretary may reasonably deem to be in the Secretary's best interest, accounting only for the net profits, if any, arising from the use of the Vessels, and charging against all receipts from the use of the Vessels, all reasonable charges and expenses relating to such Vessel's use. (b) Upon either (i) payment of the Guarantees or (ii) the Secretary's assumption of the Shipowner's rights and duties under the Indenture and the Obligations, and the making of any payments in default under Section 6.09 of the Indenture, the Secretary shall have the right to: (1) Exercise all the rights and remedies in foreclosure and otherwise given to mortgagees by Chapter 313; (2) Bring suit at law, in equity or in admiralty to recover judgment for any and all amounts due under the Secretary's Note, this Security Agreement and the Mortgage, collect the same out of any and all of Shipowner's property, whether or not the same is subject to the lien of the Mortgage, and in connection therewith, obtain a decree ordering the sale of any Vessel in accordance with paragraph (b)(4) of this Section; (3) Have a receiver of the Vessels appointed as a matter of right in any suit under this Section (and any such receiver may have the rights of the Secretary under paragraph (b)(4) of this Section); (4) Sell any Vessel, free from any claim of the Shipowner, by a public extrajudicial sale, held at such time and place and in such manner as the Secretary may reasonably deem advisable, after twice publishing notice of the time and place of such sale prior to the proposed sale in the Authorized Newspapers to the Shipowner. Such publication and mailing is to be made at least 10 Business Days prior to the date fixed for such sale; provided that, such sale may be adjourned from time to time without further publication or notice (other than announcement at the time and place appointed to such sale or adjourned sale). It shall not be necessary to bring any such Vessel to the place appointed for such sale or adjourned sale; (5) Accept a conveyance of title to, and to take without legal process (and the Shipowner or other Person in possession shall forthwith surrender possession to the Secretary), the whole or any part of any Vessel and the Security wherever the same may be, and to take 48 possession of and to hold the same; (6) In the Secretary's discretion, take any and all action authorized by Sections 1105(c), 1105(e) and 1108(b) of the Act and any and all action provided for, or authorized, or permitted by, or with respect to the Increased Security; (7) Receive, in the event of an actual or constructive total loss, or an agreed or compromised total loss, or a requisition of title to or use of any Vessel, all insurance or other payments therefor to which the Shipowner would otherwise be entitled, such insurance moneys to be applied by the Secretary in accordance with Section 6.05; and (8) Pursue to final collection of all the claims arising under this Security Agreement and to collect such claims from, the Increased Security. (c) The Shipowner hereby irrevocably appoints the Secretary the true and lawful attorney of the Shipowner, in its name and stead, to make all necessary transfers of the whole or any part of the Increased Security in connection with a sale, use or other disposition pursuant to Section 6.04(a) or 6.04(b), and for that purpose to execute all necessary instruments of assignment and transfer. Nevertheless, the Shipowner shall, if so requested by the Secretary in writing, ratify and confirm such sale by executing and delivering to any purchaser of the whole or any part of the Increased Security, such proper bill of sale, conveyance, instrument of transfer, or release as may be designated in such request. (d) No remedy shall be exclusive of any other remedy, and each and every remedy shall be cumulative and in addition to any other remedy. (e) No delay or omission to exercise any right or remedy shall impair any such right or remedy or shall be deemed to be a waiver of any Default. (f) The exercise of any right or remedy shall not constitute an election of remedies by the Secretary. (g) If the Secretary discontinues any proceeding, the rights and remedies of the Secretary and of the Shipowner shall be as though no such proceeding had been taken. Section 6.05. Application of Proceeds. (a) The proceeds (from sale or otherwise) of the whole or any part of the Increased Security and use thereof by the Secretary under any of the foregoing powers, (b) the proceeds of any judgment collected by the Secretary for any default hereunder, (c) the proceeds of any insurance and of any claim for damages to the whole or any part of the Increased Security received by the Secretary while exercising any such power, and (d) all other amounts received by the Secretary, including amounts which are required by Sections 2.05 and 2.07 shall be applied by the Secretary as follows: (1) to the payment of all advances and all reasonable charges by the Secretary pursuant to this Security Agreement; 49 (2) to the payment of the whole amount of the interest then due and unpaid upon the Secretary's Note; (3) to the payment of the whole amount of the principal then due and unpaid upon the Secretary's Note; (4) to the Secretary for application to any other debt of the Shipowner due to the Secretary under any other financing insured or guaranteed by the Secretary under to the Act; (5) to the Indenture Trustee for its reasonable fees and expenses; and (6) any balance thereof remaining shall be paid to the Shipowner. Section 6.06. General Powers of the Secretary. (a) In the event any Vessel shall be arrested or detained by a marshal or other officer of any court of law, equity or admiralty jurisdiction in any country or nation of the world or by any government or other authority, and shall not be released from arrest or detention within 15 days from the date of arrest or detention, the Shipowner hereby authorizes the Secretary, in the name of the Shipowner, to apply for and receive possession of and to take possession of such Vessel with all the rights and powers that the Shipowner might have, possess and exercise in any such event. This authorization is irrevocable. (b) The Shipowner irrevocably authorizes the Secretary or its appointee (with full power of substitution) to appear in the name of the Shipowner in any court of any country or nation of the world where a suit is pending against the whole or any part of the Increased Security because of or on account of any alleged lien or claim against the whole or any part of the Increased Security, from which the whole or said part of the Increased Security has not been released. (c) The following shall constitute a debt due from the Shipowner to the Secretary, and shall be repaid by the Shipowner upon demand: all reasonable expenses incurred pursuant to paragraphs (a) or (b) of this Section and all reasonable expenses incurred incident to the exercise by the Secretary of any remedies pursuant to Section 6.04(b) or the assumption by the Secretary of the rights and duties of the Shipowner under the Indenture and the Obligations, and the making of any payments in default under the terms of Section 6.09 of the Indenture (including, but not limited to, fees paid to the Indenture Trustee for expenses incident to said assumption of the Indenture by the Secretary), together with interest at the rate that would have been paid by the Department of Treasury on the expended funds plus 1%. The Secretary shall not be obligated to (nor be liable for the failure to) take any action provided for in paragraphs (a) and (b) of this Section. 50 ARTICLE VII AMENDMENTS AND SUPPLEMENTS TO THE SECURITY AGREEMENT, MORTGAGE AND INDENTURE Section 7.01. Amendments and Supplements to the Security Agreement and the Mortgage. This Security Agreement and the Mortgage may not be amended or supplemented orally, but may be amended or supplemented from time to time only by an instrument in writing executed by the Shipowner and the Secretary. Section 7.02. Amendments and Supplements to the Indenture. Notwithstanding any provisions in the Indenture, the Shipowner agrees that no amendments or supplements will be made to the Indenture without the Secretary's prior written consent, and any purported action contrary to this Section shall be null and void ab initio and of no force and effect. ARTICLE VIII CONSOLIDATION, MERGER OR SALE Section 8.01. Consolidation, Merger or Sale. (a) Nothing in this Security Agreement or the Mortgage shall prevent any lawful consolidation or merger of the Shipowner with or into any other Person, or any sale of a Vessel or Vessels to any other Person lawfully entitled to acquire and operate such Vessel or Vessels, or any sale by the Shipowner of all or substantially all of its assets to any other Person; provided that, the Secretary shall have given its prior written consent to such succession, merger, consolidation or sale. (b) Any Successor shall (by indenture supplemental to the Indenture, and by instrument amending or supplementing this Security Agreement, and the Mortgage, as may be necessary), expressly assume the payment of the principal of (and premium, if any) and interest on the Outstanding Obligations in accordance with the terms of the Obligations, shall execute and deliver to the Secretary, an endorsement to the Secretary's Note in form satisfactory to the Secretary, shall expressly assume the payment of the principal of and interest on the Secretary's Note, and shall expressly assume the performance of the agreements of the Shipowner in the Indenture, this Security Agreement, the Mortgage and any related document. (c) Upon the assumption of the documents listed in paragraph (b) of this Section, the Secretary shall consent to the surrender of each Vessel's documents pursuant to 46 U.S.C. 12110(c)(3), as amended; provided that, concurrently with such surrender, such Vessel shall be redocumented under the laws of the United States. (d) In the event of any sale of less than all the Vessels, the Secretary shall determine if there will remain adequate security for the Guarantees after discharge of any such Vessel or Vessels from the Security Agreement and Mortgage, and (1) the Shipowner shall redeem, together with any premium and/or accrued interest thereof, the Proportionate Part of the Outstanding Obligations relating to such Vessel or Vessels in accordance with the provisions of Article Third of the Indenture; or (2) the Person to which such sale shall have been made (the "Transferee"), shall assume the documents listed in paragraph (b) of this Section. Upon any 51 such assumption, the Transferee shall succeed to and be substituted for the Shipowner with the same force and effect as if it had been named in the Indenture, the Obligations, this Security Agreement and the Mortgage (and such other documents) to the extent the same relate to such Proportionate Part of the Outstanding Obligations and to such Vessel or Vessels. Section 8.02. Transfer of a General Partner's or a Joint Venturer's Interest. (a) If the Shipowner is organized as a partnership or a joint venture, a general partner or a joint venturer may lawfully transfer its respective interests under the terms of the partnership or joint venture agreement to any Person and may be released from all of their obligations thereunder and under this Security Agreement or the Mortgage; provided that, (i) the Secretary shall have given its prior written consent to the proposed transaction; and (ii) the transferee shall assume in full all of the existing obligations which the transferring general partner or joint venturer has under the applicable partnership or joint venture agreement, this Security Agreement, the Mortgage and any related document. ARTICLE IX NOTICES Section 9.01. Notices. Except as otherwise provided in this Security Agreement or by the Act, all notices, requests, demands, directions, consents, waivers, approvals or other communications may be made or delivered in person or by registered or certified mail, postage prepaid, addressed to the party at the address of such party specified in the Special Provisions hereof, or at such other address as such party shall advise each other party by written notice, and shall be effective upon receipt by the addressee thereof. Section 9.02. Waivers of Notice. In any case where notice by publication, mail or otherwise is provided for by this Security Agreement, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be deemed the equivalent of such notice. Section 9.03. Shipowner's Name or Address Change. The Shipowner shall not change its name or its address without first providing written notice to the Secretary of the new name and/or the change in address. ARTICLE X DISCHARGE OF SECURITY AGREEMENT AND THE MORTGAGE Section 10.01. Discharge of Security Agreement and the Mortgage. (a) If the Obligations and the related Secretary's Note shall have been satisfied and discharged, and if the Shipowner shall pay or cause to be paid all other sums that may have become secured under this Security Agreement and the Mortgage, then this Security Agreement, the Mortgage and the liens, estate and rights and interests hereby and thereby granted, shall cease, determine, and become null and void, and the Secretary, on the Shipowner's Request and at the Shipowner's cost and expense, shall forthwith cause satisfaction and discharge and duly acknowledge such satisfaction and discharge of this Security Agreement and the Mortgage to be entered upon its and other 52 appropriate records, and shall execute and deliver to the Shipowner such instruments as may be necessary, and forthwith the estate, right, title and interest of the Secretary in and to the Security, the Increased Security, and any other securities, cash, and any other property held by it under this Security Agreement and the Mortgage, shall thereupon cease, determine and become null and void, and the Secretary shall transfer, deliver and pay the same to the Shipowner. (b) If all of the Guarantees on the Outstanding Obligations shall have been terminated pursuant to Sections 3.02(b) or 3.02(d), the Secretary shall assign to the Shipowner this Security Agreement, the Mortgage and the liens, estate, rights and interests hereby and thereby granted. ARTICLE XI MISCELLANEOUS Section 11.01. Successors and Assigns. All the covenants, promises, stipulations and agreements of the Secretary and Shipowner in this Security Agreement shall bind the Secretary and Shipowner and its respective successors and assigns. This Security Agreement is for the sole benefit of the Shipowner, the Secretary, and their respective successors and assigns, and no other Person shall have any right hereunder. Section 11.02. Execution in Counterparts. This Security Agreement may be executed in any number of counterparts. All such counterparts shall be deemed to be originals and shall together constitute but one and the same instrument. Section 11.03. Shipowner's Rights in Absence of Default. Except during the existence of a Default, the Shipowner (1) shall be permitted to retain actual possession and use of the Vessel; and (2) shall have the right, from time to time, in its discretion and without the consent of or release by the Secretary, to dispose of, free from the lien hereof and of the Mortgage, any and all engines, machinery, masts, boats, anchors, cables, chains, rigging, tackle, apparel, furniture, capstans, outfit, tools, pumps, pumping and other equipment, and all other appurtenances to the Vessels, and also any and all additions, improvements and replacements in or to the Vessels or said appurtenances, after first or simultaneously replacing the same with items of at least substantially equal value. Section 11.04. Surrender of Vessels' Documents. The Secretary shall consent to the surrender of each Vessel's documents in connection with any redocumentation of such Vessel required on account of alterations to such Vessel which are not prohibited by this Security Agreement and by the Mortgage. Section 11.05. Applicable Regulations. Only the provisions of the regulations issued under Title XI of the Act as in effect on the date hereof (46 C.F.R. 298) shall control the Security Agreement provisions. Section 11.06. Table of Contents, Titles and Headings. The table of contents, and titles of the Articles and the headings of the Sections are not a part of this Security Agreement and shall not be deemed to affect the meaning or construction of any of its provisions. EX-4.(II)(F)(7) 24 c58427ex4-iif7.txt TITE XI RESERVE FUND AND FINANCIAL AGREEMENT 1 EXHIBIT 4(ii)(f)(7) Contract No. MA-13639 TITLE XI RESERVE FUND AND FINANCIAL AGREEMENT THIS TITLE XI RESERVE FUND AND FINANCIAL AGREEMENT (the "Financial Agreement") dated October 16, 2000 between Cape Cod Light, L.L.C., a Delaware limited liability company (the "Company"), and THE UNITED STATES OF AMERICA (the "United States"), represented by the SECRETARY OF TRANSPORTATION, acting by and through the MARITIME ADMINISTRATOR (the "Secretary"). RECITALS Pursuant to the conditions and understandings set forth in the Recitals to the Security Agreement executed on this date, the Company has authorized the issuance of obligations designated "United States Government Guaranteed Ship Financing Bonds, 2000 Series" in an aggregate amount not to exceed $38,500,000 to finance the cost of construction of the cv Cape Cod Light (the "Vessel"); NOW THEREFORE, in consideration of the premises and mutual covenants herein contained, and of other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereby agree as follows: Section 1. (a) Granting Clause. The Company hereby sells, grants, conveys, mortgages, assigns, transfers, pledges, confirms and sets over to the Secretary a continuing security interest in all of its right, title and interest in and to (1) the Title XI Reserve Fund, and (2) all sums, instruments, moneys, negotiable documents, chattel paper and proceeds thereof currently on deposit, or hereafter deposited in the Title XI Reserve Fund. (b) Definitions. For all purposes of this Financial Agreement, unless otherwise expressly provided or unless the context otherwise requires, the capitalized terms used herein shall have the meaning specified in Schedule X to the Security Agreement entered into on this date. Section 2. Title XI Reserve Fund Deposits. (a) Pursuant to the Depository Agreement, the Company shall establish with the Depository a depository account (herein called the "Title XI Reserve Fund"). (b)(1) If for any fiscal year the Company shall fail to meet the financial tests set forth in Section 8(b) hereof including the Proviso; the Company shall, within 105 days after the end of each fiscal year of the Company, compute its net income attributable to the operation of the Vessel ("Title XI Reserve Fund Net Income"). This computation requires the multiplication of 2 the Company's total net income after taxes by a fraction with a numerator composed of the total original capitalized cost of the Vessel and a denominator composed of the total original capitalized cost of all the Company's fixed assets. The net income after taxes, computed in accordance with generally accepted accounting principles, shall be adjusted as follows: (A) The depreciation expense applicable to the fiscal year shall be added back. (B) There shall be subtracted an amount equal to the principal amount of debt required to be paid or redeemed, and actually paid or redeemed by the Company during the fiscal year; and the principal amount of Obligations Retired or Paid, prepaid or redeemed, in excess of the required Redemptions or payments which may be used by the Company as a credit against future required Redemptions or other required payments with respect to the Obligations, but excluding payments from the Title XI Reserve Fund and the Title XI Escrow Fund. (2) Promptly after the computation of the Title XI Reserve Fund Net Income by the Company: (A) If the Vessel is owned by the Company, then from the Title XI Reserve Fund Net Income for the Vessel there shall be deducted, annually, an amount (pro rated for a period of less than a full fiscal year) which is 10% of the Company's aggregate original equity investment in said Vessel, as specified in Attachment A. (B) The Company shall, unless otherwise approved by the Secretary in writing, deposit into the Title XI Reserve Fund an amount equal to 50 percent of the balance of the Title XI Reserve Fund Net income remaining after the above deduction. (C) Irrespective of the requirements that the Company make deposits into the Title XI Reserve Fund, the Company shall not be required to make any deposits into the Title XI Reserve Fund if (i) the Obligations and the related Secretary's Note with respect to the Vessel shall have been satisfied and discharged and if the Company shall have paid or caused to be paid all other sums secured under the Security Agreement and the Mortgage, (ii) all of the Guarantees on the Outstanding Obligations shall have been terminated pursuant to the Security Agreement, or (iii) the amount (including any securities at current market value) in the Title XI Reserve Fund is equal to, or in excess of 50% of the aggregate principal amount of the Outstanding Obligations; (D) The Company shall deliver to the Secretary (with a copy to the Depository) at the time of each deposit into the Title XI Reserve Fund pursuant to Section 2(b)(2)(B), and any deposits required under the Security Agreement, a statement of an independent certified public accountant (who may be the regular auditors for the Company) stating that such deposit has been computed in accordance with Section 2(b)(2)(B), (and the Security Agreement, if applicable) and showing the pertinent calculations. (E) In addition, the Company shall deliver to the Secretary (with a copy to the Depository), within 105 days after the end of each fiscal year of the Company, a statement by 2 3 such certified public accountant stating (i) the total amount of all deposits which were required to be so deposited into the Title XI Reserve Fund for such fiscal year (and showing the pertinent calculations), or (ii) that no such deposit was required to be made for such fiscal year (and showing the pertinent calculations) and that at the end of such fiscal year no adjustments pursuant to Section 2(b)(2)(G) were required to be made (and, if such adjustments were required to be made, stating the reasons therefor). (F) The computation of all deposits required by this Section 2 shall be made on the basis of information available to the Company at the time of each such deposit. Each such deposit shall be subject to adjustments from time to time in the event and to the extent that the same would be required or permitted by mistakes or omissions, additional information becoming available to the Company, or judicial or administrative determinations made subsequent to the making of such deposits. Section 3. Withdrawals from the Title XI Reserve Fund. (a) From time to time, moneys in the Title XI Reserve Fund shall be subject to withdrawal by delivery by the Company to the Secretary of a Request for Payment (specifying the Person or Persons to be paid and the amount of such payment) executed by the Company, together with an Officer's Certificate of the Company stating the reasons and the purpose for the withdrawal. (b) Upon approval by the Secretary of the Request for Payment evidenced by the countersignature thereon of the Secretary, the Secretary shall cause the Request for Payment to be delivered to the Depository, which shall promptly make payment to such Person or Persons in accordance with the terms of such Request for Payment. Section 4. Termination of the Title XI Reserve Fund. (a) The Title XI Reserve Fund shall terminate at such time as the Secretary's Note shall have been satisfied and discharged and the Company shall have paid or caused to be paid all sums secured under the Security Agreement or the Mortgage. (b) Upon the termination of the Title XI Reserve Fund, pursuant to Section 4(a), the moneys remaining in the Title XI Reserve Fund shall be subject to withdrawal and payment into the general funds of the Company. (c) Upon payment by the Secretary to the Indenture Trustee of the Guarantees pursuant to the Indenture, the Title XI Reserve Fund shall, upon written instructions of the Secretary, be terminated and the balance remaining in the Title XI Reserve Fund shall be paid to the Secretary and the Company as determined by the Secretary. (d) Any withdrawal from the Title XI Reserve Fund pursuant to this Section 4 shall not effect a discharge of or diminish any obligations of the Company under the Security Agreement, Mortgage or any other agreement as the case may be except to the extent that the 3 4 amount withdrawn is applied to payments required to be made by the Company under the Security Agreement, Mortgage or any other agreement. Section 5. Eligible Investments; Form of Deposits. (a) Moneys held in the Title XI Reserve Fund shall, if so directed by a Request of the Company delivered to the Depository (with a copy to the Secretary), be invested by the Depository in the following Eligible Investments: (1) time deposits, negotiable certificates of deposit, or similar instruments of deposit with a bank or trust company organized as a corporation under the laws of the United States or any State thereof, or of the District of Columbia, subject to supervision or examination by Federal or State authority or authority of the District of Columbia, and having a combined capital and surplus of at least $3,000,000; provided that, the aggregate of all such time deposits and certificates of deposit with any one bank or trust company shall not exceed 10% of the combined capital and surplus of such bank or trust company; (2) short term commercial paper having either of the two highest ratings for short term commercial paper assigned by any two nationally recognized organizations regularly engaged in rating the investment quality of such commercial paper; and (3) securities (designated by the Company in such Request) which at the date of such investment are: (A) direct obligations of, or obligations (other than the Obligations or Obligations related to the Company) fully guaranteed or insured by, the United States or any agency of the United States or with the Secretary's prior written consent and subject to such conditions imposed by him, obligations or securities fully insured by an instrumentality of the United States; (B) bonds, not in default as to principal or interest of any county, municipality or state of the United States and having either of the two highest ratings for bonds assigned by any two nationally recognized organizations regularly engaged in rating the investment quality of such bonds; (C) bonds, not in default as to principal or interest, of corporations organized and existing under the laws of the United States or of the District of Columbia or of any state of the United States and having one of the three highest ratings for bonds assigned by any two nationally recognized organizations regularly engaged in rating the investment quality of such bonds; provided that, no investment under this subsection (5)(a)(3)(C) shall be made in any obligations of the Company or a Related Party; (D) capital stock, but limited at the time of acquisition to any amounts in the Title XI Reserve Fund in excess of the principal amount of Obligations to be redeemed pursuant to the mandatory sinking fund provisions of the Indenture, during the next succeeding 12 months 4 5 of (i) corporations organized and existing under the laws of the United States or the District of Columbia or of any state of the United States if such stock is currently fully listed and registered upon an exchange registered with the Securities and Exchange Commission as a national securities exchange and permitted for investment by a savings bank under the laws of the State of New York without regard to the provisions therein limiting such investments to a percentage of the assets or surplus of such savings bank, (ii) banks either regulated by the Comptroller of the Currency of the United States or subject to the Banking Law of the State of New York, or (iii) insurance companies licensed to do business in such state; provided that, no investment under this subsection shall be made in stock of the Company or a Related Party; provided further that, any request under this subsection shall be accompanied by an opinion of counsel satisfactory to the Secretary as to the qualification of such securities under this clause and provided further, that the Company shall cause to be sold, within 60 days, or at any time if the Secretary so directs the Company in writing, any securities which cease to qualify under this subsection. (b) In any case where the Company is required to deposit or redeposit sums into the Title XI Reserve Fund, the Company shall make the required deposit in cash or, in lieu thereof, with the Secretary's prior written approval, may deposit into the Title XI Reserve Fund, negotiable certificates of deposit, short term commercial paper or securities which are (1) Eligible Investments (2) owned by the Company and (3) of an equivalent current market value (based upon the last sales price thereof on the Business Day immediately preceding such deposit or, if there shall have been no sale thereof on such day, the average of the last known bid and asked prices). With the Secretary's prior written approval, the Company may exchange Eligible Investments in the Title XI Reserve Fund at current market value (determined as above provided) for an equivalent amount of cash. (c) Cash held in the Title XI Reserve Fund will be held by the Depository pursuant to the Depository Agreement. Section 6. Company's Rights with Respect to Securities Held in the Title XI Reserve Fund. Unless there is an existing Default under the Security Agreement, the Company shall have: (a) the right to vote (or direct the vote of) securities held in the Title XI Reserve Fund as to (1) the sale of all or any part of the assets of the issuer or obligor thereof, (2) the increase or reduction of the capital of such issuer or obligor, (3) the liquidation, dissolution, merger or consolidation of such issuer or obligor, or (4) any purpose which would not then impair the lien of, or the security interest granted to the Secretary; and (b) the right to exercise (or direct the exercise of) any and all rights of ownership of such securities, including the right to consent or object to the extension, modification or renewal of any thereof, the right to consent or object to any plan or reorganization, or readjustment, and the right to exercise any right, privilege or option pertaining thereto. Section 7. Annual Statement of Company with Respect to the Title XI Reserve Fund. Within 105 days after the close of each fiscal year of the Company at the end of which there are 5 6 funds in the Title XI Reserve Fund (and at such other times as the Secretary may request in writing), the Company shall submit to the Secretary (with a copy to the Depository) (a) an opinion of counsel satisfactory to the Secretary as to the qualification, under Section 5(a)(3)(D), of securities acquired pursuant to that subparagraph and then held in the Title XI Reserve Fund and (b) a list of the Eligible Investments held in the Title XI Reserve Fund at the close of said fiscal year (or at the time of the Secretary's request as aforesaid). Section 8. Financial Requirement of the Company. (a) Primary Covenants. The Company shall not without the Secretary's prior written consent: Except as hereinafter provided, make any distribution of earnings, except as may be permitted by (A) or (B) below: (A) From retained earnings in an amount specified in subsection (C) below, provided that, in the fiscal year in which the distribution of earnings is made there is no operating loss to the date of such payment of such distribution of earnings, and (i) there was no operating loss in the immediately preceding three fiscal years, or (ii) there was a one-year operating loss during the immediately preceding three fiscal years, but (a) such loss was not in the immediately preceding fiscal year, and (b) there was positive net income for the three year period; (B) If distributions of earnings may not be made under (A) above, a distribution can be made in an amount equal to the total operating net income for the immediately preceding three fiscal year period, provided that, (i) there were no two successive years of operating losses, (ii) in the fiscal year in which such distribution is made, there is no operating loss to the date of such distribution, and (iii) the distribution or earnings made would not exceed an amount specified in Section 8(a)(1)(C) below; (C) Distributions of earnings may be made from earnings of prior years in an aggregate amount equal to (i) 40 percent of the Company's total net income after tax for each of the prior years, less any distributions that were made in such years; or (ii) the aggregate of the Company's total net income after tax for such prior years, provided that, after making such distribution, the Company's Long Term Debt does not exceed its Net Worth. In computing net income for the purposes of this Section, extraordinary gains, such as gains from the sale of assets, shall be excluded. (1) Enter into any service, management or operating agreement for the operation of the Vessel (excluding husbanding type agreements), or appoint or designate a managing or operating agent for the operation of the Vessel (excluding husbanding agents) unless approved by the Secretary; 6 7 (2)(A) Sell, mortgage, transfer, or demise charter the Vessel or any assets to any non-Related Party except as permitted in subsection 8(a)(6) below, or (B) sell, mortgage, transfer, or demise charger the Vessel or any assets to a Related Party, unless such transaction is (i) at a fair market value as determined by an independent appraiser acceptable to the Secretary, and (ii) a total cash transaction or, in the case of demise charter, the charter payments are cash payments. (3) Enter into any agreement for both (A) sale and (B) leaseback of the same assets so sold unless the proceeds from such sale are at least equal to the fair market value of the property sold; (4) Guarantee, or otherwise become liable for the obligations of any Person, except in respect of any undertakings as to the fees and expenses of the Indenture Trustee, except endorsement for deposit of checks and other negotiable instruments acquired in the ordinary course of business and except as otherwise permitted in Section 8(b); (5) Directly or indirectly embark on any new enterprise or business activity not directly connected with the business of shipping or other activity in which the Company is actively engaged; (6) Enter into any merger or consolidation or convey, sell, demise charter, or otherwise transfer, or dispose of any portion of its properties or assets (any and all of which acts are encompassed within the words "sale" or "sold" as used herein), provided that, the Company shall not be deemed to have sold such properties or assets if (A) the Net Book Value (defined as the original book value of an asset less depreciation calculated on a straight line basis over its useful life) of the aggregate of all the assets sold by the Company during any period of 12 consecutive calendar months does not exceed 10% of the total Net Book Value of all the Company's assets (the assets which are the basis for the calculation of the 10% of the Net Book Value are those indicated on the most recent audited annual financial statement required to be submitted pursuant to Section 9 hereof prior to the date of the sale); (b) the Company retains the proceeds of the sale of assets for use in accordance with the Company's regular business activities; and (C) the sale is not otherwise prohibited by subsection 8(a)(3) above. Notwithstanding any other provision of this subsection, the Company may not consummate such sale without the Secretary's prior written consent if the Company has not, prior to the time of such sale, submitted to the Secretary the financial statement in clause (A) of this subsection, and any attempt to consummate a sale absent such approval shall be null and void ab initio. (b) Supplemental Covenants. Commencing with the First Calendar Year of Vessel Operations and continuing thereafter unless, after giving effect to such transaction or transactions during any fiscal year: (i) the Company's debt-to-equity ratio does not exceed 2:1; (ii) upon completion of construction of the Vessel and the First Calendar Year of Vessel Operation, the Company's Minimum Cash Flow Ratio is not less than 1.0 to 1.0; and (iii) the Company has a positive cash balance at all times, the Company shall not, without the Secretary's prior written consent during any fiscal year of the Company after completion of construction of the Vessel: (1) Withdraw any capital; 7 8 (2) Redeem any share capital or convert any of the same into debt; (3) Pay any dividend (except dividends payable in capital stock of the Company); (4) Make any loan or advance (except advances to cover current expenses of the Company), either directly or indirectly, to any stockholder, director, officer, or employee of the Company, or to any Related Party; (5) Make any investments in the securities of any Related Party; (6) Prepay in whole or in part any indebtedness to any stockholder, director, officer or employee of the Company, or to any Related Party; (7) Increase any direct employee compensation (as hereinafter defined) paid to any employee in excess of $100,000 per annum; nor increase any direct employee compensation which is already in excess of $100,000 per annum; nor initially employ or re-employ any person at a direct employee compensation rate in excess of $100,000 per annum; provided, however, that beginning with January 1, 2000, the $100,000 limit may be increased annually based on the previous year's closing CPI-U (Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics). For the purpose of this section the term "direct employee compensation" is the total amount of any wage, salary, bonus, commission, or other form of direct payment to any employee from all companies with guarantees under Title XI of the Act as reported to the Internal Revenue Service for any fiscal year; (8) Acquire any fixed assets other than those required for the maintenance of the Company's existing assets, including the normal maintenance and operation of any vessel or vessels owned or chartered by the Company; (9) Either enter into or become liable (directly or indirectly) under charters and leases (having a term of six months or more) for the payment of charter hire and rent on all such charters and leases which have annual payments aggregating in excess of $3,000,000; (10) Pay any indebtedness subordinated to the Obligations or to any other Title XI obligations; (11) Create, assume, incur, or in any manner become liable for any indebtedness, except current liabilities, or short term loans, incurred or assumed in the ordinary course of business as such business presently exists; (12) Make any investment, whether by acquisition of stock or indebtedness, or by loan, advance, transfer of property, capital contribution, guarantee of indebtedness or otherwise, in any Person, other than obligations of the United States, bank deposits or investments in securities of the character permitted for moneys in the Title XI Reserve Fund; or 8 9 (13) Create, assume, permit or suffer to exist or continue any mortgage, lien, charge or encumbrance upon, or pledge of, or subject to the prior payment of any indebtedness, any of its property or assets, real or personal, tangible or intangible, whether now owned or hereafter acquired, or own or acquire, or agree to acquire, title to any property of any kind subject to or upon a chattel mortgage or conditional sales agreement or other title retention agreement, except (i) loans, mortgages and indebtedness guaranteed by the Secretary under Title XI of the Act or related to the construction of a vessel approved for Title XI by the Secretary and (ii) liens incurred in the ordinary course of business as such business presently exists. Notwithstanding the requirements set forth in Section 8(b)(i) above, so long as the Company is not in Default under the Security Agreement and Guarantor's guarantee is in full force and effect, the Company will not be required to make any Title XI Reserve Fund Deposits during the First Calendar Year of Vessel Operation and the Second Calendar Year of Vessel Operation regardless of its debt-to-equity ratio and, in the Third Calendar Year of Vessel Operation and the Fourth Year of Vessel Operation unless its debt-to-equity ratio is in excess of 4.0 to 1.0. Notwithstanding the requirements in Section 8(b) above, so long as the Shipowner is not in Default under the Security Agreement and the Guarantor's guarantee is in full force and effect, the Shipowner may: (1) Make advances, loans or other distributions to the Sister Shipowner if the Sister Shipowner issues a guarantee of the Company's debt that is in form and substance acceptable to the Secretary and said guarantee is in full force and effect and the Sister Shipowner has not defaulted on its Security Agreement; (2) Make reimbursement or payments to the Guarantor and/ or Ocean Development Co. with respect to administrative, operational and/or management expenses incurred with respect to the Vessel; (3) Make a distribution in form and substance satisfactory to the Secretary to the Guarantor to be used for equity on an option vessel as provided for in the shipbuilding contract relating to the Vessel, and the vessel being constructed by the Sister Shipowner provided the Company has met its cash flow test for the most recent reporting period, has a debt-to-equity ratio not in excess of 4.0 to 1.0 until the sixth calendar year of vessel operation, and is not in default on its Security Agreement; and (4) Make advances to the Guarantor in accordance with the Guarantor's cash management program provided such program has been approved by the Secretary and any such advances are evidenced by a receivable from the Guarantor, which receivable is due and payable to the Company at any time the Company does not have adequate funds to meet its current obligations including but limited to current obligations with respect to the Title XI debt. 9 10 Section 9. (a) Annual Financial Statements. The Company shall furnish to the Secretary, in duplicate, (1) within 105 days after the end of each fiscal year of the Company commencing with the first fiscal year ending after the date of the Security Agreement, the Company's Audited Financial Statements including balance sheet and income statement for such fiscal year along with a completed M.A. Form 172 or such other form approved by the Secretary, and (2) within 90 days after the expiration of each semi-annual period of each fiscal year commencing with the first such semi-annual period ending after the date of the Security Agreement, a completed M.A. Form 172 or such other form approved by the Secretary for such semi-annual period along with an Officer's Certificate certifying its accuracy. (b) Annual No Default Certificates. Within 105 days after the end of each fiscal year of the Company, the Company shall furnish to the Secretary, an Officer's Certificate dated as of the close of such fiscal year stating whether or not, the Company is in default in the performance of or in default in the compliance with any covenant, agreement or condition contained herein or in the Mortgage, Security Agreement or charter relating to the Vessel listed in Attachment A hereto, and if so, specifying each such default and stating the nature thereof. Section 10. Qualifying Financial Requirements of the Company. The Company shall furnish an Officer's Certificate, dated the date hereof, certifying that the Company has equity at least equal to the difference between the Vessel's capitalizable cost and the Vessel's Title XI guaranteed amount, that any other costs related to the Vessel are funded in the manner established by the Funding Agreement, and that the Guaranty Agreement is in full force and effect. Section 11. Notices. Except as otherwise provided in this Agreement, notices, requests, directions, instructions, waivers, approvals or other communication may be made or delivered in person or by registered or certified mail, postage prepaid, addressed to the party as provided below, or to such other address as such party may hereafter specify in a written notice to the other parties named herein, and all notices or other communications shall be in writing so addressed and shall be effective upon receipt by the addressee thereof: The Secretary as: SECRETARY OF TRANSPORTATION c/o Maritime Administrator Maritime Administration 400 Seventh Street, S.W. Washington, D.C. 20590 The Title XI Reserve Fund Depository as: The Bank of New York 101 Barclay Street New York, NY 10286 Attention: Corporate Trust Administration 10 11 The Company as: Cape Cod Light, L.L.C. Robin Street Wharf 1380 Port of New Orleans Place New Orleans, Louisiana 70130-1890 Section 12. Amendments and Supplements. No agreement shall be effective to amend, supplement, or discharge in whole or in part this Financial Agreement unless such agreement is in writing signed by the parties hereto. Any amendments, additions, deletions, substitutions or other changes no made in accordance with this provision shall be invalid and of no effect. Section 13. Counterparts. This Financial Agreement may be executed in any number of counterparts. All such counterparts shall be deemed to be originals, and shall together constitute but one and the same instrument. Section 14. Governing Law. This Financial Agreement and the rights and obligations of the parties hereto shall be governed by and construed in accordance with U.S. maritime laws, to the extent applicable, and otherwise in accordance with the laws of the State of New York. 11 12 IN WITNESS WHEREOF, this Financial Agreement has been executed by the parties hereto as of the day and year first above written. UNITED STATES OF AMERICA SECRETARY OF TRANSPORTATION BY: MARITIME ADMINISTRATOR / s / Joel C. Richard -------------------------------- Secretary ATTEST: / s / Sarah J. Washington - ---------------------------------- Assistant Secretary 13 Shipowner: Cape Cod Light, L.L.C. By: DELTA QUEEN COASTAL VOYAGES, L.L.C., its Managing Member By: THE DELTA QUEEN STEAMBOAT CO., its Managing Member By: / S / JORDAN B. ALLEN ------------------------------- Its Executive Vice President ATTEST: By / s / Pam Stringer ----------------------------------------- Its Assistant Secretary 14 ATTACHMENT A TITLE XI RESERVE FUND AND FINANCIAL AGREEMENT (Contract No. MA-13639) 1. This Financial Agreement shall apply to the Cape Cod Light. 2. The Company's aggregate original equity investment for use in Section 2 for the Cape Cod Light is $5,704,526. EX-4.(II)(F)(8) 25 c58427ex4-iif8.txt GUARANTY AGREEMENT 1 EXHIBIT 4(ii)(f)(8) Document 18 GUARANTY AGREEMENT Exhibit 8 to Security Agreement 2 TABLE OF CONTENTS GUARANTY AGREEMENT
SECTION HEADING PAGE 1. Definitions..............................................................................................1 2. Guarantee................................................................................................2 3. Secretary's Rights.......................................................................................3 4. Primary Liability........................................................................................3 5. Representations and Warranties...........................................................................3 6. Continuing Guarantee.....................................................................................4 7. Default..................................................................................................4 8. Notices..................................................................................................4 9. Amendments and Supplements...............................................................................5 10. Governing Law............................................................................................5 11. Counterparts.............................................................................................5
3 GUARANTY AGREEMENT IN FAVOR OF THE UNITED STATES OF AMERICA THIS GUARANTY (this "Guaranty Agreement"), dated this October 16, 2000, is by and between DELTA QUEEN COASTAL VOYAGES, L.L.C., a Delaware limited liability company (the "Guarantor"), TO THE UNITED STATES OF AMERICA (the "United States"), represented by the SECRETARY OF TRANSPORTATION, acting by and through the MARITIME ADMINISTRATOR (the "Secretary"). WITNESSETH: A. WHEREAS, the Guarantor owns 99 percent of the membership interest of Cape Cod Light, L.L.C., a Delaware limited liability company (the "Shipowner"); B. WHEREAS, the Shipowner, in connection with the financing of the cost of construction of the Vessel on the date hereof borrowed certain funds and created and authorized the issuance of obligations designated "United States Government Guaranteed Ship Financing Bonds, 2000 Series" in the aggregate principal amount of $38,500,000 (the "Obligations") bearing interest at the rate specified therein; C. WHEREAS, the Shipowner, on the date hereof, accepted the Secretary's Commitment to Guarantee Obligations (the "Commitment") pursuant to Title XI of the Merchant Marine Act, 1936, as amended (the "Act"), whereby the Secretary authorized a guarantee to be endorsed upon each of the Obligations (the "Guarantees"); D. WHEREAS, the Shipowner has, in consideration of the issuance of the Guarantees by the Secretary of the payment of the unpaid interest on, and the unpaid balance of the principal of the Obligations, pursuant to the terms and provisions of the Security Agreement, Contract No. MA-13637, dated the date hereof between the Shipowner and the Secretary (the "Security Agreement"), issued and delivered to the Secretary a promissory note in the principal amount of $38,500,000 (said promissory note, as originally executed and as the same may hereafter be amended, modified, supplemented or endorsed, herein called the "Secretary's Note"); E. WHEREAS, the Secretary required this Guaranty Agreement from the Guarantor as an integral part of the consideration offered by or on behalf of the Shipowner as a condition of the Secretary entering into the Commitment and issuing the Guarantees, and the Guarantor is entering into this Guaranty Agreement for the purpose of guaranteeing the Shipowner's obligations to the Secretary under the Secretary's Note. NOW, THEREFORE, in consideration of the premises and of other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Guarantor hereby agrees as follows: 1. Definitions. Unless otherwise specifically defined herein, the capitalized terms used herein are defined in Schedule X to the Security Agreement and any reference therein to other instruments shall have the respective meaning stated in Schedule X of the Security Agreement or such other instruments. 4 2. Guarantee. (a) The Guarantor hereby absolutely, irrevocably, and unconditionally guarantees the due and punctual payment of the principal and interest on the Secretary's Note. The Guarantor shall be required to make said payments under this Guaranty Agreement upon receipt of a written notice from the Secretary which states that the Shipowner has not promptly, completely or effectively made said payments. The failure of Guarantor to receive such a written notice or the failure of the Secretary to send said notice shall not relieve the Guarantor of its obligations under this Guaranty Agreement. This Guaranty Agreement shall be enforceable and exercisable by the Secretary from the first day of any failure by the Shipowner to make payment or mandatory prepayment of the principal of and the interest on the Secretary's Note when the same shall be due. The Guarantor shall immediately pay to the Secretary or its designee in immediately available funds, such payments guaranteed herein. (b) The Guarantor hereby consents and agrees that its obligations under this Guaranty Agreement will not be discharged by any act or omission to act of any kind by the Secretary or any other person or any other circumstances whatsoever (including, but not limited to, any extension, rearrangement, or renewal with respect to any indebtedness or other obligation of the Shipowner with or without notice to the Guarantor, any waiver of any right of the Secretary under the terms of the Secretary's Note, the Security Agreement, the Mortgage, or this Guaranty Agreement, any release of security, any transfer or assignment of rights or obligations accruing to the Secretary under the Secretary's Note, the Security Agreement, the Mortgage, or this Guaranty Agreement, any corporate reorganization, dissolution, merger, acquisition of or by or other alteration of the corporate existence or structure of the Shipowner or the Guarantor, discharge of the Shipowner in bankruptcy, the invalidity, illegality, or unenforceability of the Secretary's Note, the Security Agreement, the Mortgage, or this Guaranty Agreement or the absence of any action to enforce the obligations of the Shipowner) which might constitute a legal or equitable discharge of the Guarantor; it being the intention of the Guarantor that this Guaranty Agreement be absolute, continuing, and unconditional and the guarantee hereunder shall only be discharged by the payment in full of all sums so guaranteed hereunder. (c) The Guarantor hereby irrevocably and unconditionally waives: (1) notice of any of the matters referred to in this Guaranty Agreement and any action by the Secretary in reliance thereon; (2) all notices which may be required by statute, rule of law, or otherwise to preserve any rights against the Guarantor hereunder, including without limitations, any demand, protest, proof of notice of non-payment of all sums payable under the Secretary's Note or any notice of any failure on the part of the Shipowner to perform or comply with any covenant, term, or obligations of any agreement to which it is a party; (3) any requirement for the enforcement, assertion, or exercise of any right, remedy, power, or privilege under or with respect to the Mortgage, the Security Agreement, or the Secretary's Note; (4) any requirement of diligence; (5) any requirement that the Shipowner be joined as a party to any proceedings for the enforcement of any provision of this Guaranty Agreement, or that the Secretary proceed against any other guarantor executing this Guaranty Agreement or any other guaranty agreement; (6) any and all defenses to payment hereunder, except the defense of payment already made, and agrees to confess without contesting liability hereunder for any judgment entered hereon; (7) presentment, demand, 2 5 protest, notice of protest and dishonor, notice of intent to accelerate, and notice of acceptance; or (8) the right to require the Secretary to pursue any remedy in the Secretary's power whatsoever. (d) The Guarantor hereby agrees that this Guaranty Agreement shall continue to be effective or shall be reinstated, as the case may be, if at any time payment of any sum hereby guaranteed is rescinded or must be otherwise restored or returned by the Secretary, upon the insolvency, bankruptcy, or reorganization of the Shipowner, or otherwise, all as though such payment had not been made. The Guarantor further agrees that if the maturity of any obligations guaranteed herein be accelerated by bankruptcy or otherwise, such maturity shall also be deemed accelerated for the purpose of this Guaranty Agreement without demand or notice to the Guarantor. (e) Any amount payable hereunder shall not be subject to any reduction by reason of any counterclaim, set-off, deduction, abatement, or otherwise. (f) The Guarantor shall pay all reasonable costs and expenses (including, without limitation, attorneys' fees and expenses) incurred in connection with the enforcement of the obligations of the Guarantor under this Guaranty Agreement. (g) The Secretary's Note may be amended, modified, or endorsed without the consent of the Guarantor. (h) The Secretary may enforce the Guarantor's obligations hereunder without in any way first pursuing or exhausting any other rights or remedies which the Secretary may have against the Shipowner or any other person, firm, or corporation or against any security the Secretary may hold. 3. Secretary's Rights. The Guarantor authorizes the Secretary, without notice or demand and without affecting the Guarantor's liability hereunder, to take and hold security for the payment of this Guaranty Agreement and/or any of the obligations guaranteed herein and exchange, enforce, waive, and release any such security; and to apply such security and direct the order or manner of sale thereof as the Secretary in his discretion may determine; and to obtain a guarantee of any of the obligations guaranteed herein from any one or more persons, corporations, or entities whomsoever and at any time or times to enforce, waive, rearrange, modify, limit or release such other persons, corporations, or entities from their obligations under such guarantees. 4. Primary Liability. It is expressly agreed that the liability of the Guarantor for the payment of the obligations guaranteed herein shall be primary and not secondary. 5. Representations and Warranties. The Guarantor represents and warrants as follows: (a) It is a limited liability company duly organized, validly existing, and in good standing under the laws of the state of Delaware and has full power and authority (legal and other) to execute, deliver, and carry out the terms of this Guaranty Agreement; 3 6 (b) This Guaranty Agreement has been duly authorized, executed, and delivered by the Guarantor and constitutes the legal, valid, and binding obligation of the Guarantor enforceable against the Guarantor in accordance with its terms; (c) The execution, delivery, and performance by the Guarantor of this Guaranty Agreement does not require the approval or consent of its shareholders or of any governmental authority and does not contravene the Guarantor's Limited Liability Company Agreement, or any mortgage, indenture, or other agreement binding upon it, or any law, regulation, order, judgment, or decree applicable to the Guarantor; (d) The Guarantor's guarantee pursuant to this Guaranty Agreement may be expected to benefit, directly or indirectly, the Guarantor; and (e) The Guarantor has fully adequate financial resources, funds, and assets to satisfy its obligations under this Guaranty Agreement and the Guarantor will in the future retain sufficient financial resources, funds, and assets to fully satisfy its obligations under this Guaranty Agreement. 6. Continuing Guarantee. This Guaranty Agreement is a continuing guarantee of payment and collectability and shall: (a) Remain in full force and effect so long as any obligation of the Shipowner to the Secretary referred to herein exists; (b) Be binding upon the Guarantor, its successors and assigns; (c) Be executed and issued for the sole and exclusive benefit of the United States, and no other party shall be permitted to claim any benefit, direct or indirect, therefrom. This Guaranty Agreement is nonassignable, any assignment thereof shall be null and void and have no legal effect whatsoever; and (d) Inure to the benefit of, and be enforceable by the Secretary, his successors and assigns. 7. Default. A default under the terms of this Guaranty Agreement shall be deemed to occur if the Guarantor fails to make any payment guaranteed hereunder. 8. Notices. All communications may be made or delivered in person or by certified or registered mail, postage prepaid, addressed to the Guarantor or the Secretary as provided below or to such other address as the Guarantor or the Secretary may hereafter specify in a written notice to the other and all notices or other communications shall be in writing so addressed and shall be effective upon receipt by the addressee thereof: 4 7 Guarantor: DELTA QUEEN COASTAL VOYAGES, L.L.C. Robin Street Wharf 1380 Port of New Orleans Place New Orleans, Louisiana 70130-1890 Attn: Executive Vice President and General Counsel Secretary: SECRETARY OF TRANSPORTATION c/o Maritime Administration U.S. Department of Transportation Washington, DC 20590 Attn: Chief, Division of Ship Financing Contracts 9. Amendments and Supplements. No agreement shall be effective to change or modify, supplement, amend, or discharge in whole or in part this Guaranty Agreement unless such agreement is in writing, signed by the Guarantor and the Secretary. 10. Governing Law. This Guaranty Agreement shall be governed by federal law of the United States of America or in the absence of applicable federal law by the laws of the State of Louisiana. 11. Counterparts. This Guaranty Agreement may be executed in one or more counterparts. All such counterparts shall be deemed to be originals and shall together constitute but one and the same instrument. 5 8 IN WITNESS WHEREOF, this Guaranty Agreement has been executed by the Guarantor as of the day and year first above written. GUARANTOR: DELTA QUEEN COASTAL VOYAGES, L.L.C. BY: THE DELTA QUEEN STEAMBOAT CO., its Managing Member By: /s/ JORDAN B. ALLEN ----------------------------- Its Executive Vice President ATTEST: By /s/ Pam Stringer ----------------------------- Its Assistant Secretary 9 ACKNOWLEDGED BY: UNITED STATES OF AMERICA, SECRETARY OF TRANSPORTATION MARITIME ADMINISTRATOR By /s/ Joel C. Richard ---------------------------- Its Secretary ATTEST: By /s/ Sarah J. Washington ----------------------------- Its Assistant Secretary EX-4.(II)(G)(1) 26 c58427ex4-iig1.txt PREFERRED SHIP MORTGAGE 1 EXHIBIT 4(ii)(g)(1) PREFERRED SHIP MORTGAGE Vessel Name: MS PATRIOT Official Number: 1103207 Name and Address of OCEANIC SHIP CO. 100% Shipowner: c/o American Classic Voyages, Co. 2 North Riverside Plaza Suite 200 Chicago, IL 60606 Attn: General Counsel Name and Address of HAL ANTILLEN N.V., 100% Mortgagee: c/o Holland America Line-Westours Inc. 300 Elliott Ave. West Seattle, WA 98119 U.S.A. Attn: General Counsel Date of Mortgage: October 18, 2000 Amount of Mortgage: $84,500,000.00 excluding interest, expenses and fees, as contemplated by 46 U.S.C.ss.31321(b)(3) THIS PREFERRED SHIP MORTGAGE (the "Mortgage") is made effective as of the 18th day of October, 2000, by OCEANIC SHIP CO., a Delaware corporation (the "Shipowner"), in favor of HAL ANTILLEN N.V., a Netherlands Antilles corporation (the "Mortgagee"). RECITALS: A. Shipowner is the sole owner of the whole of the vessel MS PATRIOT, Official Number 1103207 (the "Vessel") which vessel is duly documented in the name of Shipowner under the laws and flag of the United States of America. B. Mortgagee has made a loan to Shipowner in the principal amount of Eighty-Four Million, Five Hundred Thousand Dollars (the "Loan") which loan is evidenced by a promissory note, dated October 18, 2000, in the amount of the Loan, payable to the order of Mortgagee (the "Note"). A Copy of the form of the Note is attached hereto and incorporated herein as Exhibit A. C. In consideration of Mortgagee having agreed to advance the Loan, Shipowner has agreed to execute and deliver this Mortgage to Mortgagee for purposes of securing payment to Mortgagee of the sums payable by Shipowner under the Note and the performance of Shipowner of its obligations thereunder in accordance with the terms thereof and of this Mortgage. 2 NOW THEREFORE, THIS MORTGAGE WITNESSETH: That in consideration of the premises and of the credit extended by Mortgagee to Shipowner as above recited and of other good and valuable consideration, the receipt whereof is hereby acknowledged, and in order to secure the payment of the Loan evidenced by the Note and the payment of all such other sums as may hereafter become secured by this Mortgage in accordance with the terms hereof (the "Obligations"), and to secure the performance and observance of and compliance with the covenants, terms and conditions herein and in the Note, Shipowner does by these presents grant, convey, mortgage, pledge, assign, transfer, set over and confirm the whole of the Vessel unto Mortgagee and its successors and permitted assigns, together with all of the Earnings (as hereafter defined) of the Vessel and all of Shipowner's right, title and interest in and to the boilers, engines, machinery, masts, spars, sails, rigging, boats, anchors, nets, chains, cables, tackle, apparel, furniture, fittings, navigation equipment, propulsion equipment, fuel, lubricating and other oils, consumables and other stores and equipment and all other appurtenances to the Vessel appertaining or belonging, whether now owned or hereafter acquired, whether on board or not, and all additions, improvements and replacements hereafter made in or to the Vessel, or any part thereof, or in or to the equipment and appurtenances aforesaid and including Shipowner's rights under any leases in connection therewith, all of which property shall, including the Earnings, be deemed to be included in the term "Vessel" as used in this Mortgage. As further security for the satisfaction of the Obligations, Shipowner does also grant, convey, mortgage, pledge, assign, transfer, set over and confirm to Mortgagee absolutely all rights and interests of every kind which now or at any later time it has to, or in connection with, the Insurances and Requisition Compensation (as such terms are hereafter defined). This Mortgage is granted in order to secure the payment of all sums payable by Shipowner under the Note and the performance by Shipowner of all obligations thereunder in accordance with the terms thereof and of this Mortgage, whether now existing or hereafter created. For purposes of filing and recording this Mortgage as required by the provisions of Chapter 313 of Title 46 of the United States Code, as amended, the total amount of this Mortgage is Eighty-Four Million, Five Hundred Thousand Dollars (US$84,500,000), plus interest, fees, expenses, and performance of mortgage covenants. The discharge amount is the same as the total amount. TO HAVE AND TO HOLD the same unto Mortgagee and its successors and assigns, as trustee, upon the terms herein set forth for the enforcement of the payment of the Obligations and all interest thereon and to secure the performance and observance of and compliance with the covenants, terms and conditions in this Mortgage and in the Note contained; PROVIDED, these presents are upon the condition that if Shipowner or its successors or assigns shall pay or cause to be paid to the holders of the Obligations, the principal of the indebtedness aforesaid and interest thereon as and when the same shall become due and payable in accordance with the terms of this Mortgage and of the Note, and all other such sums as may hereafter become secured by this Mortgage in accordance with the terms hereof, and Shipowner shall perform, observe and comply with all the covenants, terms and conditions in the Note and in this Mortgage, expressed or implied, to be performed, then these presents and the rights hereunder shall cease, determine and be void, otherwise to be and remain in full force and effect. 2 3 IT IS HEREBY COVENANTED, DECLARED AND AGREED that the Vessel is to be held subject to the further covenants, conditions, provisions, terms and uses hereinafter set forth. ARTICLE 1 COVENANTS OF SHIPOWNER Shipowner covenants and agrees with Mortgagee as follows; SECTION 1.1 DEFINITIONS. In this Mortgage, unless the contrary intention appears: "affiliate" means a person controlled by, controlling or under common control with another person with "control" for these purposes meaning ownership, beneficial or otherwise, of 51% or more of the voting or owner equity. "AMCV" refers to American Classic Voyages Co., a Delaware corporation. "asset" includes every kind of property, asset, interest or right, including any present, future or contingent right to any revenues or other payment. "company" includes, without limitation, any partnership, joint venture, corporation, sole proprietorship or unincorporated association. "Default Rate" means the Reference Rate plus two percent (2.0%). "Earnings" means all hire, earnings, ticket receipts, issues, revenues, income and profits of the Vessel, return premiums, salvage awards and recoveries, recoveries general average or other amounts due and owing as a consequence of the operation or ownership of the Vessel. "Environmental Approvals" means all approvals, licenses, permits, exemptions or authorizations required under applicable Environmental Laws in connection with the ownership and operation of the Vessel. "Environmental Claim" means (i) any claim by, or directive from, any governmental, judicial or other regulatory authority having jurisdiction over Shipowner alleging breach of, or non-compliance with, any Environmental Laws or Environmental Approvals or otherwise howsoever relating to or arising out of an Environmental Incident, or (ii) any claim by any other third party howsoever relating to or arising out of an Environmental Incident (and, in each such case, "claim" shall mean a claim for damages, clean-up costs, compliance, remedial action or otherwise). "Environmental Incident" means (i) any release of Environmentally Sensitive Material from the Vessel, (ii) any incident resulting from a collision between the Vessel and another vessel or some other incident of navigation or operation in which Environmentally Sensitive Material is released from a vessel other than the Vessel and , in either case, where the Vessel, Shipowner or the approved manager of the Vessel is at fault or otherwise liable (in whole or in part), or (iii) any incident in which Environmentally Sensitive Material is released from a vessel other than the Vessel and where the Vessel is arrested as a result and/or where Shipowner or the approved manager of the Vessel are at fault or otherwise liable. 3 4 "Environmental Laws" means all laws relating to pollution, protection of the environment, prevention and cleanup of environmental pollution, and the regulation of shipowners and vessels with respect to environmental matters (including, without limitation, the United States Oil Pollution Act of 1990, the United States Clean Water Act and the United States Resource Conservation and Recovery Act). "Environmentally Sensitive Material" means oil, oil products, any other substance which is polluting, toxic or hazardous or any substance the release of which into the environment is regulated, prohibited or penalized by or pursuant to any Environmental Law. "Event of Default" shall have the meaning given in Section 2.1 below. "excess risks" means the proportion of the claims for general average, salvage and salvage charges not recoverable under the hull and machinery policies in respect of the Vessel in consequence of her insured value being less than the value at which the Vessel is assessed for the purpose of such claims. "expense" means any kind of cost, charge or expense (including all reasonable attorneys' fees, costs and expenses including at or before trial and on appeal) and any applicable value added, sales or other tax thereon. "Insurances" means all policies and contracts of insurance (which expression includes all entries of the Vessel in a protection and indemnity or war risks association) which are from time to time taken out or entered into in respect of the Vessel or her Earnings or otherwise howsoever in connection with the Vessel or her Earnings. "law" includes all statutes, rules, regulations, treaties, requirements, conventions, directives, decisions and other pronouncements having the force of law of any governmental or other regulatory authority. "liability" includes every kind of debt or liability, present or future, certain or contingent, whether incurred as principal, surety or otherwise. "Major Casualty" means any casualty to the Vessel in respect whereof the claim or the aggregate of the claims against all insurers, before adjustment for any relevant franchise or deductible, exceeds Three Million, Two Hundred Fifty Thousand Dollars ($3,250,000) or the equivalent in any other currency. "Outstanding Loan" means, as of any given time, the outstanding principal balance of the Loan together with all accrued and unpaid interest thereon. "Permitted Lien" shall have the meaning given in Section 1.7(b) below. "person" includes any individual, company, authority, political subdivision, international organization or other entity. "protection and indemnity risks" means the usual risks covered by a protection and indemnity 4 5 association managed in London including pollution risks and the proportion (if any) of any sums payable to any other person or persons in case of collision which are not recoverable under the hull and machinery policies by reason of the incorporation therein of Clause 8 of the Institute Time Clauses (Hulls) (1/11/1995) or the Institute Amending Running Down Clause (I/ 1 0/7 1) or any equivalent provision. "Receiver" means any receiver and/or manager (or joint receivers and/or managers) appointed under Section 2.6. "Reference Rate" has the meaning set forth in the Note. "Requisition Compensation" includes all moneys or other compensation payable by reason of requisition of title or for hire or other compulsory acquisition of the Vessel. "Security Interest" means (a) a mortgage, charge (whether fixed or floating) or pledge, any maritime or other lien, encumbrance or any other security interest of any kind, maritime or non-maritime including, without limitation, claims of or liability to possession or forfeiture, or (b) the rights of the plaintiff under an action in rem in which the Vessel has been arrested or a writ has been issued or similar step taken. "tax" includes any present or future tax, duty, impost, levy or charge or any kind which is imposed by any governmental authority and includes all related penalties, interest and fines. "Total Loss" means: (a) actual, constructive, compromised, agreed or arranged total loss of the Vessel; (b) any expropriation, confiscation, requisition or compulsory acquisition of the Vessel, whether for full consideration, a consideration less than her proper value, a nominal consideration or without any consideration, which is effected by any government or official authority or by any person or persons claiming to be or to represent a government or official authority, excluding a requisition for hire for a fixed period not exceeding the final maturity of the Note, including any extension of such final maturity; (c) any arrest, capture, seizure, or detention of the Vessel (including any hijacking or theft) unless she is within 30 days (90 days in the case in hijacking or theft) redelivered to Shipowner's full control. "Total Loss Date" means: (a) in the case of an actual Total Loss of the Vessel, the date on which it occurred or, if that is unknown, the date when the Vessel was last heard of; (b) in the case of a constructive, compromised, agreed or arranged Total Loss of the Vessel, the earliest of: (i) the date on which a notice of abandonment is given to the insurers; and 5 6 (ii) the date of any compromise, arrangement or agreement made by or on behalf of Shipowner with the Vessel's insurers in which the insurers agree to treat the Vessel as a Total Loss; and (c) in the case of any other type of Total Loss, on the date (or the most likely date) on which it appears to Mortgagee that the event constituting the Total Loss occurred. "war risks" includes the risk of mines and all risks excluded by Clause 23 of the Institute Time Clauses (Hulls) (10/1/83). SECTION 1.2 PERFORMANCE OF OBLIGATIONS/VALID MORTGAGE. Shipowner will pay the indebtedness evidenced by the Note and this Mortgage with interest pursuant to the terms of the Note and this Mortgage, and shall observe, perform and comply with each and every one of the covenants, terms and conditions herein and in the Note on its part to be observed, performed or complied with. Shipowner will comply with and satisfy in all material respects the provisions of Chapter 313 of Title 46 of the United States Code, as amended, and execute and deliver all other documents and take all other actions Mortgagee reasonably deems necessary in order to establish, perfect and maintain this Mortgage as a valid, enforceable, and duly perfected preferred mortgage thereunder upon the Vessel and upon all renewals, improvements and replacements made in or to the same. Shipowner shall remain liable to perform all its respective obligations connected with the Vessel, it being agreed that Mortgagee shall not, in any circumstances, have or incur any obligation of any kind in connection with the Vessel except to the extent expressly provided herein, including upon the exercise of Mortgagee's remedies hereunder and other than as required by 46 CFR ss.ss. 221.17 and 221.19. SECTION 1.3 VESSEL DOCUMENTATION. Shipowner represents, warrants and covenants that: (a) it is now, and shall remain during the life of this Mortgage, a citizen of the United States as defined in 46 U.S.C. ss. 12102(a) and under Section 2 of the Shipping Act, 1916, as amended; (b) it will keep the Vessel documented in its name as a United States of America ship and will not do or allow to be done anything whereby such documentation may be forfeited or imperiled; and (c) it will not without the previous consent in writing of Mortgagee change the name of the Vessel or change or transfer the flag of the Vessel. SECTION 1.4 REPRESENTATIONS AND WARRANTIES. Shipowner represents, warrants and covenants to Mortgagee as follows. (a) Shipowner is duly incorporated and validly existing and in good standing under the laws of the State of Delaware and shall so remain during the life of this Mortgage; (b) Shipowner has the corporate capacity, and has taken all corporate action and obtained all consents of its directors and shareholders necessary for it to execute and comply with this Mortgage and the Note; (c) all consents, governmental or otherwise, required to enable Mortgagee to execute this 6 7 Mortgage and the Note and comply with the terms hereof and thereof have been obtained, remain valid and in full force and effect and are not subject to revocation; (d) this Mortgage and the Note constitute Shipowner's legal, valid and binding obligations enforceable against Shipowner in accordance with their respective terms except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles; and (e) the execution by Shipowner of the Note and this Mortgage and its compliance with the terms thereof and hereof will not involve or lead to a contravention, breach or default of or under the constitutional documents of Shipowner or any contractual or other obligation or restriction which is binding on Shipowner or any of its assets. SECTION 1.5 OWNERSHIP AND SECURITY INTERESTS; MORTGAGEE'S RIGHT TO PROTECTION. (a) Shipowner represents and warrants that it lawfully owns and is lawfully possessed of the Vessel free from all Security Interests including, without limitation, claims of or liability to possession, forfeiture or penalty, except (a) the lien of this Mortgage, and (b) the Permitted Liens. Except as otherwise provided herein, Shipowner warrants and shall defend title to and possession of the Vessel and to every part thereof for the benefit of Mortgagee against the claims and demands of all persons whomsoever. (b) Mortgagee shall be entitled to take any action which it may reasonably think necessary for the purpose of protecting or maintaining the security created by this Mortgage except that Mortgagee, prior to taking any such action, shall give Shipowner a reasonable opportunity to perform same. Without limiting the generality of the foregoing, to effectuate the foregoing Mortgagee may: (i) effect, replace and renew any Insurances required hereby; (ii) arrange for the carrying out of such surveys and/or repairs of the Vessel as are required hereby; and (iii) discharge any liabilities charged on the Vessel, or otherwise relating to or affecting her, which, if unpaid, may become a Security Interest on the Vessel, and/or take any measures which Mortgagee may deem reasonably necessary for the purpose of securing her release therefrom. Notwithstanding the above, no liability shall be discharged if (i) Shipowner shall contest such liability in good faith through appropriate proceedings, (ii) Shipowner sets aside with Mortgagee adequate reserves reasonably acceptable to Mortgagee in accordance with generally accepted accounting principles, or otherwise obtains a protection and indemnity club letter of assurance reasonably acceptable to Mortgagee, with respect to any such liability so contested, and (iii) the non-discharge thereof does not in any way hinder the operation or trading of the Vessel or impair Shipowner's ownership of the Vessel or the rights of Mortgagee under this Mortgage. SECTION 1.6 NOTICE OF MORTGAGE. Shipowner will place, and at all times will retain, a properly certified copy of this Mortgage on board the Vessel with her papers and will cause such certified copy and such papers to be exhibited to any and all persons having business therewith which 7 8 might give rise to any Security Interest thereon other than Permitted Liens, and to any representative of Mortgagee; and will place and keep prominently displayed in the chart room and in the Master's cabin of the Vessel a framed printed notice in plain type of such size that the paragraph of reading matter shall cover a space not less than 6 inches wide by 9 inches high, and reading as follows: "NOTICE OF MORTGAGE This Vessel is owned by OCEANIC SHIP CO., a Delaware corporation, and is covered by a Preferred Ship Mortgage in favor of HAL ANTILLEN N.V., a Netherlands Antilles corporation, under authority of Chapter 313 of Title 46 of the United States Code, as amended. Under the terms of said Mortgage, neither the owner, any charterer, the Master of this Vessel, any operator nor any other person has the right, power or authority to create, incur or permit to be imposed upon this Vessel any lien whatsoever other than liens expressly permitted thereby." SECTION 1.7 DISCHARGE OF SECURITY INTERESTS. (a) Except for the lien of this Mortgage and Permitted Liens, Shipowner will not create or suffer to be continued any Security Interest on the Vessel and in due course and in any event within thirty (30) days after the same becomes due and payable will pay or cause to be discharged all claims or demands which, if not paid or discharged, might result in the creation of a Security Interest on the Vessel and will cause the Vessel to be released or discharged from each such Security Interest. Similarly, if a Security Interest is filed against the Vessel or if the Vessel is otherwise attached, levied upon, or taken into custody or detained by any proceeding in any court or tribunal or by any government or other authority, Shipowner will promptly notify Mortgagee thereof and will, within fourteen (14) days of said event, cause the Vessel to be released and all Security Interests thereon other than that of this Mortgage and the Permitted Liens, to be discharged. Notwithstanding the above, no Security Interest need be discharged if (i) Shipowner shall contest such Security Interest in good faith through appropriate proceedings, (ii) Shipowner sets aside with Mortgagee adequate reserves reasonably acceptable to Mortgagee in accordance with generally accepted accounting principles, or otherwise obtains a protection and indemnity club letter of assurance reasonably acceptable to Mortgagee, with respect to any such Security Interest so contested, and (iii) the non-discharge thereof does not in any way hinder the operation or trading of the Vessel or impair Shipowner's ownership of the Vessel or the rights of Mortgagee under this Mortgage. (b) As used in this Mortgage, "Permitted Liens" means: (i) liens for crew wages (including wages of the Master to the extent provided by 46 U.S.C. ss. 11112) accrued for not more than thirty (30) days; (ii) liens for taxes, assessments, governmental charges, fines and penalties not at the time delinquent; (iii) liens incurred in the ordinary course of trading the Vessel not exceeding $1,500,000 at any time outstanding; 8 9 (iv) liens created by or through Mortgagee prior to the date of this Mortgage but only until such time as Mortgagee has discharged same; (v) liens to which Mortgagee has given its prior written consent. Nothing in this Section 1.7(b) shall be deemed a waiver of the preferred lien status of this Mortgage or of Mortgagee's rights under Sections 1.7(a) and 1.8. (c) Shipowner shall not without the previous consent in writing of Mortgagee (not to be unreasonably withheld) put the Vessel into the possession of any person for the purpose of work being done upon her in an amount exceeding or likely to exceed Three Million, Two Hundred Fifty Thousand Dollars ($3,250,000) (or the equivalent in any other currency) unless such person shall first have given to Mortgagee and in terms reasonably satisfactory to it a written undertaking not to exercise any lien on the Vessel or her Insurances for the cost of such work. In lieu of providing such undertaking, Shipowner may instead provide Mortgagee with an opinion of counsel, from a law firm and in form and substance reasonably satisfactory to Mortgagee, that any such lien would not have priority over the lien of this Mortgage. SECTION 1.8 ARREST OF VESSEL. If the Vessel is attached or arrested, Shipowner shall promptly notify Mortgagee by telephone, facsimile transmission, telex or telegraph, confirmed by letter, and shall, if the Vessel is attached or arrested, within fourteen (14) days cause the Vessel to be released and all Security Interests thereon other than the lien of this Mortgage and the Permitted Liens to be discharged, and shall promptly notify Mortgagee concerning such release and discharge; provided, however, any Permitted Liens that have resulted in the libel, complaint, attachment or arrest must also be discharged forthwith. Notwithstanding the above, no Security Interest need be discharged if (i) Shipowner shall contest such Security Interest in good faith through appropriate proceedings, (ii) Shipowner sets aside with Mortgagee adequate reserves reasonably acceptable to Mortgagee in accordance with generally accepted accounting principles, or otherwise obtains a protection and indemnity club letter of assurance reasonably acceptable to Mortgagee, with respect to any such Security Interest so contested, and (iii) the non-discharge thereof does not in any way hinder the operation or trading of the Vessel or impair Shipowner's ownership of the Vessel or the rights of Mortgagee under this Mortgage. Upon any unreasonable delay by Shipowner to act promptly and appropriately with respect thereto, Shipowner authorizes and empowers Mortgagee to appear in the name of Shipowner in any court of any country or other jurisdiction where an action is pending against the Vessel because of or on account of any alleged Security Interest thereon from which it has not been so released, and to take such actions as to it as Mortgagee may deem proper towards the defense of such action, the purchase or discharge of such alleged Security Interest, or the release of the Vessel, including, without limitation, posting adequate security therefor. All reasonable expenditures made or incurred by Mortgagee for the purpose of such defense, purchase or discharge shall be a debt due from Shipowner to Mortgagee and shall be secured by the lien of this Mortgage, and shall bear interest at a rate per annum equal from time to time to the Default Rate. SECTION 1.9 MAINTENANCE AND OPERATION OF VESSEL. Shipowner covenants and agrees to: (a) maintain and preserve the Vessel in good running order and repair, so that the Vessel shall be, in so far as due diligence can make her so, tight, staunch, strong and well and sufficiently tackled, appareled, furnished, equipped and in every respect seaworthy and in good operating condition; 9 10 (b) maintain and preserve the Vessel consistent with first-class ship-ownership and management practice and so as to maintain her present class (namely "LR 100 A1 LMC" Passenger Ship at Lloyds Register of Shipping) or an equivalent class with American Bureau of Shipping or another classification society approved by Mortgagee, which approval shall not be unreasonably withheld, free of recommendations and qualifications affecting class save those notified to and approved in writing by Mortgagee and so as to comply with all applicable laws from time to time applicable to vessels documented under the laws and flag of the United States of America. Mortgagee shall not withhold its approval as to those recommendations or qualifications affecting class which do not prevent the Vessel from remaining in normal passenger service so long as Shipowner executes an undertaking, in form and substance satisfactory to Mortgagee, to take such actions as are necessary to remove same at the Vessel's next scheduled drydock or wetdock but in no event subsequent to a sale of the Vessel pursuant to Section 2.2; (c) not make any modification to the Vessel which would, or would be reasonably likely to, materially alter the structure, type or performance characteristics of the Vessel or materially reduce the value of the Vessel; (d) procure that all repairs to or replacement of any damaged, worn or lost parts or equipment be effected in such manner (both as regards workmanship and quality of materials) as to not materially diminish the value of the Vessel; (e) not remove any material part of, or item of equipment installed on, the Vessel unless the part or item so removed is no longer required for the operation of the Vessel or is forthwith replaced by a suitable part or item which is in the same condition as or better condition than the part or item removed, is free from any Security Interest in favor of any person other than Mortgagee (and other than Permitted Liens) and becomes an installation on the Vessel and the property of Shipowner and subject to the lien constituted by this Mortgage; (f) submit the Vessel regularly to such periodical or other surveys as may be required for classification purposes and supply to Mortgagee copies of all survey reports issued in respect thereof; (g) permit Mortgagee by surveyors or other persons appointed by it for that purpose to board the Vessel at all reasonable times and on reasonable prior notice, for the purpose of inspecting her condition or papers or for the purpose of satisfying themselves in regard to proposed or executed repairs and to afford all proper facilities for such inspections, provided Mortgagee does not materially interfere with the schedule or operation of the Vessel; (h) promptly furnish to Mortgagee copies of all such information in the possession or under the control of Shipowner or any of its affiliates, as Mortgagee may from time to time reasonably require regarding the Vessel, her employment, position and engagements, particulars of all towages and salvages and, upon Mortgagee's request in writing, copies of all charters and other contracts for her employment or otherwise howsoever concerning her; (i) notify Mortgagee forthwith of: (i) any casualty to the Vessel which is or is likely to be a Major Casualty; 10 11 (ii) any occurrence in consequence whereof the Vessel has become or is, by the passing of time or otherwise, likely to become a Total Loss; (iii) any requirement or recommendation made by any insurer or classification society or by any competent authority affecting class or which would or would be reasonably likely to materially affect the operation of the Vessel; (iv) any arrest of the Vessel or the exercise or purported exercise of any Security Interest on the Vessel or her Insurances or any requisition of the Vessel; (v) any intended drydocking or wetdocking of the Vessel; (vi) an incident of salvage or general average with respect to the Vessel; (vii) any Environmental Claim being or made against Shipowner or otherwise in connection with the Vessel; or (viii) any Environmental Incident occurring, (j) keep proper books of account in respect of the Vessel and as and when Mortgagee may so reasonably require make such books available for inspection on behalf of Mortgagee at reasonable times and on reasonable notice, and furnish satisfactory evidence that the wages and allotments and the insurance and pension contributions of the Master and crew are being regularly paid and that all deductions from crew's wages in respect of tax and/or social security liability are being properly accounted for and that the Master has no claim for disbursements other than those incurred by him in the ordinary course of trading on the voyage then in progress; (k) comply in all material respects, or procure such compliance, with all Environmental Laws and Environmental Approvals relating to the Vessel, its operation or management and the business of Shipowner from time to time; and (l) keep Mortgagee advised, in writing on such regular basis and in such detail as Mortgagee shall reasonably require, of Shipowner's response to every Environmental Claim and Environmental Incident. SECTION 1.10 LEGAL COMPLIANCE. Shipowner will cause the Vessel and its operations to comply at all times and in all material respects with (i) all laws of the United States applicable to the Vessel, as in effect from time to time, and (ii) all laws applicable to the Vessel and its operation in all trades and locations in which it operates or is located from time to time; and the Vessel shall have on board as and when required thereby valid certificates of inspection and all other certificates evidencing compliance therewith. The Vessel shall not engage in any unlawful trade or violate or be operated in violation of any applicable law, or carry any passenger, cargo, or other matter that will expose it to penalty, forfeiture or capture. Shipowner shall obtain and file all certificates of financial responsibility legally required in all jurisdictions in which the Vessel is located from time to time. Shipowner shall prepare and file all environmental pollution prevention and contingency plans and other matters required under all applicable Environmental Laws. Shipowner shall ensure that all reasonable precautions are taken to ensure that no illegal drugs or drug paraphernalia are used or kept on board the Vessel. Without limiting the generality of the foregoing, Shipowner shall take all 11 12 reasonable precautions to prevent any infringements of the Anti-Drug Abuse Act of 1986 of the United States of America (as the same may be amended and/or re-enacted from time to time hereafter) or any similar legislation applicable to the Vessel in any jurisdiction in which the Vessel shall trade. For this purpose, Shipowner shall enter into such sea carrier initiative agreement with the United States Customs Service as shall be reasonably satisfactory to Mortgagee where such agreement is required by the laws of the United States or such agreement is recommended by the United States Customs Service, and shall otherwise comply with the zero tolerance anti-drug policy of the United States Government. SECTION 1.11 LOCATION OF VESSEL. Without limiting the right of Shipowner to perform work on the Vessel in accordance with the requirements of this Mortgage, the Vessel shall not be abandoned, deactivated or laid up in any port or place. Without the prior written consent of Mortgagee, the Vessel shall not depart the United States of America, the Exclusive Economic Zone surrounding it, or Canada, except for nonstop voyages between points therein. SECTION 1.12. INSURANCES (a) Shipowner will at its own expense insure the Vessel and keep the same insured (in lawful money of the United States) for hull and machinery (fire and usual marine risks, including excess risks), general mortgagee's interest, and against protection and indemnity risks and war risks. Such insurances shall be in form, in amounts, and with deductibles generally insured against by, and otherwise generally consistent with, the practices of prudent operators of luxury cruise ships, and with reputable and financially sound insurance companies, brokers, underwriters, funds, mutual insurance associations and clubs. Shipowner shall reimburse Mortgagee within ten (10) days of demand for any costs or expenses reasonably incurred by Mortgagee in obtaining reports from time to time (but not more than once per year) from an independent marine insurance broker as to the compliance with this Section of the Insurances effected or proposed to be effected by Shipowner pursuant to this Section 1.12. Shipowner shall promptly deliver to such broker any and all such information in relation to the said Insurances as such broker may reasonably require. (b) Unless Mortgagee shall object in its reasonable discretion, the protection and indemnity, hull and machinery and mortgagee's interest insurance required by this Section 1.12 may be on the American Institute forms current at the time such insurance takes effect with deductibles or franchises no higher than the following: Hull and Machinery; All claims, each accident or occurrence - - $750,000. (c) Protection and indemnity insurance in respect to the Vessel shall be by unlimited entry in an insurance association or placed with brokers or underwriters reasonably acceptable to Mortgagee and shall include pollution liabilities (including coverage for third party claims, statutory and governmental cleanup liabilities, penalties and fines in the minimum amount of $500,000,000 for any one occurrence), and full passenger liability cover, with deductibles or franchises no higher than $200,000. (d) For the purposes of insurance against Total Loss, the Vessel shall be insured for and valued at an amount of at least equal to the full commercial value of the Vessel but in no event less than the lower of $120,000,000 or 120% of the Outstanding Loan. For purposes of broker's reports and opinions, the broker giving the same may rely on a statement as to the full commercial value of the Vessel and the gross tonnage of the Vessel as furnished annually by Shipowner to such broker 12 13 and Mortgagee at the time insurance is negotiated with underwriters or insurance providers. (e) All insurance other than protection and indemnity insurance shall be taken out in the names of Shipowner and Mortgagee as their respective interests may appear; the policies or certificates shall provide that there shall be no recourse against Mortgagee for payment of premiums, contributions or calls; and all insurance shall provide for at least ten (10) days' prior notice to be given to Mortgagee by the underwriters or other insurance providers in event of cancellation or any material change in coverage. Protection and indemnity insurance cover notes shall indicate the interest of Mortgagee. Shipowner shall pay all premiums, calls, contributions or other sums owing on such insurance before they become delinquent and shall produce all relevant receipts when so required by Mortgagee. (f) The interest of Mortgagee shall be duly endorsed upon all slips, cover notes, policies, certificates of entry or other instruments of insurance issued or to be issued in connection with the Insurances by means of a loss payable clause reflecting the terms of Section 1.17 and a notice of assignment (signed by Shipowner) each in such form as shall from time to time be reasonably approved in writing by Mortgagee. Copies of all such slips and other items above referred to shall be provided by Shipowner to Mortgagee promptly upon request. (g) Shipowner shall, upon request, authorize the brokers to provide Mortgagee with all such information that is available to them regarding the Insurances as Mortgagee may reasonably require. Shipowner shall, upon request from Mortgagee, ensure that the brokers furnish Mortgagee with a letter or letters or undertaking in such form as may from time to time be reasonably required by Mortgagee, such letter or letters to include undertakings by the brokers that: (i) they will hold the instruments of insurance, and the benefit of the Insurances thereunder, to the order of Mortgagee in accordance with the terms of the loss payable clause referred to in Section 1.12(f); (ii) they will have endorsed on each and every policy as and when the same is issued the loss payable clause and the notice of assignment referred to in Section 1.12(f); (iii) they will advise Mortgagee within ten (10) days of any material changes which may be made to the terms of the Insurances and notify Mortgagee, not less than ten (10) days prior to the expiry or cancellation of the said insurance, in the event of their not having received notice of renewal instructions from Shipowner and/or its agents; (iv) they will not set off against any sum recoverable in respect of a claim against the Vessel under the Insurances any premiums or other amounts due to the brokers or any other person in respect of any other vessel nor cancel the Insurances as to Mortgagee by reason of non-payment of such premiums or other amounts prior to giving the requisite notice provided for above; and (v) they will not permit any assured or loss payee to be added to any policy without obtaining the prior written consent of Mortgagee. (h) All hull and machinery and mortgagee's interest insurance policies or certificates shall provide that losses thereunder shall be payable to Mortgagee, and all insurance proceeds received by 13 14 Mortgagee or Shipowner shall be distributed, as provided below in Section 1.17. (i) Shipowner shall not, without the prior written consent of Mortgagee (not to be unreasonably withheld), settle, compromise or abandon any claim under the Insurances for a Total Loss or for a Major Casualty. (j) Shipowner agrees that it will not do any act, or voluntarily suffer or permit any act to be done, whereby any insurance required hereunder shall or may be invalidated, voided, suspended, impaired or defeated and will not suffer or permit the Vessel to engage in any voyage or to carry any cargo not permitted under the policies of insurance in effect, without first covering the Vessel with insurance required by this Mortgage for such voyage or the carriage of such cargo. (k) In the event that any claim or lien is asserted against the Vessel for loss, damage or expense which is covered by insurance hereunder, and it is necessary for Shipowner to obtain a bond or supply other security to prevent the arrest of the Vessel or to release the Vessel from arrest on account of such claim or lien, Mortgagee may, in its sole discretion, and upon notice to Shipowner, assign to any person executing a surety or guarantee bond or other agreement to save or release the Vessel from such arrest, all right, title and interest of Mortgagee in and to said insurance covering said loss, damage or expense, as collateral security to indemnify such person against liability under said bond or agreement. (l) At least thirty days before the relevant policies or contracts expire, Shipowner shall renew the expiring Insurances, and upon the renewal of the said Insurances, ensure that the brokers and/or the war risks and protection and indemnity risks associations with which any such renewal is effected shall notify Mortgagee in writing of the terms and conditions of such renewal. (m) Shipowner shall obtain and maintain a Certificate of Financial Responsibility as required by the United States Oil Pollution Act of 1990 and make all such quarterly or other voyage declarations as may from time to time be required by the protection and indemnity risks association in order to maintain cover for trading to the United States of America and Exclusive Economic Zone (as defined in the said United States Oil Pollution Act of 1990) and promptly deliver to Mortgagee copies of all such declarations. SECTION 1.13 REQUISITION. Shipowner agrees that in the event of the requisition of title to or use (but only if the period of use exceeds 180 days) of the Vessel, all amounts which are owed or payable as compensation for the Vessel or for its use are hereby assigned to and shall be paid over to Mortgagee to be applied toward payment of the Obligations and all sums otherwise owing under or secured by this Mortgage, whether or not the same are then due and payable, in which event the balance shall be applied as provided in Section 2.9, and to that end Shipowner agrees to execute and deliver all other and further instruments reasonably requested by Mortgagee. Mortgagee is hereby irrevocably and individually appointed Shipowner's attorney-in-fact coupled with an interest to execute all such instruments which Shipowner is required to execute and deliver in this Section 1.13 but fails to execute and deliver promptly on request. SECTION 1.14 TRANSFER/CHARTER OF VESSEL. Shipowner will not sell, mortgage, transfer, assign, convey, transfer or demise charter the Vessel, without the prior written consent of Mortgagee, and any such written consent to any one such event shall not be construed to be a waiver of this provision with respect to any subsequent proposed sale, mortgage, transfer, assignment, conveyance 14 15 or demise charter. Any such sale, mortgage, transfer, assignment, conveyance or demise charter of the Vessel shall be subject to the provisions of this Mortgage and the lien it creates. Mortgagee shall not withhold its consent in the event of a proposed sale, assignment, conveyance, transfer or demise charter to an affiliate of Shipowner so long as both Shipowner and the vendee, assignee, transferee or charterer (as the case may be) remain liable for the Obligations and for the performance and observance of and compliance with the covenants, terms and conditions in this Mortgage. Shipowner shall not let the Vessel by any time or consecutive voyage charter(s) for a term which exceeds, or which by virtue of any optional extensions therein contained is likely to exceed, six months' duration. Shipowner shall not let the Vessel on terms whereby more than two months' hire (or the equivalent) is payable in advance. Shipowner shall not let the Vessel otherwise than on bona fide arm's length terms. Shipowner shall not appoint a manager of the Vessel other than one approved by Mortgagee in writing, which approval shall not be unreasonably withheld. Forthwith upon being required so to do by Mortgagee, Shipowner shall enter into an assignment to Mortgagee, as further security for the Obligations, of the benefit, but not the burden, of any letting of the Vessel whether or not Mortgagee's consent thereof is required under this Section 1.14. SECTION 1.15 BONDS. Shipowner warrants that all surety bonds or other undertakings or instruments required by any applicable law to secure the payment of wages or the payment of any other sum in respect to the operation of the Vessel shall be obtained, effective and filed in the required amounts and in accordance with applicable law. In the event that any such bond, undertaking or instrument has not been obtained or is at any time not in effect as required by any applicable law, then, after notice to Shipowner and a reasonable opportunity for Shipowner to obtain the bond, undertaking or instrument, Mortgagee may obtain the same, and the expense thereof shall be paid forthwith to Mortgagee after notice of such expense has been given and, together with interest thereon at the Default Rate, shall be added to the sums secured hereby as of the date notice is given that such expense has been incurred. Shipowner shall use its best efforts to ensure that all such surety bonds and all parties liable on or in respect of them, by guaranty or otherwise, waive the right to be subrogated to the rights against the Vessel, if any, of those who receive funds or who are paid out of the proceeds of such surety bonds or other undertakings. SECTION 1.16 NO SET-OFF OR TAX DEDUCTION (a) All amounts due from Shipowner under this Mortgage and the Note shall be paid (i) without any form of set-off, counterclaim, cross-claim or condition, and (ii) free and clear of any tax deduction except a tax deduction which Shipowner is required by law to make. In this Section, "tax deduction" means any deduction or withholding for or on account of any present or future tax. (b) If Shipowner is required by law to make a tax deduction from any payment: (i) it shall notify Mortgagee as soon as it becomes aware of the requirement; and (ii) it shall pay the tax deducted to the appropriate taxation authority promptly, and in any event before any fine or penalty arises. (c) Within one (1) month after making the payment referred to in (b)(ii) above in this Section, Shipowner shall deliver to Mortgagee documentary evidence satisfactory to Mortgagee that the tax concerned has been paid to the appropriate taxation authority. 15 16 SECTION 1.17. RECEIPTS OF INSURANCES (a) The policies or certificates of the Insurances may provide that, unless the underwriters or insurance providers shall have been otherwise instructed by notice in writing from Mortgagee that an Event of Default shall have occurred and is continuing, and Mortgagee agrees that during any period in which an Event of Default is not continuing, sums recoverable in respect of Insurances shall be payable as follows (and Mortgagee and Shipowner shall take all necessary actions to cause such payments to be so made): (i) any loss under any insurance on the Vessel with respect to protection and indemnity or collision liability risks may be paid directly to the person to whom any liability covered by such insurance has been incurred, or to Shipowner to reimburse it for any loss, damage or expense incurred by it and covered by such insurance, provided that in the latter event the underwriter or insurance provider shall have first received evidence that the liability insured against has been discharged; (ii) in the case of any loss (other than a loss covered by subparagraph (i) above in this subsection (a) or by subsection (e) of this Section 1.17 or a loss involving a Major Casualty) under any insurance with respect to the Vessel involving any damage to the Vessel or liability of the Vessel, the underwriters or insurance providers may pay directly for the repair, salvage, liability or other charges involved, or may pay same directly to Shipowner which shall apply it in making good the loss and/or satisfying the liability, and fully repairing all damage in respect of which that insurance money was received; and (iii) in the case of any loss involving a Major Casualty (other than a loss covered by subparagraph (i) above in this subsection (a) or by subsection (e) of this Section 1.17) the underwriters or insurance providers shall make payments of the proceeds of Insurances from time to time to Mortgagee which shall, in turn and from time to time as requested by Shipowner, pay same to Shipowner so long as Shipowner is in compliance with the Repair Guidelines (as defined below). (b) No payment shall be made to or retained by Shipowner if there shall have occurred and be continuing an Event of Default, and payment of proceeds of insurances in such case shall be paid to Mortgagee and applied against the Obligations or, at Mortgagee's option, paid to Shipowner to reimburse Shipowner for costs and expenses incurred in repairing the Vessel from such casualty. (c) Any loss which is paid to Mortgagee but which should have been paid, in accordance with the provisions of this Section, directly to Shipowner, shall be paid by Mortgagee to or as directed by Shipowner, but only if there shall not have occurred any Event of Default. Any loss which is paid to Shipowner but which should have been paid, in accordance with the provisions of this Section, directly to Mortgagee, shall be paid by Shipowner to or as directed by Mortgagee. (d) As used above, "compliance with the Repair Guidelines" shall mean in respect of a Major Casualty, each of the following shall have occurred or been satisfied in Mortgagee's discretion, to be reasonably exercised; (i) the plans and specifications, cost breakdown, construction contract, 16 17 construction schedule and contractors for the work of repair or reconstruction of the Vessel must all be reasonably acceptable to Mortgagee, and the work on the Vessel must be carried out in accordance therewith; (ii) Mortgagee must receive evidence reasonably satisfactory to it that after repair or reconstruction, the Vessel would be in substantially similar condition as existed prior to the Major Casualty (or as Mortgagee shall otherwise reasonably approve); (iii) the proceeds of the Insurances must be sufficient in Mortgagee's reasonable determination to pay for the total cost of repair or reconstruction, or Shipowner must provide its own funds prorata with proceeds of the Insurances to ensure that such aggregate funds are sufficient for the completion of the repair or reconstruction; and (iv) Shipowner shall obtain customary lien waivers from contractors in connection with such repair or construction, such waivers to be reasonably satisfactory to Mortgagee. (e) In the event of a Total Loss, all amounts payable therefor from insurance required hereunder shall be paid to Mortgagee and shall be applied against the Obligations in accordance with Section 2.9 below. ARTICLE 2 EVENTS OF DEFAULT AND REMEDIES SECTION 2.1 EVENTS OF DEFAULT. The occurrence of any of the following events shall constitute an "Event of Default" hereunder: (a) default in the payment of the whole or any part of the principal of the Loan when the same shall become due and payable, whether at maturity, by acceleration or otherwise; (b) default in the payment of any other of the Obligations or any interest thereon when and as the same shall become due and payable as provided in the Note and this Mortgage, whether at maturity, by acceleration or otherwise, and such default shall continue for at least five (5) business days; or (c) default in the due and punctual observance and performance of any provision of Sections 1.3, 1.7, 1.8, 1.11, 1.12, 1.14 or 3.4 hereof; or (d) default in the due observance or performance of any of the other covenants and conditions herein required to be kept and performed by Shipowner and continuance of such default for thirty (30) days after notice of default is received from Mortgagee; or (e) Shipowner or AMCV shall (i) file a petition seeking relief for itself under Title 11 of the United States Code, as now constituted or hereafter amended, or (ii) fail to timely controvert a petition filed against it seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended; or 17 18 (f) an order for relief shall be entered against Shipowner or AMCV under Title 11 of the United States Code, as now constituted or hereafter amended, which order is not vacated, stayed or dismissed within 90 days; or (g) the appointment of a receiver, liquidator, or custodian of Shipowner or AMCV or a substantial part of Shipowner's or AMCV's property which remains undismissed or not vacated for 90 days; (h) upon the expiration of 120 days after the filing of any involuntary petition against Shipowner or AMCV seeking any of the relief specified in subsection (e) or (f) above without the petition being vacated, discharged or dismissed prior to that time; or (i) Shipowner or AMCV shall (i) make a general assignment for the benefit of its creditors, or (ii) consent to the appointment of or taking possession by a receiver, liquidator, or custodian of all or a substantial part of its property, or (iii) admits its insolvency or inability to pay its debts as they become due, or (iv) fail generally to pay its debts as they become due. SECTION 2.2 CONSEQUENCES OF DEFAULT. If any Event of Default shall occur and be continuing, then in any such case and at any time thereafter Mortgagee may exercise all rights, powers, privileges and remedies hereunder or otherwise existing or arising by agreement, at law, or in equity, in admiralty, or otherwise (including, without limitation, the exercise of all powers possessed by it as mortgagee, chargee and assignee of the Vessel, Insurances and Requisition Compensation conferred by the law of any country or territory the courts of which have or claim any jurisdiction in respect of Shipowner, the Vessel, the Insurances or Requisition Compensation), and without limiting the foregoing, Mortgagee shall have the right to: (a) declare the Loan and any of the other Obligations to be due and payable immediately, and upon such declaration the entire unpaid principal of and interest on the Loan and the other Obligations to date of declaration shall become and be immediately due and payable, and thereafter shall bear interest at the Default Rate; (b) exercise all the rights and remedies in foreclosure and otherwise given to mortgagees by the provisions of Chapter 313 of Title 46 of the United States Code, as at any time amended, subject to 46 CFR ss.ss. 221.17 and 221.19; (c) bring suit at law, in equity or in admiralty, as it may deem advisable, to recover judgment for any and all amounts due under the Obligations, or otherwise hereunder, and collect the same out of any and all property of Shipowner whether covered by this Mortgage or not; (d) take the Vessel, wherever the same may be, without legal process and remove the Vessel to any port or place selected by Mortgagee. To the extent permitted by law, Shipowner or any other person in possession shall, forthwith upon demand of Mortgagee, and at Shipowner's expense, surrender possession of the Vessel as demanded by Mortgagee, and Mortgagee may hold, lay up, charter, operate, or otherwise use the Vessel, subject always to 46 CFR ss.ss. 221.17 and 221.19, for such time and upon such terms as it may deem to be for its best advantage, accounting for the net profits, if any, arising from such use and charging upon all receipts from such use or from the sale of the Vessel by court proceedings or pursuant to subsection (e) below, all reasonable costs, charges, damages, losses or other expenses incurred by reason of such use or sale; 18 19 (e) sell the Vessel in compliance with applicable law at a properly conducted public sale at any place and at such time as Mortgagee may reasonably specify, and in such manner as Mortgagee may reasonably deem advisable, free from all claims by Shipowner, after first giving notice of the time and place of sale with a general description of the property in the following manner: (i) by publishing such notice for not less than ten (10) days in The Wall Street Journal or The Journal of Commerce and in such other newspaper(s), if any, as may be required by the court or court rules; (ii) by mailing (and facsimile transmission or delivering) a similar notice to Shipowner at least ten (10) days prior to the scheduled date of the sale; and (iii) by posting notice of sale on the Vessel; (f) require that all policies and other documents relating to the Insurances (including details of and correspondence concerning outstanding claims) be forthwith delivered to or to the order of Mortgagee; (g) collect, recover and give a good discharge for any monies or claims forming part of, or arising in relation to, the Vessel, the Insurances or the Requisition Compensation, and to permit any brokers through whom collection or recovery is effected to charge the usual brokerage therefor; (h) to take over or commence or defend (if necessary using the name of Shipowner) any claims or proceedings relating to, or affecting, the Vessel, the Insurances or the Requisition Compensation which Mortgagee may think fit and to abandon, release or settle in any way any such claims or proceedings; and/or (j) to enter into any other transaction or arrangement of any kind not described above or to do anything in relation to the Vessel, the Insurances or the Requisition Compensation which Mortgagee acting reasonably may think fit. In the event of an order for relief with respect to Shipowner under the United States Bankruptcy Code, as amended, the entire, aggregate unpaid principal balance of the Loan, all accrued and unpaid interest with respect to the Loan, and all other amounts payable with respect to the Loan or under this Mortgage, the Note and the other documents, instruments, agreements, and certificates delivered thereunder relating to the Loan or other Obligations, automatically shall become and be due and payable, without presentment, demand, protest, notice of nonpayment, notice of dishonor or any notice of any kind, all of which are hereby expressly waived by Shipowner. SECTION 2.3 SALE OF VESSEL. A sale of the Vessel made in pursuance of this Mortgage, whether under the power of sale hereby granted or any judicial proceedings, shall operate to divest all right, title and interest of any nature whatsoever of Shipowner therein and thereto. Nevertheless, the Vessel shall not be sold to any parties who are not lawfully entitled to acquire it. No purchaser shall be bound to inquire whether notice has been given or whether any default has occurred, or as to the propriety of the sale, or as to the application of the proceeds thereof. In case of such sale, Mortgagee shall be entitled, for the purpose of making settlement or payment for the property purchased, to use and apply the Obligations in order that there may be credited against the amount remaining due and unpaid thereon the sums payable out of the net proceeds of such sale to the holder of the Obligations after allowing for the costs and expense of sale and other charges. Such purchaser shall be credited, on account of such purchase price, with the net proceeds that shall have been credited upon the Obligations. At such sale, Mortgagee or any holder of the Obligations may bid for and purchase such 19 20 property, and upon compliance with the terms of sale may hold, retain and dispose of such property, subject always to 46 CFR ss.ss. 221.17 and 221.19, without further accountability therefor. Mortgagee shall not have any liability to Shipowner in connection with any disposition of the Vessel hereunder, nor shall Shipowner be entitled to any set-off, counterclaim, or recoupment with respect to any claim of such a liability. Shipowner shall have no liability to Mortgagee for any failure of Mortgagee to comply with 46 CFR ss.ss. 221.17 and 221.19. SECTION 2.4 CONVEYANCE. Mortgagee is hereby appointed Shipowner's attorney-in-fact coupled with an interest to execute and deliver to any purchaser aforesaid, and shall be vested with full power and authority to make, in the name and on behalf of Shipowner, good conveyance of the title to the Vessel to any person lawfully entitled to hold such title. In the event of a sale of the Vessel under any power herein contained, Shipowner shall, if and when required by Mortgagee, execute such form of conveyance of the Vessel as Mortgagee may direct, and Mortgagee is hereby irrevocably appointed Shipowner's attorney-in-fact coupled with an interest to execute such form upon Shipowner's failure to do so forthwith upon request. SECTION 2.5 EARNINGS OF VESSEL. Mortgagee is hereby appointed attorney-in-fact of Shipowner upon the occurrence of any Event of Default that is continuing to act in the name of Shipowner to demand, collect, receive, compromise and sue for, so far as may be permitted by law, all Earnings and all amounts due from underwriters under any insurance thereon as payment of losses or otherwise, and all other sums due or to become due at the time of the occurrence of any Event of Default that is continuing, or in respect of any insurance thereon from any person whomsoever, and, to the extent permitted by applicable law, to make, give and execute in the name of Shipowner acquittances, receipts, releases or other discharges for the same, whether under seal or otherwise, and to endorse and accept in the name of Shipowner all checks, notes, drafts, warrants, agreements and all other instruments in writing with respect to the foregoing. Notwithstanding the foregoing, so long as Shipowner has not received notice from Mortgagee that an Event of Default has occurred and is continuing, Shipowner shall be entitled to collect and retain all Earnings. Mortgagee agrees to return to Shipowner any misdirected payment not relating to the Vessel which Mortgagee receives. SECTION 2.6 RECEIVER/MANAGER. Whenever any right to enter and take possession of the Vessel accrues to Mortgagee, it may require Shipowner to deliver, and Shipowner shall on demand, at its own cost and expense, deliver, to Mortgagee the Vessel as demanded. If any legal proceedings shall be taken to enforce any right under this Mortgage, Mortgagee shall be entitled as a matter of right to request a court of competent jurisdiction to appoint a Receiver of the Vessel. In the event of such appointment: (a) all liabilities, costs and other expenses reasonably incurred by the Receiver shall be for the account of Shipowner but shall first be paid from Earnings to the extent of the Earnings; (b) Mortgagee may exercise any of the powers conferred by this Mortgage while a Receiver is in office and is acting; (c) an appointment of such Receiver shall be by action of such court; (d) the remuneration of such Receiver shall be fixed by such court; (e) to the fullest extent permitted by law, such Receiver shall be Shipowner's agent (in 20 21 relation to Shipowner's rights and interests in the Vessel) provided that, unless such court provides otherwise, Shipowner shall be responsible, to the exclusion of any liability on the part of Mortgagee, for the Receiver's remuneration and for its contracts, acts and defaults both in its capacity and as Shipowner's agent; (f) the Receiver shall have all the powers conferred by Section 2.2 as if the reference to Mortgagee in Section 2.2 were a reference to the Receiver; (g) Shipowner irrevocably and by way of security irrevocably appoints such Receiver its attorney on its behalf and in its name or otherwise to execute or sign any document and do any act or thing which such Receiver considers necessary or desirable with a view to or in connection with any exercise or proposed exercise of any of its powers; (h) if approved by such court, such Receiver may delegate to any person or persons any of the powers (including any discretionary authority) conferred on it and may do so on terms authorizing successive sub-delegations; (i) in the case of joint Receivers any of the powers (including any discretionary authority) conferred by such court or this Mortgage or by general law may be exercised by any one or more of them, unless their appointment specifically states the contrary; (j) if approved by such court, Mortgagee may remove such Receiver, with or without appointing another Receiver. Such a removal may be effected by a document signed by any of Mortgagee's officers; (k) if approved by such court, Mortgagee may appoint a Receiver to replace a Receiver who has resigned or for any other reason ceased to hold office; and (l) such Receiver shall account to the court for any monies received by it and, with the approval of the court, shall be entitled to retain out of any such monies received by it such amounts in respect of its expenses (or to cover estimated future expenses) as is approved by such court. SECTION 2.7 EXPENSES. Shipowner covenants that upon the occurrence of any Event of Default that is continuing, then, upon written demand of Mortgagee, Shipowner will pay to Mortgagee the whole amount due and payable on the Obligations; and in case Shipowner shall fail to pay the same forthwith upon such demand, Mortgagee shall be entitled to recover judgment for the whole amount so due and unpaid, together with the reasonable costs and expenses of collection, including a reasonable compensation to the attorneys of Mortgagee plus any necessary advances, expenses and liabilities made or incurred by them. All monies collected by Mortgagee under this Section 2.7 shall be applied by Mortgagee in accordance with the provisions of Section 2.9 hereof. SECTION 2.8 CUMULATIVE REMEDIES. Each and every power and remedy herein given to Mortgagee shall be cumulative and shall be in addition to every other power and remedy herein given or now or hereafter existing at law, in equity, in admiralty or by statute, and each and every power and remedy whether herein given or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by Mortgagee, and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or thereafter any other power or remedy. No delay or omission by Mortgagee or by the 21 22 holder of the Obligations in the exercise of any right or power or in the pursuance of any remedy accruing upon any default or Event of Default shall impair any such right, power or remedy or be construed to be a waiver of any such default or Event of Default or to be an acquiescence therein; nor shall the acceptance by Mortgagee of any security or of any payment of or on account of any part of the Obligations maturing after any default or Event of Default or of any payment on account of any past default be construed to be a waiver of any right to take advantage of any future Event of Default or of any past Event of Default not completely cured thereby. SECTION 2.9 APPLICATION OF PROCEEDS. The proceeds of a sale of the Vessel, insurance pertaining to the Vessel, and all other sums received by Mortgagee pursuant to or under the provisions of this Mortgage or in any proceedings hereunder, including Earnings received by Mortgagee, the application of which has not otherwise been specifically provided for, shall, except as otherwise provided by law, be applied as follows: FIRST: To the payment of all reasonable expenses, including the expenses of any sale, the expenses of any retaking, attorneys' fees, court costs, and other expenses incurred by Mortgagee in the protection of its rights, powers, and privileges or the pursuance of its remedies, with interest thereon at the Default Rate; SECOND: To the payment of all amounts as required by law or otherwise at Mortgagee's sole option, to the payment of or to provide adequate indemnity against Security Interests known to Mortgagee and having or claiming priority over the lien of this Mortgage; THIRD: To the payment of the Loan and the payment of the other Obligations and all other sums evidenced by the Note or evidenced or secured hereby from time to time and not already paid pursuant to the foregoing subsection, whether due or not, owed to Mortgagee, together with interest thereon at the Default Rate; FOURTH: To the payment of all amounts secured by means of preferred mortgage or other Security Interests in and to the Vessel in favor of Mortgagee that is or are junior in priority to this Mortgage, allocated amongst such secured obligations as Mortgagee may choose, in its sole discretion, and, at Mortgagee's sole option to the payment of or to provide adequate indemnity against Security Interests known to Mortgagee and having or claiming priority over the lien of such junior preferred mortgage(s); and FIFTH: To the payment of any surplus thereafter remaining to Shipowner or to whomsoever else may be entitled thereto. SECTION 2.10 POSSESSION OF VESSEL. Until the occurrence of any Event of Default that is continuing, Shipowner shall be suffered and permitted to retain actual possession and use of the Vessel. SECTION 2.11 NO REQUIREMENT TO COMMENCE PROCEEDINGS AGAINST SHIPOWNER. Mortgagee will not need to commence any proceedings under, or enforce any Security Interest created by, any other agreement or by law before commencing proceedings under, or enforcing any Security Interest created by, this Mortgage. SECTION 2.12 SUSPENSE ACCOUNT. Mortgagee, for the purpose of claiming or proving in a 22 23 bankruptcy of Shipowner or any other person, may place any sum received or recovered from Shipowner under or by virtue of this Mortgage or any Security Interest connected with it in a separate suspense or other nominal account without applying it in satisfaction of the Obligations. ARTICLE 3 SUNDRY PROVISIONS SECTION 3.1 AMOUNT OF MORTGAGE. For purposes of filing and recording this Mortgage as required by the provisions of Chapter 313 of Title 46 of the United States Code, as amended, the total amount of this Mortgage is $84,500,000 and No/100 Dollars, plus interest, fees, expenses and performance of mortgage covenants. The discharge amount is the same as the total amount. SECTION 3.2 AMENDMENTS. No waiver, termination, amendment or other modification of any provision of this Mortgage, and no consent to any departure by Shipowner from any provision thereof, shall in any event be effective unless the same shall be in writing and signed by Mortgagee and Shipowner, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it is given; provided that no such consent, waiver, termination, amendment or other modification, unless in writing and signed by Mortgagee shall affect the rights or duties of Mortgagee under this Mortgage. SECTION 3.3 SUCCESSORS AND ASSIGNS. All covenants, promises, stipulations and agreements of Shipowner in this Mortgage shall bind Shipowner and its successors and assigns and all persons claiming by, through or under it and shall inure to the benefit of Mortgagee and its successors and permitted assigns and all persons claiming by, through or under it. Shipowner recognizes that Mortgagee may, consistent with applicable law, assign or otherwise transfer its rights under the Note and/or this Mortgage. Any such assignment or transfer shall only be made to or for the benefit of an affiliate of Mortgagee except that if, during the continuation of an Event of Default, Mortgagee shall reasonably determine that it is necessary or desirable to assign or otherwise transfer its rights under the Note and/or this Mortgage to a citizen of the United States as defined in the Shipping Act, 1916, as amended, it may do so even if such citizen is not an affiliate of Mortgagee. SECTION 3.4 REIMBURSEMENT. Shipowner shall reimburse Mortgagee on demand for all reasonable attorneys' fees the payment of which is otherwise secured hereby, and for all reasonable expenses and fees which Mortgagee may incur from time to time in providing insurance coverage, in discharging the Vessel from arrest or the like, or providing security therefor, salvage, general average and tort claim expenses, for Security Interests, for mortgage recording and duplication expenses and fees, in providing repairs, moving the Vessel and for such other matters as Shipowner is obligated herein to provide, but fails to provide, all to the extent provided for herein. Such obligation of Shipowner to reimburse Mortgagee shall be an additional indebtedness due from Shipowner and secured by this Mortgage, and shall accrue interest at the Default Rate from the date of notice that such amount is due or is unpaid. Mortgagee, though privileged to do, shall be under no obligation to Shipowner to make any such expenditures, nor shall the making thereof relieve Shipowner of any default in that respect. SECTION 3.5 NOTICES. Any notice, demand, consent, authorization, approval, instruction, waiver or other communication pursuant to the terms of this Mortgage shall only be valid if in writing and in English (unless otherwise specified) and shall be mailed by certified mail, return receipt 23 24 requested (with first class postage prepaid) or sent or delivered to each party by facsimile or courier service at the address or facsimile number set forth below, or at such other address as shall be designated by such party in a written notice to the other parties. Except as otherwise specified all notices sent by certified mail, if duly given, shall be effective three (3) "Business Days" (being a day other than Saturday, Sunday or other day on which banks are authorized or obligated to close in Chicago, Illinois or Seattle, Washington) after deposit into the mails, all notices sent by a nationally recognized courier service, if duly given, shall be effective one Business Day after delivery to such courier service, and all other notices and communications if duly given or made shall be effective upon receipt. For purposes of this clause, the addresses are as follows: If to Shipowner: OCEANIC SHIP CO. c/o American Classic Voyages Co. Two North Riverside Plaza Suite 200 Chicago, Illinois 60606 Attn: General Counsel (312) 466-6151 (fax) If to Mortgagee: HAL Antillen N.V. c/o Holland America Line-Westours Inc. 300 Elliott Ave. West Seattle, Washington 98119 Attn: General Counsel (206) 284-8332 (fax) Shipowner or Mortgagee may change their address by giving notice of such change in the manner stated above. The provisions relating to the delivery or sending of copies of notices is for convenience only and failure to send a copy of any notice shall not invalidate that notice. SECTION 3.6 AGENTS. Wherever and whenever herein any right, power or authority is granted or given to Mortgagee, such right, power or authority may be exercised in all cases by Mortgagee or such agent or agents as it may appoint, and the act or acts of such agent or agents when taken shall constitute the act of Mortgagee; provided, that any such agent shall be a citizen of the United States as defined in the Shipping Act, 1916, as amended, as that Act may require. Shipowner acknowledges that any such agent is the agent of Mortgagee entitled to act on behalf of Mortgagee. SECTION 3.7 DISCHARGE OF MORTGAGE. Mortgagee, upon payment of all principal and interest and of all sums otherwise due under the Note and this Mortgage, shall, at the expense of Shipowner, forthwith cause this Mortgage to be discharged and transfer or release to Shipowner all insurance policies and other documents relating to the Vessel. SECTION 3.8 NO LIABILITY OF LENDER OR RECEIVER. Absent gross negligence, neither Mortgagee nor any Receiver shall be obliged to check the nature or sufficiency of any payment received by it under this Mortgage or the Note or to preserve, exercise or enforce any right forming part of, or relating to, the Vessel. 24 25 SECTION 3.9 FURTHER ASSURANCES. (a) Shipowner shall execute and deliver to Mortgagee (or as it may direct) any assignment, mortgage, power of attorney, proxy or other document as Mortgagee may, in any particular case, reasonably specify, and/or shall effect any registration or notarization, give any notice or take any other step, which Mortgagee may, by notice to Shipowner, reasonably specify for any of the purposes described in subsection (b) of this Section or for any similar or related purpose. (b) The purposes referred to in subsection (a) of this Section are to: (i) validly and effectively to create the Security Interest and rights intended to be created by or pursuant to this Mortgage; (ii) create a specific mortgage or assignment of any particular asset contemplated by this Mortgage; (iii) protect the priority in any jurisdiction of any Security Interest which is created, or intended to be created, by or pursuant to this Mortgage; (iv) enable or assist Mortgagee or a Receiver to sell or otherwise deal with the Vessel, Insurances or Requisition Compensation, to transfer title to, or grant any interest or right relating to, the Vessel, Insurances or Requisition Compensation or otherwise to exercise, during the continuance of an Event of Default, any power or right which is referred to in Section 2.2; and (v) enable or assist Mortgagee to enter into any transaction to commence, defend or conduct any proceedings and/or to take any other action relating to the Vessel, the Insurances or the Requisition Compensation in any country or under the law of any country, to the extent Mortgagee is entitled to do so pursuant to the terms of this Mortgage. (c) Mortgagee may specify the terms of any document to be executed by Shipowner under this Section and those terms may include any covenants, powers and provisions consistent with this Mortgage which Mortgagee reasonably considers appropriate to protect its or a Receiver's interests. (d) Shipowner shall comply with a notice under this Section by the date reasonably specified in the notice. (e) At the same time as Shipowner delivers to Mortgagee any document executed under this Section, Shipowner shall also deliver to Mortgagee a certificate signed by the Secretary of Shipowner which shall: (i) set out the text of a resolution of Shipowner's directors specifically authorizing the execution of the document specified by Mortgagee; and (ii) state that either the resolution was duly passed at a meeting of the directors validly convened and held throughout which a quorum of directors entitled to vote on the resolution was present or that the resolution has been signed by all the directors and is valid under Shipowner's articles of incorporation or other constitutional documents. 25 26 SECTION 3.10 POWER OF ATTORNEY. For the purpose of securing Mortgagee's interest in the Vessel, Insurances and Requisition Compensation and the due and punctual performance of its obligations to Mortgagee under this Mortgage and the Note, Shipowner irrevocably and by way of security appoints Mortgagee its attorney, on behalf of Shipowner and in its name or otherwise, with full power of substitution, to execute, sign or deliver any document and do any act or thing which Shipowner is obliged to do under this Mortgage, it being agreed that such power of attorney is coupled with an interest and shall only be operative during the continuance of an Event of Default. SECTION 3.11 GOVERNING LAW. To the extent not governed by the laws of the United States, this Mortgage shall be governed by and construed in accordance with the laws of the State of Washington, without regard to its conflicts of law rules, it being the intent that the substantive laws of Washington shall always apply. Nothing in this Section shall exclude or limit any right which the Mortgagee may have with regard to the bringing of proceedings, the service of process, the recognition or enforcement of a judgment or any similar or related matter in any jurisdiction. SECTION 3.12 CONSENT TO JURISDICTION/AGENT FOR SERVICE OF PROCESS. Shipowner hereby irrevocably submits to the non-exclusive jurisdiction of any state or federal court sitting in Seattle, King County, Washington, in any action or proceeding brought to enforce or otherwise arising out of or relating to this Mortgage and irrevocably waives to the fullest extent permitted by law any objection which it may now or hereafter have to the laying of venue in any such action or proceeding in any such forum, and hereby further irrevocably waives any claim that any such forum is an inconvenient forum. Shipowner agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in any other jurisdiction by suit on the judgment or in any other manner provided by law. Nothing herein shall impair the right of Mortgagee to bring any action or proceeding against Shipowner or its property in the courts of any other jurisdiction. The Shipowner irrevocably appoints The Prentice-Hall Corporation System, Inc. for the time being presently at 1013 Centre Road, Wilmington, Delaware 19805-1297 to act as its agent to receive and accept on its behalf any process or other document relating to any proceedings in any court which are connected with this Mortgage or the Note. SECTION 3.13 WAIVER OF JURY TRIAL. EACH PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS MORTGAGE, THE NOTE OR ANY OTHER AGREEMENT ENTERED INTO IN CONNECTION THEREWITH, ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR ANY OF THE ACTIONS OF ANY PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF. SECTION 3.14 COUNTERPARTS. This Mortgage may be executed simultaneously in any number of counterparts and all such counterparts executed and delivered each as an original will constitute but one and the same instrument. SECTION 3.15 EXHIBITS. All exhibits referred to herein are attached hereto and incorporated herein by this reference. 26 27 SECTION 3.16 CAPTIONS. The captions of the articles and sections and subsections of this Mortgage are included for convenience of reference only, and shall not constitute a part of this Mortgage for any other purpose. SECTION 3.17 PREFERRED STATUS. Nothing contained herein will be construed as a waiver by Shipowner of the preferred status of this Mortgage, and any provision which would otherwise constitute such a waiver shall to such extent be of no force or effect. IN WITNESS WHEREOF, Shipowner has executed this Mortgage the ___day of October, 2000. OCEANIC SHIP CO. a Delaware Corporation By ----------------------- Its -------------------- EXHIBITS: Exhibit A - Note 27 28 STATE OF ) -------------------------- ) ss. COUNTY OF ) ------------------------- On this _____ day of October, 2000, before me, a Notary Public in and for the State of________________________________, personally appeared _________ _______________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person who executed this instrument, on oath stated that he/she was authorized to execute the instrument, and acknowledged it as the ____________________________________ of Oceanic Ship Co., to be the free and voluntary act and deed of said corporation for the uses and purposes mentioned in the instrument. IN WITNESS WHEREOF, I have hereunto set my hand and official seal this ____ day of October, 2000. ---------------------------------------------------- NOTARY PUBLIC in and for the State of --------------- residing at -------------------------------- My appointment expires ----------------------------- 28 EX-4.(II)(G)(2) 27 c58427ex4-iig2.txt $84,500,000 PROMISSORY NOTE 1 EXHIBIT 4(II)(g)(2) EXHIBIT A PROMISSORY NOTE US$84,500,000.00 Date: October 18, 2000 FOR VALUE RECEIVED, the undersigned, OCEANIC SHIP CO., a Delaware corporation (the "Maker") hereby promises to pay to the order of HAL ANTILLEN N.V., a Netherlands Antilles corporation (the "Holder") the principal amount of Eighty-Four Million Five Hundred Thousand and No/100 Dollars (US$84,500,000.00), together with interest on the unpaid principal amount thereof at a rate per annum equal from time to time to the Reference Rate (as hereafter defined) and, if default shall occur in the payment when due (whether by acceleration or otherwise) of any principal or interest amount hereunder, from the maturity of that amount until it is paid in full at a rate per annum equal to the Reference Rate plus two percent (2.0%) per annum. As used herein, "Reference Rate" means, on any date, the rate of interest publicly announced from time to time by U.S. Bank, National Association ("Bank") in Seattle, Washington, as its "reference rate" or any similar successor rate announced from time to time by Bank or its successor (the "Reference Rate"). Any change in the Reference Rate shall take effect at the opening of business on the day specified in the public announcement of a change in the Bank's reference rate or any similar successor rate announced from time to time by Bank or its successor. Notwithstanding anything herein to the contrary, interest shall not accrue at a rate in excess of the maximum rate permitted by applicable law. Holder shall provide notice to Maker of each change in the Reference Rate. Interest shall be calculated based on a 360 day year, for actual days elapsed. 1. Maker shall repay to Holder the principal amount of the loan evidenced by this Note in equal consecutive semi-annual installments commencing on March 31, 2001, and continuing on each September 30th and March 31st thereafter in an amount equal to Five Million, Seventy Thousand and No/100 Dollars ($5,070,000.00), and shall repay the balance of the principal outstanding hereunder on or before January 18, 2007. 2. Maker shall pay interest on the unpaid principal amount of this Note from the date hereof until all amounts due hereunder are fully paid, in arrears on the first business day of each calendar month, commencing on November 1, 2000, except that interest shall be payable on demand after and during the continuance of a default in the payment of any amount when due hereunder. 3. All payments of principal and of interest on this Note shall be made to Holder in United States Dollars in immediately available funds at c/o Holland America Line-Westours Inc., 300 Elliott Ave. West, Seattle, WA 98119, or at such other address as Holder shall from time to time designate. Holder may require all payments hereunder to be made by wire transfer to such account as Holder may designate. 4. Maker shall have the right to prepay this Note or any portion hereof at any time, 2 without premium or penalty. Prepayments of principal shall be applied in inverse order of maturity. 5. Payments made hereunder shall be applied: first, against fees and expenses due hereunder; second, against interest due on amounts in default, if any; third, against interest due hereunder; and fourth, against principal due hereunder. 6. Each maker, surety, guarantor and endorser of this Note expressly waives all notices, demands for payment, presentations for payment, notices of intention to accelerate the maturity, protest and notice of protest as to this Note, except for notices expressly provided for in this Note, the Preferred Ship Mortgage referred to below and any other document securing this Note, if any. 7. It is expressly provided that upon (a) default in the payment of principal hereunder, as the same shall become due and payable, or (b) default in the payment of interest hereunder, as the same shall become due and payable, which default shall continue for five (5) or more business days, the entire remaining unpaid balance of the principal and interest may, at the option of Holder, be declared to be immediately due and payable. 8. If a default shall occur in the payment when due of any amount hereunder, and this Note is placed in the hands of an attorney for collection, or suit is brought on the same, or the same is collected through bankruptcy or other judicial proceedings, then Maker agrees and promises to reimburse Holder for actual costs incurred in connection therewith, including reasonable attorney's fee, collection costs and all out-of-pocket expenses incurred by Holder. 9. Maker's obligations under this Note are secured by that certain Preferred Ship Mortgage executed and delivered on the date of this Note by Maker to Holder with respect to the United States flag vessel ms PATRIOT, Official Number 1103207 and an Assignment of Insurances executed and delivered on the date of this Note by Maker to Holder with respect to said vessel. 10. Maker will keep a register of this note wherein the name of HAL Antillen N.V., a Netherlands Antilles corporation, will be entered as the holder of the Note. Only the registered holder of the Note on a payment date shall be entitled to receive payment of principal and/or interest on the Note. A holder of the Note can transfer the right to receive payments of principal and/or interest on the Note only by providing notice of the intended transfer to the Maker and such transfer shall become effective only upon entry by the Maker of the transferee's name in the register as the holder of the Note. Any transfer shall only be made to or for the benefit of an affiliate of Holder except that if a default shall be continuing in the payment when due of any amount hereunder and Holder shall reasonably determine that it is necessary or desirable to 3 transfer its rights under this Note to a citizen of the United States as defined in the Shipping Act, 1916, as amended, it may do so even if such citizen is not an affiliate of Holder. 11. This Note has been executed and delivered in and shall be governed by and construed in accordance with the laws of the State of Washington, without regard to its conflicts of law rules, it being the intent that the substantive laws of Washington shall always apply. Maker hereby irrevocably submits to the non-exclusive jurisdiction of any state or federal court sitting in Seattle, King County, Washington, in any action or proceeding brought to enforce or otherwise arising out of or relating to this Note and irrevocably waives to the fullest extent permitted by law any objection which it may now or hereafter have to the laying of venue in any such action or proceeding in any such forum, and hereby further irrevocably waives any claim that any such forum is an inconvenient forum. NOTICE TO MAKER: ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FOREBEAR FROM COLLECTION OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW. IN WITNESS WHEREOF, Maker has executed this Note the day and year first above written. OCEANIC SHIP CO., a Delaware Corporation By /s/ JORDAN B. ALLEN ------------------------------------- Its Executive Vice President EX-10.(A)(IV)(10) 28 c58427ex10-aiv10.txt AMENDMENT #1 TO 5/1/99 CONSTRUCTION CONTRACT 1 EXHIBIT 10(a)(iv)(10) AMENDMENT "1" TO MAY 1, 1999 CONSTRUCTION CONTRACT BETWEEN COASTAL QUEEN HOLDINGS LLC AND ATLANTIC MARINE, INC. Coastal Queen Holdings, L.L.C. ("Coastal") and Atlantic Marine, Inc. ("AMI") agree to settle and resolve the following: 1. Coastal will pay AMI the amounts set forth in Paragraphs 2 and 3 below in exchange for settlement of all known or unknown Regulatory and design development changes to the Contract documents, Specifications, Guidance Drawings and/or Working Drawings, and/or all issues known or unknown concerning design of the ships through completion. 2. In payment for the above, Coastal will pay the following to AMI: $250,000 for Ship 1 within three (3) business days after this Amendment is signed and $250,000 for Ship 2 on August 1, 2000 3. It is agreed by Coastal and AMI that the revised completion date for Ship 1 is March 4, 2001 and the revised completion date for Ship 2 is June 25, 2001 ("Revised Completion Dates"). In addition to the payments in Paragraph 2, Coastal will make the balance of the payments set forth in Paragraph 1 to AMI conditioned on the following terms: A payment of $250,000 for Ship 1 if Ship 1 is delivered and the punch list for Ship 1 is completed within 30 days after March 4, 2001. This payment will be made upon the completion of the punchlist items by AMI. A payment of $250,000 for Ship 2 if Ship 2 is delivered and the punch list for Ship 2 is completed within 30 days after June 25, 2001. This payment will be made upon the completion of the punchlist items by AMI. 3.1 AMI has the 30 day punch list period to obtain Regulatory certificates for Ship 1 (except that the Incline Test which shall be performed per Specification Section 843 shall occur prior to the Revised Completion Date). If there is a configuration change to Ship 2 which requires an incline test, Coastal will allow AMI to perform that incline test up to the beginning of the Owner Outfitting Period per Section 9.1 of the Contract and obtain Regulatory certificates relating specifically to the inclining test concurrent to 30 day punch list period for Ship 2. If necessary, AMI may utilize as much of the Owner Outfitting Period as is utilized by Coastal to obtain Regulatory certificates for Ship 2 as long as such Regulatory certificates do not require physical work on Ship 2. In no event shall the obtaining of Regulatory certificates by AMI impair Coastal's ability to sail Ship 2 from AMI's dock once Coastal has completed its outfitting work. 4. AMI will earn the payment referred to in Paragraph 3 above only if the dates as specified in Paragraph 3 are met. Except as set forth below, AMI will have no claim for excusable delay (i.e. extension of time for subcontractors, suppliers, regulatory issues, design 2 development, etc.) for purposes of the Paragraph 3 payments. The only excusable delays to AMI's work for purposes of the Paragraph 3 payments are delays by Coastal in timely furnishing to AMI of Owner Furnished Materials pursuant to Section 10.2(iii) of the Contract and Owner directed Changes pursuant to Section 11.3 of the Contract. An Owner Furnished Material Schedule mutually agreed to by the parties that identifies all the delivery dates for the Owner Furnished Materials pursuant to the Project Schedule for Ship 1 is attached and will be incorporated into AMI's 5-26-2000 construction schedule. AMI and Coastal also agree that the Owner Furnished Materials Schedule for Ship 2 will be prepared by mutual agreement of the parties and will be incorporated into AMI's 5-26-2000 construction schedule for Ship 2. 5. In conformance with the Revised Completion Dates, all claims or potential claims for excusable delay to date (May 3, 2000) are withdrawn and released by AMI. 6. AMI will reasonably cooperate with Coastal or its consultant Jim Wilson on matters concerning the Project Schedule. 7. Except as stated in this amendment, the Contract is in full force. 8. Precedence. If any discrepancy, difference or conflict exists between the provisions of this Amendment and the Contract, than to the extent of such discrepancy, difference or conflict only, this Amendment shall prevail. However, in all other respects the Contract, including the Precedence provisions contained in Section 1.2, shall be in full force and effect. 9. All terms used in this Amendment shall have the meanings given in the Contract unless otherwise defined herein. 10. This Amendment may be executed in one or more counterparts, each one of which shall be an original and all together shall constitute one instrument. /s/ Jordan B. Allen /s/ Edward P. Doherty - ----------------------------------- ----------------------- For Coastal Queen Holdings, LLC For Atlantic Marine, Inc. and The Delta Queen Steamboat Co. June 13, 2000 EX-10.(A)(IV)(11) 29 c58427ex10-aiv11.txt ASSIGNMENT AND ASSUMPTION OF CONTRACT 1 10(a)(iv)(11) ASSIGNMENT AND ASSUMPTION OF CONTRACT This Assignment and Assumption of Contract is entered into as of the 25th day of September, 2000, by and between DELTA QUEEN COASTAL VOYAGES, L.L.C. (f/k/a Coastal Queen Holdings, L.L.C.), a Delaware limited liability company, ("Assignor") and CAPE MAY LIGHT, L.L.C. and CAPE COD LIGHT, L.L.C., Delaware limited liability companies (individually, "Assignee" and collectively, "Assignees"). WITNESSETH: WHEREAS, Assignor is the Owner under that certain Construction Contract for Coastal Queen Class Vessel ("Contract") dated as of May 1, 1999, as amended, by and between Assignor and Atlantic Marine, Inc., a Florida corporation, as Shipyard, for the construction of two Coastal Queen Class vessels. WHEREAS, Assignor desires to assign all of its right, title and interest in, to and under the Contract to: (i) Cape May Light, L.L.C., as Assignee, as to Hull No. 4242, known as cv Cape May Light; and (ii) Cape Cod Light, L.L.C., as Assignee, as to Hull No. 4243, known as cv Cape Cod Light; and Assignees desire to accept such assignment. NOW, THEREFORE, in consideration of the mutual covenants herein contained, and for other good and adequate consideration, the receipt and sufficiency of which are hereby acknowledged, Assignor and Assignees agree as follows: 1. Transfer of Interest. Assignor hereby sells, transfers, sets over and assigns to Cape May Light, L.L.C., as to Hull No. 4242, and to Cape Cod Light, L.L.C., as to Hull No. 4243, all of its right, title and interest in, to and under the Contract. 2. Acceptance. Assignees hereby accept said assignment, assume and agree to perform all of the undertakings, covenants and conditions of the Contract to be performed by Assignor thereunder and assume all of Assignor's obligations thereunder; provided, however that Assignor shall remain liable under the Contract. 3. Successors and Assigns. This instrument shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective heirs, personal representatives, successors and assigns. 1 2 IN WITNESS WHEREOF, the parties hereto have executed and delivered this instrument on the date and year first above written. ASSIGNOR ASSIGNEES: DELTA QUEEN COASTAL VOYAGES, CAPE MAY LIGHT, L.L.C., a Delaware L.L.C., a Delaware limited limited liability company liability company By: The Delta Queen Steamboat By: Delta Queen Coastal Voyages, Co., a Delaware corporation L.L.C., a Delaware limited and its Managing Member liability company and its Managing Member By: The Delta Queen Steamboat Co., a Delaware corporation By: /s/ Jordan B. Allen and its Managing Member ----------------------- Name: Jordan B. Allen Title: Executive Vice President By: /s/ Jordan B. Allen ----------------------- Name: Jordan B. Allen Title: Executive Vice President CAPE COD LIGHT, L.L.C., a Delaware limited liability company By: Delta Queen Coastal Voyages, a Delaware limited liability company and its Managing Member By: The Delta Queen Steamboat Co., a Delaware corporation and its Managing Member By: /s/ Jordan B. Allen ----------------------- Name: Jordan B. Allen Title: Executive Vice President 2 EX-10.(A)(IV)(12) 30 c58427ex10-aiv12.txt AMENDMENT #2 TO CONSTRUCTION CONTRACT 1 10(a)(iv)(12) AMENDMENT NO. 2 TO CONSTRUCTION CONTRACT FOR COASTAL QUEEN CLASS VESSEL THIS AMENDMENT NO. 2 is made as of October ___, 2000, by and between Atlantic Marine, Inc., a corporation organized and existing under the laws of Florida (the "Shipyard"), the party of the first part, and Cape May Light, L.L.C., a Delaware limited liability company, and Cape Cod Light, L.L.C., a Delaware limited liability company (collectively, the "Owner"), the party of the second part. RECITALS: WHEREAS, Owner will issue its United States Government Guaranteed Ship Financing Bonds, 2000 Series (the "Obligations"), in order to finance the construction of the Cape May Light, Hull No. 4242, and the Cape Cod Light, Hull No. 4243 (collectively, the "Vessels") on the closing date relating to such issuance (the "Closing Date"). WHEREAS, the United States of America, represented by the Secretary of Transportation, acting by and through the Maritime Administrator (the "Secretary"), on the Closing Date will guarantee the payment of the outstanding principal and interest on the Obligations (the "Guarantee") pursuant to Title XI of the Merchant Marine Act, 1936, as amended. WHEREAS, Owner and Shipyard, in order to induce the Secretary to issue the Guarantee, desire to amend that certain Construction Contract for Coastal Queen Class Vessel, dated May 1, 1999, between Coastal Queen Holdings, L.L.C. and Shipyard, as amended, and subsequently assigned by Coastal Queen Holdings, L.L.C. to Owner on September 25, 2000 (the "Original Agreement" or the "Contract"). WHEREAS, pursuant to the Security Agreement entered into on the date hereof between the Secretary and the Owner relating to the Guarantee, the Secretary has required the Owner to grant to the Secretary a security interest in all of the Owner's right, title and interest in and to the Vessels as paid for, and pursuant to this Amendment. WHEREAS, as additional security for the Guarantee, and in order to facilitate the financing of the Vessels, the parties hereto desire to provide additional assurances to the Secretary with respect to the property acquired by the Shipyard for purposes of construction of the Vessels. 1 2 NOW, THEREFORE, in consideration of these premises, the mutual benefit set forth herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Owner and Shipyard agree as follows: 1. Section 3.3 is hereby amended by inserting the following paragraph immediately after the last paragraph of the Subsection 3.3(e): "(f) Shipyard shall provide to Owner, at the time of the notice required by the immediately preceding paragraph, all documentation to substantiate completion of the relevant milestone event to the extent required in support of each Owner's Request for Disbursement, a form of which is attached hereto as Exhibit A, and in support of Owner's timely application for withdrawal from the proceeds of the Obligations in an amount necessary to make such payments. Within one (1) business day of receipt of such written documentation from Shipyard, Owner shall submit to the Secretary a Request for Disbursements under the Security Agreement relating to the Obligations unless the Owner disputes the data submitted by the Shipyard or requires additional information to complete the Request for Disbursement. Within a reasonable time after receipt of such Request, the parties hereto contemplate that the Secretary will approve or deny the Request for Disbursement and notify Owner promptly (together with a written explanation, in sufficient detail, of any denial). Immediately upon receipt of the Secretary's approval to such Request, the parties hereto contemplate that the Secretary will disburse the amount pursuant to the Security Agreement and instruct lender to make payment directly to Shipyard. Notwithstanding the provisions of this subsection 3.3(f), Owner remains fully and completely responsible to make payments to Shipyard within the time set forth in subsection 3.3(e) above." 2. Section 5.2 is hereby amended by deleting it in its entirety and the following inserted in lieu thereof: 1. Effective with the date of this Amendment, the Shipyard shall obtain, at its own cost and expense, and furnish certificates of copies thereof to Owner, the following policies of insurances: (a) Workers' compensation (including occupational disease) and employer's liability insurance with Maritime, In Rem and U.S. Longshoremen's and Harborworkers' Act coverage and in accordance with the applicable statutory requirements of the United States of America, with limits on the employer liability 2 3 coverage of not less than U.S.$1,000,000 for bodily injury per person, with umbrella excess liability limits of U.S.$25,000,000; (b) Comprehensive public liability, including broad form contractual liability coverage, with limits of not less than U.S.$500,000 for bodily injury per occurrence, and U.S.$500,000 for property damage per occurrence with umbrella excess liability limits of U.S.$25,000,000; and (c) Automobile liability insurance covering automobile equipment used in the performance of the work under this Contract with limits of U.S.$10,000,000. All the Shipyard insurance policies set forth in this Section 5.2.1 shall, either on the face thereof or by appropriate endorsement: (w) name (except for the policy specified herein) the Shipyard and Owner as assureds and provide that payments thereunder shall be made to the extent that their respective interests may appear, (x) provide that they shall not be cancelled or their coverage reduced, except upon thirty (30) days' prior written notice to the Shipyard and Owner (if such cancellation or reduction should be caused by the Shipyard's failure to pay any premium when due, Owner shall have the right to pay any such premium within such thirty (30) days to maintain the coverage in effect for the benefit of Owner, and Owner retains the right to be reimbursed by the Shipyard), (y) contain waiver of subrogation provisions pursuant to which the insurer waives all express or implied rights of subrogation against Owner, the Shipyard and Owner hereby waiving any rights to subrogate against each other, and (z) be maintained in full force and effect by the Shipyard from the effective date of this Amendment until the Delivery Date, the obligation to name Owner as assured and waive subrogation with respect to the policy specified herein shall be limited to those risks which are covered by the Shipyard's indemnity obligations under this Contract. 2. From the time the first material destined for inclusion as part of the Vessels becomes at risk and until the Vessels have been physically delivered to and accepted by Owner, the Vessels and all materials, outfit and equipment provided by the Owner for and to be used in the construction thereof, shall be kept fully insured under a full form Builder's Risk Policy under the latest American Institute Builder's Risk Clauses, including loss or damage caused by strikers, locked-out workmen, or persons taking part in labor disturbances, or riot or civil commotion, protection and indemnity 3 4 clauses. The amount of such insurance shall be equal to the aggregate value of the work done, including material, appurtenances, equipment and outfit delivered to the Shipyard for the Vessels at any time during the construction period, including any such items furnished by Owner. The amount of insurance, the terms of the policies and the underwriters shall at all times be reasonably satisfactory to the Shipyard, Owner and the Secretary. The Owner shall at its own cost and expense keep the Vessels fully insured under the aforementioned Builder's Risk Policy. In addition, Owner shall provide acceptable total loss only insurance covering the expenses of design and inspection, construction period interest, and the guarantee fee for the Obligations. 3. The Builder's Risk Policy shall contain the following provisions: (a) The Owner, the Shipyard and the Secretary shall be named additional assureds. (b) The policy shall provide no recourse against Shipyard and the Secretary for payment of premium. (c) At least ten (10) days' prior written notice of any cancellation or material change in the policy shall be given to the Shipyard and the Owner at the addresses provided in Section 11.2 and to the Secretary at the following address: U.S. Department of Transportation, c/o Maritime Administration, 400 Seventh Street, S.W., Washington, D.C. 20590, Attention: Chief, Division of Marine Insurance. (d) There shall be a waiver of subrogation provision pursuant to which the insurer waives all express and implied rights of subrogation against the Owner. The Shipyard and Owner hereby waive any rights to subrogate against each other. (e) The deductible or self-insured retention under the Builder's Risk Policy shall be to the account of the Shipyard at any amount to be agreed among the Shipyard, Owner and the Secretary, in any case not exceeding $100,000 per occurrence. The Shipyard shall cooperate in providing timelines of increasing values and other information Owner may require to secure coverage. 4 5 4. (a) If the Vessels or any Owner furnished equipment shall be damaged by any insured cause whatsoever prior to acceptance thereof by Owner, and such damage does not constitute an actual, compromised or a constructive total loss of the Vessels, insurance proceeds shall be applied to the repair of the item and paid in accordance with Section 2.05 of the Security Agreement, and Owner and the Shipyard shall then seek to mutually agree on new milestone payments for work which has to be redone as a result of the damage covered by the Builder's Risk Policy. (b) In the event of an actual, compromised or constructive total loss of the Vessels prior to delivery, this Contract shall automatically be deemed terminated unless the Shipyard, Owner and the Secretary elect to construct the Vessels under this Contract. Upon any such termination, the Shipyard shall retain all installment payments made pursuant to this Contract and the price for that portion of the Vessels then constructed for which an installment payment has not yet been made and all work in progress (including profit thereon to the Shipyard). Notwithstanding anything to the contrary in Section 2.05 of the Security Agreement all proceeds in excess of $100,000 per occurrence of the Builder's Risk insurance shall be paid to the Secretary for distribution to the Shipyard, the Secretary and the Owner as their interests may appear and any proceeds equal to or less than $100,000 per occurrence of the Builder's Risk insurance shall be paid to the Shipyard for distribution to the Secretary, the Shipyard and the Owner as their interests may appear; provided however, if a default exists under the Security Agreement, then all proceeds of whatever amount shall be paid to the Secretary for disbursement in accordance with Section 2.05 of the Security Agreement." 3. Section 6.7 is hereby amended by designating the existing paragraph as subsection "(f)" and inserting the following prior to the beginning of said paragraph: 5 6 "(a) The Shipyard hereby represents, warrants and covenants that no lender to the Shipyard, under any form of credit, loan or other extension of funds facility of any manner whatsoever, has or possesses any security interest, lien or other encumbrance of any nature, or has any right to any such security interest, lien or other encumbrance of any nature in, on or as to the Property described in clause (c) of this Section. (b) Provided that the Shipyard is paid all amounts owing by the Owner to the Shipyard. The Shipyard hereby represents, warrants and covenants that all Property described in clause (c) of this Section other than Owner Furnished Equipment, which it has acquired, or may at any time hereafter acquire with respect to the construction of the Vessels, whether by means of cash purchase, purchase-money transaction, conditional sale agreement, or otherwise, is and shall at all times be free of any and all security interests, liens or other encumbrances of any nature in favor of any person, which might otherwise arise in favor of any vendor or other person providing such Property. (c) For all purposes of this Contract, the "Property" shall consist of Hull Nos. 4242 and 4243 and all material, machinery and equipment which are purchased for or identified for use in the construction of said hulls, and identifiable proceeds or products thereof; provided, however, that the tools, equipment and implements of the Shipyard used in the construction of the Vessels are specifically excluded herefrom. (d) Shipyard agrees and acknowledges that Shipyard has, as contemplated by the Security Agreement dated October ___, 2000, between the Shipyard and the Secretary (the "Shipyard Security Agreement"), granted a security interest to the Secretary in the Vessels, any equipment, inventory or materials incorporated or to be incorporated therein as specified in the Shipyard Security Agreement. (e) On the Closing Date, and at the time of delivery of the Vessels, and from time to time as Owner shall submit a Request for Disbursement under the Security Agreement to the Secretary, Shipyard agrees, on behalf of itself, or any party claiming through the Shipyard, to execute certificates that are in form and substance satisfactory to the Secretary, stating there are no liens with respect to the applicable Vessels, hulls or component parts other than the lien of the Secretary pursuant to the Shipyard Security Agreement, in each case for which payment has been made or is currently due and with respect to all work that has previously been accomplished and incorporated in and made a part of the Vessels." 6 7 4. Section 6.8 is hereby amended by inserting the sentence "The Shipyard shall give Owner and the Secretary simultaneous notice of any default by Owner under this Section." At the beginning of the first paragraph prior to the first word and by adding the following paragraphs immediately after the last paragraph of the Section: "Notwithstanding anything to the contrary contained in this Contract, the Shipyard hereby grants the Secretary twenty (20) days from the receipt of the notice referred to in this Section, to cure any default under this Contract, and the Shipyard agrees to take no action to enforce its rights pursuant to this Contract, including, without limitation, its right to terminate pursuant to this Section 6.8, until the elapse of said twenty (20) days." 5. Section 8.1 is hereby amended by inserting the following paragraph after the third paragraph of the section and prior to the fourth paragraph: "Notwithstanding any provisions in this Contract, the Shipyard shall permit inspection by, supply information to and cooperate with representatives of the Secretary at the Shipyard and at such other yards of the Shipyard, its affiliates and subcontractors where parts of the Contract or subcontracts may be performed. The Shipyard acknowledges that such cooperation may include, but not be limited to, providing the Secretary (a) access to the Vessels and areas of the Shipyard where work related to the Vessels is being performed by the Shipyard, its contractors and subcontractors, at all reasonable times during normal working hours to inspect performance of the work performed hereunder, and to observe trials and other tests, (b) copies of detailed production and construction schedules and critical paths for the Vessels along with changes to such documents as they occur, and updated schedules of all Equipment and material received by or delivered to the Shipyard relating to the Vessels, (c) access to contract plans and specifications for the Vessels, (d) reasonable access to the Shipyard's production manager or supervisor, (e) information on the origination and source of materials, (f) access to progress payment and construction milestone information, and (g) simultaneous copies of all notices and correspondence required by Section 14.6. In conjunction with any such inspections by the Secretary, the Shipyard will provide access to the Owner's space at its Shipyard for the Secretary's representatives for communication, copying and access to any other facilities available to the Owner, as appropriate. The Secretary's representatives shall comply with and follow the Shipyard's safety, traffic and security rules while at the Shipyard, and shall not interfere in the Shipyard's prosecution of the work hereunder." 7 8 6. Section 10.5 is hereby amended by adding the following paragraph immediately after the last paragraph in the Section: "Shipyard and Owner shall keep records of construction costs paid by or for Owner's account and furnish the Secretary with a detailed statement of these costs, distinguishing between (i) items paid or obligated to be paid, and (ii) with respect to the hull and superstructure only the costs of American and foreign materials (including services)." 7. Notwithstanding anything to the contrary in Section 11, (a) prior written notice to the Secretary shall be given by Owner and Shipyard for (i) any changes to the Construction Contract as the result of any requirements of any classification society or any governmental agency other than those that are specified in the Specification ("Mandatory Changes"), or (ii) any changes that are not Mandatory Changes, and that the Shipyard and Owner desire to make which do not exceed, with respect to any item of the Vessels' construction, one percent (1%) of each Vessel's Contract Price and which do not, in the aggregate, cause each Vessel's Contract Price to be increased more than five percent (5%) or the delivery and completion date of each Vessel to be extended more than ten (10) days; (b) no change shall be made after the Closing Date that exceeds the five percent (5%) limit set forth in clause (a)(ii), without the Secretary's prior written consent; (c) Owner has agreed in the Security Agreement not to make any change in the general dimensions and/or characteristics of the Vessels which would diminish the capacity of the Vessels to perform as originally intended by this Contract without the Secretary's prior written consent, and hereby further agrees not to present or propose to the Shipyard any such change without receiving such prior written consent from the Secretary. No payment for any change requiring prior written approval from the Secretary shall be made with proceeds from the escrow fund until such prior written consent shall have been received. 8. Section 12.1 is hereby amended by inserting the following paragraphs after the last paragraph thereof: The Shipyard agrees to, and does fully subordinate to the rights of the Secretary all liens and security rights and remedies to enforce such rights which the Shipyard has or may have with respect to any work, materials and components, incorporated in, or incorporated in the hulls and in each Vessel (the "Equipment") to the extent that (a) the Owner has paid Shipyard for the Equipment or (b)(i) such work is performed on the hull of each Vessel, (ii) such materials are installed in the hull of each Vessel, or (iii) such components are fabricated and installed in the hull of each Vessel, whether or not such work materials or components have been paid for by the Owner. For the purposes of this Agreement, Equipment shall be deemed "paid" if ordered and received by the Shipyard prior to the Owner's latest payment in accordance with Appendix One, Progress Payment Milestones. 8 9 In the event that prior to delivery of the Vessels, following the occurrence or during the continuance of any default by Owner under any agreements with the Secretary, including but not limited to the Security Agreement (the "Secretary's Documents"), or by the Shipyard under the Contract, the Secretary shall have the sole right to foreclose its lien and to sell the Equipment. Any proceeds the Secretary receives from the sale of the Equipment, shall be distributed promptly between the Shipyard and the Secretary on a Pro Rata Basis (as defined below) based on the Amount Due (as defined below) to the Shipyard and the Secretary. For the purposes of this section, the "Amount Due" to the Shipyard shall include all progress payments then due to the Shipyard for materials purchased or work performed, provided, however, if the Shipyard is in material default under the Contract as amended and Owner is not in material default, such Amount Due to the Shipyard shall be zero. For the purposes of this section, the Amounts Due to the Secretary shall include all amounts secured by the Secretary's Documents. For the purposes of this section, the share to be distributed to a party under the Pro Rata Basis shall be the amount realized from the sale of the Equipment times a fraction equal to the Amount Due that party divided by the sum of the Amount Due both parties. In the event of a Owner default and an enforcement of the Secretary's Documents, the Secretary shall use reasonable efforts to expedite the enforcement and foreclosure process for the enforcement of the Secretary's Documents. Prior to the delivery of the Vessels and acceptance thereof by the Owner in accordance with the Contract, the Shipyard agrees (i) to provide to the Secretary searches and copies of filings with respect to UCC filings against the Shipyard, and (ii) to provide the Secretary with releases or subordinations of any security interest, lien or other encumbrance of any nature, held or claimed by any financing party, vendor or provider referred to in Subsections 12.1 hereof (and any such release or subordination shall be in form and substance satisfactory to the Secretary)." 9. Article 14 is hereby amended by adding the following new Section 14.14 immediately after Section 14.13: "(a) Distinct Obligations The Shipyard hereby agrees and acknowledges that the obligations of Owner under this Contract with regard to the Vessels are separate, distinct and independent of any other obligation or agreement of Owner to or with 9 10 the Shipyard in connection with any other transaction, and that a default by Owner under such other obligation or agreement in connection with any other such transaction shall not in any way affect the obligations of the Shipyard under this Contract with regard to the Vessels or permit the Shipyard to exercise any right of set-off or other remedy (all of which the Shipyard expressly waives and agrees not to assert with respect to this Contract) which could materially adversely affect this Contract, the Vessels, or the construction thereof. (b) Shipyard Plans Upon the delivery of the Vessels, or earlier if feasible, upon the Secretary's written request, the Shipyard and Owner agree to submit to the Secretary one set of Shipyard plans, in form and substance satisfactory to the Secretary, for the Vessels as built. 10. Section 14.5 is hereby amended by inserting the following after the last paragraph thereof: "Notwithstanding anything in this Contract to the contrary, Owner may not terminate, cancel or assign this Contract without the prior written consent of the Secretary." 11. Section 14.6 is hereby amended by: (i) adding the following paragraph immediately after the first paragraph of the Section: "All notices required after the date of this Amendment under Sections 6.1, 6.3, 6.6, 6.7, 6.8, 7.2 (except the Guidance Drawings and Working Drawings or notices relating thereto), 7.3 (except the maker's list (except where such list contains information relating to foreign materials) or notices relating thereto), 8.2, 9.1, 10.1, 10.2, 10.4 (except the minutes of progress meetings or notices thereto), 11.2, 11.3, 11.4 and 14.9 shall be simultaneously copied to the Secretary." (ii) adding the following notice information immediately after the Shipyard notice information contained therein: "(c) To the Secretary: United States Maritime Administration 400 Seventh Street, S.W. 10 11 Washington, D.C. 20590 Attention: Office of Ship Financing" 12. Except for the changes set forth in this Amendment, all other terms and conditions of the Original Agreement, shall remain in full force and effect. 13. Counterparts. This Amendment may be executed in one or more counterparts. All such counterparts shall be deemed to be originals and shall together constitute but one and the same agreement. 11 12 IN WITNESS WHEREOF, the parties hereto have executed this Amendment. No. 2 to Construction Contract for Coastal Queen Class Vessel as of the day and year first above written. ATLANTIC MARINE, INC., Shipyard /s/ William F. Clifford By: -------------------------- William F. Clifford Vice President 13 IN WITNESS WHEREOF, the parties hereto have executed this Amendment. No. 2 to Construction Contract for Coastal Queen Class Vessel as of the day and year first above written. CAPE MAY LIGHT, L.L.C., By: DELTA QUEEN COASTAL VOYAGES, L.L.C., its Managing Member By: THE DELTA QUEEN STEAMBOAT CO., its Managing Member Owner By: /s/ JORDAN B. ALLEN --------------------------- Jordan B. Allen Executive Vice President CAPE COD LIGHT, L.L.C., By: DELTA QUEEN COASTAL VOYAGES, L.L.C., its Managing Member By: THE DELTA QUEEN STEAMBOAT CO., its Managing Member Owner By: /s/ JORDAN B. ALLEN --------------------------- Jordan B. Allen Executive Vice President 14 CONSENTED TO: UNITED STATES OF AMERICA, SECRETARY OF TRANSPORTATION MARITIME ADMINISTRATOR By /s/ JOEL C. RICHARD ---------------------------- Its Secretary ATTEST: By /s/ Sarah J. Washington ---------------------------------------------- Its Assistant Secretary 15 EXHIBIT A [FORM OF REQUEST FOR DISBURSEMENT] EX-27 31 c58427ex27.txt FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-2000 SEP-30-2000 91,661 3,877 2,553 0 3,829 109,447 292,240 103,959 516,139 166,943 70,026 100,000 0 210 178,960 516,139 0 159,718 0 102,272 0 0 1,049 (2,031) (751) (4,076) 0 0 0 (4,076) (0.20) (0.20) Includes restricted short-term investments of $43,889.
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