Exhibit 10.9
Transaction No. 1192-L01-01
SUB-BAREBOAT CHARTER
of the Casino Cruise Ship
EMPRESS II
THIS SUB-BAREBOAT CHARTER (hereinafter "Charter") made and entered into by
and between Palm Beach Empress Inc., a Delaware corporation ("PBE"), with an
office and place of business at Xxx Xxxx 00xx Xxxxxx, Xxxxx 000, Xxxxxxx Xxxxx,
Xxxxxxx 00000 and Palm Beach Maritime Corporation, formerly named MJQ
Corporation, a Delaware corporation ("MJQ"), with an office and place of
business at Xxx Xxxx 00xx Xxxxxx, Xxxxx 000, Xxxxxxx Xxxxx, Xxxxxxx 00000,
jointly and severally as the owners pro hac vice and current bareboat Charterers
of the casino cruise ship EMPRESS II, United States Official Number 998517
(hereinafter the "Vessel")(PBE and MJQ are hereinafter individually and
collectively referred to as, the "Owner") and ITG Vegas, Inc., a Nevada
Corporation ("ITGV") and ITG Palm Beach, LLC, a Delaware limited liability
company, jointly and severally as Charterers of the Vessel ("ITGPB") (ITGV and
ITGPB are hereinafter individually and collectively referred to as, the
"Charterer"), each with an office and place of business of Xxx Xxxx 00xx Xxxxxx,
Xxxxx 000, Xxxxxxx Xxxxx, Xxxxxxx 00000.
W I T N E S S E T H:
NOW THEREFORE, upon the terms and conditions hereinafter set forth, Owner
agrees to charter and Charterer agrees to accept under charter the Vessel.
ARTICLE 1
DESCRIPTION OF VESSEL
The Vessel is a United States registered vessel (official number 998517),
more particularly described in Appendix A attached hereto.
ARTICLE 2
PERIOD OF CHARTER
A. The period of this Charter shall be for five (5) years (hereinafter the
"Original Period") from the date of delivery as hereinafter provided.
B. At the end of the Charter Period or in the event of termination of
Master Charter, defined below, if Charterer exercises its option pursuant to
Article 19 and pays the option exercise price thereof, Owner agrees to execute
and deliver an assignment of its rights to purchase, or otherwise obtain title
to, the Vessel under the Bareboat Charter and Option to Purchase ("Master
Charter") dated of even date herewith between Cruise Holdings II, LLC ("Cruise
Holdings") and Owner pursuant to the terms and conditions of Article 19 hereof.
ARTICLE 3
MONTHLY CHARTER HIRE
A. Subject to Article 3.D. below, the Charterer shall pay charter hire
("Charter Hire") monthly in advance on or before the first day of each calendar
month commencing on the date of delivery and continuing thereafter until
termination of the Charter as provided herein at the rate for each month or pro
rata for any part of a month equal to the sum of One Hundred Thousand Dollars
($100,000.00) plus one percent (1%) of the gross operating revenue of the Vessel
for such month; provided, however, that in the event Charterer notifies Owner,
in accordance with Article 2.B. hereinabove, that it elects to exercise its
renewal option for the Vessel, the monthly rate of hire during the Renewal Term
shall be at the then fair market rate of hire as mutually determined by Owner
and Charterer. Any Charter Hire paid in advance and not earned shall be promptly
refunded to the Charterer by Owner, including any unearned Charter Hire paid in
advance during the month in which the Vessel may be sold to the Charterer.
Payment of Charter Hire shall be made to PBE by electronic funds transfer or as
otherwise directed by PBE or, if no directions are given by Owner, for the
benefit of Owner at Xxx Xxxx 00xx Xxxxxx, Xxxxx 000, Xxxxxxx Xxxxx, Xxxxxxx
00000, and shall be deemed paid when it is received by the PBE or its designee.
The first monthly Charter Hire payment shall be made, pro rata, the August 1,
2004 and all subsequent payments shall be made monthly, in arrears, on or before
the first day of each calendar month thereafter
B. In addition to the monthly Charter Hire, Charterer shall make an annual
payment ("Cash Flow Sweep"), which amounts shall constitute consideration for
the grant of the Assignment Option (as defined in Article 19). The amount of the
annual Cash Flow Sweep payment shall be determined by multiplying
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the Cash Flow Sweep Percentage, defined below, by an amount equal to the
combined annual EBITDA of the Vessel and a second vessel, the PALM BEACH
PRINCESS (Panama No. 14348-84-E and IMO No. 8402937)(the "Second Vessel"),
operated by Charterer for the prior fiscal year less Capital Expenditures, as
defined herein, and less, to the extent not otherwise expensed or deducted, any
"Additional Payments" under and as defined in Articles 3.B and 19.B of this
Charter, but without regard to Cash Flow Sweep payments hereunder or under the
subcharter for the Second Vessel.. The initial fiscal year shall commence on
July 1, 2004. The Cash Flow Sweep calculation shall be based upon the annual
audited financial statements provided by Charterer or other operator of the
Vessel and the Second Vessel to Owner within ninety (90) days of fiscal
year-end. Owner shall submit a statement of the amount of Cash Flow Sweep
payment due to Owner within five (5) days of Owner's receipt of annual audited
financial statements from Charterer. "Capital Expenditures" means an amount
equal to four percent (4%) of the net operating revenue resulting from the
operations of the Vessel and the Second Vessel. The Cash Flow Sweep Percentage
will be determined based on the annual EBITDAR (earnings before interest, taxes,
depreciation, amortization and rents) generated by and from the Vessel and the
Second Vessel, operated by Charterer as follows (all amounts in millions of
dollars):
--------------------------- ----------------------------------------
EBITDAR Cash Flow Sweep Percentage of EBITDA
--------------------------- ----------------------------------------
More than $10.0 None
--------------------------- ----------------------------------------
Between $8.0 and $10 15% (fifteen percent)
--------------------------- ----------------------------------------
Less than $8.0 70% (seventy percent)
--------------------------- ----------------------------------------
The Cash Flow Sweep payment shall be due on the later of (i) the fifteenth
(15th) day after the end of the first quarter of the following fiscal year or
(ii) fifteen (15) days after the submission by Owner of the statement of the
amount of Cash Flow Sweep payment due to PBE. Each Cash Flow Sweep payment shall
be deemed to be a payment of the option consideration for the Assignment Option,
and if the Assignment Option is exercised, such option consideration shall be
credited toward the Assignment Option exercise price (an "Assignment Option
Prepayment"). The Cash Flow Sweep shall be paid by Charterer to or as directed
by Cruise Holdings for the account of PBE, and the Assignment Option Prepayments
shall be
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credited by Cruise Holdings toward payment of the exercise price of the Purchase
Option (as defined in Article 19). Notwithstanding the foregoing, all Cash Flow
Sweep payments are optional, provided, in the event Charterer fails to make any
Cash Flow Sweep payment within ten (10) days after the due date for payment
thereof, Owner may terminate the Assignment Option by written notice to
Charterer.
C. At the end of each quarter of the current fiscal year, Owner shall
provide Charterer with a year-to-date calculation of EBITDAR, annualized based
on seasonality factors provided by Owner and attached hereto as Exhibit A
("Annualized EBITDAR"). Based upon the product of Annualized EBITDAR and
10/12ths ("YTD Result"), Charterer agrees to deposit the following percentage of
Annualized EBITDAR ("YTD EBITDA" and such percentage, "Escrow Amount") into an
account (the "Cashflow Account") for the benefit of Cruise Holdings II, LLC and
Cruise Holdings I, LLC, a Nevada limited liability company ("Cruise I"), in
accordance with that certain Blocked Account Agreement ("Account Agreement") of
even date herewith among Charterer, Owner, Cruise Holdings and Cruise I (which
deposit shall satisfy the same deposit requirement contained in Charterer's
sub-bareboat charter of the Second Vessel):
------------------------------------------------- ------------------------------
YTD RESULT ESCROW AMOUNT
------------------------------------------------- ------------------------------
YTD Result is less than $10 Million, but greater 50% of YTD EBITDA
than $8 Million
------------------------------------------------- ------------------------------
YTD Result is less than $8 Million 100% of YTD EBITDA
------------------------------------------------- ------------------------------
YTD Result is greater than $10 Million NONE
------------------------------------------------- ------------------------------
The applicable Escrow Amount shall be paid to the Cashflow Account on or before
the fifteenth (15th) day after the end of the respective quarter of the then
current fiscal year. At the end of each subsequent quarter of the applicable
fiscal year, if the YTD Result is greater than $10,000,000.00, all funds in the
Cashflow Account, if any, shall be promptly remitted to Charterer; and if the
YTD Result is between $8,000,000.00 and $10,000,000.00, the amount previously
deposited in escrow in excess of 50% of YTD EBITDA will be promptly remitted to
Charterer. At the end of each fiscal year, any funds held in the Cashflow
Account pursuant to this paragraph 3.C. shall be applied to any Cash Flow Sweep
payment due under Article 3.B and excess amounts remaining in the Cash Flow
Account after such application, if any, shall be remitted to Charterer in
accordance with the terms of the Account Agreement. Owner and Charterer
acknowledge and agree that the Escrow Amount shall be determined with respect
to, and payment in full by Charterer of the Escrow Amounts hereunder shall
satisfy the Charterer's obligations under this Paragraph 3.C for, both the
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Vessel and the Second Vessel.
D. Except as permitted by the last sentence of this Paragraph D, Charterer
shall not make any direct or indirect payments to International Thoroughbred
Breeders, Inc., a Delaware corporation ("ITB"), or any of ITB's subsidiaries or
affiliates, including without limitation (i) any tax sharing payment ("Tax
Payment") by Charterer to ITB, pursuant to that certain Amended and Restated Tax
Agreement, dated as of July 1, 2004 by and among ITB, ITGV and ITGPB, among
others (such direct or indirect payments are hereinafter referred to as the
"Upstream Payments") and (ii) any Charter Hire hereunder in excess of Fifty
Thousand Dollars ($50,000.00) per month (all Charter Hire in excess of Fifty
Thousand Dollars ($50,000.00) per month being hereinafter called "Conditional
Charter Hire"), if and as long as the YTD Result is less than $8 Million, except
that ITGPB may at any time make distributions to ITGV as its sole member and
except as permitted in the following sentence. In the event the YTD Result is
greater than $8 Million at the end of any of the first three fiscal quarters or
EBITDAR is greater than $8 Million at the end of any fiscal year, and solely to
the extent that Charterer has made any and all payments due and payable pursuant
to this Charter and with respect to the Second Vessel (including without
limitation any Cash Flow Sweep payment or Escrow Amount), Charterer may make (i)
Tax Payments owing to ITB (including any Tax Payments previously deferred by
virtue of the application of the provisions of this Paragraph D) and (ii)
Upstream Payments to ITB, other than Tax Payments, and Conditional Charter Hire
(collectively "Corporate Payment"), which aggregate amount of Corporate Payament
shall not exceed $200,000.00 (collectively "Corporate Payment") per month;
provided that should Charterer be prohibited, by virtue of this Paragraph D,
from making such Corporate Payment for any month, once such payments are again
allowed hereunder, Charterer may pay to ITB and/or Owner a Corporate Payment for
such month; provided further that in no event shall the total amount of
Corporate Payments paid by Charterer to ITB and Owner in any twelve-month period
exceed $2,400,000. Owner and Charterer acknowledge and agree that the Corporate
Payment shall be determined in the aggregate with respect to Corporate Payments
made by ITGV and/or ITGPB with respect to both the Vessel and the Second Vessel.
Additionally, Charter Hire of Fifty Thousand Dollars ($50,000.00) per month for
each of the Vessel and the Second Vessel, any Cash Flow Sweep payment, any
Escrow Amount and any Additional Payment required under this Charter or the
sub-bareboat charter of the Second Vessel to be paid to Owner may be made by
Charterer.
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E. Charterer shall not make any deductions from the Charter Hire, except
with respect to the following:
(1)Time actually lost by reasons of action or failure to act of Owner
or Owner's creditors or claimants other than the Charterer or its affiliates,
except to the extent such delays were caused or contributed to by Charterer.
(2) Any disbursements for Owner's account, provided Owner agrees in
writing.
(3) Any previous overpayments of Charter Hire, excluding any
overpayments of Charter Hire concerning which a bonafide dispute may exist, but
in the latter event the Owner shall furnish an adequate bank guarantee or other
good and sufficient security on request of the Charterer.
(4) Any sums to which Charterer is entitled under Article 12 herein.
ARTICLE 4
ON-HIRE SURVEY
A. Charterer has made its own independent assessment of the Vessel and
accepts the Vessel As-Is And Where-Is and the parties agree not to require an
on-hire survey. Any damage or deficiencies in either the hull, equipment and/or
machinery affecting either the seaworthiness of the Vessel or its capability to
operate in its intended service or the maintenance of the Vessel's
classification society certificates or U. S. Coast Guard required documents,
certificates, or certifications required to operate in U.S. waters, if any,
discovered at any time prior to or during this Charter shall be the sole
responsibility of Charterer and any such damage or deficiency shall not in any
way alter, amend or excuse Charterer's obligations under this Charter.
B. Charterer's acceptance of the Vessel under this Charter shall constitute
an admission by the Charterer of full performance by the Owner of its
obligations with respect to the condition of the Vessel on Delivery per Article
5. Thereafter, the Charterer shall not be entitled to make or assert any claim
against the Owner on account of agreement, representation or warranty, either
express or implied, with respect to the condition, seaworthiness or fitness of
the Vessel. Failure of the Charterer to make an inspection of the Vessel and its
appurtenances shall be entirely at its own risk.
ARTICLE 5
DELIVERY OF THE VESSEL
A. The Vessel will be delivered by Owner hereunder to Charterer at a safe
and accessible berth or anchorage at Joliet, Illinois on or about the date
hereof ("Delivery").
B. Representatives of Owner and Charterer shall jointly execute a
Certificate of Delivery and
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Acceptance, in the form attached hereto and marked as Appendix B, acknowledging
the delivery and receipt of the Vessel.
C. Due to the planned modification of the Vessel, the Vessel shall be
accepted As Is and Where Is, not in class and without any required United States
Coast Guard Certificate of Inspection. Charterer has obtained, independent from
Owner, all classification and Coast Guard certificates for the Vessel and if any
of the Vessel's classification or Coast Guard certificates require renewal at
the time of Delivery, such renewals shall be paid for by Charterer and Charterer
accepts full responsibility for obtaining any classification or certificates
required for the Vessel. The Charterer shall keep the Vessel's documentation and
classification certificates in full force and effect during the term of this
Charter or any extensions thereof, providing copies of such certificates to
Owner when issued, and shall renew all such certificates at the time of any
Redelivery under Article 13 whether or not due for renewal, unless otherwise
agreed to by the parties. Further, subject to the prior written approval of
Owner, such approval not to be unreasonably withheld, Charterer may change the
Vessel's classification society.
D. Concurrently with the Delivery of the Vessel hereunder, the Owner shall
assign to the Charterer all of its rights, title and interest in and to any
warranties and guaranties which the Owner may have, provided that the same, if
still in effect, shall be reassigned to Owner upon Redelivery of the Vessel. If
any such warranty or guaranty is not fully assignable to the Charterer, the
Owner shall cooperate with Charterer to enforce its rights thereunder.
ARTICLE 6
USE AND OPERATION OF THE VESSEL
A. The Charterer shall have the full use of the Vessel and, subject to the
trading limits of Article 24 hereof, may employ the Vessel in any lawful trade
or trades in accordance with the laws and regulations of the Vessel's flag state
and any country where the Vessel may be operated, as the Charterer may from time
to time elect, and it agrees to comply with all Local, State, and Federal
Regulations pertaining to the operation of the Vessel in the United States.
B. During the Charter Period the Vessel shall be under the complete control
of the Charterer, who shall have exclusive possession, control, and command of
the Vessel, subject to the terms hereof, and assumes full responsibility
therefor, including port charges, agencies, fines, assessments and penalties
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incurred due to Charterer's use and operation of the Vessel. Nothing herein
contained shall be construed as constituting any implied restriction on
Charterer's right, during the Charter Period, consistent with this Charter, to
employ the Vessel for its own account or for the account of others, either on a
voyage or time charter basis, as the Charterer may from time to time determine,
provided, however, Charterer must first obtain written consent of Owner, which
shall not be unreasonably withheld or delayed, before entering into any voyage
or time charter other than in the ordinary course of business.
C. This Charter is a full and complete demise of the Vessel to the
Charterer. From the time of delivery to the termination of the Charter, at its
own expense, the Charterer shall either itself or through a maritime management
or agency contract, man, victual, navigate, including engaging other vessels and
pilots, operate, maintain in a good state of repair and in efficient operating
condition, insure and supply the Vessel. The Charterer shall be responsible for
all charges and expenses of every kind and nature whatsoever incidental to
Charterer's use and operation of the Vessel under the Charter including without
limitation fuel, lubricating oil, and water. Charterer shall return the Vessel
to Owner at the expiration of this Charter in the event Charterer does not elect
to take assignment of the Purchase Option pursuant to Article 19 hereof, in the
same good order and condition as when received, reasonable wear and tear
excepted, in accordance with Article 13 herein.
D. (1) Except for a lien for wages of a stevedores, wages for the crew of
the vessel, general average or salvage including contract salvage, and except
for maritime tort liens covered (subject to a reasonable deductible) by
insurance or protection and indemnity entry, Charterer will not create or suffer
to be continued any security interest, lien, encumbrance or charge on the Vessel
or any income therefrom. In due course, and in any event within thirty (30) days
after the same becomes due and payable, the Charterer will pay or cause to be
discharged or make adequate provision for the payment or discharge of all claims
or demands which, if not paid or discharged, might result in the creation of a
security interest, lien, encumbrance or charge against the Vessel or any income
therefrom, and will cause the Vessel to be released or discharged from each such
security interest, lien, encumbrance or charge therefor.
(2) If a complaint shall be filed against the Vessel or if the Vessel
shall be seized, arrested and/or taken into custody or sequestered by virtue of
any legal proceedings in any court, the Charterer shall within
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ten (10) days thereafter cause the Vessel to be released and discharged.
Charterer shall remain liable for the payment of Charter Hire throughout any of
the foregoing events.
E. Charterer agrees, at its expense, to drydock the Vessel for the purpose
of cleaning and painting the Vessel's bottom when necessary and making any
required repairs, inspections or surveys, but not less frequently than as
required by the Master Charter or applicable classification society rules, and
when drydocking is due, Charterer agrees to send the Vessel to a port where the
Vessel can so drydock, clean and paint. All expenses incidental to such
drydocking and all charges incurred in connection therewith shall be for the
Charterer's account, regardless of whether Owner's repairs, if any, are
concurrently made, provided that the Owner's repairs do not delay the operation
of the Vessel or increase the cost to Charterer.
F. Charterer will pay and discharge when and as due and payable, all taxes,
assessments, excises, levies, documentation and registration fees, duties, fines
and penalties and other governmental charges including without limitation,
sales, use, franchise, property, gross receipts and occupation taxes lawfully
imposed upon the Vessel or the ownership, use, operation, registration,
documentation or maintenance thereof during the term of the Charter or on any
Charter Hire or other amounts payable hereunder, other than taxes and other
charges imposed on or measured by the net income or capital of Owner.
G. Notwithstanding anything herein to the contrary, until such time as
Charterer has applied for and obtained an Alcoholic Beverage License from the
State of Florida, Owner shall continue to conduct certain operations and
concessions necessary for the sale of alcoholic beverages and shall be entitled
to reimbursement from Charterer of the actual, out-of-pocket costs incurred by
Owner in connection therewith.
ARTICLE 7
CONTINUED REGISTRATION OF VESSEL
The Vessel shall be kept documented under the laws and flag of the United
States during the period of this Charter. Charterer warrants it is a citizen of
the United States and entitled to own and operate vessels documented under the
laws of the United States with the privilege of engaging in the Coastwise trade.
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ARTICLE 8
EQUIPMENT, OUTFIT AND FURNISHINGS
The Charterer shall have the use, without extra cost, of all equipment
(which shall include equipment for cabin, crew, and galley, navigational aids,
and technical equipment, furnishings, furniture, and fittings) outfit,
appliances, tools, spare and replacement parts, non-consumable stores, crockery,
linen, etc., as may be on board or installed upon the Vessel (as confirmed by an
inventory conducted by the Owner and the Charterer) on delivery of the Vessel to
the Charterer, but shall exclude all gaming devices and related equipment and
materials. The same or their substantial equivalent, excluding gaming devices
and related equipment and materials and all other equipment leased by Charterer
from third parties, shall be returned to the Owner (as confirmed by an inventory
conducted by the Owner and Charterer) on Redelivery of the Vessel in the same
good order and condition as when received, normal wear and tear excepted. The
Charterer shall from time to time during the Charter period, replace such items
of equipment as shall be so damaged or worn as to be unfit for use. Should the
inventory at Redelivery show missing items of equipment, to the extent the
reasonable value of the missing items exceeds the Purchase Option Prepayments,
the Charterer shall replace the item or pay such excess to the Owner.
ARTICLE 9
[INTENTIONALLY OMITTED]
ARTICLE 10
ALTERATIONS
A. Charterer has proposed certain alterations to the Vessel as submitted to
Owner shortly after Charterer is to take delivery of the Vessel from Owner.
Owner hereby provides it consent to such alterations, but assumes no liability
or responsibility and makes no representation or warranty as to the feasibility
of the alterations, the ability to complete the alterations within budgeted
costs, the qualifications of the shipyard to perform the alterations, or the
ability of Charterer to obtain Coast Guard and classification society approvals
required for the certification of the altered Vessel for any purpose, including
Charterer's intended use and operation of the Vessel. Charterer's failure to
complete the alterations for any reason, including impossibility of performance,
the failure of the shipyard to complete the work, costs overruns, or the failure
to obtain certification for the altered Vessel, will not excuse
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Charterer from its obligation hereunder including its obligation to pay monthly
Charter Hire as set forth in Article 3 and this Charter will continue in full
force and effect regardless of any failure hereunder. Notwithstanding anything
to the contrary contained in this Charter, Charterer shall not have the right to
remove any gaming equipment other than in accordance with that certain Master
Lease (Palm Beach Princess and Empress II Gaming Equipment), of even date
herewith, between PDS Gaming Corporation, a Minnesota corporation ("PDS"), as
Lessor, and Owner, as Lessee, without the prior written approval of PDS.
B. From time to time after delivery of the Vessel into the Charterer's
service, the Charterer may make structural and other alterations to the Vessel,
its machinery, or electrical equipment, only with Owner's prior written
approval, which shall not be unreasonably withheld, provided the alterations to
the Vessel and its equipment are returned to their original state at or prior to
the termination of this Charter and Redelivery of the Vessel to Owner. Owner,
however, has the option to retain any alterations made by Charterer at a
mutually agreed price. In addition, leased equipment may be placed on board the
Vessel by the Charterer. At the time of Redelivery, the Owner has the right at
Owner's expense to continue the lease should the lease permit or may require the
Charterer to have it removed. As to equipment placed aboard the Vessel by the
Charterer, Charterer shall have the right to remove same upon Redelivery,
provided that if Owner desires to retain the equipment on board the Vessel, it
may purchase the equipment at a price to be agreed upon at the time of
Redelivery. Any additions or alterations permitted by this Article are subject
to American Bureau of Shipping and, if required, U. S. Coast Guard approval.
C. Charterer shall have the right to paint its own house colors thereon at
Charterer's expense and on its time, provided Charterer changes the colors and
markings back prior to Redelivery at its expense. Charterer shall have the right
to rename the Vessel, and shall pay for all associated costs therefor. Prior to
Redelivery, Charterer shall rename the Vessel at its expense in accordance with
Owner's instructions. However, Owner shall not have the right to the use of the
Charterer's trademark following Redelivery.
D. The Vessel shall be kept painted and metal surfaces preserved at all
times, and the Charterer shall maintain the Vessel in as good a condition as
when delivered to Charterer from the shipyard upon completion of the above
referenced modifications and re-fit in Article 10.A., normal wear and tear
excepted.
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ARTICLE 11
INSURANCE
A. (1) Charterer shall, at all times during the period of this Charter, at
its own cost and expense, carry and maintain on the Vessel insurance coverage
covering all marine and hull risks, including towers liability, war risk
insurance, protection and indemnity insurance, together with coverage for
pollution clean up costs and expenses including natural resource damage, third
party claims as well as any fines or civil penalties now or hereafter imposed
under all applicable Federal, State and Local laws, or the laws of any foreign
country or political subdivision thereof having jurisdiction over the Vessel,
and such crew insurance as is required, in order to completely protect the Owner
from any and all liability or loss or damage to any party whomsoever. Such
insurance shall, at a minimum, be in the standard forms available in the
American and British insurance markets and further be in such form and in such
amounts and with such underwriters as Owner shall approve. Charterer agrees to
pay all deductibles and franchises provided for in said insurance policies.
(2) The Vessel shall be covered by Hull and Machinery, Marine and War
Risk insurances in the amount of 6 Million Dollars ($6,000,000.00), during the
entire duration of this Charter and shall include an endorsement for acts of
terror.
(3) The Vessel shall be entered for Protection and Indemnity insurance
with a Protection and Indemnity Association or Club, or Charterer shall obtain
such liability insurance coverage, covering customary protection and indemnity
liabilities as outlined in this Article 11 in an amount not less than the value
of the Vessel or $6,000,000.00 and covering pollution liability in the amount of
Twenty-Five Million ($25,000,000.00) Dollars, with a deductible for each
accident of not more than Twenty-Five Thousand ($25,000.00) Dollars and shall
include an endorsement for acts of terror.
(4) Charterer will have Owner named as a co-insured or additional
insured in all policies of insurance including the waiver of subrogation of any
and all claims against the Owner.
B. Notwithstanding anything herein to the contrary, in the event that any
of the insurance, to be provided by the Charterer, by reason of an act, omission
or neglect of the Charterer, shall not be kept in full force and effect, or for
any reason does not cover in full all losses, damages, claims and/or
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demands, the Charterer shall indemnify, defend and hold harmless the Owner
against all such losses, claims and/or demands.
C. Losses under any insurance provided for in this Article shall be payable
as hereunder provided, and all policies shall contain clauses to the same
effect:
(1) The proceeds of insurance for all losses, except for total or
constructive total loss, shall be payable to the satisfaction and discharge of
the liability or to the repair of damage in respect of which the insurance loss
has been paid or in reimbursement for monies theretofore applied.
(2) In the event of an actual or constructive total loss of the
Vessel, the insurance proceeds shall be paid to the Owner and shall be applied
by the Owner to reduce any amounts due and payable by the Charterer hereunder.
D. The Charterer shall promptly furnish Owner with full information
regarding any casualty or other accident or damage to the Vessel involving an
amount in excess of Fifty Thousand Dollars ($50,000.00).
ARTICLE 12
INDEMNITIES
A. (1) Charterer shall assume the defense of, indemnify and hold harmless
the Owner against any lien or claim of whatsoever nature on the Vessel and
against any claims of third parties against the Owner or the Vessel of
whatsoever nature, including claims for personal injuries, death or property
damage and without limitation by this enumeration, penalties or fines, either
criminal or civil arising from violation of the laws of the United States or any
state thereof or of the laws of any country or subdivision thereof to which the
Vessel may be sent, whether such claims or liens are founded or unfounded
provided such lien or claim shall have arisen from the use, operation or custody
of the Vessel by Charterer or out of any act or neglect on Charterer's part or
on the part of its employees, agents, representatives, or contractors. The
indemnity shall include all reasonable costs payable or incurred in defending or
investigating such claims or liens.
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(2) Should a suit or any other legal proceeding be filed against the
vessel or should the vessel be levied against, arrested or taken into custody by
virtue of a legal proceeding arising out of the use, operation or custody of the
vessel by Charterer or out of any act or neglect on Charterer's part or on the
part of Charterer's employees, agents, representatives, or contractors,
Charterer shall immediately notify owner or owner shall immediately notify
Charterer as the case may be, and Charterer shall take immediate action to free
the vessel from the claim, demand or lien thereupon placed and obtain the
release of the vessel from custody or arrest.
(3) In the event that Charterer fails to fulfill its obligations under
this Article, Owner may undertake same at the expense of Charterer.
B. (1) Owner shall assume the defense of, indemnify and hold harmless the
Charterer against any lien or claim of whatsoever nature on the Vessel and
against any claims of third parties against the Charterer or the Vessel of
whatsoever nature including claims for personal injuries, death or property
damage and without limitation by this enumeration, penalties or fines arising
from violation of the laws of the United States or any state thereof whether
such claims or liens are founded or unfounded provided such lien or claim shall
have arisen from the use, operation or custody of the Vessel by Owner or out of
any act or neglect on Owner's part or on the part of its employees, agents,
representatives or contractors. The indemnity shall include all reasonable costs
payable or incurred in defending or investigating such claims or liens.
(2) Should a libel be filed against the vessel or should the vessel be
levied against, arrested or taken into custody all during the period of this
charter by virtue of legal proceeding arising out of the use, operation or
custody of the vessel by owner or out of any act or neglect
14
on owner's part or on the part of owner's employees, agents, representatives or
contractors, Charterer shall immediately notify owner and owner shall take
immediate action to free the vessel from the claim, demand or lien thereupon
placed and obtain the release of the vessel from custody or arrest.
(3) In the event Owner fails to fulfill its obligations under this
Article, Charterer may undertake same at the expense of owner.
ARTICLE 13
TERMINATION AND REDELIVERY AND OFF-HIRE SURVEY
A. In the event Charterer does not exercise its Assignment Option pursuant
to Article 19, upon termination of the Charter, the Charterer shall, at its
expense redeliver the Vessel ("Redelivery") (unless lost or declared a
constructive total loss) to the Owner at any port identified by Owner provided
such port is at or within one hundred (100) nautical miles of the Port of Palm
Beach, Florida, or such other port mutually agreed upon.
B. Charter Hire shall continue until completion of the off-hire survey and
of all repairs, removals and restorations required to place the Vessel in the
same good order and condition in which it was at the time of commencement,
reasonable wear and tear excepted, and all other work required of the Charterer
herein. For purposes of this Article, the same good order and condition upon
commencement is agreed as that set forth in the drydock survey of the Vessel to
be performed after completion of the initial alterations. All machinery,
appliances, and appurtenances are to be placed in good working order.
C. At the port of Redelivery, the Vessel shall be placed on drydock
selected by Charterer with the cost and expense thereof to be paid by the
Charterer and a joint off-hire survey shall be carried out by representatives of
the Owner and the Charterer to determine the condition of the Vessel. The cost
of drydocking for the purpose of conducting the off-hire survey and the cost of
the off-hire survey itself for which Owner is responsible under the Bareboat
Charter and Option to Purchase dated of even date herewith between Owner and
Cruise Holdings shall be split equally between the parties. The Charterer shall,
at its expense, and on its time, make all such repairs and do all such work as
is found to be necessary to comply
15
with this Article 13. All drydocking charges incurred after completion of the
off-hire survey during the period required to perform repairs and otherwise to
comply with Article 13 shall be for Charterer's account. During same period,
Owner shall have the right to carry out repairs for its own account, provided
that Owner's work does not increase Charterer's expense.
D. The Vessel and its appurtenances shall be painted and Coast Guard, if
any, and Classification Society inspections are to be conducted at the time of
the off-hire survey, it being the intention of the parties that all certificates
issued by said agencies are to be renewed, free of all outstanding
recommendations, whether or not due.
E. Acceptance of the Vessel by the Owner shall be conclusive evidence of
Charterer's compliance with any and all of the Charterer's obligations under
this Charter with respect to Vessel's class and condition at the time of
Redelivery.
F. Upon the termination of this Charter for any reason or, at any time,
upon the reasonable request of Owner, Charterer shall cooperate with Owner and
perform any reasonable acts necessary to fulfill Charterer's obligations under
that certain Collateral Assignment of Maritime Office Complex Lease and
Operating Agreement of even date herewith between Cruise Holdings II, LLC, a
Nevada limited liability company and Charterer.
ARTICLE 14
EVENTS OF DEFAULT
Should the Charterer fail to pay Charter Hire or any Cash Flow Sweep
payment or any other payment hereunder when due or otherwise breach in any
material respect any of its undertakings herein, the Charterer shall be deemed
to be in default. The Owner may, after notifying the Charterer in writing of the
default, and after giving the Charterer thirty (30) days from the receipt of
notice to remedy any default (other than a Charter Hire, Cash Flow Sweep or
other payment default which requires five (5) days written notice), withdraw the
Vessel from the service of the Charterer and immediately terminate this Charter.
Notwithstanding any provisions of this Charter to the contrary, this Charter
shall immediately terminate upon the termination of the Master Charter. Any
termination of this Charter, as provided in this Article 14, shall be without
prejudice to any claim the Owner may have against the Charterer pursuant to this
Charter, including cost of Redelivery to the Port of Palm Beach, Florida;
provided, however, that Charterer shall, in
16
such event, have the rights set forth in Article 19.
ARTICLE 15
REQUISITION OR SEIZURE OR FORFEITURE
A. Requisition of the use of the Vessel by any government or governmental
authority on a bareboat, time or voyage charter basis, or on any other basis not
involving requisition of title to or seizure or forfeiture of the Vessel, during
the Charter Period even though at the time of such requisition the Charterer
shall have been deprived of, or limited in, the use of the Vessel to any extent
and for any duration, for whatever cause, shall not terminate or extend this
Charter. The Charterer shall continue to make payment of Charter Hire without
interruption or abatement and shall remain liable for all other obligations
under this Charter and shall be entitled to the total amount of requisition
charter hire and any other amount payable with respect to such requisition. The
foregoing provisions shall be without prejudice to the rights of the Owner and
the Charterer against other parties in respect of any such charges or expenses.
The Owner undertakes, insofar as any such rights are vested in it, to take at
the Charterer's request and expense all reasonable steps to enforce such rights,
and any sums recovered from other parties in respect of such charges or expenses
shall be retained by or payable to the Charterer.
B. In the event that title to the Vessel shall be requisitioned, or if the
Vessel should be seized by, or forfeited to, any government or governmental
authority, during the Charter Period, and such requisition, seizure or
forfeiture shall not result from any act or omission of the Charterer (even
though at the time of such requisition or seizure or forfeiture the Charterer
shall have been deprived of, or limited in, the use of the Vessel to any extent
and for any duration, for whatever cause), the Charterer shall forthwith notify
the Owner of the facts and circumstances of such requisition, seizure or
forfeiture and this Charter shall terminate. Charter Hire payments shall
continue until receipt by Owner of an amount equal to the Casualty Value of the
Vessel as defined in the Master Charter. However, PBE shall be entitled to any
and all proceeds or amounts received from any governmental agency or authority
representing payment for charter hire and/or the value of the Vessel at the time
of requisition or seizure.
C. In the event of a termination of this Charter pursuant to this Article
15, the Charterer shall have the rights set forth in Article 19.
17
ARTICLE 16
INSPECTION BY OWNER
The Owner or its authorized representative may inspect the Vessel at any
time during the currency of this Charter upon reasonable notice to the Charterer
and provided such inspection does not delay the Vessel's employment.
ARTICLE 17
LIMITATIONS AND BENEFITS
Nothing contained herein shall be deemed to prohibit or deny to the Owner
or to the Charterer the benefit of any limitations of, and exemptions from,
liability accorded to the owners, bareboat Charterers, and operators of Vessels
by any statute or rule or law in force at the time such benefit, limitation or
exemption is invoked.
ARTICLE 18
ASSIGNMENT AND SUB CHARTER
Neither the Owner nor the Charterer may assign this Charter (except for
Owner's collateral assignment to Cruise Holdings), nor may the Charterer
sub-demise charter the Vessel without the express written consent of the Owner.
The parties to this Charter shall remain responsible for its performance in the
event of any assignment thereof.
ARTICLE 19
OPTION TO ACQUIRE PURCHASE OPTION
A. PBE hereby grants to Charterer the right, exercisable at Charterer's
option by written notice to PBE within five (5) days after termination of this
Charter for any reason, to purchase PBE's right to purchase or otherwise obtain
title to the Vessel, together with everything belonging to the Vessel, including
the hull, machinery and tackle, as well as all other associated and installed
equipment which may be on board, but excluding gaming devices and related
equipment and material, as set forth in Article 19 of the Bareboat Charter and
Option to Purchase dated of even date herewith between Owner and Cruise Holdings
(such right of PBE to purchase being herein called the "Purchase Option" and the
option herein granted to Charterer being herein called the "Assignment Option"),
at an option exercise price for such Assignment Option equal to the appraised
value of the Vessel (including the hull, machinery and tackle, as well as all
other associated and installed equipment on board, but excluding
18
gaming devices and related equipment and material). The appraised value of the
Vessel shall be determined upon the refitting and refurbishment of the Vessel.
B. Prior to the date hereof, Charterer had agreed to purchase the ship
mortgage obligation of MJQ which had been held by Xxxxxx X. Xxxxxx as Chapter 11
Trustee for the Bankruptcy Estate of Xxxxxx X. Xxxxxxx (the "Trustee"), for a
purchase price of Thirteen Million Seven Hundred Fifty Thousand Dollars
($13,750,000.00). As of the date immediately preceding the date hereof,
Charterer had paid Seven Million Two Hundred Nineteen Thousand Dollars
($7,219,000.00) (excluding interest) towards the purchase price of such ship
mortgage obligation. MJQ has agreed to apply proceeds from its sale of the
Second Vessel to pay all of the joint and several indebtedness of MJQ and
Charterer to the Trustee, which includes One Million Two Hundred Thirty-Four
Thousand Dollars ($1,234,000.00) in remaining debt attributable to the purchase
of Charterer's parent company stock. Charterer has elected to apply its
investment in the ship mortgage obligation (the "Net Ship Investment") as
consideration for Owner's grant of the Assignment Option and option to acquire
Owner's right to purchase the Second Vessel from an affiliate of Cruise
Holdings). As further consideration for PBE's grant of the Assignment Option,
Charterer shall make the Cash Flow Sweep payments contemplated by Article 3.B.
hereof and shall pay to PBE, monthly in advance of each calendar month
commencing on the date of delivery of the Vessel and continuing thereafter for a
period of twelve (12) months at the rate of Eighty-Two Thousand Six Hundred
Ninety-Five Dollars (US$82,695.00) per month and thereafter until termination of
the Charter as provided herein, the sum of One Hundred Seventy-One Thousand
Seven Hundred Two and 54/100ths Dollars (US$171,702.54) per month (applied pro
rata for any portion of a month) (the "Additional Payment"). In addition,
Charterer shall be permitted to set-off any debts owing by MJQ to Charterer
against the Assignment Option exercise price payable hereunder. Payment of the
monthly Additional Payments shall be made concurrently with the payment of
Charter Hire in accordance with Article 3.A. Notwithstanding the foregoing, all
payments of option consideration are optional and in the event Charterer fails
to make such payments within ten (10) days after the due date for payment
thereof, PBE may terminate the Assignment Option by written notice to Charterer.
C. If the Assignment Option is exercised, promptly upon termination or
expiration of this Charter, Owner shall execute and deliver to Charterer a
written instrument, reasonably satisfactory to Charterer,
19
assigning to Charterer all of Owner's right to the Purchase Option and to
purchase the assets contemplated thereby, against delivery by Charterer to PBE
of the Assignment Option exercise price, to which shall be credited all option
consideration paid or applied hereunder -- to wit, the Net Ship Investment
(except to the extent Net Ship Investment shall be credited toward payment of
the Assignment Option Exercise Price for the Second Vessel) plus the aggregate
amount of all Assignment Option Prepayments, plus the portion of the Additional
Payments made for the thirteenth (13th) month through the sixtieth (60th) month
of the term hereof which would be considered principal payments if such
Additional Payments were payments of principal and interest on a loan of Six
Million Dollars ($6,000,000.00) amortized over forty-eight (48) months at an
interest rate of sixteen and fifty-four one hundreths percent (16.54%). In
addition, Charterer shall be permitted to set-off any debts owing by PBE to
Charterer against the Assignment Option Exercise Price payable hereunder. By
reason thereof, Charterer shall have the right to purchase the Vessel pursuant
to Article 19 of the Bareboat Charter and Option to Purchase dated of even date
herewith between Owner and Cruise Holdings, which shall entail payment of any
unpaid balance of the exercise price thereof. Owner shall execute all
instruments and documents, and take such further actions, as Charterer
reasonably may request in order to effectuate the Charterer's rights hereunder
and, if the Assignment Option shall have been exercised, under the Purchase
Option. Owner shall not, without the prior written consent of Charterer, amend
or modify any term or condition of the Purchase Option as in effect on the date
hereof.
ARTICLE 20
GOVERNING LAW
The interpretation of this entire agreement shall be governed by the
Maritime Law of the United States of America and by the laws of the State of
Nevada.
If any provision of this Charter is unenforceable under applicable law,
such provision shall be void and the other provisions hereof shall continue in
full force and effect. The parties shall use their best efforts to resolve by
agreement any problem which may arise as a result of any changes in applicable
law or regulations affecting performance of this Charter.
The terms and provisions of this Charter constitute the entire agreement
between the parties hereto and this Charter shall not be amended or
supplemented, or any term or provision thereof waived except in writing signed
by the party or parties to be bound thereby and no promise, agreement, warranty,
or
20
representation not set forth herein or in such written amendment or supplement
shall be of any force or effect.
ARTICLE 21
JURISDICTION, WAIVER OF JURY TRIAL AND PUNITIVE DAMAGES
A. Each of the parties irrevocably and unconditionally (i) agrees that any
legal suit, action or proceeding brought by a party hereto arising out of or
based upon this Charter, except for an in rem action against the Vessel, may be
brought in the United States District Court for the District of Nevada
("District of Nevada"), (ii) waives, to the fullest extent it may effectively do
so, any objection with it may now or hereafter have to the laying of venue of
any such proceeding brought in the District of Nevada, and any claim that any
such action or proceeding brought in the District of Nevada has been brought in
an inconvenient forum, (iii) submits to the in personam jurisdiction of the
District of Nevada in any suit, action or proceeding, and (iv) agrees that the
losing party shall pay to the prevailing party the attorneys' fees and expenses
incurred by the prevailing party in such action. If for any reason the District
of Nevada lacks jurisdiction over a matter arising out of or based upon this
Charter, excluding any in rem action against the Vessel, the District Court for
the State of Nevada in Las Vegas, Nevada ("Nevada State Court") shall then have
non-exclusive jurisdiction and all other provisions of this Article 20 shall
remain valid and enforceable in such court.
B. Each of the parties agrees and acknowledges that any controversy that
may arise under this Charter, whether filed in the District of Nevada, the
Nevada State Court or otherwise, is likely to involve complicated and difficult
issues, and therefore each such party hereby irrevocably and unconditionally
waives any right such party may have to a trial by jury in respect of any
litigation directly or indirectly arising out of or relating to this Charter, or
the breach, termination or validity of this Charter.
C. Each of the parties hereby irrevocably and unconditionally waives any
right it may have to claim and receive an award for punitive damages for any
claim arising out of or relating to this Charter, or the breach, termination or
validity of this Charter.
ARTICLE 22
LOSS AFTER DELIVERY
21
A. If the Vessel becomes an actual total loss during any term of this
Charter and prior to any sale to Charterer, this Charter shall terminate as of
the date of the actual loss. If the Vessel becomes a constructive or compromised
total loss under the insurances, this Charter shall terminate, but payment of
Charter Hire shall continue until the underwriters or Charterer in the case of
self-insurance remit to Owner the proceeds of said insurance, and Owner remits
such proceeds to Cruise Holdings pursuant to the terms of the Master Charter.
B. No tender or abandonment of the Vessel to the underwriters as a
constructive total loss shall be made without the prior approval of the Owner,
which approval will not be unreasonably withheld.
ARTICLE 23
LOG BOOKS
Charterer's crew shall maintain full and complete logs and at Owner's
request, Charterer shall furnish to Owner true copies of said logs.
ARTICLE 24
TRADING LIMITS
During any term of this Charter, the parties agree that the Vessel shall
have a trading limit of inland, tributary, coastal and nearby adjacent waters of
the United States East Coast; Bahamas; Gulf of Mexico; and Caribbean.
ARTICLE 25
BUSINESS POLICY PROVISIONS
Charterer agrees to comply with all laws and lawful regulations, including
any gaming laws, regulations, licenses or permits, applicable to any activities
carried out in the name of or representative of Charterer under this Charter.
Charterer agrees that all financial settlements and reports rendered to Owner
under this Charter will, to the best of its knowledge and belief, reflect
properly the facts about all activities and transactions handled for the account
of Charterer which data may be relied upon as being complete and accurate in any
further recording and reporting made by Owner for whatever purpose. Charterer
agrees to notify Owner promptly upon discovery of any instances where the
Charterer fails to comply with provisions above.
22
ARTICLE 26
ANTI-DISCRIMINATION PROVISIONS
During the performance of this Charter, and any and all supplements and
amendments hereunder to the extent applicable, Charterer agrees to comply with
requirements of the Federal Government as more particularly specified that both
parties understand Charterer is an Equal Opportunity Employer and will not
engage in any conduct or practice which violates any applicable law, order or
regulation prohibiting discrimination against any person by reason of race,
color, religion, national origin, sex or age or on account of being handicapped,
a disabled veteran or a veteran of the Vietnam era.
ARTICLE 27
NOTICES
Any written notice required or authorized to be given hereunder by either
party to the other may be given by postage prepaid letter or by telegram, cable,
telex, facsimile or other similar means,
TO THE OWNER:
Xxx Xxxx 00xx Xxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxx 00000
Cable:
Telefax Number:
Telephone Number:
TO THE Charterer:
Xxx Xxxx 00xx Xxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxx 00000
Cable:
Telefax Number:
Telephone Number:
or to such other address or addresses as may from time to time be specified by
either party to the other in writing.
[SIGNATURES ON FOLLOWING PAGE]
23
IN WITNESS WHEREOF, the parties hereto have executed this Charter as of
July 6, 2004.
ITG VEGAS, INC. PALM BEACH EMPRESS INC.
By:/S/Xxxxxxx X. Xxxxxx By:/S/Xxxxxxx X. Xxxxxx
Name: Xxxxxxx X. Xxxxxx Name: Xxxxxxx X. Xxxxxx
Its: President Its: President
Witness: Witness:
ITG PALM BEACH, LLC PALM BEACH MARITIME CORPORATION,
formerly named MJQ CORPORATION
By:ITG Vegas Inc, Sole Member By:/S/Xxxxxxx X. Xxxxxx
By:/s/Xxxxxxx X. Xxxxxx Name: Xxxxxxx X. Xxxxxx
Its: President Its: President
24
Appendix A
EMPRESS II
The EMPRESS II is the Ship and General Improvement at an on the maritime vessel
named the EMPRESS II Casino Cruise Ship (United States Official Number 998517.
General Improvements shall mean all equipment and FF&E as defined in Section
1250 of the United States Internal Revenue Service Publication 946, where the
equipment and FF&E is considered a structural component or critical operating
component of the vessel.
00
Xxxxxxxx X
CERTIFICATE OF DELIVERY AND ACCEPTANCE
Palm Beach Empress, Inc. and Palm Beach Maritime Corporation, formerly
named MJQ Corporation, Owner, acting through its authorized agent, does hereby
deliver to ITG Vegas, Inc. and ITG Palm Beach, LLC the Vessel EMPRESS II, Coast
Guard Official Number 998517 (hereinafter the "Vessel"), pursuant to the terms
of the Sub-Bareboat Charter the Casino Cruise Ship EMPRESS II previously
executed by the parties.
ITG Vegas, Inc. and ITG Palm Beach, LLC, collectively as Charterer, acting
through its authorized agent, hereby accept physical delivery of the Vessel in
accordance with the terms of the aforesaid mentioned agreement at the time, date
and place set forth herein.
Delivered and Accepted at_________________________ hours Eastern Daylight
Savings Time this 6th Day of July, 2004 at Palm Beach, Florida.
Accepted: Delivered:
ITG VEGAS, INC. PALM BEACH EMPRESS INC.
By:/S/Xxxxxxx X. Xxxxxx By:/S/Xxxxxxx X. Xxxxxx
Name: Xxxxxxx X. Xxxxxx Name: Xxxxxxx X. Xxxxxx
Its: President Its: President
Witness: Witness:
Delivered:
ITG PALM BEACH, LLC PALM BEACH MARITIME CORPORATION,
formerly named MJQ CORPORATION
By:ITG Vegas Inc, Sole Member By:/S/Xxxxxxx X. Xxxxxx
By:/s/Xxxxxxx X. Xxxxxx Name: Xxxxxxx X. Xxxxxx
Its: President Its: President
Witness:
26
Appendix C
CHARTERER'S PROPOSED ALTERATIONS
27
