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Ambassadors International 10-K 2010 UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K/A
(Amendment No. 1)
For the fiscal year ended December 31, 2009
OR
For the transition period from to
Commission file number: 0-26420
AMBASSADORS INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in Its Charter)
Registrant’s Telephone Number, Including Area Code: (206) 292-9606
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act. Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Exchange Act. Yes o No þ
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 þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate website, every Interactive Data File required to be submitted and posted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large
accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
As of June 30, 2009 the aggregate market value of the registrant’s common stock held by
non-affiliates of the registrant was $3 million based on the closing sale price as reported on the
Nasdaq Global Market.
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as
of the latest practicable date.
Explanatory Note
This Amendment No. 1 to the Annual Report on Form 10-K of Ambassadors International, Inc., a
Delaware corporation, for the period ended December 31, 2009, which was filed with the Securities
and Exchange Commission on March 31, 2010, is being filed solely for the limited purpose of
amending Items 10, 11, 12, 13 and 14 to reflect the inclusion of the information required by the
Form 10-K. The Form 10-K contemplated the incorporation of such information from a proxy statement
to be filed by us within 120 days following the end of our fiscal year on December 31, 2009. We
are including the information required by Items 10, 11, 12, 13 and 14 of the Form 10-K through this
amendment as contemplated by instruction G(3) to the Form 10-K.
Except as contained herein, this amendment does not modify or update the disclosures contained
in the Form 10-K. This amendment should be read in conjunction with any other filings made by us
with the Securities and Exchange Commission subsequent to the date of
the
Form 10-K. ii
TABLE OF CONTENTS
iii
PART III
Item 10. Directors, Executive Officers and Corporate Governance
We have
a classified board of directors consisting of five directors, divided as equally as possible
into three classes. At each annual meeting of stockholders, directors are elected for a
term of three years to succeed those directors whose terms expire on that annual meeting
date. At the Company’s 2010 annual meeting of the stockholders, one Class I director
is to be elected for a three-year term. Stephen P. McCall is our only Class I director;
Eugene I. Davis and Daniel J. Englander are Class II directors whose terms expire in 2012
and Timothy J. Bernlohr and Arthur A. Rodney are Class III directors whose terms expire in 2011.
Director and Executive Officer Biographical Information
Timothy J. Bernlohr, 51, has served as a director of the Company since February 2010. Mr.
Bernlohr is the founder and managing member of TJB Management Consulting, LLC, which specializes in
providing project specific consulting services to businesses in transformation, including
restructurings, interim executive management and strategic planning services. He founded the
consultancy in 2005. Mr. Bernlohr is the former President and Chief Executive Officer of RBX
Industries, Inc., which was a nationally recognized leader in the design, manufacture and marketing
of rubber and plastic materials to the automotive, construction and industrial markets. Prior to
joining RBX in 1997, Mr. Bernlohr spent 16 years in the International and Industry Products
division of Armstrong World Industries, where he served in a variety of management positions. Mr.
Bernlohr is also chairman of the board of directors of The Manischewitz Company and a director of
Atlas Air Worldwide Holdings, Inc, Nybron Flooring International, Trident Resources Corporation,
Bally Total Fitness Corporation, Hayes Lemmerz Inc., Hilite International and Aventine Renewable
Energy. Within the past five years Mr. Bernlohr has served as a director of WCI Steel, Inc. General
Chemical Industrial Products, Inc., General Insulation Company, Zemex Minerals, PetroRig Pte Ltd.,
Cadence Innovation, LLC, and BHM Technologies, Inc. Mr. Bernlohr is a graduate of The Pennsylvania
State University. Mr. Bernlohr possesses particular knowledge and experience in operations,
finance, accounting, strategic planning and corporate governance.
Eugene I. Davis, 55, has served as chairman of our board of directors since November 2009. Mr.
Davis is Chairman and Chief Executive Officer of PIRINATE Consulting Group, LLC, a privately held
consulting firm specializing in turnaround management, merger and acquisition consulting and
hostile and friendly takeovers, proxy contests and strategic planning advisory services for
domestic and international public and private business entities. Since forming PIRINATE in 1997,
Mr. Davis has advised, managed, sold, liquidated and served as a Chief Executive Officer, Chief
Restructuring Officer, Director, Committee Chairman and Chairman of the Board of a number of
businesses operating in diverse sectors such as telecommunications, automotive, manufacturing,
high-technology, medical technologies, metals, energy, financial services, consumer products and
services, import-export, mining and transportation and logistics. Previously, Mr. Davis served as
President, Vice Chairman and Director of Emerson Radio Corporation and Chief Executive Officer and
Vice Chairman of Sport Supply Group, Inc. He began his career as an attorney and international
negotiator with Exxon Corporation and Standard Oil Company (Indiana) and as a partner in two
Texas-based law firms, where he specialized in corporate/securities law, international transactions
and restructuring advisory. Mr. Davis holds a bachelor’s degree from Columbia College, a master of
international affairs degree (MIA) in international law and organization from the School of
International Affairs of Columbia University, and a Juris Doctorate from Columbia University School
of Law. Mr. Davis is also a member of the Board of Directors of American Commercial Lines, Inc.
(until May 17, 2010, when he is scheduled to retire from this board), Knology, Inc., DEX One Corp.,
Atlas Air Worldwide Holdings, Inc., Rural/Metro Corp, Spectrum Brands, Inc. and TerreStar
Corporation. Within the last five years, Mr. Davis has served as a Director of Delta Airlines,
Inc., Haights Cross Communications, Inc., SeraCare Life Sciences Inc., Solutia, Inc., Atari, Inc.,
Exide Technologies, IPCS, Inc., Knology Broadband, Inc., Oglebay Norton Company, Tipperary
Corporation, McLeod Communications, Footstar, Inc., PRG Schultz International, Inc., Silicon
Graphics, Inc., Foamex, Inc., Ion Broadcasting, Viskase Companies, Inc. and Media General, Inc. As
a result of these and other professional
experiences, coupled with his strong leadership qualities, Mr. Davis possesses particular knowledge
and experience in the areas of strategic planning, mergers and acquisitions, finance, accounting,
capital structure and board practices of other corporations.
Daniel J. Englander, 40, has served as a director of the Company since November 2008. Mr.
Englander is the founder and currently the Managing Partner of Ursula Investors, an investment
partnership founded in 2004. Prior to Ursula Investors, Mr. Englander served as a Managing
Director of Allen & Company where he was employed for a period of 12 years. Mr. Englander has over
15 years of Wall Street experience and is a graduate of Yale University. Mr. Englander is
currently on the Board of Directors of America’s Car-Mart, Inc. and Copart, Inc. Mr. Englander’s
background in investment management and finance qualify him as an audit committee financial expert
and enable him to be a valuable resource to us with respect to financial and business issues.
Stephen P. McCall, 40, has served as a director of the Company since November 2009. He has 15
years of private equity investing experience focused on growth capital and buyout investments. He
founded and is currently a Managing Member of Blackpoint Equity Partners LLC, a private equity
investment firm. Prior to founding Blackpoint, he was a General Partner at Seaport Capital, a
private equity investment firm, where he was employed from 1997 through 2007. Previously, Mr.
McCall worked at Patricof & Co. Ventures, a private equity investment firm, and Montgomery
Securities in the Corporate Finance Department. He graduated from Stanford University with an A.B.
in economics. Mr. McCall has been a director of Otelco Inc. (including its predecessor Rural LEC
Acquisition LLC) since January 1999 and served as Chairman of the Board of Rural LEC Acquisition
LLC until the closing of its initial public offering on December 21, 2004. Mr. McCall is also a
director of several private companies. Mr. McCall possesses particular knowledge and experience in
private equity investing, portfolio management, analyzing potential acquisitions, raising equity,
debt financing and setting company strategy.
Arthur A. Rodney, 67, has served as a director of the Company since April 2008 and has served
as our Interim Chief Executive Officer since April 14, 2009. Mr. Rodney has been in the cruise
industry for over 30 years. He served as Chief Financial Officer and President of Princess Cruises
from 1970 to 1986. Mr. Rodney then created Crystal Cruises, a luxury cruise line, for a large
Japanese shipping company and served as its President from 1987 until 1994. In 1994, at its
request to develop and oversee the operations of two large cruise ships, Mr. Rodney joined The Walt
Disney Company. He served as President of Disney Cruise Line until the end of 1999. From 2000, Mr.
Rodney has been an independent consultant. Mr. Rodney holds licenses in New York and California as
a Certified Public Accountant. Mr Rodney possesses particular knowledge and experience in the areas
of finance, accounting and the travel industry in which the company operates.
Mark T. Detillion, 48, has served as our chief financial officer since April 1, 2009. For the
previous eight years Mr. Detillion served as the vice president of finance and chief financial
officer for Cruise West in Seattle, WA. Prior to Cruise West Mr. Detillion spent several years as
the chief financial officer for Shilo Inns in Portland, OR. He also served as the director of
finance for Holland America Lines.
Tammy C. Smolkowski, 52, has served as our chief accounting officer since March 2010 and as
our corporate controller since April 2009. Prior to joining the Company, Ms. Smolkowski was a
director of finance at AT&T Wireless and has held various vice president and controller positions
in both public and private companies. Ms. Smolkowski holds license in Washington as Certified
Public Accountant and received her Bachelor of Science from Texas A&M University.
Messrs. Davis and McCall were initially appointed to the board of directors pursuant to the
Exchange Offer Commitment and Support Agreements between the Company and Whippoorwill Associates,
Inc. and Polygon Investments Inc., respectively, in connection with the Company’s exchange offering
consummated in November 2009, pursuant to which the Company issued shares of common stock and its
10% Senior Secured Notes due 2012 in exchange for a portion of its outstanding 3.75% Convertible Senior Notes
due 2027. Under such agreements, the Company agreed to elect as a director one (1) individual
designated by the counterparty to each agreement promptly after consummation of the exchange offer.
Mr. Davis was designated by Whippoorwill Associates, Inc. and Mr. McCall was designated by Polygon
Investments Inc. Mr. Bianco, who was similarly designated by Highbridge Capital Management, LLC, resigned on
February 15, 2010 and the board of directors subsequently replaced him with Mr. Bernlohr. There
are no other arrangements or understandings known to us between any of our other directors or nominees
for director and any other person pursuant to which any such person was or is to be elected a
director.
Other Key Officer Biographical Information
Diane Moore, 59 has served as the President of Windstar Cruises since April 2008. Ms. Moore
joined Windstar Cruises in 2005 as Vice President of Sales & Marketing and served as Executive Vice
President from 2007 to April 2008. Prior to Windstar Cruises, Ms. Moore served as Executive Vice
President of supplier relations at Virtuoso, a network of luxury travel agencies, in Seattle, WA.
Before this, she served as Senior Vice President of guest services at Crystal Cruises, Vice
President of guest programs at Holland America Line and Senior Vice President of guest services at
Royal Cruise Line in San Francisco. Ms. Moore has more than 35 years experience in the cruise
industry.
2
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires executive officers and directors and persons who
beneficially own more than 10% of a class of securities registered under Section 12(g) the Exchange
Act to file initial reports of ownership and reports of changes in ownership with the SEC. Such
officers, directors, and stockholders are required by SEC regulations to furnish us with copies of
all such reports that they file. Based solely upon our review of such forms furnished to us during
the fiscal year ended December 31, 2009, and written representations from certain reporting
persons, we believe that during 2009, all filing requirements applicable to our executive officers,
directors and more than 10% stockholders have been complied with.
Code of Ethics
Our board of directors maintains a code of ethics and conduct that applies to all of our
employees, executive officers and directors. Our code of business conduct and ethics can be found
on our website at www.ambassadors.com by clicking on “Investor Information” and “Corporate
Governance”. You may also obtain a copy of the code of ethics and conduct and other information
regarding our corporate governance practices by writing to our Corporate Secretary, at Ambassadors
International, Inc., 2101 Fourth Avenue, Suite 201, Seattle, Washington 98121. We intend to timely
disclose any amendments to or waivers of certain provisions of our code of ethics and conduct
applicable to our Chief Executive Officer, Principal Financial Officer, Principal Accounting
Officer, Controller and other senior financial officers on our website at www.ambassadors.com.
Security Holder Nominations
There have been no material changes to the procedures by which security holders may recommend
nominees to the Company’s board of directors that were disclosed in the Company’s most recent proxy
statement on Schedule 14A.
Audit Committee
Stephen P. McCall (chairman), Timothy J. Bernlohr, Eugene I. Davis and Daniel J. Englander are
the current members of our Audit Committee. Our board of directors has determined that Messrs.
Davis and Englander qualify as “audit committee financial experts” under the rules of the SEC, and
that Messrs. Davis and Englander meet the financial sophistication requirement rules of the NASDAQ
Global Market, and are independent under the requirements of the rules of the SEC. The Audit
Committee selects our independent registered public accountants, reviews with the independent
registered public accountants the plans and results of the audit engagement, approves professional
services provided by and fees paid to the independent registered public accountants, reviews the
independence of the independent registered public accountants, considers the range of audit and any
non-audit fees and reviews the adequacy of our internal accounting controls and financial
management practices. The Audit Committee has reviewed and reassessed the adequacy of the Audit
Committee charter on an annual basis. The Audit Committee met nine times during 2009.
3
Item 11. Executive Compensation
Summary Compensation Table
The following table sets forth the compensation for our principal executive officer, Arthur A.
Rodney, our principal financial officer, Mark Detillion, and our chief accounting officer, Tammy
Smolkowski (our “named executive officers”), and our former Chairman, President and Chief Executive
Officer, Joseph J. Uberroth:
On March 20, 2009, Joseph J. Ueberroth resigned as our president and chief executive
officer, effective as of April 1, 2009, and from the board of directors, effective March 20, 2009.
On March 24, 2009, Arthur Rodney was appointed our interim chief executive officer. In 2009, Mr.
Rodney received $8,000 per month to serve in this position. On February 5, 2010, our board of
directors increased this amount to $14,000 per month, effective as of November 17, 2009, the day
the current board of directors took office.
Employment Agreements and Severance Agreements
On November 2, 2006, we entered into an employment agreement with Joseph J. Ueberroth, who was
then our chairman, president and chief executive officer, which provides Mr. Ueberroth with certain
severance and other benefits upon a termination of his employment by us without cause (as defined
below) or by Mr. Ueberroth with or without good reason (as defined below) or upon a change of
control of us (as defined below), his death or permanent disability.
The employment agreement provided that, in the event of termination of Mr. Ueberroth’s
employment by us without cause or by Mr. Ueberroth with good reason, we were to pay Mr. Ueberroth
the sum of (i) an amount equal to the projected cost of Mr. Ueberroth’s medical insurance under
COBRA for the eighteen month period immediately following the termination, and (ii) an amount equal
to two times the average annual base salary plus the average annual bonus paid to Mr. Ueberroth for
the two full fiscal years immediately preceding termination (the value of annual bonuses includes,
in addition to cash amounts, the values ascribed to option and share grants for financial
accounting purposes on the dates of grants). In addition to these severance amounts, all unvested
stock options and stock grants held by Mr. Ueberroth were to immediately vest as of the date of
termination. Subject to the terms and conditions of the employment agreement, in the event of
termination of Mr. Ueberroth’s employment by Mr. Ueberroth without good reason and upon at least
twelve months notice, the employment agreement required
us to pay Mr. Ueberroth the sum of (i) an amount equal to the projected cost of Mr.
Ueberroth’s medical insurance under COBRA for the eighteen month period immediately following the
termination, and (ii) an amount equal to one times the average annual base salary plus the average
annual bonus paid to Mr. Ueberroth for the two full fiscal years immediately preceding termination.
In the event of a termination of Mr. Ueberroth’s employment by us due to death or disability, all
of Mr. Ueberroth’s unvested stock options and stock grants were to fully vest on such date. In
addition, in the event of a change of control, all of Mr. Ueberroth’s unvested stock options and
stock grants were to fully vest.
4
On December 15, 2008, Mr. Ueberroth notified us that he elected to forego approximately $3
million in cash compensation due in September 2009, pursuant to section 4 of his employment
agreement, and his 2008 long term compensation in common shares of the company valued at $750,000
that was due pursuant to Section 3 of his employment agreement.
On February 27, 2009, we entered into an employment agreement with Mr. Detillion that provides
for severance equal to four months base salary upon termination for any reason other than an
illegal act. As the employment agreement does not provide a term of employment, Mr. Detillion is
an at-will employee. Mr. Rodney and Ms. Smolkowski are not parties to employment agreements with
the Company.
On March 20, 2009, Mr. Ueberroth resigned as our president, chief executive officer and
director, foregoing any severance due him under the terms of his employment agreement with the
Company.
On May 1, 2009, the Company and its wholly-owned subsidiary, Ambassadors Marine Group, LLC
(“AMG”), entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) with
Bellwether Financial Group, Inc., a Delaware corporation (the “Buyer”), which is an affiliate of
Mr. Ueberroth, our former president, chief executive officer and director. Pursuant to the terms
of the Purchase Agreement, the Buyer acquired all of the issued and outstanding membership
interests of AMG from the Company for a purchase price equal to $5,000,000.
Equity-Based Compensation Plans
The Company adopted its 1995 Equity Participation Plan (the “1995 Plan”) during 1995 and
amended and restated the 1995 Plan in 1998, 1999 and 2002. In 2005, the Company adopted its 2005
Incentive Award Plan (the “2005 Plan”) and amended and restated the 2005 Plan in 2007. Both the
1995 Plan and the 2005 Plan provide for the grant of stock options, awards of restricted stock,
performance or other awards or stock appreciation rights to directors, employees and consultants of
the Company. The maximum number of shares which may be awarded under the 1995 Plan is 2,200,000
shares. The maximum number of shares which may be awarded under the 2005 Plan is 1,200,000 shares.
Under the terms of both the 1995 Plan and the 2005 Plan, options to purchase shares of the
Company’s common stock are granted at a price set by the Compensation Committee of the board of
directors, not to be less than the par value of a share of common stock and if granted as
performance-based compensation or as incentive stock options, or
under the 2005 Plan, no less than the fair market value of
the stock on the date of grant. The Compensation Committee establishes the vesting period of the
awards. Vested options may be exercised for a period up to ten years from the grant date, as long
as option holders remain employed by the Company.
None of the named executive officers have received equity based compensation awards under
either the 1995 Plan or the 2005 Plan.
Director Compensation
Our compensation program for non-employee directors is designed to align the directors’
interests with the long-term interests of our stockholders and to fairly compensate our directors
for the work that is required. Each of our non-employee directors receives an annual retainer,
which amount is determined each year by our board of directors. We do not pay additional cash
compensation to our directors for their services on committees of the board or for attendance at
meetings of the board of directors or any committees upon with they sit. However, we reimburse all
directors for out-of-pocket expenses incurred in connection with their attendance at board and
committee meetings. We also periodically award restricted stock or options to purchase our common
stock to our directors.
5
Our interim president and chief executive officer, Arthur A. Rodney, is not compensated
separately for his service on our board of directors.
Director Compensation Table-2009
The table below summarizes the compensation received by our non-employee directors, who served
on our board of directors during the year ended December 31, 2009:
We currently pay Mr. Davis, our chairman of the board of directors, an annual retainer of
$100,000 and each of our other independent directors an annual retainer of $50,000, payable in
quarterly installments in advance. Prior to the appointment and resignation of certain directors
on November 17, 2009, we paid Mr. Johnson and Mr. Symington quarterly payments of $5,000. In
addition, on November 17, 2009, Mr. Hoak and Mr. Englander each received a one-time lump sum cash
payment of $15,000 in recognition of their prior services as directors of the Company.
Upon
appointment of the new members of our board of directors on November 17, 2009, we made a one-time grant of
restricted stock under our 2005 Plan to each of our four independent directors.
Mr. Davis was awarded 321,211 restricted shares and each of Messrs. Bianco, Englander and McCall
was awarded 53,535 restricted shares. The restricted shares will vest in three equal installments
on the first, second and third anniversaries of the grant date, November 17, 2009, subject to the
continued service as a director and terms of the 2005 Incentive Award Plan and the grant award
agreement. The grants of restricted stock are subject to adjustment for the dilutive effect of any
common stock issuance in connection with any exchange of the Company’s 3.75% Convertible Senior
Notes due 2027 for shares of the Company’s common stock and the Company’s 10% Senior Secured Notes
due 2012. On February 15, 2010, Mr. Bianco resigned from the board of directors and was replaced
by Mr. Bernlohr on February 18, 2010. Similar to the other recently appointed directors, on
February 18, 2010, Mr. Bernlohr was also awarded 53,535
restricted shares under our 2005 Plan, which will vest in three
equal installments on the first, second and third anniversaries of the grant date.
6
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
See “Item 5 — Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities” for the “Securities Authorized for Issuance under Equity
Compensation Plans” table.
The
following table shows ownership of our common stock on April 23, 2010, based on
26,517,557 shares of common stock outstanding on that date, by (i) each person known to us to own
beneficially more than five percent (5%) of our capital stock; (ii) each director and executive
officer; and (iii) all current directors and executive officers as a group. Except to the extent
indicated in the footnotes to the following table, the person or entity listed has sole voting and
dispositive power with respect to the shares that are deemed beneficially owned by such person or
entity, subject to community property laws, where applicable. Also, unless otherwise indicated,
the business address for each person below is 2101 Fourth Avenue, Suite 201, Seattle, Washington
98121.
7
Item 13. Certain Relationships and Related Transactions, and Director Independence
Certain Relationships and Related Transactions
Under SEC rules, we are required to disclose material transactions with us in which “related
persons” have a direct or indirect material interest. Related persons include any director,
nominee for director, or executive officer of us, a 5% or greater stockholder and any immediate
family members of such persons. The term “transaction” is broadly defined under SEC rules to
include any financial transaction, arrangement or relationship, including any indebtedness
transaction or guarantee of indebtedness.
Our board of directors has adopted a written policy that requires the Audit Committee to
review and approve any related party transactions. At each calendar year’s first regularly
scheduled meeting of our board of directors on an annual basis, management is required to present
to the Audit Committee specific information with respect to any such transaction expected to be
entered into or continued during that calendar year. After reviewing this information, the Audit
Committee will approve such transaction only if the following two conditions are met: (1) the
transaction must be in the best interests (or not inconsistent with the best interests) of us and
our stockholders; and (2) the transaction must be entered into by us on terms that are comparable
to those that would be obtained in an arm’s length transaction with an unrelated third party. If
any additional related party transactions are proposed to be
8
entered into subsequent to our board of directors’ first calendar year meeting, management is
required to present such transactions to the Audit Committee, or any special committee delegated to
by our board of directors, for approval or ratification at a subsequent meeting of our board of
directors.
On March 23, 2010, we established a term loan and revolving credit facility for working
capital purposes (the “Credit Facility”), the terms of which are governed by a Credit and Guaranty
Agreement (the “Credit Agreement”), by and among the Company, our subsidiaries (as borrowers and/or
guarantors), Whippoorwill Associates, Inc. (and/or certain funds and accounts managed by it)
(“Whippoorwill”), as lenders, and Law Debenture Trust Company of New York, as administrative agent
and as collateral agent. The Credit Facility provides for a $5 million revolving credit facility
and for a $10 million term loan to be drawn in two tranches, all of which is to be used to fund
dry-dock costs for two Windstar vessels as well as working capital and other corporate purposes of
the Company and its subsidiaries. On March 23, 2010, the first tranche of the term loan, in the
amount of $7.5 million, was funded. Borrowings under the Credit Facility bear interest at a rate of
12 percent per annum, are secured (on a first priority basis) by substantially all the assets of
the Company and its subsidiaries, and mature on January 2, 2012. The Credit Facility provides for
payment of a 4% annual facility fee to the lenders and customary agent fees.
Determination of Independence of Directors
Under the listing standards of the NASDAQ Global Market, a director qualifies as “independent”
only if our board of directors affirmatively determines that the director has no material
relationship with us (either directly, or as a partner, shareholder or officer of an organization
that has a relationship with us). In November 2009 and February 2010, upon the appointment of our
new members to the board of directors, the board of directors reviewed the independence of its
members. During these reviews, our board of directors considered transactions and relationships
between each director or any member of his or her immediate family and us and our subsidiaries and
affiliates, including those reported under “Election of Directors — Director Biographical
Information” above. In making independence determinations, our board of directors considered each
relationship not only from the standpoint of the director, but also from the standpoint of persons
and organizations with which the director has a relationship. The purpose of these reviews is to
determine whether any such relationships or transactions would interfere with the director’s
independent judgment, and therefore be inconsistent with a determination that the director is
independent.
As a result of its review, our board of directors has affirmatively determined that all of the continuing directors, except for Arthur Rodney, are
independent. As of April 14, 2009, Arthur Rodney ceased to be an independent director because he
was appointed to serve as our interim chief executive officer.
Our independent directors regularly meet in executive sessions. In 2009, the independent
directors met nine times in executive session. At each executive session, our board of directors
elects one director to lead the session.
Item 14. Principal Accounting Fees and Services
On
July 6, 2009, the Audit Committee of the board of directors approved
the engagement of Moss Adams LLP as the Company’s independent
registered public accounting firm, replacing Ernst & Young LLP.
The replacement of Ernst & Young LLP was not due to any
disagreement.
Fees Paid to the Independent Registered Public Accountants
The following sets forth the aggregate fees for professional audit services rendered by Moss
Adams LLP for the audit of our annual financial statements for the fiscal year 2009, and fees
billed for other services provided by Moss Adams LLP for fiscal year 2009.
Audit Fees
Fees
for audit services totaled approximately $274,300 in 2009, including the reviews of our
quarterly reports on Form 10-Q.
Audit Related Fees
Fees
for audit related services totaled $2,000 in 2009.
9
Tax and All Other Fees
In 2009, we did not incur any other fees, including fees for services relating to tax
compliance, tax advice and tax planning.
During fiscal year 2009, the Audit Committee of our board of directors approved policies and
procedures for the pre-approval of all audit and non-audit services to be provided by our
independent auditor and for the prohibition of certain services from being provided by the
independent auditor. We may not engage our independent auditor to render any audit or non-audit
service unless the service is approved in advance by the Audit Committee or the engagement to
render the service is entered into pursuant to the Audit Committee’s pre-approval policies and
procedures. On an annual basis, the Audit Committee may pre-approve services that are expected to
be provided to us by the independent auditor during the fiscal year. At the time such pre-approval
is granted, the Audit Committee specifies the pre-approved services and establishes a monetary
limit with respect to each particular pre-approved service, which limit may not be exceeded without
obtaining further pre-approval under the policy. For any pre-approval, the Audit Committee
considers whether such services are consistent with the rules of the SEC on auditor independence.
If the cost of any service exceeds the pre-approved monetary limit, such service must be
approved by the Audit Committee. The Audit Committee has delegated authority to the chairman of
the Audit Committee to pre-approve any audit or non-audit services to be provided to us by the
independent auditor. The chairman must report any pre-approval pursuant to the delegation of
authority to the Audit Committee at its next scheduled meeting.
All services provided by our independent auditor in 2009 were pre-approved in accordance with
the Audit Committee’s pre-approval policies and procedures.
10
PART IV
Item 15. Exhibits, Financial Statement Schedules
The following documents are filed as part of this Report:
(a)(3) Exhibits:
The exhibits listed on the accompanying Exhibit Index are furnished or filed as part of this
Form 10-K.
11
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Date: April 26, 2010
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
EXHIBIT INDEX
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