-----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, M0aItwNO5t/Vz7mMim+VajJAp9ejjJX3urhOKojqCkMl2REV2n54sAxCmKjPOY8r CkA5jQQSPAIaTAbN3VqoXg== 0000950144-00-004542.txt : 20000405 0000950144-00-004542.hdr.sgml : 20000405 ACCESSION NUMBER: 0000950144-00-004542 CONFORMED SUBMISSION TYPE: 20-F PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000404 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROYAL CARIBBEAN CRUISES LTD CENTRAL INDEX KEY: 0000884887 STANDARD INDUSTRIAL CLASSIFICATION: WATER TRANSPORTATION [4400] IRS NUMBER: 980081645 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 20-F SEC ACT: SEC FILE NUMBER: 001-11884 FILM NUMBER: 593372 BUSINESS ADDRESS: STREET 1: 1050 CARIBBEAN WAY CITY: MIAMI STATE: FL ZIP: 33132 BUSINESS PHONE: 3055396000 MAIL ADDRESS: STREET 1: 1050 CARIBBEAN WAY CITY: MIAMI STATE: FL ZIP: 33132 20-F 1 ROYAL CARIBBEAN CRUISES LTD. 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 20-F (MARK ONE) [ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 1-11884 ROYAL CARIBBEAN CRUISES LTD. (Exact name of Registrant as specified in its charter) REPUBLIC OF LIBERIA (Jurisdiction of incorporation or organization) 1050 CARIBBEAN WAY, MIAMI, FLORIDA 33132 (Address of principal executive offices) Securities registered or to be registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED ------------------- ----------------------------------------- Common Stock, par value $.01 per share New York Stock Exchange $3.625 Series A Convertible Preferred Stock New York Stock Exchange par value $.01 per share
Securities registered or to be registered pursuant to Section 12(g) of the Act: None Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report: As of December 31, 1998, the Registrant had outstanding 168,945,222 shares of common stock, par value $.01 per share. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark which financial statement item the registrant has elected to follow: Item 17 [ ] Item 18 [X] - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 ROYAL CARIBBEAN CRUISES LTD. INDEX TO REPORT ON FORM 20-F
PAGE ---- PART I. Item 1. Description of Business..................................... 1 Item 2. Description of Property..................................... 13 Item 3. Legal Proceedings........................................... 13 Item 4. Control of Registrant....................................... 14 Item 5. Nature of Trading Market.................................... 15 Item 6. Exchange Controls and Other Limitations Affecting Security Holders..................................................... 15 Item 7. Taxation.................................................... 16 Item 8. Selected Financial Data..................................... 16 Item 9. Management's Discussion and Analysis of Financial Condition and Results of Operations....................................... 16 Item 9A. Quantitative and Qualitative Disclosures About Market Risk........................................................ 22 Item 10. Directors and Officers of the Registrant.................... 22 Item 11. Compensation of Directors and Officers...................... 25 Item 12. Options to Purchase Securities From Registrant or Subsidiaries................................................ 26 Item 13. Interest of Management in Certain Transactions.............. 27 PART II. Item 14. Description of Securities to be Registered.................. 27 PART III. Item 15. Defaults Upon Senior Securities............................. 27 Item 16. Changes in Securities and Changes in Security for Registered Securities.................................................. 27 PART IV. Item 17. Financial Statements........................................ 27 Item 18. Financial Statements........................................ 27 Item 19. Financial Statements and Exhibits........................... 27 SIGNATURES............................................................. 28
3 PART I As used in this document, the terms "Royal Caribbean", "we", "our" and "us" refer to Royal Caribbean Cruises Ltd., the term "Celebrity" refers to Celebrity Cruise Lines Inc. and the terms "Royal Caribbean International" and "Celebrity Cruises" refer to our two cruise brands. ITEM 1. DESCRIPTION OF BUSINESS GENERAL We are the world's second largest cruise company with 17 cruise ships and a total of 32,900 berths. Our ships operate worldwide with a selection of itineraries that call on approximately 200 destinations. We operate two brands, Royal Caribbean International and Celebrity Cruises. We acquired Celebrity in July 1997. Both brands offer a wide array of shipboard activities, services and amenities, including swimming pools, sun decks, beauty salons, exercise and massage facilities, gaming facilities, lounges, bars, show-time entertainment, retail shopping and cinemas. The Royal Caribbean International Brand Royal Caribbean International serves the volume cruise vacation market which we categorize as the contemporary and premium segments. The brand operates 12 cruise ships with an aggregate of 24,700 berths, offering various cruise itineraries that range from three to 21 nights and call on approximately 160 destinations. Royal Caribbean International's strategy is to attract an array of vacationing consumers in the contemporary segment of the volume market by providing a wide variety of itineraries and cruise lengths with multiple options for onboard dining, entertainment, and other onboard activities. Additionally, we offer a variety of shore execursions at each port of call. We believe that the variety and quality of Royal Caribbean International's product offering represents excellent value to consumers, especially to couples and families traveling with children. Because of the brand's extensive product offerings, we believe Royal Caribbean International is well positioned to attract new consumers to the cruise industry and continue to bring past guests back for their next vacation. While the brand is positioned at the upper end of the contemporary segment, we believe that Royal Caribbean International's quality enables it to attract consumers from the premium segment as well, thereby achieving the broadest market coverage of any of the major brands in the cruise industry. The Celebrity Cruises Brand Celebrity Cruises primarily serves the premium segment of the cruise vacation market. Celebrity Cruises operates five cruise ships with an aggregate of 8,200 berths. Celebrity Cruises offers various cruise itineraries that range from five to 15 nights and call on approximately 100 destinations. Celebrity Cruises' strategy is to attract consumers who want an enhanced cruise vacation in terms of modern vessels, gourmet dining and service, extensive and luxurious spa facilities, large staterooms and a high staff-to-guest ratio. Celebrity Cruises is expanding its fleet to provide an increasing variety of itineraries and cruise lengths and therefore has a higher proportion of its fleet deployment in seasonal markets (i.e.Alaska, Bermuda, Europe and Trans-Canal) than does the Royal Caribbean International brand. These are hallmarks of the premium cruise vacation market, which is Celebrity Cruises' primary target. Celebrity Cruises also attracts consumers from the contemporary and luxury cruise categories. INDUSTRY Since 1970, cruising has been one of the fastest growing sectors of the vacation market, as the number of North American guests has grown to an estimated 5.9 million in 1999 from 0.5 million in 1970, a compound annual growth rate of approximately 8.9% according to Cruise Lines International Association. We have 1 4 capitalized on the increasing popularity of cruises through an extensive fleet expansion program. Our revenues increased at a compound annual growth rate of approximately 16% between 1989 and 1999. According to our estimates, the North American market was served by an estimated 124 cruise ships with an aggregate capacity of approximately 100,650 berths at the end of 1994. The number of berths in the industry is estimated to have increased to approximately 138,000 berths on 127 ships by the end of 1999. The net increase in capacity over the last five years is inclusive of approximately 33 ships with an aggregate capacity of approximately 20,000 berths that have either been retired or moved out of the North American market. There are a number of cruise ships on order with a total estimated capacity of 72,500 berths which will be placed in service between 2000 and 2004. Although we cannot predict the rate at which future retirements will occur, we believe ship retirements will continue due to competitive pressures and the age of the vessels. The following table details the growth in the North American cruise market of both guests and weighted average berths over the past five years:
WEIGHTED AVERAGE NORTH SUPPLY OF BERTHS AMERICAN MARKETED IN CRUISE NORTH YEAR GUESTS(1) AMERICA(2) - ---- --------- ---------------- 1995........................................................ 4,378,000 103,313 1996........................................................ 4,659,000 105,586 1997........................................................ 5,051,000 109,257 1998........................................................ 5,428,000 118,747 1999........................................................ 5,894,000 130,152
- --------------- (1) Source: Cruise Lines International Association based on guests carried for at least three consecutive nights. (2) Source: Our estimates. The following table details the total number of worldwide guests carried on our ships for at least three consecutive nights:
GUESTS CARRIED ON OUR PERCENTAGE YEAR SHIPS(1) CHANGE - ---- ---------- ---------- 1995........................................................ 1,058,126 0.6% 1996........................................................ 1,245,696 17.7 1997........................................................ 1,633,457 31.1 1998........................................................ 1,841,152 12.7 1999........................................................ 1,704,034 (7.4)
- --------------- (1) 1995 -- 1997 are pro forma to include Celebrity. As shown in the tables above, the North American cruise market experienced growth between 1998 and 1999 in both the total number of cruise guests and the number of weighted average berths. Over the same time period, while we maintained approximately the same occupancy levels, the number of guests carried on our ships decreased primarily as a result of an increase in the average lengths of our itineraries and a temporary reduction in capacity. Cruise lines compete for consumers' disposable leisure time dollars with other vacation alternatives such as land-based resort hotels and sightseeing destinations, and public demand for such activities is influenced by general economic conditions. We believe that cruise guests currently represent only a small share of the vacation market and that a significant portion of cruise guests carried are "first-time cruisers." Our ships operate worldwide and call on destinations in Alaska, Australia, the Bahamas, Bermuda, Canada, the Caribbean, Europe, the Far East, Hawaii, Mexico, New England, the Panama Canal, Scandina- 2 5 via and South America. Competition for cruise guests in all of these geographic areas is vigorous. In most of these areas, we compete with cruise ships owned by other international operators. We compete with a number of cruise lines; however, our principal competitors are Carnival Cruise Line, Holland America Line, Norwegian Cruise Line and Princess Cruises. We compete principally on the basis of quality of service, variety of itineraries and price. OPERATING STRATEGIES Our principal operating strategies are to: - build the awareness and market penetration of both brands, - continue to expand our fleet with state-of-the-art cruise ships, - broaden our itineraries worldwide, - maintain our competitive position with respect to the quality and innovation of our onboard product, - further expand our international guest sourcing, - utilize sophisticated yield management systems (revenue optimization per berth), - further improve our technological capabilities and - maintain strong relationships with travel agencies, the principal industry distribution system. Brand Awareness Our strategy is to continue to broaden the recognition of both the Royal Caribbean International brand and the Celebrity Cruises brand in the cruise vacation marketplace. Each brand has a distinct identity and marketing focus but utilizes shared infrastructure resources. Royal Caribbean International has positioned itself in the contemporary and premium segments of the cruise vacation market and focuses on providing multiple choices to its guests through a variety of itineraries, accommodations, dining options, ship activities and shore excursions. Hallmarks of the brand include friendly and engaging service, modern ships, family programs, entertainment, health and fitness and activities designed for guests of all ages. Celebrity Cruises primarily serves the premium segment of the cruise vacation market. The brand is recognized for its gourmet dining, impeccable service, large staterooms, a high staff-to-guest ratio and luxurious spa facilities. In 1998 and 1999, Berlitz rated Celebrity Cruises the highest rated premium cruise line in the large vessel category (over 1,000 berths). Fleet Expansion Currently, our combined fleet has an average age of approximately five years, which we believe is the youngest of any major cruise company. Based on the ships currently on order, our year-end berth capacity is expected to increase 69.3% to 55,700 berths between 1999 and 2004. Our increased average ship size and number of available berths have enabled us to achieve certain economies of scale. Larger ships allow us to transport more guests than smaller ships without a corresponding increase in certain operating expenses. This increase in fleet size also provides a larger revenue base to absorb our marketing, selling and administrative expenses. Royal Caribbean International Founded in 1968, Royal Caribbean International was the first cruise line to design ships specially for warm water year round cruising. Royal Caribbean International operated a modern fleet in the 1970's and early 1980's, establishing a reputation for high quality. Between 1988 and 1992, the brand tripled its capacity by embarking on its first major capital expansion program. 3 6 Royal Caribbean International committed to its second capital expansion program with orders for six Vision-class vessels, ranging in size from 1,800 to 2,000 berths, for delivery from 1995 through 1998. During this same period, Royal Caribbean International sold four of its original vessels because these ships were older in age and design and no longer consistent with its image and marketing strategy. Each Vision-class ship features a seven-deck atrium with glass elevators, skylights and glass walls, a pool and entertainment complex covered by a moveable glass roof, hundreds of cabins with verandahs, a two-deck main dining room, a state-of-the-art show theater, a glass-encased indoor/outdoor cafe and a shopping mall. Royal Caribbean International took delivery of Voyager of the Seas, the first of the Voyager-class vessels, in October 1999. The Voyager-class vessels are the largest and most innovative passenger cruise ships ever built. Each ship is approximately 140,000 gross tons with 3,100 berths. This new class of vessels is designed to provide more diverse vacation options for families and for those seeking active sports and entertainment alternatives during their vacation experience. Each Voyager-class ship has a variety of unique features: the cruise industry's first horizontal atrium (which is four decks tall, longer than a football field and provides entertainment, shopping and dining experiences), recreational activities such as rock climbing, ice skating, miniature golf and full court basketball, enhanced staterooms, expanded dining options and a variety of intimate spaces. Royal Caribbean International currently has two additional Voyager-class vessels on order. The two ships are scheduled for delivery in the third quarter of 2000 and first quarter of 2002. We have signed a letter of intent with Kvaerner Masa-Yards to build the fourth and fifth Voyager-class vessels for the Royal Caribbean International fleet with delivery dates scheduled for 2002 and 2003. The letter of intent is subject to the fulfillment of certain conditions, such as financing by the shipyard. Royal Caribbean International also has four Vantage-class vessels on order and options to purchase two additional vessels. The four ships on order are scheduled for delivery in the first quarter of 2001, second quarter of 2002, second quarter of 2003 and second quarter of 2004. The delivery dates for the two vessels on option are in the second quarters of 2005 and 2006. The Vantage-class is a progression from the brand's Vision-class series and will have approximately 2,100 berths. CELEBRITY CRUISES Celebrity Cruises was founded in 1990 and operated three ships between 1992 and 1995. Between 1995 and 1997, Celebrity Cruises undertook its first capital expansion program, adding three Century-class vessels which range in size from 1,750 to 1,850 berths and disposing of one of its original three vessels. Celebrity Cruises has on order four Millennium-class vessels which will have 2,000 berths each and are scheduled for delivery in the second quarter 2000, first quarter 2001, third quarter 2001 and second quarter 2002. With the addition of the four Millennium-class vessels, Celebrity's capacity will nearly double, from 8,200 berths in 1999 to 16,200 berths by the end of 2002. The Millennium-class ships are a progression from the Century-class vessels, which have been widely accepted in the premium segment of the marketplace. This new class of vessels will build on the brand's primary strengths, including gourmet dining, spacious staterooms and suites complete with verandahs, luxurious spa facilities and impeccable service. On the Millennium-class ships, an entire resort deck is dedicated to health, fitness and the rejuvenating powers of water. Celebrity Cruises' Aqua Spa(SM) is the largest, most luxurious spa afloat and offers a variety of features, including a large hydropool with neck massage and body jets. Guests can relax in the music library, Notes, smoke cigars at Michael's Club or stop by The Platinum Club for champagne and caviar. Worldwide Itineraries Our ships operate worldwide with a selection of itineraries that call on approximately 200 destinations. New ships allow us to expand into new destinations, itineraries and markets. Royal Caribbean International offers the Royal Journeys(SM) program which provides global cruise itineraries spanning four continents. For the second year in a row, we are deploying a Celebrity Cruises vessel to the European market. Celebrity Cruises is also introducing Celebrity Voyages(SM), which offers 10 to 15-night itineraries throughout the Caribbean and 4 7 South America beginning in November 2000. In addition, we are increasing our capacity in the short cruise market in 2000 by establishing a Royal Caribbean International vessel year-round in Port Canaveral to provide 3 and 4-night Bahamas cruises. Product Innovation We recognize the need for new and innovative onboard products and experiences for our guests, which we develop based on guest feedback, crew suggestions and competitive product reviews. Accordingly, we continue to invest in design innovations on new ships and additional product offerings on our existing fleet. Expanded dining options, recreational activities such as rock climbing and ice skating and the latest technology such as our Internet Cafe and interactive TV are among the services currently offered. International Guests International guests continue to provide an increasing share of our growth. International guests have grown from approximately 7% of total guests in 1991 to approximately 17% of total guests in 1999. One of our strategies is to use fleet deployment and expanded itineraries to increase our guest sourcing outside North America. Over the past two years, we have increased our investment in information technology spending and increased our international advertising to enhance brand awareness worldwide. We carry out our international sales effort through our sales offices located in London, Frankfurt, Oslo, Genoa and Paris, and a network of 38 independent international representatives located throughout the world. We are also able to accept bookings in various currencies. Revenue Management We continue to develop more sophisticated pricing and revenue management programs to maximize our revenue and occupancy by projecting the demand for our cruises in various guest markets and, based on certain variables, directing our marketing efforts toward such markets. In addition to projecting demand, we believe these programs will enable us to react quickly to changes in market conditions. Technological Development We continue to invest heavily in information technology to support our corporate infrastructure and guest and travel-trade relations. We now have fully automated our pierside embarkation process. We have developed a corporate shoreside intranet as well as electronic ship to shore communication tools to improve our internal productivity. Both Royal Caribbean International and Celebrity Cruises have extensive websites, providing access to millions of Internet users throughout the world. We also have begun installing interactive television in guests' staterooms, enabling them to shop for shore excursions, select a dinner wine and monitor their onboard accounts. Another innovation, Royal Caribbean Online(SM), allows guests unprecedented access to the Internet and their e-mail. Travel Agency Support Essentially all of the bookings for our ships are made by independent travel agencies and we are committed to supporting the travel agency community. We maintain a large sales support organization including a district sales team of approximately 110 members that supports both brands in North America. We were the first cruise company to develop an automated booking system, Cruisematch 2000(TM). This automated reservations system allows travel agents direct access to our computer reservation system to improve ease of bookings. More than 30,000 independent travel agencies worldwide can book cruises for both brands using Cruisematch 2000(TM). We also have a desktop publishing system, Cruisewriter(sm), that allows travel agents to customize marketing materials for their clients. Our new Customer Service Center uses state-of-the-art technology to help travel agents resolve booking and billing issues before guests sail. We operate two reservation call centers, one in Miami, Florida and the other in Wichita, Kansas, thereby offering flexibility and extended hours of operations. 5 8 SALES, MARKETING AND GUEST SERVICES In addition to our large sales support organization, we believe that maintaining personal contact with travel agency owners, managers and front-line retail agents is crucial to retaining travel agency loyalty. We augment this type of contact with an extensive program of seminars, CD-ROM training tools and Internet updates designed to familiarize travel agents with the cruise industry and the marketing of cruises. Royal Caribbean International has a comprehensive marketing program with an emphasis on building consumer preference using the tag line, Like No Vacation on Earth(SM). Through its advertising, Royal Caribbean International positions itself as a provider of high quality, excellent value, all-inclusive cruise vacations. Royal Caribbean International's marketing strategy focuses on educating and enticing non-cruisers to the brand, while continuing to invite past guests to sail again. Royal Caribbean International's current television campaign, using the popular "Lust for Life" music, appeals to a broad demographic of consumers who have an interest in a vacation that allows them to experience its innovative ships, while seeing the world and choosing from exciting onboard and destination activities. Celebrity Cruises pursues a comprehensive marketing program with a combined emphasis on consumer and trade markets. Celebrity is currently developing a new advertising campaign (e.g. television, magazine, newspaper) which is expected to be launched during the second quarter of 2000. The campaign will focus on increasing the level and depth of consumer and trade awareness and knowledge of the Celebrity Cruises product. We believe that Celebrity Cruises represents enhanced value to the premium segment based on elements such as its gourmet dining experience, staff-to-guest ratio, cabin size, museum quality artwork, technology, AquaSpa(SM) packages and its modern fleet of ships, all of which have been built in the 1990's. We offer to handle travel aspects related to guest reservations and transportation. Arranging guest air transportation is one of our important areas of operation. We have developed a new technology, "EZ-Book," which enables an automated process of booking air at the lowest costs and preferred routing. We maintain a comprehensive relationship with many of the major airlines ranging from fare negotiation and space handling to baggage transfer. 6 9 OPERATIONS Cruise Ships and Itineraries We operate 17 ships, under two brands, worldwide with a selection of itineraries ranging from three to 21 nights that call on approximately 200 destinations. The following table represents summary information concerning our ships and their areas of operation based on 2000 itineraries (subject to change):
YEAR VESSEL ENTERED SERVICE BERTHS(1) PRIMARY AREAS OF OPERATION --------------- --------- ------------------------------- ROYAL CARIBBEAN INTERNATIONAL: Explorer of the Seas(2)............ 2000 3,100 Eastern Caribbean Voyager of the Seas................ 1999 3,100 Western Caribbean Vision of the Seas................. 1998 2,000 Panama Canal, Hawaii, Alaska, Pacific Northwest Enchantment of the Seas............ 1997 1,950 Eastern & Western Caribbean Rhapsody of the Seas............... 1997 2,000 Alaska, Mexico, Hawaii Grandeur of the Seas............... 1996 1,950 Eastern & Southern Caribbean Splendour of the Seas.............. 1996 1,800 Europe, Caribbean, Canada/New England, South America Legend of the Seas................. 1995 1,800 Europe, Far East, Australia Majesty of the Seas................ 1992 2,350 Southern Caribbean, Bahamas Monarch of the Seas................ 1991 2,350 Southern Caribbean Viking Serenade(3)................. 1982/1991 1,500 Mexican Baja Nordic Empress..................... 1990 1,600 Southern Caribbean, Bermuda Sovereign of the Seas.............. 1988 2,250 Bahamas CELEBRITY CRUISES: Millennium(4)...................... 2000 2,000 Europe, Eastern & Western Caribbean Mercury............................ 1997 1,850 Caribbean, Alaska, Panama Canal, South America Galaxy............................. 1996 1,850 Southern Caribbean, Alaska Century............................ 1995 1,750 Eastern & Western Caribbean Zenith............................. 1992 1,350 Panama Canal, Bermuda, Caribbean Horizon............................ 1990 1,350 Caribbean, Bermuda
- --------------- (1) Based on double occupancy per cabin. (2) Explorer of the Seas is expected to enter service in the fourth quarter of 2000. (3) Indicates year placed in service and year redeployed after conversion to expand capacity. (4) Millennium is expected to enter service in the second quarter of 2000. Currently, the combined fleets of Royal Caribbean International and Celebrity Cruises have an average age of approximately five years, which we believe is the youngest of any major cruise company. 7 10 New Vessels We have 10 ships on order as follows:
EXPECTED VESSEL DELIVERY DATES BERTHS(1) - ------ -------------------- --------- ROYAL CARIBBEAN INTERNATIONAL: Voyager-class Explorer of the Seas(2)................................ 3rd Quarter 2000 3,100 Adventure of the Seas.................................. 1st Quarter 2002 3,100 Vantage-class Radiance of the Seas................................... 1st Quarter 2001 2,100 Brilliance of the Seas................................. 2nd Quarter 2002 2,100 Unnamed................................................ 2nd Quarter 2003 2,100 Unnamed................................................ 2nd Quarter 2004 2,100 CELEBRITY CRUISES: Millennium-class Millennium(2).......................................... 2nd Quarter 2000 2,000 Infinity............................................... 1st Quarter 2001 2,000 Unnamed................................................ 3rd Quarter 2001 2,000 Unnamed................................................ 2nd Quarter 2002 2,000
- --------------- (1) Based on double occupancy per cabin. (2) Included in table on prior page -- Cruise Ships and Itineraries. The Voyager-class vessels are being built in Turku, Finland by Kvaerner-Masa Yards, the Vantage-class vessels are being built in Papenburg, Germany by Meyer Werft, and the Millennium-class vessels are being built by Chantiers de l'Atlantique in St. Nazaire, France. These three yards have built the majority of the vessels in both the Royal Caribbean International and Celebrity Cruises fleets. Shipboard Activities and Shipboard Revenues Both brands offer modern fleets with a wide array of shipboard activities, services and amenities including swimming pools, sun decks, spa facilities which include massage and exercise facilities, beauty salons, gaming facilities (which operate while the ships are at sea), lounges, bars, Las Vegas-style entertainment, retail shopping, libraries, cinemas, conference centers and shore excursions at each port of call. While many shipboard activities are included in the base price of a cruise, additional revenues are realized from gaming, the sale of alcoholic and other beverages, the sale of gift shop items and shore excursions, photography and spa services. In addition, both Royal Caribbean International and Celebrity Cruises offer a catalogue gift service to provide travel agents and others with the opportunity to purchase "bon voyage" gifts. Private Destinations Royal Caribbean International operates two private destinations: CocoCay, an island we own which is known as Little Stirrup Cay and is located in the Bahamas; and Labadee, a secluded peninsula which we lease and is located on the north coast of Haiti. The facilities at CocoCay and Labadee include a variety of watersports activities, refreshment bars, artisan markets and picnic facilities. Seasonality Our revenues are moderately seasonal, due to variations in rates and occupancy percentages. 8 11 Guests and Capacity The following table sets forth the aggregate number of guests carried and the number of guests carried expressed as a percentage of the total capacity of our ships:
YEAR ENDED DECEMBER 31, --------------------------------- 1999 1998 1997 --------- --------- --------- Number of Guests Carried.............................. 1,704,034 1,841,152 1,465,450 Percentage of Total Capacity.......................... 104.7% 105.2% 104.2%
In accordance with cruise industry practice, total capacity is determined based on double occupancy per cabin even though some cabins accommodate three or four guests; accordingly, a percentage in excess of 100% indicates that more than two guests occupied some cabins. Cruise Pricing Our cruise prices include a wide variety of activities and amenities, including all meals and entertainment. Prices vary depending on the destination, cruise length, cabin category selected and the time of year the voyage takes place. Additionally, we offer air transportation as a service for our guests that elect to utilize our air program. Our air transportation prices vary by gateway and destination and are available from cities in the United States, Canada and Europe. Furthermore, we sell trip cancellation insurance which provides guests with insurance coverage for trip cancellation, medical protection and baggage protection. SUPPLIERS Our largest purchases are for airfare, food and related items, advertising, diesel fuel, hotel supplies and products related to guest accommodations. Most of the supplies we require are available from numerous sources at competitive prices. Our largest operating cost is air transportation for our guests. None of our suppliers provided goods or services in excess of 10% of our revenues in 1999. INSURANCE We maintain an aggregate of approximately $7.0 billion of insurance on the hull and machinery of our ships, which includes additional coverage for disbursements, earnings and increased value, which are maintained in amounts related to the value of each vessel. The coverage for each of the hull policies is maintained with syndicates of insurance underwriters from the British, Scandinavian, United States and other international insurance markets. Liability coverage for shipowners, commonly referred to as protection and indemnity insurance, is available through a worldwide network of mutual insurance associations. Each of these associations participates in and is subject to rules issued by the International Group of Protection and Indemnity Associations. We maintain protection and indemnity insurance on each of our ships through either Assuranceforeningen GARD or the United Kingdom Mutual Steam Ship Assurance Association (Bermuda Limited). We maintain war risk insurance on each vessel through a Norwegian war risk insurance organization in an amount equal to the total insured hull value. This coverage includes physical damage to the vessel and protection and indemnity risks for which coverage would be excluded by reason of war exclusion clauses in the hull policies or rules of the indemnity insurance organizations. We also maintain a form of business interruption insurance with our insurance underwriters in the event that a vessel is unable to operate during scheduled cruise periods due to loss or damage to the vessel arising from certain covered events which last more than a specified period of time. Insurance coverage is also maintained for certain events which would result in a delayed delivery of our contracted new vessels, which we normally place starting approximately two years prior to the scheduled delivery dates. 9 12 Insurance coverage for shoreside property, shipboard consumables and inventory and general liability risks are maintained with insurance underwriters in the United States and the United Kingdom. We have decided not to carry business interruption insurance for our shoreside operations based on our evaluation of the risks involved and our protective measures already in place, as compared to the premium expense. All insurance coverage is subject to certain limitations, exclusions and deductible levels. In addition, in certain circumstances, we co-insure a portion of these risks. Premiums charged by insurance carriers, including carriers in the maritime insurance industry, increase or decrease from time to time and tend to be cyclical in nature. We historically have been able to obtain insurance coverage in amounts and at premiums we have deemed to be commercially acceptable. We believe that, based on our historical experience, we will continue to be able to do so. EMPLOYEES As of December 31, 1999, we employed approximately 2,400 full-time and 400 part-time employees in our shoreside operations worldwide. We also employed approximately 20,000 crew and staff for our vessels. As of December 31, 1999, approximately 70% of our shipboard employees were covered by collective bargaining agreements. We believe that our relationship with our employees is good. TRADEMARKS We own a number of registered trademarks relating to, among other things, the name ROYAL CARIBBEAN, its crown and anchor logo, the name CELEBRITY, its "X" logo and the names of our cruise ships. We believe such trademarks are widely recognized throughout the world and have considerable value. REGULATION All of our ships are registered in Norway or Liberia except for Mercury which is registered in Panama. Each ship is subject to regulations issued by its country of registry, including regulations issued pursuant to international treaties governing the safety of the ship and its guests. Each country of registry conducts periodic inspections to verify compliance with these regulations. In addition, ships operating out of United States ports are subject to inspection by the United States Coast Guard for compliance with international treaties and by the United States Public Health Service for sanitary conditions. Our ships are required to comply with international safety standards defined in the Safety of Life at Sea Convention. The Safety of Life at Sea Convention standards are revised from time to time, and the most recent modifications are being phased in through 2010. We do not anticipate that we will be required to make any material expenditures in order to comply with these rules. In 1993, the Safety of Life at Sea Convention was amended to adopt the International Safety Management Code. The International Safety Management Code provides an international standard for the safe management and operation of ships and for pollution prevention. The International Safety Management Code became mandatory for passenger vessel operators such as ourselves on July 1, 1998. We are also subject to various United States and international laws and regulations relating to environmental protection. Under such laws and regulations, we are prohibited from, among other things, discharging certain materials, such as petrochemicals and plastics, into the waterways. We are required to obtain certificates from the United States Federal Maritime Commission relating to our ability to meet liability in cases of nonperformance of obligations to guests as well as casualty and personal injury. Under the Federal Maritime Commission's current regulations, we are required to provide a $15 million bond for each of Royal Caribbean International and Celebrity Cruises as a condition to obtaining the required certificates. The Federal Maritime Commission has proposed a revision to its regulations that would require us to significantly increase the amount of this bond based on the level of our customer deposits. We 10 13 have indicated to the Federal Maritime Commission that we support an increase in the bond amount and do not expect any revisions to the Federal Maritime Commission regulations to have a material effect on us. We are required to obtain certificates from the United States Coast Guard relating to our ability to meet liability in cases of water pollution. Under the United States Coast Guard's current regulations, Royal Caribbean International and Celebrity Cruises are required to provide guarantees of approximately $123.5 million and $70.0 million, respectively, as a condition to obtaining the required certificates. We believe that we are in material compliance with all the regulations applicable to our ships and that we have all licenses necessary to the conduct of our business. From time to time various other regulatory and legislative changes have been or may in the future be proposed that could have an effect on the cruise industry in general. TAXATION OF THE COMPANY The following discussion of the application of the federal income tax laws to us and to our subsidiaries is based on the current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), proposed, temporary and final Treasury Department regulations, administrative rulings and court decisions. All of the foregoing are subject to change, and any change thereto could affect the accuracy of this discussion. Application of Section 883 of the Code We and our subsidiary, Celebrity, the operator of Celebrity Cruises, are foreign corporations engaged in a trade or business in the United States, and our vessel-owning subsidiaries are foreign corporations that, in many cases, depending upon the itineraries of their vessels, receive income from sources within the United States. Under Section 883 of the Code, certain foreign corporations are not subject to United States income or branch profits tax on United States source income derived from or incidental to the international operation of a ship or ships, including income from the leasing of such ships. A foreign corporation will qualify for the benefits of Section 883 of the Code if in relevant part (1) the foreign country in which the foreign corporation is organized grants an equivalent exemption to corporations organized in the United States and (2) more than 50% of the value of its capital stock is owned, directly or indirectly, by individuals who are residents of a foreign country that grants such an equivalent exemption to corporations organized in the United States ("qualifying shareholders") or the stock of the corporation (or the direct or indirect corporate parent thereof) is "primarily and regularly traded on an established securities market" in the United States. In the opinion of our United States tax counsel, and based on the representations and assumptions set forth therein, we, Celebrity and our vessel-owning subsidiaries should qualify for the benefits of Section 883 because we and each of those subsidiaries are incorporated in a qualifying jurisdiction and our common stock and series A convertible preferred stock should be considered to be primarily and regularly traded on an established securities market in the United States. In addition, we believe that substantially all of our income is derived from or incidental to the international operation of a ship or ships. Any United States source income not so derived will be subject to United States taxation, but we believe that such income is not a material portion of our total income. Although no final regulations have been promulgated that explain when stock will be considered "primarily and regularly traded on an established securities market" for purposes of Section 883, regulations on this subject have recently been proposed by the Internal Revenue Service. The proposed regulations have no current legal effect and may be modified before they are finalized. They provide, in relevant part, that a corporation's stock will satisfy this requirement only if more than 50% is owned by persons who each own less than 5% of the value of the corporation's stock. Our United states tax counsel expects us to meet the ownership requirements of Section 883 in 2001 and beyond because (a) the proposed regulations may be modified prior to finalization; and/or (b) we and our two largest shareholders may take steps to reduce their aggregate shareholding to below 50%. Additionally, we will recommend to our shareholders at the annual meeting that our Articles of Incorporation be amended to 11 14 prohibit any person, other than our two existing largest shareholders, from holding shares that give such person in the aggregate more than 4.9% of the relevant class or classes of our shares. However, in the event that final regulations are issued substantially as currently proposed and, contrary to our tax counsel's expectations, they are effective for the year 2000, our U.S. source income for the year 2000 will be subject to U.S. income tax. There can be no assurance that the opinions of our United States tax counsel set forth above will be accepted by the Internal Revenue Service or the courts. In addition, there can be no assurance that the expectations of our United States tax counsel will be realized. Furthermore, Section 883 has been the subject of legislative modifications in past years that have had the effect of limiting its availability to certain taxpayers and there can be no assurance that future legislation or certain changes in our stock ownership will not preclude us from obtaining the benefits of Section 883. Taxation in the Absence of an Exemption under Section 883 of the Code In the event that we, Celebrity, or our vessel-owning subsidiaries were to fail to meet the requirements of Section 883 of the Code, or if such provision were repealed then as explained below, such companies would be subject to United States income taxation on only a portion of their income. Since we and Celebrity conduct a trade or business in the United States, we and Celebrity would be taxable at regular corporate rates on our company taxable income (i.e., without regard to the income of the vessel-owning subsidiaries), from United States sources, which includes 100% of income, if any, from transportation which begins and ends in the United States (not including possessions of the United States), 50% of income from transportation which either begins or ends in the United States, and no income from transportation which neither begins nor ends in the United States. The legislative history of the transportation income source rules suggests that a cruise that begins and ends in a United States port, but that calls on more than one foreign port, will derive United States source income only from the first and last legs of such cruise. Because there are no regulations or other Internal Revenue Service interpretations of these rules, the applicability of the transportation income source rules in the aforesaid favorable manner is not free from doubt. In addition, if any of our earnings and profits effectively connected with our United States trade or business are withdrawn or are deemed to have been withdrawn from our United States trade or business (by dividend distribution, for example, or otherwise), such withdrawn amount would be subject to a "branch profits" tax at the rate of 30%. The amount of such earnings and profits would be equal to the aforesaid United States source income, with certain generally minor adjustments, less income taxes. Finally, we and Celebrity would also be potentially subject to tax on portions of certain interest paid by us at rates of up to 30%. If Section 883 of the Code were not available to a vessel-owning subsidiary, such subsidiary would be subject to a special 4% tax on its United States source gross transportation income, if any, each year because its income is derived from the leasing of a vessel and because it does not have a fixed place of business in the United States. Such United States source gross transportation income may be determined under any reasonable method, including ratios based upon (i) days traveling directly to or from United States ports to total days traveling; or (ii) the lessee's United States source gross income from the vessel (as determined under the source rules discussed in the preceding paragraph, and subject to the assumptions and qualifications set forth therein) to the lessee's total gross income from the vessel. While we believe that the methods we would use to calculate our United States source income are reasonable, the calculations would be based on an interpretation of applicable law that in many respects is not clear due to the absence of controlling regulations. Our position as to certain matters of law and our determination of the amount of income subject to United States taxation could be challenged by the Internal Revenue Service and, if so challenged, might not be upheld by a United States court. Furthermore, there can be no assurance that the applicable law will not change or that regulations or rulings will not take a different position. In addition, although we do not currently intend to change our operations or the operations of our subsidiaries, such a change, or changes in the amount, source or character of our or any subsidiary's income and expense, could affect the amount of income that would be subject to United States tax in the event Section 883 of the Code were not available to us or our subsidiaries. 12 15 ITEM 2. DESCRIPTION OF PROPERTY Our principal executive office and shoreside operations are located on the Port of Miami, Florida where we lease three office buildings totaling approximately 359,430 square feet from Miami-Dade County, Florida under long-term leases with initial terms expiring in various years on and after 2011. We also lease space in Wichita, Kansas for use primarily as an additional reservation center. Royal Caribbean International operates two private destinations: (i) CocoCay, an island we own which is known as Little Stirrup Cay and is located in the Bahamas; and (ii) Labadee, a secluded peninsula which we lease and is located on the north coast of Haiti. We believe that our facilities are adequate for our current needs. We evaluate our needs periodically and obtain additional facilities when considered necessary. ITEM 3. LEGAL PROCEEDINGS Since October 1994, the U.S. Government has been investigating our waste disposal practices through a series of federal grand jury proceedings. In July 1999, we entered into a plea agreement with the U.S. Department of Justice in order to resolve those investigations. Under the plea agreement, we agreed to plead guilty to twenty-one felony counts and to pay a criminal fine of $18 million to resolve all outstanding counts against Royal Caribbean. The felony counts relate to the improper disposal of oil-contaminated bilge water and attempts to conceal such activities from the U.S. Coast Guard, the improper disposal of other waste water, known as gray water, that was contaminated with pollutants, and the storage of hazardous waste on land for more than 90 days without a permit. The plea agreement calls for us to be on probation for up to five years and a Court supervised Environmental Compliance Plan. Although the plea agreement resolves the federal criminal investigation, it does not preclude us from becoming subject to additional civil or State actions. The July 1999 plea agreement is in addition to a plea agreement entered into in June 1998 pursuant to which we pled guilty to eight felony counts and paid a criminal fine of $9 million for other similar offenses. In January 2000, we entered into a settlement with the State of Alaska resolving a civil lawsuit filed by the State against us seeking monetary damages for alleged violations of Alaskan laws relating to the discharge of oil and hazardous waste and agreed to make payments totaling $3.3 million. Beginning in December 1995, several purported class action suits were filed alleging that Royal Caribbean International and Celebrity Cruises misrepresented to their guests the amount of their port charge expenses. Similar suits were filed against other companies in the cruise industry. In January 1999, Royal Caribbean International and Celebrity Cruises entered into agreements to settle the suits. Under the terms of the settlement agreements, each of Royal Caribbean International and Celebrity Cruises have issued travel vouchers having face amounts ranging from $8 to $30 in the case of Royal Caribbean International, and from $20 to $45 in the case of Celebrity Cruises, to guests who are U.S. residents and who sailed on Royal Caribbean International or Celebrity Cruises, as the case may be, between April 1992 and April 1997. Such vouchers may be applied to reduce the cruise fare of a future cruise on Royal Caribbean International or Celebrity Cruises, as the case may be, and are valid for up to three years from the date of issuance. Beginning in August 1996, several purported class-action suits were filed alleging that Royal Caribbean International and Celebrity Cruises should have paid commissions to travel agents on port charges included in the price of cruise fares. The suits seek damages in an unspecified amount. Similar suits are pending against other companies in the cruise industry. In December 1998, a Florida state court judge dismissed one of the class-action suits filed on behalf of travel agents for failure to state a claim under Florida law. The plaintiff in that case has filed an appeal of that decision. We are not able at this time to estimate the timing or impact of the travel agent proceedings on our business. In April 1999 a lawsuit was filed in the United States District Court for the Southern District of New York on behalf of current and former crew members alleging that we failed to pay the plaintiffs their full wages. The suit seeks payment of (i) the wages alleged to be owed, (ii) penalty wages under U.S. law and (iii) punitive damages. In November 1999, a purported class action suit was filed in the same court alleging a similar cause of action. We are not able at this time to estimate the impact of these proceedings on our 13 16 business; there can be no assurance that such proceedings, if decided adversely, would not have a material adverse effect on our results of operations. We are routinely involved in other claims typical to the cruise industry. The majority of these claims are covered by insurance. We believe the outcome of such other claims which are not covered by insurance would not have a material adverse effect upon our financial condition or results of operations. ITEM 4. CONTROL OF REGISTRANT PRINCIPAL SHAREHOLDERS The following table sets forth certain information regarding the beneficial ownership of our common stock as of March 1, 2000 (i) by each person who is known by us to own beneficially more than 10% of any class of the outstanding common stock and (ii) by all of our directors and executive officers as a group.
NUMBER OF SHARES OF COMMON PERCENTAGE NAME STOCK(1) OWNERSHIP - ---- ---------------- ---------- A. Wilhelmsen AS(2)......................................... 46,329,330 25.2% Cruise Associates(3)...................................... 50,781,900 27.6% All Directors and Officers (41 persons)(4)................ 3,129,497 1.7%
- --------------- (1) For purposes of this table, any security which a person or group has a right to acquire within 60 days after March 1, is deemed to be owned by such person or group. Such security is deemed to be outstanding for the purpose of computing the percentage ownership of such person or group, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person or group. (2) A. Wilhelmsen AS is a Norwegian corporation, the indirect beneficial owners of which are members of the Wilhelmsen family of Norway. (3) Cruise Associates is a Bahamian general partnership, the indirect beneficial owners of which are various trusts primarily for the benefit of certain members of the Pritzker family of Chicago, Illinois, and various trusts primarily for the benefit of certain members of the Ofer family. (4) Includes (i) 1,549,024 shares of common stock issuable upon exercise of options granted to officers and directors, (ii) 1,071,412 shares of common stock held by Monument Capital Corporation as nominee for various trusts primarily for the benefit of certain members of the Fain family and (iii) 415,008 shares of common stock issued to a trust for the benefit of Mr. Fain. Mr. Fain disclaims beneficial ownership of some or all of the shares of common stock referred to in (ii) and (iii) above. Does not include shares of common stock held by A. Wilhelmsen AS or Cruise Associates. A. Wilhelmsen AS and Cruise Associates are parties to a shareholders agreement and, pursuant thereto, have agreed upon certain matters relative to our organization and operation and certain matters concerning their respective ownership of our voting stock. Pursuant to the shareholders agreement, A. Wilhelmsen AS and Cruise Associates have agreed to vote their shares of common stock in favor of the following individuals as our directors: (i) up to four nominees of A. Wilhelmsen AS (at least one of whom must be independent); (ii) up to four nominees of Cruise Associates (at least one of whom must be independent); and (iii) one nominee who must be Richard D. Fain or such other individual who is then employed as our chief executive officer. In connection with our acquisition of Celebrity, A. Wilhelmsen AS and Cruise Associates have agreed to vote their shares of common stock in favor of the election of one additional director to be nominated by Archinav Holdings, Ltd., for a specified period until 2004. In addition, until either of them should decide otherwise, A. Wilhelmsen AS and Cruise Associates have agreed to vote their shares of common stock in favor of two additional named directors of our board of directors. The shareholders agreement provides that A. Wilhelmsen AS and Cruise Associates will from time to time consider our dividend policy with due regard for the interests of the shareholders in maximizing the return on their investment and our ability to pay such dividends. The declaration of dividends shall at all times be subject to the final determination of our board of directors that a dividend is prudent at that time in consideration of the needs of the business. The shareholders agreement also provides that payment of 14 17 dividends will depend, among other factors, upon our earnings, financial condition and capital requirements and the income and other tax liabilities of A. Wilhelmsen AS, Cruise Associates and their respective affiliates relating to their ownership of common stock. ITEM 5. NATURE OF TRADING MARKET Our common stock is listed on the New York Stock Exchange ("NYSE") and the Oslo Stock Exchange ("OSE") under the symbol "RCL". Our convertible preferred stock is listed on the NYSE under the symbol "RCL Pr". The table below sets forth the quarterly high and low prices of the common stock and convertible preferred stock for our two most recent fiscal years:
NYSE OSE NYSE COMMON STOCK COMMON STOCK(1) PREFERRED STOCK ------------------- -------------------- -------------------- 1999 HIGH LOW HIGH LOW HIGH LOW - ---- -------- ------- -------- -------- -------- -------- First Quarter................... $40 1/4 $31 3/8 302 1/2 246 $123 5/16 $ 98 11/16 Second Quarter.................. 44 1/2 31 7/8 350 266 1/2 138 3/16 103 Third Quarter................... 51 5/8 41 1/16 401 328 156 5/8 131 1/8 Fourth Quarter.................. 58 7/8 42 5/8 450 338 172 5/16 131 3/4 1998 - ---- First Quarter................... $35 7/16 $24 3/4 262 1/2 185 $113 $ 80 1/8 Second Quarter.................. 40 3/8 32 5/8 305 247 1/2 126 1/8 104 Third Quarter................... 43 29/32 23 1/8 327 1/2 195 139 72 2/3 Fourth Quarter.................. 37 1/8 17 274 137 115 1/4 60
- --------------- (1) Denominated in Norwegian Kroner. As of December 31, 1999, there were 1,010 record holders of common stock in the United States, holding 66,974,758 shares or approximately 37.0% of the total outstanding common stock. During 1999, we paid two quarterly cash dividends of $0.09 per common share, and two quarterly cash dividends of $0.11 per common share, totaling $69.1 million. In addition, we paid dividends on our convertible preferred stock totaling $12.5 million. During 1998, we paid two quarterly cash dividends of $0.08 per common share and two quarterly cash dividends of $0.09 per common share, totaling $55.2 million as well as dividends on our convertible preferred stock totaling $12.5 million. On March 10, 2000, we announced that we would redeem all outstanding shares of the convertible preferred stock on April 14, 2000. The shares of the convertible preferred stock will stop trading on the NYSE prior to the April 14th redemption date, and dividends will cease to accrue on the shares of convertible preferred stock on April 14th. The convertible preferred stock is convertible into shares of common stock at the option of the holder, and we believe that most holders will convert their shares of preferred stock into common stock prior to the April 14th redemption date. The declaration and payment of future common stock dividends, if any, will at all times be subject to the final determination of the Board of Directors that a dividend is prudent at the time in consideration of the needs of our business. Payment of dividends will depend, among other things, upon our earnings, financial condition and capital requirements and certain tax considerations of A. Wilhelmsen AS, Cruise Associates and their respective affiliates. ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS There are now no exchange control restrictions on remittances of dividends on our common stock or our convertible preferred stock, or on the conduct of our operations in Liberia by reason of our incorporation in Liberia. 15 18 ITEM 7. TAXATION Since (1) we are and intend to maintain our status as a "non-resident corporation" under the Internal Revenue Code of Liberia and (2) our vessel-owning subsidiaries are not now engaged, and are not in the future expected to engage, in any business in Liberia, including voyages exclusively within the territorial waters of the Republic of Liberia, we have been advised by Watson, Farley & Williams, our special Liberian counsel, that under current Liberian law, no Liberian taxes or withholding will be imposed on payments to holders of our securities other than a holder that is a resident Liberian entity or a resident individual or entity or a citizen of Liberia. ITEM 8. SELECTED FINANCIAL DATA The following selected financial data are for each of the fiscal years in the period 1995 through 1999 and as of the end of each such fiscal year. The financial information presented for fiscal years 1999, 1998 and 1997 and as of the end of fiscal years 1999 and 1998 is derived from our financial statements and should be read together with such financial statements and the related notes included elsewhere herein. The 1997 financial information includes the results of Celebrity commencing July 1, 1997.
FISCAL YEARS -------------------------------------------------------------- 1999 1998 1997 1996 1995 ---------- ---------- ---------- ---------- ---------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Revenues............................. $2,546,152 $2,636,291 $1,939,007 $1,357,325 $1,183,952 Net Income........................... 383,853 330,770 175,127 150,866 148,958 Net income per share -- basic(1)..... 2.15 1.90 1.17 1.19 1.17 Net income per share -- diluted(2)... 2.06 1.83 1.15 1.17 1.16 Dividends declared per common share.............................. 0.40 0.34 0.29 0.27 0.24 Total assets......................... 6,380,511 5,686,076 5,339,748 2,842,299 2,203,243 Total debt, including capital leases............................. 2,342,177 2,469,082 2,572,696 1,366,967 935,692
- --------------- (1) Net income per share -- basic is computed by dividing net income, after deducting preferred stock dividends accumulated during the period, by the weighted-average number of shares of common stock outstanding during each period. (2) Net income per share -- diluted is computed by dividing net income by the weighted-average number of shares of common stock, common stock equivalents and other potentially dilutive securities outstanding during each period. ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain statements under this caption "Management's Discussion and Analysis of Financial Condition and Results Of Operations," include forward-looking statements. These forward-looking statements are subject to risks, uncertainties and other factors, which may cause our actual results, performance or achievements to differ materially from the future results, performance or achievements expressed or implied in those forward-looking statements. Examples of these risks, uncertainties and other factors include: - general economic and business conditions, - cruise industry competition, - the impact of tax laws and regulations, - changes in other laws and regulations, - the delivery schedule of new vessels, - emergency ship repairs, - incidents involving cruise vessels at sea, 16 19 - reduced consumer demand for cruises as a result of any number of reasons, including armed conflict or political instability, - changes in interest rates and - weather. GENERAL Summary We reported improved net income and earnings per share for the year ended December 31, 1999 as shown in the table below. Net income increased 16.0% to $383.9 million or $2.06 per share on a diluted basis compared to $330.8 million or $1.83 per share in 1998. The improvements were attained despite a decline in revenues and operating income resulting from a temporary reduction in capacity. Monarch of the Seas missed 11 voyages during the first quarter of 1999 due to a grounding incident in mid-December 1998 and Grandeur of the Seas and Enchantment of the Seas lost two and six voyages, respectively, during the first half of 1999 due to unscheduled engine repairs. We recover certain lost income from ships being out of service through our loss-of-hire insurance. Included in net income for 1999 is approximately $26.5 million of loss-of-hire insurance, which is recorded in Other income (expense). Included in net income in 1999 and 1998 are charges of $14.0 million and $9.0 million, respectively, related to settlements with the U.S. Department of Justice and $3.3 million in 1999 related to a settlement with the State of Alaska. Net income for 1998 also includes a reduction in earnings of approximately $9.0 million related to the Monarch of the Seas incident. Accordingly, on a comparable basis, before the previously mentioned settlements and the Monarch of the Seas incident, earnings increased to $401.2 million or $2.15 per share in 1999, from $348.8 million or $1.93 per share in 1998. As a result of the temporary decline in capacity and the inclusion of loss-of-hire insurance in Other income (expense) during 1999, certain operating margins are not comparative year over year.
FOR THE YEAR ENDED DECEMBER 31, ----------------------------------------- 1999 1998 1997 ----------- ----------- ----------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Revenues............................................... $2,546,152 $2,636,291 $1,939,007 Operating Income....................................... 480,174 488,735 303,555 Net Income............................................. 383,853 330,770 175,127 Basic Earnings Per Share............................... $ 2.15 $ 1.90 $ 1.17 Diluted Earnings Per Share............................. $ 2.06 $ 1.83 $ 1.15
SELECTED STATISTICAL INFORMATION:
1999 1998 1997 ---------- ---------- --------- Guests Carried.......................................... 1,704,034 1,841,152 1,465,450 Guest Cruise Days....................................... 11,227,196 11,607,906 8,759,651 Occupancy Percentage.................................... 104.7% 105.2% 104.2%
Fleet Expansion Our fleet expansion continued with the delivery of Voyager of the Seas in October 1999, the first of three Voyager-class vessels to be added to the Royal Caribbean International fleet. With the delivery of Voyager of the Seas, six Vision-class vessels from 1995 through 1998 and the acquisition of Celebrity in 1997, our capacity has increased approximately 131.2% from 14,228 berths at December 31, 1994 to 32,900 at December 31, 1999. We currently have 10 ships on order, options to purchase two additional Vantage-class vessels and a letter of intent to purchase two additional Voyager-class vessels. The delivery dates for the two vessels on option are 17 20 in the second quarters of 2005 and 2006. The vessels under the letter of intent would be scheduled for delivery in 2002 and 2003. The planned berths and expected delivery dates of the ships on order are as follows:
EXPECTED VESSEL DELIVERY DATES BERTHS(1) - ------ ------------------- --------- ROYAL CARIBBEAN INTERNATIONAL: Voyager-class Explorer of the Seas................................... 3rd Quarter 2000 3,100 Adventure of the Seas.................................. 1st Quarter 2002 3,100 Vantage-class Radiance of the Seas................................... 1st Quarter 2001 2,100 Brilliance of the Seas................................. 2nd Quarter 2002 2,100 Unnamed................................................ 2nd Quarter 2003 2,100 Unnamed................................................ 2nd Quarter 2004 2,100 CELEBRITY CRUISES: Millennium-class Millennium............................................. 2nd Quarter 2000 2,000 Infinity............................................... 1st Quarter 2001 2,000 Unnamed................................................ 3rd Quarter 2001 2,000 Unnamed................................................ 2nd Quarter 2002 2,000
- --------------- (1) Based on double occupancy per cabin. The Voyager-class vessels are the largest passenger cruise ships ever built. The Vantage-class vessels are a progression from Royal Caribbean International's Vision-class vessels, while the Millennium-class vessels are a progression from Celebrity Cruises' Century-class vessels. Based on the ships currently on order, our year-end berth capacity will increase 69.3% to 55,700 berths between 1999 and 2004. In May 1998, we sold Song of America for $94.5 million and recognized a gain on the sale of $31.0 million. We operated Song of America under a charter agreement until March 1999. RESULTS OF OPERATIONS: The following table presents operating data as a percentage of revenues:
FOR THE YEAR ENDED DECEMBER 31, ----------------------- 1999 1998 1997 ----- ----- ----- Revenues.................................................... 100.0% 100.0% 100.0% Expenses: Operating................................................. 58.8 60.5 62.9 Marketing, selling and administrative..................... 14.6 13.6 14.0 Depreciation and amortization............................. 7.8 7.4 7.4 ----- ----- ----- Operating Income............................................ 18.8 18.5 15.7 Other Income (Expense)...................................... (3.8) (6.0) (6.3) ----- ----- ----- Income Before Extraordinary Item............................ 15.0% 12.5% 9.4% ===== ===== =====
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998 Revenues Revenues decreased 3.4% to $2.5 billion in 1999 compared to $2.6 billion for the same period in 1998. The decline in revenues is due to a 2.9% decrease in capacity and a 0.6% decline in gross revenue per available lower berth ("Yield"). The reduction in capacity is associated with the departure of Song of America from the 18 21 fleet in March 1999 and a temporary decline in capacity associated with ships out of service as mentioned previously. The reduction in capacity was partially offset by the full-year impact of Vision of the Seas which entered service in the second quarter of 1998 and Voyager of the Seas which entered service in the fourth quarter of 1999. The decrease in Yield is primarily due to a reduction in air revenue per diems associated with fewer guests using our air program, partially offset by improved guest per diems. We offer air transportation as a service to our guests through our air program. Generally, revenues received from air tickets sold to guests are approximately the same as our underlying cost. Therefore, when a guest purchases his or her own air transportation, rather than use our air program, both our revenues and operating expenses decrease by approximately the same amount. Expenses Operating expenses decreased 6.1% to $1.5 billion in 1999 as compared to $1.6 billion in 1998. Included in operating expenses are charges of $17.3 million and $9.0 million in 1999 and 1998, respectively, related to settlements with the U.S. Department of Justice and the State of Alaska, as previously mentioned. The decrease in operating expenses is primarily due to the decline in capacity and lower air costs from fewer guests using our air program. As a percentage of revenues, operating expenses decreased from 60.5% in 1998 to 58.8% in 1999 primarily due to fewer guests using our air program. Marketing, selling and administrative expenses increased 3.5% to $371.8 million in 1999 from $359.2 million in 1998. The increase is primarily due to an increased investment in information technology spending and an increase in international advertising to enhance our brand awareness worldwide. As a percentage of revenue, marketing, selling and administrative expenses increased to 14.6% in 1999 from 13.6% in 1998. Approximately half of the margin increase is the result of higher expenses described above and approximately half is due to a decline in revenues from ships out of service. Depreciation and amortization remained relatively consistent at $197.9 million in 1999 compared to $194.6 million in 1998. Other Income (Expense) Gross interest expense (excluding capitalized interest) decreased to $165.2 million in 1999 as compared to $182.8 million in 1998. The decline is primarily due to a decrease in the average debt level from prepayments made during 1998 as well as a decrease in interest rates. Capitalized interest increased $19.6 million from $15.0 million in 1998 to $34.6 million in 1999, due to an increase in expenditures related to ships under construction. Included in Other income (expense) in 1999 is $26.5 million of loss-of-hire insurance resulting from ships out of service. Other income (expense) in 1998 includes a gain of $31.0 million from the sale of Song of America as well as a $32.0 million charge related to the write-down to fair market value of Viking Serenade. Also included in Other income (expense) in 1998 is $3.8 million of net costs related to the Monarch of the Seas incident. (See Year Ended December 31, 1998 Compared to Year Ended December 31, 1997.) YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997 Revenues Revenues increased 36.0% to $2.6 billion compared to $1.9 billion in 1997. The increase in revenues was primarily due to a 31.2% increase in capacity and a 3.6% increase in Yield. The acquisition of Celebrity (which occurred in July 1997) accounted for approximately two-thirds of the capacity increase, while additions to the Royal Caribbean International fleet accounted for the balance of the increase. The increase in Yield was due to an increase in occupancy levels to 105.2% as compared to 104.2% in 1997 as well as an increase in cruise ticket per diems, partially offset by a reduction in shipboard revenue per diems. The reduction in shipboard revenue per diems is due to the inclusion of Celebrity's results for the full year 1998 as compared to six months in 1997. Celebrity derives a higher percentage of its shipboard revenue from concessionaires than does Royal Caribbean International, resulting in a dilutive effect on the per diem. 19 22 Concessionaires pay us a net commission which is recorded as revenue, in contrast to in-house operations, where shipboard revenues and related cost of sales are recorded on a gross basis. Expenses Operating expenses increased 30.7% in 1998 to $1.6 billion as compared to $1.2 billion in 1997. The increase in operating expenses was primarily due to the increase in capacity. Included in operating expenses is a $9.0 million charge related to the plea agreement with the U.S. Department of Justice. As a percentage of revenues, operating expenses decreased 2.4% in 1998 primarily due to improved ticket pricing as well as the inclusion of Celebrity's results for the full year of 1998 versus six months of 1997. Celebrity's operating expenses as a percentage of revenues were lower than Royal Caribbean International's due to lower shipboard cost of sales as a result of the higher use of concessionaires onboard Celebrity vessels as discussed above. Marketing, selling and administrative expenses increased 31.9% in 1998 to $359.2 million from $272.4 million in 1997. The increase was primarily due to the acquisition of Celebrity as well as higher advertising and staffing costs. As a percentage of revenues, marketing, selling and administrative expenses decreased to 13.6% in 1998 as a result of economies of scale. Depreciation and amortization increased to $194.6 million in 1998 from $143.8 million in 1997. The increase was primarily due to the acquisition of Celebrity as well as additions to the Royal Caribbean International fleet. Other Income (Expense) Interest expense, net of capitalized interest, increased to $167.9 million in 1998 as compared to $128.5 million in 1997. The increase is due to the increase in the average debt level as a result of our fleet expansion program as well as the acquisition of Celebrity in July 1997. Included in Other income (expense) in 1998 is a $31.0 million gain from the sale of SONG OF AMERICA as well as a $32.0 million charge related to the write-down to fair market value of Viking Serenade. Based on our strategic objectives, the unique circumstances of this vessel and indications of the current value of Viking Serenade, we recorded a write-down of the carrying value to its estimated fair market value. We continue to operate and depreciate the vessel which is classified as part of Property and Equipment on the balance sheet. On December 15, 1998, Monarch of the Seas experienced significant damage to the ship's hull and equipment, resulting in the ship being out of service until mid-March 1999. The incident resulted in a net reduction in earnings of approximately $9.0 million or $0.05 per share in the fourth quarter of 1998. This reduction is comprised of lost revenue, net of related variable expenses, of $5.2 million, and costs associated with repairs to the ship, guest transportation and lodging, commissions and various other costs, net of estimated insurance recoveries, of $3.8 million. The costs of $3.8 million were included in Other income (expense) for the quarter and year ended December 31, 1998. Included in Other income (expense) in 1997 is a $4.0 million gain from the sale of Sun Viking. Extraordinary Item Included in 1997 is an extraordinary charge of $7.6 million or $0.05 per share related to the early extinguishment of debt. LIQUIDITY AND CAPITAL RESOURCES Sources and Uses of Cash Net cash provided by operating activities was $583.4 million in 1999 as compared to $526.9 million in 1998 and $434.1 million in 1997. The increase was primarily due to higher net income. 20 23 In 1999, we issued 10,825,000 shares of common stock. The net proceeds were approximately $487.4 million. During the year ended December 31, 1999, our capital expenditures were approximately $1.0 billion as compared to $0.6 billion during 1998 and $1.1 billion during 1997. The largest portion of capital expenditures related to the delivery of Voyager of the Seas in 1999, delivery of Vision of the Seas in 1998, delivery of Rhapsody of the Seas, Enchantment of the Seas and Mercury in 1997, as well as progress payments for ships under construction in all years. Also included in capital expenditures are shoreside capital expenditures primarily related to information technology in support of our growth plans. We received proceeds of $94.5 million from the sale of a vessel during 1998. Capitalized interest increased to $34.6 million in 1999 from $15.0 million in 1998 and $15.8 million in 1997. The increase during 1999 was due to an increase in expenditures related to ships under construction. During 1999, we paid quarterly cash dividends on our common stock totaling $69.1 million as well as quarterly cash dividends on our preferred stock, totaling $12.5 million. During 1998, we paid quarterly cash dividends on our common stock totaling $55.2 million as well as quarterly cash dividends on our preferred stock, totaling $12.5 million. We made principal payments totaling approximately $127.9 and $343.2 million under various term loans and capital leases during 1999 and 1998, respectively. Future Commitments We currently have 10 ships on order for an additional capacity of 22,800 berths. The aggregate contract price of the 10 ships, which excludes capitalized interest and other ancillary costs, is approximately $3.9 billion, of which we deposited $247.0 million during 1999, $119.3 million during 1998 and $23.7 million during 1997. Additional deposits are due prior to the dates of delivery of $88.1 million in 2000, $64.6 million in 2001 and $39.6 million in 2002. We anticipate that overall capital expenditures, based on ships currently on order plus estimates of other shoreside capital expenditures, will be approximately $1.3, $1.6 and $1.4 billion for 2000, 2001 and 2002, respectively. The amount and timing of such expenditures are our current projections. Any additional ships ordered would have an impact on these estimates. We have options to purchase two additional Vantage-class vessels with delivery dates in the second quarters of 2005 and 2006. The options have an aggregate contract price of $804.6 million. We have the right to cancel the first option on or before August 31, 2000 and the second option on or before delivery of Radiance of the Seas, which is currently scheduled for the first quarter of 2001. We have also signed a letter of intent to purchase two additional Voyager-class vessels with delivery dates scheduled for 2002 and 2003. The aggregate contract price of the two ships is 1.1 billion euros. The letter of intent is subject to the fulfillment of certain conditions, such as financing by the shipyard. We had $2.3 billion of long-term debt of which $128.1 million is due during the 12-month period ending December 31, 2000. As a normal part of our business, depending on market conditions, pricing and our overall growth strategy, we continuously consider opportunities to enter into contracts for the building of additional ships. We may also consider the sale of ships. We continuously consider potential acquisitions and strategic alliances. If any of these were to occur, they would be financed through the incurrence of additional indebtedness, the issuance of additional shares of equity securities or through cash flows from operations. Funding Sources As of December 31, 1999, our liquidity was $1.1 billion consisting of $63.5 million in cash and cash equivalents and $1.0 billion available under our $1.0 billion unsecured revolving credit facility. Effective January 2000, we have $300.0 million available from April 1, 2000 through June 30, 2000 under a $300.0 million credit facility. Capital expenditures and scheduled debt payments will be funded through a combination of cash flows provided by operations, drawdowns under our available credit facilities, the 21 24 incurrence of additional indebtedness and sales of securities in private or public securities markets. In addition, the agreements related to six of the 10 ships under construction, require the shipyards to make available export financing for up to 80% of the contract price of the vessels. Other We enter into interest rate swap agreements to manage interest costs as part of our liability risk management program. The differential in interest rates to be paid or received under these agreements is recognized in income as part of interest expense over the life of the contracts. The objective of the program is to modify our exposure to interest rate movements. We continuously evaluate our debt portfolio, including interest rate swap agreements, and make periodic adjustments to the mix of fixed rate and floating rate debt based on our view of interest rate movements. Impact of Year 2000 We experienced no significant computer system failures or disruptions as a result of the changeover from 1999 to 2000 (the "Year 2000 issue"), and the Year 2000 issue had no material adverse effect on the results of our operations, liquidity or financial condition. Since January 1, 1998, we incurred approximately $3.6 million in expense on efforts directly related to fixing the Year 2000 issue, as well as an additional $3.8 million of capital expenditures related to the accelerated replacement of non-compliant systems. Prior to 1998, we did not separately track associated Year 2000 software compliant costs. ITEM 9A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK General We are exposed to market risk attributable to changes in interest rates, currency exchange rates and commodity prices. As a result, we enter into various derivative transactions to manage a portion of these exposures to market risk pursuant to our hedging practices and policies. The impacts of these hedging instruments are offset by corresponding changes in the underlying exposures being hedged. We achieve this by closely matching the amount, term and conditions of the derivative instrument with the underlying risk being hedged. We do not hold or issue derivative financial instruments for trading or other speculative purposes. Derivatives positions are monitored using techniques including market valuations and sensitivity analysis. Interest Rate Risk Our exposure to market risk for changes in interest rates relates to our long-term debt obligations. At December 31, 1999, the fair value of our long-term fixed rate debt was estimated at $2,340.0 million using quoted market prices where available, or discounted cash flow analyses. Market risk associated with our long-term debt is the potential increase in fair value resulting from a decrease in interest rates. We use interest rate swaps to modify our exposure to interest rate movements and manage our interest expense. Our interest rate swaps are primarily floating rate instruments that are tied to LIBOR. The fair value of our interest rate swaps was approximately $(13.7) million at December 31, 1999. A 10% decrease in assumed interest rates would increase the fair value of our long-term debt by approximately $87.3 million. This increase would be partially offset by an increase in the fair value of our interest rate swaps of $14.3 million. ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT Our directors and executive officers are listed below. Officers are appointed by the Board of Directors. At our 1999 Annual Meeting, our shareholders approved the establishment of a classified board of directors. Four directors were elected for a term of one year, four directors were elected for a term of two years and four directors were elected for a term of three years, and until their successors are duly elected and 22 25 qualified. In subsequent meetings, each newly elected director will serve three years from the date of his or her election.
NAME AGE POSITION ---- --- -------- Richard D. Fain(1)......................... 52 Chairman, Chief Executive Officer and Director Jack L. Williams........................... 50 President, Royal Caribbean International Richard E. Sasso........................... 50 President, Celebrity Cruises Richard J. Glasier......................... 54 Executive Vice President and Chief Financial Officer Bonnie S. Biumi............................ 37 Vice President and Treasurer Michael J. Smith........................... 45 Vice President, General Counsel and Secretary Edwin W. Stephan(2)........................ 68 Director and Vice Chairman Tor Arneberg(2)............................ 71 Director Bernard W. Aronson(1)...................... 53 Director John D. Chandris(1)........................ 49 Director Kaspar K. Kielland(1)...................... 70 Director Laura Laviada(3)........................... 49 Director Jannik Lindbaek(2)......................... 61 Director Eyal Ofer(3)............................... 49 Director Thomas J. Pritzker(2)...................... 49 Director William K. Reilly(3)....................... 60 Director Arne Wilhelmsen(3)......................... 70 Director
- --------------- (1) Term as a director ends in 2000 (2) Term as a director ends in 2001 (3) Term as a director ends in 2002 Richard D. Fain has served as our Chairman and Chief Executive Officer since April 1988. Mr. Fain has served as a Director since 1981. Mr. Fain is vice chairman of the International Council of Cruise Lines, an industry trade organization, and served as its chairman from 1992 to 1994. Mr. Fain is a director of Assuranceforeningen GARD, a mutual shipowners' insurance organization. Mr. Fain has been involved in the shipping industry for over 20 years. Mr. Fain has served as a director of SEMX Corporation, a manufacturer of electronics packaging materials, since November 1991. Jack L. Williams has served as President of Royal Caribbean International since January 1997. Formerly Vice President and General Sales Manager for American Airlines, Mr. Williams had been employed at American Airlines for 23 years in a variety of positions in finance, marketing and operations. In his most recent assignment, Mr. Williams was responsible for American Airlines' sales programs and promotions worldwide. Richard E. Sasso has served as President of Celebrity Cruises since January 1996. From the founding of Celebrity in 1990 through January 1996, Mr. Sasso served as its Senior Vice President Sales and Marketing. Mr. Sasso has been involved in the cruise industry for over 28 years. Richard J. Glasier has served as our Executive Vice President and Chief Financial Officer since June 1996 and as our Senior Vice President and Chief Financial Officer since 1985. Mr. Glasier has held various senior financial positions in the hospitality and cruise industry for 20 years. Bonnie S. Biumi has served as our Vice President and Treasurer since May 1999. From December 1997 through May 1999, Ms. Biumi served as the Chief Financial Officer of Neff Corp., a New York Stock Exchange listed equipment rental company based in Miami, Florida. From 1994 through 1997, Ms. Biumi served as Executive Vice President and Chief Financial Officer of People's Telephone Company, Inc., a Miami-based publicly owned telecommunications services company. Prior to that, Ms. Biumi was a senior manager with Price Waterhouse. 23 26 Michael J. Smith has served as our Vice President, General Counsel and Secretary since February 1995 and Secretary and General Counsel since 1990. Edwin W. Stephan has served as a Director since January 1996. From our inception in 1968 through 1995, Mr. Stephan served as President or General Manager of the Company. Mr. Stephan has been involved in the cruise industry for over 30 years. Tor Arneberg has served as a Director since November 1988. Mr. Arneberg is a senior advisor and has served as an Executive Vice President of Nightingale & Associates, a management consulting company, since 1982. From 1975 until 1982, Mr. Arneberg co-founded and operated AgTek International, a company a company involved in the commercial fishing industry. Prior to that, Mr. Arneberg was director of marketing for Xerox Corporation. He is an executive trustee and vice president of the American Scandinavian Foundation and received a silver medal in the 1952 Summer Olympics in Helsinki, Finland as a member of the Norwegian Olympic Yachting Team. Bernard W. Aronson has served as a Director since July 1993. Mr. Aronson is currently Managing Partner of ACON Investments, LLC. Prior to that he served as international advisor to Goldman, Sachs & Co. From June 1989 to July 1993, Mr. Aronson served as Assistant Secretary of State for Inter-American Affairs. Prior to that, Mr. Aronson served in various positions in the private and government sectors. Mr. Aronson is a member of the Council on Foreign Relations. Since January, 1998, Mr. Aronson has served as a Director of Liz Claiborne, Inc. John D. Chandris has served as a Director since July 1997. Mr. Chandris is Chairman of Chandris (UK) Limited, a shipbrokering office based in London, England. Until September 1997, Mr. Chandris also served as Chairman of Celebrity Cruise Lines Inc. Mr. Chandris is a director of Leathbond Limited, a U.K. real estate company, and serves on the Board of the classification society, Lloyd's Register. Kaspar K. Kielland has served as a Director since July 1993. Until May 1996, Mr. Kielland served as Chairman of Kvaerner A/S, a company of diversified shipping, shipbuilding and energy businesses. From 1980 through 1988, Mr. Kielland served as President and Chief Executive Officer of Elkem A/S, a company engaged in aluminum and ferro-alloys. Since 1991, Mr. Kielland has served as a Director of Anders Wilhelmsen & Co. A/S. In 1985, Mr. Kielland was awarded the Knight 1st Class of the Royal Norwegian Order of St. Olav. Laura Laviada has served as a Director since July 1997. Ms. Laviada is the President and Chief Executive Officer of Editorial Televisa, a Spanish language magazine publishing company based in Mexico and a Grupo Televisa subsidiary. A former magazine editor, Ms. Laviada began her career in 1979 when she founded TU magazine. In 1988, she created ERES and two years later created SOMOS. In 1995, when Editorial Eres merged with Editorial Televisa, Ms. Laviada was named President and Chief Executive Officer of the company. Jannik Lindbaek has served as a Director since May 1999. From 1994 until 1999, Mr. Lindbaek served as Executive Vice President of International Finance Corp., Washington D.C. International Finance Corp. is the private sector arm of the World Bank Group and makes equity investments and loans to private sector projects in developing countries. From 1986 until 1994, Mr. Lindbaek served as President and Chief Executive Officer of Nordic Investment Bank, Helsinki, Finland, a multilateral financial institution owned by the five Nordic countries. From 1976 through 1985, Mr. Lindbaek served as President and Chief Executive Officer of Storebrand Insurance Co., Oslo, Norway, the largest insurance group in Norway. Mr. Lindbaek is a director of Vital Life Insurance Co., Anders Wilhelmsen & Co. and Chairman of the Board (non-executive) of Den norske Bank. Mr. Lindbaek also serves on the International Advisory Boards of The Chubb Corporation and the East African Development Bank and is Chairman of the Bergen Festival of Music and Drama, Bergen, Norway. Eyal Ofer has served as a Director since May 1995. Mr. Ofer has served as the Chief Executive Officer of Carlyle M.G. Limited since May 1991. 24 27 Thomas J. Pritzker has served as a Director since February 1999. Mr. Pritzker is President of The Pritzker Organization and a partner in the law firm of Pritzker & Pritzker. He is Chairman of Hyatt Hotels and Resorts and President of Hyatt Corporation. Mr. Pritzker is also a founder and Chairman of First Health Corporation, a publicly traded company engaged in the managed care industry, and a founder and a director of Triton Container Holding, Ltd., a major lessor of dry van containers. Mr. Pritzker is a member of the Board of Trustees of the University of Chicago and the Art Institute of Chicago where he is Chairman of the Committee on Asian Art. William K. Reilly has served as a Director since January 1998. Mr. Reilly is the Chief Executive Officer of Aqua International Partners, an investment group which finances water purification in developing countries. From 1989 to 1993, Mr. Reilly served as the Administrator of the U.S. Environmental Protection Agency. He has also previously served as the Payne Visiting Professor at Stanford University's Institute of International Studies, president of World Wildlife Fund and of The Conservation Foundation, executive director of the Rockefeller Task Force on Land Use and Urban Growth and Chairman of the Natural Resources Council of America. He serves on the Board of Trustees of the American Academy in Rome, the National Geographic Society, World Wildlife Fund, the Packard Foundation, Yale University Corporation and the Presidio Trust. He also serves as a director of Dupont, Conoco and Evergreen Holdings. Arne Wilhelmsen has served as a Director since 1968. Mr. Wilhelmsen, one of our founders, is a principal and Chairman of the Board of Anders Wilhelmsen & Co. A/S and other holding companies in the Anders Wilhelmsen & Co. Group. Mr. Wilhelmsen has been involved in the shipping industry for over 40 years. Our Compensation Committee consists of not less than two directors who are not salaried officers of our company. The purpose of the Compensation Committee is to review the compensation of our executives and to make determinations relative to that. The current members of the Compensation Committee are Mr. Arneberg and Mr. Aronson. The Audit Committee consists of three directors. The purpose of the Audit Committee is to provide general oversight of audit, legal compliance and potential conflict of interest matters. The current members of the Audit Committee are Messrs. Arneberg, Aronson and Lindbaek. ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS CASH COMPENSATION We paid our directors and officers (46 persons) aggregate cash compensation of $12.0 million during the year ended December 31, 1999. EXECUTIVE COMPENSATION PURSUANT TO PLANS Executive Bonus Plan Our Executive Bonus Plan provides a means of rewarding key executives who contribute to our profitable growth. Annual bonuses under the Executive Bonus Plan are paid to eligible executives based upon (i) the extent to which our financial performance during the year meets certain established objectives and (ii) the extent to which the executive attains established individual and corporate performance objectives. The Executive Bonus Plan is administered by the Compensation Committee of the Board of Directors. Retirement Plan and Other Executive Compensation Plans All eligible shoreside officers and employees are participants in our Retirement Plan. Contributions of between 8% and 12% of the participant's compensation (as defined in the plan), depending on the length of such participant's employment, are made on an annual basis to the participant's account. Benefits under the Retirement Plan are payable on the later of the date the participant attains the age of 65 or the date the participant actually retires, but in no event later than the April 1st following the calendar year in which the participant attains the age of 70 1/2. Benefits are payable as follows: (i) in a single lump sum, payable upon termination of employment; (ii) as a life annuity, payable monthly upon retirement during the lifetime of the employee; (iii) in installments payable upon retirement for a period not to exceed 120 months; or (iv) a joint 25 28 and 50% surviving spouse annuity, payable monthly upon retirement during the lifetime of the employee and spouse. We also have a Supplemental Executive Retirement Plan ("SERP"). Under SERP, we accrue, but do not fund, an annual amount for the account of each Company Executive equal to the reduction in our contribution under the Retirement Plan due to recently enacted changes to Section 401(a)(17) of the Code. Other terms and benefits of SERP are the same as those of the Retirement Plan. In connection with his employment, Richard D. Fain is entitled to receive upon his cessation of employment by us for any reason the assets of a grantor trust established by us for the benefit of Mr. Fain. We make quarterly contributions of common stock to the grantor trust and will continue to do so until the earlier of the cessation of Mr. Fain's employment or June 2014. The aggregate amount set aside or accrued during 1999 to provide pension, retirement or other executive compensation benefits for the 46 directors and officers as a group was $1.3 million. ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES Our 1990 Employee Stock Option Plan provides for the issuance of options to directors, officers and other key employees to purchase up to 6,703,000 shares of our common stock. As of March 22, 2000 there were outstanding under the 1990 Employee Stock Option Plan options to purchase an aggregate of 3,777,982 shares of common stock. The outstanding options are exercisable at prices ranging from $7.24 to $44.19 per share and expire on various dates between January 31, 2001 and September 2, 2009. By its terms, the 1990 Employee Stock Option Plan terminated on March 14, 2000. No new options may be granted under the plan although all outstanding options still remain in effect. Our 1995 Incentive Stock Option Plan provides for the issuance of options to purchase up to 2,700,000 shares of our common stock to officers and other key employees. In September 1999, the Board of Directors increased to 3,700,000 the number of shares available for issuance of options under the Incentive Stock Option Plan, subject to approval by our shareholders at the 2000 Annual Meeting. As of March 22, 2000, there were outstanding under the 1995 Incentive Stock Option Plan, options to purchase an aggregate of 2,695,590 shares of common stock. The outstanding options are exercisable at prices ranging from $11.19 to $48.00 per share and expire on various dates between February 3, 2005 and March 3, 2010. In September 1999, our Board of Directors adopted the 2000 Stock Option Plan, subject to approval by our shareholders at the 2000 Annual Meeting. The 2000 Stock Option Plan provides for the issuance of options to directors, officers and other key employees to purchase up to 8,000,000 shares of our common stock. As of March 22, 2000, there were outstanding under the 2000 Stock Option Plan, options to purchase an aggregate of 2,461,600 shares of common stock. The outstanding options are exercisable at prices ranging from $28.78 to $48.00 per share and expire on various dates between September 2, 2009 and March 3, 2010. In connection with our initial public offering in April 1993, we issued 379,714 stock options at an exercise price of $9.00 per share to one of our officers. The options, which vested immediately, will generally expire upon termination of the Officer's employment. As of March 22, 2000, 354,714 options were outstanding. The 1994 Employee Stock Purchase Plan provides for the grant of rights to eligible employees to purchase a maximum of 800,000 shares of common stock. The 1994 Employee Stock Purchase Plan is generally available to all of our employees who have been employed for at least one year and who customarily work at least five months per calendar year. Offerings to employees under the 1994 Employee Stock Purchase Plan are made on a quarterly basis. Subject to certain limitations, the purchase price for each share of common stock under the 1994 Employee Stock Purchase Plan is equal to 90% of the average of the market prices of the common stock as reported on the NYSE on the first business day of the purchase period and the last business day of each month of the purchase period. Effective January 1, 1998, we instituted a program, "Taking Stock in Employees," to award stock to employees up to a maximum of 1,400,000 shares of common stock. Employees are awarded 50 shares of our 26 29 common stock which vest over a 10-year period. Employees can elect to receive cash equal to the fair market value of the stock upon vesting. Compensation expense was $3.3 million in 1999 related to this program. ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS Not applicable. PART II ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED Not applicable. PART III ITEM 15. DEFAULTS UPON SENIOR SECURITIES None. ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED SECURITIES In February 1999, we amended our By-Laws to increase the shareholder vote to call a special meeting from 20% to 50%. Effective as of the 1999 Annual Meeting, we also amended the By-Laws to require that any shareholder proposal or nomination for election to the Board of Directors must be submitted to our Secretary at least 120 days in advance of the first anniversary of our last annual meeting. In May 1999, we (i) amended our By-Laws and Articles of Incorporation to provide for a classified Board of Directors, and (ii) amended our Articles of Incorporation to increase, subject to certain exceptions, from a majority to 66 2/3% the number of outstanding shares needed to amend the Articles of Incorporation or to approve any shareholder proposed amendment to the By-Laws. This latter amendment does not apply to any amendment to the Articles of Incorporation (a) to change our registered agent or registered address; (b) to change the authorized number of shares of our stock which we shall have authority to issue; and (c) which arises from the filing of a copy of a resolution establishing and designating the shares of any class or any series of any class. PART IV ITEM 17. FINANCIAL STATEMENTS Our Consolidated Financial Statements have been prepared in accordance with Item 18 hereof. ITEM 18. FINANCIAL STATEMENTS Our Consolidated Financial Statements are included beginning at page F-1 of this report and are hereby incorporated herein by this reference. ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS (a) The list of financial statements is set forth in the accompanying Index to Consolidated Financial Statements and is hereby incorporated herein by this reference. (b) The exhibits listed on the accompanying Exhibit Index are filed and incorporated by reference as part of this report and such Exhibit Index is hereby incorporated by this reference. 27 30 SIGNATURES Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the registrant certifies that it meets all of the requirements for filing on Form 20-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized. ROYAL CARIBBEAN CRUISES LTD. (Registrant) By: /s/ RICHARD J. GLASIER ------------------------------------ Richard J. Glasier Executive Vice President and Chief Financial Officer Date: April 4, 2000 28 31 ROYAL CARIBBEAN CRUISES LTD. FINANCIAL TABLE OF CONTENTS Report of Independent Public Accountants.................... F-2 Consolidated Statements of Operations....................... F-3 Consolidated Balance Sheets................................. F-4 Consolidated Statements of Cash Flows....................... F-5 Notes to the Consolidated Financial Statements.............. F-6
F-1 32 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Shareholders and Directors of Royal Caribbean Cruises Ltd.: In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations and of cash flows present fairly, in all material respects, the financial position of Royal Caribbean Cruises Ltd. and its subsidiaries at December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP Miami, Florida January 28, 2000 F-2 33 ROYAL CARIBBEAN CRUISES LTD. CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31, ------------------------------------ 1999 1998 1997 ---------- ---------- ---------- INCOME STATEMENT Revenues................................................... $2,546,152 $2,636,291 $1,939,007 ---------- ---------- ---------- Expenses Operating................................................ 1,496,252 1,593,728 1,219,268 Marketing, selling and administrative.................... 371,817 359,214 272,368 Depreciation and amortization............................ 197,909 194,614 143,816 ---------- ---------- ---------- 2,065,978 2,147,556 1,635,452 ---------- ---------- ---------- Operating Income........................................... 480,174 488,735 303,555 ---------- ---------- ---------- Other Income (Expense) Interest income.......................................... 8,182 15,912 4,666 Interest expense, net of capitalized interest............ (130,625) (167,869) (128,531) Other income (expense)................................... 26,122 (6,008) 2,995 ---------- ---------- ---------- (96,321) (157,965) (120,870) ---------- ---------- ---------- Income Before Extraordinary Item........................... 383,853 330,770 182,685 Extraordinary Item......................................... -- -- (7,558) ---------- ---------- ---------- Net Income................................................. $ 383,853 $ 330,770 $ 175,127 ========== ========== ========== EARNINGS PER SHARE Basic Earnings Per Share Income before extraordinary item......................... $ 2.15 $ 1.90 $ 1.22 Extraordinary item....................................... -- -- (0.05) ---------- ---------- ---------- Net income............................................... $ 2.15 $ 1.90 $ 1.17 ========== ========== ========== Diluted Earnings Per Share Income before extraordinary item......................... $ 2.06 $ 1.83 $ 1.20 Extraordinary item....................................... -- -- (0.05) ---------- ---------- ---------- Net income............................................... $ 2.06 $ 1.83 $ 1.15 ========== ========== ==========
The accompanying notes are an integral part of these financial statements. F-3 34 ROYAL CARIBBEAN CRUISES LTD. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS EXCEPT SHARE AMOUNTS)
AS OF DECEMBER 31, ------------------------ 1999 1998 ---------- ---------- ASSETS Current Assets Cash and cash equivalents................................. $ 63,470 $ 172,921 Trade and other receivables, net.......................... 53,459 36,532 Inventories............................................... 26,398 31,834 Prepaid expenses.......................................... 51,050 45,044 ---------- ---------- Total current assets.............................. 194,377 286,331 Property and Equipment-at cost less accumulated depreciation and amortization.......................................... 5,858,185 5,073,008 Goodwill -- less accumulated amortization of $117,778 and $107,365, respectively................................ 299,388 309,801 Other Assets................................................ 28,561 16,936 ---------- ---------- $6,380,511 $5,686,076 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Current portion of long-term debt......................... $ 128,086 $ 127,919 Accounts payable.......................................... 103,041 115,833 Accrued liabilities....................................... 209,104 243,477 Customer deposits......................................... 465,033 402,926 ---------- ---------- Total current liabilities......................... 905,264 890,155 Long-Term Debt.............................................. 2,214,091 2,341,163 Commitments and Contingencies (Note 12) Shareholders' Equity Preferred stock ($.01 par value; 20,000,000 shares authorized; 3,450,000 cumulative convertible preferred shares issued; 3,444,000 and 3,450,000 shares outstanding stated at liquidation value)............... 172,200 172,500 Common stock ($.01 par value; 500,000,000 shares authorized 181,217,378 and 168,945,222 shares issued)................................................ 1,812 1,690 Paid-in capital........................................... 1,866,647 1,361,796 Retained earnings......................................... 1,225,976 923,691 Treasury stock (394,836 and 354,492 common shares at cost).................................................. (5,479) (4,919) ---------- ---------- Total shareholders' equity........................ 3,261,156 2,454,758 ---------- ---------- $6,380,511 $5,686,076 ========== ==========
The accompanying notes are an integral part of these financial statements. F-4 35 ROYAL CARIBBEAN CRUISES LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEAR ENDED DECEMBER 31, ------------------------------------ 1999 1998 1997 -------- ----------- ----------- OPERATING ACTIVITIES Net income................................................ $383,853 $ 330,770 $ 175,127 Adjustments: Depreciation and amortization........................... 197,909 194,614 143,816 Gain on sale of assets.................................. -- (31,031) (4,000) Write-down of vessel to fair value...................... -- 32,035 -- Extraordinary item...................................... -- -- 2,387 Changes in operating assets and liabilities: (Increase) decrease in trade and other receivables, net.................................................. (16,927) (13,904) 145 Decrease (increase) in inventories...................... 5,436 5,440 (1,885) Increase in prepaid expenses............................ (6,006) (3,600) (6,206) (Decrease) increase in accounts payable, trade.......... (12,792) 7,359 2,010 (Decrease) increase in accrued liabilities.............. (34,373) 27,722 31,299 Increase (decrease) in customer deposits................ 62,107 (26,477) 89,896 Other, net.............................................. 4,151 3,930 1,532 -------- ----------- ----------- Net cash provided by operating activities....... 583,358 526,858 434,121 -------- ----------- ----------- INVESTING ACTIVITIES Purchase of property and equipment........................ (972,481) (556,953) (1,106,214) Proceeds from sale of assets.............................. -- 94,500 99,966 Acquisition of Celebrity Cruise Lines Inc., net of cash, cash equivalents and short-term investments acquired.... -- -- (152,423) Other, net................................................ (14,963) 247 (11,802) -------- ----------- ----------- Net cash used in investing activities........... (987,444) (462,206) (1,170,473) -------- ----------- ----------- FINANCING ACTIVITIES Proceeds from issuance of long-term debt.................. -- 296,141 695,189 Repayment of long-term debt............................... (127,919) (403,178) (367,353) Dividends................................................. (81,568) (67,734) (49,984) Proceeds from issuance of common stock.................... 487,399 165,532 364,631 Proceeds from issuance of preferred stock................. -- -- 167,030 Other, net................................................ 16,723 6,715 (2,787) -------- ----------- ----------- Net cash provided by (used in) financing activities.................................... 294,635 (2,524) 806,726 -------- ----------- ----------- Net (Decrease) Increase in Cash and Cash Equivalents...... (109,451) 62,128 70,374 Cash and Cash Equivalents, Beginning of Year.............. 172,921 110,793 40,419 -------- ----------- ----------- Cash and Cash Equivalents, End of Year.................... $ 63,470 $ 172,921 $ 110,793 ======== =========== =========== SUPPLEMENTAL DISCLOSURE Interest paid, net of amount capitalized.................. $133,925 $ 170,278 $ 127,457 ======== =========== =========== Capital stock issued for acquisition...................... $ -- $ -- $ 270,000 ======== =========== ===========
The accompanying notes are an integral part of these financial statements. F-5 36 ROYAL CARIBBEAN CRUISES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. GENERAL Description of Business Royal Caribbean Cruises Ltd., a Liberian corporation, and its subsidiaries (the "Company"), is a global cruise company. The Company operates two cruise brands, Royal Caribbean International, which operates 12 cruise ships, and Celebrity Cruises, which operates five cruise ships. The Company's ships operate worldwide and call on destinations in Alaska, Australia, the Bahamas, Bermuda, Canada, the Caribbean, Europe, the Far East, Hawaii, Mexico, New England, the Panama Canal and Scandinavia. Basis for Preparation of Consolidated Financial Statements The consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles and are presented in U.S. dollars. Management estimates are required for the preparation of financial statements in accordance with generally accepted accounting principles. Actual results could differ from these estimates. All significant intercompany accounts and transactions are eliminated in consolidation. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cruise Revenues and Expenses Deposits received on sales of guest cruises are recorded as customer deposits and are recognized, together with revenues from shipboard activities and all associated direct costs of a voyage, upon completion of voyages with durations of 10 days or less and on a pro rata basis for voyages in excess of 10 days. Certain revenues and expenses for pro rata voyages are estimated. Cash and Cash Equivalents Cash and cash equivalents include cash and marketable securities with original maturities of less than 90 days. Inventories Inventories consist of provisions, supplies, fuel and gift shop merchandise carried at the lower of cost (weighted-average) or market. Property and Equipment Property and equipment are stated at cost. Significant vessel improvement costs are capitalized as additions to the vessel, while costs of repairs and maintenance are charged to expense as incurred. The Company capitalizes interest as part of the cost of construction. The Company reviews long-lived assets, identifiable intangibles and goodwill and reserves for impairment whenever events or changes in circumstances indicate, based on estimated future cash flows, that the carrying amount of the assets will not be fully recoverable. Depreciation of property and equipment, which includes amortization of vessels under capital lease, is computed using the straight-line method over useful lives of primarily 30 years for vessels and three to 10 years for other property and equipment. (See Note 5-Property and Equipment.) Goodwill Goodwill represents the excess of cost over the fair value of net assets acquired and is being amortized over 40 years using the straight-line method. F-6 37 ROYAL CARIBBEAN CRUISES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Advertising Costs Advertising costs are expensed as incurred except those costs which result in tangible assets, such as brochures, are treated as prepaid supplies and charged to operations as consumed. Advertising expense consists of media advertising as well as brochure, production and direct mail costs. Media advertising was $93.1, $76.7 and $62.5 million, and brochure, production and direct mail costs were $57.4, $63.2 and $33.7 million for the years 1999, 1998 and 1997, respectively. Drydocking Drydocking costs are accrued evenly over the period to the next scheduled drydocking and are included in accrued liabilities. Financial Instruments The Company enters into various forward, option and swap contracts to limit its exposure to fluctuations in foreign currency exchange rates and oil prices, to modify its exposure to interest rate movements and to manage its interest costs. The differential in interest rates and oil prices to be paid or received under these agreements is recognized in income over the life of the contracts as part of interest expense and fuel expense, respectively. Foreign exchange forward and/or option contracts are revalued as of the balance sheet date based on forward and/or option contracts with comparable characteristics, and resulting gains and losses are recognized in income currently. Foreign Currency Transactions The majority of the Company's transactions are settled in U.S. dollars. Gains or losses resulting from transactions denominated in other currencies and remeasurements of other currencies are recognized in income currently. Earnings Per Share Basic earnings per share is computed by dividing net income, after deducting preferred stock dividends accumulated during the period, by the weighted-average number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing net income by the weighted-average number of shares of common stock, common stock equivalents and other potentially dilutive securities outstanding during each period. Stock-Based Compensation The Company accounts for stock-based compensation using the intrinsic value method and discloses certain fair market value information with respect to its stock option activity in the notes to the financial statements. Segment Reporting The Company operates two brands, Royal Caribbean International and Celebrity Cruises. The brands have been aggregated as a single operating segment based on the similarity of their economic characteristics as well as product and services provided. F-7 38 ROYAL CARIBBEAN CRUISES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Information about geographic areas is shown in the table below. Revenues are attributed to geographic areas based on the source of the customer.
1999 1998 1997 ---- ---- ---- Revenues: United States............................................... 83% 84% 85% All Other Countries......................................... 17% 16% 15%
NOTE 3. STOCK SPLIT On June 23, 1998, the Company authorized a two-for-one split of its common stock effected in the form of a stock dividend. The additional shares were distributed on July 31, 1998 to shareholders of record on July 10, 1998. All share and per share information has been retroactively restated to reflect this stock split. NOTE 4. ACQUISITION In July 1997, the Company acquired all of the outstanding stock of Celebrity Cruise Lines Inc. ("Celebrity"), a provider of cruises to the North American market. The purchase price was $515.0 million, payable in cash of $245.0 million and 14,896,552 shares of the Company's common stock. This acquisition has been accounted for under the purchase method and the results of the operations of Celebrity have been included in the consolidated financial statements since July 1, 1997. The total cost of the acquisition was allocated to the tangible assets acquired and liabilities assumed based on their respective fair values. The following unaudited pro forma information presents a summary of consolidated results of operations of the Company, including Celebrity, as if the acquisition had occurred January 1, 1997 (in thousands, except per share amounts).
1997 ---------- Revenue..................................................... $2,196,571 Income before extraordinary item............................ $ 174,406 Net income.................................................. $ 166,848 Earnings per share Income before extraordinary item Basic..................................................... $ 1.10 Diluted................................................... $ 1.10 Net income Basic..................................................... $ 1.05 Diluted................................................... $ 1.05
The unaudited pro forma results have been prepared for comparative purposes only and include certain adjustments, such as additional depreciation expense as a result of a step-up in the basis of fixed assets and increased interest expense on acquisition debt. They do not purport to be indicative of the results which would actually have been achieved if this acquisition had been effected on the date indicated or of those results which may be obtained in the future. F-8 39 ROYAL CARIBBEAN CRUISES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 5. PROPERTY AND EQUIPMENT Property and equipment consists of the following (in thousands):
1999 1998 ---------- ---------- Land........................................................ $ 7,549 $ 5,320 Vessels..................................................... 5,158,278 4,457,070 Vessels under capital lease................................. 766,826 763,350 Vessels under construction.................................. 495,483 285,243 Other....................................................... 223,920 170,290 ---------- ---------- 6,652,056 5,681,273 Less -- accumulated depreciation and amortization........... (793,871) (608,265) ---------- ---------- $5,858,185 $5,073,008 ========== ==========
Vessels under construction includes progress payments for the construction of new vessels as well as planning, design, interest, commitment fees and other associated costs. The Company capitalized interest costs of $34.6, $15.0 and $15.8 million for the years 1999, 1998 and 1997, respectively. Accumulated amortization related to vessels under capital lease was $90.2 and $67.9 million at December 31, 1999 and 1998, respectively. In May 1998, the Company sold Song of America for $94.5 million and recognized a gain on the sale of $31.0 million which is included in Other income (expense). In the second quarter of 1998, the Company incurred a $32.0 million charge related to the write-down to fair market value of Viking Serenade. Based on the Company's strategic objectives, the unique circumstances of this vessel and indications of the current value of Viking Serenade, the Company recorded a write-down of the carrying value to its estimated fair market value which is included in Other income (expense). The Company continues to operate and depreciate the vessel which is classified as part of Property and Equipment on the balance sheet. In October 1997, the Company sold Sun Viking for $30.0 million and recognized a gain on the sale of $4.0 million. In September 1997, the Company sold Meridian. The sale price was $62.1 million and there was no gain or loss recognized in the transaction. The Company has recorded the gains in Other income (expense). F-9 40 ROYAL CARIBBEAN CRUISES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 6. LONG-TERM DEBT Long-term debt consists of the following (in thousands):
1999 1998 ---------- ---------- $1 billion revolving credit facility, LIBOR plus 0.30% interest rate on balances outstanding, 0.15% facility fee, due 2003.................................................. $ -- $ -- Senior Notes and Senior Debentures bearing interest at rates ranging from 6.75% to 8.25%, due 2002 through 2008, 2018 and 2027.................................................. 1,391,012 1,390,006 Unsecured fixed rate loan bearing interest at 8.0%, due 2006...................................................... 159,703 185,277 Fixed rate loans bearing interest at rates ranging from 6.7% to 8.0%, due through 2005, secured by certain Celebrity vessels................................................... 322,084 403,560 Variable rate loans bearing interest at 6.5% through Nov. 2001, LIBOR plus 0.45% through 2004, due through 2004, secured by certain Celebrity vessels...................... 25,342 30,978 Capital lease obligations, implicit interest rates ranging from 7.0% to 7.2%, due through 2011....................... 444,036 459,261 ---------- ---------- 2,342,177 2,469,082 Less -- current portion..................................... (128,086) (127,919) ---------- ---------- Long-term portion........................................... $2,214,091 $2,341,163 ========== ==========
Under the Company's $1.0 billion unsecured revolving credit facility (the "$1 Billion Revolving Credit Facility"), the contractual interest rate on balances outstanding varies with the Company's debt rating. In March 1998, the Company issued $150.0 million of 6.75% Senior Notes due 2008 and $150.0 million of 7.25% Senior Debentures due 2018. Net proceeds to the Company were approximately $296.1 million. In May 1997, the Company redeemed the remaining $104.5 million of 11 3/8% Senior Subordinated Notes and incurred an extraordinary charge of approximately $7.6 million, or $0.05 per share on the early extinguishment of debt. The Senior Notes and Senior Debentures are unsecured and are not redeemable prior to maturity. The Company entered into a $264.0 million capital lease to finance Splendour of the Seas and a $260.0 million capital lease to finance Legend of the Seas in 1996 and 1995, respectively. The capital leases each have semi-annual payments of $12.0 million over 15 years with final payments of $99.0 and $97.5 million, respectively. The Company's debt agreements contain covenants that require the Company, among other things, to maintain minimum liquidity amounts, net worth and fixed charge coverage ratios and limit debt to capital ratios. The Company is in compliance with all covenants as of December 31, 1999. Following is a schedule of principal repayments on long-term debt (in thousands):
YEAR - ---- 2000........................................................ $ 128,086 2001........................................................ 109,982 2002........................................................ 260,009 2003........................................................ 110,948 2004........................................................ 217,940 Thereafter.................................................. 1,515,212 ---------- $2,342,177 ==========
F-10 41 ROYAL CARIBBEAN CRUISES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 7. SHAREHOLDERS' EQUITY The following represents an analysis of the changes in shareholders' equity for the years 1999, 1998 and 1997 (in thousands):
PREFERRED COMMON PAID-IN RETAINED TREASURY STOCK STOCK CAPITAL EARNINGS STOCK TOTAL --------- ------ ---------- ---------- -------- ---------- Balance, January 1, 1997.................. $ -- $1,276 $ 551,945 $ 535,512 $(3,799) $1,084,934 Issuance of Convertible Preferred Stock... 172,500 -- (5,470) -- -- 167,030 Acquisition of Celebrity Cruise Lines Inc..................................... -- 148 269,852 -- -- 270,000 Issuance of Common Stock.................. -- 187 364,444 -- -- 364,631 Issuance under Employee Related Plans..... -- 10 7,533 -- (560) 6,983 Preferred stock dividends................. -- -- -- (9,201) -- (9,201) Common stock dividends.................... -- -- -- (40,783) -- (40,783) Net Income................................ -- -- -- 175,127 -- 175,127 -------- ------ ---------- ---------- ------- ---------- Balance, December 31, 1997................ 172,500 1,621 1,188,304 660,655 (4,359) 2,018,721 Issuance of Common Stock.................. -- 61 165,471 -- -- 165,532 Issuance under Employee Related Plans..... -- 8 8,021 -- (560) 7,469 Preferred stock dividends................. -- -- -- (12,506) -- (12,506) Common stock dividends.................... -- -- -- (55,228) -- (55,228) Net Income................................ -- -- -- 330,770 -- 330,770 -------- ------ ---------- ---------- ------- ---------- Balance, December 31, 1998................ 172,500 1,690 1,361,796 923,691 (4,919) 2,454,758 Issuance of Common Stock.................. -- 108 487,291 -- -- 487,399 Issuance under Preferred Stock Conversion.............................. (300) -- 300 -- -- -- Issuance under Employee Related Plans..... -- 14 17,260 -- (560) 16,714 Preferred stock dividends................. -- -- -- (12,506) -- (12,506) Common stock dividends.................... -- -- -- (69,062) -- (69,062) Net Income................................ -- -- -- 383,853 -- 383,853 -------- ------ ---------- ---------- ------- ---------- Balance, December 31, 1999................ $172,200 $1,812 $1,866,647 $1,225,976 $(5,479) $3,261,156 ======== ====== ========== ========== ======= ==========
In 1999, the Company completed a public offering of 11,625,000 shares of common stock at a price of $46.69 per share. Of the total shares sold, 10,825,000 shares were sold by the Company and the balance of 800,000 shares were sold by a selling shareholder. After deduction of the underwriting discount and other estimated expenses of the offering, net proceeds to the Company were approximately $487.4 million. In March 1998, the Company completed a public offering of 13,800,000 shares of common stock at a price of $28.25 per share. Of the total shares sold, 6,100,690 shares were sold by the Company, and the balance of 7,699,310 shares were sold by selling shareholders. After deduction of the underwriting discount and other estimated expenses of the offering, net proceeds to the Company were approximately $165.5 million. In February 1997, the Company issued 3,450,000 shares of $3.625 Series A Convertible Preferred Stock (the "Convertible Preferred Stock"). The Convertible Preferred Stock has a liquidation preference of $50 per share and is convertible by the holder at any time into shares of common stock at a conversion price of $16.20 per share of common stock (equivalent to a conversion rate of 3.0864 shares of common stock for each share of Convertible Preferred Stock). The shares of Convertible Preferred Stock are redeemable, at the option of the Company, subsequent to February 16, 2000 at pre-established redemption prices. The Company's Employee Stock Purchase Plan facilitates the purchase by employees of up to 800,000 shares of common stock commencing January 1, 1994. The purchase price is derived from a formula based on 90% of the fair market value of the common stock during the quarterly purchase period, subject to certain restrictions. Shares of common stock of 35,263, 35,546 and 33,276 were issued under the Employee Stock Purchase Plan at an average price of $37.81, $28.33 and $16.48 during 1999, 1998 and 1997, respectively. F-11 42 ROYAL CARIBBEAN CRUISES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Under an executive compensation program approved in 1994, the Company will award to a trust 10,086 shares of common stock per quarter, up to a maximum of 806,880 shares. The Company issued 40,344 shares each year under the program during 1999, 1998 and 1997. The Company has an Employee Stock Option Plan and an Incentive Stock Option Plan which provide for awards to officers, directors and key employees of the Company up to an aggregate 14,703,000 shares and 3,700,000 shares of common stock, respectively. Options are granted at a price not less than the fair value of the shares on the date of grant and expire not later than 10 years after the date of grant. Options under the Employee Stock Option Plan generally become exercisable as to 40% of the amount granted two years after the grant date and 20% of the amount granted at the end of each of the three succeeding years. Options under the Incentive Stock Option Plan generally become exercisable as to 25% of the amount granted two years after the grant date and 25% of the amount granted at the end of each of the three succeeding years. Stock option activity and information about stock options are summarized in the following tables.
NUMBER OF AVERAGE STOCK OPTION ACTIVITY OPTIONS PRICE - --------------------- ---------- ------- Balance at January 1, 1997.................................. 5,321,700 $10.81 Granted................................................... 1,080,000 $19.49 Exercised................................................. (831,608) $ 7.87 Canceled.................................................. (95,776) $13.16 ---------- Balance at December 31, 1997................................ 5,474,316 $12.92 Granted................................................... 2,013,000 $25.07 Exercised................................................. (652,474) $ 9.90 Canceled.................................................. (342,452) $16.74 ---------- Balance at December 31, 1998................................ 6,492,390 $16.78 Granted................................................... 2,285,500 $39.23 Exercised................................................. (1,318,714) $11.01 Canceled.................................................. (565,004) $23.03 ---------- Balance at December 31, 1999................................ 6,894,172 $24.82 ========== Available for Future Grants, end of the Year................ 8,553,864
STOCK OPTIONS OUTSTANDING AS OF DECEMBER 31, 1999
OUTSTANDING EXERCISABLE -------------------------------------- -------------------------- AVERAGE REMAINING AVERAGE AVERAGE EXERCISE PRICE RANGE SHARES LIFE EXERCISE PRICE SHARES EXERCISE PRICE - -------------------- --------- --------- -------------- --------- -------------- $7.24 - $12.16......................... 923,430 4.6 years $ 9.96 653,380 $ 9.35 $13.31 - $19.97........................ 1,649,842 6.2 years $14.59 916,850 $13.98 $21.92 - $32.85........................ 2,155,400 8.3 years $24.34 78,950 $21.92 $35.09 - $44.19........................ 2,165,500 9.4 years $39.42 -- -- --------- --------- 6,894,172 7.6 years $24.82 1,649,180 $12.53 ========= =========
The Company uses the intrinsic value method of accounting for stock-based compensation. Had the fair value based method been used to account for such compensation, compensation costs would have reduced net income by $15.0, $8.2 and $4.0 million or $0.08, $0.05 and $0.03 per share in 1999, 1998 and 1997, respectively. The weighted-average fair value of options granted during 1999, 1998 and 1997 was $15.52, $10.49 and $7.80, respectively. Fair market value information for the Company's stock options for 1999, 1998 and 1997 was estimated using the Black-Scholes Model assuming an expected dividend rate of 1.0% in 1999 F-12 43 ROYAL CARIBBEAN CRUISES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) and 1.5% in 1998 and 1997, an estimated term of six years, a risk-free rate of return of approximately 5% in 1999 and 1998 and 6% in 1997, and an expected volatility of 35.6%, 35.0% and 28.0% in 1999, 1998 and 1997, respectively. Effective January 1, 1998, the Company instituted a program, "Taking Stock in Employees," to award stock to employees up to a maximum of 1,400,000 shares of common stock. Employees are awarded 50 shares of the Company's stock which vest over a 10-year period. Employees can elect to receive cash equal to the fair market value of the stock upon vesting. Compensation expense was $3.3 and $3.6 million in 1999 and 1998, respectively, related to this program. NOTE 8. EARNINGS PER SHARE Below is a reconciliation between basic and diluted earnings per share before extraordinary item for the years ended December 31, 1999, 1998 and 1997 (in thousands, except per share amounts).
FOR THE YEARS ENDED DECEMBER 31, ------------------------------------------------------------------------------------ 1999 1998 1997 -------------------------- -------------------------- -------------------------- PER PER PER INCOME SHARES SHARE INCOME SHARES SHARE INCOME SHARES SHARE -------- ------- ----- -------- ------- ----- -------- ------- ----- Income before extraordinary item......... $383,853 $330,770 $182,685 Less: Preferred stock dividend........... (12,506) (12,506) (10,765) -------- -------- -------- Basic earnings per share................. 371,347 172,319 $2.15 318,264 167,577 $1.90 171,920 141,010 $1.22 ===== ===== ===== Effect of Dilutive Securities Stock options.......................... 3,508 2,940 1,978 Convertible preferred stock............ 12,506 10,629 12,506 10,648 10,765 9,186 -------- ------- -------- ------- -------- ------- Diluted earnings per share............... $383,853 186,456 $2.06 $330,770 181,165 $1.83 $182,685 152,174 $1.20 ======== ======= ===== ======== ======= ===== ======== ======= =====
Extraordinary loss per share for the year ended 1997 for basic and diluted earnings per share was ($0.05). NOTE 9. RETIREMENT PLANS The Company maintains a defined contribution pension plan covering all of its full-time shoreside employees who have completed the minimum period of continuous service. Annual contributions to the plan are based on fixed percentages of participants' salaries and years of service, not to exceed certain maximums. Pension cost was $7.2, $6.9 and $4.9 million for the years 1999, 1998 and 1997, respectively. Effective January 1, 2000, the Company instituted a defined benefit pension plan to cover all of its shipboard employees not covered under another pension plan. Benefits to eligible employees are accrued based on the employee's years of service. The Company made an initial funding pursuant to this plan as of December 31, 1999. NOTE 10. INCOME TAXES The Company and the majority of its subsidiaries are not subject to U.S. corporate income tax on income generated from the international operation of ships pursuant to Section 883 of the Internal Revenue Code, provided that they meet certain tests related to country of incorporation and composition of shareholders. The Company believes that it and a majority of its subsidiaries meet these tests. Income tax expense related to the Company's remaining subsidiaries is not significant. F-13 44 ROYAL CARIBBEAN CRUISES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 11. FINANCIAL INSTRUMENTS The estimated fair values of the Company's financial instruments are as follows (in thousands):
1999 1998 ------------------------- ------------------------- CARRYING CARRYING AMOUNT FAIR VALUE AMOUNT FAIR VALUE ----------- ----------- ----------- ----------- Cash and Cash Equivalents........... $ 63,470 $ 63,470 $ 172,921 $ 172,921 Long-Term Debt (including current portion of long-term debt)........ (2,342,177) (2,339,960) (2,469,082) (2,564,985) Interest Rate Swap Agreements in a net receivable (payable) position.......................... 2,130 (13,661) 2,370 48,558
The carrying amounts shown are the amounts reported in the consolidated balance sheets. The reported fair values are based on a variety of factors and assumptions. Accordingly, the fair values may not represent actual values of the financial instruments that could have been realized as of December 31, 1999 or 1998 or that will be realized in the future and do not include expenses that could be incurred in an actual sale or settlement. The following methods were used to estimate the fair values of the Company's financial instruments, none of which are held for trading or speculative purposes: Cash and Cash Equivalents The carrying amount approximates fair value because of the short maturity of those instruments. Long-Term Debt The fair values of the $1 Billion Revolving Credit Facility, the capital leases, the secured fixed and variable rate loans and the unsecured fixed rate loan were estimated based on the market rates available to the Company for similar debt with the same remaining maturities. The fair values of the Senior Notes and Senior Debentures were estimated by obtaining quoted market prices. Interest Rate Swap Agreements The fair value of interest rate swap agreements was estimated based on quoted market prices for similar or identical financial instruments to those held by the Company. The Company's exposure to market risk for changes in interest rates relates to its long-term debt obligations. Market risk associated with the Company's long-term debt is the potential increase in fair value resulting from a decrease in interest rates. The Company uses interest rate swaps to modify its exposure to interest rate movements and manage its interest expense. As of December 31, 1999, the Company had agreements in effect which exchanged fixed interest rates for floating interest rates in a notional amount of $850.0 million maturing in 2002 through 2008. The Company has exposure under these interest rate swap agreements for the cost of replacing the contracts in the event of nonperformance by the counterparties, all of which are currently the Company's lending banks. To minimize that risk, the Company limits its exposure to any individual counterparty and selects counterparties with credit risks acceptable to the Company. During June 1999, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 137, Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of FASB Statement 133. The Statement defers the effective date of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, until January 1, 2000 for the Company. The Company has not yet determined the impact that the adoption of SFAS No. 133 will have on its earnings or statement of financial position. F-14 45 ROYAL CARIBBEAN CRUISES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 12. COMMITMENTS AND CONTINGENCIES Capital Expenditures The Company has 10 ships on order. Two are Voyager-class vessels designated for the Royal Caribbean International fleet, which are scheduled for delivery in the third quarter of 2000 and first quarter of 2002. The Company also has four Vantage-class vessels designated for the Royal Caribbean International fleet scheduled for delivery in the first quarter of 2001 and second quarters of 2002, 2003 and 2004 and four Millennium-class vessels designated for the Celebrity Cruises fleet, scheduled for delivery in the second quarter of 2000, first quarter of 2001, third quarter of 2001 and second quarter of 2002. The aggregate contract price of the 10 ships, which excludes capitalized interest and other ancillary costs, is approximately $3.9 billion, of which the Company deposited $247.0 million during 1999, $119.3 million during 1998 and $23.7 million during 1997. Additional deposits are due prior to the dates of delivery of $88.1 million in 2000, $64.6 million in 2001 and $39.6 million in 2002. Litigation In July 1999, the Company entered into a plea agreement with the U.S. Department of Justice resolving a series of federal grand jury investigations of the Company's waste disposal practices. The Company was assessed fines of $18.0 million of which $4.0 million had previously been accrued in connection with the plea agreement. In January 2000, the Company entered into a settlement with the State of Alaska resolving a civil lawsuit relating to the same incidents. The settlement calls for the Company to make payments totaling $3.3 million, which were accrued in 1999. Beginning in August 1996, several purported class action suits were filed alleging that Royal Caribbean International and Celebrity should have paid commissions to travel agents on a portion of the port charges that were included in the price of cruise fares. The suits seek damages in an unspecified amount. Similar suits are pending against other companies in the cruise industry. In December 1998, a Florida state court dismissed one of the suits for failure to state a claim under Florida law. The plaintiff in that case has filed an appeal of that decision. The Company is not able at this time to estimate the timing or impact of these proceedings on the Company. In April 1999, a lawsuit was filed in the United States District Court for the Southern District of New York on behalf of current and former crew members alleging that the Company failed to pay the plaintiffs their full wages. The suit seeks payment of (i) the wages alleged to be owed, (ii) penalty wages under U.S. law and (iii) punitive damages. In November 1999, a purported class action suit was filed in the same court alleging a similar cause of action. The Company is not able at this time to estimate the impact of these proceedings on the Company; there can be no assurance that such proceedings, if decided adversely, would not have a material adverse effect on the Company's results of operations. The Company is routinely involved in other claims typical to the cruise industry. The majority of these claims are covered by insurance. Management believes that the outcome of such other claims which are not covered by insurance are not expected to have a material adverse effect upon the Company's financial condition or results of operations. F-15 46 ROYAL CARIBBEAN CRUISES LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Operating Leases The Company is obligated under noncancelable operating leases for various facilities, primarily office and warehouse space. As of December 31, 1999, future minimum lease payments under noncancelable operating leases were as follows (in thousands):
YEAR ---- 2000........................................................ $ 5,485 2001........................................................ 4,882 2002........................................................ 4,523 2003........................................................ 4,058 2004........................................................ 3,849 Thereafter.................................................. 22,414 ------- $45,211 =======
Total rent expense for all operating leases amounted to $5.1, $6.9 and $5.7 million for the years 1999, 1998 and 1997, respectively. Other At December 31, 1999, the Company has commitments through 2014 to pay a minimum amount for its annual usage of certain port facilities as follows (in thousands):
YEAR ---- 2000........................................................ $ 9,720 2001........................................................ 11,238 2002........................................................ 13,050 2003........................................................ 12,524 2004........................................................ 13,302 Thereafter.................................................. 138,060 -------- $197,894 ========
NOTE 13. QUARTERLY DATA (UNAUDITED)
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER ------------------- ------------------- ------------------- ------------------- 1999 1998 1999 1998 1999 1998 1999 1998 -------- -------- -------- -------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Revenues.............................. $610,046 $659,777 $617,664 $656,456 $734,460 $744,910 $583,982 $575,148 Operating Income...................... 108,390 119,461 108,110 121,533 198,225 183,592 65,449 64,149 -------- -------- -------- -------- -------- -------- -------- -------- Net Income............................ $ 90,196 $ 77,537 $ 85,347 $ 79,770 $169,972 $150,038 $ 38,338 $ 23,425 ======== ======== ======== ======== ======== ======== ======== ======== Earnings Per Share Basic............................... $ 0.52 $ 0.45 $ 0.49 $ 0.45 $ 0.98 $ 0.87 $ 0.19 $ 0.12 -------- -------- -------- -------- -------- -------- -------- -------- Diluted............................. $ 0.49 $ 0.44 $ 0.47 $ 0.44 $ 0.92 $ 0.82 $ 0.19 $ 0.12 -------- -------- -------- -------- -------- -------- -------- -------- Dividends Declared Per Share.......... $ 0.09 $ 0.08 $ 0.09 $ 0.08 $ 0.11 $ 0.09 $ 0.11 $ 0.09 -------- -------- -------- -------- -------- -------- -------- --------
F-16 47 INDEX TO EXHIBITS
EXHIBIT DESCRIPTION - ------- ----------- 1.1 -- Third Supplemental Agreement dated September 2, 1999 to Loan Facility Agreement dated November 29, 1993 between Esker Marine Shipping Inc. and Kreditanstalt fur Wiederaufbau ("KfW"). 1.2 -- Third Supplemental Agreement dated September 2, 1999 to Loan Facility Agreement dated November 29, 1993 between Blue Sapphire Marine Inc. and KfW. 1.3 -- Seventh Supplemental Agreement dated September 2, 1999 to Loan Facility Agreement dated June 21, 1990 between Zenith Shipping Corporation and KfW. 2.1 -- Restated Articles of Incorporation of the Company, as amended (incorporated by reference to Exhibit 3.1 to the Company's Registration Statement on Form F-1, File No. 33-59304, filed with the Securities and Exchange Commission (the "Commission"); Exhibit 2.2 to the Company's 1996 Annual Report on Form 20-F filed with the Commission; Document No. 1 in the Company's Form 6-K filed with the Commission on October 14, 1999; and Document No. 1 in the Company's Form 6-K filed with the Commission on May 18, 1999). 2.2 -- Certificate of the Powers, Designations, Preferences and Rights of the Convertible Preferred Stock (incorporated by reference to Exhibit 2.2 to the Company's 1996 Annual Report on Form 20-F filed with the Commission). 2.3 -- Restated By Laws of the Company (incorporated by reference to Document No. 2 to the Company's Form 6-K filed with the Commission on May 18, 1999). 2.4 -- Indenture dated as of July 15, 1994 between the Company, as issuer, and The Bank of New York, successor to NationsBank of Georgia, National Association, as Trustee (incorporated by reference to Exhibit 2.4 to the Company's 1994 Annual Report on Form 20-F filed with the Commission). 2.5 -- First Supplemental Indenture dated as of July 28, 1994 to Indenture dated as of July 15, 1994 between the Company, as issuer, and The Bank of New York, successor to NationsBank of Georgia, National Association, as Trustee (incorporated by reference to Exhibit 2.5 to the Company's 1994 Annual Report on Form 20-F filed with the Commission). 2.6 -- Second Supplemental Indenture dated as of March 29, 1995 to Indenture dated as of July 15, 1994 between the Company, as issuer, and The Bank of New York, successor to NationsBank of Georgia, National Association, as Trustee (incorporated by reference to Exhibit 2.5 to the Company's 1995 Annual Report on Form 20-F filed with the Commission). 2.7 -- Third Supplemental Indenture dated as of September 18, 1995 to Indenture dated as of July 15, 1994 between the Company, as issuer, and The Bank of New York, successor to NationsBank of Georgia, National Association, as Trustee (incorporated by reference to Exhibit 2.6 to the Company's 1995 Annual Report on Form 20-F filed with the Commission). 2.8 -- Fourth Supplemental Indenture dated as of August 12, 1996 to Indenture dated as of July 15, 1994 between the Company, as issuer, and The Bank of New York, as Trustee (incorporated by reference to Document No. 2 in the Company's Form 6-K filed with the Commission on February 10, 1997). 2.9 -- Fifth Supplemental Indenture dated as of October 14, 1997 to Indenture dated as of July 15, 1994 between the Company, as issuer, and The Bank of New York, as Trustee (incorporated by reference to Exhibit 2.10 to the Company's 1997 Annual Report on Form 20-F filed with the Commission). 2.10 -- Sixth Supplemental Indenture dated as of October 14, 1997 to Indenture dated as of July 15, 1994 between the Company, as issuer and The Bank of New York, as Trustee (incorporated by reference to Exhibit 2.11 to the Company's 1997 Annual Report on Form 20-F filed with the Commission). 2.11 -- Seventh Supplemental Indenture dated as of March 16, 1998 to Indenture dated as of July 15, 1994 between the Company, as issuer, and The Bank of New York, as Trustee (incorporated by reference to Exhibit 2.12 to the Company's 1997 Annual Report on Form 20-F filed with the Commission).
48
EXHIBIT DESCRIPTION - ------- ----------- 2.12 -- Eighth Supplemental Indenture dated as of March 16, 1998 to Indenture dated as of July 15, 1994 between the Company, as issuer, and The Bank of New York, as Trustee (incorporated by reference to Exhibit 2.13 to the Company's 1997 Annual Report on Form 20-F filed with the Commission). 2.13 -- Amended and Restated Credit Agreement dated as of June 28, 1996 among the Company and various financial institutions and The Bank of Nova Scotia as Administrative Agent and Amendment No. 1 thereto (incorporated by reference to Document No. 3 in the Company's Form 6-K filed with the Commission on February 10, 1997 and Exhibit 1.1 to the Company's 1997 Annual Report on Form 20-F filed with the Commission). 2.14 -- Credit Agreement dated as of December 16, 1999 between the Company and KfW. 2.15 -- New Credit Agreement dated December 12, 1997 between Seabrook Maritime Inc. and KfW (incorporated by reference to Exhibit 2.13 to the Company's 1997 Annual Report on Form 20-F filed with the Commission). 2.16 -- Loan Facility Agreement dated November 29, 1993 between Esker Marine Shipping Inc. and KfW, together with supplemental agreements thereto (incorporated by reference to Exhibit 2.16 to the Company's 1997 Annual Report on Form 20-F filed with the Commission and to Exhibit 1.8 to the Company's 1998 Annual Report on Form 20-F filed with the Commission). 2.17 -- Loan Facility Agreement dated November 29, 1993 between Blue Sapphire Marine Inc. and KfW, together with supplemental agreements thereto (incorporated by reference to Exhibit 2.17 to the Company's 1997 Annual Report on Form 20-F filed with the Commission and to Exhibit 1.9 to the Company's 1998 Annual Report on Form 20-F filed with the Commission). 2.18 -- Loan Facility Agreement dated June 21, 1990 between Zenith Shipping Corporation and KfW, together with supplemental agreements thereto (incorporated by reference to Exhibit 2.18 to the Company's 1997 Annual Report on Form 20-F filed with the Commission and to Exhibit 1.10 to the Company's 1998 Annual Report on Form 20-F filed with the Commission). 2.19 -- Amended and Restated Registration Rights Agreement dated as of July 30, 1997 among the Company, A. Wilhelmsen AS, Cruise Associates, Monument Capital Corporation, Archinav Holdings, Ltd. and Overseas Cruiseship, Inc (incorporated by reference to Exhibit 2.20 to the Company's 1997 Annual Report on Form 20-F filed with the Commission). 2.20 -- Lease Agreement dated March 3, 1993 between the Company and G.I.E. Cruise Vision One and Amendment Nos. 1, 2 and 3 thereto (incorporated by reference to Exhibit 2.9 to the Company's 1994 Annual Report on Form 20-F filed with the Commission; Exhibit 1.4 to the Company's 1995 Annual Report on Form 20-F filed with the Commission; and to Exhibit 1.3 to the Company's 1998 Annual Report on Form 20-F filed with the Commission). 2.21 -- Lease Agreement dated March 3, 1993 between the Company and G.I.E. Cruise Vision Two and Amendment Nos. 1, 2, 3 and 4 thereto (incorporated by reference to Exhibit 2.11 to the Company's 1995 Annual Report on Form 20-F filed with the Commission and to Exhibit 1.4 to the Company's 1998 Annual Report on Form 20-F filed with the Commission). 2.22 -- Office Building Lease Agreement dated July 25, 1989 between Dade County and the Company, as amended (incorporated by reference to Exhibits 10.116 and 10.117 to the Company's Registration Statement on Form F-1, File No. 33-46157, filed with the Commission). 2.23 -- Office Building Lease Agreement dated January 18, 1994 between Dade County and the Company (incorporated by reference to Exhibit 2.13 to the Company's 1993 Annual Report on Form 20-F filed with the Commission). 23 -- Consent of PricewaterhouseCoopers LLP, independent certified public accountants.
- --------------- * Portions of this document have been omitted pursuant to an order by the Commission granting confidential treatment. Confidential portions of this document have been separately filed with the Commission. ** Portions of this document have been omitted pursuant to an application filed with the Commission for an order for confidential treatment. Confidential portions of this document have been separately filed with the Commission. EX-1.1 2 3RD SUPP AGREEMENT TO LOAN FACILITY "GALAXY" 1 EXHIBIT 1.1 KREDITANSTALT FUR WIEDERAUFBAU (1) - and - ESKER MARINE SHIPPING INC. (2) --------------------------------------------- THIRD SUPPLEMENTAL AGREEMENT - TO - LOAN FACILITY AGREEMENT IN RESPECT OF M.V. "GALAXY" (EX YARD NO. 638 AT JOS. L. MEYER GMBH & CO.) F(W) 751 --------------------------------------------- Sinclair Roche & Temperley London 2 INDEX PAGE 1. DEFINITIONS.........................................................2 2. CONSENT OF THE LENDER...............................................3 3. DOCUMENTATION TO BE SIGNED CONCURRENTLY WITH THIS THIRD SUPPLEMENTAL AGREEMENT...................................4 4. AMENDMENTS TO THE ORIGINAL LOAN AGREEMENT...........................5 5. LAW AND JURISDICTION................................................8 SCHEDULES FIRST : Form of Second Letter of Consent SECOND : Form of Cross Collateral Guarantee Supplement THIRD : Form of Supplement No. 2 to the Second Mortgage FOURTH : Form of Second Supplement to the Second Assignment of Insurances FIFTH : Form of Second Supplement to the Second Assignment of Charter Earnings SIXTH : Form of Second Supplement to the Second Tripartite Agreement SEVENTH : Form of Second Supplement to the Subordination Agreement EIGHTH : Form of Supplement to the Cruise Mar Guarantee NINTH : Form of Supplement to Surplus Earnings Application Agreement 3 THIS AGREEMENT made as of the 2nd day of September 1999 BETWEEN:- (1) KREDITANSTALT FUR WIEDERAUFBAU a public law corporation incorporated in the Federal Republic of Germany whose office is at present at Palmengartenstra e 5-9, D-60325 Frankfurt am Main ("the Lender"); and (2) ESKER MARINE SHIPPING INC. a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("the Borrower") IS SUPPLEMENTAL TO a loan facility agreement dated 29 November 1993 as amended by agreements supplemental thereto dated 30 November 1995 and 1 September 1998 (together "the Original Loan Agreement"). WHEREAS:- A. The Lender has been requested to release:- (i) Fantasia from all of its obligations to the Lender under the guarantee dated 29 November 1993 (as amended) (together "THE GUARANTEE") executed by Fantasia in favour of the Lender in respect of the obligations of the Borrower under the Original Loan Agreement; and (ii) the Borrower from all of its obligations to the Lender under the guarantee dated 30 November 1995 ("THE ESKER GUARANTEE") executed by the Borrower in favour of the Lender in respect of the obligations of Fantasia under the Collateral Vessel Loan Agreement; B. Pursuant to a deed of release and reassignment dated as of 2 September 1999 made between (1) the Lender, (2) Blue Sapphire, (3) the Borrower, (4) Zenith, (5) Fantasia and (6) CCI the Lender has released the Guarantee; 4 - 2 - C. This Supplemental Agreement (inter alia) sets out the terms and conditions upon which the Lender will agree to grant its consent to the release of the Esker Guarantee and upon which certain amendments will be made to the Original Loan Agreement and the Security Documents; NOW IT IS HEREBY MUTUALLY AGREED by and between the parties hereto as follows:- 1. DEFINITIONS 1.1 Terms and expressions defined in the Recitals to this Supplemental Agreement shall, when used in this Supplemental Agreement, have the meanings therein set out; terms and expressions not defined herein but whose meanings are defined in the Original Loan Agreement shall, when used herein, have the same meanings set out therein and the following terms and expressions shall have the following meanings:- "CROSS COLLATERAL GUARANTEE SUPPLEMENTS" means together the supplements to the Cross Collateral Guarantees in respect of each of the Blue Sapphire Loan Agreement and the Zenith Loan Agreement each in the form and upon the terms and conditions of the draft set out in the Second Schedule hereto; "SECOND LETTER OF CONSENT" means a letter of consent to be addressed by the Lender to the Borrower in the form set out in the First Schedule hereto; "SECOND ASSIGNMENT OF CHARTER EARNINGS SECOND SUPPLEMENT" means, in respect of the Vessel, the second supplement to the Second Assignment of Charter Earnings in the form and upon the terms and conditions of the draft set out in the Fifth Schedule hereto; "SECOND ASSIGNMENT OF INSURANCES SECOND SUPPLEMENT" means, in respect of the Vessel, the second supplement to the Second Assignment of Insurances in the form and upon the terms and conditions of the draft set out in the Fourth Schedule hereto; "SECOND MORTGAGE SUPPLEMENT NO. 2" means a supplement to the Second Mortgage in form and upon terms and conditions of the draft set out in the Third Schedule hereto; 5 - 3 - "SECOND TRIPARTITE AGREEMENT SECOND SUPPLEMENT" means, in respect of the Vessel, the second supplement to the Second Tripartite Agreement in the form and upon the terms and conditions of the draft set out in the Sixth Schedule; "SUBORDINATION AGREEMENT SUPPLEMENT" means the first supplemental agreement to the Subordination Agreement in the form and upon the terms and conditions of the draft set out in the Seventh Schedule hereto; "SUPPLEMENT TO THE CRUISE MAR GUARANTEE" means the supplement to the Cruise Mar Guarantee in the form and upon the terms and conditions set out in the Eighth Schedule; "SURPLUS EARNINGS APPLICATION AGREEMENT SUPPLEMENT" means an agreement supplemental to the Surplus Earnings Application Agreement in the form and upon the terms and conditions of the draft set out in the Ninth Schedule hereto; 2. CONSENT OF THE LENDER 2.1 Subject to the fulfilment of all the terms and conditions set out in Clause 2.2 the Lender will issue the Second Letter of Consent and agree to the amendments to the Original Loan Agreement hereinafter set out. (A) the Lender has received the following documents each in form and substance satisfactory to the Lender:- (i) this Third Supplemental Agreement duly executed by the Borrower; (ii) the Cross Collateral Guarantee Supplements duly executed by the Borrower; and (iii) the Supplement to the Cruise Mar Guarantee duly executed by Cruise Mar. (B) the Lender has received a certificate from the Secretary of each of the Borrower, Zenith, Blue Sapphire, Cruise Mar, CMI and CCI attaching resolutions passed at 6 - 4 - the Meeting of the Board of Directors of the relevant company approving or ratifying the execution, delivery, implementation and performance of such of this Third Supplemental Agreement and each of the documents executed or to be executed pursuant thereto to which such company is or is to be a party, such certificate to certify that such resolutions remain in full force and effect on the date of such certificate and such certificate to certify the names of the current officers and directors of the relevant company; and (C) no Event of Default has occurred and is continuing. 3. DOCUMENTATION TO BE SIGNED CONCURRENTLY WITH THIS THIRD SUPPLEMENTAL AGREEMENT 3.1 The following shall be effected concurrently with the execution of this Third Supplemental Agreement:- (A) the Second Mortgage Supplement No. 2 duly executed by the Borrower and registered under the laws and flag of the Republic of Liberia at the Office of the Deputy Commissioner of Maritime Affairs of the Republic of Liberia at the port of New York; (B) the Second Assignment of Insurances Second Supplement duly executed by the Borrower and CCI respectively; (C) the Second Assignment of Charter Earnings Second Supplement duly executed by the Borrower; (D) the Second Tripartite Agreement Second Supplement duly executed by the Borrower and CCI; (E) the Subordination Agreement Supplement duly executed by CMI; and (F) the Surplus Earnings Application Agreement Supplement duly executed by Fantasia, Zenith, Blue Sapphire, the Borrower and CCI. 7 - 5 - 4. AMENDMENTS TO THE ORIGINAL LOAN AGREEMENT 4.1 As and with effect from 31 October 1998 the Original Loan Agreement shall be further amended as follows:- (A) DEFINITIONS The definition of "ADDITIONAL SECURITIES" shall be amended by the deletion therefrom of "FANTASIA CROSS SECURITIES"; The definition of "CHARTER" shall be amended by the insertion after "1 SEPTEMBER 1998" of the words "AND ADDENDUM NO. 3 DATED 2 SEPTEMBER 1999"; The definition of "CHARTER EARNINGS" shall be amended by the deletion therefrom of "AND, IN RESPECT OF THE COLLATERAL VESSEL, ALL EARNINGS DUE OR TO BECOME DUE TO FANTASIA UNDER THE COLLATERAL VESSEL CHARTER"; The definition of "CMI/FANTASIA LOAN" shall be deleted in full; The definition of "CMI/FANTASIA SUBORDINATION AGREEMENT" shall be deleted in full; The definition of "COLLATERAL VESSEL" shall be deleted in full; The definition of "COLLATERAL VESSEL CHARTER " shall be deleted in full; The definition of "COLLATERAL VESSEL LOAN AGREEMENT" shall be deleted in full; The definition of "COLLATERAL VESSEL LOAN AGREEMENT SUPPLEMENT" shall be deleted in full; 8 - 6 - The definition of "COLLATERAL VESSEL FIRST MORTGAGE" shall be deleted in full; The definition of "CROSS COLLATERAL GUARANTEES" shall be amended by the deletion therefrom in line 1 of "FOUR (4)" and the substitution therefor of "TWO (2)" and in line 5 of "FANTASIA UNDER THE COLLATERAL VESSEL LOAN AGREEMENT"; The definition "DEFERRAL" shall be amended by the deletion therefrom in line 1 of "FOUR (4)" and the substitution therefor of "THREE (3)"; The definition of "EARNINGS" shall be amended by the deletion therefrom in line 3 and in the last line respectively of the words "OR FANTASIA (OR AS THE CASE MAY BE)". The definition of "FANTASIA CROSS SECURITIES" shall be deleted in full; The definition of "GUARANTEE" shall be deleted in full; The definition of "INSURANCES" shall be amended by the deletion therefrom of sub paragraph (B) in full; The definition "KFW FACILITY AGREEMENTS" shall be amended by the deletion therefrom of "THE COLLATERAL VESSEL LOAN AGREEMENT"; The definition of "LOAN AGREEMENT" shall be amended to read "MEANS THE ORIGINAL LOAN AGREEMENT AS AMENDED BY AGREEMENTS SUPPLEMENTAL THERETO DATED 30 NOVEMBER 1995, 1 SEPTEMBER 1998 AND 2 SEPTEMBER 1999"; The definition of "NOTICE OF ASSIGNMENT OF COLLATERAL VESSEL CHARTER EARNINGS" shall be deleted in full; The definition of "OBLIGORS" shall be amended by the deletion therefrom of "FANTASIA"; 9 - 7 - The definition of "OWNER'S REQUISITION COMPENSATION" shall be amended by the deletion therefrom of "OR FANTASIA (AS THE CASE MAY BE)"; The definitions of "SECOND ASSIGNMENT OF CHARTER EARNINGS", "SECOND ASSIGNMENT OF INSURANCES", "SECOND MORTGAGE" and "SECOND TRIPARTITE AGREEMENT" shall each be deemed to include therein the respective supplements to each such security referred to in Clause 2.2(B); The definition of "SECURITY VESSELS" shall be amended by the deletion therefrom of "THE COLLATERAL VESSEL"; The definition of "SUBORDINATION AGREEMENT" shall be amended to read "MEANS THE SUBORDINATION AGREEMENT MADE BETWEEN CMI AND KFW ON 30 NOVEMBER 1995 AS AMENDED BY A DEED SUPPLEMENTAL THERETO DATED 2 SEPTEMBER 1999"; The definition "SURPLUS EARNINGS APPLICATION AGREEMENT" shall be deemed to include the supplement thereto referred to in Clause 2.2(B); The definition of "ZENITH LOAN AGREEMENT" shall be amended by the insertion after "1 SEPTEMBER 1998" of the words "AND 2 SEPTEMBER 1999"; (B) CLAUSE 13 (i) Clause 13.1(O) shall be amended by the deletion therefrom of "TO FANTASIA AS CONSIDERATION FOR THE ISSUE BY FANTASIA OF THE GUARANTEE AND" and all references to "FANTASIA" and "GUARANTEE"; (ii) Clause 13.2(K) shall be deleted in full; (C) CLAUSE 17 (i) Clause 17.2(Q) shall be amended by the deletion therefrom of "OR (UNTIL FANTASIA IS RELEASED FROM ITS OBLIGATIONS UNDER THE GUARANTEE AND THE 10 - 8 - OTHER SECURITY DOCUMENTS TO WHICH IT IS A PARTY PURSUANT TO CLAUSE 14.5) FANTASIA"; (ii) Clause 17.2(R)(i) shall be deleted in full; (iii) Clause 17.2(U) shall be amended by the deletion therefrom of all references to "COLLATERAL VESSEL CHARTER"; (iv) Clause 17.2(V) shall be amended by the deletion therefrom of "FANTASIA" and "SEABROOK"; (v) Clause 17.2(W) shall be amended by the deletion therefrom of "OR THE COLLATERAL VESSEL CHARTER"; (vi) Clause 17.2(AC) shall be deleted in full; (vii) Clause 17.2(AF) shall be deleted in full; (D) CLAUSE 21 (i) Clause 21.2 shall be amended by the deletion in full of the application under "FIRSTLY". 4.2 Save as amended by Clause 3.1 the Original Loan Agreement shall remain unchanged and in full force and effect. 5. LAW AND JURISDICTION 5.1 The provisions of Clauses 31 (Law) and 32 (Jurisdiction) of the Original Loan Agreement shall apply to this Third Supplemental Agreement mutatis mutandis. 11 - 9 - AS WITNESS the hands of the duly authorized representatives of the parties hereto the day and year first before written. SIGNED by ) ) /s/ JP Ward for and on behalf of ) ------------------------- KREDITANSTALT FUR WIEDERAUFBAU ) Jonathan Paul Ward in the presence of:- ) ATTORNEY IN FACT SIGNED by ) ) /s/ Bonnie Biumi for and on behalf of ) ------------------------ ESKER MARINE SHIPPING INC. ) Bonnie Biumi in the presence of:- ) Vice President & Treasurer 12 THE FIRST SCHEDULE [to be typed on headed paper of Kreditanstalt fur Wiederaufbau] Esker Marine Shipping Inc. c/o Celebrity Cruises Inc. 1050 Caribbean Way Miami Florida 33132-2096 USA Dear Sirs M.V. "GALAXY" - LOAN AGREEMENT DATED 29 NOVEMBER 1993 - F(W) 751 We refer to the loan agreement dated 29 November 1993 as amended by supplemental agreements dated 30 November 1995 and 1 September 1998 (together "THE ORIGINAL LOAN AGREEMENT") and as further amended by a further supplemental agreement dated 1999 ("THE THIRD SUPPLEMENT") made between yourselves and ourselves. Pursuant to Clause 2.1 of the Third Supplement we hereby confirm that the conditions set out in Clause 2.2 have been satisfied and accordingly the amendments set out in Clause 3 have become effective. Words and expressions defined in the Original Loan Agreement as amended by the Third Supplement shall, unless the context otherwise requires, bear the same meanings when used in this letter. Yours faithfully for and on behalf of KREDITANSTALT FUR WIEDERAUFBAU 13 THE SECOND SCHEDULE THIS DEED dated the day of 1999 and made between:- (1) ESKER MARINE SHIPPING INC. as Guarantor; and (2) KREDITANSTALT FUR WIEDERAUFBAU as Lender IS SUPPLEMENTAL TO a deed of guarantee and indemnity dated 30 November 1995 ("THE ORIGINAL GUARANTEE") made between the same parties. NOW THIS DEED WITNESSETH as follows:- 1. DEFINITIONS AND INTERPRETATION 1.1 All terms and expressions defined in the Original Guarantee shall have the same meanings when used in this Supplemental Deed. 2. APPROVAL OF THE GUARANTOR 2.1 The Guarantor hereby gives its approval to the Lender and the Borrower entering into the agreement supplemental to the Loan Agreement in the form of the draft annexed hereto as Appendix "A" ("THE SUPPLEMENTAL AGREEMENT"). 3. AMENDMENTS TO THE ORIGINAL GUARANTEE 3.1 As and with effect from 31 October 1998:- (A) All references to "THE LOAN AGREEMENT" shall be deemed to refer to the Loan Agreement referred to in the Original Guarantee as amended by this Deed; (B) Clause 1.1 shall be amended such that:- 14 - 2 - (i) the definition of "ESKER LOAN AGREEMENT" shall be deemed to refer to the Esker Loan Agreement as amended by agreements supplemental thereto dated 30 November 1995, 1 September 1998 and 1999; (ii) the definition of "THIS GUARANTEE" shall be deemed to refer to the Original Guarantee as amended by this Deed; (iii) the definition of "LOAN AGREEMENT" shall be deemed to refer to the Loan Agreement as further amended by an agreement supplemental thereto dated 1 September 1998 and the Supplemental Agreemen; and (iv) the definition of "SECOND ASSIGNMENT OF CHARTER EARNINGS", "SECOND ASSIGNMENT OF INSURANCES", "SECOND MORTGAGE" and "SECOND TRIPARTITE AGREEMENT" shall each be deemed to include therein the respective supplement to each security referred to in Clause 2.1(B) of the Supplemental Agreement. 3.2 Save as amended hereby, the Original Guarantee shall remain unchanged and in full force and effect. 4. GOVERNING LAW 4.1 The provisions of Clauses 18 and 19 of the Original Guarantee shall apply to this Supplemental Deed mutatis mutandis. IN WITNESS whereof this Supplemental Deed has been executed by the parties hereto on the day and year first before written. 15 - 3 - EXECUTED and DELIVERED ) as a Deed ) by ESKER MARINE SHIPPING INC. ) acting by ) ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) KREDITANSTALT FUR ) WIEDERAUFBAU ) in the presence of:- ) 16 - 4 - APPENDIX "A" SUPPLEMENTAL AGREEMENT TO LOAN AGREEMENT 17 THE THIRD SCHEDULE SUPPLEMENT NO. 2 -to- SECOND PREFERRED MORTGAGE -on- "GALAXY" SUPPLEMENT NO. 2 dated 1999 ("THIS SUPPLEMENT NO. 2") to a second bpreferred mortgage dated 30 November 1995 ("THE MORTGAGE") by ESKER MARINE SHIPPING INC. a Liberian corporation ("THE OWNER") in favour of KREDITANSTALT FUR WIEDERAUFBAU a public law corporation incorporated in the Federal Republic of Germany whose registered office is at present at Palmengartenstrasse 5-9, D-60325 Frankfurt am Main, Federal Republic of Germany ("THE MORTGAGEE") recorded on 20 November 1996 at 10.17 AM EST in Book PM48 at Page 1025 as amended by supplement no. 1 thereto dated 1 September 1998 by the Owner to the Mortgagee recorded on 1 September 1998 at 3.36 PM EDST in Book PM50 at page 580 (together "THE MORTGAGE"). WHEREAS:- A. The Owner is the registered and beneficial owner of the whole of the Liberian flag cruise vessel "GALAXY" ("THE VESSEL"): official number "10527" of 76,522 gross and 43,108 net tons; or thereabouts, duly documented in the name of the Owner under the laws of the Republic of Liberia, with her home port at Monrovia, Liberia; B. Words and expressions defined in the Mortgage shall, unless stated herein to the contrary, bear the same meanings when used in this Supplement No. 2; C. By a deed of release and reassignment dated 1999 made between (1) the Mortgagee (2) Blue Sapphire (3) the Owner (4) Zenith (5) Fantasia and (6) CCL the Mortgagee has (inter alia) released the Owner from all of its obligations under the Guarantee in respect of the Horizon Loan Agreement; 18 - 2 - D. By an agreement dated 1999 supplemental to the Blue Sapphire Loan Agreement it has been agreed by Blue Sapphire with the Mortgagee that at the date of this Supplement No. 2 the aggregate of all possible advances that may be made by the Mortgagee to Blue Sapphire pursuant to the Blue Sapphire Loan Agreement is one hundred and seventy seven million four hundred and sixty nine thousand two hundred and twenty United States Dollars (USD177,469,220) (of which USD149,384,402 is Blue Sapphire Loan A, USD18,673,050 is Blue Sapphire Loan B and USD9,411,768 is Blue Sapphire Loan D); E. By an agreement dated 1999 supplemental to the Zenith Loan Agreement it has been agreed by Zenith with the Mortgagee that at the date of this Supplement No. 2 the aggregate of all possible advances that may be made by the Mortgagee to Zenith pursuant to the Zenith Loan Agreement and secured by the Mortgage (as amended and supplemented by this Supplement No. 2) is eighteen million two hundred and seventy seven thousand six hundred and forty United States Dollars (USD18,277,640) (all of which is Zenith Loan A); F. The Owner and the Mortgagee wish by this Supplement No. 2 to amend the Recording Clause of the Mortgage so as to reflect the transactions referred to in Recitals C, D, and E. NOW THEREFORE, in consideration of the premises and other good and valuable consideration the receipt and sufficiency whereof are hereby acknowledged by the Owner and the Mortgagee, the Owner and the Mortgagee hereby covenant and agree as follows:- 1. As and with effect from 31 October 1998 the Mortgage shall cease to secure Horizon Loan A, Horizon Loan B, Horizon Loan C and Horizon Loan D. 2. For the purpose of recording this Supplement No. 2 as required by Chapter 3 of Title 22 of the Liberian Code of Law of 1956, as amended, this Supplement No. 2 amends the total amount secured by the Mortgage. The total amount of the Mortgage is amended to one hundred and ninety five million seven hundred and forty six thousand eight hundred and sixty United States Dollars (USD195,746,860) (of which USD177,469,220 is the aggregate of Blue Sapphire Loan A, Blue Sapphire Loan B and Blue Sapphire Loan D and 19 - 3 - USD18, 277,640 is Zenith Loan A) and interest and performance of mortgage covenants. The date of maturity is on demand. There is no separate discharge amount. IN WITNESS whereof the Owner and the Mortgagee have executed this Supplement No. 2 the date and year first before written. ESKER MARINE SHIPPING INC. By: Title: KREDITANSTALT FUR WIEDERAUFBAU By: Title: Attorney-in-Fact 20 - 4 - ACKNOWLEDGEMENT STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the day of 1999 before me personally came , to me known, and known to me to be the person who executed the foregoing Supplement No. 2 who, being by me duly sworn, did depose and say that he resides at ; that he is of Esker Marine Shipping Inc., a Liberian corporation, the entity described in and which executed the foregoing Supplement No. 2; that he signed his name thereto pursuant to authority granted to him by the Board of Directors of the said entity; and he further acknowledged that the said Supplement No. 2 is the act and deed of the said entity. NOTARY PUBLIC [FOR USE THE IN THE REPUBLIC OF LIBERIA] 21 - 5 - ACKNOWLEDGEMENT STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the day of 1999 before me personally came , to me known, and known to me to be the person who executed the foregoing Supplement No. 2 who, being by me duly sworn, did depose and say that he/she resides at ; that he/she is Attorney-in-Fact for Kreditanstalt fur Wiederaufbau the corporation described in and which executed the foregoing Supplement No. 2; that he/she signed his/her name thereto pursuant to authority granted to him/her by a Power of Attorney of the said entity; and he/she further acknowledged that the said Supplement No. 2 is the act and deed of the said entity. NOTARY PUBLIC [FOR USE THE IN THE REPUBLIC OF LIBERIA] 22 THE FOURTH SCHEDULE THIS DEED dated the day of 1999 made between: (1) ESKER MARINE SHIPPING INC. ("THE OWNER"); (2) CELEBRITY CRUISES INC. ("THE CHARTERER"); and (3) KREDITANSTALT FUR WIEDERAUFBAU ("THE ASSIGNEE") IS SUPPLEMENTAL TO a deed of second assignment of insurances of the Liberian flag cruise vessel m.v. "GALAXY" dated 20 November 1996 as amended by a deed supplemental thereto dated 1 September 1998 (together "THE ORIGINAL ASSIGNMENT"). WHEREAS:- A. Words and expressions defined in the Original Assignment shall bear the same meanings when used in this Supplemental Deed including the Recitals; B. By a deed of release and reassignment dated 1999 made between (1) the Assignee, (2) Blue Sapphire, (3) the Owner, (4) Zenith, (5) Fantasia and (6) CCI the Assignee has (inter alia) released the Owner from all further obligations under the Guarantee dated 30 November 1995 ("THE RELEASED GUARANTEE") issued by the Owner in favour of the Assignee in respect of the obligations of Fantasia under the Horizon Loan Agreement and has further agreed to enter into this Supplemental Deed in order that the Original Assignment shall cease to stand as security for the obligations of the Owner under the Released Guarantee. NOW THIS DEED WITNESSETH and it is hereby agreed by and between the parties hereto as follows:- 1. As and with effect from 31 October 1998 the Original Assignment shall cease to stand as security for the balance from time to time outstanding of the principal amount of the Fantasia Loans, interest accrued thereon and all other sums whatsoever and howsoever 23 - 2 - that may hereafter be secured by the Released Guarantee and any securities executed for the obligations of the Owner under the Released Guarantee. 2. Without prejudice to the generality of Clause 1 as and with effect from the date hereof the following further amendments shall be deemed to have been made to the Original Assignment:- (A) the expression "Guarantees" shall exclude the Released Guarantee; (B) the definition "Borrowers" shall be amended by the deletion therefrom of "Fantasia"; (C) the definition "Loan Agreements" shall be amended by the deletion therefrom of "the Horizon Loan Agreement"; (D) the definition "Loans" shall be amended by the deletion therefrom of "the Fantasia Loans". 3. Save as amended hereby the Original Assignment shall remain unchanged and in full force and effect. 4. The provisions of Clause 12 (Governing Law) and Clause 13 (Jurisdiction) shall apply mutatis mutandis to this Supplemental Deed. IN WITNESS whereof this Supplemental Deed has been executed by the parties hereto on the day and year first before written. SIGNED and DELIVERED as a DEED ) by ESKER MARINE SHIPPING INC. ) acting by ) ) in the presence of: ) 24 - 3 - SIGNED and DELIVERED as a DEED ) by CELEBRITY CRUISES INC. ) acting by ) ) in the presence of: ) SIGNED and DELIVERED as a DEED ) by ) for and on behalf of ) KREDITANSTALT FUR WIEDERAUFBAU ) in the presence of: ) 25 THE FIFTH SCHEDULE THIS DEED dated the day of 1999 made between: (1) ESKER MARINE SHIPPING INC. ("THE ASSIGNOR"); and (2) KREDITANSTALT FUR WIEDERAUFBAU ("THE ASSIGNEE") IS SUPPLEMENTAL TO a deed of second assignment of Charter Earnings, Owner's Requisition Compensation and Earnings of the Liberian flag cruise vessel m.v. "GALAXY" dated 20 November 1996 as amended by a deed supplemental thereto dated 1 September 1998 ("THE ORIGINAL ASSIGNMENT"). WHEREAS:- A. Words and expressions defined in the Original Assignment shall bear the same meanings when used in this Supplemental Deed including the Recitals; B. By a deed of release and reassignment dated 1999 made between (1) the Assignee, (2) Blue Sapphire, (3) the Assignor, (4) Zenith, (5) Fantasia and (6) CCI the Assignee has (inter alia) released the Assignor from all further obligations under the Guarantee dated 30 November 1995 ("THE RELEASED GUARANTEE") issued by the Assignor in favour of the Assignee in respect of the obligations of Fantasia under the Horizon Loan Agreement and has further agreed to enter into this Supplemental Deed in order that the Original Assignment shall cease to stand as security for the obligations of the Assignor under the Released Guarantee. NOW THIS DEED WITNESSETH and it is hereby agreed by and between the parties hereto as follows:- 1. As and with effect from 31 October 1998 the Original Assignment shall cease to stand as security for the balance from time to time outstanding of the principal amount of the 26 - 2 - Fantasia Loans, interest accrued thereon and all other sums whatsoever and howsoever that may hereafter be secured by the Released Guarantee and any securities executed for the obligations of the Assignor under the Released Guarantee. 2. Without prejudice to the generality of Clause 1 as and with effect from [the date hereof] the following further amendments shall be deemed to have been made to the Original Assignment:- (A) the definition "Guarantees" shall exclude the Released Guarantee; (B) the definition "Borrowers" shall be amended by the deletion therefrom of "Fantasia"; (C) the definition "Loan Agreements" shall be amended by the deletion therefrom of "the Horizon Loan Agreement"; (D) the definition "Loans" shall be amended by the deletion therefrom of "the Horizon Loans". 3. Save as amended hereby the Original Assignment shall remain unchanged and in full force and effect. 4. The provisions of Clause 12 (Governing Law) shall apply mutatis mutandis to this Supplemental Deed. IN WITNESS whereof this Supplemental Deed has been executed by the parties hereto on the day and year first before written. SIGNED and DELIVERED as a DEED ) by ESKER MARINE SHIPPING INC. ) acting by ) ) in the presence of: ) 27 - 3 - SIGNED and DELIVERED as a DEED ) by ) ) for and on behalf of ) KREDITANSTALT FUR WIEDERAUFBAU ) in the presence of: ) 28 THE SIXTH SCHEDULE THIS AGREEMENT dated the day of 1999 made between: (1) ESKER MARINE SHIPPING INC. ("THE OWNER"); (2) CELEBRITY CRUISES INC. ("THE CHARTERER"); and (3) KREDITANSTALT FUR WIEDERAUFBAU ("THE MORTGAGEE") IS SUPPLEMENTAL TO a second tripartite agreement in respect of the Liberian flag cruise vessel m.v. "GALAXY" dated 20 November 1996 as amended by an agreement supplemental thereto dated 1 September 1998 (together "THE ORIGINAL AGREEMENT") WHEREAS:- A. Words and expressions defined in the Original Agreement shall bear the same meanings when used in this Supplemental Agreement including the Recitals; B. By a deed of release and reassignment dated 1999 between (1) the Mortgagee, (2) Blue Sapphire, (3) the Owner, (4) Zenith, (5) Fantasia and (6) CCI the Mortgagee has (inter alia) released the Owner from all further obligations under the Guarantee dated 30 November 1995 ("THE RELEASED GUARANTEE") issued by the Owner in favour of the Mortgagee in respect of the obligations of Fantasia under the Horizon Loan Agreement and has further agreed to enter into this Supplemental Agreement in order that the Original Agreement shall cease to stand as security for the obligations of the Owner under the Released Guarantee; C. By a Supplement No. 1 of even date herewith to the Second Mortgage the Owner and the Mortgagee have agreed that as and with effect from [the date hereof] the Second Mortgagee shall cease to stand as security for the Released Guarantee. NOW it is hereby agreed by and between the parties hereto as follows:- 29 - 2 - 1. As and with effect from 31 October 1998 the Original Agreement shall cease to stand as security for the balance from time to time outstanding of the principal amount of the Fantasia Loans, interest accrued thereon and all other sums whatsoever and howsoever that may hereafter be secured by the Released Guarantee and any securities executed for the obligations of the Owner under the Released Guarantee. 2. Without prejudice to the generality of Clause 1 as and with effect from [the date hereof] the following further amendments shall be deemed to have been made to the Original Agreement:- (A) the definition "Guarantees" shall exclude the Released Guarantee; (B) the definition "Borrowers" shall be amended by the deletion therefrom of "Fantasia"; (C) the definition "Loan Agreements" shall be amended by the deletion therefrom of "the Horizon Loan Agreement"; (D) the definition "Loans" shall be amended by the deletion therefrom of "the Horizon Loans". 3. Save as amended hereby the Original Assignment shall remain unchanged and in full force and effect. 4. The provisions of Clause 8 (Applicable Law and Jurisdiction) shall apply mutatis mutandis to this Supplemental Deed. IN WITNESS whereof this Supplemental Agreement has been executed by the parties hereto on the day and year first before written. SIGNED ) by ESKER MARINE SHIPPING INC. ) acting by ) ) in the presence of: ) 30 - 3 - SIGNED ) by CELEBRITY CRUISES INC. ) acting by ) ) in the presence of: ) SIGNED ) by ) KREDITANSTALT FUR WIEDERAUFBAU ) acting by ) ) in the presence of: ) 31 THE SEVENTH SCHEDULE THIS AGREEMENT dated the day of 1999 made between: (1) CRUISE MAR INVESTMENT INC. a corporation incorporated under the laws of the Republic of Liberia whose registered office is at present at 80 Broad Street, Monrovia, Republic of Liberia ("CMI"); and (2) KREDITANSTALT FUR WIEDERAUFBAU a public law corporation incorporated in the Federal Republic of Germany whose office is at present at Palmengartenstrasse 5-9, D-60325 Frankfurt am Main ("KFW") IS SUPPLEMENTAL TO a subordination agreement dated 30 November 1995 (together "THE ORIGINAL AGREEMENT") made between the same parties. WHEREAS:- A. Words and expressions defined in the Original Agreement shall have the same meanings when used in this Supplemental Agreement including the Recitals; B. By a deed of release and reassignment dated 1999 between (1) KfW, (2) Blue Sapphire Marine Inc., (3) Esker Marine Shipping Inc. ("ESKER"), (4) Zenith Shipping Corporation, (5) Fantasia Cruising Inc. ("FANTASIA") and (6) Celebrity Cruises Inc. KfW has (inter alia) released Esker from all of its obligations to KfW under the Fantasia Cross Collateral Guarantee dated 30 November 1995 in respect of the obligations of Fantasia under the Horizon Loan Agreement. NOW IT IS HEREBY MUTUALLY AGREED by and between the parties hereto as follows:- 1. As and with effect from 31 October 1998: (A) All references to the "KFW LOAN AGREEMENT" in the Original Agreement shall be deemed to include supplemental agreements thereto dated 30 November 1995, 1 32 - 2 - September 1998 and 1999 made between Blue Sapphire and KfW; (B) Clause 4.2 shall be amended by the deletion therefrom of "OR THE COLLATERAL VESSEL" in line 1 and "FANTASIA" in line 6". 2. Save as amended hereby the Original Agreement shall remain unamended and in full force and effect. 3. The provisions of Clause 8 (Law and Jurisdiction) shall apply to this Supplemental Agreement mutatis mutandis. AS WITNESS the hands of the duly authorised representatives of the parties hereto the day and year first before written SIGNED by ) ) for and on behalf of ) CRUISE MAR INVESTMENT INC. ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) KREDITANSTALT FUR WIEDERAUFBAU ) in the presence of:- ) 33 THE EIGHTH SCHEDULE This Deed dated the day of 1999 and made between:- (1) CRUISE MAR SHIPPING HOLDINGS LTD. as Guarantor; and (2) KREDITANSTALT FUR WIEDERAUFBAU as Lender IS SUPPLEMENTAL TO a deed of guarantee and indemnity dated 30 November 1995 ("THE ORIGINAL GUARANTEE") made between the same parties. NOW THIS DEED WITNESSETH as follows:- 1. DEFINITIONS AND INTERPRETATION 1.1 All terms and expressions defined in the Original Guarantee shall have the same meanings when used in this Supplemental Deed. 2. APPROVAL OF THE GUARANTOR 2.1 The Guarantor hereby gives its approval to the Lender and the Borrower entering into the agreement supplemental to the Loan Agreement in the form of the draft annexed hereto as Appendix "A" ("THE SUPPLEMENTAL AGREEMENT"). 3. AMENDMENTS TO THE ORIGINAL GUARANTEE 3.1 As and with effect from 31 October 1998 all references to "the Loan Agreement" shall be deemed to refer to the Loan Agreement referred to in the Original Guarantee as amended by an agreement supplemental thereto dated 1 September 1998 and this Deed; 3.2 Save as amended hereby, the Original Guarantee shall remain unchanged and in full force and effect. 34 - 2 - 4. GOVERNING LAW 4.1 The provisions of Clauses 16 and 18 of the Original Guarantee shall apply to this Supplemental Deed mutatis mutandis. IN WITNESS whereof this Supplemental Deed has been executed by the parties hereto on the day and year first before written. EXECUTED and DELIVERED ) as a Deed by ) CRUISE MAR SHIPPING ) HOLDINGS LTD. acting by ) ) in the presence of:- ) Signed by ) ) for and on behalf of ) KREDITANSTALT FUR ) WIEDERAUFBAU ) in the presence of:- ) 35 THE NINTH SCHEDULE This Agreement dated the day of 1999 BETWEEN:- (1) FANTASIA CRUISING INC. a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("FANTASIA"); (2) ZENITH SHIPPING CORPORATION a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("ZENITH"); (3) BLUE SAPPHIRE MARINE INC. a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("BLUE SAPPHIRE"); (4) ESKER MARINE SHIPPING INC. a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("ESKER"); (5) CELEBRITY CRUISES INC. a corporation incorporated under the laws of the Republic of Liberia whose principal place of business is at 95 Akti Miaouli, Piraeus, Greece ("CCI"); and (6) KREDITANSTALT FUR WIEDERAUFBAU a public law corporation incorporated in the Federal Republic of Germany whose office is at present at Palmengartenstrasse 5-9, D-60325 Frankfurt am Main ("KFW"). IS SUPPLEMENTAL TO an agreement dated 30 November 1995 as amended by an agreement supplemental thereto dated 1 September 1998 (together known as the "ORIGINAL SURPLUS EARNINGS APPLICATION AGREEMENT") made between the same parties and Seabrook Maritime Inc. 36 - 2 - WHEREAS:- It has been agreed (inter alia) that KfW enter into an agreement supplemental to the Original Surplus Earnings Application Agreement so as to release Fantasia from being a party thereto and to delete therefrom the provisions relating to the application of Sub Earnings or Net Sub Earnings of m.v. "HORIZON" referred to in Recital G to the Original Agreement. NOW IT IS HEREBY AGREED by and between the parties hereto as follows:- 1. As and with effect from 31 October 1998 ("THE EFFECTIVE DATE"), KfW hereby releases Fantasia from any further obligations and liabilities under the Original Surplus Earnings Application Agreement and Fantasia shall cease to be a party to the Original Surplus Earnings Application Agreement. 2. As and with effect from the Effective Date:- (A) The definition of "VESSELS" in Recital F shall be amended by deletion of the word "HORIZON"; (B) The definition of "FIRST MORTGAGE" shall be amended by deletion of the words "(MEANS IN RESPECT OF "HORIZON") THE FIRST PREFERRED MORTGAGE DATED 30 APRIL 1990 (AS AMENDED BY SUPPLEMENT NO.'S 1 AND 2 THERETO DATED 1 MARCH 1993 AND 30 NOVEMBER 1995) GRANTED BY FANTASIA TO KFW"; (C) Clause 3.1(A) and Clause 3.2(A) shall each be deleted in full; 3. Save as amended hereby the Original Surplus Earnings Application Agreement shall remain unchanged and in full force and effect. 4. Each of the Owners (other than Fantasia) and CCI hereby acknowledge towards KfW that notwithstanding the said release of Fantasia they shall remain bound by the Original Agreement (as amended and supplemented by this Supplemental Agreement). 37 - 3 - 5. The provisions of Clause 5 (Applicable Law and Jurisdiction) shall apply to this Supplemental Agreement mutatis mutandis. IN WITNESS whereof the parties hereto have executed this Agreement the day and year first before written SIGNED by ) ) for and on behalf of ) FANTASIA CRUISING INC. ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) ZENITH SHIPPING CORPORATION ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) BLUE SAPPHIRE MARINE INC. ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) ESKER MARINE SHIPPING INC. ) in the presence of:- ) 38 - 4 - SIGNED by ) ) for and on behalf of ) CELEBRITY CRUISES INC. ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) KREDITANSTALT FUR ) WIEDERAUFBAU ) in the presence of:- ) EX-1.2 3 3RD SUPP. AGREEMENT TO LOAN FACILITY "CENTURY" 1 EXHIBIT 1.2 KREDITANSTALT FUR WIEDERAUFBAU (1) - and - BLUE SAPPHIRE MARINE INC. (2) --------------------------------------------- THIRD SUPPLEMENTAL AGREEMENT - TO - LOAN FACILITY AGREEMENT IN RESPECT OF M.V. "CENTURY" (EX YARD NO. 637 AT JOS. L. MEYER GMBH & CO.) F(W) 750 --------------------------------------------- Sinclair Roche & Temperley London 2 INDEX PAGE 1. DEFINITIONS........................................................2 2. CONSENT OF THE LENDER..............................................3 3. DOCUMENTATION TO BE SIGNED CONCURRENTLY WITH THIS THIRD SUPPLEMENTAL AGREEMENT.......................................4 4. AMENDMENTS TO THE ORIGINAL LOAN AGREEMENT..........................5 5. LAW AND JURISDICTION...............................................8 SCHEDULES FIRST : Form of Second Letter of Consent SECOND : Form of Cross Collateral Guarantee Supplement THIRD : Form of Supplement No. 2 to the Second Mortgage FOURTH : Form of Second Supplement to the Second Assignment of Insurances FIFTH : Form of Second Supplement to the Second Assignment of Charter Earnings SIXTH : Form of Second Supplement to the Second Tripartite Agreement SEVENTH : Form of Second Supplement to the Subordination Agreement EIGHTH : Form of Supplement to the Cruise Mar Guarantee NINTH : Form of Supplement to Surplus Earnings Application Agreement 3 - 1 - This Agreement made as of the 2nd day of September 1999 BETWEEN:- (1) KREDITANSTALT FUR WIEDERAUFBAU a public law corporation incorporated in the Federal Republic of Germany whose office is at present at Palmengartenstra e 5-9, D-60325 Frankfurt am Main ("the Lender"); and (2) BLUE SAPPHIRE MARINE INC. a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("the Borrower") IS SUPPLEMENTAL TO a loan facility agreement dated 29 November 1993 as amended by agreements supplemental thereto dated 30 November 1995 and 1 September 1998 (together "the Original Loan Agreement"). WHEREAS:- A. The Lender has been requested to release:- (i) Fantasia from all of its obligations to the Lender under the guarantee dated 29 November 1993 (as amended) (together "THE GUARANTEE") executed by Fantasia in favour of the Lender in respect of the obligations of the Borrower under the Original Loan Agreement; and (ii) the Borrower from all of its obligations to the Lender under the guarantee dated 30 November 1995 ("THE BLUE SAPPHIRE GUARANTEE") executed by the Borrower in favour of the Lender in respect of the obligations of Fantasia under the Horizon Loan Agreement; B. Pursuant to a deed of release and reassignment dated as of 2 September 1999 made between (1) the Lender, (2) Borrower, (3) Esker, (4) Zenith, (5) Fantasia and (6) CCI the Lender has released the Guarantee; 4 - 2 - C. This Supplemental Agreement (inter alia) sets out the terms and conditions upon which the Lender will agree to grant its consent to the release of the Blue Sapphire Guarantee and upon which certain amendments will be made to the Original Loan Agreement and the Security Documents; NOW IT IS HEREBY MUTUALLY AGREED by and between the parties hereto as follows:- 1. DEFINITIONS 1.1 Terms and expressions defined in the Recitals to this Supplemental Agreement shall, when used in this Supplemental Agreement, have the meanings therein set out; terms and expressions not defined herein but whose meanings are defined in the Original Loan Agreement shall, when used herein, have the same meanings set out therein and the following terms and expressions shall have the following meanings:- "CROSS COLLATERAL GUARANTEE SUPPLEMENTS" means together the supplements to the Cross Collateral Guarantees in respect of each of the Zenith Loan Agreement and the Esker Loan Agreement each in the form and upon the terms and conditions of the draft set out in the Second Schedule hereto; "SECOND LETTER OF CONSENT" means a letter of consent to be addressed by the Lender to the Borrower in the form set out in the First Schedule hereto; "SECOND ASSIGNMENT OF CHARTER EARNINGS SECOND SUPPLEMENT" means, in respect of the Vessel, the second supplement to the Second Assignment of Charter Earnings in the form and upon the terms and conditions of the draft set out in the Fifth Schedule hereto; "SECOND ASSIGNMENT OF INSURANCES SECOND SUPPLEMENT" means, in respect of the Vessel, the second supplement to the Second Assignment of Insurances in the form and upon the terms and conditions of the draft set out in the Fourth Schedule hereto; "SECOND MORTGAGE SUPPLEMENT NO. 2" means a supplement to the Second Mortgage in form and upon terms and conditions of the draft set out in the Third Schedule hereto; 5 - 3 - "SECOND TRIPARTITE AGREEMENT SECOND SUPPLEMENT" means, in respect of the Vessel, the second supplement to the Second Tripartite Agreement in the form and upon the terms and conditions of the draft set out in the Sixth Schedule; "SUBORDINATION AGREEMENT SUPPLEMENT" means the first supplemental agreement to the Subordination Agreement in the form and upon the terms and conditions of the draft set out in the Seventh Schedule hereto; "SUPPLEMENT TO THE CRUISE MAR GUARANTEE" means the supplement to the Cruise Mar Guarantee in the form and upon the terms and conditions set out in the Eighth Schedule; "SURPLUS EARNINGS APPLICATION AGREEMENT SUPPLEMENT" means an agreement supplemental to the Surplus Earnings Application Agreement in the form and upon the terms and conditions of the draft set out in the Ninth Schedule hereto; 2. CONSENT OF THE LENDER 2.1 Subject to the fulfilment of all the terms and conditions set out in Clause 2.2 the Lender will issue the Second Letter of Consent and agree to the amendments to the Original Loan Agreement hereinafter set out. 2.2 The Lender shall issue the Second Letter of Consent upon the fulfilment of all of the following conditions to the Lender's satisfaction:- (A) the Lender has received the following documents each in form and substance satisfactory to the Lender:- (i) this Third Supplemental Agreement duly executed by the Borrower; (ii) the Cross Collateral Guarantee Supplements duly executed by the Borrower; and (iii) the Supplement to the Cruise Mar Guarantee duly executed by Cruise Mar. 6 - 4 - (B) the Lender has received a certificate from the Secretary of each of the Borrower, Zenith, Esker, Cruise Mar, CMI and CCI attaching resolutions passed at the Meeting of the Board of Directors of the relevant company approving or ratifying the execution, delivery, implementation and performance of such of this Third Supplemental Agreement and each of the documents executed or to be executed pursuant thereto to which such company is or is to be a party, such certificate to certify that such resolutions remain in full force and effect on the date of such certificate and such certificate to certify the names of the current officers and directors of the relevant company; and (C) no Event of Default has occurred and is continuing. 3. DOCUMENTATION TO BE SIGNED CONCURRENTLY WITH THIS THIRD SUPPLEMENTAL AGREEMENT 3.1 The following shall be effected concurrently with the execution of this Supplemental Agreement:- (A) the Second Mortgage Supplement No. 2 duly executed by the Borrower and registered under the laws and flag of the Republic of Liberia at the Office of the Deputy Commissioner of Maritime Affairs of the Republic of Liberia at the port of New York; (B) the Second Assignment of Insurances Second Supplement duly executed by the Borrower and CCI respectively; (C) the Second Assignment of Charter Earnings Second Supplement duly executed by the Borrower; (D) the Second Tripartite Agreement Second Supplement duly executed by the Borrower and CCI; (E) the Subordination Agreement Supplement duly executed by CMI; and 7 - 5 - (F) the Surplus Earnings Application Agreement Supplement duly executed by Fantasia, Zenith, the Borrower, Esker and CCI. 4. AMENDMENTS TO THE ORIGINAL LOAN AGREEMENT 4.1 As and with effect from 31 October 1999 the Original Loan Agreement shall be further amended as follows:- (A) DEFINITIONS The definition of "ADDITIONAL SECURITIES" shall be amended by the deletion therefrom of "FANTASIA CROSS SECURITIES"; The definition of "CHARTER" shall be amended by the insertion after "1 SEPTEMBER 1998" of the words "AND ADDENDUM NO. 3 DATED 2 September 1999"; The definition of "CHARTER EARNINGS" shall be amended by the deletion therefrom of "AND, IN RESPECT OF THE COLLATERAL VESSEL, ALL EARNINGS DUE OR TO BECOME DUE TO FANTASIA UNDER THE COLLATERAL VESSEL CHARTER"; The definition of "CMI/FANTASIA LOAN" shall be deleted in full; The definition of "CMI/FANTASIA SUBORDINATION AGREEMENT" shall be deleted in full; The definition of "COLLATERAL VESSEL" shall be deleted in full; The definition of "COLLATERAL VESSEL CHARTER " shall be deleted in full; The definition of "COLLATERAL VESSEL LOAN AGREEMENT" shall be deleted in full; The definition of "COLLATERAL VESSEL LOAN AGREEMENT SUPPLEMENT" shall be deleted in full; 8 - 6 - The definition of "COLLATERAL VESSEL FIRST MORTGAGE" shall be deleted in full; The definition of "CROSS COLLATERAL GUARANTEES" shall be amended by the deletion therefrom in line 1 of "FOUR (4)" and the substitution therefor of "TWO (2)" and the deletion in line 5 of "FANTASIA UNDER THE COLLATERAL VESSEL LOAN AGREEMENT"; The definition "DEFERRAL" shall be amended by the deletion therefrom in line 1 of "FOUR (4)" and the substitution therefor of "THREE (3)"; The definition of "EARNINGS" shall be amended by the deletion therefrom in line 3 and in the last line respectively of the words "OR FANTASIA (OR AS THE CASE MAY BE)"; The definition of "FANTASIA CROSS SECURITIES" shall be deleted in full; The definition of "GUARANTEE" shall be deleted in full; The definition of "INSURANCES" shall be amended by the deletion therefrom of sub paragraph (B) in full; The definition "KFW FACILITY AGREEMENTS" shall be amended by the deletion therefrom of "THE COLLATERAL VESSEL LOAN AGREEMENT"; The definition of "LOAN AGREEMENT" shall be amended to read "MEANS THE ORIGINAL LOAN AGREEMENT AS AMENDED BY AGREEMENTS SUPPLEMENTAL THERETO DATED 30 NOVEMBER 1995, 1 SEPTEMBER 1998 AND 2 SEPTEMBER 1999"; The definition of "NOTICE OF ASSIGNMENT OF COLLATERAL VESSEL CHARTER EARNINGS" shall be deleted in full; The definition of "OBLIGORS" shall be amended by the deletion therefrom of "FANTASIA"; 9 - 7 - The definition of "OWNER'S REQUISITION COMPENSATION" shall be amended by the deletion therefrom of "OR FANTASIA (AS THE CASE MAY BE)"; The definitions of "SECOND ASSIGNMENT OF CHARTER EARNINGS", "SECOND ASSIGNMENT OF INSURANCES", "SECOND MORTGAGE" and "SECOND TRIPARTITE AGREEMENT" shall each be deemed to include therein the respective supplements to each such security referred to in Clause 2.2(B); The definition of "SECURITY VESSELS" shall be amended by the deletion therefrom of "THE COLLATERAL VESSEL"; The definition of "SUBORDINATION AGREEMENT" shall be amended to read "MEANS THE SUBORDINATION AGREEMENT MADE BETWEEN CMI AND KFW ON 30 NOVEMBER 1995 AS AMENDED BY SUPPLEMENT THERETO DATED 2 SEPTEMBER 1999"; The definition "SURPLUS EARNINGS APPLICATION AGREEMENT" shall be deemed to include the supplement thereto referred to in Clause 2.2(B); The definition of "ZENITH LOAN AGREEMENT" shall be amended by the insertion after "1 SEPTEMBER 1998" of the words "AND 2 SEPTEMBER 1999"; (B) CLAUSE 13 (i) Clause 13.1(O) shall be amended by the deletion therefrom of "TO FANTASIA AS CONSIDERATION FOR THE ISSUE BY FANTASIA OF THE GUARANTEE AND" and any reference to "FANTASIA" and "GUARANTEE"; (ii) Clause 13.2(K) shall be deleted in full; (C) CLAUSE 17 (i) Clause 17.2(Q) shall be amended by the deletion therefrom of "OR (UNTIL FANTASIA IS RELEASED FROM ITS OBLIGATIONS UNDER THE GUARANTEE AND THE 10 - 8 - OTHER SECURITY DOCUMENTS TO WHICH IT IS A PARTY PURSUANT TO CLAUSE 14.5) FANTASIA"; (ii) Clause 17.2(R)(i) shall be deleted in full; (iii) Clause 17.2(U) shall be amended by the deletion therefrom of all references to "COLLATERAL VESSEL CHARTER"; (iv) Clause 17.2(V) shall be amended by the deletion therefrom of "FANTASIA" and "SEABROOK"; (v) Clause 17.2(W) shall be amended by the deletion therefrom of "OR THE COLLATERAL VESSEL CHARTER"; (vi) Clause 17.2(AC) shall be deleted in full; (vii) Clause 17.2(AF) shall be deleted in full; (D) CLAUSE 21 (i) Clause 21.2 shall be amended by the deletion in full of the application under "FIRSTLY". 4.2 Save as amended by Clause 3.1 the Original Loan Agreement shall remain unchanged and in full force and effect. 5. LAW AND JURISDICTION 5.1 The provisions of Clauses 31 (Law) and 32 (Jurisdiction) of the Original Loan Agreement shall apply to this Third Supplemental Agreement mutatis mutandis. 11 - 9 - AS WITNESS the hands of the duly authorised representatives of the parties hereto the day and year first before written. SIGNED by ) ) /s/ JP Ward for and on behalf of ) ------------------------ KREDITANSTALT FUR WIEDERAUFBAU ) Jonathan Paul Ward in the presence of:- ) ATTORNEY IN FACT SIGNED by ) ) /s/ Bonnie Biumi for and on behalf of ) ------------------------ BLUE SAPPHIRE MARINE INC. ) Bonnie Biumi in the presence of:- ) VICE PRESIDENT & TREASURER 12 THE FIRST SCHEDULE [to be typed on headed paper of Kreditanstalt fur Wiederaufbau] Blue Sapphire Marine Inc. c/o Celebrity Cruises Inc. 1050 Caribbean Way Miami Florida 33132-2096 USA Dear Sirs M.V. "CENTURY" - LOAN AGREEMENT DATED 29 NOVEMBER 1993 - F(W) 750 We refer to the loan agreement dated 29 November 1993 as amended by supplemental agreements dated 30 November 1995 and 1 September 1998 (together "THE ORIGINAL LOAN AGREEMENT") and as further amended by a further supplemental agreement dated 1999 ("THE THIRD SUPPLEMENT") made between yourselves and ourselves. Pursuant to Clause 2.1 of the Third Supplement we hereby confirm that the conditions set out in Clause 2.2 have been satisfied and accordingly the amendments set out in Clause 3 have become effective. Words and expressions defined in the Original Loan Agreement as amended by the Third Supplement shall, unless the context otherwise requires, bear the same meanings when used in this letter. Yours faithfully for and on behalf of KREDITANSTALT FUR WIEDERAUFBAU 13 THE SECOND SCHEDULE THIS DEED dated the day of 1999 and made between:- (1) BLUE SAPPHIRE MARINE INC. as Guarantor; and (2) KREDITANSTALT FUR WIEDERAUFBAU as Lender IS SUPPLEMENTAL TO a deed of guarantee and indemnity dated 30 November 1995 ("THE ORIGINAL GUARANTEE") made between the same parties. NOW THIS DEED WITNESSETH as follows:- 1. DEFINITIONS AND INTERPRETATION 1.1 All terms and expressions defined in the Original Guarantee shall have the same meanings when used in this Supplemental Deed. 2. APPROVAL OF THE GUARANTOR 2.1 The Guarantor hereby gives its approval to the Lender and the Borrower entering into the agreement supplemental to the Loan Agreement in the form of the draft annexed hereto as Appendix "A" ("THE SUPPLEMENTAL AGREEMENT"). 3. AMENDMENTS TO THE ORIGINAL GUARANTEE 3.1 As and with effect from 31 October 1998:- (A) All references to "THE LOAN AGREEMENT" shall be deemed to refer to the Loan Agreement referred to in the Original Guarantee as amended by this Deed; (B) Clause 1.1 shall be amended such that:- 14 - 2 - (i) the definition of "BLUE SAPPHIRE LOAN AGREEMENT" shall be deemed to refer to the Blue Sapphire Loan Agreement as amended by the agreements supplemental thereto dated 30 November 1995, 1 September 1998 and 1999; (ii) the definition of "THIS GUARANTEE" shall be deemed to refer to the Original Guarantee as amended by this Deed; (iii) the definition of "LOAN AGREEMENT" shall be deemed to refer to the Loan Agreement as further amended by an agreement supplemental thereto dated 1 September 1998 and the Supplemental Agreement; and (iv) the definition of "SECOND ASSIGNMENT OF CHARTER EARNINGS", "SECOND ASSIGNMENT OF INSURANCES", "SECOND MORTGAGE" and "SECOND TRIPARTITE AGREEMENT" shall each be deemed to include therein the respective supplement to each security referred to in Clause 2.1(B) of the Supplemental Agreement; and 3.2 Save as amended hereby, the Original Guarantee shall remain unchanged and in full force and effect. 4. GOVERNING LAW 4.1 The provisions of Clauses 18 and 19 of the Original Guarantee shall apply to this Supplemental Deed mutatis mutandis. IN WITNESS whereof this Supplemental Deed has been executed by the parties hereto on the day and year first before written. 15 - 3 - EXECUTED and DELIVERED ) as a Deed ) by BLUE SAPPHIRE MARINE INC. ) acting by ) ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) KREDITANSTALT FUR ) WIEDERAUFBAU ) in the presence of:- ) 16 - 4 - APPENDIX "A" SUPPLEMENTAL AGREEMENT TO LOAN AGREEMENT 17 THE THIRD SCHEDULE SUPPLEMENT NO. 2 -to- SECOND PREFERRED MORTGAGE -on- "CENTURY" SUPPLEMENT NO. 2 dated 1999 ("THIS SUPPLEMENT NO. 2") to a second preferred mortgage dated 30 November 1995 ("THE MORTGAGE") by BLUE SAPPHIRE MARINE INC. a Liberian corporation ("THE OWNER") in favour of KREDITANSTALT FUR WIEDERAUFBAU a public law corporation incorporated in the Federal Republic of Germany whose registered office is at present at Palmengartenstrasse 5-9, D-60325 Frankfurt am Main, Federal Republic of Germany ("THE MORTGAGEE") recorded on 30 November 1995 at 9.04 AM EST in Book PM47 at Page 902 as amended by supplement no. 1 thereto dated 1 September 1998 by the Owner to the Mortgagee recorded on 1 September 1998 at 3.35 PM EDST in Book PM50 at page 579 (together "THE MORTGAGE"). WHEREAS:- A. The Owner is the registered and beneficial owner of the whole of the Liberian flag cruise vessel "CENTURY" ("THE VESSEL"): official number "10084" of 70,606 gross and 39,002 net tons; or thereabouts, duly documented in the name of the Owner under the laws of the Republic of Liberia, with her home port at Monrovia, Liberia; B. Words and expressions defined in the Mortgage shall, unless stated herein to the contrary, bear the same meanings when used in this Supplement No. 2; C. By a deed of release and reassignment dated 1999 made between (1) the Mortgagee (2) the Owner (3) Esker (4) Zenith (5) Fantasia and (6) CCL the Mortgagee has (inter alia) released the Owner from all of its obligations under the Guarantee in respect of the Horizon Loan Agreement; 18 - 2 - D. By an agreement dated 1999 supplemental to the Esker Loan Agreement it has been agreed by Esker with the Mortgagee that at the date of this Supplement No. 2 the aggregate of all possible advances that may be made by the Mortgagee to Esker pursuant to the Esker Loan Agreement is one hundred and seventy three million six hundred and fourteen thousand two hundred and twenty eight United States Dollars (USD173,614,228) all of which is Esker Loan A; E. By an agreement dated 1999 supplemental to the Zenith Loan Agreement it has been agreed by Zenith with the Mortgagee that at the date of this Supplement No. 2 the aggregate of all possible advances that may be made by the Mortgagee to Zenith pursuant to the Zenith Loan Agreement and secured by the Mortgage (as amended and supplemented by this Supplement No. 2) is eighteen million two hundred and seventy seven thousand six hundred and forty United States Dollars (USD18,277,640) all of which is Zenith Loan A; F. The Owner and the Mortgagee wish by this Supplement No. 2 to amend the Recording Clause of the Mortgage so as to reflect the transactions referred to in Recitals C, D, and E. NOW THEREFORE, in consideration of the premises and other good and valuable consideration the receipt and sufficiency whereof are hereby acknowledged by the Owner and the Mortgagee, the Owner and the Mortgagee hereby covenant and agree as follows:- 1. As and with effect from 31 October 1998 the Mortgage shall cease to secure Horizon Loan A, Horizon Loan B, Horizon Loan C and Horizon Loan D. 2. For the purpose of recording this Supplement No. 2 as required by Chapter 3 of Title 22 of the Liberian Code of Law of 1956, as amended, this Supplement No. 2 amends the total amount secured by the Mortgage. The total amount of the Mortgage is amended to one hundred and ninety one million eight hundred and ninety one thousand eight hundred and sixty eight United States Dollars (USD191,891,868) (of which USD173,614,228 is Esker Loan A and USD18,277,640 is Zenith Loan A) and interest and performance of mortgage covenants. The date of maturity is on demand. There is no separate discharge amount. 19 - 3 - IN WITNESS whereof the Owner and the Mortgagee have executed this Supplement No. 2 the date and year first before written. BLUE SAPPHIRE MARINE INC. By: Title: KREDITANSTALT FUR WIEDERAUFBAU By: Title: Attorney-in-Fact 20 - 4 - ACKNOWLEDGEMENT STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the day of 1999 before me personally came , to me known, and known to me to be the person who executed the foregoing Supplement No. 2 who, being by me duly sworn, did depose and say that he resides at ; that he is of Blue Sapphire Marine Inc., a Liberian corporation, the entity described in and which executed the foregoing Supplement No. 2; that he signed his name thereto pursuant to authority granted to him by the Board of Directors of the said entity; and he further acknowledged that the said Supplement No. 2 is the act and deed of the said entity. NOTARY PUBLIC [FOR USE THE IN THE REPUBLIC OF LIBERIA] 21 - 5 - ACKNOWLEDGEMENT STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the day of 1999 before me personally came , to me known, and known to me to be the person who executed the foregoing Supplement No. 2 who, being by me duly sworn, did depose and say that he/she resides at ; that he/she is Attorney-in-Fact for Kreditanstalt fur Wiederaufbau the corporation described in and which executed the foregoing Supplement No. 2; that he/she signed his/her name thereto pursuant to authority granted to him/her by a Power of Attorney of the said entity; and he/she further acknowledged that the said Supplement No. 2 is the act and deed of the said entity. NOTARY PUBLIC [FOR USE THE IN THE REPUBLIC OF LIBERIA] 22 THE FOURTH SCHEDULE THIS DEED dated the day of 1999 made between: (1) BLUE SAPPHIRE MARINE INC. ("THE OWNER"); (2) CELEBRITY CRUISES INC. ("THE CHARTERER"); and (3) KREDITANSTALT FUR WIEDERAUFBAU ("THE ASSIGNEE") IS SUPPLEMENTAL TO a deed of second assignment of insurances of the Liberian flag cruise vessel m.v. "CENTURY" dated 30 November 1995 as amended by a deed supplemental thereto dated 1 September 1998 (together "THE ORIGINAL ASSIGNMENT"). WHEREAS:- A. Words and expressions defined in the Original Assignment shall bear the same meanings when used in this Supplemental Deed including the Recitals; B. By a deed of release and reassignment dated 1999 made between (1) the Assignee, (2) the Owner, (3) Esker, (4) Zenith, (5) Fantasia and (6) CCI the Assignee has (inter alia) released the Owner from all further obligations under the Guarantee dated 30 November 1995 ("THE RELEASED GUARANTEE") issued by the Owner in favour of the Assignee in respect of the obligations of Fantasia under the Horizon Loan Agreement and has further agreed to enter into this Supplemental Deed in order that the Original Assignment shall cease to stand as security for the obligations of the Owner under the Released Guarantee. NOW THIS DEED WITNESSETH and it is hereby agreed by and between the parties hereto as follows:- 1. As and with effect from 31 October 1998 the Original Assignment shall cease to stand as security for the balance from time to time outstanding of the principal amount of the Fantasia Loans, interest accrued thereon and all other sums whatsoever and howsoever 23 - 2 - that may hereafter be secured by the Released Guarantee and any securities executed for the obligations of the Owner under the Released Guarantee. 2. Without prejudice to the generality of Clause 1 as and with effect from the date hereof the following further amendments shall be deemed to have been made to the Original Assignment:- (A) the expression "Guarantees" shall exclude the Released Guarantee; (B) the definition "Borrowers" shall be amended by the deletion therefrom of "Fantasia"; (C) the definition "Loan Agreements" shall be amended by the deletion therefrom of "the Horizon Loan Agreement"; (D) the definition "Loans" shall be amended by the deletion therefrom of "the Fantasia Loans". 3. Save as amended hereby the Original Assignment shall remain unchanged and in full force and effect. 4. The provisions of Clause 12 (Governing Law) and Clause 13 (Jurisdiction) shall apply mutatis mutandis to this Supplemental Deed. IN WITNESS whereof this Supplemental Deed has been executed by the parties hereto on the day and year first before written. SIGNED and DELIVERED as a DEED ) by BLUE SAPPHIRE MARINE INC. ) acting by ) ) in the presence of: ) 24 - 3 - SIGNED and DELIVERED as a DEED ) by CELEBRITY CRUISES INC. ) acting by ) ) in the presence of: ) SIGNED and DELIVERED as a DEED ) by ) for and on behalf of ) KREDITANSTALT FUR WIEDERAUFBAU ) in the presence of: ) 25 THE FIFTH SCHEDULE THIS DEED dated the day of 1999 made between: (1) BLUE SAPPHIRE MARINE INC. ("THE ASSIGNOR"); and (2) KREDITANSTALT FUR WIEDERAUFBAU ("THE ASSIGNEE") IS SUPPLEMENTAL TO a deed of second assignment of Charter Earnings, Owner's Requisition Compensation and Earnings of the Liberian flag cruise vessel m.v. "CENTURY" dated 30 November 1995 as amended by a deed supplemental thereto dated 1 September 1998 ("THE ORIGINAL ASSIGNMENT"). WHEREAS:- A. Words and expressions defined in the Original Assignment shall bear the same meanings when used in this Supplemental Deed including the Recitals; B. By a deed of release and reassignment dated 1999 made between (1) the Assignee, (2) the Assignor, (3) Esker, (4) Zenith, (5) Fantasia and (6) CCI the Assignee has (inter alia) released the Assignor from all further obligations under the Guarantee dated 30 November 1995 ("THE RELEASED GUARANTEE") issued by the Assignor in favour of the Assignee in respect of the obligations of Fantasia under the Horizon Loan Agreement and has further agreed to enter into this Supplemental Deed in order that the Original Assignment shall cease to stand as security for the obligations of the Assignor under the Released Guarantee. NOW THIS DEED WITNESSETH and it is hereby agreed by and between the parties hereto as follows:- 1. As and with effect from 31 October 1998 the Original Assignment shall cease to stand as security for the balance from time to time outstanding of the principal amount of the 26 - 2 - Fantasia Loans, interest accrued thereon and all other sums whatsoever and howsoever that may hereafter be secured by the Released Guarantee and any securities executed for the obligations of the Assignor under the Released Guarantee. 2. Without prejudice to the generality of Clause 1 as and with effect from [the date hereof] the following further amendments shall be deemed to have been made to the Original Assignment:- (A) the definition "Guarantees" shall exclude the Released Guarantee; (B) the definition "Borrowers" shall be amended by the deletion therefrom of "Fantasia"; (C) the definition "Loan Agreements" shall be amended by the deletion therefrom of "the Horizon Loan Agreement"; (D) the definition "Loans" shall be amended by the deletion therefrom of "the Horizon Loans". 3. Save as amended hereby the Original Assignment shall remain unchanged and in full force and effect. 4. The provisions of Clause 12 (Governing Law) shall apply mutatis mutandis to this Supplemental Deed. IN WITNESS whereof this Supplemental Deed has been executed by the parties hereto on the day and year first before written. SIGNED and DELIVERED as a DEED ) by BLUE SAPPHIRE MARINE INC. ) acting by ) ) in the presence of: ) 27 - 3 - SIGNED and DELIVERED as a DEED ) by ) ) for and on behalf of ) KREDITANSTALT FUR WIEDERAUFBAU ) in the presence of: ) 28 THE SIXTH SCHEDULE THIS AGREEMENT dated the day of 1999 made between: (1) BLUE SAPPHIRE MARINE INC. ("THE OWNER"); (2) CELEBRITY CRUISES INC. ("THE CHARTERER"); and (3) KREDITANSTALT FUR WIEDERAUFBAU ("THE MORTGAGEE") IS SUPPLEMENTAL TO a second tripartite agreement in respect of the Liberian flag cruise vessel m.v. "CENTURY" dated 30 November 1995 as amended by an agreement supplemental thereto dated 1 September 1998 (together "THE ORIGINAL AGREEMENT") WHEREAS:- A. Words and expressions defined in the Original Agreement shall bear the same meanings when used in this Supplemental Agreement including the Recitals; B. By a deed of release and reassignment dated 1999 between (1) the Mortgagee, (2) the Assignor, (3) Esker, (4) Zenith, (5) Fantasia and (6) CCI the Mortgagee has (inter alia) released the Owner from all further obligations under the Guarantee dated 30 November 1995 ("THE RELEASED GUARANTEE") issued by the Owner in favour of the Mortgagee in respect of the obligations of Fantasia under the Horizon Loan Agreement and has further agreed to enter into this Supplemental Agreement in order that the Original Agreement shall cease to stand as security for the obligations of the Owner under the Released Guarantee; C. By a Supplement No. 1 of even date herewith to the Second Mortgage the Owner and the Mortgagee have agreed that as and with effect from 31 October 1998 the Second Mortgagee shall cease to stand as security for the Released Guarantee. NOW it is hereby agreed by and between the parties hereto as follows:- 29 - 2 - 1. As and with effect from 31 October 1998 the Original Agreement shall cease to stand as security for the balance from time to time outstanding of the principal amount of the Fantasia Loans, interest accrued thereon and all other sums whatsoever and howsoever that may hereafter be secured by the Released Guarantee and any securities executed for the obligations of the Owner under the Released Guarantee. 2. Without prejudice to the generality of Clause 1 as and with effect from [the date hereof] the following further amendments shall be deemed to have been made to the Original Agreement:- (A) the definition "Guarantees" shall exclude the Released Guarantee; (B) the definition "Borrowers" shall be amended by the deletion therefrom of "Fantasia"; (C) the definition "Loan Agreements" shall be amended by the deletion therefrom of "the Horizon Loan Agreement"; (D) the definition "Loans" shall be amended by the deletion therefrom of "the Horizon Loans". 3. Save as amended hereby the Original Assignment shall remain unchanged and in full force and effect. 4. The provisions of Clause 8 (Applicable Law and Jurisdiction) shall apply mutatis mutandis to this Supplemental Deed. IN WITNESS whereof this Supplemental Agreement has been executed by the parties hereto on the day and year first before written. SIGNED ) by BLUE SAPPHIRE MARINE INC. ) acting by ) ) in the presence of: ) 30 - 3 - SIGNED ) by CELEBRITY CRUISES INC. ) acting by ) ) in the presence of: ) SIGNED ) by ) KREDITANSTALT FUR WIEDERAUFBAU ) acting by ) ) in the presence of: ) 31 THE SEVENTH SCHEDULE THIS AGREEMENT dated the day of 1999 made between: (1) CRUISE MAR INVESTMENT INC. a corporation incorporated under the laws of the Republic of Liberia whose registered office is at present at 80 Broad Street, Monrovia, Republic of Liberia ("CMI"); and (2) KREDITANSTALT FUR WIEDERAUFBAU a public law corporation incorporated in the Federal Republic of Germany whose office is at present at Palmengartenstrasse 5-9, D-60325 Frankfurt am Main ("KFW") IS SUPPLEMENTAL TO a subordination agreement dated 30 November 1995 (together "THE ORIGINAL AGREEMENT") made between the same parties. WHEREAS:- A. Words and expressions defined in the Original Agreement shall have the same meanings when used in this Supplemental Agreement including the Recitals; B. By a deed of release and reassignment dated 1999 between (1) KfW, (2) Blue Sapphire Marine Inc. ("BLUE SAPPHIRE"), (3) Esker Marine Shipping Inc., (4) Zenith Shipping Corporation, (5) Fantasia Cruising Inc. ("FANTASIA") and (6) Celebrity Cruises Inc. KfW has (inter alia) released Blue Sapphire from all of its obligations to KfW under the Fantasia Cross Collateral Guarantee dated 30 November 1995 in respect of the obligations of Fantasia under the Horizon Loan Agreement. NOW IT IS HEREBY MUTUALLY AGREED by and between the parties hereto as follows:- 1. As and with effect from 31 October 1998:- (A) All references to the "KFW LOAN AGREEMENT" in the Original Agreement shall be deemed to include supplemental agreements thereto dated 30 November 1995, 1 32 - 2 - September 1998 and 1999 made between Blue Sapphire and KfW; (B) Clause 4.2 shall be amended by the deletion therefrom of "OR THE COLLATERAL VESSEL" in line 1 and "FANTASIA" in line 6". 2. Save as amended hereby the Original Agreement shall remain unamended and in full force and effect. 3. The provisions of Clause 8 (Law and Jurisdiction) shall apply to this Supplemental Agreement mutatis mutandis. AS WITNESS the hands of the duly authorised representatives of the parties hereto the day and year first before written SIGNED by ) ) for and on behalf of ) CRUISE MAR INVESTMENT INC. ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) KREDITANSTALT FUR WIEDERAUFBAU ) in the presence of:- ) 33 THE EIGHTH SCHEDULE THIS DEED dated the day of 1999 and made between:- (1) CRUISE MAR SHIPPING HOLDINGS LTD. as Guarantor; and (2) KREDITANSTALT FUR WIEDERAUFBAU as Lender IS SUPPLEMENTAL TO a deed of guarantee and indemnity dated 30 November 1995 ("THE ORIGINAL GUARANTEE") made between the same parties. NOW THIS DEED WITNESSETH as follows:- 1. DEFINITIONS AND INTERPRETATION 1.1 All terms and expressions defined in the Original Guarantee shall have the same meanings when used in this Supplemental Deed. 2. APPROVAL OF THE GUARANTOR 2.1 The Guarantor hereby gives its approval to the Lender and the Borrower entering into the agreement supplemental to the Loan Agreement in the form of the draft annexed hereto as Appendix "A" ("THE SUPPLEMENTAL AGREEMENT"). 3. AMENDMENTS TO THE ORIGINAL GUARANTEE 3.1 As and with effect from 31 October 1998 all references to "THE LOAN AGREEMENT" shall be deemed to refer to the Loan Agreement referred to in the Original Guarantee as amended by an agreement supplemental thereto dated 1 September 1998 and this Deed; 3.2 Save as amended hereby, the Original Guarantee shall remain unchanged and in full force and effect. 34 - 2 - 4. GOVERNING LAW 4.1 The provisions of Clauses 16 and 18 of the Original Guarantee shall apply to this Supplemental Deed mutatis mutandis. IN WITNESS whereof this Supplemental Deed has been executed by the parties hereto on the day and year first before written. EXECUTED and DELIVERED ) as a Deed by ) CRUISE MAR SHIPPING ) HOLDINGS LTD. acting by ) ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) KREDITANSTALT FUR ) WIEDERAUFBAU ) in the presence of:- ) 35 THE NINTH SCHEDULE This Agreement dated the day of 1999 BETWEEN:- (1) FANTASIA CRUISING INC. a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("FANTASIA"); (2) ZENITH SHIPPING CORPORATION a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("ZENITH"); (3) BLUE SAPPHIRE MARINE INC. a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("BLUE SAPPHIRE"); (4) ESKER MARINE SHIPPING INC. a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("ESKER"); (5) CELEBRITY CRUISES INC. a corporation incorporated under the laws of the Republic of Liberia whose principal place of business is at 95 Akti Miaouli, Piraeus, Greece ("CCI"); and (6) KREDITANSTALT FUR WIEDERAUFBAU a public law corporation incorporated in the Federal Republic of Germany whose office is at present at Palmengartenstrasse 5-9, D-60325 Frankfurt am Main ("KFW"). IS SUPPLEMENTAL TO an agreement dated 30 November 1995 as amended by an agreement supplemental thereto dated 1 September 1998 (together known as the "ORIGINAL SURPLUS EARNINGS APPLICATION AGREEMENT") made between the same parties and Seabrook Maritime Inc. 36 - 2 - WHEREAS:- It has been agreed (inter alia) that KfW enter into an agreement supplemental to the Original Surplus Earnings Application Agreement so as to release Fantasia from being a party thereto and to delete therefrom the provisions relating to the application of Sub Earnings or Net Sub Earnings of m.v. "HORIZON" referred to in Recital G to the Original Agreement. NOW IT IS HEREBY AGREED by and between the parties hereto as follows:- 1. As and with effect from 31 October 1998 ("THE EFFECTIVE DATE"), KfW hereby releases Fantasia from any further obligations and liabilities under the Original Surplus Earnings Application Agreement and Fantasia shall cease to be a party to the Original Surplus Earnings Application Agreement. 2. As and with effect from the Effective Date:- (A) The definition of "VESSELS" in Recital F shall be amended by deletion of the word "HORIZON"; (B) The definition of "FIRST MORTGAGE" shall be amended by deletion of the words "(MEANS IN RESPECT OF "HORIZON") THE FIRST PREFERRED MORTGAGE DATED 30 APRIL 1990 (AS AMENDED BY SUPPLEMENT NO.'S 1 AND 2 THERETO DATED 1 MARCH 1993 AND 30 NOVEMBER 1995) GRANTED BY FANTASIA TO KFW"; (C) Clause 3.1(A) and Clause 3.2(A) shall each be deleted in full; 3. Save as amended hereby the Original Surplus Earnings Application Agreement shall remain unchanged and in full force and effect. 4. Each of the Owners (other than Fantasia) and CCI hereby acknowledge towards KfW that notwithstanding the said release of Fantasia they shall remain bound by the Original Agreement (as amended and supplemented by this Supplemental Agreement). 37 - 3 - 5. The provisions of Clause 5 (Applicable Law and Jurisdiction) shall apply to this Supplemental Agreement mutatis mutandis. IN WITNESS whereof the parties hereto have executed this Agreement the day and year first before written SIGNED by ) ) for and on behalf of ) FANTASIA CRUISING INC. ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) ZENITH SHIPPING CORPORATION ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) BLUE SAPPHIRE MARINE INC. ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) ESKER MARINE SHIPPING INC. ) in the presence of:- ) 38 - 4 - SIGNED by ) ) for and on behalf of ) CELEBRITY CRUISES INC. ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) KREDITANSTALT FUR ) WIEDERAUFBAU ) in the presence of:- ) EX-1.3 4 7TH SUPP. AGREEMENT TO LOAN FACILITY "ZENITH" 1 EXHIBIT 1.3 KREDITANSTALT FUR WIEDERAUFBAU (1) - and - ZENITH SHIPPING CORPORATION (2) ----------------------------------------------- SEVENTH SUPPLEMENTAL AGREEMENT - TO - LOAN FACILITY AGREEMENT IN RESPECT OF M.V. "ZENITH" (EX YARD NO. S.620 AT JOS. L. MEYER GMBH & CO.) F(W) 709 ----------------------------------------------- Sinclair Roche & Temperley London 2 INDEX PAGE 1. DEFINITIONS........................................................2 2. CONSENT OF THE LENDER..............................................3 3. DOCUMENTATION TO BE SIGNED CONCURRENTLY WITH THIS SEVENTH SUPPLEMENTAL AGREEMENT.....................................4 4. AMENDMENTS TO THE ORIGINAL LOAN AGREEMENT..........................5 5. LAW AND JURISDICTION...............................................7 SCHEDULES FIRST : Form of Fifth Letter of Consent SECOND : Form of Cross Guarantee Supplement THIRD : Form of Supplement No. 2 to the Second Mortgage FOURTH : Form of Second Supplement to the Second Assignment of Insurances FIFTH : Form of Second Supplement to the Second Assignment of Charter Earnings SIXTH : Form of Second Supplement to the Second Tripartite Agreement SEVENTH : Form of Second Supplement to UCH / KfW Subordination Agreement EIGHTH : Form of Supplement to the Cruise Mar Guarantee NINTH : Form of Supplement to Surplus Earnings Application Agreement 3 THIS AGREEMENT made as of the 2nd day of September 1999 BETWEEN:- (1) KREDITANSTALT FUR WIEDERAUFBAU a public law corporation incorporated in the Federal Republic of Germany whose office is at present at Palmengartenstra e 5-9, D-60325 Frankfurt am Main ("the Lender"); and (2) ZENITH SHIPPING CORPORATION a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("the Borrower") IS SUPPLEMENTAL TO a loan facility agreement dated 21 June 1990 as amended by agreements supplemental thereto dated 25 February 1992, 21 October 1992, 29 January 1993, 31 March 1995, 30 November 1995 and 1 September 1998 (together "the Original Loan Agreement"). WHEREAS:- A. The Lender has been requested to release:- (i) Fantasia from all of its obligations to the Lender under the guarantee dated 30 November 1995 ("THE FANTASIA GUARANTEE") executed by Fantasia in favour of the Lender in respect of the obligations of the Borrower under the Original Loan Agreement; and (ii) the Borrower from all of its obligations to the Lender under the guarantee dated 30 November 1995 ("THE ZENITH GUARANTEE") executed by the Borrower in favour of the Lender in respect of the obligations of Fantasia under the Horizon Loan Agreement; B. Pursuant to a deed of release and reassignment dated 2 September 1999 made between (1) the Lender, (2) Blue Sapphire, (3) Esker, (4) the Borrower, (5) Fantasia and (6) CCI the Lender has released the Fantasia Guarantee; 4 - 2 - C. This Supplemental Agreement (inter alia) sets out the terms and conditions upon which the Lender will agree to grant its consent to the release of the Zenith Guarantee and upon which certain amendments will be made to the Original Loan Agreement and the Security Documents; NOW IT IS HEREBY MUTUALLY AGREED by and between the parties hereto as follows:- 1. DEFINITIONS 1.1 Terms and expressions defined in the Recitals to this Supplemental Agreement shall, when used in this Supplemental Agreement, have the meanings therein set out; terms and expressions not defined herein but whose meanings are defined in the Original Loan Agreement shall, when used herein, have the same meanings set out therein and the following terms and expressions shall have the following meanings:- "CROSS COLLATERAL GUARANTEE SUPPLEMENTS" means together the supplements to the Cross Collateral Guarantees in respect of each of the Blue Sapphire Loan Agreement and the Esker Loan Agreement each in the form and upon the terms and conditions of the draft set out in the Second Schedule hereto; "FIFTH LETTER OF CONSENT" means a letter of consent to be addressed by the Lender to the Borrower in the form set out in the First Schedule hereto; "SECOND ASSIGNMENT OF CHARTER EARNINGS SECOND SUPPLEMENT" means, in respect of the Vessel, the second supplement to the Second Assignment of Charter Earnings in the form and upon the terms and conditions of the draft set out in the Fifth Schedule hereto; "SECOND ASSIGNMENT OF INSURANCES SECOND SUPPLEMENT" means, in respect of the Vessel, the second supplement to the Second Assignment of Insurances in the form and upon the terms and conditions of the draft set out in the Fourth Schedule hereto; "SECOND MORTGAGE SUPPLEMENT NO. 2" means a supplement to the Second Mortgage in form and upon terms and conditions of the draft set out in the Third Schedule hereto; 5 - 3 - "SECOND TRIPARTITE AGREEMENT SECOND SUPPLEMENT" means, in respect of the Vessel, the second supplement to the Second Tripartite Agreement in the form and upon the terms and conditions of the draft set out in the Sixth Schedule; "SUPPLEMENT TO THE CRUISE MAR GUARANTEE" means the supplement to the Cruise Mar Guarantee in the form and upon the terms and conditions set out in the Eighth Schedule; "SURPLUS EARNINGS APPLICATION AGREEMENT SUPPLEMENT" means an agreement supplemental to the Surplus Earnings Application Agreement in the form and upon the terms and conditions of the draft set out in the Ninth Schedule hereto; "UCH/KFW SUBORDINATION AGREEMENT SECOND SUPPLEMENT" means the second supplemental agreement to the UCH/KfW Subordination Agreement in the form and upon the terms and conditions of the draft set out in the Seventh Schedule hereto; 2. CONSENT OF THE LENDER 2.1 Subject to the fulfilment of all the terms and conditions set out in Clause 2.2 the Lender will issue the Fifth Letter of Consent and agree to the amendments to the Original Loan Agreement hereinafter set out. 2.2 The Lender shall issue the Fifth Letter of Consent upon the fulfilment of all of the following conditions to the Lender's satisfaction:- (A) the Lender has received the following documents each in form and substance satisfactory to the Lender:- (i) this Seventh Supplemental Agreement duly executed by the Borrower; (ii) the Cross Collateral Guarantee Supplements duly executed by the Borrower; and (iii) the Supplement to the Cruise Mar Guarantee duly executed by Cruise Mar Holdings. 6 - 4 - (B) the Lender has received a certificate from the Secretary of each of the Borrower, Blue Sapphire, Esker, Cruise Mar, UCH and CCI attaching resolutions passed at the Meeting of the Board of Directors of the relevant company approving or ratifying the execution, delivery, implementation and performance of such of this Seventh Supplemental Agreement and each of the documents executed or to be executed pursuant thereto to which such company is or is to be a party, such certificate to certify that such resolutions remain in full force and effect on the date of such certificate and such certificate to certify the names of the current officers and directors of the relevant company; and (C) no Event of Default has occurred and is continuing. 3. DOCUMENTATION TO BE SIGNED CONCURRENTLY WITH THIS SEVENTH SUPPLEMENTAL AGREEMENT 3.1 The following shall be effected concurrently with the execution of this Seventh Supplemental Agreement:- (A) the Second Mortgage Supplement No. 2 duly executed by the Borrower and registered under the laws and flag of the Republic of Liberia at the Office of the Deputy Commissioner of Maritime Affairs of the Republic of Liberia at the port of New York; (B) the Second Assignment of Insurances Second Supplement duly executed by the Borrower and CCI respectively; (C) the Second Assignment of Charter Earnings Second Supplement duly executed by the Borrower; (D) the Second Tripartite Agreement Second Supplement duly executed by the Borrower and CCI; 7 - 5 - (E) the UCH/KfW Subordination Agreement Second Supplement duly executed by UCH; (F) the Surplus Earnings Application Agreement Supplement duly executed by Fantasia, the Borrower, Blue Sapphire, Esker and CCI. 4. AMENDMENTS TO THE ORIGINAL LOAN AGREEMENT 4.1 As and with effect from 31 October 1998 the Original Loan Agreement shall be further amended as follows:- (A) DEFINITIONS The definition of "ADDITIONAL SECURITIES" shall be amended by the deletion therefrom of "HORIZON CROSS SECURITIES"; The definition of "BLUE SAPPHIRE LOAN AGREEMENT" shall be amended by the insertion after "1 SEPTEMBER 1998" of the words "AND 2 SEPTEMBER 1999"; The definition "CHARTER" shall be amended to read "MEANS, IN RESPECT OF THE VESSEL, THE REVISED 'BARECON 89' CHARTER DATED 29 NOVEMBER 1993 AS AMENDED BY ADDENDUM NO.1 DATED 30 NOVEMBER 1995, ADDENDUM NO. 2 DATED 1 SEPTEMBER 1998 AND 2 SEPTEMBER 1999 WHEREBY THE BORROWER HAS BAREBOAT CHARTERED THE VESSEL TO CCI FOR AN INITIAL PERIOD AS AND WITH EFFECT FROM 1 JANUARY 1993 UP TO 31 MARCH 2008 UPON THE TERMS AND CONDITIONS THEREIN CONTAINED;" The definition of "CROSS COLLATERAL GUARANTEES" shall be amended by the deletion therefrom in line 9 of "HORIZON LOAN AGREEMENT"; The definition "DEFERRAL" shall be amended in line 1 by the deletion of "FOUR (4)" and the substitution therefor of "THREE (3)"; 8 - 6 - The definition of "ESKER LOAN AGREEMENT" shall be amended by the insertion after "1 SEPTEMBER 1998" of the words "AND 2 SEPTEMBER 1999"; The definition "KFW FACILITY AGREEMENTS" shall be amended by the deletion therefrom of "THE HORIZON LOAN AGREEMENT"; The definition "HORIZON CROSS SECURITIES" shall be deleted in full; The definition "HORIZON LOAN AGREEMENT" shall be deleted in full; The definitions of "SECOND ASSIGNMENT OF CHARTER EARNINGS", "SECOND ASSIGNMENT OF INSURANCES", "SECOND MORTGAGE" and "SECOND TRIPARTITE AGREEMENT" shall each be deemed to include therein the respective supplements to each such security referred to in Clause 2.1(B); The definition "SURPLUS EARNINGS APPLICATION AGREEMENT" shall be deemed to include the supplement thereto referred to in Clause 2.1(B); The definition "ZENITH LOAN AGREEMENT" shall be amended in line 5 by the insertion of a "SEVENTH AGREEMENT SUPPLEMENTAL THERETO DATED 2 SEPTEMBER 1999"; (B) CLAUSE 13 (i) Clause 13.01(xv) shall be amended by the deletion therefrom of the references to "FANTASIA"; (C) CLAUSE 17:- (i) Clause 17.01 shall be amended by the deletion therefrom of the reference to "FANTASIA"; (ii) Clause A.01 "FIFTHLY" shall be amended by the deletion of the words "AND THE OPERATING RESERVE REFERRED TO UNDER CLAUSE 15.01(I) OF THE HORIZON 9 -7- LOAN AGREEMENT HAS REACHED THE LEVEL OF TEN MILLION DOLLARS ($10,000,000)"; 4.2 All references in the Original Agreement to "this Agreement", "hereunder", "hereof"or "herein" shall be deemed to refer to the Original Loan Agreement as amended by this Seventh Supplemental Agreement. 4.3 Save as amended by Clause 3.1 the Original Loan Agreement shall remain unchanged and in full force and effect. 5. LAW AND JURISDICTION 5.1 The provisions of Clauses 31 (Law) and 32 (Jurisdiction) of the Original Loan Agreement shall apply to this Seventh Supplemental Agreement mutatis mutandis. AS WITNESS the hands of the duly authorised representatives of the parties hereto the day and year first before written. SIGNED by ) ) /s/ JP Ward for and on behalf of ) ------------------------ KREDITANSTALT FUR WIEDERAUFBAU ) JONATHAN PAUL WARD in the presence of:- ) ATTORNEY IN FACT SIGNED by ) ) /s/ Bonnie Biumi for and on behalf of ) ------------------------ ZENITH SHIPPING CORPORATION ) BONNIE BIUMI in the presence of:- ) VICE PRESIDENT & TREASURER 10 THE FIRST SCHEDULE [to be typed on headed paper of Kreditanstalt fur Wiederaufbau] Zenith Shipping Corporation c/o Celebrity Cruises Inc. 1050 Caribbean Way Miami Florida 33132-2096 USA Dear Sirs M.V. "ZENITH" - LOAN AGREEMENT DATED 21 JUNE 1990 - F(W) 709 We refer to the loan agreement dated 21 June 1990 as amended by supplemental agreements dated 25 February 1992, 21 October 1992, 29 January 1993, 31 March 1995, 30 November 1995 and 1 September 1998 (together "THE ORIGINAL LOAN AGREEMENT") and as further amended by a further supplemental agreement dated 1999 ("THE SEVENTH SUPPLEMENT") made between yourselves and ourselves. Pursuant to Clause 2.1 of the Seventh Supplement we hereby confirm that the conditions set out in Clause 2.2 have been satisfied and accordingly the amendments set out in Clause 3 have become effective. Words and expressions defined in the Original Loan Agreement as amended by the Seventh Supplement shall, unless the context otherwise requires, bear the same meanings when used in this letter. Yours faithfully for and on behalf of KREDITANSTALT FUR WIEDERAUFBAU 11 THE SECOND SCHEDULE THIS DEED dated the day of 1999 and made between:- (1) ZENITH SHIPPING CORPORATION as Guarantor; and (2) KREDITANSTALT FUR WIEDERAUFBAU as Lender IS SUPPLEMENTAL TO a deed of guarantee and indemnity dated 30 November 1995 ("THE ORIGINAL GUARANTEE") made between the same parties. NOW THIS DEED WITNESSETH as follows:- 1. DEFINITIONS AND INTERPRETATION 1.1 All terms and expressions defined in the Original Guarantee shall have the same meanings when used in this Supplemental Deed. 2. APPROVAL OF THE GUARANTOR 2.1 The Guarantor hereby gives its approval to the Lender and the Borrower entering into the agreement supplemental to the Loan Agreement in the form of the draft annexed hereto as Appendix "A" ("THE SUPPLEMENTAL AGREEMENT"). 3. AMENDMENTS TO THE ORIGINAL GUARANTEE 3.1 As and with effect from 31 October 1998:- (A) All references to "THE LOAN AGREEMENT" shall be deemed to refer to the Loan Agreement referred to in the Original Guarantee as amended by agreements supplemental thereto dated 1 September 1998 and 1999; (B) Clause 1.1 shall be amended such that:- (i) the definition "THIS GUARANTEE" shall be deemed to refer to the Original Guarantee as amended by this Deed; 12 - 2 - (ii) the definition of "SECOND ASSIGNMENT OF CHARTER EARNINGS", "SECOND ASSIGNMENT OF INSURANCES", "SECOND MORTGAGE" and "SECOND TRIPARTITE AGREEMENT" shall each be deemed to include therein the respective supplement to each security referred to in Clause 2.1(B) of the Supplemental Agreement; and (iii) the definition of "ZENITH LOAN AGREEMENT" shall be deemed to refer to the Zenith Loan Agreement as further amended by an agreement supplemental thereto dated 1999. 3.2 Save as amended hereby, the Original Guarantee shall remain unchanged and in full force and effect. 4. GOVERNING LAW 4.1 The provisions of Clauses 18 and 19 of the Original Guarantee shall apply to this Supplemental Deed mutatis mutandis. IN WITNESS whereof this Supplemental Deed has been executed by the parties hereto on the day and year first before written. EXECUTED and DELIVERED ) as a Deed ) by ZENITH SHIPPING ) CORPORATION acting by ) ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) KREDITANSTALT FUR ) WIEDERAUFBAU ) in the presence of:- ) 13 THE THIRD SCHEDULE SUPPLEMENT NO. 2 -TO- SECOND PREFERRED MORTGAGE -ON- "ZENITH" SUPPLEMENT NO. 2 dated 1999 ("THIS SUPPLEMENT NO. 2") to a second preferred mortgage dated 30 November 1995 ("THE MORTGAGE") by ZENITH SHIPPING CORPORATION a Liberian corporation ("THE OWNER") in favour of KREDITANSTALT FUR WIEDERAUFBAU a public law corporation incorporated in the Federal Republic of Germany whose registered office is at present at Palmengartenstrasse 5-9, D-60325 Frankfurt am Main, Federal Republic of Germany ("THE MORTGAGEE") recorded on 30 November 1995 at 9.03 AM EST in Book PM47 at Page 901 as amended by supplement no. 1 thereto dated 1 September 1998 by the Owner to the Mortgagee recorded on 1 September 1998 at 3.38 PM EDST in Book PM50 at page 582 (together "THE MORTGAGE"). WHEREAS:- A. The Owner is the registered and beneficial owner of the whole of the Liberian flag cruise vessel "ZENITH" ("THE VESSEL"): official number "9660" of 47,255 gross and 24,560 net tons; or thereabouts, duly documented in the name of the Owner under the laws of the Republic of Liberia, with her home port at Monrovia, Liberia; B. Words and expressions defined in the Mortgage shall, unless stated herein to the contrary, bear the same meanings when used in this Supplement No. 2; C. By a deed of release and reassignment dated 1999 made between (1) the Mortgagee (2) Blue Sapphire (3) Esker (4) the Owner (5) Fantasia and (6) CCL the Mortgagee has (inter alia) released the Owner from all of its obligations under the Guarantee in respect of the Horizon Loan Agreement; D. By an agreement dated 1999 supplemental to the Blue Sapphire Loan Agreement it has been agreed by Blue Sapphire with the Mortgagee that at the date of this 14 - 2 - Supplement No. 2 the aggregate of all possible advances that may be made by the Mortgagee to Blue Sapphire pursuant to the Blue Sapphire Loan Agreement and secured by the Mortgage (as amended and supplemented by this Supplement No. 2) is one hundred and seventy seven million four hundred and sixty nine thousand two hundred and twenty United States Dollars (USD177,469,220) (of which USD149,384,402 is Blue Sapphire Loan A, USD18,673,050 is Blue Sapphire Loan B and USD9,411,768 is Blue Sapphire Loan D); E. By an agreement dated 1999 supplemental to the Esker Loan Agreement it has been agreed by Esker with the Mortgagee that at the date of this Supplement No. 2 the aggregate of all possible advances that may be made by the Mortgagee to Esker pursuant to the Esker Loan Agreement is one hundred and seventy three million six hundred and fourteen thousand two hundred and twenty eight United States Dollars (USD173,614,228) all of which is Esker Loan A; F. The Owner and the Mortgagee wish by this Supplement No. 2 to amend the Recording Clause of the Mortgage so as to reflect the transactions referred to in Recitals C, D, and E. NOW THEREFORE, in consideration of the premises and other good and valuable consideration the receipt and sufficiency whereof are hereby acknowledged by the Owner and the Mortgagee, the Owner and the Mortgagee hereby covenant and agree as follows:- 1. As and with effect from 31 October 1998 the Mortgage shall cease to secure Horizon Loan A, Horizon Loan B, Horizon Loan C and Horizon Loan D. 2. For the purpose of recording this Supplement No. 2 as required by Chapter 3 of Title 22 of the Liberian Code of Law of 1956, as amended, this Supplement No. 2 amends the total amount secured by the Mortgage. The total amount of the Mortgage is amended to three hundred and fifty one million eighty three thousand four hundred and forty eight United States Dollars (USD351,083,448) (of which USD177,469,220 is the aggregate of Blue Sapphire Loan A, Blue Sapphire Loan B and Blue Sapphire Loan D and USD173,614,228 is Esker Loan A) and interest and performance of mortgage covenants. The date of maturity is on demand. There is no separate discharge amount. 15 - 3 - IN WITNESS whereof the Owner and the Mortgagee have executed this Supplement No. 2 the date and year first before written. ZENITH SHIPPING CORPORATION By: Title: KREDITANSTALT FUR WIEDERAUFBAU By: Title: Attorney-in-Fact 16 - 4 - ACKNOWLEDGEMENT STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the day of 1999 before me personally came , to me known, and known to me to be the person who executed the foregoing Supplement No. 2 who, being by me duly sworn, did depose and say that he resides at ; that he is of Zenith Shipping Corporation, a Liberian corporation, the entity described in and which executed the foregoing Supplement No. 2; that he signed his name thereto pursuant to authority granted to him by the Board of Directors of the said entity; and he further acknowledged that the said Supplement No. 2 is the act and deed of the said entity. NOTARY PUBLIC [FOR USE THE IN THE REPUBLIC OF LIBERIA] 17 - 5 - ACKNOWLEDGEMENT STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the day of 1999 before me personally came , to me known, and known to me to be the person who executed the foregoing Supplement No. 2 who, being by me duly sworn, did depose and say that he/she resides at ; that he/she is Attorney-in-Fact for Kreditanstalt fur Wiederaufbau the corporation described in and which executed the foregoing Supplement No. 2; that he/she signed his/her name thereto pursuant to authority granted to him/her by a Power of Attorney of the said entity; and he/she further acknowledged that the said Supplement No. 2 is the act and deed of the said entity. NOTARY PUBLIC [FOR USE THE IN THE REPUBLIC OF LIBERIA] 18 THE FOURTH SCHEDULE This Deed dated the day of 1999 made between: (1) ZENITH SHIPPING CORPORATION ("THE OWNER"); (2) CELEBRITY CRUISES INC. ("THE CHARTERER"); and (3) KREDITANSTALT FUR WIEDERAUFBAU ("THE ASSIGNEE") IS SUPPLEMENTAL TO a deed of second assignment of insurances of the Liberian flag cruise vessel m.v. "ZENITH" dated 30 November 1995 as amended by a deed supplemental thereto dated 1 September 1998 (together "THE ORIGINAL ASSIGNMENT"). WHEREAS:- A. Words and expressions defined in the Original Assignment shall bear the same meanings when used in this Supplemental Deed including the Recitals; B. By a deed of release and reassignment dated 1999 made between (1) the Assignee, (2) Blue Sapphire, (3) Esker, (4) the Owner, (5) Fantasia and (6) CCI the Assignee has (inter alia) released the Owner from all further obligations under the Guarantee dated 30 November 1995 ("THE RELEASED GUARANTEE") issued by the Owner in favour of the Assignee in respect of the obligations of Fantasia under the Horizon Loan Agreement and has further agreed to enter into this Supplemental Deed in order that the Original Assignment shall cease to stand as security for the obligations of the Owner under the Released Guarantee. NOW THIS DEED WITNESSETH and it is hereby agreed by and between the parties hereto as follows:- 1. As and with effect from 31 October 1998 the Original Assignment shall cease to stand as security for the balance from time to time outstanding of the principal amount of the Fantasia Loans, interest accrued thereon and all other sums whatsoever and howsoever 19 - 2 - that may hereafter be secured by the Released Guarantee and any securities executed for the obligations of the Owner under the Released Guarantee. 2. Without prejudice to the generality of Clause 1 as and with effect from the date hereof the following further amendments shall be deemed to have been made to the Original Assignment:- (A) the expression "Guarantees" shall exclude the Released Guarantee; (B) the definition "Borrowers" shall be amended by the deletion therefrom of "Fantasia"; (C) the definition "Loan Agreements" shall be amended by the deletion therefrom of "the Horizon Loan Agreement"; (D) the definition "Loans" shall be amended by the deletion therefrom of "the Fantasia Loans". 3. Save as amended hereby the Original Assignment shall remain unchanged and in full force and effect. 4. The provisions of Clause 12 (Governing Law) and Clause 13 (Jurisdiction) shall apply mutatis mutandis to this Supplemental Deed. IN WITNESS whereof this Supplemental Deed has been executed by the parties hereto on the day and year first before written. SIGNED and DELIVERED as a DEED ) by ZENITH SHIPPING CORPORATION ) acting by ) ) in the presence of: ) 20 - 3 - SIGNED and DELIVERED as a DEED ) by CELEBRITY CRUISES INC. ) acting by ) ) in the presence of: ) SIGNED and DELIVERED as a DEED ) by ) for and on behalf of ) KREDITANSTALT FUR WIEDERAUFBAU ) in the presence of: ) 21 THE FIFTH SCHEDULE THIS DEED dated the day of 1999 made between: (1) ZENITH SHIPPING CORPORATION ("THE ASSIGNOR"); and (2) KREDITANSTALT FUR WIEDERAUFBAU ("THE ASSIGNEE") IS SUPPLEMENTAL TO a deed of second assignment of Charter Earnings, Owner's Requisition Compensation and Earnings of the Liberian flag cruise vessel m.v. "ZENITH" dated 30 November 1995 as amended by a deed supplemental thereto dated 1 September 1998 ("THE ORIGINAL ASSIGNMENT"). WHEREAS:- A. Words and expressions defined in the Original Assignment shall bear the same meanings when used in this Supplemental Deed including the Recitals; B. By a deed of release and reassignment dated 1999 made between (1) the Assignee, (2) Blue Sapphire, (3) Esker, (4) the Assignor, (5) Fantasia and (6) CCI the Assignee has (inter alia) released the Assignor from all further obligations under the Guarantee dated 30 November 1995 ("THE RELEASED GUARANTEE") issued by the Assignor in favour of the Assignee in respect of the obligations of Fantasia under the Horizon Loan Agreement and has further agreed to enter into this Supplemental Deed in order that the Original Assignment shall cease to stand as security for the obligations of the Assignor under the Released Guarantee. NOW THIS DEED WITNESSETH and it is hereby agreed by and between the parties hereto as follows:- 1. As and with effect from 31 October 1998 the Original Assignment shall cease to stand as security for the balance from time to time outstanding of the principal amount of the 22 - 2 - Fantasia Loans, interest accrued thereon and all other sums whatsoever and howsoever that may hereafter be secured by the Released Guarantee and any securities executed for the obligations of the Assignor under the Released Guarantee. 2. Without prejudice to the generality of Clause 1 as and with effect from [the date hereof] the following further amendments shall be deemed to have been made to the Original Assignment:- (A) the definition "Guarantees" shall exclude the Released Guarantee; (B) the definition "Borrowers" shall be amended by the deletion therefrom of "Fantasia"; (C) the definition "Loan Agreements" shall be amended by the deletion therefrom of "the Horizon Loan Agreement"; (D) the definition "Loans" shall be amended by the deletion therefrom of "the Horizon Loans". 3. Save as amended hereby the Original Assignment shall remain unchanged and in full force and effect. 4. The provisions of Clause 12 (Governing Law) shall apply mutatis mutandis to this Supplemental Deed. IN WITNESS whereof this Supplemental Deed has been executed by the parties hereto on the day and year first before written. SIGNED and DELIVERED as a DEED ) by ZENITH SHIPPING CORPORATION ) acting by ) ) in the presence of: ) 23 - 3 - SIGNED and DELIVERED as a DEED ) by ) ) for and on behalf of ) KREDITANSTALT FUR WIEDERAUFBAU ) in the presence of: ) 24 THE SIXTH SCHEDULE THIS AGREEMENT dated the day of 1999 made between: (1) ZENITH SHIPPING CORPORATION ("THE OWNER"); (2) CELEBRITY CRUISES INC. ("THE CHARTERER"); and (3) KREDITANSTALT FUR WIEDERAUFBAU ("THE MORTGAGEE") IS SUPPLEMENTAL TO a second tripartite agreement in respect of the Liberian flag cruise vessel m.v. "Zenith" dated 30 November 1995 as amended by an agreement supplemental thereto dated 1 September 1998 (together "THE ORIGINAL AGREEMENT") WHEREAS:- A. Words and expressions defined in the Original Agreement shall bear the same meanings when used in this Supplemental Agreement including the Recitals; B. By a deed of release and reassignment dated 1999 between (1) the Mortgagee, (2) Blue Sapphire, (3) Esker, (4) the Owner, (5) Fantasia and (6) CCI the Mortgagee has (inter alia) released the Owner from all further obligations under the Guarantee dated 30 November 1995 ("THE RELEASED GUARANTEE") issued by the Owner in favour of the Mortgagee in respect of the obligations of Fantasia under the Horizon Loan Agreement and has further agreed to enter into this Supplemental Agreement in order that the Original Agreement shall cease to stand as security for the obligations of the Owner under the Released Guarantee; C. By a Supplement No. 1 of even date herewith to the Second Mortgage the Owner and the Mortgagee have agreed that as and with effect from 31 October 1998 the Second Mortgagee shall cease to stand as security for the Released Guarantee. NOW it is hereby agreed by and between the parties hereto as follows:- 25 - 2 - 1. As and with effect from 31 October 1998 the Original Agreement shall cease to stand as security for the balance from time to time outstanding of the principal amount of the Fantasia Loans, interest accrued thereon and all other sums whatsoever and howsoever that may hereafter be secured by the Released Guarantee and any securities executed for the obligations of the Owner under the Released Guarantee. 2. Without prejudice to the generality of Clause 1 as and with effect from [the date hereof] the following further amendments shall be deemed to have been made to the Original Agreement:- (A) the definition "Guarantees" shall exclude the Released Guarantee; (B) the definition "Borrowers" shall be amended by the deletion therefrom of "Fantasia"; (C) the definition "Loan Agreements" shall be amended by the deletion therefrom of "the Horizon Loan Agreement"; (D) the definition "Loans" shall be amended by the deletion therefrom of "the Horizon Loans". 3. Save as amended hereby the Original Assignment shall remain unchanged and in full force and effect. 4. The provisions of Clause 7 (Applicable Law and Jurisdiction) shall apply mutatis mutandis to this Supplemental Deed. IN WITNESS whereof this Supplemental Agreement has been executed by the parties hereto on the day and year first before written. SIGNED ) by ZENITH SHIPPING CORPORATION ) acting by ) ) in the presence of: ) 26 - 3 - SIGNED ) by CELEBRITY CRUISES INC. ) acting by ) ) in the presence of: ) SIGNED ) by ) KREDITANSTALT FUR WIEDERAUFBAU ) acting by ) ) in the presence of: ) 27 THE SEVENTH SCHEDULE THIS AGREEMENT dated the day of 1999 made between: (1) UNIVERSAL CRUISE HOLDINGS LIMITED a company incorporated under the laws of the British Virgin Islands whose registered office is at present at Craigmuir Chambers, Road Town, Tortola, British Virgin Islands ("UCH"); and (2) KREDITANSTALT FUR WIEDERAUFBAU a public law corporation incorporated in the Federal Republic of Germany whose office is at present at Palmengartenstrasse 5-9, D-60325 Frankfurt am Main ("KFW") IS SUPPLEMENTAL TO a subordination agreement dated 31 March 1995 as amended by agreements supplemental thereto dated 30 November 1995 and 1 September 1998 (together "THE ORIGINAL AGREEMENT") made between the same parties. WHEREAS:- A. Words and expressions defined in the Original Agreement shall have the same meanings when used in this Supplemental Agreement including the Recitals; B. By a deed of release and reassignment dated 1999 between (1) KfW, (2) Blue Sapphire Marine Inc., (3) Esker Marine Shipping Inc. (4) Zenith Shipping Corporation ("ZENITH"), (5) Fantasia Cruising Inc. ("FANTASIA") and (6) Celebrity Cruises Inc. KfW has (inter alia) released Zenith from all of its obligations to KfW under the guarantee (the "Fantasia Guarantee") executed by Zenith in respect of the obligations of Fantasia under the Horizon Loan Agreement. NOW IT IS HEREBY MUTUALLY AGREED by and between the parties hereto as follows:- 1. As and with effect from 31 October 1998 all references in the Original Agreement to "the Borrower's Cross Securities" shall be deemed to exclude the Fantasia Guarantee referred to in Recital B to this Supplemental Agreement and the expression "the KfW Facility Agreements" shall be deemed to exclude the Horizon Loan Agreement. 28 - 2 - 2. Save as amended hereby the Original Agreement shall remain unamended and in full force and effect. 3. The provisions of Clause 8 (Law and Jurisdiction) shall apply to this Supplemental Agreement mutatis mutandis. AS WITNESS the hands of the duly authorised representatives of the parties hereto the day and year first before written SIGNED by ) ) for and on behalf of ) UNIVERSAL CRUISE HOLDINGS LIMITED ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) KREDITANSTALT FUR WIEDERAUFBAU ) in the presence of:- ) 29 THE EIGHTH SCHEDULE THIS DEED dated the day of 1999 and made between:- (1) CRUISE MAR SHIPPING HOLDINGS LTD. as Guarantor; and (2) KREDITANSTALT FUR WIEDERAUFBAU as Lender IS SUPPLEMENTAL TO a deed of guarantee and indemnity dated 30 November 1995 ("THE ORIGINAL GUARANTEE") made between the same parties. NOW THIS DEED WITNESSETH as follows:- 1. DEFINITIONS AND INTERPRETATION 1.1 All terms and expressions defined in the Original Guarantee shall have the same meanings when used in this Supplemental Deed. 2. APPROVAL OF THE GUARANTOR 2.1 The Guarantor hereby gives its approval to the Lender and the Borrower entering into the agreement supplemental to the Loan Agreement in the form of the draft annexed hereto as Appendix "A" ("THE SUPPLEMENTAL AGREEMENT"). 3. AMENDMENTS TO THE ORIGINAL GUARANTEE 3.1 As and with effect from 31 October 1998 all references to "THE LOAN AGREEMENT" shall be deemed to refer to the Loan Agreement referred to in the Original Guarantee as amended by agreements supplemental thereto dated 1 September 1998 and 1999; 3.2 Save as amended hereby, the Original Guarantee shall remain unchanged and in full force and effect. 30 - 2 - 4. GOVERNING LAW 4.1 The provisions of Clauses 18 and 19 of the Original Guarantee shall apply to this Supplemental Deed mutatis mutandis. IN WITNESS whereof this Supplemental Deed has been executed by the parties hereto on the day and year first before written. EXECUTED and DELIVERED ) as a Deed by ) CRUISE MAR SHIPPING ) HOLDINGS LTD. acting by ) ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) KREDITANSTALT FUR ) WIEDERAUFBAU ) in the presence of:- ) 31 THE NINTH SCHEDULE This Agreement dated the day of 1999 BETWEEN:- (1) FANTASIA CRUISING INC. a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("FANTASIA"); (2) ZENITH SHIPPING CORPORATION a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("ZENITH"); (3) BLUE SAPPHIRE MARINE INC. a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("BLUE SAPPHIRE"); (4) ESKER MARINE SHIPPING INC. a corporation incorporated under the laws of the Republic of Liberia whose registered office is at 80 Broad Street, Monrovia, Republic of Liberia ("ESKER"); (5) CELEBRITY CRUISES INC. a corporation incorporated under the laws of the Republic of Liberia whose principal place of business is at 95 Akti Miaouli, Piraeus, Greece ("CCI"); and (6) KREDITANSTALT FUR WIEDERAUFBAU a public law corporation incorporated in the Federal Republic of Germany whose office is at present at Palmengartenstrasse 5-9, D-60325 Frankfurt am Main ("KFW"). IS SUPPLEMENTAL TO an agreement dated 30 November 1995 as amended by an agreement supplemental thereto dated 1 September 1998 (together known as the "ORIGINAL SURPLUS EARNINGS APPLICATION AGREEMENT") made between the same parties and Seabrook Maritime Inc. 32 - 2 - WHEREAS:- It has been agreed (inter alia) that KfW enter into an agreement supplemental to the Original Surplus Earnings Application Agreement so as to release Fantasia from being a party thereto and to delete therefrom the provisions relating to the application of Sub Earnings or Net Sub Earnings of m.v. "HORIZON" referred to in Recital G to the Original Agreement. NOW IT IS HEREBY AGREED by and between the parties hereto as follows:- 1. As and with effect from 31 October 1998 ("THE EFFECTIVE DATE"), KfW hereby releases Fantasia from any further obligations and liabilities under the Original Surplus Earnings Application Agreement and Fantasia shall cease to be a party to the Original Surplus Earnings Application Agreement. 2. As and with effect from the Effective Date:- (A) The definition of "VESSELS" in Recital F shall be amended by deletion of the word "HORIZON"; (B) The definition of "FIRST MORTGAGE" shall be amended by deletion of the words "(MEANS IN RESPECT OF "HORIZON") THE FIRST PREFERRED MORTGAGE DATED 30 APRIL 1990 (AS AMENDED BY SUPPLEMENT NO.'S 1 AND 2 THERETO DATED 1 MARCH 1993 AND 30 NOVEMBER 1995) GRANTED BY FANTASIA TO KFW"; (C) Clause 3.1(A) and Clause 3.2(A) shall each be deleted in full; 3. Save as amended hereby the Original Surplus Earnings Application Agreement shall remain unchanged and in full force and effect. 4. Each of the Owners (other than Fantasia) and CCI hereby acknowledge towards KfW that notwithstanding the said release of Fantasia they shall remain bound by the Original Agreement (as amended and supplemented by this Supplemental Agreement). 33 - 3 - 5. The provisions of Clause 5 (Applicable Law and Jurisdiction) shall apply to this Supplemental Agreement mutatis mutandis. IN WITNESS whereof the parties hereto have executed this Agreement the day and year first before written SIGNED by ) ) for and on behalf of ) FANTASIA CRUISING INC. ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) ZENITH SHIPPING CORPORATION ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) BLUE SAPPHIRE MARINE INC. ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) ESKER MARINE SHIPPING INC. ) in the presence of:- ) 34 - 4 - SIGNED by ) ) for and on behalf of ) CELEBRITY CRUISES INC. ) in the presence of:- ) SIGNED by ) ) for and on behalf of ) KREDITANSTALT FUR ) WIEDERAUFBAU ) in the presence of:- ) EX-2.14 5 CREDIT AGREEMENT 1 EXHIBIT 2.14 Dated as of December 16, 1999 Between ROYAL CARIBBEAN CRUISES LTD., as the Borrower and KREDITANSTALT FUR WIEDERAUFBAU As the Lender CREDIT AGREEMENT US $300,000,000 2 TABLE OF CONTENTS
PAGE ---- ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.1 Defined Terms 1 SECTION 1.2 Use of Defined Terms 10 SECTION 1.3 Cross-References 10 SECTION 1.4 Accounting and Financial Determinations 10 ARTICLE II COMMITMENT, BORROWING PROCEDURE AND THE NOTE SECTION 2.1 Commitment 11 SECTION 2.2 Borrowing Procedure 11 SECTION 2.3 Election of Interest Periods 11 SECTION 2.4 Note 11 ARTICLE III REPAYMENTS, PREPAYMENTS AND INTEREST SECTION 3.1 Repayments and Prepayments 12 SECTION 3.2 Interest Provisions 12 SECTION 3.2.1 Rates 12 SECTION 3.2.2 Post-Maturity Rates 12 SECTION 3.2.3 Payment Dates 13 ARTICLE IV INCREASED LOAN COSTS AND OTHER PROVISIONS SECTION 4.1 LIBO Rate Lending Unlawful 13 SECTION 4.2 Deposits Unavailable 14 SECTION 4.3 Increased Loan Costs, etc. 14 SECTION 4.4 Funding Losses 16 SECTION 4.5 Increased Capital Costs 16 SECTION 4.6 Taxes 17 SECTION 4.7 Payments, Computations, etc. 19 SECTION 4.8 Setoff 20 SECTION 4.9 Use of Proceeds 20 ARTICLE V CONDITIONS TO BORROWING SECTION 5.1 Drawdown 20 SECTION 5.1.1 Resolutions, etc. 20 SECTION 5.1.2 Delivery of the Note 21 SECTION 5.1.3 Ownership, etc. of Vessels 21 SECTION 5.1.4 Opinions of Counsel 21 SECTION 5.1.5 Closing Fees, Expenses, etc. 21 SECTION 5.1.6 Loan Request 21 SECTION 5.1.7 Certificate of Compliance 21 SECTION 5.1.8 Compliance with Warranties, No Default, etc. 22
3 TABLE OF CONTENTS (Continued)
PAGE ---- ARTICLE VI REPRESENTATIONS AND WARRANTIES SECTION 6.1 Organization, etc. 22 SECTION 6.2 Due Authorization, Non-Contravention, etc. 22 SECTION 6.3 Government Approval, Regulation, etc. 23 SECTION 6.4 Compliance with Environmental Laws 23 SECTION 6.5 Validity, etc. 23 SECTION 6.6 Financial Information 23 SECTION 6.7 No Defaults under Material Agreements 24 SECTION 6.8 No Default, Event of Default or Prepayment Event 24 SECTION 6.9 Litigation 24 SECTION 6.10 Vessels 24 SECTION 6.11 Subsidiaries 24 SECTION 6.12 Obligations rank pari passu 25 SECTION 6.13 Withholding, etc. 25 SECTION 6.14 No Filing, etc. Required 25 SECTION 6.15 No Immunity 25 SECTION 6.16 Pension Plans 25 ARTICLE VII COVENANTS SECTION 7.1 Affirmative Covenants 26 SECTION 7.1.1 Financial Information, Reports, Notices, etc. 26 SECTION 7.1.2 Approvals and Other Consents 27 SECTION 7.1.3 Compliance with Laws, etc. 27 SECTION 7.1.4 Vessels 28 SECTION 7.1.5 Insurance 28 SECTION 7.1.6 Books and Records 29 SECTION 7.2 Negative Covenants 29 SECTION 7.2.1 Business Activities 29 SECTION 7.2.2 Indebtedness 29 SECTION 7.2.3 Liens 29 SECTION 7.2.4 Financial Condition 31 SECTION 7.2.5 Investments 32 SECTION 7.2.6 Consolidation, Merger, etc. 32 SECTION 7.2.7 Asset Dispositions, etc. 32 SECTION 7.2.8 Transactions with Affiliates 33 ARTICLE VIII EVENTS OF DEFAULT SECTION 8.1 Listing of Events of Default 34 SECTION 8.1.1 Non-Payment of Obligations 34 SECTION 8.1.2 Breach of Warranty 34 SECTION 8.1.3 Non-Performance of Certain Covenants and Obligations 34 SECTION 8.1.4 Default on Other Indebtedness 35 SECTION 8.1.5 Pension Plans 35
ii 4 TABLE OF CONTENTS (Continued)
PAGE ---- SECTION 8.1.6 Bankruptcy, Insolvency, etc 36 SECTION 8.1.7 Ownership of Principal Subsidiaries 36 SECTION 8.2 Action if Bankruptcy 37 SECTION 8.3 Action if Other Event of Default 37 ARTICLE IX PREPAYMENT EVENTS SECTION 9.1 Listing of Prepayment Events 37 SECTION 9.1.1 Change in Ownership 37 SECTION 9.1.2 Change in Board 38 SECTION 9.1.3 Unenforceability 38 SECTION 9.1.4 Approvals 38 SECTION 9.1.5 Non-Performance of Certain Covenants and Obligations 38 SECTION 9.1.6 Judgments 38 SECTION 9.1.7 Condemnation, etc. 39 SECTION 9.1.8 Arrest 39 SECTION 9.2 Mandatory Prepayment 39 ARTICLE X MISCELLANEOUS PROVISIONS SECTION 10.1 Waivers, Amendments, etc. 39 SECTION 10.2 Notices 40 SECTION 10.3 Payment of Costs and Expenses 40 SECTION 10.4 Indemnification 40 SECTION 10.5 Survival 41 SECTION 10.6 Severability 41 SECTION 10.7 Headings 42 SECTION 10.8 Execution in Counterparts, Efctiveness, etc. 42 SECTION 10.9 Governing Law; Entire Agreeme 42 SECTION 10.10 Successors and Assigns 42 SECTION 10.11 Sale and Transfer of the Loan and Note; Participations in the Loan and Note 42 SECTION 10.11.1 Assignments 43 SECTION 10.11.2 Participations 44 SECTION 10.12 Other Transactions 45 SECTION 10.13 Forum Selection and Consent to Jurisdiction 45 SECTION 10.14 Process Agent 46 SECTION 10.15 Waiver of Jury Trial 46
iii 5 TABLE OF CONTENTS (Continued) SCHEDULE I - Disclosure Schedule EXHIBIT A - Form of Note EXHIBIT B - Form of Loan Request EXHIBIT C - Form of Interest Period Notice EXHIBIT D-1 - Form of Opinion of Counsel to the Borrower EXHIBIT D-2 - Form of Opinion of Liberian Counsel to the Borrower EXHIBIT E - Form of Opinion of Counsel to the Lender EXHIBIT F - Form of Lender Assignment Agreement EXHIBIT G - Repayment Schedule iv 6 CREDIT AGREEMENT THIS CREDIT AGREEMENT, dated as of December 16, 1999, is between ROYAL CARIBBEAN CRUISES LTD., a Liberian corporation (the "BORROWER")and KREDITANSTALT FUR WIEDERAUFBAU,a public law corporation incorporated in the Federal Republic of Germany (the "LENDER"). W I T N E S S E T H: WHEREAS, the Lender has agreed to make available to the Borrower a loan facility in the principal amount of US$300,000,000, on the terms and subject to the conditions hereinafter set forth (including ARTICLE V);and WHEREAS, the proceeds of such Loan will be used to finance capital expenditures associated with the Borrower's shipbuilding program (inter alia) for the construction of Hull No's S-655 and S-656 by Jos. L. Meyer GmbH & Co. NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.1 DEFINED TERMS. The following terms (whether or not underscored) when used in this Agreement, including its preamble and recitals, shall, when capitalized, except where the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular and plural forms thereof): "AFFILIATE" of any Person means any other Person which, directly or indirectly, controls, is controlled by or is under common control with such Person. A Person shall be deemed to be "controlled by" any other Person if such other Person possesses, directly or indirectly, power to direct or cause the direction of the management and policies of such Person whether by contract or otherwise. "AGREEMENT" means, on any date, this Credit Agreement as originally in effect on the Effective Date and as thereafter from time to time amended, supplemented, amended and restated, or otherwise modified and in effect on such date. 1 7 "APPLICABLE JURISDICTION" means the jurisdiction or jurisdictions under which the Borrower is organized, domiciled or resident or from which any of its business activities are conducted or in which any of its properties are located and which has jurisdiction over the subject matter being addressed. "APPLICABLE MARGIN" means, as of any date, 0.80% per annum. "APPROVED APPRAISER" means any of the following: Barry Rogliano Salles, Paris, H Clarkson & Co. Ltd., London, R.S. Platou Shipbrokers, Norway, or Fearnley AS, Norway. "ASSIGNEE LENDER" is defined in Section 10.11.1 "AUTHORIZED OFFICER" means those officers of the Borrower authorized to act with respect to the Loan Documents and whose signatures and incumbency shall have been certified to the Lender by the Secretary or an Assistant Secretary of the Borrower. "BORROWER" is defined in the PREAMBLE. "BUSINESS DAY" means any day which is neither a Saturday or Sunday nor a legal holiday on which banks are authorized or required to be closed in Miami, New York City, London or Frankfurt. "CAPITALIZATION" means, as at any date, the sum of (a) Total Debt on such date, PLUS (b) Stockholders' Equity on such date. "CAPITALIZED LEASE LIABILITIES" means the principal portion of all monetary obligations of the Borrower or any of its Subsidiaries under any leasing or similar arrangement which, in accordance with GAAP, would be classified as capitalized leases, and, for purposes of this Agreement and each other Loan Document, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP. "CASH EQUIVALENTS" means the "cash equivalents" shown on the Borrower's balance sheet prepared in accordance with GAAP. "CLOSING DATE" means the date on which the Loan is advanced "CODE" means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time. "COMMITMENT" means, the Lender's obligation to make the Loan pursuant to SECTION 2.1. 2 8 "COMMITMENT TERMINATION DATE" means June 30, 2000. "CONTROLLED GROUP" means all members of a controlled group of corporations and all members of a controlled group of trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414(b) or 414(c) of the Code or Section 4001 of ERISA. "DEFAULT" means any Event of Default or any condition, occurrence or event which, after notice or lapse of time or both, would constitute an Event of Default. "DISCLOSURE SCHEDULE" means the Disclosure Schedule attached hereto as SCHEDULE I. "DOLLAR" and the sign "$" mean lawful money of the United States. "EFFECTIVE DATE" means the date this Agreement becomes effective pursuant to SECTION 10.8. "ENVIRONMENTAL LAWS" means all applicable federal, state, local or foreign statutes, laws, ordinances, codes, rules and regulations (including consent decrees and administrative orders) relating to the protection of the environment. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of ERISA also refer to any successor sections. "EVENT OF DEFAULT" is defined in SECTION 8.1. "EXISTING DEBT" means the obligations of the Borrower and its Subsidiaries, as amended from time to time, under (i) the Loan Facility Agreement with respect to the vessel Zenith dated June 21, 1990 between the Lender and Zenith Shipping Corporation, (ii) the Lease Agreement, with respect to the vessel Legend of the Seas, dated March 3, 1993 between G.I.E. Cruise Vision One and the Borrower, (iii) the Lease Agreement, with respect to the vessel Splendour of the Seas, dated March 3, 1993 between G.I.E. Cruise Vision Two and the Borrower, (iv) the Loan Facility Agreement with respect to the vessel Century, dated November 29, 1993 between the Lender and Blue Sapphire Marine Inc., (v) the Loan Facility Agreement with respect to the vessel Galaxy, dated November 29, 1993 between the Lender and Esker Marine Shipping Inc. and (vi) the New Credit Agreement with respect to the vessel Mercury, dated December 12, 1997 between the Lender and Seabrook Maritime Inc. 3 9 "EXISTING GROUP" means the following Persons: (a) A. Wilhelmsen AS., a Norwegian corporation ("WILHELMSEN"); (b) Cruise Associates, a Bahamian general partnership ("CRUISE"); and (c) any Affiliate of either or both of Wilhelmsen and Cruise. "EXISTING PRINCIPAL SUBSIDIARIES" means each Subsidiary of the Borrower that is a Principal Subsidiary on the date hereof. "FISCAL QUARTER" means any quarter of a Fiscal Year. "FISCAL YEAR" means any annual fiscal reporting period of the Borrower. "FIXED CHARGE COVERAGE RATIO" means, as of the end of any Fiscal Quarter, the ratio computed for the period of four consecutive Fiscal Quarters ending on the close of such Fiscal Quarter of: (a) net cash from operating activities (determined in accordance with GAAP) for such period, as shown in the Borrower's consolidated statement of cash flow for such period, TO (b) the sum of: (i) dividends actually paid by the Borrower during such period (including, without limitation, dividends in respect of preferred stock of the Borrower); PLUS (ii) scheduled payments of principal of all debt (determined in accordance with GAAP, but in any event including Capitalized Lease Liabilities) of the Borrower and its Subsidiaries for such period. "F.R.S. BOARD" means the Board of Governors of the Federal Reserve System or any successor thereto. "FREE CASH" means, at any time, the sum of (without duplication): (a) all cash on hand of the Borrower and its Subsidiaries; PLUS (b) all Cash Equivalents; PLUS 4 10 (c) any committed lines of credit of the Borrower and its Subsidiaries to the extent then undrawn. "GAAP" is defined in SECTION 1.4. "GOVERNMENT-RELATED OBLIGATIONS" means obligations of the Borrower or any Subsidiary of the Borrower under, or Indebtedness incurred by the Borrower or any Subsidiary of the Borrower to satisfy obligations under, any governmental requirement imposed by any Applicable Jurisdiction that must be complied with to enable the Borrower and its Subsidiaries to continue their business in such Applicable Jurisdiction, EXCLUDING, in any event, any taxes imposed on the Borrower or any Subsidiary of the Borrower. "HEREIN", "HEREOF", "HERETO", "HEREUNDER" and similar terms contained in this Agreement or any other Loan Document refer to this Agreement or such other Loan Document, as the case may be, as a whole and not to any particular Section, paragraph or provision of this Agreement or such other Loan Document. "INDEBTEDNESS" of any Person means, without duplication: (a) indebtedness of such Person (whether present or future, actual or contingent, long-term or short-term, secured or unsecured) in respect of moneys borrowed or raised, the advance or extension of credit (including interest and commitment or guarantee commission but not including arrangement or other fees and other charges on or in respect of any of the foregoing); (b) the amount of any liability of such Person in respect of leases entered into for the purpose of raising or obtaining finance or in respect of the purchase price for assets or services payment of which is deferred for a period in excess of 180 days; and (c) indebtedness of such Person (whether present or future, actual or contingent, long-term or short-term, secured or unsecured) in respect of guarantees or letters of credit. "INDEMNIFIED LIABILITIES" is defined in SECTION 10.4. "INDEMNIFIED PARTIES" is defined in SECTION 10.4. "INTEREST PAYMENT DATE" means any date on which interest is payable with respect to the Loan pursuant to CLAUSE (c) of SECTION 3.2.3. 5 11 "INTEREST PERIOD" means, relative to the Loan, the period beginning on (and including) the date on which the Loan is made or continued pursuant to SECTION 2.2 or 2.3 and shall end on (but exclude) the day which numerically corresponds to such date one, two, three,six or twelve months thereafter or longer (PROVIDED that any Interest Period longer than twelve months duration shall be subject to availability and the agreement of the Lender) or, if such month has no numerically corresponding day, on the last Business Day of such month, in either case as the Borrower may select in its relevant notice pursuant to SECTION 2.2 or 2.3; PROVIDED that: (a) if such Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next following Business Day (unless such next following Business Day is the first Business Day of a calendar month, in which case such Interest Period shall end on the Business Day next preceding the first Business Day of such calendar month); (b) no Interest Period may end later than the last Repayment Date specified in Exhibit G; and (c) the Borrower shall not be permitted to have outstanding more than six one-month Interest Periods in any 12-month period (unless otherwise agreed to by the Lender). "INTEREST PERIOD NOTICE" means a certificate duly executed by an Authorized Officer of the Borrower, substantially in the form of EXHIBIT C hereto. "INVESTMENT" means, relative to any Person, (a) any loan or advance made by such Person to any other Person (excluding commission, travel, expense and similar advances to officers and employees made in the ordinary course of business); and (b) any ownership or similar interest held by such Person in any other Person. "LENDER ASSIGNMENT AGREEMENT" means a Lender Assignment Agreement substantially in the form of EXHIBIT F. "LENDER" is defined in the PREAMBLE. 6 12 "LIBO RATE" means, relative to any Interest Period, the rate per annum of the offered quotation for deposits in Dollars for delivery on the first day of such Interest Period and for the duration thereof which appears on Telerate Page 3750 at or about 11:00 a.m. (London time) two Business Days before the commencement of such Interest Period; PROVIDED that: (a) if no such offered quotation appears on Telerate Page 3750 at the relevant time, the LIBO Rate shall be the rate per annum certified by the Lender to be the rate quoted by the Lender as the rate at which the Lender was (or would have been) offered deposits of Dollars by prime banks in the London interbank eurocurrency market in an amount approximately equal to the amount of the Loan for a period approximately equal to such Interest Period; and (b) for the purposes of determining the post-maturity rate of interest under SECTION 3.2.2, the LIBO Rate shall be determined by reference to deposits on an overnight or call basis or for such other period or periods as the Lender may determine. "LIBOR OFFICE" means, relative to the Lender, the office of the Lender designated as such below its signature hereto or designated in a Lender Assignment Agreement or such other office of the Lender as designated from time to time by notice from the Lender to the Borrower, whether or not outside the United States, which shall be making or maintaining the Loan of the Lender hereunder. "LIEN" means any security interest, mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), charge against or interest in property to secure payment of a debt or performance of an obligation or other priority or preferential arrangement of any kind or nature whatsoever. "LOAN" means the principal sum of US$300,000,000 available to be advanced by the Lender to the Borrower upon the terms and conditions of this Agreement or the amount thereof for the time being advanced and outstanding under this Agreement (as the context may require). "LOAN DOCUMENT" means this Agreement and the Note. "LOAN REQUEST" means a loan request and certificate duly executed by an Authorized Officer of the Borrower, substantially in the form of Exhibit B hereto. "MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the financial condition of the Borrower or (b) the Borrower's ability to pay when due principal of or interest on the Loan or other amounts payable by the Borrower hereunder. 7 13 "MATERIAL LITIGATION" is defined in SECTION 6.9. "NOTE" means the promissory note of the Borrower payable to the Lender, in the form of EXHIBIT A hereto (as such promissory note may be amended or otherwise modified from time to time), evidencing the aggregate Indebtedness of the Borrower to the Lender resulting from the Loan, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "OBLIGATIONS" means all obligations (monetary or otherwise) of the Borrower arising under or in connection with this Agreement and the Note. "ORGANIC DOCUMENT" means, relative to the Borrower, its articles of incorporation and its by-laws. "PARTICIPANT" is defined in SECTION 10.11.2. "PENSION PLAN" means a "pension plan", as such term is defined in section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a multiemployer plan as defined in section 4001(a)(3) of ERISA), and to which the Borrower or any corporation, trade or business that is, along with the Borrower, a member of a Controlled Group, may have liability, including any liability by reason of being deemed to be a contributing sponsor under section 4069 of ERISA. "PERCENTAGE" means, in relation to the Lender, the Percentage as set forth in the applicable Lender Assignment Agreement, as such Percentage may be adjusted from time to time pursuant to Lender Assignment Agreement(s) executed by the Lender and its Assignee Lender(s) and delivered pursuant to Section 10.11.1 "PERSON" means any natural person, corporation, partnership, firm, association, trust, government, governmental agency or any other entity, whether acting in an individual, fiduciary or other capacity. "PREPAYMENT EVENT" is defined in SECTION 9.1. "PRINCIPAL SUBSIDIARY" means any Subsidiary of the Borrower that owns a Vessel. "REPAYMENT DATE" means each of the dates for payment of the repayment installments of the Loan specified in Exhibit G. 8 14 "STOCKHOLDERS' EQUITY" means, as at any date, the Borrower's stockholders' equity on such date, determined in accordance with GAAP, PROVIDED that any non-cash charge to Stockholders' Equity resulting (directly or indirectly) from a change after the Effective Date in GAAP or in the interpretation thereof shall be disregarded in the computation of Stockholders' Equity such that the amount of any reduction thereof resulting from such change shall be added back to Stockholders' Equity. "SUBSIDIARY" means, with respect to any Person, any corporation of which more than 50% of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by such Person, by such Person and one or more other Subsidiaries of such Person, or by one or more other Subsidiaries of such Person. "TAXES" is defined in SECTION 4.6. "TELERATE PAGE 3750" means the display designated as "Page 3750" on the Telerate Service (or such other page as may replace Page 3750 on that service or such other service as may be nominated by the British Bankers' Association as the information vendor for the purpose of displaying British Bankers' Association Interest Settlement Rates for deposits in Dollars). "TOTAL DEBT" means, at any time, the aggregate outstanding principal amount of all debt (including, without limitation, the principal portion of all capitalized leases) of the Borrower and its Subsidiaries (determined on a consolidated basis in accordance with GAAP). "TOTAL DEBT TO CAPITALIZATION RATIO" means, as at any date, the ratio of (a) Total Debt on such date TO (b) Capitalization on such date. "UNITED STATES" or "U.S." means the United States of America, its fifty States and the District of Columbia. "VESSEL" means a passenger cruise vessel owned by the Borrower or one of its Subsidiaries. "VOTING STOCK" means shares of capital stock of the Borrower of any class or classes (however designated) that have by the terms thereof normal voting power to elect the members of the Board of Directors of the Borrower (other than voting power upon the occurrence of a stated contingency, such as the failure to pay dividends). 9 15 SECTION 1.2 USE OF DEFINED TERMS. Unless otherwise defined or the context otherwise requires, terms for which meanings are provided in this Agreement shall, when capitalized, have such meanings when used in the Disclosure Schedule and in the Note, Loan Request, Interest Period Notice and other communication delivered from time to time in connection with this Agreement or any other Loan Document. SECTION 1.3 CROSS-REFERENCES. Unless otherwise specified, references in this Agreement and in each other Loan Document to any Article or Section are references to such Article or Section of this Agreement or such other Loan Document, as the case may be, and, unless otherwise specified, references in any Article, Section or definition to any clause are references to such clause of such Article, Section or definition. SECTION 1.4 ACCOUNTING AND FINANCIAL DETERMINATIONS. Unless otherwise specified, all accounting terms used herein or in any other Loan Document shall be interpreted, all accounting determinations and computations hereunder or thereunder (including under SECTION 7.2.4) shall be made, and all financial statements required to be delivered hereunder or thereunder shall be prepared, in accordance with United States generally accepted accounting principles ("GAAP") consistently applied (or, if not consistently applied, accompanied by details of the inconsistencies); PROVIDED that if, as a result of any change in GAAP or in the interpretation thereof after the date of the financial statements referred to in SECTION 6.6, there is a change in the manner of determining any of the items referred to herein that are to be determined by reference to GAAP, and the effect of such change would (in the reasonable opinion of the Lender) be such as to affect the basis or efficacy of the covenants contained in SECTION 7.2.4 in ascertaining the financial condition of the Borrower or the consolidated financial condition of the Borrower and its Subsidiaries, then such item shall for the purposes of such Sections of this Agreement continue to be determined in accordance with GAAP relating thereto as GAAP were applied immediately prior to such change in GAAP or in the interpretation thereof. 10 16 ARTICLE II COMMITMENT, BORROWING PROCEDURE AND THE NOTE SECTION 2.1 COMMITMENT. On the terms and subject to the conditions of this Agreement (including ARTICLE V), the Lender agrees to make the Loan pursuant to the Commitment described in this SECTION 2.1. On such Business Day occurring on or prior to the Commitment Termination Date as the Borrower shall request, the Lender will make the Loan to the Borrower. The commitment of the Lender described in this SECTION 2.1. is herein referred to as its "COMMITMENT". SECTION 2.2. BORROWING PROCEDURE. By delivering a Loan Request to the Lender on or before 11:00 a.m., London time, on a Business Day on or after April 1, 2000, the Borrower may irrevocably request, on not less than two Business Days' notice, advance of the Loan by a single advance. On the terms and subject to the conditions of this Agreement, the Loan shall be made on the Business Day specified in such Loan Request. The Lendershall, without any set-off or counterclaim, make such funds available to the Borrower on the Business Day specified in the Loan Request by wire transfer of same day funds to the account(s) the Borrower shall have specified in its Loan Request. No amount of the Loan paid or prepaid may be reborrowed under this Agreement. SECTION 2.3 ELECTION OF INTEREST PERIODS. By delivering an Interest Period Notice to the Lender on or before 11:00 a.m., London time, on a Business Day, the Borrower may from time to time irrevocably elect, on not less than two Business Days' notice that the Loan be continued as a Loan with an Interest Period of one, two, three, six or twelve months duration (or a longer duration, subject to availability and the agreement of the Lender). In the absence of delivery of an Interest Period Notice with respect to the Loan at least two Business Days before the last day of the then current Interest Period with respect thereto, the Loan shall, on such last day, automatically be continued as a Loan with an Interest Period of three-months duration. SECTION 2.4 NOTE. The Lender's Loan under its Commitment shall be evidenced by a Note payable to the order of the Lender in a maximum principal amount equal to the Loan. 11 17 ARTICLE III REPAYMENTS, PREPAYMENTS AND INTEREST SECTION 3.1 REPAYMENTS AND PREPAYMENTS. The Borrower shall repay the Loan in the installments and on the dates set out in Exhibit G. Prior thereto, the Borrower (a) may, from time to time on any Business Day, make a voluntary prepayment, in whole or in part, of the Loan; PROVIDED that: (i) all such voluntary prepayments shall require at least three Business Days'(or, if such prepayment is to be made on the last day of an Interest Period for such Loan, two Business Days') prior written notice to the Lender; and (ii) any such voluntary partial prepayments shall be in an aggregate minimum amount of $10,000,000 and a multiple of $1,000,000 (or the remaining amount of the Loan being prepaid) and shall be applied in satisfaction of the repayment installments of the Loan set out in Exhibit G in inverse chronological order of maturity; (b) shall, immediately upon any acceleration of the Repayment Dates of the Loan pursuant to SECTION 8.2 or 8.3 or the mandatory repayment of the Loan pursuant to SECTION 9.2, repay the Loan. Each prepayment of the Loan made pursuant to this Section shall be without premium or penalty, except as may be required by SECTION 4.4. SECTION 3.2 INTEREST PROVISIONS. Interest on the Loan shall accrue and be payable in accordance with this SECTION 3.2. SECTION 3.2.1 RATES. The Loan shall accrue interest at a rate per annum during each Interest Period applicable thereto, equal to the sum of the LIBO Rate for such Interest Period plus the Applicable Margin. The Loan shall bear interest from and including the first day of the applicable Interest Period to (but not including) the last day of such Interest Period at the interest rate determined as applicable to the Loan. SECTION 3.2.2 POST-MATURITY RATES. After the date any principal amount of the Loan is due and payable (whether on any Repayment Date, upon acceleration or otherwise), or after any other monetary Obligation of the Borrower shall have become due and payable, the Borrower shall pay, but only to the extent permitted by law, interest (after as well as before judgment) on such amounts for each day during the period of such default at a rate per annum certified by the Lender to the Borrower (which certification shall be conclusive in the absence of manifest error) to be equal to the sum of (a) the Applicable Margin PLUS (b) the LIBO Rate PLUS (c) 2% per annum. 12 18 SECTION 3.2.3 PAYMENT DATES. Interest accrued on the Loan shall be payable, without duplication: (a) on each Repayment Date therefor; (b) on the date of any payment or prepayment, in whole or in part, of principal outstanding on the Loan (but only on the principal so paid or prepaid); (c) on the last day of each applicable Interest Period (and if such Interest Period shall exceed six months, on each date occurring at six-month intervals after the commencement of such Interest Period); and (d) on any portion of the Loan the repayment of which is accelerated pursuant to SECTION 8.2 or SECTION 8.3, immediately upon such acceleration. Interest accrued on the Loan or other monetary Obligations arising under this Agreement or any other Loan Document after the date such amount is due and payable (whether on any Repayment Date, upon acceleration or otherwise) shall be payable upon demand. ARTICLE IV INCREASED LOAN COSTS AND OTHER PROVISIONS SECTION 4.1 LIBO RATE LENDING UNLAWFUL. If the introduction of or any change in or in the interpretation of any law makes it unlawful, or any central bank or other governmental authority having jurisdiction over the Lender asserts that it is unlawful, for the Lender to make, continue or maintain the Loan bearing interest at a rate based on the LIBO Rate, the obligation of the Lender to make, continue or maintain the Loan bearing interest at a rate based on the LIBO Rate shall, upon notice thereof to the Borrower, forthwith be suspended until the circumstances causing such suspension no longer exist, PROVIDED that the Lender's obligation to make, continue and maintain the Loan hereunder shall be automatically converted into an obligation to make, continue and maintain the Loan bearing interest at a rate to be negotiated between the Lender and the Borrower that is the equivalent of the sum of the LIBO Rate for the relevant Interest Period PLUS the Applicable Margin. 13 19 SECTION 4.2 DEPOSITS UNAVAILABLE. If the Lender shall have determined that: (a) Dollar deposits in the relevant amount and for the relevant Interest Period are not available to the Lender in its relevant market; or (b) by reason of circumstances affecting the Lender's relevant market, adequate means do not exist for ascertaining the interest rate applicable hereunder to LIBO Rate loans, then the Lender shall give notice of such determination (hereinafter called a "DETERMINATION NOTICE") to the Borrower. The Borrower and the Lender shall then negotiate in good faith in order to agree upon a mutually satisfactory interest rate and interest period (or interest periods) to be substituted for those which would otherwise have applied under this Agreement. If the Borrower and the Lender are unable to agree upon an interest rate (or rates) and interest period (or interest periods) prior to the date occurring thirty days after the giving of such Determination Notice, the Lender shall set an interest rate and an interest period (or interest periods), in each case to take effect at the end of the Interest Period current at the date of the Determination Notice, which rate (or rates) shall be equal to the sum of the Applicable Margin and the cost to the Lender of funding its Commitment. In the event that the circumstances described in this SECTION 4.2 shall extend beyond the end of an interest period agreed or set pursuant hereto, the foregoing procedure shall be repeated as often as may be necessary. SECTION 4.3 INCREASED LOAN COSTS, ETC. If a change in any applicable treaty, law, regulation or regulatory requirement or in the interpretation thereof or in its application to the Borrower, or if compliance by the Lender with any applicable direction, request, requirement or guideline (whether or not having the force of law) of any governmental or other authority insofar as it may be changed or imposed after the date hereof, shall: (a) subject the Lender to any taxes, levies, duties, charges, fees, deductions or withholdings of any nature with respect to the Loan or any part thereof imposed, levied, collected, withheld or assessed by any jurisdiction or any political subdivision or taxing authority thereof (other than taxation on overall net income and, to the extent such taxes are described in SECTION 4.6, withholding taxes); or 14 20 (b) change the basis of taxation to the Lender (other than a change in taxation on the overall net income of the Lender) of payments of principal or interest or any other payment due or to become due pursuant to this Agreement; or (c) impose, modify or deem applicable any reserve or capital adequacy requirements or other banking or monetary controls or requirements which affect the manner in which the Lender shall allocate its capital resources to its obligations hereunder or require the making of any special deposits against or in respect of any assets or liabilities of, deposits with or for the account of, or loans by, the Lender (PROVIDED that the Lender shall, unless prohibited by law, allocate its capital resources to its obligations hereunder in a manner which is consistent with its present treatment of the allocation of its capital resources); or (d) impose on the Lender any other condition affecting the Loan or any part thereof, and the result of any of the foregoing is either (i) to increase the cost to the Lender of making available the Loan or maintaining the Loan or any part thereof, (ii) to reduce the amount of any payment received by the Lender or its effective return hereunder or on its capital or (iii) to cause the Lender to make any payment or to forego any return based on any amount received or receivable by the Lender hereunder, then and in any such case if such increase or reduction in the opinion of the Lender materially affects the interests of the Lender, (A) the Lender shall notify the Borrower of the occurrence of such event and use reasonable efforts to avoid the effects of such law, regulation or regulatory requirement or any change therein or in the interpretation thereof and, in particular, shall consider, subject to obtaining any necessary consents, fulfilling its obligations through another office or transferring the Loan to one or more of its Affiliates or other financial institutions not affected by such law, regulation or regulatory requirement and (B) the Borrower shall forthwith upon demand pay to the Lender such amount as is necessary to compensate the Lender for such additional cost or such reduction and ancillary expenses, including taxes, incurred as a result of such adjustment. Such notice shall (i) describe in reasonable detail the event leading to such additional cost, together with the approximate date of the effectiveness thereof, (ii) set forth the amount of such additional cost, (iii) describe the manner in which such amount has been calculated, (iv) certify that the method used to calculate such amount is the Lender's standard method of calculating such amount, (v) certify that such request is consistent with its treatment of other borrowers that are subject to similar provisions, and (vi) certify that, to the best of its knowledge, such change in circumstance is of general application to the commercial banking industry in the Lender's jurisdiction of organization or in the relevant jurisdiction in which the Lender does business. Notwithstanding the foregoing, the Borrower shall not be obligated to reimburse the Lender for any additional cost under this SECTION 4.3 arising prior to 60 days preceding the date of request unless the applicable law or regulation is expressly imposed retroactively, in which case such notice shall be provided to the Borrower not later than 90 days after the date that the Lender reasonably should have learned of such law or regulation (and in such case the Borrower's obligation to pay additional amounts to the Lender under this Section for periods prior to such 60-day period is conditioned on the giving of such timely notice). 15 21 SECTION 4.4 FUNDING LOSSES. In the event the Lender shall incur any loss or expense by reason of the liquidation or reemployment of deposits or other funds acquired by the Lender to make, continue or maintain any portion of the principal amount of the Loan as a LIBO Rate Loan as a result of: (a) any repayment or prepayment of the principal amount of the Loan on a date other than the scheduled last day of the Interest Period applicable thereto, whether pursuant to SECTION 3.1 or otherwise; or (b) the Loan not being made in accordance with the Loan Request therefor due to the fault of the Borrower or as a result of any of the conditions precedent set forth in ARTICLE V not being satisfied, then, upon the written notice of the Lender to the Borrower, the Borrower shall, within five Business Days of its receipt thereof, pay directly to the Lender such amount as will reimburse the Lender for such loss or expense. The written notice shall include calculations in reasonable detail setting forth the loss or expense to the Lender. SECTION 4.5 INCREASED CAPITAL COSTS. If any change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in of, any law or regulation, directive, guideline, decision or request (whether or not having the force of law) of any court, central bank, regulator or other governmental authority increases the amount of capital required to be maintained by the Lender or any Person controlling the Lender, and the rate of return on its or such controlling Person's capital as a consequence of its Commitment or the Loan made by the Lender is reduced to a level below that which the Lender or such controlling Person would have achieved but for the occurrence of any such change in circumstance, then, in any such case upon notice from time 16 22 to time by the Lender to the Borrower, the Borrower shall immediately pay directly to the Lender additional amounts sufficient to compensate the Lender or such controlling Person for such reduction in rate of return. Any such notice shall (i) describe in reasonable detail the capital adequacy requirements which have been imposed, together with the approximate date of the effectiveness thereof, (ii) set forth the amount of such lowered return, (iii) describe the manner in which such amount has been calculated, (iv) certify that the method used to calculate such amount is the Lender's standard method of calculating such amount, (v) certify that such request for such additional amounts is consistent with its treatment of other borrowers that are subject to similar provisions and (vi) certify that, to the best of its knowledge, such change in circumstances is of general application to the commercial banking industry in the jurisdictions in which such Lender does business. In determining such amount, the Lender may use any method of averaging and attribution that it shall, subject to the foregoing sentence, deem applicable. The Lender will take all reasonable actions that are available to it to avoid such reduction in such rate of return (including by designating a different LIBOR Office), PROVIDED that the Lender shall not be obligated to designate a LIBOR Office located in the United States. Notwithstanding the foregoing, the Borrower shall not be obligated to reimburse the Lender for any lowered return under this SECTION 4.5 arising prior to 60 days preceding the date of request unless the applicable law or regulation is expressly imposed retroactively, in which case such notice shall be provided to the Borrower not later than 90 days after the date that the Lender reasonably should have learned of such law or regulation (and in such case the Borrower's obligation to pay additional amounts to the Lender for such reduction for any period prior to such 60-day period is conditioned on the giving of such timely notice). SECTION 4.6 TAXES. All payments by the Borrower of principal of, and interest on, the Loan and all other amounts payable hereunder shall be made free and clear of and without deduction for any present or future income, excise, stamp or franchise taxes and other taxes, fees, duties, withholdings or other charges of any nature whatsoever imposed by any taxing authority, but excluding (i) franchise taxes and taxes imposed on or measured by the Lender's net income or receipts and (ii) any tax imposed by reason of (A) the failure of the certification made by the Lender on any form provided pursuant to the last paragraph of this SECTION 4.6 to be true and correct when made in all material respects or (B) the failure of the Lender to comply with the last paragraph of 17 23 this SECTION 4.6 or (C) the failure by the Lender to file any other certification, notification, statement, return or other document that it is entitled to file (such non-excluded items being called "TAXES"). In the event that any withholding or deduction from any payment to be made by the Borrower hereunder is required in respect of any Taxes pursuant to any applicable law, rule or regulation, then the Borrower will: (a) pay directly to the relevant authority the full amount required to be so withheld or deducted; (b) promptly forward to the Lender an official receipt or other documentation satisfactory to the Lender evidencing such payment to such authority; and (c) pay to the Lender such additional amount or amounts as is necessary to ensure that the net amount actually received by the Lender will equal the full amount the Lender would have received had no such withholding or deduction been required. Moreover, if any Taxes are directly asserted against the Lender with respect to any payment received by the Lender hereunder, the Lender may pay such Taxes and the Borrower will promptly pay such additional amounts (including any penalties, interest or expenses) as is necessary in order that the net amount received by such person after the payment of such Taxes (including any Taxes on such additional amount) shall equal the amount such person would have received had no such Taxes been asserted. The Lender shall take all reasonable actions that are available to it to avoid the imposition of any Taxes on payments by the Borrower hereunder. If the Borrower fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Lender, the required receipts or other required documentary evidence, the Borrower shall indemnify the Lender for any incremental Taxes, interest or penalties that may become payable by the Lender as a result of any such failure (so long as such amount did not become payable as a result of the failure of the Lender to provide timely notice to the Borrower of the assertion of a liability related to the payment of Taxes). For purposes of this SECTION 4.6, a distribution hereunder by the Lender shall be deemed a payment by the Borrower. 18 24 If the Lender is entitled to any refund, credit, deduction or other reduction in tax by reason of any payment made by the Borrower in respect of any tax under this SECTION 4.6 or by reason of any payment made by the Borrower pursuant to SECTION 4.3, the Lender shall use reasonable efforts to obtain such refund, credit, deduction or other reduction and, promptly after receipt thereof, will pay to the Borrower such amount (plus any interest received by the Lender in connection with such refund, credit, deduction or reduction) as is equal to the net after-tax value to the Lender of such part of such refund, credit, deduction or reduction as the Lender reasonably determines is allocable to such tax or such payment, PROVIDED that the Lender shall not be obligated to disclose to the Borrower any information regarding its tax affairs or tax computations. The Lender (and each Participant) that is organized under the laws of a jurisdiction other than the United States agrees with the Borrower that it will (a) provide to the Borrower an appropriately executed copy of Internal Revenue Service Form 4224 certifying that any payments made to or for the benefit of the Lender or such Participant are effectively connected with a trade or business in the United States (or, alternatively, Internal Revenue Service Form 1001, but only if the applicable treaty described in such form provides for a complete exemption from U.S. federal income tax withholding), or any successor form, on or prior to the date hereof (or, in the case of any Assignee Lender or Participant, on or prior to the date of the relevant assignment or participation), and (b) notify the Borrower if the certifications made on any form provided pursuant to this paragraph are no longer accurate and true in all material respects. SECTION 4.7 PAYMENTS, COMPUTATIONS, ETC. Unless otherwise expressly provided, all payments by the Borrower pursuant to this Agreement shall be made by the Borrower to the Lender without setoff, deduction or counterclaim not later than 11:00 a.m., New York time, on the date due, in same day or immediately available funds through the New York Clearing House Interbank Payments System (or such other funds as may be customary for the settlement of international banking transactions in Dollars), to such account as the Lender shall specify from time to time by notice to the Borrower. Funds received after that time shall be deemed to have been received by the Lender on the next succeeding Business Day. All interest and fees shall be computed on the basis of the actual number of days (including the first day but excluding the last day) occurring during the period for which such interest or fee is payable over a year comprised of 360 days. Whenever any payment to be made shall otherwise be due on a day which is not a Business Day, such payment shall (except as otherwise required by CLAUSE (a) of the definition of the term "INTEREST PERIOD") be made on the next succeeding Business Day and such extension of time shall be included in computing interest and fees, if any, in connection with such payment. 19 25 SECTION 4.8 SETOFF. The Lender shall have the right to appropriate and apply to the payment of the Obligations owing to it any and all balances, credits, deposits, accounts or moneys of the Borrower then or thereafter maintained with the Lender. The Lender agrees promptly to notify the Borrower after any such setoff and application made by the Lender; PROVIDED that the failure to give such notice shall not affect the validity of such setoff and application. The rights of the Lender under this Section are in addition to other rights and remedies (including other rights of setoff under applicable law or otherwise) which the Lender may have. SECTION 4.9 USE OF PROCEEDS. The Borrower shall apply the proceeds of the Loan in accordance with the second recital. ARTICLE V CONDITIONS TO BORROWING SECTION 5.1 DRAWDOWN. The obligation of the Lender to fund the Loan shall be subject to the prior or concurrent satisfaction of each of the conditions precedent set forth in this SECTION 5.1. SECTION 5.1.1 RESOLUTIONS, ETC. The Lender shall have received from the Borrower: (a) a certificate of its Secretary or Assistant Secretary as to the incumbency and signatures of those of its officers authorized to act with respect to this Agreement and each other Loan Document and as to the truth and completeness of the attached: (x) an extract of the resolutions of its Board of Directors then in full force and effect authorizing the execution, delivery and performance of this Agreement and each other Loan Document, and (y) Organic Documents of the Borrower, and upon which certificate the Lender may conclusively rely until it shall have received a further certificate of the Secretary of the Borrower canceling or amending such prior certificate; (b) a Certificate of Goodstanding issued by the relevant Liberian authorities in respect of the Borrower; and 20 26 (c) a certificate of the Borrower's Secretary or Assistant Secretary listing the principal office address (and if not the same, the address where its company statutory books and records are located) of the Borrower. SECTION 5.1.2 DELIVERY OF THE NOTE. The Lender shall have received the Note duly executed and delivered by the Borrower. SECTION 5.1.3 OWNERSHIP, ETC. OF VESSELS. The Lender shall have received the following with respect to each Vessel: (a) evidence as to the ownership of such Vessel by the Borrower or a Principal Subsidiary; (b) disclosure of all recorded Liens on such Vessel; (c) evidence of the class of such Vessel; and (d) evidence as to all required insurance being in effect with respect to such Vessel. SECTION 5.1.4 OPINIONS OF COUNSEL. The Lender shall have received opinions addressed to the Lender, from: (a) the general counsel to the Borrower, substantially in the form of EXHIBIT D-1 hereto; (b) Watson, Farley & Williams, counsel to the Borrower, as to Liberian Law, substantially in the form of EXHIBIT D-2 hereto; and (c) Haight Gardner Holland & Knight,counsel to the Lender in the form of EXHIBIT E hereto. SECTION 5.1.5 CLOSING FEES, EXPENSES, ETC. The Lender shall have received all fees and commitment commission that the Borrower shall have agreed in writing to pay to the Lender on or prior to the Closing Date in accordance with a letter of even date with this Agreement addressed by the Lender to the Borrower (and countersigned by the Borrower). SECTION 5.1.6 LOAN REQUEST. The Lender shall have received the Loan Request duly executed by the Borrower. SECTION 5.1.7 CERTIFICATE OF COMPLIANCE. The Lender shall have received a certificate, executed by the chief financial officer, the treasurer or the corporate controller of the Borrower, showing as of the last day of the relevant Fiscal Quarter or Fiscal Year compliance with the covenants set forth in SECTION 7.2.4 (in reasonable detail and with appropriate calculations and computations in all respects reasonably satisfactory to the Lender). 21 27 SECTION 5.1.8 COMPLIANCE WITH WARRANTIES, NO DEFAULT, ETC. Both before and after giving effect to the Loan, the following statements shall be true and correct: (a) the representations and warranties set forth in ARTICLE VI shall be true and correct with the same effect as if then made; and (b) no Default and no Prepayment Event and no event which (with notice or lapse of time or both) would become a Prepayment Event shall have then occurred and be continuing. ARTICLE VI REPRESENTATIONS AND WARRANTIES To induce the Lender to enter into this Agreement and to make the Loan hereunder, the Borrower represents and warrants to the Lender as set forth in this ARTICLE VI as of the Closing Date. SECTION 6.1 ORGANIZATION, ETC. The Borrower and each of the Principal Subsidiaries is a corporation validly organized and existing and in good standing under the laws of its jurisdiction of incorporation; the Borrower is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the nature of its business requires such qualification, except where the failure to be so qualified would not have a Material Adverse Effect; and the Borrower has full power and authority, has taken all corporate action and holds all governmental and creditors' licenses, permits, consents and other approvals necessary to enter into each Loan Document and to perform the Obligations. SECTION 6.2 DUE AUTHORIZATION, NON-CONTRAVENTION, ETC. The execution, delivery and performance by the Borrower of this Agreement and each other Loan Document, are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, and do not: (a) contravene the Borrower's Organic Documents; (b) contravene any law or governmental regulation of any Applicable Jurisdiction; 22 28 (c) contravene any court decree or order binding on the Borrower or any of its property; (d) contravene any contractual restriction binding on the Borrower or any of its property; or (e) result in, or require the creation or imposition of, any Lien on any of the Borrower's properties. SECTION 6.3 GOVERNMENT APPROVAL, REGULATION, ETC. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or other Person is required for the due execution, delivery or performance by the Borrower of this Agreement or any other Loan Document (except for authorizations or approvals not required to be obtained on or prior to the Closing Date that have been obtained or actions not required to be taken on or prior to the Closing Date that have been taken). Each of the Borrower and each Principal Subsidiary holds all governmental licenses, permits and other approvals required to conduct its business as conducted by it on the Closing Date, except to the extent the failure to hold any such licenses, permits or other approvals would not have a Material Adverse Effect. SECTION 6.4 COMPLIANCE WITH ENVIRONMENTAL LAWS. The Borrower and each Principal Subsidiary are in compliance with all applicable Environmental Laws, except to the extent that the failure to so comply would not have a Material Adverse Effect. SECTION 6.5 VALIDITY, ETC. This Agreement constitutes, and the Note will, on the due execution and delivery thereof, constitute, the legal, valid and binding obligations of the Borrower enforceable in accordance with their respective terms, except as the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally or by general equitable principles. 23 29 SECTION 6.6 FINANCIAL INFORMATION. The consolidated balance sheet of the Borrower and its Subsidiaries as at December 31, 1998, and the related consolidated statements of operations and cash flows of the Borrower and its Subsidiaries, copies of which have been furnished to the Lender, have been prepared in accordance with GAAP, and present fairly the consolidated financial condition of the Borrower and its Subsidiaries as at December 31, 1998 and the results of their operations for the Fiscal Year then ended, and no change has occurred in the Borrower's financial condition since December 31, 1998 that might reasonably be expected to materially adversely affect its ability to perform the Obligations. SECTION 6.7 NO DEFAULTS UNDER MATERIAL AGREEMENTS. Neither the Borrower nor any Principal Subsidiary is in default (a) under any material agreement by which it is bound or (b) in respect of any financial commitment or actual or contingent obligation (including obligations under guarantees), except, in each case, to the extent that such default would not have a Material Adverse Effect. SECTION 6.8 NO DEFAULT, EVENT OF DEFAULT OR PREPAYMENT EVENT. No Default, Event of Default or Prepayment Event has occurred and is continuing. SECTION 6.9 LITIGATION. There is no pending or, to the knowledge of the Borrower, threatened litigation, action or proceeding against the Borrower or any Principal Subsidiary, or any of the properties, businesses, assets or revenues of the Borrower or any Principal Subsidiary, which (in the reasonable opinion of the Borrower) might reasonably be expected to materially adversely affect the financial condition of the Borrower and the Principal Subsidiaries, taken as a whole, except as otherwise disclosed(collectively, "MATERIAL LITIGATION"). SECTION 6.10 VESSELS. Each Vessel is (a) legally and beneficially owned by the Borrower or a Principal Subsidiary, (b) registered in the name of the Borrower or such Principal Subsidiary under the flag identified in ITEM 6.10(b) of the Disclosure Schedule, (c) classed as required by SECTION 7.1.4(b), (d) free of all recorded Liens, other than Liens permitted by SECTION 7.2.3, (e) insured against loss or damage in compliance with SECTION 7.1.5, and (f) chartered exclusively to the Borrower or one of the Borrower's wholly-owned subsidaries. SECTION 6.11 SUBSIDIARIES. All Existing Principal Subsidiaries are designated with an asterisk in ITEM 6.11 of the Disclosure Schedule. All Existing Principal Subsidiaries are direct or indirect wholly-owned Subsidiaries of the Borrower, except to the extent any such Existing Principal Subsidiary or an interest therein has been sold in accordance with CLAUSE (b) of SECTION 7.2.7 or such Existing Principal Subsidiary no longer owns a Vessel. 24 30 SECTION 6.12 OBLIGATIONS RANK PARI PASSU. The Obligations rank at least PARI PASSU in right of payment and in all other respects with all other unsecured unsubordinated Indebtedness of the Borrower. SECTION 6.13 WITHHOLDING, ETC. As of the Closing Date, no payment to be made by the Borrower under any Loan Document is subject to any withholding or like tax imposed by any Applicable Jurisdiction. SECTION 6.14 NO FILING, ETC. REQUIRED. No filing, recording or registration and no payment of any stamp, registration or similar tax is necessary under the laws of any Applicable Jurisdiction to ensure the legality, validity, enforceability, priority or admissibility in evidence of this Agreement or the other Loan Document (except for filings, recordings, registrations or payments not required to be made on or prior to the Closing Date that have been made), except that for the enforcement of any document in the Republic of Liberia a stamp, at present of nominal value, must be affixed thereto prior to presentation to the court. SECTION 6.15 NO IMMUNITY. The Borrower is subject to civil and commercial law with respect to the Obligations. Neither the Borrower nor any of its properties or revenues is entitled to any right of immunity in any Applicable Jurisdiction from suit, court jurisdiction, judgment, attachment (whether before or after judgment), set-off or execution of a judgment or from any other legal process or remedy relating to the Obligations (to the extent such suit, court jurisdiction, judgment, attachment, set-off, execution, legal process or remedy would otherwise be permitted or exist). SECTION 6.16 PENSION PLANS. To the extent that, at any time after the Effective Date, there are any Pension Plans, no steps will have been taken to terminate any Pension Plan, and no contribution failure will have occurred with respect to any Pension Plan, in each case which could (a) give rise to a Lien under section 302(f) of ERISA and (b) result in the incurrence by the Borrower or any member of the Controlled Group of any material liability, fine or penalty. 25 31 ARTICLE VII COVENANTS SECTION 7.1 AFFIRMATIVE COVENANTS. The Borrower agrees with the Lender that, beginning on the Closing Date and until all Obligations have been paid in full, the Borrower will perform the obligations set forth in this SECTION 7.1. SECTION 7.1.1 FINANCIAL INFORMATION, REPORTS, NOTICES, ETC. The Borrower will make available, or will cause to be made available to the Lender the following financial statements, reports, notices and information: (a) as soon as available and in any event within 60 days after the end of each of the first three Fiscal Quarters of each Fiscal Year of the Borrower, a copy of the Borrower's report on Form 6-K (or any successor form) as filed by the Borrower with the Securities and Exchange Commission for such Fiscal Quarter, containing unaudited consolidated financial statements of the Borrower for such Fiscal Quarter (including a balance sheet and profit and loss statement) prepared in accordance with GAAP, subject to normal year-end audit adjustments; (b) as soon as available and in any event within 120 days after the end of each Fiscal Year of the Borrower, a copy of the Borrower's annual report on Form 20-F (or any successor form) as filed by the Borrower with the Securities and Exchange Commission for such Fiscal Year, containing audited consolidated financial statements of the Borrower for such Fiscal Year prepared in accordance with GAAP (including a balance sheet and profit and loss statement) and audited by PricewaterhouseCoopers LLP or another firm of independent public accountants of similar standing; (c) together with each of the statements delivered pursuant to the foregoing clause (a) or (b), a certificate, executed by the chief financial officer, the treasurer or the corporate controller of the Borrower, showing, as of the last day of the relevant Fiscal Quarter or Fiscal Year (a) compliance with the covenants set forth in SECTION 7.2.4 (in reasonable detail and with appropriate calculations and computations in all respects reasonably satisfactory to the Lender and (b) any material changes to ITEM 6.11 of the Disclosure Schedule since the Closing Date or the last such certificate delivered pursuant to this clause (as the case may be); 26 32 (d) as soon as possible after the occurrence of a Default or Prepayment Event, a statement of the chief financial officer of the Borrower setting forth details of such Default or Prepayment Event (as the case may be) and the action which the Borrower has taken and proposes to take with respect thereto; (e) as soon as the Borrower becomes aware thereof, notice of any Material Litigation; (f) as soon as the Borrower becomes aware thereof, notice of any event which, in its reasonable opinion, might have a material adverse effect on the Borrower's ability to (i) pay when due principal of or interest on the Loan or other amounts payable by the Borrower hereunder or (ii) perform its other obligations hereunder and under the other Loan Documents; (g) promptly after the sending or filing thereof, copies of all reports which the Borrower sends to all holders of each security issued by the Borrower, and all registration statements which the Borrower or any of its Subsidiaries files with the Securities and Exchange Commission or any national securities exchange; and (h) such other information respecting the condition or operations, financial or otherwise, of the Borrower or any of its Subsidiaries as the Lender may from time to time reasonably request. SECTION 7.1.2 APPROVALS AND OTHER CONSENTS. The Borrower will obtain (or cause to be obtained) all such governmental licenses, authorizations, consents, permits and approvals as may be required for (a) the Borrower to perform its obligations under this Agreement and the other Loan Document and (b) the operation of each Vessel in compliance with all applicable laws. SECTION 7.1.3 COMPLIANCE WITH LAWS, ETC. The Borrower will, and will cause each of its Subsidiaries to, comply in all material respects with all applicable laws, rules, regulations and orders, except to the extent that the failure to so comply would not have a Material Adverse Effect, which compliance shall in any case include (but not be limited to): (a) in the case of each of the Borrower and the Principal Subsidiaries, the maintenance and preservation of its corporate existence (subject to the provisions of SECTION 7.2.6); (b) in the case of the Borrower, maintenance of its qualification as a foreign corporation in the State of Florida, except to the extent that the failure to so qualify would not have a Material Adverse Effect; 27 33 (c) the payment, before the same become delinquent, of all taxes, assessments and governmental charges imposed upon it or upon its property if the failure to pay the same would have a Material Adverse Effect, except to the extent being diligently contested in good faith by appropriate proceedings; and (d) compliance with all applicable Environmental Laws, except to the extent that the failure to so comply would not have a Material Adverse Effect. SECTION 7.1.4 VESSELS. The Borrower will (or will cause the applicable Principal Subsidiary to): (a) cause each Vessel to be chartered exclusively to the Borrower, or one of the Borrower's wholly-owned subsidiaries, PROVIDED that the Borrower or such subsidiary may charter out any Vessel on a time charter with a stated duration not in excess of one year; and (b) cause each Vessel to be kept in such condition as will entitle her to classification by a classification society of recognized standing. SECTION 7.1.5 INSURANCE. The Borrower will, or will cause one or more of its Subsidiaries to, maintain or cause to be maintained with responsible insurance companies insurance with respect to all of the material properties and operations of the Borrower and each Principal Subsidiary against usual marine risks, war risks and usual protection and indemnity risks (including oil pollution risks and passenger liabilities such as are covered by the basic entry of the Vessels in one of the international group of P & I Clubs) and in such amounts as is customary for other businesses of similar size in the passenger cruise line industry (PROVIDED that in no event will the Borrower or any Subsidiary be required to obtain any business interruption, loss of hire or delay in delivery insurance) and will, upon request, furnish to the Lender at reasonable intervals a certificate of a senior officer of the Borrower setting forth the nature and extent of all insurance maintained by the Borrower and its Subsidiaries and certifying as to compliance with this Section. 28 34 SECTION 7.1.6 BOOKS AND RECORDS. The Borrower will, and will cause each of its Principal Subsidiaries to, keep books and records that accurately reflect all of its business affairs and transactions and permit the Lender or any of its respective representatives, at reasonable times and intervals, to visit each of its offices, to discuss its financial matters with its officers and to examine any of its books or other corporate records. SECTION 7.2 NEGATIVE COVENANTS. The Borrower agrees with the Lender that, until all Obligations have been paid and performed in full, the Borrower will perform the obligations set forth in this SECTION 7.2. SECTION 7.2.1 BUSINESS ACTIVITIES. The Borrower will not, and will not permit any of its Subsidiaries to, engage in any business activity other than those engaged in by the Borrower and its Subsidiaries on the date hereof and other business activities reasonably related thereto. SECTION 7.2.2 INDEBTEDNESS. The Borrower will not permit any of the Existing Principal Subsidiaries to create, incur, assume or suffer to exist or otherwise become or be liable in respect of any Indebtedness, other than, without duplication, the following: (a) Indebtedness secured by Liens of the type described in CLAUSES (a), (b), (c), (d), (e) and (f) of SECTION 7.2.3; and (b) Indebtedness owing to the Borrower. SECTION 7.2.3 LIENS. The Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any of its property, revenues or assets, whether now owned or hereafter acquired, except: (a) Liens on the vessels SPLENDOUR OF THE SEAS, LEGEND OF THE SEAS, CENTURY, GALAXY AND ZENITH existing as of the Effective Date and securing the Existing Debt (and any Lien on SPLENDOUR OF THE SEAS, LEGEND OF THE SEAS, CENTURY, GALAXY, OR ZENITH, securing any refinancing of the Existing Debt, so long as the relevant Vessel was subject to a Lien securing the Indebtedness being refinanced immediately prior to such refinancing); (b) Liens on assets (including, without limitation, shares of capital stock of corporations and assets owned by any corporation that becomes a Subsidiary of the Borrower after the Effective Date) acquired after the Effective Date (whether by purchase, construction or otherwise) by the Borrower or any of its Subsidiaries (other than (x) an Existing Principal Subsidiary or (y) any other Principal Subsidiary which, at any time, owns a Vessel free of any mortgage Lien), which Liens were created solely for the purpose of securing Indebtedness representing, or incurred to finance, refinance or refund, the cost (including the cost of construction) of such assets, so long as (i) the acquisition of such assets is not otherwise prohibited by the terms of this Agreement and (ii) each such Lien is created within three months after the acquisition of the relevant assets; 29 35 (c) in addition to other Liens permitted under this SECTION 7.2.3, Liens securing Indebtedness in an aggregate principal amount not exceeding $150,000,000 at any one time outstanding, PROVIDED that, with respect to each such item of Indebtedness, the fair market value of the assets subject to Liens securing such Indebtedness (determined at the time of the creation of such Lien) shall not exceed two TIMES the aggregate principal amount of such Indebtedness (and for purposes of this CLAUSE (c), the fair market value of any assets shall be determined by (i) in the case of any Vessel, by an Approved Appraiser selected by the Borrower and (ii) in the case of any other assets, by an officer of the Borrower or by the board of directors of the Borrower); (d) Liens on assets acquired after the Effective Date by the Borrower or any of its Subsidiaries (other than by (x) any Subsidiary that is an Existing Principal Subsidiary or (y)on any other Principal Subsidiary which, at any time, owns a Vessel free of any mortgage Lien) so long as (i) the acquisition of such assets is not otherwise prohibited by the terms of this Agreement and (ii) each of such Liens existed on such assets before the time of its acquisition and was not created by the Borrower or any of its Subsidiaries in anticipation thereof; (e) Liens on any asset of any corporation that becomes a Subsidiary of the Borrower (other than a corporation that also becomes a Subsidiary of an Existing Principal Subsidiary) after the Effective Date so long as (i) the acquisition or creation of such corporation by the Borrower is not otherwise prohibited by the terms of this Agreement and (ii) such Liens are in existence at the time such corporation becomes a Subsidiary of the Borrower and were not created by the Borrower or any of its Subsidiaries in anticipation thereof; (f) Liens securing Government-related Obligations; (g) Liens for taxes, assessments or other governmental charges or levies not at the time delinquent or thereafter payable without penalty or being diligently contested in good faith by appropriate proceedings; 30 36 (h) Liens of carriers, warehousemen, mechanics, materialmen and landlords incurred in the ordinary course of business for sums not overdue or being diligently contested in good faith by appropriate proceedings; (i) Liens incurred in the ordinary course of business in connection with workers' compensation, unemployment insurance or other forms of governmental insurance or benefits; (j) Liens for current crew's wages and salvage; (k) Liens arising by operation of law as the result of the furnishing of necessaries for any Vessel so long as the same are discharged in the ordinary course of business or are being diligently contested in good faith by appropriate proceedings; and (l) Liens on Vessels that: (i) secure obligations covered (or reasonably expected to be covered) by insurance; (ii) were incurred in the course of or incidental to trading such Vessel in connection with repairs or other work to such Vessel; or (iii) were incurred in connection with work to such Vessel that is required to be performed pursuant to applicable law, rule, regulation or order; PROVIDED that, in each case described in this CLAUSE (l), such Liens are either (x) discharged in the ordinary course of business or (y) being diligently contested in good faith by appropriate proceedings. SECTION 7.2.4 FINANCIAL CONDITION. The Borrower will not permit: (a) Free Cash to be less than $50,000,000 at any time. (b) Total Debt to Capitalization Ratio, as at the end of any Fiscal Quarter, to be greater than 0.625 to 1. (c) Fixed Charge Coverage Ratio to be less than 1.25 to 1 as at the last day of any Fiscal Quarter. 31 37 (d) Stockholders' Equity to be less than, as at the last day of any Fiscal Quarter, the sum of (i) $750,000,000 PLUS (ii) 50% of the consolidated net income of the Borrower and its Subsidiaries for the period commencing on April 1, 2000 and ending on the last day of the Fiscal Quarter most recently ended (treated for these purposes as a single accounting period, but in any event excluding any Fiscal Quarters for which the Borrower and its Subsidiaries have a consolidated net loss). SECTION 7.2.5 INVESTMENTS. The Borrower will not permit any of the Principal Subsidiaries to make, incur, assume or suffer to exist any Investment in any other Person. SECTION 7.2.6 CONSOLIDATION, MERGER, ETC. The Borrower will not, and will not permit any of its Subsidiaries to, liquidate or dissolve, consolidate with, or merge into or with, any other corporation, or purchase or otherwise acquire all or substantially all of the assets of any Person except: (a) any such Subsidiary may liquidate or dissolve voluntarily into, and may merge with and into, the Borrower or any other Subsidiary, and the assets or stock of any Subsidiary may be purchased or otherwise acquired by the Borrower or any other Subsidiary; and (b) so long as no Default has occurred and is continuing or would occur after giving effect thereto, the Borrower or any of its Subsidiaries may merge into any other Person, or any other Person may merge into the Borrower or any such Subsidiary, or the Borrower or any of its Subsidiaries may purchase or otherwise acquire all or substantially all of the assets of any Person, in each case so long as: (i) after giving effect thereto, the Stockholders' Equity of the Borrower and its Subsidiaries is at least equal to 90% of such Stockholders' Equity immediately prior thereto; and (ii) in the case of a merger involving the Borrower where the Borrower is not the surviving corporation, the surviving corporation shall have assumed in a writing, delivered to the Lender, all of the Borrower's obligations hereunder and under the other Loan Documents. SECTION 7.2.7 ASSET DISPOSITIONS, ETC. The Borrower will not, and will not permit any of its Subsidiaries to, sell, transfer, contribute or otherwise convey, or grant options, warrants or other rights with respect to, any material asset (including accounts receivable and capital stock of Principal Subsidiaries) to any Person, except: 32 38 (a) sales of assets (including, without limitation, Vessels) so long as: (i) the aggregate net book value of all such assets sold during each 12-month period commencing on the Closing Date, and each anniversary of the Closing Date, does not exceed an amount equal to $175,000,000; and (ii) the Borrower or Subsidiary selling such asset receives consideration therefor at least equal to the fair market value thereof (as determined in good faith by (x) in the case of any Vessel, the board of directors of the Borrower and (y) in the case of any other asset, an officer of the Borrower or its board of directors); (b) sales of capital stock of any Principal Subsidiary of the Borrower so long as a sale of all of the assets of such Subsidiary would be permitted under the foregoing CLAUSE (a); (c) sales of capital stock of any Subsidiary other than a Principal Subsidiary; and (d) sales of other assets in the ordinary course of business. SECTION 7.2.8 TRANSACTIONS WITH AFFILIATES. The Borrower will not, and will not permit any of the Principal Subsidiaries to, enter into, or cause, suffer or permit to exist any arrangement or contract with any of its Affiliates (other than arrangements or contracts among the Borrower and its wholly-owned Subsidiaries) unless such arrangement or contract is on an arms'-length basis, PROVIDED that, to the extent that the aggregate fair value of the goods furnished or to be furnished or the services performed or to be performed under all such contracts or arrangements in any one Fiscal Year does not exceed $5,000,000, such contracts or arrangements shall not be subject to this SECTION 7.2.8. 33 39 ARTICLE VIII EVENTS OF DEFAULT SECTION 8.1. LISTING OF EVENTS OF DEFAULT. Each of the following events or occurrences described in this SECTION 8.1 shall constitute an "EVENT OF DEFAULT". SECTION 8.1.1 NON-PAYMENT OF OBLIGATIONS. The Borrower shall default in the payment or prepayment when due of any principal of or interest on the Loan, PROVIDED that, in the case of any default in the payment of the interest on the Loan, such default shall continue unremedied for a period of at least two Business Days after notice thereof shall have been given to the Borrower by the Lender. SECTION 8.1.2 BREACH OF WARRANTY. Any representation or warranty of the Borrower made or deemed to be made hereunder (including any certificates delivered pursuant to ARTICLE V) is or shall be incorrect when made in any material respect and such incorrectness shall continue unremedied for at least five Business Days after notice thereof shall have been given to the Borrower by the Lender (or, if (a) such incorrectness is capable of being remedied within 15 days (commencing on the first day of such five-Business-Day period) and (b) the Borrower is actively seeking to remedy the same during such period, such incorrectness shall continue unremedied for at least 15 days). SECTION 8.1.3 NON-PERFORMANCE OF CERTAIN COVENANTS AND OBLIGATIONS. The Borrower shall default in the due performance and observance of any other covenant contained herein or in any other Loan Document (other than the covenants set forth in SECTION 7.2.4) and such default shall continue unremedied for a period of five days after notice thereof shall have been given to the Borrower by the Lender (or, if (a) such default is capable of being remedied within 30 days (commencing on the first day following such five-day period) and (b) the Borrower is actively seeking to remedy the same during such period, such default shall continue unremedied for at least 35 days after such notice to the Borrower). 34 40 SECTION 8.1.4 DEFAULT ON OTHER INDEBTEDNESS. Any of the following shall occur: (a) any Indebtedness of the Borrower or any Principal Subsidiary aggregating $25,000,000 or more (or the equivalent in other currencies) shall have become due, or be required to be prepaid in full (whether by redemption, purchase, offer to purchase or otherwise) prior to its stated maturity, and is then due and payable; or (b) the Borrower or any Principal Subsidiary shall default in the payment when due (after giving effect to any applicable grace period) of any principal of or interest on any Indebtedness aggregating $25,000,000 or more (or the equivalent in other currencies); or (c) any holder or holders of any Indebtedness of the Borrower or any Principal Subsidiary aggregating $25,000,000 or more (or the equivalent in other currencies), or any agent acting on their behalf, shall take any action to realize on any collateral security for such Indebtedness as a result of any event of default under such Indebtedness; and, in each such case, such event shall continue unremedied for a period of five Business Days (or, if (a) such default is capable of being remedied within 15 days (commencing on the first day of such five-Business-Day period) and (b) the Borrower is actively seeking to remedy the same during such period, such default shall continue unremedied for at least 15 days). SECTION 8.1.5 PENSION PLANS. Any of the following events shall occur with respect to any Pension Plan: (a) the institution of any steps by the Borrower, any member of its Controlled Group or any other Person to terminate a Pension Plan if, as a result of such termination, the Borrower or any such member could be required to make a contribution to such Pension Plan, or could reasonably expect to incur a liability or obligation to such Pension Plan, in excess of $25,000,000; or (b) a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA and, in each case, such event shall continue unremedied for a period of five Business Days after notice thereof shall have been given to the Borrower by the Lender (or, if (a) such default is capable of being remedied within 15 days (commencing on the first day of such five-Business-Day period) and (b) the Borrower is actively seeking to remedy the same during such period, such default shall continue unremedied for at least 15 days). 35 41 SECTION 8.1.6 BANKRUPTCY, INSOLVENCY, ETC. The Borrower or any of the Principal Subsidiaries (or any of its other Subsidiaries to the extent that the relevant event described below would have a Material Adverse Effect) shall: (a) become insolvent or generally fail to pay, or admit in writing its inability to pay, its debts as they become due; (b) apply for, consent to, or acquiesce in, the appointment of a trustee, receiver, sequestrator or other custodian for it or any of its property, or make a general assignment for the benefit of creditors; (c) in the absence of such application, consent or acquiescence, permit or suffer to exist the appointment of a trustee, receiver, sequestrator or other custodian for it or for a substantial part of its property, and such trustee, receiver, sequestrator or other custodian shall not be discharged within 30 days, provided that the Borrower hereby expressly authorizes the Lender to appear in any court conducting any relevant proceeding during such 30-day period to preserve, protect and defend its rights under the Loan Documents; (d) permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding, in respect of the Borrower or any of such Subsidiaries, and, if any such case or proceeding is not commenced by the Borrower or such Subsidiary, such case or proceeding shall be consented to or acquiesced in by the Borrower or such Subsidiary or shall result in the entry of an order for relief or shall remain for 30 days undismissed, provided that the Borrower hereby expressly authorizes the Lender to appear in any court conducting any such case or proceeding during such 30-day period to preserve, protect and defend its rights under the Loan Documents; or (e) take any corporate action authorizing, or in furtherance of, any of the foregoing. SECTION 8.1.7 OWNERSHIP OF PRINCIPAL SUBSIDIARIES. Except as a result of a disposition permitted pursuant to CLAUSE (b) of SECTION 7.2.7, the Borrower shall cease to own beneficially and of record all of the capital stock of each Existing Principal Subsidiary. 36 42 SECTION 8.2 ACTION IF BANKRUPTCY. If any Event of Default described in CLAUSES (a) through (d) of SECTION 8.1.6 shall occur with respect to the Borrower, the Commitment (if not theretofore terminated) shall automatically terminate and the outstanding principal amount of the Loan and all other Obligations shall automatically be and become immediately due and payable, without notice or demand. SECTION 8.3 ACTION IF OTHER EVENT OF DEFAULT. If any Event of Default (other than any Event of Default described in CLAUSES (a) through (d) of SECTION 8.1.6 with respect to the Borrower) shall occur for any reason, whether voluntary or involuntary, and be continuing, the Lender, may by notice to the Borrower declare all of the outstanding principal amount of the Loan and other Obligations to be due and payable whereupon the full unpaid amount of the Loan and other Obligations shall be and become immediately due and payable, without further notice, demand or presentment. ARTICLE IX PREPAYMENT EVENTS SECTION 9.1 LISTING OF PREPAYMENT EVENTS. Each of the following events or occurrences described in this SECTION 9.1 shall constitute a "PREPAYMENT EVENT". SECTION 9.1.1 CHANGE IN OWNERSHIP. Any Person other than a member of the Existing Group (a "NEW SHAREHOLDER") shall acquire (whether through legal or beneficial ownership of capital stock, by contract or otherwise), directly or indirectly, effective control over more than 30% of the Voting Stock and: (a) the members of the Existing Group have (whether through legal or beneficial ownership of capital stock, by contract or otherwise) in the aggregate, directly or indirectly, effective control over fewer shares of Voting Stock than does such New Shareholder; and (b) the members of the Existing Group do not collectively have (whether through legal or beneficial ownership of capital stock, by contract or otherwise) the right to elect, or to designate for election, at least a majority of the Board of Directors of the Borrower. 37 43 SECTION 9.1.2 CHANGE IN BOARD. During any period of 24 consecutive months, a majority of the Board of Directors of the Borrower shall no longer be composed of individuals: (a) who were members of said Board on the first day of such period; or (b) whose election or nomination to said Board was approved by a vote of at least two-thirds of the members of said Board who were members of said Board on the first day of such period; or (c) whose election or nomination to said Board was approved by a vote of at least two-thirds of the members of said Board referred to in the foregoing CLAUSES (a) and (b). SECTION 9.1.3 UNENFORCEABILITY. Any Loan Document shall cease to be the legally valid, binding and enforceable obligation of the Borrower (in each case, other than with respect to provisions of any Loan Document (i) identified as unenforceable in the form of the opinion of the Borrower's counsel set forth as EXHIBIT D-1 or (ii) that a court of competent jurisdiction has determined are not material) and such event shall continue unremedied for 15 days after notice thereof has been given to the Borrower by the Lender. SECTION 9.1.4 APPROVALS. Any material license, consent, authorization, registration or approval at any time necessary to enable the Borrower or any Principal Subsidiary to conduct its business shall be revoked, withdrawn or otherwise cease to be in full force and effect, unless the same would not have a Material Adverse Effect. SECTION 9.1.5 NON-PERFORMANCE OF CERTAIN COVENANTS AND OBLIGATIONS. The Borrower shall default in the due performance and observance of any of the covenants set forth in SECTION 7.2.4 and such default shall continue unremedied for a period of 30 days after notice thereof shall have been given to the Borrower by the Lender and the Lender fails to agree with the Borrower within that 30-day period on a proposal (to be made by the Borrower) for the remedy of such default within a period and on such terms as are acceptable to the Lender. SECTION 9.1.6 JUDGMENTS. Any judgment or order for the payment of money in excess of $25,000,000 shall be rendered against the Borrower or any of the Principal Subsidiaries by a court of competent jurisdiction and the Borrower or such Principal Subsidiary shall have failed to satisfy such judgment and either: 38 44 (a) enforcement proceedings in respect of any material assets of the Borrower or such Principal Subsidiary shall have been commenced by any creditor upon such judgment or order and shall not have been stayed or enjoined within five Business Days after the commencement of such enforcement proceedings; or (b) there shall be any period of 10 consecutive Business Days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect. SECTION 9.1.7 CONDEMNATION, ETC. Any Vessel or Vessels shall be condemned or otherwise taken under color of law and the same shall continue unremedied for at least 20 days, unless such condemnation or other taking would not have a Material Adverse Effect. SECTION 9.1.8 ARREST. Any Vessel or Vessels shall be arrested and the same shall continue unremedied for at least 20 days, unless such arrest would not have a Material Adverse Effect. SECTION 9.2 MANDATORY PREPAYMENT. If any Prepayment Event shall occur and be continuing, the Lender shall by notice to the Borrower require the Borrower to prepay in full on the date of such notice all principal of and interest on the Loan and all other Obligations (and, in such event, the Borrower shall so pay the full unpaid amount of the Loan and all accrued and unpaid interest thereon and all other Obligations). ARTICLE X MISCELLANEOUS PROVISIONS SECTION 10.1 WAIVERS, AMENDMENTS, ETC. The provisions of this Agreement and of each other Loan Document may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by the Borrower and the Lender. No failure or delay on the part of the Lender in exercising any power or right under this Agreement or any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude any other or further exercise thereof or the exercise of any other power or right. No notice to or demand on the Borrower in any case shall entitle it to any notice or demand in similar or other circumstances. No waiver or approval by the Lender under this Agreement or any other Loan Document shall, except as may be otherwise stated in such waiver or approval, be applicable to subsequent transactions. No waiver or approval hereunder shall require any similar or dissimilar waiver or approval thereafter to be granted hereunder. 39 45 SECTION 10.2 NOTICES. All notices and other communications provided to any party hereto under this Agreement or any other Loan Document shall be in writing or by telex or by facsimile and addressed, delivered or transmitted to such party at its address, telex or facsimile number set forth below its signature hereto or set forth in the Lender Assignment Agreement or at such other address, telex or facsimile number as may be designated by such party in a notice to the other parties. Any notice, if mailed and properly addressed with postage prepaid or if properly addressed and sent by pre-paid courier service, shall be deemed given when received; any notice, if transmitted by telex or facsimile, shall be deemed given when transmitted (answer back confirmed in the case of telexes). SECTION 10.3 PAYMENT OF COSTS AND EXPENSES. The Lender and the Borrower shall pay all the fees and out of pocket expenses of the counsel respectively appointed by each of them in respect of the preparation and negotiation of this Agreement and the Note (including, without limitation, in the case of the Borrower the counsel referred to in SECTIONS 5.1.4.a and b) and, in the case of the Lender the counsel referred to in SECTION 5.1.4.c))The Borrower agrees to pay on demand all reasonable expenses of the Lender(including the reasonable fees and out-of-pocket expenses of counsel to the Lender and of local counsel, if any, who may be retained by counsel to the Lender) in connection with any amendments, waivers, consents, supplements or other modifications to this Agreement or any other Loan Document as may from time to time hereafter be required, whether or not the transactions contemplated hereby are consummated. The Borrower further agrees to pay, and to save the Lender harmless from all liability for, any stamp or other taxes which may be payable in connection with the execution or delivery of this Agreement, the borrowing hereunder, or the issuance of the Note or any other Loan Documents. The Borrower also agrees to reimburse the Lender upon demand for all reasonable out-of-pocket expenses (including reasonable attorneys' fees and legal expenses) incurred by the Lender in connection with (x) the negotiation of any restructuring or "work-out", whether or not consummated, of any Obligations and (y) the enforcement of any Obligations. SECTION 10.4 INDEMNIFICATION. In consideration of the execution and delivery of this Agreement by the Lender, the Borrower hereby indemnifies and holds the Lender and its respective Affiliates, officers, directors and employees (collectively, the "INDEMNIFIED PARTIES") free and harmless from and against any and all causes of action, suits or other claims that may be asserted against any Indemnified Party (and all losses, costs, liabilities, damages and expenses arising or incurred in connection therewith (irrespective of whether any such 40 46 Indemnified Party is a party to the action for which indemnification hereunder is sought), including reasonable attorneys' fees and disbursements (collectively, the "INDEMNIFIED LIABILITIES")), incurred by the Indemnified Parties or any of them as a result of, or arising out of, or relating to any of the Loan Documents or the Loan provided for herein or any use of the proceeds of the Loan, except for any such Indemnified Liabilities arising for the account of a particular Indemnified Party by reason of the relevant Indemnified Party's gross negligence or wilful misconduct. Each Indemnified Party shall (a) furnish the Borrower with prompt notice of any action, suit or other claim covered by this SECTION 10.4, (b) at the Borrower's request, give the Borrower the right to control (at the Borrower's expense) the defense of any such action, suit or other claim (PROVIDED that (x) the Borrower shall not settle or compromise any such action, suit or other claim if such Indemnified Party shall demonstrate to the reasonable satisfaction of the Borrower that such settlement or compromise would materially adversely affect such Indemnified Party and (y) the Borrower's selection of counsel in any such action, suit or claim being controlled by the Borrower shall be subject to such Indemnified Party's consent, which consent shall not be unreasonably withheld), (c) not agree to any settlement or compromise of any such action, suit or claim without the Borrower's prior consent and (d) shall cooperate fully in the Borrower's defense of any such action, suit or other claim (PROVIDED, that the Borrower shall reimburse such Indemnified Party for its reasonable out-of-pocket expenses incurred pursuant hereto). If and to the extent that the foregoing undertaking may be unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. SECTION 10.5 SURVIVAL. The obligations of the Borrower under SECTIONS 4.1, 4.2, 4.3, 10.3 and 10.4, shall in each case survive any termination of this Agreement and the payment in full of all Obligations. The representations and warranties made by the Borrower in this Agreement and in the other Loan Document shall survive the execution and delivery of this Agreement and such other Loan Document. SECTION 10.6 SEVERABILITY. Any provision of this Agreement or of the other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or such Loan Document or affecting the validity or enforceability of such provision in any other jurisdiction. 41 47 SECTION 10.7 HEADINGS. The various headings of this Agreement and of the other Loan Document are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or such other Loan Document or any provisions hereof or thereof. SECTION 10.8 EXECUTION IN COUNTERPARTS, EFFECTIVENESS, ETC. This Agreement may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. This Agreement shall become effective on the first Business Day which occurs in January 2000 provided that prior to that date counterparts hereof executed on behalf of the Borrower and the Lender and the originals thereof shall have been received by the Lender and the Borrower. SECTION 10.9 GOVERNING LAW; ENTIRE AGREEMENT. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA, INCLUDING ALL MATTERS OF CONSTRUCTION VALIDITY AND PERFORMANCE, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW (OTHER THAN TITLE 14 OF ARTICLE 5 OF THE GENERAL OBLIGATIONS OF LAW). This Agreement and the Note and the instruments herein and therein referenced constitute the entire understanding among the parties hereto with respect to the subject matter hereof and thereof and supersede any prior agreements, written or oral, with respect thereto. SECTION 10.10 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; PROVIDED that: (a) except to the extent permitted under SECTION 7.2.6, the Borrower may not assign or transfer its rights or obligations hereunder without the prior written consent of the Lender; and (b) the rights of sale, assignment and transfer of the Lender are subject to SECTION 10.11. SECTION 10.11 SALE AND TRANSFER OF THE LOAN AND NOTE; PARTICIPATIONS IN THE LOAN AND NOTE. The Lender may assign, or sell participations in the Loan to one or more other Persons in accordance with this SECTION 10.11. 42 48 SECTION 10.11.1 ASSIGNMENTS. The Lender, (i) with the written consent of the Borrower (which consent shall not be unreasonably delayed or withheld and which consent, shall be deemed to have been given in the absence of a written notice delivered by the Borrower to the Lender, on or before the fifth Business Day after receipt by the Borrower of the Lender's request for consent, stating, in reasonable detail, the reasons why the Borrower proposes to withhold such consent) may at any time assign and delegate to one or more commercial banks or other financial institutions provided that the Lender gives the Borrower 45 days notice of the intention to assign and delegate and that the Borrower may solicit commercial banks or other financial institutions with which it has relationships for consideration by the Lender (which consideration will not be unreasonably denied); and (ii) with notice to the Borrower but without the consent of the Borrower, may assign and delegate to any of its Affiliates; (each Person described in either of the foregoing clauses as being the Person to whom such assignment and delegation is to be made, being hereinafter referred to as an "ASSIGNEE LENDER"), all or any fraction of the Lender's Loan not to exceed 49.9% in the aggregate (which assignment and delegation shall be of a constant, and not a varying, percentage of the Lender's Loan) in a minimum aggregate amount of $25,000,000; PROVIDED that the Borrower shall be entitled to continue to deal solely and directly with the Lender in connection with the interests so assigned and delegated to an Assignee Lender until: (a) written notice of such assignment and delegation, together with payment instructions, addresses and related information with respect to such Assignee Lender, shall have been given to the Borrower by the Lender and such Assignee Lender;and (b) Such Assignee Lender shall have executed and delivered to the Borrower a Lender Assignment Agreement. From and after the date that the Borrower accepts such Lender Assignment Agreement, (x) the Assignee Lender thereunder shall be deemed automatically to have become a party hereto and to the extent that rights and obligations hereunder have been assigned and delegated to such Assignee Lender in connection with such Lender Assignment Agreement, shall have the rights and obligations of the Lender hereunder and under the other Loan Document, and (y) the assignor 43 49 Lender, to the extent that rights and obligations hereunder have been assigned and delegated by it, shall be released from its obligations hereunder and under the other Loan Documents, other than any obligations arising prior to the effective date of such assignment. In no event shall the Borrower be required to pay to any Assignee Lender at the time of the relevant assignment any amount under SECTIONS 4.3, 4.4, 4.5 and 4.6 that is greater than the amount which it would have been required to pay had no such assignment been made. Within five Business Days after the Borrower has received an executed Lender Assignment Agreement, the Borrower shall execute and deliver to the Lender (for delivery to the relevant Assignee Lender) a new Note evidencing such Assignee Lender's assigned Loan and a replacement Note in the principal amount of the Loan retained by the assignor Lender hereunder (such Note to be in exchange for, but not in payment of, that Note then held by such assignor Lender). Each such Note shall be dated the date of the predecessor Note. The assignor Lender shall mark the predecessor Note "exchanged" and deliver it to the Borrower concurrently with the delivery by the Borrower of the new Note. In no event shall the Lender retain less than 50.1% of the Loan for its own risk and benefit. SECTION 10.11.2 PARTICIPATIONS. The Lender may at any time sell to one or more commercial banks or other financial institutions provided that the Lender gives the Borrower 45 days notice of the intention to sell and that the Borrower may solicit commercial banks or other financial institutions with which it has relationships for consideration by the Lender (which consideration will not be unreasonably denied) (each of such commercial banks and other financial institutions being herein called a "PARTICIPANT") participating interests in the Loan not to exceed 49.9% in the aggregate, PROVIDED that: (a) no participation contemplated in this SECTION 10.11 shall relieve the Lender from its obligations hereunder; (b) the Lender shall remain solely responsible for the performance of its obligations hereunder; (c) the Borrower shall continue to deal solely and directly with the Lender in connection with the Lender's rights and obligations under this Agreement and the other Loan Document; 44 50 (d) no Participant, unless the Participant is an Affiliate of the Lender, shall be entitled to require the Lender to take or refrain from taking any action hereunder or under the other Loan Document, (e) the Borrower shall not be required to pay any amount under SECTIONS 4.3, 4.4, 4.5 and 4.6 that is greater than the amount which it would have been required to pay had no participating interest been sold. The Borrower acknowledges and agrees that each Participant, for purposes of SECTIONS 4.3, 4.4, 4.5, 4.6 and CLAUSE (H) of 7.1.1, shall be considered a Lender. In no event shall the Lender retain less than 50.1% of the Loan for its own risk and benefit. SECTION 10.12. OTHER TRANSACTIONS. Nothing contained herein shall preclude the Lender from engaging in any transaction, in addition to those contemplated by this Agreement or the other Loan Document, with the Borrower or any of its Affiliates in which the Borrower or such Affiliate is not restricted hereby from engaging with any other Person. SECTION 10.13. FORUM SELECTION AND CONSENT TO JURISDICTION. ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR THE OTHER LOAN DOCUMENT SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE SUPREME COURT OF THE STATE OF NEW YORK FOR THE COUNTY OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY PROPERTY OF THE BORROWER MAY BE BROUGHT, AT THE LENDER'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH PROPERTY MAY BE FOUND. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK FOR THE COUNTY OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY FINAL JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OF FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE BORROWER HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENT. 45 51 SECTION 10.14 PROCESS AGENT. If at any time the Borrower ceases to have a place of business in the United States, the Borrower shall appoint an agent for service of process (reasonably satisfactory to the Lender) located in New York City and shall furnish to the Lender evidence that such agent shall have accepted such appointment for a period of time ending no earlier than one year after the last Repayment Date specified in Exhibit G. SECTION 10.15 WAIVER OF JURY TRIAL. THE LENDER AND THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR THE OTHER LOAN DOCUMENT. EACH OF THE PARTIES HERETO ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF THE OTHER LOAN DOCUMENT) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR EACH OTHER PARTY ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENT. 46 52 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written. ROYAL CARIBBEAN CRUISES LTD. By /s/ BONNIE BIUMI --------------------------------- Name: Bonnie Biumi Title: Vice President & Treasurer Address: 1050 Caribbean Way Miami, Florida 33132 Facsimile No.: (305) 539-0562 Attention: Treasurer With a copy to: General Counsel KREDITANSTALT FUR WIEDERAUFBAU By /s/ --------------------------------- Name: Title: Address: Palmengartenstrasse 5-9 D-60325 Frankfurt am Main Germany Facsimile No.: 00 49 69 7431 2944 Telex No.: 415 256 0 Attention: Shipfinancing Department 47 53 SCHEDULE I DISCLOSURE SCHEDULE ITEM 6.10 (b): VESSELS
VESSEL OWNER FLAG Sovereign of the Seas Sovereign of the Seas Norwegian Shipping Inc. Nordic Empress Nordic Empress Shipping Inc. Liberian Viking Serenade Viking Serenade Inc. Liberian Monarch of the Seas Monarch of the Seas Inc. Liberian Majesty of the Seas Majesty of the Seas Inc. Norwegian Grandeur of the Seas Grandeur of the Seas Inc. Norwegian Rhapsody of the Seas Rhapsody of the Seas Inc. Liberian Enchantment of the Seas Enchantment of the Seas Inc. Norwegian Vision of the Seas Vision of the Seas Inc. Liberian Voyager of the Seas Voyager of the Seas Inc. Liberian Horizon Fantasia Cruising Inc. Liberian Zenith Zenith Shipping Corp. Liberian Century Blue Sapphire Marine Inc. Liberian Galaxy Esker Marine Shipping Inc. Liberian Mercury Seabrook Maritime Inc. Panamanian
ITEM 6.11: SUBSIDIARIES
NAME OF THE SUBSIDIARY JURISDICTION OF ORGANIZATION Song of Norway Inc. Liberia Nordic PrInce Inc. Liberia Sun Viking Inc. Liberia Song of America Inc. Liberia Sovereign of the Seas Shipping Inc.* Liberia Viking Serenade Inc.* Liberia Nordic Empress Shipping Inc.* Liberia Majesty of the Seas Inc.* Liberia Monarch of the Seas Inc.* Liberia Admiral Management Inc. Liberia GG Operations Inc. Delaware Island for Science Inc. Indiana Royal Caribbean Management Inc. Liberia Labadee Investments Ltd. Cayman Islands Societe Labadee Nord, S.A. Haiti Royal Caribbean Cruise Line A/S Norway Royal Caribbean Merchandise Inc. Florida
i 54
Eastern Steamship Lines Inc. Liberia Grandeur of the Seas Inc.* Liberia Enchantment of the Seas Inc.* Liberia Rhapsody of the Seas Inc.* Liberia Vision of the Seas Inc. * Liberia Voyager of the Seas Inc.* Liberia Celebrity Cruise Lines Inc. Cayman Islands Celebrity Cruise Holdings Inc. Liberia Cruise Mar Shipping Holdings Ltd. Liberia Seabrook Maritime Inc. * Liberia Esker Marine Shipping Inc. * Liberia Blue Sapphire Marine Inc. * Liberia Fantasia Cruising Inc. * Liberia Cruise Mar Investment Inc. Liberia Universal Cruise Holdings Ltd. British Virgin Islands Celebrity Cruises Inc. Liberia Fourth Transoceanic Shipping Co. Ltd. Liberia Zenith Shipping Corp. * Liberia Mediterranean Blue Sea Holdings Ltd. Liberia Celebrity Cruises (Management) Inc. Liberia Cruceros Celebrity S.L. Spain Celebrity Travel S.L. Spain Celebrity Cruises (France) SARL France Celebrity Croisieres S.A. Switzerland Celebrity Cruises (Hellas) Ltd. Greece Celebrity Crociere (Italia) SRL Italy Celebrity Cruises (UK) Ltd. U.K. Silver Oak Investments Corporation Liberia General Electric and Machinery Corporation Panama Odysseus Reisen GMBH Germany Atlantic Maritime Recruitment Inc. Liberia Serenity Management Inc. Liberia Fifth Transoceanic Shipping Company Ltd. Liberia Phaidon Navegacion S.A. Panama Ajut Navigation Corporation Liberia
* Shipholding companies ii 55 EXHIBIT A NOTE $300,000,000 _______, 2000 FOR VALUE RECEIVED, the undersigned, ROYAL CARIBBEAN CRUISES LTD., a Liberian corporation (the "BORROWER"), promises to pay to the order of KREDITANSTALT FUR WIEDERAUFBAU (the "LENDER") on ____________, 2009 the principal sum of ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000)and on _____, 2010 the principal sum of ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000) made by the Lender pursuant to the Credit Agreement, dated as of December 16, 1999 (together with all amendments and other modifications, if any, from time to time thereafter made thereto, the "CREDIT AGREEMENT"), among the Borrower and the Lender. The Borrower also promises to pay interest on the unpaid principal amounts hereof from time to time outstanding from the date hereof until maturity (whether by acceleration or otherwise) and, after maturity, until paid, at the rates per annum and on the dates specified in the Credit Agreement. Payments of both principal and interest are to be made in the lawful money of the United States of America in same day or immediately available funds to the account designated by the Lender pursuant to the Credit Agreement. This Note is the Note referred to in, and evidences Indebtedness incurred under, the Credit Agreement, to which reference is made for a statement of the terms and conditions on which the Borrower is permitted and required to make prepayments and repayments of principal of the Indebtedness evidenced by this Note and on which such Indebtedness may be declared to be immediately due and payable. Unless otherwise defined, terms used herein have the meanings provided in the Credit Agreement. All parties hereto, whether as makers, endorsers, or otherwise, severally waive presentment for payment, demand, protest and notice of dishonor. THIS NOTE SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA, INCLUDING ALL MATTERS OF CONSTRUCTION VALIDITY AND PERFORMANCE, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW (OTHER THAN TITLE 14 OF ARTICLE 5 OF THE GENERAL OBLIGATIONS OF LAW). ROYAL CARIBBEAN CRUISES LTD. By__________________________ Title: iii 56 EXHIBIT B LOAN REQUEST KREDITANSTALT FUR WIEDERAUFBAU Palmengartenstrasse 5-9 D-60325 Frankfurt am Main Federal Republic of Germany ROYAL CARIBBEAN CRUISES LTD. - NOTICE OF DRAWDOWN Dear Sirs: This Loan Request is delivered to you pursuant to SECTION 2.2 of the Credit Agreement, dated as of December 16, 1999 (together with all amendments, if any, from time to time made thereto, the "CREDIT AGREEMENT"), made between Royal Caribbean Cruises Ltd., a Liberian corporation (the "BORROWER")and Kreditanstalt Fur Wiederaufbau (the "LENDER"). Unless otherwise defined herein or the context otherwise requires, terms used herein have the meanings provided in the Credit Agreement. The Borrower hereby requests that the Loan be made in the aggregate principal amount of $300,000,000 on _________, 2000 having an initial Interest Period of _________months. Please wire transfer the proceeds of the Loan as follows: Bank: Chase Manhattan Bank, NY ABA#: 021-000-021 For the Account of: ROYAL CARIBBEAN CRUISES LTD. Account #: 910-2-763274 The Borrower certifies that at the date hereof the representations set out in ARTICLE VI of the Credit Agreement are true and no event has occurred which is or may become (with the passage of time or the giving of notice or both) an Event of Default or a Prepayment Event. The Borrower has caused this Loan Request to be executed and delivered, and the certification and warranties contained herein to be made by its duly Authorized Officer this __________day of___________, 2000. ROYAL CARIBBEAN CRUISES LTD. BY__________________________ Name: Title: iv 57 EXHIBIT C INTEREST PERIOD NOTICE KREDITANSTALT FUR WIEDERAUFBAU Palmengartenstrasse 5-9 D-60325 Frankfurt am Main Federal Republic of Germany Attention: [NAME] [Title] ROYAL CARIBBEAN CRUISES LTD. Gentlemen and Ladies: This Interest Period Notice is delivered to you pursuant to SECTION 2.3 of the Credit Agreement, dated as of December 16, 1999 (together with all amendments, if any, from time to time made thereto, the "CREDIT AGREEMENT"), among Royal Caribbean Cruises Ltd., a Liberian corporation (the "Borrower") and Kreditanstalt Fur Wiederaufbau (the "Lender"). Unless otherwise defined herein or the context otherwise requires, terms used herein have the meanings provided in the Credit Agreement. The Borrower hereby requests that on_______________, 20__, the Loan be continued as a Loan having an Interest Period of _____months. The Borrower has caused this Interest Period Notice to be executed and delivered by its Authorized Officer this______day of ________, 20____. ROYAL CARIBBEAN CRUISES LTD. By:_______________________ Title: v 58 EXHIBIT D-1 [Form of Opinion of Counsel to the Borrower] _______,2000 To: KREDITANSTALT FUR WIEDERAUFBAU Gentlemen: I am the General Counsel of Royal Caribbean Cruises Ltd. ("RCCL") and have acted in that capacity in connection with the Credit Agreement dated as of December 16, 1999 (the "Credit Agreement") between RCCL and Kreditanstalt Fur Wiederaufbau (the "Lender"). In connection with the opinions expressed herein, I have examined originals or copies certified or otherwise identified to my satisfaction of such agreements, documents, certificates, and other statements of such governmental officials and corporate officers and other representations of the corporations referred to herein and other papers as I have deemed relevant and necessary as a basis for such opinions. In making such examinations I have assumed the genuineness of all signatures and the conformity with the originals of all documents submitted to me as copies. As to facts material to my opinion, I have relied on the representations warranties and statements made in or pursuant to the Credit Agreement and the other documents referred to herein and upon certificates of public officials and certificates and other written or oral statements of officers and other representatives of the corporations named herein. Unless otherwise defined herein, the capitalized terms used herein shall have meanings assigned to them in the Credit Agreement. Based on the foregoing and subject to the qualifications and exceptions expressed herein, it is my opinion that: (i) no registration or other official action in the State of Florida is required in order to render the Credit Agreement or the other Loan Document enforceable against RCCL; and (ii) to the extent that their respective incomes are excludable from the United States Income Taxation pursuant to Section 883 of the Internal Revenue Code, none of RCCL and its Principal Subsidiaries is, or under current law will be, taxable on its income under the Revenue Code of the State of Florida. In addition, RCCL is not required, as a matter of the law of the State of Florida, to withhold income tax with respect to any interest or principal payments it is or may be required to make under the Loan Documents. vi 59 The opinions expressed above are subject to the following further qualifications: (i) the effect on the enforceability of the Loan Documents of insolvency, bankruptcy, moratorium, fraudulent conveyance or reorganization laws or other similar laws affecting generally the enforcement of the creditors' rights, (ii) the effect of general principles of public policy and of equity, (iii) the possibility that certain provisions of the Loan Documents may not be specifically enforceable due to the effect of certain laws, equitable principles and judicial decisions, (iv) no opinion is expressed herein as to the choice of law provisions contained in the Loan Documents, (v) no opinion is expressed herein as to the necessity of the Lender to be qualified to do business in the State of Florida or to make any filings in connection therewith and (vi)no opinion is expressed herein as to laws other than the laws of the State of Florida. This opinion is solely for the benefit of the Lender and, except for Counsel to the Lender in connection with this transaction, is not to be relied on by any other person. This opinion letter is limited strictly to the matters stated herein and is not to be read as extending by implication to any matter not specifically referred to herein. This opinion letter is based on states of law, documentation and fact as they exist on the date hereof, and we do not undertake to advise you of any changes that hereafter may be brought to our attention. Very truly yours, vii 60 EXHIBIT D-2 [Form of Opinion of Liberian Counsel to the Borrower] _______,2000 To: Kreditanstalt Fur Wiederaufbau Gentlemen: We have acted as legal counsel on matters of Liberian law to Royal Caribbean Cruises Ltd., a Liberian corporation (the "Borrower"), in connection with (a) a Credit Agreement dated as of December 16, 1999 (the "Credit Agreement") and made between (1) the Borrower and (2) Kreditanstalt Fur Wiederaufbau(the "Lender") in respect of a loan facility in the maximum aggregate amount of $300,000,000, and (b)the Note referred to in the Credit Agreement (collectively, together with the Credit Agreement, the "Documents"). With reference to the Documents, you have asked for our opinion on the matters set forth below. In rendering this opinion, we have examined executed copies of the Documents. We have also examined originals or photostatic copies or certified copies of all such agreements and other instruments, certificates by public officials and certificates of officers of the Borrower as are relevant and necessary and relevant corporate authorities of the Borrower. We have assumed with your approval, the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity with the original documents of all documents submitted to us as copies, the power, authority and legal right of the parties to the Documents other than the Borrower to enter into and perform their respective obligations under each of the Documents and the due authorization of the execution of the Documents by all parties thereto other than the Borrower. We have further assumed the due execution and delivery of each of the Documents, due compliance with all matters of, and the validity and enforceability of the Documents other than the laws governing each of the Documents, under the respective laws of the Republic of Liberia, in respect of which we are opining. As to questions of fact material to this opinion, we have, when relevant facts were not independently established, relied upon certificates of public officials and of officers or representatives of the Borrower. We are attorneys admitted to practice in the State of New York and do not purport to be experts in the laws of any other jurisdiction. Insofar as our opinion relates to the law of the Republic of Liberia, we have relied on opinions of counsel in Liberia rendered in transactions which we consider to viii 61 afford a satisfactory basis for such opinion, and upon our independent examinations of the Liberian Corporation Act of 1948 (Chapter 1 of Title 4 of the Liberian Code of Laws of 1956, effective March 1, 1958 as amended to July, 1973), the Liberian Business Corporation Act of 1976 (Part 1 of Title V of the Liberian Code of Laws (Revised) of 1976, effective January 2, 1977) and the Liberian Maritime Law (Chapter 3 of Title 22 of the Liberian Code of Laws as amended) as contained in pamphlets delivered to us by Liberian Corporation Services Inc. (who have today advised us that to the best of their knowledge such laws remain in effect on the date hereof) and our knowledge and interpretation of analogous laws in the United States. We express no opinion as to the laws of any other jurisdiction by which any of the Documents are expressed to be governed, and we have assumed with your approval that each of the Documents is valid, legally binding and enforceable under the law by which it is expressed to be governed. In rendering our opinion as to the valid existence in good standing of the Borrower , we have relied on the Certificate of Good Standing issued by order of the Minister of Foreign Affairs of the Republic of Liberia on _________,2000. Based upon and subject to the foregoing and having regard to the legal considerations which we deem relevant, we are of the opinion that, insofar as Liberian law is concerned: 1. The Borrower is a corporation duly incorporated, validly existing under the aforementioned Business Corporation Act and in good standing under the laws of the Republic of Liberia and has full power to enter into and perform its obligations under the Documents; 2. The Borrower has full right, power and authority to enter into, execute and deliver the Documents and to perform each and all of the matters and things provided for therein; 3. Each of the Documents has been executed and delivered by a duly authorized signatory of the Borrower and constitutes the legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with its terms; 4. Neither the execution of, nor the performance of its obligations under, any of the Documents by the Borrower will contravene any existing applicable law, regulation or restrictions of the Republic of Liberia and no consents or approvals of, or exemptions by any Liberian governmental or public bodies and authorities are required in connection with the execution and delivery by the Borrower of the Documents; ix 62 5. Neither the execution nor delivery of any of the Documents, nor the transactions contemplated therein, nor compliance with the terms and conditions thereof, will contravene any provisions of Liberian law or regulation or violate any provisions of the Articles of Incorporation or the By-laws of the Borrower; 6. It is not necessary to file, record or register any of the Documents or any instrument relating thereto or effect any other official action in any public office or elsewhere in the Republic of Liberia to render any such document enforceable against Borrower; 7. Assuming that no more than 25% of the total combined voting power and no more than 25% of the total value of the outstanding equity stock of the Borrower is owned, directly or indirectly, by persons resident in Liberia and that the Borrower does not engage in Liberia in the pursuit of gain or profit with a degree of continuity or regularity, the Borrower is not required or entitled under any existing applicable law or regulation of the Republic of Liberia to make any withholding or deduction in respect of any tax or otherwise from any payment which it is or may be required to make under any of the Documents; 8. Assuming none of the Documents having been executed in Liberia, no stamp or registration or similar taxes or charges are payable in the Republic of Liberia in respect of any of the Documents or the enforcement thereof in the Courts of Liberia other than (i)customary court fees payable in litigation in the Courts of Liberia and (ii) nominal documentary stamp taxes if the Documents are ever submitted to a Liberian court; 9. Assuming that the shares of the Borrower and the Principal Subsidiaries are not owned, directly or indirectly, by the Republic of Liberia or any other sovereign under Liberian law, neither the Borrower nor any of the Principal Subsidiaries nor the property or assets of any of them (including in the case of Principal Subsidiaries any of the Vessels and their earnings and insurances and requisition compensation) is immune from the institution of legal proceedings or the obtaining or execution of a judgment in the Republic of Liberia; and 10. Under Liberian law the choice by the Borrower of the law of the State of New York to govern the Credit Agreement and the Note is a valid choice of law and the irrevocable submission thereunder by the Borrower to the jurisdiction of the Supreme Court of the State of New York for the County of New York and for the United x 63 States District Court for the Southern District of New York is a valid submission to such courts. In the event a judgment of such courts against the Borrower was obtained after service of process in the manner specified in the Credit Agreement, the same would be enforced by the courts of the Republic of Liberia without further review on the merits unless: (i) the judgment was obtained by fraud; or (ii) the judgment was given in a manner contrary to natural justice or the judgment was given in a manner contrary to the public policy of the Republic of Liberia; or (iii) the judgment was in a case in which the defendant did not appear or in which an authorized person in such defendant's behalf; or (iv) the judgment was not for a specific ascertained sum of money; or(v) the judgment was not final and conclusive in accordance with the laws of the jurisdiction in which the judgment was obtained. We qualify our opinion to the extent that (i) the enforceability of the rights and remedies provided for in the Documents (a) may be limited by bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance and other similar laws affecting generally the enforcement of creditors' rights and (b) is subject to general principles of public policy and of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law), including application by a court of competent jurisdiction of principles of good faith, fair dealing, commercial reasonableness, materiality, unconscionability and conflict with public policy or similar principles, and (ii) while there is nothing in the laws of the Republic of Liberia that prohibits a Liberian corporation from submitting to the jurisdiction of a forum other than Liberia, the enforceability of such submission to jurisdiction provisions is not dependent upon Liberian law and such provisions may not be enforceable under the laws of a particular jurisdiction. This opinion is issued solely for the benefit of the Lender and may be relied upon solely by the Lender in connection with the transaction described herein and, except for Counsel to the Lender in connection with this transaction, is not to be made available to, or relied upon by, any other person, firm or entity. This opinion letter is limited strictly to the matters stated herein and is not to be read as extending by implication to any matter not specifically referred to herein. This opinion letter is based on states of law, documentation and fact as they exist on the date hereof, and we do not undertake to advise you of any changes that hereafter may be brought to our attention. Very truly yours, xi 64 EXHIBIT E December __, 1999 To the Lender to the Credit Agreement referred to below. Re: ROYAL CARIBBEAN CRUISES LTD. Gentlemen and Ladies: This letter is furnished to you in connection with the Credit Agreement, dated as of December 16, 1999 (the "CREDIT AGREEMENT"), among Royal Caribbean Cruises Ltd., a Liberian corporation (the "Borrower") and Kreditanstalt Fur Wiederaufbau (the "LENDER"). Unless otherwise defined, terms used herein have the meanings provided in the Credit Agreement. We have acted as counsel to the Lender in connection with the preparation, execution and delivery of the Credit Agreement and the Note, and we have participated in the closing held in connection with the making of the Loan on the date hereof. In that regard, we have examined executed counterparts of the Credit Agreement, dated December 16, 1999 and the Note, dated _______, 2000 (collectively, the "SUBJECT DOCUMENTS"). We have also examined the legal opinions contained in the opinion letters listed on ATTACHMENT 1 hereto, each dated as of the date hereof, which were delivered to you on the date hereof. In our examination of the Subject Documents and the opinion letters listed on ATTACHMENT 1, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals or copies of originals, the conformity with the originals of all such documents submitted to us as copies and the due execution and delivery thereof by each party thereto pursuant to due authorization(corporate and otherwise) and with all requisite corporate powers. As to the questions of fact relevant to this opinion, we have, with your approval and without independent investigation, assumed the accuracy of the representations and warranties contained in the Loan Documents and contained in the certificates of officers and representatives of the Borrower and of public officials, copies of which are being delivered to you on the date hereof. To the extent that our opinions expressed below involve conclusions as to the matters set forth in the opinion letters listed on ATTACHMENT 1, we have, with your approval and without independent investigation, assumed the correctness of the matters and opinions set forth in such opinion letters, our opinions being subject to the assumptions, qualifications and limitations set forth in such opinion letters. Based upon the foregoing examination of documents and assumptions and upon such other investigations as we have deemed necessary, we are of the opinion that each of the Subject Documents executed and delivered by the Borrower constitutes a legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms. xii 65 Our opinion set forth above is subject to the following qualifications: (a) Our opinion is limited to the law of the State of New York, and we do not express any opinion herein concerning any other law. (b) Our opinion is limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and other similar laws affecting creditors' rights generally, and (ii) the effect of general principles of public policy and of equity (regardless of whether considered in a proceeding in equity and or at law). (c) Our opinion above is also subject to the effect of certain laws, equitable principles and judicial decisions that may limit the enforceability of certain provisions of the Loan Documents, although such limitations do not make the remedies provided for therein (taken as a whole) inadequate for the practical realization of the benefits afforded thereby. (d) We express no opinion as to the effect of the law of any jurisdiction (other than the State of New York) wherein the Lender may be located or where in enforcement of the Credit Agreement or the Note may be sought which limits the rates of interest legally chargeable or collectible. This opinion letter is being furnished to you solely for your use in connection with the transactions contemplated by the Credit Agreement. No other use or distribution of this opinion letter may be made without our prior written consent. This opinion letter is limited strictly to matters stated herein and is not to be read as extending by implication to any matter not specifically referred to herein. This opinion letter is based on states of law, documentation and fact as they exist on the date hereof, and we do not undertake to advise you of any changes that hereafter may be brought to our attention. Very truly yours, xiii 66 ATTACHMENT 1 1. Opinion of Watson, Farley & Williams of even date herewith. 2. Opinion of Michael J. Smith, Esq. of even date herewith. xiv 67 EXHIBIT F LENDER ASSIGNMENT AGREEMENT To: Royal Caribbean Cruises Ltd. ROYAL CARIBBEAN CRUISES LTD. Gentleman and Ladies: We refer to CLAUSE (b) of SECTION 10.11.1 of the Credit Agreement, dated as of December 16, 1999 (together with all amendments and other modifications, if any, from time to time therafter made thereto, the "CREDIT AGREEMENT"), among Royal Caribbean Cruises Ltd., a Liberian corporation (the "BORROWER") and Kreditanstalt fur Wiederaufbau (the "Lender"). Unless otherwise defined herein or the context otherwise requires, terms used herein have the meanings provided in the Credit Agreement. This agreement is delivered to you pursuant to CLAUSE (b) of SECTION 10.11.1 of the Credit Agreement and also constitutes notice to you, pursuant to CLAUSE (a) of SECTION 10.11.1 of the Credit Agreement, of the assignment and delegation to________________ (the "ASSIGNEE") of ___% of the Loan of______________(the "ASSIGNOR") outstanding under the Credit Agreement on the date hereof. After giving effect to the foregoing assignment and delegation, the Assignor's and the Assignee's Percentages for the purposes of the Credit Agreement are set forth opposite such Person's name on the signature pages hereof. [Add paragraph dealing with accrued interest and fees with respect to Loan assigned.] The Assignee hereby acknowledges and confirms that it has received a copy of the Credit Agreement and the exhibits related thereto, together with copies of the documents which were required to be delivered under the Credit Agreement as a condition to the making of the Loan thereunder. Except as otherwise provided in the Credit Agreement, effective as of the date of acceptance hereof by the Borrower: xv 68 (a) the Assignee (i) shall be deemed automatically to have become a party to the Credit Agreement, have all the rights and obligations of a "Lender" under the Credit Agreement and the other Loan Documents as if it were an original signatory thereto to the extent specified in the second paragraph hereof; (ii) agrees to be bound by the terms and conditions set forth in the Credit Agreement and the other Loan Document as if it were an original signatory thereto; and (b) the Assignor shall be released from its obligations under the Credit Agreement and the other Loan Document to the extent specified in the second paragraph hereof. The Assignee hereby advises each of you of the following administrative details with respect to the assigned Loan and requests the Borrower to acknowledge receipt of this document: (A) Address for Notices: Institution Name: Attention: Domestic Office: Telephone: Facsimile: Telex (Answerback): LIBOR Office: Telephone: Facsimile: Telex (Answerback): (B) Payment Instructions: The Assignee agrees to furnish the tax form required by the last paragraph of SECTION 4.6 (if so required) of the Credit Agreement no later than the date of acceptance hereof by the Borrower. xvi 69 This Agreement may be executed by the Assignor and Assignee in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Adjusted Percentage [ASSIGNOR] Loan: ___% By:__________________ Title Percentage [ASSIGNEE] Loan: ___% By:__________________ Title Accepted and Acknowledged this ___day of _______, 20__ ROYAL CARIBBEAN CRUISES LTD. BY:_________________________ Title: xvii 70 EXHIBIT G REPAYMENT SCHEDULE REPAYMENT DATES LOAN BALANCE REPAYMENT Nineth Anniversary $300,000,000 $150,000,000 of Closing Date Tenth Anniversary $150,000,000 $150,000,000 of Closing Date xviii EX-23 6 CONSENT OF PRICEWATERHOUSE COOPERS LLP 1 Exhibit 23 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statement on Form F-3 (No. 333-89015) and Registration Statements on Form S-8 (No. 333-7288, No. 333-7290, No. 33-64326, No. 33-95224 and No. 33-71956) of Royal Caribbean Cruises Ltd. of our report dated January 28, 2000 appearing on page F-2 of this Form 20-F. PricewaterhouseCoopers LLP Miami, Florida April 3, 2000 -----END PRIVACY-ENHANCED MESSAGE-----