ROYAL CARIBBEAN CRUISES LTD (Form: 10-K, Received: 02/28/2007)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

	(Mark One)
x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2006
	OR
[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission file number: 1-11884

ROYAL CARIBBEAN CRUISES LTD.

(Exact name of registrant as specified in its charter)

	Republic of Liberia		98-0081645
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1050 Caribbean Way, Miami, Florida 33132

(Address of principal executive offices) (zip code)

(305) 539-6000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, par value $.01 per share	New York Stock Exchange

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 x No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No 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. [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Act).

x large accelerated filer

[

] accelerated filer

[

] non-accelerated filer

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No x

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold was $4.9 billion as of the last business day of the registrant’s most recently completed second fiscal quarter.

There were 212,266,640 shares of common stock outstanding as of February 7, 2007.

DOCUMENTS INCORPORATED BY REFERENCE

The information required under Part III of this report is incorporated herein by reference to registrant's definitive proxy statement for the 2007 Annual Meeting of Shareholders.

ROYAL CARIBBEAN CRUISES LTD.

TABLE OF CONTENTS

		Page

PART I
Item 1.	Business	1
Item 1A.	Risk Factors	18
Item 1B.	Unresolved Staff Comments	22
Item 2.	Properties	22
Item 3.	Legal Proceedings	22
Item 4.	Submission of Matters to a Vote of Security Holders	23

PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	24
Item 6.	Selected Financial Data	26
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 8.	Financial Statements and Supplementary Data	42
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	42
Item 9A.	Controls and Procedures	42
Item 9B.	Other Information	43

PART III
Item 10.	Directors, Executive Officers and Corporate Governance of the Registrant	44
Item 11.	Executive Compensation	44
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	44
Item 13.	Certain Relationships and Related Transactions, and Director Independence	44
Item 14.	Principal Accounting Fees and Services	44

PART IV
Item 15.	Exhibits and Financial Statement Schedules	45
Signatures		46

PART I

As used in this Annual Report on Form 10-K, the terms “Royal Caribbean,” the “Company,” “we,” “our” and “us” refer to Royal Caribbean Cruises Ltd., the term “Celebrity” refers to Celebrity Cruise Lines Inc., the term “Pullmantur” refers to Pullmantur S.A. and the terms “Royal Caribbean International”, “Celebrity Cruises” and “Pullmantur Cruises” refer to our three cruise brands. In accordance with cruise vacation industry practice, the term “berths” is determined based on double occupancy per cabin even though many cabins can accommodate three or more passengers.

Item 1. Business

General

Royal Caribbean International was founded in 1968. The current parent corporation, Royal Caribbean Cruises Ltd., was incorporated on July 23, 1985 in the Republic of Liberia under the Business Corporation Act of Liberia.

We are the world’s second largest cruise company operating 34 cruise ships with approximately 67,550 berths.

We operate three cruise brands, Royal Caribbean International, Celebrity Cruises and Pullmantur Cruises, in the cruise vacation industry. The cruise vacation industry is comprised of the budget, contemporary, premium and luxury segments. Our ships operate on a selection of worldwide itineraries that call on approximately 310 destinations. We compete principally on the basis of quality of ships, quality of service, variety of itineraries and price.

Royal Caribbean International

Royal Caribbean International serves the contemporary and premium segments of the cruise vacation industry. The contemporary segment is served by cruises that are generally seven nights or shorter and feature a casual ambiance. The premium segment is served by cruises that are generally seven to 14 nights and appeal to the more experienced passenger who is usually more affluent. Royal Caribbean International operates 20 cruise ships with approximately 47,900 berths, offering various cruise itineraries that range from two to 15 nights.

Royal Caribbean International’s strategy is to attract an array of vacationing consumers in the contemporary segment by providing a wide variety of itineraries and cruise lengths with multiple innovative options for onboard dining, entertainment and other onboard activities. Royal Caribbean International offers a wide array of onboard activities, services and amenities, including swimming pools, sun decks, beauty salons, exercise and spa facilities, ice skating rinks, in-line skating, basketball courts, rock climbing walls, surf machines, bungee jumping trampolines, miniature golf courses, an interactive waterpark called the H2O Zone™, gaming facilities, lounges, bars, Las Vegas-style entertainment, cinemas and “Royal Promenades” which are boulevards with shopping, dining and entertainment venues. Additionally, Royal Caribbean International offers a variety of shore excursions at each port of call. We believe that the variety and quality of Royal Caribbean International’s product offerings represent excellent value to consumers, especially to couples and families traveling with children. Because of the brand’s extensive product offerings, we believe Royal Caribbean International is well positioned to attract new consumers to the cruise vacation industry and to continue to bring past passengers back for their next vacation. While the brand is positioned at the upper end of the contemporary segment, we believe that Royal Caribbean International’s quality enables it to attract consumers from the premium segment as well, thereby achieving one of the broadest market coverages of any of the major brands in the cruise vacation industry.

Celebrity Cruises

Celebrity Cruises primarily serves the premium segment of the cruise vacation industry. Celebrity Cruises operates nine cruise ships with approximately 15,150 berths. The brand offers various cruise itineraries that range from two to 17 nights.

Celebrity Cruises’ strategy is to attract experienced cruise passengers who appreciate and want the unique experience the brand offers. Celebrity Cruises delivers a high quality experience and good value with ships that offer extensive and luxurious spa facilities, fine dining, personalized service, and a high staff-to-passenger ratio. These are the hallmarks of the premium cruise vacation segment. Celebrity Cruises provides a variety of itineraries and cruise lengths and has a high proportion of its fleet deployment in seasonal markets (i.e. Alaska, Australia, Bermuda, Europe, Hawaii, New Zealand, the Panama Canal and South America). Celebrity Cruises includes in its breadth of product offerings itineraries to the Galapagos Islands, and recently inaugurated excursions to Machu Picchu in Peru. To further enhance our passengers’ experiences, Celebrity Cruises also offers a variety of shore excursions at each port of call.

Under its Celebrity Expeditions concept, Celebrity Cruises provides passengers a more intimate experience onboard smaller, upscale ships offering cruises to premium destinations. In 2004, Celebrity Cruises introduced Celebrity Xpedition , a 100-berth ship that offers cruises in the Galapagos Islands, as a Celebrity Expedition. Beginning in 2007, Celebrity Cruises will expand Celebrity Expeditions by introducing two additional ships. Blue Dream and Blue Moon , which are currently part of the recently-acquired Pullmantur fleet, will be redeployed to Celebrity and renamed Celebrity Journey and Celebrity Quest , respectively. Celebrity Journey will offer cruises from the United States to Bermuda commencing in May 2007 and Celebrity Quest will offer a series of Caribbean sailings featuring several first time ports of call as well as a series of Panama Canal itineraries commencing in October 2007. Before switching to the Celebrity Brand, each ship will undergo a revitalization to incorporate Celebrity’s signature elements.

Pullmantur Cruises

On November 14, 2006, we completed our acquisition of Pullmantur S.A., a Madrid-based cruise and tour operator. Pullmantur, formed in 1971, is the largest cruise operator in Spain. It has two primary businesses: cruises and tour operations. Since 2001, Pullmantur has operated five cruise ships in Europe and Latin America serving the contemporary cruise vacation segment with approximately 4,500 berths as of December 31, 2006. Pullmantur’s tour operations sell land-based travel packages to Spanish guests including hotel and flights primarily to Caribbean resorts, and sells land-based travel packages to Europe aimed at Latin American customers. Pullmantur also owns a minority interest in a small air business that operates three aircraft in support of its cruise and tour operations. Pullmantur has offices in Spain and Portugal, with approximately 2,600 employees, and is Royal Caribbean’s first wholly-owned European brand.

Pullmantur increases our presence in Spain and provides us with an opportunity to further grow our business in Europe and Latin America and to increase our product offerings. Pullmantur also provides us an opportunity for incremental guest, revenue and earnings growth.

In June 2007, Zenith will be redeployed from Celebrity Cruises to Pullmantur where it will begin offering cruises to the Eastern Mediterranean. Before switching to the Pullmantur brand, Zenith will undergo a revitalization to increase verandas, enlarge public areas and customize the ship for Spanish and Latin American guests.

Other

As part of our effort to develop our presence in markets outside of North America, in July 2000, we formed a joint venture with First Choice Holidays PLC (“First Choice”), one of the largest integrated tour operators in the United Kingdom. This joint venture operates a cruise brand, Island Cruises, offering itineraries designed to attract passengers from the United Kingdom and Brazil. Island Cruises operates a 1,500-berth ship sailing under the name Island Escape . Celebrity Cruises' Horizon, a 1,350-berth ship, is currently chartered under a six-year agreement through 2011 to this joint venture. Horizon is currently sailing under the name Island Star, expanding Island Cruise's presence in Europe and South America.

Industry

Since 1970, cruising has been one of the fastest growing sectors of the vacation market, as the number of North American passengers has grown to an estimated 10.8 million in 2006 from 0.5 million in 1970, a compound annual growth rate of approximately 9%. However, from 2002 to 2006 a significant amount of growth was experienced resulting in a compound annual growth rate of approximately 12%. We have sought to capitalize on the increasing popularity of cruises through an extensive fleet expansion program.

According to our estimates, the North American cruise market was served by an estimated 112 cruise ships with approximately 156,987 berths at the beginning of 2002. We estimate that this capacity increased to approximately 229,486 berths on approximately 140 ships by the end of 2006. The increase in capacity over the last five years is net of approximately 24 ships with approximately 33,584 berths that have either been retired or moved out of the North American market. There are approximately 24 cruise ships with an estimated 68,360 berths that are expected be placed in service between 2007 and 2010.

The following table details the growth in the North American cruise market of both passengers and estimated weighted-average berths over the past five years:

Year	North American Cruise Passengers(1)	Weighted-Average Supply of Berths Marketed in North America(2)
2002	7,640,000	163,100
2003	8,195,000	182,600
2004	9,108,000	206,700
2005	9,909,000	216,300
2006	10,836,000	227,300

__________

(1)	Source: Cruise Line International Association based on passengers carried for at least two consecutive nights, except for 2006, which is based on our estimates.

(2)	Source: Our estimates.

Cruise lines compete for consumers’ disposable leisure time spending with other vacation alternatives such as land-based resort hotels and sightseeing destinations. Demand for such activities is influenced by geo-political and general economic conditions. We believe that cruise passengers currently represent only a small share of the vacation market and that a significant portion of cruise passengers carried are first-time cruisers.

Our ships operate worldwide and have itineraries that call on destinations in Alaska, Asia, Australia, the Bahamas, Bermuda, California, Canada, the Caribbean, Europe, the Galapagos Islands, Hawaii, Mexico, New England, New Zealand, the Panama Canal and South America.

We compete with a number of cruise lines; however, our principal competitors are Carnival Corporation & plc, which owns, among others, Carnival Cruise Lines, Princess Cruises, Holland America Line, Costa Cruises, P&O Cruises, and Cunard Line; Star Cruises, which owns, among others, Star Cruises and Norwegian Cruise Line; Mediterranean Shipping Company, which owns MSC Cruises; and Disney Cruise Line.

Operating Strategies

Our principal operating strategies are to:

• improve the awareness and market penetration of our brands,

• continue to expand our fleet with state-of-the-art cruise ships,

• continue to improve and expand the quality and innovation of our fleet,

• expand into new markets and itineraries,

• further expand our international passenger sourcing,

• utilize sophisticated revenue management systems to optimize revenue from demand for our products,

• continue to manage our costs,

• further improve our technological capabilities, and

• maintain strong relationships with travel agencies, the principal industry distribution channel, while offering direct access for consumers.

Brand Awareness

We continue to broaden the recognition of our brands among consumers. Royal Caribbean International is an established brand in the contemporary and premium segments of the cruise vacation industry. We believe we are positioning Celebrity Cruises as the best choice in the premium segment of the cruise vacation industry. Pullmantur Cruises is a widely recognized brand in the Spanish and Latin American contemporary cruise markets.

Brand awareness for Royal Caribbean International is achieved through communication strategies designed to broadly communicate its high quality and excellent-value cruise vacations. Royal Caribbean International’s communication strategies target active adults and families who are vacation enthusiasts interested in exploring new destinations, seeking new experiences and having a real “lust for life”. These strategies are also designed to attract first-time cruisers to the cruise vacation industry and to the Royal Caribbean International brand.

In order to attract the active cruiser who is seeking new experiences as well as first-time cruisers, Royal Caribbean International provides multiple choices to passengers through a wide array of itineraries, accommodations, dining options, onboard activities and shore excursions. The hallmarks of the brand include friendly and engaging service, state-of-the-art cruise ships, family programs, entertainment, health and fitness and energizing onboard and shoreside activities designed for passengers of all ages.

Celebrity Cruises communicates its brand image and message through a series of consumer and trade campaigns, products and experiences, all designed to build awareness of its high quality cruise vacations and drive brand preference. Celebrity Cruises’ communications target cruisers who seek upscale experiences and appreciate quality and value. We believe Celebrity Cruises provides a high quality cruise vacation by offering award-winning cuisine, personal service with a high staff-to-passenger ratio and spacious accommodations .

Under its Celebrity Expeditions concept, Celebrity Cruises provides passengers a more intimate experience onboard smaller, upscale ships offering cruises to premium destinations. Beginning in 2007, Celebrity Cruises will expand Celebrity Expeditions by introducing two additional ships, Celebrity Journey and Celebrity Quest.

Pullmantur Cruises operates in the Spanish market, which is one of the fastest growing cruise markets in Europe. Pullmantur’s cruise product is tailored specifically to Spanish-speaking passengers from both Spain and Latin America. All customer-facing crewmembers speak Spanish, dining times are later and onboard activities, services, shore excursions and menu offerings are designed to suit their target customers’ preferences. We will seek to broaden the awareness and market penetration of our new brand.

Fleet Expansion

Based on the ships currently on order, our capacity is expected to increase to approximately 88,750 berths by December 31, 2010. Since our first fleet expansion program beginning in 1988, we have continued to increase our average ship size and number of available berths, which has enabled us to achieve certain economies of scale. Larger ships allow us to carry more passengers without a corresponding increase in certain operating expenses.

Royal Caribbean International. Founded in 1968, Royal Caribbean International was the first cruise line to design cruise ships especially for warm water year-round cruising. Royal Caribbean International operated a modern fleet in the 1970s and early 1980s, establishing a reputation for high quality. Between 1988 and 1992, the brand tripled its capacity by embarking on its first major capital expansion program and taking delivery of three Sovereign-class ships. From 1995 through 1998, Royal Caribbean International completed its second capital expansion program by taking delivery of six Vision-class ships, ranging in size from approximately 1,800 to 2,000 berths. During this same period, Royal Caribbean International sold four of its older ships because their age and design were no longer consistent with its image and marketing strategy.

Royal Caribbean International began its third capital expansion program with orders for five Voyager-class ships and four Radiance-class ships. The Voyager-class ships were placed in service from 1999 through 2003. Each ship is approximately 140,000 gross tons with approximately 3,100 berths.

The brand introduced its four Radiance-class ships from 2001 through 2004. The Radiance-class ships (approximately 90,000 gross tons each) are a progression from the brand’s Vision-class ships and have approximately 2,100 berths each.

In May 2006, Royal Caribbean International launched the 3,600 berth Freedom of the Seas , the first of three planned Freedom-class ships, and the largest cruise ship in the world. Royal Caribbean International expects to take delivery of two additional Freedom-class ships, Liberty of the Seas and Independence of the Seas , in 2007 and 2008, respectively.

Royal Caribbean International will introduce a new class of ship in 2009. This class of ship will have a capacity of approximately 5,400 berths, which is 50% larger than the capacity on the Freedom-class ships. At 1,180 feet long, 154 feet wide and 240 feet high, this new class of ship will give Royal Caribbean ample room to create new amenities to heighten guests’ cruise experience. We have an option to purchase an additional ship in this class, exercisable through March 2007. If ordered, the ship will be delivered in the third quarter of 2010.

Celebrity Cruises. Celebrity Cruises was founded in 1990 and operated three ships between 1992 and 1995. Between 1995 and 1997, Celebrity Cruises undertook its first capital expansion program, adding three Century-class ships, which range in size from approximately 1,750 to 1,850 berths and disposing of one of its original three ships. Celebrity Cruises completed its second capital expansion program with the delivery of four Millennium-class ships from 2000 through 2002. Each Millennium-class ship has approximately 2,050 berths and is approximately 90,000 gross tons.

In 2004, Celebrity Cruises introduced its Celebrity Expeditions cruise concept by launching Celebrity Xpedition , a 100-berth ship that offers a more intimate, smaller ship experience with sailings to the Galapagos Islands. We intend to expand the Celebrity Expeditions concept with the introduction of Celebrity Journey and Celebrity Quest in May and October 2007, respectively.

To continue its product evolution, Celebrity Cruises entered into contracts with a shipyard to build three Solstice-class ships, Celebrity Solstice , Celebrity Equinox and Celebrity Eclipse . The Solstice-class ships will be approximately 118,000 gross tons each with approximately 2,850 berths, incorporating many features typically associated with luxury cruising. Celebrity Solstice, Celebrity Equinox and Celebrity Eclipse are scheduled for delivery in the fourth quarter of 2008, the third quarter of 2009 and the second quarter of 2010, respectively.

Fleet Innovation

We place a strong focus on product innovation, not only for stimulating repeat business, but also for driving new demand for our products. The Voyager, Radiance and Millennium-class ships introduced several product innovations to the marketplace, and our brands have begun to adopt these innovations as signature elements. For example, Royal Caribbean International’s Voyager-class ships provide more diverse vacation options for families and for those seeking active sports and entertainment alternatives during their vacation experience. Each Voyager-class ship has a variety of unique features, including the cruise vacation industry’s first horizontal atrium, the “Royal Promenade” (which is four decks tall, longer than a football field and provides entertainment, shopping and dining experiences), recreational activities such as ice skating, in-line skating, rock climbing, miniature golf and full court basketball, enhanced staterooms, expanded dining venues and a variety of intimate spaces. Radiance-class ships incorporate many of the dining and entertainment options of the Voyager-class ships, as well as offer a wide array of unique features. These features include alternative dining venues, panoramic glass elevators facing outward to the sea, floor to ceiling glass windows offering sea views and a billiards club featuring gyroscopic billiard tables. During the second quarter of 2006, Freedom of the Seas began offering several new experiences to cruising including a surf machine, an interactive water park called the H2O ZoneTM and a dedicated sports pool. The Freedom-class ships are approximately 16% larger than the Voyager-class ships and have some of the largest staterooms and balconies in the industry, flat screen televisions, cell phone services and other amenities. Building upon the innovations of the Voyager-class and Freedom-class ships, Royal Caribbean International will introduce a new class of ship in 2009.

The Millennium-class ships elevated Celebrity Cruises’ position in the premium segment of the marketplace. This class of ships, which is a progression from the Century-class ships, builds on the brand’s primary strengths, including gourmet dining, luxurious spa facilities, and spacious staterooms and suites complete with verandas. On the Millennium-class ships, an entire deck is dedicated to health, fitness and the rejuvenating powers of water. Celebrity Cruises’ spas offer a variety of features, including a large hydropool with neck massage and body jets and services including “acupuncture at sea”. To further enhance the onboard experience, Celebrity Cruises offers a more intimate setting in our piano, champagne, and martini bars and lounges. In 2008, Celebrity Cruises will introduce the Solstice-class, a new wide-body construction class of ships, with large staterooms averaging 215 square feet. Approximately 90% of the ships' staterooms will be outside and 85% of the staterooms will have verandas.

In order to offer passengers a wider range of activities and amenities and to ensure consistency across our fleets, we embarked on a program of revitalizing our older ships to update and refresh their interiors and to incorporate signature brand elements. Renovations included the addition of new balconies, verandas, dining venues, lounges and teen areas as well as extensive refurbishments to staterooms and public areas.

Royal Caribbean International commenced its revitalization program in 2003 with extensive renovations to Monarch of the Seas , followed by extensive renovations to Empress of the Seas and Sovereign of the Seas in 2004. In 2005, Enchantment of the Seas underwent a lengthening with a new 73-foot midsection, which features 151 additional staterooms, suspension bridges, an overhanging bar offering panoramic views and bungee jumping trampolines. For the increasing number of young cruisers, Enchantment of the Seas introduced a new interactive splash pad with water jets on the floor, which transforms into a fiber-optic and water show at night. Majesty of the Seas is scheduled for extensive renovations in the first quarter of 2007 to include the addition of new dining venues, lounges and teen areas as well as new bedding packages for all staterooms.

Celebrity’s revitalization program began during 2006, with extensive renovations to Century , which incorporated many of the Millennium-class standards, while adding 314 new verandas, approximately 26 additional suites and staterooms, and a new specialty restaurant.

New Markets and Itineraries

Our ships operate worldwide with a selection of itineraries that call on approximately 310 ports. New ships, including both newly constructed vessels and those we acquire, allow us to expand into new destinations, itineraries and markets. Our brands have expanded their mix of itineraries in Europe, and our recent Pullmantur acquisition provides us with a brand operating in the Spanish market, while strengthening our ability to penetrate the European and Latin American markets further.

In 2007, we will focus on the acceleration of Royal Caribbean International’s strategic position as a global cruise brand with the announced deployments of Splendour of the Seas in South America and Legend of the Seas in the Dominican Republic. In addition, Royal Caribbean International is expanding itineraries into Asia, Australia and New Zealand with Rhapsody of the Seas in December 2007, and Celebrity Cruises is expanding operations into Australia and New Zealand with Mercury in December 2007. The brands are now offering a wide variety of cruise tours from Alaska, the Canadian Rockies and Europe in order to provide vacationers with a broad range of product options.

In an effort to secure desirable berthing facilities for our ships, and to provide new or enhanced cruise destinations for our passengers, from time to time we assist or invest in the development or enhancement of certain port facilities and infrastructure located in strategic ports of call. Generally, we collaborate with local private or governmental entities by providing management and/or financial assistance. In exchange for our involvement, we generally secure preferential berthing rights for our ships.

International Passengers

Passenger ticket revenues generated by sales in countries outside of the United States were approximately 18%, 21%, and 18% of total passenger ticket revenues in 2006, 2005 and 2004, respectively. The percentage of passengers sourced outside of the United States was approximately 13% in 2006 compared to approximately 16% in 2005 and approximately 15% in 2004. International passengers have grown from approximately 213,000 in 1998 to approximately 586,000 in 2006.

We sell and market the Royal Caribbean International and Celebrity Cruises brands to passengers outside of North America through our offices in the United States, United Kingdom, Germany, Norway, Italy and Spain. We further extend our reach with a network of 48 independent international representatives located throughout the world. We market our product in these countries by focusing on innovation and by responding to cultural characteristics of our global passengers. Our recently acquired Pullmantur Cruises brand sells and markets its cruises to passengers primarily in Spain and Latin America through its offices in Spain.

During the summer of 2005, Royal Caribbean International dedicated Legend of the Seas to the United Kingdom passenger market, offering itineraries to the Mediterranean sailing directly from Southampton, United Kingdom and offering onboard products designed to appeal to passengers from the United Kingdom. Due to the success of this effort, we will be replacing Legend of the Seas with a Voyager-class vessel, Navigator of the Seas, to this itinerary in 2007. Also in 2007, Royal Caribbean International’s Voyager of the Seas will return to Barcelona, Spain offering Mediterranean itineraries. Royal Caribbean International will also introduce the Vision-class ship, Rhapsody of the Seas , to Australia, New Zealand and the South Pacific offering sailings from Singapore, Hong Kong and Shanghai. Splendour of the Seas will begin a Pan-European itinerary out of Venice, Italy beginning in May and will also sail in South America with emphasis on Brazil. At the end of 2007, Celebrity Cruises will introduce Mercury to Australia and New Zealand offering open-jaw sailings between Auckland and Sydney. In May 2008, Independence of the Seas will be introduced in the United Kingdom and will offer itineraries to the Mediterranean, the Channel Islands and the Canary Islands.

In addition to the development of our global brands, we focus on innovative ways to develop our local presence in markets outside of North America. We have a joint venture with First Choice, one of the largest integrated tour operators in the United Kingdom. This joint venture operates a cruise brand, Island Cruises, offering itineraries designed to attract passengers from the United Kingdom and Brazil. Island Cruises operates a 1,500 berth ship sailing under the name Island Escape . Celebrity Cruises’ Horizon , a 1,350 berth ship, is currently chartered under a six-year agreement through 2011 to this joint venture. Horizon is currently sailing under the name Island Star , expanding Island Cruise’s presence in Europe and South America.

Revenue Management

We believe we have one of the most advanced revenue management systems in the industry, which enables us to make more advantageous decisions about pricing, inventory management and marketing actions. We are continuously working to improve these systems and tools through increased forecasting capabilities, ongoing improvements to our understanding of price/demand relationships, and greater automation of the decision process.

Cost Management

We continue to prioritize the identification and implementation of shipboard and shoreside operating cost initiatives, and to foster a corporate culture focused on cost management. Examples of these ongoing efforts include continued optimization of shipboard and shoreside staffing levels, application of continuous improvement processes, and improved efficiency of fuel consumption through technology and opportunistic initiatives, including use of alternative fuel solutions, itinerary optimization, and diligent shipboard conservation efforts.

Technological Development

We continue to invest in information technology to support and improve our corporate infrastructure and passenger and travel trade relations. We have a workforce management system to schedule and manage contracts for our shipboard employees worldwide and have also automated the transmission of passenger and crew information to all relevant government agencies. Both Royal Caribbean International and Celebrity Cruises have extensive websites that are world-class marketing portals with consumer booking engines providing access to millions of Internet users throughout the world. We have streamlined our documentation process by providing our passengers with electronic documents accessible online. We also offer passengers the ability to complete their embarkation forms online prior to the embarkation date and also offer automated pierside embarkation and disembarkation to our passengers. Automation of the disembarkation process improves the travel experience for our passengers by providing airline boarding passes and luggage check-in for same-day return flights while passengers are still onboard the ship. To further enhance our customer service, we provide online access so passengers can book shore excursions and Alaska cruisetour land excursions via our websites. We offer a website for Celebrity Cruises which improves the ease of use and distribution of multimedia marketing information to our current and potential customers. Additionally, we have implemented a customer relationship management tool, which improves our ability to respond to passenger and travel agent inquiries in a timely and accurate manner. Other innovations include wireless Internet cafes and cellular phone access on selected ships to satisfy our passengers’ mobile computing and communication needs. We have interactive televisions in passenger staterooms on certain ships, enabling passengers to shop for shore excursions, select a dinner wine and monitor their onboard accounts. We have cruisingpower.com , a website dedicated to Internet communications with the travel agency community, which enables fast access to online tools and is the ultimate shared resource center for Royal Caribbean International and Celebrity Cruises information. These online tools include CruiseMatch® Online , an Internet browser-based booking system, CruisePay ^SM , an online payment service, Insight , a booking summary report and Cruise Writer ^SM , which provides the capability to customize brochures and flyers.

Travel Agency Support

Travel agencies generate the majority of the bookings for our ships and we are committed to further developing and strengthening this very important distribution channel. Each of our brands has a brand-dedicated sales force. Each sales team focuses on the unique qualities of each brand and provides support to the travel agency community. The Trade Support & Services department, with branded call center operations, further supports the travel agency community in designing the cruise vacation experience. We offer an automated reservations system, CruiseMatch® Online , which allows travel agents direct access to Royal Caribbean International’s and Celebrity Cruises’ computer reservation system for direct bookings. We launched a dedicated home-based portal on cruisingpower.com , which offers home-based travel partners access to exclusive communication, education, sales and marketing tools and resources needed to grow their business with us. We have customer service representatives that are trained to assist travel agents in providing a higher level of service and Insight , the first Internet service tool of its kind in the industry, which assists agencies with productivity and enhances customer service. We currently operate reservation call centers to support our travel agent community in the United States, Canada, Spain and the United Kingdom offering flexibility and extended hours of operations. Call centers for the United States and Canada are located in Miami and Miramar, Florida, Wichita, Kansas and Springfield, Oregon. The call center for the United Kingdom is located in Addlestone, England. The call center for Pullmantur Cruises is located in Madrid, Spain. We have certified vacation planners in our call centers in Miami, Miramar, Wichita, Springfield and Addlestone offering cruise planning expertise and personal attention for direct bookings. In addition, direct booking channels for Royal Caribbean International and Celebrity Cruises are available through our Internet sites at www.royalcaribbean.com and www.celebrity.com.

Passenger Services

We offer to handle virtually all travel aspects related to passenger reservations and transportation, including arranging passenger pre and post hotel stay arrangements and air transportation. Our air/sea program offers passengers the choice of our standard air or custom air programs. Our standard air program allows our passengers to benefit from comprehensive relationships that we maintain with many major airlines ranging from fare negotiation and space handling to baggage transfer. Our custom air program enables passengers to customize their flight arrangements, including selection of airline, specific flights and class of service.

The Royal Caribbean International passenger loyalty program, “Crown & Anchor Society” has over 4.1 million members worldwide and includes benefits such as a secured dedicated section in the www.royalcaribbean.com Internet site with special cruise offers and onboard amenities. The Celebrity Cruises passenger loyalty program, “Captain's Club” has approximately 850,000 members. Captain's Club members enjoy exclusive members-only onboard programs and amenities, and are provided with a secured area on the Celebrity Cruises web site, which communicates select product offers.

Operations

Cruise Ships and Itineraries

We operate 34 ships, under three brands, with a selection of worldwide itineraries ranging from two to 17 nights that call on approximately 310 destinations. Liberty of the Seas is expected to enter revenue service in May 2007. In addition, Pullmantur Cruises will operate Pacific and Mona Lisa under charter agreements with third parties from April through October 2007 and June through August 2007, respectively. The following table represents summary information concerning our ships and their areas of operation based on 2007 itineraries (subject to change):

Ship	Year Ship Entered Service		Approximate Berths		Primary Areas of Operation
Royal Caribbean International
Liberty of the Seas		2007		3,600		Eastern/Western Caribbean
Freedom of the Seas		2006		3,600		Eastern/Western Caribbean
Jewel of the Seas		2004		2,100		Eastern/Western Caribbean, Canada/New England, Europe
Mariner of the Seas		2003		3,100		Eastern/Western Caribbean
Serenade of the Seas		2003		2,100		Alaska, Southern Caribbean, Panama Canal, Hawaii
Navigator of the Seas		2002		3,100		Eastern/Western Caribbean, Europe
Brilliance of the Seas		2002		2,100		Caribbean, Europe, Panama Canal
Adventure of the Seas		2001		3,100		Southern Caribbean
Radiance of the Seas		2001		2,100		Eastern/Western Caribbean, Alaska, Hawaii, Panama Canal
Explorer of the Seas		2000		3,100		Eastern/Western Caribbean, Bermuda
Voyager of the Seas		1999		3,100		Eastern/Western Caribbean, Europe
Vision of the Seas		1998		2,000		Alaska, Mexican Riviera
Enchantment of the Seas ¹		1997		2,250		Western Caribbean
Rhapsody of the Seas		1997		2,000		Western Caribbean, Australia/NZ, Asia
Grandeur of the Seas		1996		1,950		Caribbean, Bermuda, Canada, New England
Splendour of the Seas		1996		1,800		Western Caribbean, Europe, South America
Legend of the Seas		1995		1,800		Europe, Western Caribbean, Southern Caribbean
Majesty of the Seas		1992		2,350		Bahamas
Monarch of the Seas		1991		2,350		Baja Mexico
Empress of the Seas		1990		1,600		Southern Caribbean, Bermuda
Sovereign of the Seas		1988		2,300		Bahamas

Celebrity Cruises Constellation		2002		2,050		Caribbean, Europe, Canada/New England
Summit		2001		2,050		Alaska, Panama Canal, Hawaii, Southern Caribbean
Infinity		2001		2,050		Alaska, Panama Canal, South America, Hawaii
Millennium		2000		2,050		Eastern Caribbean, Europe
Mercury		1997		1,850		Alaska, Pacific/Northwest, Mexican Riviera, Panama Canal, Hawaii, Australia/NZ
Galaxy		1996		1,850		Southern Caribbean, Europe
Century ²		1995		1,800		Western Caribbean, Europe
Zenith ³		1992		1,350		Caribbean, Bermuda, Mediterranean
Celebrity Xpedition ⁴		2004		100		Galapagos Islands

Pullmantur Cruises
Blue Moon ⁵	2006		700	Baltic, Caribbean, Panama Canal
Sky Wonder ⁶	2006		1,200	Eastern Mediterranean
Holiday Dream ⁶	2005		750	Mediterranean, Caribbean
Oceanic ⁶	2001		1,150	Western Mediterranean
Blue Dream ⁷	2004		700	Mediterranean, Bermuda
Pacific	2007		600	Mediterranean
Mona Lisa	2007		750 ____	Mediterranean
Total		72,500

¹ Enchantment of the Seas was lengthened in 2005, resulting in approximately 300 additional berths.

² Century was revitalized in 2006, resulting in approximately 26 additional berths.

³ Zenith will undergo a revitalization and will be redeployed to Pullmantur in June 2007.

⁴ Celebrity Xpedition was built in 2001.

⁵ Blue Moon was built in 2000. Blue Moon will undergo a revitalization and be redeployed to Celebrity as Celebrity Quest in October of 2007.

⁶ Sky Wonder, Holiday Dream and Oceanic were built in 1984, 1981 and 1965, respectively.

⁷ Blue Dream was built in 2000. Blue Dream will undergo a revitalization and be redeployed to Celebrity as Celebrity Journey in May of 2007.

Celebrity Cruises’ Horizon , a 1,350 berth ship, is currently chartered under a six-year agreement through 2011 to Island Cruises, our joint venture with First Choice.

We have two Freedom-class ships and one ship of a new class on order for Royal Caribbean International. These ships are being built in Finland by Aker Finnyards. We have three Solstice-class ships on order for Celebrity Cruises. These ships are being built in Germany by Meyer Werft. The expected delivery dates and planned berths of the six ships on order are as follows:

Ship	Expected Delivery Date	Approximate Berths
Royal Caribbean International:
Freedom-class:
Liberty of the Seas	2nd Quarter 2007	3,600
Independence of the Seas	2nd Quarter 2008	3,600
New Class (unnamed)
Unnamed	3rd Quarter 2009	5,400
Celebrity Cruises:
Solstice-class:
Celebrity Solstice	4th Quarter 2008	2,850
Celebrity Equinox	3rd Quarter 2009	2,850
Celebrity Eclipse	2nd Quarter 2010	2,850

We have an option to purchase an additional ship for Royal Caribbean International, exercisable through March 2007, for an additional capacity of approximately 5,400 berths. If ordered, we expect the optional ship will be delivered in the third quarter of 2010.

Seasonality

Our revenues are seasonal based on the demand for cruises. Demand is strongest for cruises during the summer months and holidays.

Passengers and Capacity

Selected statistical information (amounts exclude Pullmantur) is shown in the following table (see Terminology and Non-GAAP Financial Measures under Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations , for definitions):

	Year Ended December 31,

	2006	2005	2004	2003	2002

Passengers Carried	3,600,807	3,476,287	3,405,227	2,990,607	2,768,475
Passenger Cruise Days	23,849,606	23,178,560	22,661,965	20,064,702	18,112,782
Available Passenger Cruise Days (APCD)	22,392,478	21,733,724	21,439,288	19,439,238	17,334,204
Occupancy	106.5%	106.6%	105.7%	103.2%	104.5%

Cruise Pricing

Our cruise prices include a wide variety of activities and amenities, including meals and entertainment. Prices vary depending on the destination, cruise length, cabin category selected and the time of year the voyage takes place. Additionally, we offer air transportation as a service for passengers that elect to utilize the air program. Our air transportation is available from cities in the United States, Canada, Latin America and Europe. Prices vary by gateway and destination. On average, air tickets are sold to passengers at prices close to cost.

Onboard Activities and Other Revenues

Our brands offer modern fleets with a wide array of onboard activities, services and amenities, including swimming pools, sun decks, spa facilities (which include massage and exercise facilities), beauty salons, gaming facilities, lounges, bars, Las Vegas-style entertainment, retail shopping, libraries, cinemas, conference centers, Internet cafes and shore excursions at each port of call. While many onboard activities are included in the base price of a cruise, we realize additional revenues from, among other things, gaming, the sale of alcoholic and other beverages, gift shop items, shore excursions, photography, spa services and art auctions. Royal Caribbean International and Celebrity Cruises offer a catalogue gift service, which is now offered via the Internet to provide travel agents and others the opportunity to purchase “bon voyage” gifts. In 2006, both brands introduced enhanced functionality on our Internet sites for selecting shore excursions and amenities prior to embarkation. In 2007 Celebrity will continue to offer the “Savor the Caribbean” culinary themed cruises, marking the third year of this successful program. Royal Caribbean International ships offer rock climbing walls and the Voyager-class ships offer additional activities including ice skating rinks and in-line skating. In 2005, Royal Caribbean International introduced bungee jumping trampolines on the renovated Enchantment of the Seas . In 2006, Freedom of the Seas began offering several new experiences to cruising including a surf machine, an interactive water park called the H2O Zone™ and a dedicated sports pool.

In conjunction with our cruise vacations, we offer pre and post cruise hotel packages. We also offer fully escorted, premium land-tour packages in Alaska, Australia, the Canadian Rockies, New Zealand, and Europe through Royal Celebrity Tours. These land-tour itineraries include travel by deluxe motorcoach and/or Wilderness Express traincars. In addition, we sell cruise vacation protection coverage, which provides passengers with coverage for trip cancellation, medical protection and baggage protection.

Pullmantur Cruises also offers land-based travel packages to Spanish and European vacation travelers including hotels and flights to Caribbean resorts and sells land based packages to Europe aimed at Latin American customers.

Segment Reporting

We operate three cruise brands, Royal Caribbean International, Celebrity Cruises and Pullmantur Cruises. The brands have been aggregated as a single reportable segment based on the similarity of their economic characteristics, as well as products and services provided. (For financial information see Item 8. Financial Statements and Supplementary Data .)

Employees

As of December 31, 2006, we employed approximately 4,329 full-time and 687 part-time employees worldwide in our shoreside operations. We also employed approximately 37,942 shipboard employees. As of December 31, 2006, approximately 80% of our shipboard employees were covered by collective bargaining agreements. We believe that our relationship with our employees is good.

Insurance

We maintain insurance on the hull and machinery of our ships, which includes additional coverage for disbursements, earnings and increased value, which are maintained in amounts related to the value of each ship. The coverage for each of the hull policies is maintained with syndicates of insurance underwriters from the British, Scandinavian, French, United States, Spanish and other international insurance markets.

We maintain liability protection and indemnity insurance for each of our Royal Caribbean International and Celebrity Cruises ships through either Assuranceforeningen GARD or the United Kingdom Mutual Steam Ship Assurance Association (Bermuda) Limited.

We maintain war risk insurance for our Royal Caribbean International and Celebrity Cruises ships, including terrorist risk insurance, on each ship through a Norwegian war risk insurance organization. This coverage includes coverage for physical damage to the ship which is not covered under the hull policies as a result of war exclusion clauses in such hull policies. We also maintain protection and indemnity war risk coverage for risks that would be excluded by the rules of the indemnity insurance organizations, subject to certain limitations. Consistent with most marine war risk policies, under the terms of our war risk insurance coverage, underwriters can give seven days notice to us that the policy will be canceled and reinstated at higher premium rates.

Pullmantur's liability protection, indemnity insurance and war risk insurance for its ships are maintained with the Steamship Mutual Underwriting Association (Bermuda) Limited and Assuranceforeningen SKULD.

We also maintain a form of business interruption insurance for our Royal Caribbean International and Celebrity Cruises brands with our insurance underwriters in the event that a ship is unable to operate during scheduled cruise periods due to loss or damage to the ship arising from certain covered events that last more than a specified period of time. We also maintain insurance coverage for certain events, which would result in a delayed delivery of our contracted new ships, which we normally place starting approximately two years prior to the scheduled delivery dates.

Insurance coverage for shoreside property, shipboard inventory, and general liability risks are maintained with insurance underwriters in the United States and the United Kingdom. We have decided not to carry business interruption insurance for shoreside operations based on our evaluation of the risks involved and our protective measures already in place, as compared to the premium expense.

All insurance coverage is subject to certain limitations, exclusions and deductible levels. In addition, in certain circumstances, we co-insure a portion of these risks. Premiums charged by insurance carriers, including carriers in the maritime insurance industry, increase or decrease from time to time and tend to be cyclical in nature. These cycles are impacted both by our own loss experience and by losses incurred in direct and reinsurance markets. We historically have been able to obtain insurance coverage in amounts and at premiums we have deemed to be commercially acceptable. No assurance can be given that affordable and secure insurance markets will be available to us in the future, particularly for war risk insurance.

The Athens Convention relating to the Carriage of Passengers and their Luggage by Sea (1974) and the 1976 Protocol to the Athens Convention are generally applicable to passenger ships. The United States has not ratified the Athens Convention; however, with limited exceptions, the 1976 Athens Convention Protocol may be contractually enforced with respect to those of our cruises that do not call at a United States port. The International Maritime Organization Diplomatic Conference agreed upon a new Protocol to the Athens Convention on November 1, 2002. The 2002 Protocol, which is not yet in force, substantially increases the level of compulsory insurance, which must be maintained by passenger ship operators. No assurance can be given as to if or when the 2002 Protocol will come into force. If in force, no assurance can be given that affordable and secure insurance markets will be available to provide the level of coverage required under the 2002 Protocol.

Trademarks

We own a number of registered trademarks related to the Royal Caribbean International, Celebrity Cruises and Pullmantur Cruises brands. The registered trademarks include the name “Royal Caribbean” and its crown and anchor logo, the name “Celebrity Cruises” and its “X” logo, the names “Pullmantur Cruises” and “Pullmantur” and the names of various cruise ships. We believe such trademarks are widely recognized throughout the world and have considerable value.

Regulation

Our ships are regulated by various international, national, state and local laws, regulations and treaties in force in the jurisdictions in which they operate. In addition, our ships are registered in the Bahamas, Malta or in the case of Celebrity Xpedition , Ecuador. Each ship is subject to regulations issued by its country of registry, including regulations issued pursuant to international treaties governing the safety of the ship and its passengers. Each country of registry conducts periodic inspections to verify compliance with these regulations. Ships operating out of United States ports are subject to inspection by the United States Coast Guard for compliance with international treaties and by the United States Public Health Service for sanitary conditions. Our ships are also subject to similar inspections pursuant to the laws and regulations of various other countries our ships visit.

Our ships are required to comply with international safety standards defined in the Safety of Life at Sea Convention. The Safety of Life at Sea Convention standards are revised from time to time and the most recent modifications are being phased in through 2010. We do not anticipate that we will be required to make any material expenditures in order to comply with these rules.

We are required to obtain certificates from the United States Federal Maritime Commission relating to our ability to satisfy liability in cases of non-performance of obligations to passengers, as well as casualty and personal injury. Pursuant to the United States Federal Maritime Commission regulations, we arrange through our insurers for the provision of guarantees aggregating $45.0 million for our ship-operating companies as a condition to obtaining the required certificates. The United States Federal Maritime Commission has proposed various revisions to the financial responsibility regulations, which could require us to significantly increase the amount of our bonds and accordingly increase our costs of compliance.

We are also required by the United Kingdom and other jurisdictions to establish our financial responsibility for any liability resulting from the non-performance of our obligations to passengers from these jurisdictions. In the United Kingdom, we are currently required by the United Kingdom Passenger Shipping Association and United Kingdom Civil Aviation Authority to provide performance bonds totaling approximately £44.3 million.

We are subject to various United States and international laws and regulations relating to environmental protection. Under such laws and regulations, we are prohibited from, among other things, discharging certain materials, such as petrochemicals and plastics, into the waterways. We have made, and will continue to make, capital and other expenditures to comply with environmental laws and regulations. From time to time, environmental and other regulators consider more stringent regulations, which may affect our operations and increase our compliance costs. We believe that the impact of cruise ships on the global environment will continue to be an area of focus by the relevant authorities throughout the world and, accordingly, this will likely subject us to increasing compliance costs in the future.

We are required to obtain certificates from the United States Coast Guard relating to our ability to satisfy liability in cases of water pollution. Pursuant to United States Coast Guard regulations, we arrange through our insurers for the provision of guarantees aggregating $318.0 million as a condition to obtaining the required certificates.

We believe that we are in material compliance with all the regulations applicable to our ships and that we have all licenses necessary to conduct our business. Health, safety, security and financial responsibility issues are, and we believe will continue to be, an area of focus by the relevant government authorities in the United States and internationally. From time to time, various regulatory and legislative changes may be proposed that could impact our operations and would likely subject us to increasing compliance costs in the future.

Taxation of the Company

United States Federal Income Tax

The following discussion of the application of the United States federal income tax laws to us and our subsidiaries is based on the current provisions of the United States Internal Revenue Code, Treasury Department regulations, administrative rulings, and court decisions. All of the foregoing is subject to change, and any such change could affect the accuracy of this discussion.

Application of Section 883 of the Internal Revenue Code

We and our subsidiary, Celebrity Cruises Inc., the operator of Celebrity Cruises, are foreign corporations engaged in a trade or business in the United States, and our ship-owning subsidiaries are foreign corporations that, in many cases, depending upon the itineraries of their ships, receive income from sources within the United States. Under Section 883 of the Internal Revenue Code, certain foreign corporations are not subject to United States income or branch profits tax on United States source income derived from or incidental to the international operation of a ship or ships, including income from the leasing of such ships.

A foreign corporation will qualify for the benefits of Section 883 if, in relevant part: (1) the foreign country in which the foreign corporation is organized grants an equivalent exemption to corporations organized in the United States; and (2)(A) more than 50% of the value of the corporation’s capital stock is owned, directly or indirectly, by individuals who are residents of a foreign country that grants such an equivalent exemption to corporations organized in the United States, or (B) the stock of the corporation (or the direct or indirect corporate parent thereof) is “primarily and regularly traded on an established securities market” in the United States or another qualifying country such as Norway. In the opinion of our United States tax counsel, Drinker Biddle & Reath LLP, based on the representations and assumptions set forth in that opinion, we, Celebrity Cruises Inc. and our ship-owning subsidiaries qualify for the benefits of Section 883 because we and each of those subsidiaries are incorporated in Liberia or Malta, which are qualifying countries, and our common stock is primarily and regularly traded on an established securities market in the United States or Norway.

We believe that most of our income and the income of our ship-owning subsidiaries is derived from or incidental to the international operation of a ship or ships and, therefore, is exempt from taxation under Section 883. In 2005, final regulations became effective under Section 883, which, among other things, narrow somewhat the scope of activities that are considered by the Internal Revenue Service to be incidental to the international operation of ships. The activities listed in the regulations as not being incidental to the international operation of ships include income from the sale of air and land transportation, shore excursions and pre and post cruise tours. To the extent the income from these activities is earned from sources within the United States, that income will be subject to United States taxation; but the determination of the precise amount of such United States source income involves some uncertainties. The tax impact of these new regulations reduced our net income for the year ended December 31, 2006 by approximately $6.3 million, and we anticipate tax impacts in subsequent years on an ongoing basis.

Under certain circumstances, changes in the identity, residence or holdings of our direct or indirect shareholders could cause our common stock not to be “regularly traded on an established securities market” within the meaning of the regulations under Section 883. To substantially reduce any such risk, in May 2000, our Articles of Incorporation were amended to prohibit any person, other than our two existing largest shareholders, from owning, directly or constructively as determined for purposes of Section 883(c)(3) of the Internal Revenue Code and the regulations promulgated under it, more than 4.9% of the relevant class or classes of our shares. Under Liberian law, this amendment may not be enforceable with respect to shares of common stock that were voted against the amendment or that were recorded as abstaining from the vote.

Also, it should be noted that Section 883 has been the subject of legislative modifications in past years that have had the effect of limiting its availability to certain taxpayers, and there can be no assurance that future legislation will not preclude us from obtaining the benefits of Section 883. At this time, however, there is no known limiting legislation pending before the United States Congress.

Taxation in the Absence of an Exemption under Section 883 of the Internal Revenue Code

If we, Celebrity Cruises Inc., or our ship-owning subsidiaries were to fail to meet the requirements of Section 883 of the Internal Revenue Code, or if the provision was repealed, then, as explained below, such companies would be subject to United States income taxation on a portion of their income derived from or incidental to the international operation of our ships.

Because we and Celebrity Cruises Inc. conduct a trade or business in the United States, we and Celebrity Cruises Inc. would be taxable at regular corporate rates on our separate company taxable income (i.e., without regard to the income of our ship-owning subsidiaries), from United States sources, which includes 100% of income, if any, from transportation that begins and ends in the United States (not including possessions of the United States), 50% of income from transportation that either begins or ends in the United States, and no income from transportation that neither begins nor ends in the United States. The legislative history of the transportation income source rules suggests that a cruise that begins and ends in a United States port, but that calls on more than one foreign port, will derive United States source income only from the first and last legs of such cruise. This conclusion is not free from doubt, however, because there are no regulations or other Internal Revenue Service interpretations of the above rules. In addition, if any of our earnings and profits effectively connected with our United States trade or business were withdrawn, or were deemed to have been withdrawn, from our United States trade or business, those withdrawn amounts would be subject to a “branch profits” tax at the rate of 30%. The amount of such earnings and profits would be equal to the aforesaid United States source income, with certain generally minor adjustments, less income taxes. We and Celebrity Cruises Inc. would also be potentially subject to tax on portions of certain interest paid by us at rates of up to 30%.

If Section 883 were not available to our ship-owning subsidiaries, each such subsidiary would be subject to a special 4% tax on its United States source gross transportation income, if any, each year because it does not have a fixed place of business in the United States and its income is derived from the leasing of a ship. Such United States source gross transportation income may be determined under any reasonable method, including ratios of days traveling directly to or from United States ports to total days traveling, or of the lessee’s United States source gross income from the ship (as determined under the source rules discussed in the preceding paragraph, and subject to the assumptions and qualifications set forth therein) to the lessee’s total gross income from the ship.

Maltese Income Tax

The Pullmantur ship-owning subsidiaries qualify as licensed shipping organizations in Malta. No Maltese income tax is charged on the income derived from shipping activities of a licensed shipping organization. Instead, a licensed shipping organization is liable to pay a tonnage tax based on the net tonnage of the ship or ships registered under the relevant provisions of the Merchant Shipping Act. A company qualifies as a shipping organization if it engages in qualifying activities and it obtains a license from the Registrar-General to enable it to carry on such activities. Qualifying activities include, but are not limited to, the ownership, operation (under charter or otherwise), administration and management of a ship or ships registered as a Maltese ship in terms of the Merchant Shipping Act and the carrying on of all ancillary financial, security and commercial activities in connection therewith.

Our Maltese operations that do not qualify as licensed shipping organizations, which are not considered significant, remain subject to normal Maltese corporate income tax.

United Kingdom Income Tax

The Brilliance of the Seas is operated by a company that is strategically and commercially managed in the United Kingdom, which has elected to be subject to the United Kingdom tonnage tax regime (“U.K. tonnage tax”). Companies subject to U.K. tonnage tax pay a corporate tax on a notional profit determined with reference to the net tonnage of qualifying vessels. Normal United Kingdom corporate income tax is not chargeable on the relevant shipping profits of a qualifying U.K. tonnage tax company. The requirements for a company to qualify for the U.K. tonnage tax regime include being subject to United Kingdom corporate income tax, operating qualifying ships, which are strategically and commercially managed in the United Kingdom, and fulfilling a seafarer training requirement.

Relevant shipping profits include income from the operation of qualifying ships and from shipping related activities. Our United Kingdom income from non-shipping activities which do not qualify under the U.K. tonnage tax regime and which are not considered significant, remain subject to United Kingdom corporate income tax.

Website Access to Reports

We make available, free of charge, access to our Annual Reports, all quarterly and current reports and all amendments to those reports, as soon as reasonably practicable after such reports are electronically filed with or furnished to the Securities and Exchange Commission through our website at www.rclinvestor.com . The information contained on our website is not a part of any of these reports and is not incorporated by reference herein.

Executive Officers of the Company

Pursuant to Instruction 3 to Item 401(b) of Regulation S-K, the information regarding our executive officers is hereby included in Part I of this Annual Report on Form 10-K.

Our executive officers are:

Name	Age	Position
Richard D. Fain	59	Chairman, Chief Executive Officer and Director
Adam M. Goldstein	47	President, Royal Caribbean International
Daniel J.Hanrahan	49	President, Celebrity Cruises
Brian J. Rice	48	Executive Vice President and Chief Financial Officer
Harri U. Kulovaara	54	Executive Vice President Maritime

Richard D. Fain has served as a director since 1979 and as our Chairman and Chief Executive Officer since 1988. Mr. Fain is Chairman of the Cruise Line International Association, an industry trade organization consisting of 16,000 travel agencies and 21 cruise lines. Mr. Fain has been involved in the shipping industry for over 25 years.

Adam M. Goldstein has served as President of Royal Caribbean International since February 2005. As President, Mr. Goldstein oversees fleet operations, sales, marketing and brand development for the Royal Caribbean International brand. Mr. Goldstein is also responsible for international sales and marketing in Europe and Asia, continuous improvement, government relations, supply chain management and our tour company, Royal Celebrity Tours. Mr. Goldstein has been employed with Royal Caribbean since 1988 in a variety of positions, including Executive Vice President, Brand Operations, Senior Vice President, Total Guest Satisfaction and Senior Vice President, Marketing. Mr. Goldstein served as National Chair of the Travel Industry Association of America in 2001.

Daniel J. Hanrahan has served as President of Celebrity Cruises since February 2005 and, in such capacity, is responsible for the brand’s fleet operations, sales and marketing and brand development, as well as corporate communications, human resources and sales and marketing for the Latin America and Caribbean regions. From 1999 through February 2005, Mr. Hanrahan served as Senior Vice President, Sales and Marketing, for the Royal Caribbean International brand where he oversaw the brand’s marketing and sales operations. Mr. Hanrahan is currently Chairman of the Marketing Committee for the Cruise Line International Association and a member of its executive committee. Mr. Hanrahan has been employed by the company since 1999.

Brian J. Rice has served as Executive Vice President and Chief Financial Officer since November 2006. Mr. Rice has been employed with Royal Caribbean since 1989 in a variety of positions including Executive Vice President, Revenue Performance. In such capacity, Mr. Rice was responsible for revenue performance, air/sea, groups, international operations, decision support, reservations and customer service for both Royal Caribbean International and Celebrity Cruises. In addition to serving as Executive Vice President and Chief Financial Officer, Mr. Rice will continue to oversee revenue performance.

Harri U. Kulovaara has served as Executive Vice President, Maritime, since January 2005. Mr. Kulovaara is responsible for fleet design and newbuild operations for Royal Caribbean International and Celebrity Cruises. Mr. Kulovaara also oversees our safety and environment department and chairs our Maritime Safety Advisory Board. Mr. Kulovaara has been employed with Royal Caribbean since 1995 in a variety of positions, including Senior Vice President, Marine Operations, and Senior Vice President, Quality Assurance. Mr. Kulovaara is a naval architect and engineer.

Item 1A. Risk Factors

The risk factors set forth below and elsewhere in this Annual Report on Form 10-K are important factors, among others, that could cause actual results to differ from expected or historical results. It is not possible to predict or identify all such factors. Consequently, this list should not be considered a complete statement of all potential risks or uncertainties. (See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for a note regarding forward-looking statements.)

We may lose business to competitors throughout the vacation market .

We operate in the vacation market and cruising is one of many alternatives for people choosing a vacation. We therefore risk losing business not only to other cruise lines, but also to other vacation operators, which provide other leisure options including hotels, resorts and package holidays and tours.

We face significant competition from other cruise lines, both on the basis of cruise pricing and also in terms of the nature of ships and services we offer to cruise passengers. Our principal competitors within the cruise vacation industry include Carnival Corporation & plc, which owns, among others, Carnival Cruise Lines, Princess Cruises, Holland America Line, Costa Cruises, P&O Cruises, and Cunard Line; Star Cruises, which owns, among others, Star Cruises and Norwegian Cruise Line; Mediterranean Shipping Company, which owns MSC Cruises; and Disney Cruise Line.

In the event that we do not compete effectively with other vacation alternatives and cruise companies, our results of operations and financial condition could be adversely affected.

Overcapacity within the cruise vacation industry, a reduction in demand or geo-political and economic uncertainties could have a negative impact on revenues, result in impairment of assets and may adversely affect profitability .

Cruising capacity has grown in recent years and we expect it to increase further as the major cruise vacation companies introduce new ships. Demand for cruises has been and is expected to continue to be dependent on the strength of the economies in the countries in which we market our products, the public’s attitude towards the safety of travel and the geo-political climate. Economic or political changes may reduce demand for cruise vacations and may lead to reduced occupancy and/or price discounting which, in turn, could adversely affect our results of operations and financial condition and could result in impairment of our asset values.

Fears of terrorist attacks, war and other hostilities and the spread of contagious diseases could have a negative impact on our profitability.

Events such as terrorist attacks, war and other hostilities, the spread of contagious diseases and the resulting political instability, travel restrictions and concerns over safety, health and security aspects of traveling have had, and could have in the future, a significant adverse impact on demand and pricing in the travel and vacation industry. These events could also impact our ability to source qualified crew from throughout the world at competitive costs and, therefore, increase our shipboard employee costs.

Incidents or adverse publicity concerning the cruise vacation industry or unusual weather conditions could affect our reputation and harm our future sales and profitability .

The operation of cruise ships involves the risk of accidents, illnesses and other incidents which may bring into question passenger safety, health, security and vacation satisfaction and thereby adversely affect future industry performance. Incidents involving cruise ships, adverse media publicity concerning the cruise vacation industry or unusual weather patterns or natural disasters, such as hurricanes and earthquakes, could impact demand and consequently have an adverse impact on our profitability.

Environmental, health and safety, financial responsibility and other maritime regulations could affect operations and increase operating costs .

The United States and various state and foreign government or regulatory agencies have enacted or are considering new environmental regulations or policies that could adversely impact the cruise vacation industry. Some environmental groups have lobbied for more stringent regulation of cruise ships and have generated negative publicity about the cruise vacation industry and its environmental impact. In addition, we are subject to various international, national, state and local laws, regulations and treaties that govern, among other things, safety standards applicable to our ships, health and sanitary standards applicable to our passengers, security standards on board our ships and at the ship/port interface areas, and financial responsibilities to our passengers. These issues are, and we believe will continue to be, an area of focus by the relevant authorities throughout the world. This could result in the enactment of more stringent regulation of cruise ships that would subject us to increasing compliance costs in the future.

We may not be able to obtain financing on terms that are favorable or consistent with our expectations .

To fund our capital expenditures and scheduled debt payments, we rely on a combination of cash flows provided by operations, drawdowns under our available credit facility, the incurrence of additional indebtedness and the sales of equity or debt securities in private or public securities markets. Our credit ratings impact our ability to obtain financing in financial markets and the terms of the financing. Any lowering of our credit ratings may have adverse consequences on our ability to access the financial markets and/or on our cost of financings. In addition, interest rates and our ability to obtain financing are dependent on many economic and political factors beyond our control. Accordingly, we cannot be sure that our cash flows from operations and additional financings will be available in accordance with our expectations.

Conducting business internationally may result in increased costs and other risks .

We operate our business internationally and plan to continue to develop our international presence. Operating internationally exposes us to a number of risks. Examples include political risks and risk of increases in duties and taxes as well as changes in laws and policies affecting cruising, vacation or maritime businesses, or governing the operations of foreign-based companies. Additional risks include currency fluctuations, interest rate movements, imposition of trade barriers and restrictions on repatriation of earnings. If we are unable to address these risks adequately, our results of operations and financial condition could be adversely affected.

We have ship construction contracts, which are denominated in euros. While we have entered into euro-denominated forward contracts to manage a portion of the currency risk associated with these ship construction contracts, we are exposed to fluctuations in the euro exchange rate for the portion of the ship construction contracts that has not been hedged. If the shipyard is unable to perform under the related ship construction contract, any foreign currency hedges that were entered into to manage the currency risk would need to be terminated. Termination of these contracts could result in a significant loss.

Ship construction delays or mechanical faults may result in cancellation of cruises and unscheduled drydocks and repairs .

We depend on shipyards to construct and deliver our cruise ships on a timely basis and in good working order. The sophisticated nature of building a ship involves risks. Delays or mechanical faults in ship construction have in the past and may in the future result in delays or cancellation of cruises or necessitate unscheduled drydocks and repairs of ships. Shipyard insolvency and other industrial actions could also delay or indefinitely postpone the timely delivery of new ships. We have experienced mechanical problems with the pod propulsion units on certain ships and there can be no assurance that we will not experience such problems in the future. These events together with any related adverse publicity could, to the extent they are not covered by contractual provisions or insurances, adversely affect our financial results.

Our operating costs and taxes could increase due to market forces and economic or political factors beyond our control.

Our operating costs, including fuel, food, payroll, insurance and security costs, are subject to increases due to market forces and economic or political instability or other factors beyond our control. Increases in these operating costs could adversely affect our profitability. In addition, United States state and local authorities as well as foreign authorities periodically consider increases in taxes. The implementation of these and other taxes could also cause an increase in our costs.

Unavailability of ports of call may adversely affect our profits .

We believe that port destinations are a major reason why passengers choose to go on a particular cruise or on a cruise vacation. The availability of ports is affected by a number of factors, including, but not limited to, existing capacity constraints, security concerns, adverse weather conditions and natural disasters, financial limitations on port development, local governmental regulations and local community concerns about port development and other adverse impacts on their communities from additional tourists. Any limitations on the availability of our ports of call could adversely affect our profits.

A change in our tax status under the United States Internal Revenue Code may have adverse effects on our income .

We and a number of our subsidiaries are foreign corporations that derive income from a United States trade or business and/or from sources within the United States. Drinker Biddle & Reath LLP, our United States tax counsel, has delivered to us an opinion, based on certain representations and assumptions set forth in it, to the effect that this income, to the extent derived from or incidental to the international operation of a ship or ships, is exempt from United States income tax pursuant to Section 883 of the Internal Revenue Code. We believe that most of our income (including that of our subsidiaries) is derived from or incidental to the international operation of a ship or ships.

In 2005, final regulations under Section 883 became effective, which narrowed somewhat the scope of activities that are considered by the Internal Revenue Service to be incidental to the international operation of ships. To the extent the income from non-incidental activities is earned from sources within the United States, that income will be subject to United States taxation; but the determination of the precise amount of such Untied States source income involves some uncertainties. The tax impact of these new regulations reduced our net income for the year ended December 31, 2006 by approximately $6.3 million and we anticipate tax impacts in subsequent years on an ongoing basis.

It should also be noted that the provisions of Section 883 are subject to change at any time by legislation. Moreover, changes could occur in the future with respect to the identity, residence or holdings of our direct or indirect shareholders that could affect our eligibility for the Section 883 exemption. Accordingly, there can be no assurance that we will continue to be exempt from United States income tax on United States source shipping income in the future. If we were not entitled to the benefit of Section 883, we and our subsidiaries would be subject to United States taxation on a portion of the income derived from or incidental to the international operation of our ships, which would reduce our net income. See Taxation of the Company above for a discussion of such taxation in the absence of an exemption under Section 883.

Finally, changes in the income tax laws affecting our cruise business in Malta, the United Kingdom or elsewhere could result in higher income taxes being charged against our cruise operations, resulting in lower net income.

We are controlled by principal shareholders that have the power to determine our policies, management and actions requiring shareholder approval .

As of February 7, 2007, A. Wilhelmsen AS., a Norwegian corporation indirectly owned by members of the Wilhelmsen family of Norway, owned approximately 20.2% of our common stock and Cruise Associates, a Bahamian general partnership indirectly owned by various trusts primarily for the benefit of certain members of the Pritzker family and various trusts primarily for the benefit of certain members of the Ofer family, owned approximately 15.7% of our common stock. A. Wilhelmsen AS. and Cruise Associates have the power to determine, among other things:

• our policies and the policies of our subsidiaries,

• the persons who will be our directors and officers, and

• actions requiring shareholder approval.

A. Wilhelmsen AS. and Cruise Associates are parties to a shareholders’ agreement. The agreement provides that our board of directors will consist of the following persons:

• four nominees of A. Wilhelmsen AS.,

• four nominees of Cruise Associates and

• our Chief Executive Officer.

During the term of the shareholders’ agreement, certain corporate actions require the approval of at least one director nominated by A. Wilhelmsen AS. and one director nominated by Cruise Associates. Our principal shareholders are not prohibited from engaging in a business that may compete with our business, subject to certain exceptions. If any person other than A. Wilhelmsen AS. and Cruise Associates, our two principal shareholders, acquires ownership of more than 30% of our common stock and our two principal shareholders, in the aggregate, own less of our common stock than such person and do not collectively have the right to elect, or to designate for election, at least a majority of the board of directors, we may be obligated to prepay indebtedness outstanding under the majority of our credit facilities, which we may be unable to replace on similar terms. If this were to occur, it could have an adverse impact on our liquidity and operations.

The holders of our common stock may experience a decrease in the value of their equity interest as a result of the sale of currently restricted shares of our common stock into the public market .

A substantial number of shares of our common stock were either issued by us in private transactions not involving a public offering or are held by our affiliates and, therefore the sale of these securities is subject to restrictions under the Securities Act of 1933 (“Securities Act”). These shares include the 20.2% shares of our common stock held by A. Wilhelmsen AS. and the 15.7% held by Cruise Associates. No predictions can be made as to the effect, if any, that market sales of such shares, or the availability of such shares for future market sales, will have on the market price of our common stock prevailing from time to time. Sales of substantial amounts of our common stock, or the perceptions that such sales could occur, could materially adversely affect the prevailing market price for our common stock and could impair our ability to raise capital through an offering of equity securities. Each of A. Wilhelmsen AS. and Cruise Associates has the right, pursuant to a registration rights agreement, to require us, subject to certain qualifications, to effect the registration under the Securities Act of all or part of their shares of common stock which would allow these shares to be sold into the public market.

We are not a United States corporation and our shareholders may be subject to the uncertainties of a foreign legal system in protecting their interests .

Our corporate affairs are governed by our Restated Articles of Incorporation and By-Laws and by the Business Corporation Act of Liberia. The provisions of the Business Corporation Act of Liberia resemble provisions of the corporation laws of a number of states in the United States. However, while most states have a fairly well developed body

of case law interpreting their respective corporate statutes, there are very few judicial cases in Liberia interpreting the Business Corporation Act of Liberia. For example, the rights and fiduciary responsibilities of directors under Liberian law are not as clearly established as the rights and fiduciary responsibilities of directors under statutes or judicial precedent in existence in certain United States jurisdictions. Thus, our public shareholders may have more difficulty in protecting their interests with respect to actions by management, directors or controlling shareholders than would shareholders of a corporation incorporated in a United States jurisdiction.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Information about our cruise ships, including their size and primary areas of operation, may be found within the Operating Strategies - Fleet Expansion section and the Operations - Cruise Ships and Itineraries section in Item 1 . Business . Information regarding our cruise ships under construction, estimated expenditures and financing may be found within the Future Capital Commitments and Funding Sources sections of Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Our principal executive office and shoreside operations are located at the Port of Miami, Florida where we lease three office buildings totaling approximately 359,000 square feet from Miami-Dade County, Florida, under long-term leases with initial terms expiring in various years in and after 2011. We also lease offices in Addlestone, England, which are used primarily to administer our operations in Europe, and an office in Madrid, Spain to administer our Pullmantur operations.

We lease an office building in Springfield, Oregon totaling approximately 163,000 square feet, which is used as a call center for reservations. In addition, we lease an office building in Wichita, Kansas totaling approximately 95,000 square feet, which is used as a call center for reservations and customer service.

We lease an office building in Miramar, Florida totaling approximately 128,000 square feet, which is used primarily as additional office space.

Royal Caribbean International operates two private destinations: (i) an island we own in the Bahamas which we call Cococay; and (ii) Labadee, a secluded peninsula which we lease and is located on the north coast of Haiti.

Item 3. Legal Proceedings

In April 2005, a purported class action lawsuit was filed in the United States District Court of the Southern District of Florida alleging that Celebrity Cruises improperly requires its cabin stewards to share guest gratuities with assistant cabin stewards. The suit sought payment of damages, including penalty wages under the U.S. Seaman’s Wage Act. In March 2006, the Southern District of Florida dismissed the suit and held that the case should be arbitrated pursuant to the arbitration provision in Celebrity’s collective bargaining agreement. In April 2006, the plaintiff appealed the order to the United States 11th Circuit Court of Appeals. We are not able at this time to estimate the impact of this proceeding on us. However, we believe that we have meritorious defenses and we intend to vigorously defend against this action.

In January 2006, a purported class action lawsuit was filed in the United States District Court for the Southern District of New York alleging that we infringed rights in copyrighted works and other intellectual property by presenting performances on our cruise ships without securing the necessary licenses. The suit seeks payment of damages, disgorgement of profits and a permanent injunction against future infringement. In April 2006, we filed a motion to sever and transfer the case to the United States District Court for the Southern District of Florida. The motion is pending. We are not able at this time to estimate the impact of this proceeding on us.

The suit seeks payment of damages, including penalty wages under the U.S. Seaman’s Wage Act and equitable relief damages under the California Unfair Competition Law. In December 2006, the District Court granted our motion to dismiss the claim and held that it should be arbitrated pursuant to the arbitration provision in Royal Caribbean’s collective bargaining agreement. In January 2007, the plaintiffs appealed the order to the United States Ninth Circuit Court of Appeals. We are not able at this time to estimate the impact of this proceeding on us. However, we believe that we have meritorious defenses and we intend to vigorously defend against this action.

Item 4. Submission of Matters to a Vote of Security Holders

None.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Our common stock is listed on the New York Stock Exchange (“NYSE”) and the Oslo Stock Exchange (“OSE”) under the symbol “RCL”. The table below sets forth the intra-day high and low prices of our common stock as reported by the NYSE and the OSE for the two most recent years by quarter:

	NYSE Common Stock		OSE Common Stock (1)
	High	Low	High	Low

2006 Fourth Quarter	$43.97	$38.06	282.00	243.00
Third Quarter	39.28	32.47	260.00	203.50
Second Quarter	43.86	35.00	280.00	213.00
First Quarter	46.77	40.59	316.50	271.00
2005 Fourth Quarter	$47.35	$38.59	319.94	251.52
Third Quarter	49.47	41.56	327.03	258.96
Second Quarter	49.00	40.72	320.70	257.03
First Quarter	55.23	43.05	345.47	271.14

__________

(1)

Denominated in Norwegian kroner.

Holders

As of February 7, 2007 there were 1,058 record holders of our common stock. Since certain of our shares are held indirectly, the foregoing number is not representative of the number of beneficial owners.

Dividends

We declared cash dividends on our common stock of $0.15 per share in each of the quarters of 2006. Cash dividends of $0.13 per share on our common stock were declared in each of the first and second quarters of 2005 and $0.15 per share in each of the third and fourth quarters of 2005.

Holders of our common stock have an equal right to share in our profits in the form of dividends when declared by our board of directors out of funds legally available for the distribution of dividends. Holders of our common stock have no rights to any sinking fund.

There are no exchange control restrictions on remittances of dividends on our common stock. Since (1) we are and intend to maintain our status as a nonresident Liberian entity under the Revenue Code of Liberia (2000) and the regulations thereunder, and (2) our ship-owning subsidiaries are not now engaged, and are not in the future expected to engage, in any business in Liberia, including voyages exclusively within the territorial waters of the Republic of Liberia, we have been advised by Watson, Farley & Williams (New York) LLP, our special Liberian counsel, that under current Liberian law, no Liberian taxes or withholding will be imposed on payments to holders of our securities other than to a holder that is a resident Liberian entity or a resident individual or an individual or entity subject to taxation in Liberia as a result of having a permanent establishment within the meaning of the Revenue Code of Liberia (2000) in Liberia.

The declaration of dividends shall at all times be subject to the final determination of our board of directors that a dividend is prudent at that time in consideration of the needs of the business. The shareholders agreement provides that A. Wilhelmsen AS. and Cruise Associates will from time to time consider our dividend policy with due regard for the interests of the shareholders in maximizing the return on their investment and our ability to pay such dividends. The shareholders agreement also provides that payment of dividends will depend, among other factors, upon our earnings, financial condition and capital requirements and the income and other tax liabilities of A. Wilhelmsen AS., Cruise Associates and their respective affiliates relating to their ownership of common stock.

Issuer Purchases of Equity Securities

None.

Performance Graph

The following graph compares the performance of the Company’s common stock with the performance of the Standard & Poor’s 500 Composite Stock Index and the Dow Jones U.S. Travel and Leisure Index for a five year period by measuring the changes in common stock prices from December 31, 2001 to December 31, 2006.

The stock performance graph assumes for comparison that the value of the Company’s Common Stock and of each index was $100 on December 31, 2001 and that all dividends were reinvested. Past performance is not necessarily an indicator of future results.

Item 6. Selected Financial Data

The selected consolidated financial data presented below for the years 2002 through 2006 and as of the end of each such year, are derived from our audited financial statements and should be read in conjunction with those financial statements and the related notes.

	Year Ended December 31,

	2006	2005	2004	2003	2002

	(in thousands, except per share data)
Operating Data:
Total revenues	$5,229,584	$4,903,174	$4,555,375	$3,784,249	$3,434,347
Operating income	858,446	871,565	753,589	526,185	550,975
Income before cumulative effect of a change in accounting principle	633,922	663,465	474,691	280,664	351,284
Cumulative effect of a change in accounting principle ¹	-	52,491	-	-	-
Net income	633,922	715,956	474,691	280,664	351,284
Per Share Data — Basic:
Income before cumulative effect of a change in accounting principle	$3.01	$3.22	$2.39	$1.45	$1.82
Cumulative effect of a change in accounting principle ¹	$ -	$0.25	$ -	$ -	$ -
Net income	$3.01	$3.47	$2.39	$1.45	$1.82
Weighted-average shares	210,703	206,217	198,946	194,074	192,485
Per Share Data — Diluted:
Income before cumulative effect of a change in accounting principle	$2.94	$3.03	$2.26	$1.42	$1.76
Cumulative effect of a change in accounting principle ¹	$ -	$0.22	$ -	$ -	$ -
Net income	$2.94	$3.26	$2.26	$1.42	$1.76
Weighted-average shares and potentially dilutive shares	221,485	234,714	234,580	211,175	209,565
Dividends declared per common share	$0.60	$0.56	$0.52	$0.52	$0.52
Balance Sheet Data:
Total assets	$13,393,088	$11,255,771	$11,964,084	$11,322,742	$10,538,531
Total debt, including capital leases	5,413,744	4,154,775	5,731,944	5,835,804	5,444,838
Common stock	2,225	2,165	2,012	1,961	1,930
Total shareholders’ equity	6,091,575	5,554,465	4,804,520	4,262,897	4,034,694

¹ In the third quarter of 2005, we changed our method of accounting for drydocking costs from the accrual in advance to the deferral method (see Note 2. Summary of Significant Accounting Policies to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data .)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Certain statements under this caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this document constitute forward-looking statements under the Private Securities Litigation Reform Act of 1995. Words such as “expect,” “anticipate,” “goal,” “project,” “plan,” “believe,” “seek” and similar expressions are intended to identify these forward-looking statements. Forward-looking statements do not guarantee future performance and may involve risks, uncertainties and other factors, which could cause our actual results, performance or achievements to differ materially from the future results, performance or achievements expressed or implied in those forward-looking statements. Examples of these risks, uncertainties and other factors include, but are not limited to those discussed under Item 1A . Risk Factors as well as the following:

• general economic and business conditions,

• vacation industry competition and changes in industry capacity and overcapacity,

• the impact of tax laws and regulations affecting our business or our principal shareholders,

• the impact of changes in other laws and regulations affecting our business,

• the impact of pending or threatened litigation,

• the delivery of scheduled new ships,

• emergency ship repairs,

• negative incidents involving cruise ships including those involving the health and safety of passengers,

• reduced consumer demand for cruises as a result of any number of reasons, including geo-political and economic uncertainties and the unavailability of air service,

• fears of terrorist attacks, armed conflict and the resulting concerns over safety and security aspects of traveling,

• the impact of the spread of contagious diseases,

• the availability under our unsecured revolving credit facility, cash flows from operations and our ability to obtain new borrowings and raise new capital on terms that are favorable or consistent with our expectations to fund operations, debt payment requirements, capital expenditures and other commitments,

• changes in our stock price or principal shareholders,

• the impact of changes in operating and financing costs, including changes in foreign currency, interest rates, fuel, food, payroll, insurance and security costs,

• weather.

The above examples are not exhaustive and new risks emerge from time to time. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Critical Accounting Policies

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. (See Note 1. General and Note 2. Summary of Significant Accounting Policies to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data .) Certain of our accounting policies are deemed “critical,” as they require management’s highest degree of judgment, estimates and assumptions. We have discussed these accounting policies and estimates with the audit committee of our board of directors. We believe our most critical accounting policies are as follows:

Ship Accounting

Our ships represent our most significant assets and are stated at cost less accumulated depreciation or amortization. Depreciation of ships is generally computed net of a 15% projected residual value using the straight-line method over estimated service lives of primarily 30 years. Improvement costs that we believe add value to our ships are capitalized as additions to the ship and depreciated over the improvements’ estimated useful lives. The estimated cost and accumulated depreciation of refurbished or replaced ship components are written off and any resulting losses are recognized in cruise operating expenses. Repairs and maintenance activities are charged to expense as incurred. We use the deferral method to account for drydocking costs. Under the deferral method, drydocking costs incurred are deferred and charged to expense on a straight-line basis over the period to the next scheduled drydock. (See Note 2. Summary of Significant Accounting Policies to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data ).

Our service life and residual value estimates take into consideration the impact of anticipated technological changes, long-term cruise and vacation market conditions and historical useful lives of similarly-built ships. In addition, we take into consideration our estimates of the average useful lives of the ships’ major component systems, such as hull, superstructure, main electric, engines and cabins. Given the very large and complex nature of our ships, our accounting estimates related to ships and determinations of ship improvement costs to be capitalized require considerable judgment and are inherently uncertain. We do not have cost segregation studies performed to specifically componentize our ship systems; therefore, we estimate the costs of component systems based principally on general and technical information known about major ship component systems and their lives and our knowledge of the cruise vacation industry. We do not identify and track depreciation by ship component systems, but instead utilize these estimates to determine the net cost basis of assets replaced or refurbished.

We believe we have made reasonable estimates for ship accounting purposes. However, should certain factors or circumstances cause us to revise our estimates of ship service lives or projected residual values, depreciation expense could be materially higher or lower. If circumstances cause us to change our assumptions in making determinations as to whether ship improvements should be capitalized, the amounts we expense each year as repairs and maintenance costs could increase, partially offset by a decrease in depreciation expense. If we had reduced our estimated average 30-year ship service life by one year, depreciation expense for 2006 would have increased by approximately $27.4 million. If our ships were estimated to have no residual value, depreciation expense for 2006 would have increased by approximately $93.9 million.

Valuation of Long-Lived Assets and Goodwill

We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be fully recoverable. The assessment of possible impairment is based on our ability to recover the carrying value of our asset based on our estimate of its undiscounted future cash flows. If these estimated future cash flows were less than the carrying value of the asset, an impairment charge would be recognized for the difference between the asset’s estimated fair value and its carrying value.

The determination of fair value is based on quoted market prices in active markets, if available. Such markets are often not available for used cruise ships. Accordingly, we also base fair value on independent appraisals, sales price negotiations and projected future cash flows discounted at a rate determined by management to be commensurate with our business risk. The estimation of fair value utilizing discounted forecasted cash flows includes numerous uncertainties which require our significant judgment when making assumptions of revenues, operating costs, marketing, selling and administrative expenses, interest rates, ship additions and retirements, cruise vacation industry competition and general economic and business conditions, among other factors.

Goodwill and other intangible assets are reviewed annually or whenever events or changes in circumstances indicate that the carrying amount of the intangible asset may not be fully recoverable. The impairment review consists of comparing the fair value of our reporting units with their carrying value including the intangible asset. If the carrying value of the reporting unit exceeds its fair value, it may be an indication of possible impairment of assets. In this case we would compare the fair value of the reporting unit to the carrying value of the intangible asset. If the carrying value of the intangible asset exceeds the fair value of the reporting unit, an impairment charge would be recognized for the difference between the carrying value of the intangible asset and the fair value of the reporting unit. We use a present value of future cash flows approach to determine the fair value of our reporting units.

We believe we have made reasonable estimates and judgments in determining whether our long-lived assets and intangible assets have been impaired; however, if there is a material change in the assumptions used in our determination of fair values or if there is a material change in the conditions or circumstances influencing fair value, we could be required to recognize a material impairment charge.

Contingencies — Litigation

On an ongoing basis, we assess the potential liabilities related to any lawsuits or claims brought against us. While it is typically very difficult to determine the timing and ultimate outcome of such actions, we use our best judgment to determine if it is probable that we will incur an expense related to the settlement or final adjudication of such matters and whether a reasonable estimation of such probable loss, if any, can be made. In assessing probable losses, we take into consideration estimates of the amount of insurance recoveries, if any. We accrue a liability when we believe a loss is probable and the amount of loss can be reasonably estimated. Due to the inherent uncertainties related to the eventual outcome of litigation and potential insurance recoveries, it is possible that certain matters may be resolved for amounts materially different from any provisions or disclosures that we have previously made.

Terminology and Non-GAAP Financial Measures

Available Passenger Cruise Days (“APCD”) are our measurement of capacity and represent double occupancy per cabin multiplied by the number of cruise days for the period.

Gross Cruise Costs represent the sum of total cruise operating expenses plus marketing, selling and administrative expenses.

Gross Yields represent total revenues per APCD.

Net Cruise Costs represent Gross Cruise Costs excluding commissions, transportation and other expenses and onboard and other expenses (each of which is described below under the Overview heading). In measuring our ability to control costs in a manner that positively impacts net income, we believe changes in Net Cruise Costs to be the most relevant indicator of our performance. A reconciliation of historical Gross Cruise Costs to Net Cruise Costs is provided below under Summary of Historical Results of Operations . We have not provided a quantitative reconciliation of projected Gross Cruise Costs to projected Net Cruise Costs due to the significant uncertainty in projecting the costs deducted to arrive at this measure. Accordingly, we do not believe that reconciling information for such projected figures would be meaningful.

Net Debt-to-Capital is a ratio which represents total long-term debt, including current portion of long-term debt, less cash and cash equivalents (“Net Debt”) divided by the sum of Net Debt and shareholders' equity ("Capital"). We believe Net Debt and Net Debt-to-Capital, along with total long-term debt and shareholders' equity are useful measures of our capital structure. A reconciliation of historical Debt-to-Capital to Net Debt-to-Capital is provided below under Summary of Historical Results of Operations .

Net Yields represent Gross Yields less commissions, transportation and other expenses and onboard and other expenses (each of which is described below under the Overview heading) per APCD. We utilize Net Yields to manage

our business on a day-to-day basis and believe that it is the most relevant measure of our pricing performance because it reflects the cruise revenues earned by us net of our most significant variable costs. A reconciliation of historical Gross Yields to Net Yields is provided below under Summary of Historical Results of Operations . We have not provided a quantitative reconciliation of projected Gross Yields to projected Net Yields due to the significant uncertainty in projecting the costs deducted to arrive at this measure. Accordingly, we do not believe that reconciling information for such projected figures would be meaningful.

Occupancy, in accordance with cruise vacation industry practice, is calculated by dividing Passenger Cruise Days by APCD. A percentage in excess of 100% indicates that three or more passengers occupied some cabins.

Passenger Cruise Days represent the number of passengers carried for the period multiplied by the number of days of their respective cruises.

Overview

Our revenues consist of the following items:

Passenger ticket revenues consist of revenue recognized from the sale of passenger tickets and the sale of air transportation to our ships.

Onboard and other revenues consist primarily of revenues from the sale of goods and/or services onboard our ships not included in passenger ticket prices, cancellation fees, sales of vacation protection insurance and pre and post cruise hotel and air packages. Also included are revenues we receive from independent third party concessionaires that pay us a percentage of their revenues in exchange for the right to provide selected goods and/or services onboard our ships.

Our cruise operating expenses consist of the following items:

Commissions, transportation and other expenses consist of those costs directly associated with passenger ticket revenues, including travel agent commissions, air and other transportation expenses, port costs that vary with passenger head counts and related credit card fees.

Onboard and other expenses consist of the direct costs associated with onboard and other revenues. These costs include the cost of products sold onboard our ships, vacation protection insurance premiums, costs associated with pre and post tours and related credit card fees. Concession revenues have minimal costs associated with them, as the costs related to these activities are incurred by the concessionaires.

Payroll and related expenses consist of costs for shipboard personnel.

Food expenses include food costs for both passengers and crew.

Fuel expenses include fuel costs, net of the financial impact of fuel swap agreements, and fuel delivery costs.

Other operating expenses consist of operating costs such as repairs and maintenance, port costs that do not vary with passenger head counts, insurance, entertainment and all other operating costs.

We do not allocate payroll and related costs, food costs, fuel costs or other operating costs to the expense categories attributable to passenger ticket revenues or onboard and other revenues since they are incurred to provide the total cruise vacation experience.

Summary of Historical Results of Operations

We achieved a 3.4 % increase in Net Yields in 2006 as compared to 2005, marking the third consecutive year of positive yield growth. This increase is primarily due to a favorable pricing environment driven by a positive demand for our products. In contrast, increases in fuel costs represented a challenge for us again in 2006. Although price and consumption related initiatives partially mitigated the increase in fuel costs, fuel expenses on an APCD basis increased 26.7% in 2006 as compared to 2005. As a result, income before the cumulative effect of a change in accounting principle in 2006 decreased to $633.9 million or $2.94 per share on a fully diluted basis compared to $663.5 million or $3.03 per share on a fully diluted basis in 2005.

Highlights for 2006 included:

•	Total revenues increased 6.7% to $5.2 billion from total revenues of $4.9 billion in 2005 primarily due to a 3.5% increase in Gross Yields and a 3.0% increase in capacity.

•	Net Cruise Costs per APCD increased 6.4% compared to 2005 primarily as a result of increases in the cost of fuel and marketing, selling and administrative expenses during the year.

•	Our Net Debt-to-Capital ratio increased to 46.6% in 2006 from 42.0% in 2005 primarily due to the financing of our acquisition of Pullmantur. Similarly, our Debt-to-Capital ratio increased to 47.1% in 2006 from 42.8% in 2005.

•	We took delivery of Freedom of the Seas , Royal Caribbean International’s first Freedom-class ship, which was financed with a $570.0 million unsecured term loan.

•	We placed three additional ship orders, one for Royal Caribbean International and two for Celebrity Cruises bringing our total number of ships on order to six for an additional capacity of approximately 21,150 berths.

•	We acquired Pullmantur in November 2006. For reporting purposes, however, we will be including Pullmantur’s results of operations on a two-month lag beginning with the first quarter of 2007. We have included Pullmantur’s balance sheet in our consolidated balance sheet as of December 31, 2006.
•	We called for redemption all of our outstanding zero coupon convertible notes due May 18, 2021. Most note holders elected to convert their notes into shares of our common stock rather than redeem them for cash, resulting in the issuance of approximately 4.1 million shares of our common stock through the end of the redemption period.

•

Under a forward sale agreement relating to an Accelerated Share Repurchase (“ASR”) transaction, we purchased 4.6 million shares of our common stock at a price of $35.99 per share. The ASR transaction was initiated to offset the dilution from the call for redemption and conversion of our zero coupon convertible notes into common shares.

•	We paid $530.6 million to redeem in full the accreted balance of our outstanding Liquid Yield Option™ Notes (“LYONs”) due February 2, 2021.

•	We issued at a discount, $900.0 million of senior unsecured notes to fund the redemption of our LYONs and the ASR transaction.

•	We recorded a net gain of $36.0 million resulting from the partial settlement of a pending lawsuit against Rolls Royce and Alstom Power Conversion for recurring pod failures on Millennium-class ships.

Total revenues for 2005 increased 7.6% to $4.9 billion from total revenues of $4.6 billion in 2004. The increase in total revenues was primarily as a result of increases in ticket prices. During 2005, Net Yields increased 7.4% and Net Cruise Costs per APCD increased 6.3% compared to 2004. Gross Cruise Costs increased 6.5% in 2005 compared to 2004 primarily as a result of increases in fuel expenses.

Our revenues are seasonal based on demand for cruises. Demand is strongest for cruises during the summer months and holidays.

We reported historical total revenues, operating income, income before cumulative effect of a change in accounting principle, cumulative effect of a change in accounting principle, net income and earnings per share as shown in the following table (in thousands, except per share data):

	Year Ended December 31,

	2006	2005	2004

Total revenues	$5,229,584	$4,903,174	$4,555,375

Operating income	$858,446	$871,565	$753,589

Income before cumulative effect of a change in accounting principle	$633,922	$663,465	$474,691
Cumulative effect of a change in accounting principle ¹	-	52,491	-

Net income	$633,922	$715,956	$474,691

Basic earnings per share:
Income before cumulative effect of a change in accounting principle	$ 3.01	$ 3.22	$ 2.39
Cumulative effect of a change in accounting principle ¹	$ -	$ 0.25	$ -
Net income	$ 3.01	$ 3.47	$ 2.39
Diluted earnings per share:
Income before cumulative effect of a change in accounting principle	$ 2.94	$ 3.03	$ 2.26
Cumulative effect of a change in accounting principle ¹	$ -	$ 0.22	$ -
Net income	$ 2.94	$ 3.26	$ 2.26

The following table presents historical operating data as a percentage of total revenues for the last three years:

	Year Ended December 31,

	2006	2005	2004


Passenger ticket revenues	73.4	73.6	73.7
Onboard and other revenues	26.6	26.4	26.3

Total revenues	100.0%	100.0%	100.0%

Cruise operating expenses
Commissions, transportation and other	17.6	17.5	18.1
Onboard and other	6.3	6.3	6.6
Payroll and related	9.6	10.4	10.7
Food	5.3	5.5	5.9
Fuel	9.2	7.5	5.5
Other operating	14.1	13.8	15.1

Total cruise operating expenses	62.1	61.0	61.9
Marketing, selling and administrative expenses	13.4	13.0	12.9
Depreciation and amortization expenses	8.1	8.2	8.7

Operating income	16.4	17.8	16.5
Other income (expense)	(4.3 )	(4.3 )	(6.1 )

Income before cumulative effect of a change in accounting principle	12.1	13.5	-
Cumulative effect of a change in accounting principle	-	1.1	-

Net income	12.1 %	14.6 %	10.4 %

Unaudited selected historical statistical information is shown in the following table (amounts exclude Pullmantur):

	Year Ended December 31,

	2006	2005		2004

Passengers Carried	3,600,807	3,476,287		3,405,227
Passenger Cruise Days	23,849,606	23,178,560		22,661,965
APCD	22,392,478	21,733,724		21,439,288
Occupancy	106.5%		106.6%		105.7%

Gross Yields and Net Yields were calculated as follows (in thousands, except APCD and Yields):

	Year Ended December 31,

	2006	2005	2004

Passenger ticket revenues	$3,838,648	$3,609,487	$3,359,201
Onboard and other revenues	1,390,936	1,293,687	1,196,174

Total revenues	5,229,584	4,903,174	4,555,375

Less:
Commissions, transportation and other	917,929	858,606	822,206
Onboard and other	331,218	308,611	300,717

Net revenues	$3,980,437	$3,735,957	$3,432,452

APCD	22,392,478	21,733,724	21,439,288
Gross Yields	$233.54	$225.60	$212.48
Net Yields	$177.76	$171.90	$160.10

Gross Cruise Costs and Net Cruise Costs were calculated as follows (in thousands, except APCD and costs per APCD):

	Year Ended December 31,

	2006	2005	2004

Total cruise operating expenses	$3,249,629	$2,994,232	$2,819,383
Marketing, selling and administrative expenses	699,864	635,308	588,267

Gross Cruise Costs	3,949,493	3,629,540	3,407,650

Less:
Commissions, transportation and other	917,929	858,606	822,206
Onboard and other	331,218	308,611	300,717

Net Cruise Costs	$2,700,346	$2,462,323	$2,284,727

APCD	22,392,478	21,733,724	21,439,288
Gross Cruise Costs per APCD	$176.38	$167.00	$158.94
Net Cruise Costs per APCD	$120.59	$113.30	$106.57

Net Debt-to-Capital was calculated as follows (in thousands):

	As of
	December 31,
	2006	2005
Long-term debt, net of current portion	$5,040,322	$3,553,892
Current portion of long-term debt	373,422	600,883
Total debt	5,413,744	4,154,775
Less: Cash and cash equivalents	104,520	125,385
Net Debt	$5,309,224	$4,029,390


Total shareholders' equity, “Capital”	$6,091,575	$5,554,465
Debt	5,413,744	4,154,775
Debt and Capital	11,505,319	9,709,240
Debt-to-Capital	47.1%	42.8%
Net Debt	5,309,224	4,029,390
Net Debt and Capital	$11,400,799	$9,583,855

Net Debt-to-Capital	46.6%	42.0%

Outlook

Full Year 2007

On February 5, 2007, we announced that bookings continued to be solid, while pricing appeared to be leveling off from the appreciation experienced over the last few years. We expected Net Yields to increase in a range around 3% as compared to 2006. We expected Pullmantur’s cruise brand to account for one percentage point of this change, and that its non-cruise operations would contribute an additional percentage point.

Net Cruise Costs per APCD were expected to increase in a range around 3% as compared to 2006. Pullmantur’s cruise brand was expected to decrease Net Cruise Costs per APCD by approximately one percentage point. Pullmantur’s non-cruise operations were expected to increase our costs approximately four percentage points as a result of not having the benefit of additional APCDs.

Our “at-the-pump” fuel price was $361 per metric ton. We are currently 45% hedged for 2007, and estimate that a 10% change in the market price of fuel would result in a $24 million change in fuel costs after taking into account existing hedges.

We expected a 12.2% increase in capacity driven by the acquisition of Pullmantur, the April delivery of Liberty of the Seas, and a full year of service from Freedom of the Seas.

Depreciation and amortization was expected to be in the range of $480.0 to $500.0 million and interest expense was expected to be in the range of $335.0 to $355.0 million in 2007.

Based on the expectations contained in this Outlook section, and assuming that fuel prices remain at the level mentioned herein, we expected full year 2007 earnings per share to be in the range of $3.05 to $3.20.

Our outlook has remained unchanged since our announcement on February 5, 2007.

First Quarter 2007

As announced on February 5, 2007, we expected Net Yields to decrease in a range around 3% in the first quarter of 2007 compared to the first quarter of 2006. We expected Pullmantur’s cruise brand will account for two percentage points of the change and that its non-cruise operations will contribute an additional percentage point.

Net Cruise Costs per APCD was expected to increase in the range of 4% to 5% compared to the first quarter of 2006. We estimated that approximately half of this increase will be driven by Pullmantur’s overall operations, with its cruise brand having a positive impact of approximately one percentage point.

Our “at-the-pump” fuel price was $361 per metric ton and has not changed significantly since our announcement. For the first quarter, our fuel expense is 60% hedged. We estimate that a 10% change in the market price of fuel would result in a $4.0 million impact on our first quarter results.

Based on the expectations contained in this Outlook section, and assuming that fuel prices remain at the level mentioned herein, we expected first quarter 2007 earnings per share to be in the range of $0.03 to $0.08.

Our outlook has remained unchanged since our announcement on February 5, 2007.

Year Ended December 31, 2006 Compared to Year Ended December 31, 2005

Revenues

Net Revenues increased 6.5% in 2006 compared to 2005 due to a 3.4% increase in Net Yields and a 3.0% increase in capacity. The increase in Net Yields was primarily due to higher cruise ticket prices, onboard spending and revenue associated with the charter of Horizon to Island Cruises, our joint venture with First Choice. Higher cruise ticket prices were primarily attributable to a strong demand environment. The increase in capacity was primarily attributed to the addition of Freedom of the Seas in 2006 and the lengthening of Enchantment of the Seas in 2005. This increase was partially offset by the charter of Horizon to Island Cruises. Occupancy in 2006 was 106.5% compared to 106.6% in 2005. Gross Yields increased 3.5% in 2006 compared to 2005 primarily due to the same reasons discussed above for Net Yields.

Onboard and other revenues included concession revenues of $234.5 million and $223.0 million in 2006 and 2005, respectively. The increase in concession revenues was primarily due to the increase in capacity mentioned above and higher amounts spent per passenger onboard.

Expenses

Net Cruise Costs increased 9.7% in 2006 compared to 2005 due to a 6.4% increase in Net Cruise Costs per APCD and the 3.0% increase in capacity mentioned above. Approximately 4.0 percentage points of the increase in Net Cruise Costs per APCD were attributed to increases in fuel expenses. Total fuel expenses (net of the financial impact of fuel swap agreements) increased 28.2% per metric ton in 2006 as compared to an increase of 46.0% per metric ton in 2005. As a percentage of total revenues, fuel expenses were 9.2% and 7.5% in 2006 and 2005, respectively. The remaining 2.4 percentage points of the increase in Net Cruise Costs per APCD were primarily attributed to increases in marketing, selling and administrative expenses associated with personnel costs. Gross Cruise Costs increased 8.8% in 2006 compared to 2005, which was a lower percentage increase than Net Cruise Costs primarily due to lower trip insurance expenses a result of lower trip insurance premiums and lower commission expenses as a result of an increase in direct business.

Depreciation and amortization expenses increased 4.9% in 2006 compared to 2005. The increase was primarily due to the addition of Freedom of the Seas, ship improvements and shore side additions.

Other Income (Expense)

Gross interest expense increased to $295.7 million in 2006 from $287.4 million in 2005. The increase was primarily attributable to higher interest rates, partially offset by lower average debt levels. Interest capitalized increased to $27.8 million in 2006 from $17.7 million in 2005 primarily due to a higher average level of investment in ships under construction.

During 2006, we partially settled a pending lawsuit against Rolls Royce and Alstom Power Conversion, co-producers of the mermaid pod-propulsion system on Millennium-class ships, for the recurring Mermaid pod failures. Under the terms of the partial settlement, we received $38.0 million from Alstom and released them from the suit, which remains pending against Rolls Royce. The $38.0 million settlement resulted in a gain of $36.0 million, net of reimbursements to insurance companies.

In July 2005, First Choice redeemed in full its 6.75% convertible preferred shares. We received $348.1 million in cash, resulting in a net gain of $44.2 million, primarily due to foreign exchange.

Dividend income decreased approximately $14.2 million for 2006 compared to 2005 due to the redemption of our First Choice investment in the third quarter of 2005.

Cumulative Effect of a Change in Accounting Principle

In the third quarter of 2005, we changed our method of accounting for drydocking costs from the accrual in advance to the deferral method (see Note 2 . Summary of Significant Accounting Policies to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data ). The change resulted in a one-time gain of $52.5 million, or $0.22 per share on a diluted basis, to recognize the cumulative effect of the change on prior years, which we reflected as part of our results in 2005. Other than this one-time gain, the change did not have a material impact on our consolidated statement of operations.

Year Ended December 31, 2005 Compared to Year Ended December 31, 2004

Revenues

Net Revenues increased 8.8% in 2005 compared to 2004 due to a 7.4% increase in Net Yields and, to a lesser extent, a 1.4% increase in capacity. The increase in Net Yields was primarily due to higher cruise ticket prices and onboard spending. Higher cruise ticket prices were primarily attributable to a strong demand environment and a decrease in capacity growth within the industry. The increase in capacity was primarily attributed to the addition of Jewel of the Seas in 2004, partially offset by Enchantment of the Seas , which was out of service for 53 days due to its lengthening. In addition, capacity in 2004 was negatively impacted by the cancellation of certain sailings primarily due to hurricanes and unscheduled drydocks. Occupancy in 2005 was 106.6% compared to 105.7% in 2004. Gross Yields increased 6.2% in 2005 compared to 2004 primarily due to the same reasons discussed above for Net Yields.

Onboard and other revenues included concession revenues of $223.0 million and $196.3 million in 2005 and 2004, respectively. The increase in concession revenues was primarily due to higher amounts spent per passenger onboard and the increase in capacity mentioned above.

Expenses

Net Cruise Costs increased 7.8% in 2005 compared to 2004 due to a 6.3% increase in Net Cruise Costs per APCD and the 1.4% increase in capacity mentioned above. Approximately 4.9 percentage points of the increase in Net Cruise Costs per APCD was attributed to increases in fuel expenses. Total fuel expenses (net of the financial impact of fuel swap agreements) increased 46.0% per metric ton in 2005 as compared to an increase of 27.5% in 2004. As a percentage of total revenues, fuel expenses were 7.5% and 5.5% in 2005 and 2004, respectively. The remaining 1.4 percentage points of the increase in Net Cruise Costs per APCD were primarily attributed to increases in personnel costs associated with benefits. In addition, Net Cruise Costs in 2004 included approximately $11.3 million in costs related to the impact of hurricanes. Gross Cruise Costs increased 6.5% in 2005 compared to 2004, which was a lower percentage increase than Net Cruise Costs primarily due to a lower proportion of passengers who purchased air transportation from us in 2005.

Depreciation and amortization expenses increased 2.0% in 2005 compared to 2004. The increase was primarily due to the addition of Jewel of the Seas in 2004 as well as depreciation associated with other capital expenditures, including the lengthening of Enchantment of the Seas in 2005.

Other Income (Expense)

Gross interest expense decreased to $287.4 million in 2005 from $317.2 million in 2004. The decrease was primarily attributable to lower average debt level, partially offset by higher interest rates. Interest capitalized increased to $17.7 million in 2005 from $7.2 million in 2004 due to a higher average level of investment in ships under construction.

In July 2005, First Choice redeemed in full its 6.75% convertible preferred shares. We received $348.1 million in cash, resulting in a net gain of $44.2 million, primarily due to foreign exchange.

Cumulative Effect of a Change in Accounting Principle

Liquidity and Capital Resources

Sources and Uses of Cash

Cash flow generated from operations provides us with a significant source of liquidity. Net cash provided by operating activities was $948.5 million in 2006 and $1.1 billion in each of 2005 and 2004. This decrease was primarily a result of the payment of approximately $121.2 million of accreted interest in connection with the repurchase of our LYONs, a decrease in accounts payable of approximately $25.9 million and an increase in trade and other receivables of approximately $19.5 million as compared to 2005.

Net cash used in investing activities increased to $1.8 billion in 2006, from $89.0 million in 2005 and $632.5 million in 2004. The increase was primarily due to an increase in capital expenditures which were approximately $1.2 billion for the year ended December 31, 2006 compared to approximately $429.9 million in 2005 and $630.1 million in 2004. Capital expenditures were primarily related to ships under construction including the delivery of Freedom of the Seas in 2006, the lengthening of Enchantment of the Seas in 2005, and the delivery of Jewel of the Seas in 2004 as well as progress payments for ships under construction in all years. The increase in net cash used in investing activities was also driven by the purchase of Pullmantur which resulted in a cash outlay of approximately $558.9 million.

Net cash provided by financing activities was $879.7 million in 2006 compared to net cash used in financing activities of $1.5 billion in 2005 and $146.0 million in 2004. The increase in 2006 was primarily due to net proceeds from debt issuances of approximately $2.9 billion including net proceeds of approximately $890.5 million from a public offering consisting of $550.0 million of 7.0% senior unsecured notes due 2013, and $350.0 million of 7.25% senior unsecured notes due 2016. In addition, in connection with the financing of Freedom of the Seas , we entered into and drew in full a $570.0 million unsecured term loan with an interest rate of 3.77% due through 2013. We also obtained a €750.0 million, or approximately $960.5 million, unsecured short-term bridge loan to finance the acquisition of Pullmantur on which we drew €701.0 million, or approximately $925.1 million. Net cash provided by financing activities was partially offset by payments on various term loans, senior notes, revolving credit facilities and capital leases totaling approximately $1.8 billion in 2006 compared to $1.6 billion and $361.4 million in 2005 and 2004, respectively. Debt repayments in 2006 included approximately $529.6 million toward unsecured debt, $409.4 million in connection with the repurchase of our LYONs, $345.9 million of debt repaid in connection with the acquisition of Pullmantur, $260.0 million towards our $1.0 billion revolving credit facility and $237.4 million towards loans secured by certain Celebrity ships. We also purchased 4.6 million shares of our common stock in 2006 from an investment bank at a price of $35.99 per share as part of an ASR transaction. Total consideration paid to repurchase such shares, including commissions and other fees, was approximately $164.6 million. The forward sale agreement matured in 2006. During the term of the forward sale agreement, the investment bank purchased shares of our common stock in the open market to settle its obligation related to the shares borrowed from third parties and sold to us. The shares were recorded in shareholders’ equity as a component of treasury stock (see Note 7. Shareholders’ Equity ). Also in 2006 we drew $570.0 million on our revolving credit facility. In 2005, we drew $200.0 million on unsecured variable rate term loans due 2010 and $190.0 million on our revolving credit facility. In 2004, we drew $225.0 million on an unsecured variable rate term loan due 2006 through 2012. During 2006, 2005 and 2004, we received $23.0 million, $22.0 million and $98.3 million, respectively, in connection with the exercise of common stock options and we paid cash dividends on our common stock of $124.5 million, $118.8 million and $104.5 million, respectively. In 2006, we called for redemption all of our outstanding zero coupon convertible notes due May 18, 2021. Most holders of the notes elected to convert them into shares of our common stock, rather than redeem them for cash, resulting in the issuance of approximately 4.1 million shares during the redemption period. Net Debt-to-Capital increased to 46.6% in 2006 compared to 42.0% in 2005. Similarly, our Debt-to-Capital ratio increased to 47.1% in 2006 from 42.8% in 2005.

Interest capitalized during 2006 increased to $27.8 million from $17.7 million in 2005 primarily due to a higher average level of investment in ships under construction and to a lesser extent higher interest rates.

Future Capital Commitments

Our future capital commitments consist primarily of new ship orders. As of December 31, 2006, we had two Freedom-class ships and one ship of a new class designated for Royal Caribbean International and three Solstice-class ships, designated for Celebrity Cruises , on order for an aggregate additional capacity of approximately 21,150 berths.

The aggregate cost of the six ships is approximately $5.3 billion, of which we have deposited $438.4 million as of December 31, 2006. Approximately 11% of the aggregate cost of ships was exposed to fluctuations in the euro exchange rate at December 31, 2006. (See Note 11. Financial Instruments to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data .)

As of December 31, 2006 we anticipated overall capital expenditures, including the six ships on order, will be approximately $1.3 billion for 2007, $1.8 billion for 2008, $2.0 billion for 2009, and $1.0 billion for 2010.

We have an option to purchase an additional ship for Royal Caribbean International, exercisable through March 2007, for an additional capacity of approximately 5,400 berths. If ordered, the optional ship will be delivered in the third quarter of 2010.

Contractual Obligations and Off-Balance Sheet Arrangements

As of December 31, 2006, our contractual obligations were as follows (in thousands ):


	Payments due by period
		Less than 1	1-3	3-5	More than 5
	Total	year	years	years	years

Long-term debt obligations (1)	$5,365,962	$372,211	$545,547	$1,674,881	$2,773,323
Capital lease obligations(1)	47,782	1,211	2,937	3,346	40,288
Operating lease obligations (2)(3)	570,801	58,728	107,114	97,435	307,524
Ship purchase obligations(4)	4,277,355	755,544	2,946,475	575,336	-
Other (5)	428,329	138,511	130,198	56,378	103,242

Total	$10,690,229	$1,326,205	$3,732,271	$2,407,376	$3,224,377

(1)	Amounts exclude interest.
(2)	We are obligated under noncancelable operating leases primarily for a ship, offices, warehouses and motor vehicles.

(3)

Under the Brilliance of the Seas lease agreement, we may be required to make a termination payment of approximately £126.0 million, or approximately $246.8 million based on the exchange rate at December 31, 2006, if the lease is canceled in 2012. This amount is included in the more than five years category. (See Note 12. Commitments and Contingencies to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data.)

(4)	Amounts represent contractual obligations with initial terms in excess of one year.

(5)	Amounts represent future commitments with remaining terms in excess of one year to pay for our usage of certain port facilities, marine consumables, services and maintenance contracts.

Under the Brilliance of the Seas operating lease, we have agreed to indemnify the lessor to the extent its after-tax return is negatively impacted by unfavorable changes in corporate tax rates and capital allowance deductions. These indemnifications could result in an increase in our lease payments. We are unable to estimate the maximum potential increase in such lease payments due to the various circumstances, timing or combination of events that could trigger such indemnifications. Under current circumstances we do not believe an indemnification in any material amount is probable.

Some of the contracts that we enter into include indemnification provisions that obligate us to make payments to the counterparty if certain events occur. These contingencies generally relate to changes in taxes, increased lender capital costs and other similar costs. The indemnification clauses are often standard contractual terms and are entered into in the normal course of business. There are no stated or notional amounts included in the indemnification clauses and we are not able to estimate the maximum potential amount of future payments, if any, under these indemnification clauses. We have not been required to make any payments under such indemnification clauses in the past and, under current circumstances, we do not believe an indemnification in any material amount is probable.

As a normal part of our business, depending on market conditions, pricing and our overall growth strategy, we continuously consider opportunities to enter into contracts for the building of additional ships. We may also consider the sale of ships. We continuously consider potential acquisitions and strategic alliances. If any of these were to occur, they would be financed through the incurrence of additional indebtedness, the issuance of additional shares of equity securities or through cash flows from operations.

Funding Sources

As of December 31, 2006, our liquidity was $0.7 billion consisting of approximately $0.1 billion in cash and cash equivalents and $0.6 billion available under our unsecured revolving credit facility. (See Note 6. Long-Term Debt to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data .) We have commitments of approximately $1.3 billion due during the twelve-month period ending December 31, 2007. These commitments will be funded through a combination of cash flows from operations, drawdowns under our available unsecured revolving credit facility, the incurrence of additional indebtedness and the sales of equity or debt securities in private or public securities markets. Although we believe our existing unsecured revolving credit facility, cash flows from operations, our ability to obtain new borrowings and/or raise new capital or a combination of these sources will be sufficient to fund operations, debt payment requirements, capital expenditures and other commitments over the next twelve-month period, there can be no assurances that these sources of cash will be available in accordance with our expectations.

In January 2007, we received approximately €990.9 million, or approximately $1.3 billion, of net proceeds from a €1.0 billion, or approximately $1.3 billion, bond offering. A portion of the net proceeds were used to retire the €750.0 million, or approximately $960.5 million, short-term unsecured bridge loan obtained to finance our acquisition of Pullmantur on which we drew €701.0 million, or approximately $925.1 million. The remainder of the net proceeds, approximately €289.0 million, or approximately $374.8 million, was used to repay a portion of the outstanding balance on our unsecured revolving credit facility. (See Note 14. Subsequent Events )

Our financing agreements contain covenants that require us, among other things, to maintain minimum net worth, and fixed charge coverage ratio and limit our net debt-to-capital ratio. We were in compliance with all covenants as of December 31, 2006.

If any person other than A. Wilhelmsen AS. and Cruise Associates, our two principal shareholders, acquires ownership of more than 30% of our common stock and our two principal shareholders, in the aggregate, own less of our common stock than such person and do not collectively have the right to elect, or to designate for election, at least a majority of the board of directors, we may be obligated to prepay indebtedness outstanding under the majority of our credit facilities, which we may be unable to replace on similar terms. If this were to occur, it could have an adverse impact on our liquidity and operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Financial Instruments and Other

General

We are exposed to market risk attributable to changes in interest rates, foreign currency exchange rates and fuel prices. We manage these risks through a combination of our normal operating and financing activities and through the use of derivative financial instruments pursuant to our hedging practices and policies. The financial impacts of these hedging instruments are primarily offset by corresponding changes in the underlying exposures being hedged. We achieve this by closely matching the amount, term and conditions of the derivative instrument with the underlying risk being hedged. We do not hold or issue derivative financial instruments for trading or other speculative purposes. We monitor our derivative positions using techniques including market valuations and sensitivity analyses. (See Note 11. Financial Instruments to our consolidated financial statements under Item 8. Financial Statements and Supplementary Data .)

Interest Rate Risk

Our exposure to market risk for changes in interest rates relates to our long-term debt obligations and our operating lease for Brilliance of the Seas . At December 31, 2006, 60% of our long-term debt was effectively fixed and 40% was floating. We enter into interest rate swap agreements to modify our exposure to interest rate movements and to manage our interest expense and rent expense.

Market risk associated with our long-term fixed rate debt is the potential increase in fair value resulting from a decrease in interest rates. At December 31, 2006, our interest rate swap agreements effectively changed $175.0 million of fixed rate debt with a weighted-average fixed rate of 8.11% to LIBOR-based floating rate debt. The estimated fair value of our long-term fixed rate debt at December 31, 2006, was $3.4 billion using quoted market prices, where available, or using discounted cash flow analyses based on market rates available to us for similar debt with the same remaining maturities. The fair value of our associated interest rate swap agreements was estimated to be $5.6 million as of December 31, 2006 based on quoted market prices for similar or identical financial instruments to those we hold. A hypothetical one percentage point decrease in interest rates at December 31, 2006 would increase the fair value of our long-term fixed rate debt, by approximately $158.7 million, net of an increase in the fair value of the associated interest rate swap agreements.

Market risk associated with our long-term floating rate debt is the potential increase in interest expense from an increase in interest rates. A hypothetical one percentage point increase in interest rates would increase our 2007 interest expense by approximately $12.1 million. At December 31, 2006, we have an interest rate swap agreement that effectively changes $25.0 million of LIBOR-based floating rate debt to fixed rate debt of 4.40%.

Market risk associated with our operating lease for Brilliance of the Seas is the potential increase in rent expense from an increase in sterling LIBOR rates. As of January 2007, we have effectively changed 50% of the operating lease obligation from a floating rate to a fixed rate obligation with a weighted-average rate of 4.76% through rate fixings with the lessor. A hypothetical one percentage point increase in sterling LIBOR rates would increase our 2007 rent expense by approximately $2.2 million, based on the exchange rate at December 31, 2006.

Foreign Currency Exchange Rate Risk

Our primary exposure to foreign currency exchange rate risk relates to our firm commitments under ship construction contracts denominated in euros. We enter into euro-denominated forward contracts to manage this risk. The estimated fair value of such euro-denominated forward contracts at December 31, 2006, was a net unrealized gain of approximately $106.3 million, based on quoted market prices for equivalent instruments with the same remaining maturities. At December 31, 2006, approximately 11% of the aggregate cost of the ships was exposed to fluctuations in the euro exchange rate. A hypothetical 10% strengthening of the euro as of December 31, 2006, assuming no changes in comparative interest rates, would result in a $433.2 million increase in the United States dollar cost of the foreign currency denominated ship construction contracts. This increase would be largely offset by an increase in the fair value of our euro-denominated forward contracts.

We are also exposed to foreign currency exchange rate fluctuations on the United States dollar value of our foreign currency denominated forecasted transactions. To manage this exposure, we take advantage of natural offsets of our foreign currency revenues and expenses and enter into foreign currency forward contracts for a portion of the remaining exposure related to these forecasted transactions. Our principal net foreign currency exposure relates to the euro, the British pound and the Canadian dollar. At December 31, 2006, the estimated fair value of such contracts was an unrealized loss of approximately $2.1 million based on quoted market prices for equivalent instruments with the same remaining maturities. A hypothetical 10% strengthening of the principal foreign currencies as of December 31, 2006, assuming no changes in comparative interest rates, would result in a $28.8 million increase in the United States dollar value of the 2007 foreign currency denominated forecasted transactions. This increase would be offset by a decrease in the fair value of our foreign currency forward contracts maturing in 2007 of approximately $10.1 million.

Also, we consider our investments in foreign subsidiaries to be denominated in relatively stable currencies and of a long-term nature. We partially address the exposure of our investments in foreign subsidiaries by denominating a portion of our debt in our subsidiaries’ functional currencies (generally euros). Specifically, we have assigned debt of approximately €478.8 million, or approximately $631.8 million, as a hedge of our net investment in Pullmantur and, accordingly, have included approximately $18.7 million of foreign-currency transaction losses in the cumulative translation adjustment component of accumulated other comprehensive income (loss)at December 31, 2006. A hypothetical 10% increase or decrease in the December 31, 2006 foreign currency exchange rate, would increase or decrease the fair value of our debt by $63.2 million, which would be offset by a decrease or increase of $63.2 million in the U.S. dollar value of our net investment.

Fuel Price Risk

Our exposure to market risk for changes in fuel prices relates to the consumption of fuel on our ships. Fuel cost (net of the financial impact of fuel swap agreements), as a percentage of our total revenues, was approximately 9.2% in 2006, 7.5% in 2005 and 5.5% in 2004. Historically, we have used fuel swap agreements to mitigate the financial impact of fluctuations in fuel prices. As of December 31, 2006, we had fuel swap agreements to pay fixed prices for fuel with an aggregate notional amount of approximately $205.3 million, maturing through 2008. The estimated fair value of these contracts at December 31, 2006 was an unrealized loss of $20.5 million. We estimate that a hypothetical 10% increase in our weighted-average fuel price from that experienced during the year ended December 31, 2006 would increase our 2007 fuel cost by approximately $52.5 million. This increase would be partially offset by an increase in the fair value of our fuel swap agreements maturing in 2007 of approximately $18.2 million.

Item 8. Financial Statements and Supplementary Data

Our Consolidated Financial Statements and Quarterly Selected Financial Data are included beginning on page F-1 of this report.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We carried out under the supervision and with the participation of our management, including our Chairman and Chief Executive Officer and Executive Vice President and Chief Financial Officer, an evaluation of the effectiveness of our disclosure controls and procedures, as such term is defined in Exchange Act Rule 13a-15(e), as of the end of the period covered by this report and concluded that those controls and procedures were effective.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our Chairman and Chief Executive Officer and Executive Vice President and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control-Integrated Framework , our management concluded that our internal control over financial reporting was effective as of December 31, 2006. Our management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2006 has been audited by PricewaterhouseCoopers LLP, an independent registered certified public accounting firm, as stated in their report which is included herein.

Changes in Internal Controls Over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 and 15d-15 during the quarter ended December 31, 2006 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there is only the reasonable assurance that our controls will succeed in achieving their goals under all potential future conditions.

Item 9B. Other Information

None.

PART III

Items 10, 11, 12, 13 and 14. Directors, Executive Officers and Corporate Governance of the Registrant, Executive Compensation, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters, Certain Relationships and Related Transactions, and Director Independence and Principal Accounting Fees and Services .

The information required by Items 10, 11, 12, 13 and 14 is incorporated herein by reference to the Royal Caribbean Cruises Ltd. definitive proxy statement to be filed with the Securities and Exchange Commission not later than 120 days after the close of the fiscal year, except that the information concerning the executive officers called for by Item 401(b) of Regulation S-K is included in Part I of this Annual Report on Form 10-K.

We have adopted a Code of Ethics that applies to our Chief Executive Officer, Chief Financial Officer and other senior officers. This code of ethics is posted on our website at www.rclinvestor.com.

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a)	(1) Financial Statements

Our Consolidated Financial Statements have been prepared in accordance with Item 8. Financial Statements and Supplementary Data and are included beginning on page F-1 of this report.

(2) Financial Statement Schedules

None.

(3) Exhibits

The exhibits listed on the accompanying Index to Exhibits are filed or incorporated by reference as part of this Annual Report on Form 10-K and such Index to Exhibits is hereby incorporated herein by reference.

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.

ROYAL CARIBBEAN CRUISES LTD.

(Registrant)

	By: /s/ B RIAN J. R ICE
			Brian J. Rice
			Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)
February 28, 2007

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 indicated on February 28, 2007.

/s/ R ICHARD D. F AIN
	Richard D. Fain
	Director, Chairman and Chief Executive Officer
	(Principal Executive Officer)

/s/ B RIAN J. R ICE
	Brian J. Rice
	Executive Vice President and Chief Financial Officer
	(Principal Financial Officer)

/s/ B LAIR H . G OULD
	Blair H. Gould
	Vice President and Controller
	(Principal Accounting Officer)

/s/ * B ERNARD W. A RONSON
	Bernard W. Aronson
	Director

/s/ * A RVID G RUNDEKJOEN
	Arvid Grundekjoen
	Director

/s/ * W ILLIAM L. K IMSEY
	William L. Kimsey
	Director

/s/ * L AURA L AVIADA
		Laura Laviada
	Director

/s/ * G ERT W. M UNTHE
	Gert W. Munthe
	Director

/s/ * E YAL O FER
	Eyal Ofer
	Director

/s/ * T HOMAS J. P RITZKER
	Thomas J. Pritzker
	Director

/s/ * W ILLIAM K. R EILLY
	William K. Reilly
	Director

/s/ * B ERNT R EITAN
	Bernt Reitan
	Director

/s/ * A RNE A LEXANDER W ILHELMSEN
	Arne Alexander Wilhelmsen
	Director

By: /s/ B RIAN J. R ICE*
	Brian J. Rice, as Attorney-in-Fact

INDEX TO EXHIBITS

Exhibits 10.13 through 10.34 represent management compensatory plans or arrangements.

Exhibit		Description
3.1	— Restated Articles of Incorporation of the Company, as amended (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form F-1, File No. 33-59304, filed with the Securities and Exchange Commission (the “Commission”); Exhibit 2.2 to the Company’s 1996 Annual Report on Form 20-F filed with the Commission, File No. 1-11884; Document No. 1 in the Company’s Form 6-K filed with the Commission on October 14, 1999; Document No. 1 in the Company’s Form 6-K filed with the Commission on May 18, 1999; and Document No. 1 in the Company’s Form 6-K filed with the Commission on August 28, 2000).
3.2	— Restated By-Laws of the Company, as amended (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Commission on May 31, 2006).
4.1	— Indenture dated as of July 15, 1994 between the Company, as issuer, and The Bank of New York Trust Company, N.A., successor to NationsBank of Georgia, National Association, as Trustee (incorporated by reference to Exhibit 2.4 to the Company’s 1994 Annual Report on Form 20-F filed with the Commission, File No. 1-11884).
4.2	— Second Supplemental Indenture dated as of March 29, 1995 to Indenture dated as of July 15, 1994 between the Company, as issuer, and the Bank of New York Trust Company, N.A., successor to NationsBank of Georgia, National Association, as Trustee (incorporated by reference to Exhibit 2.5 to the Company's 1995 Annual Report on Form 20-F filed with the Commission, File No. 1-11884).
4.3	— Fourth Supplemental Indenture dated as of August 12, 1996 to Indenture dated as of July 15, 1994 between the Company, as issuer, and The Bank of New York Trust Company, N.A., as Trustee (incorporated by reference to Document No. 2 in the Company's Form 6-K filed with the Commission on February 10, 1997, File No. 1-11884).
4.4	— Fifth Supplemental Indenture dated as of October 14, 1997 to Indenture dated as of July 15, 1994 between the Company, as issuer, and The Bank of New York Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 2.10 to the Company’s 1997 Annual Report on Form 20-F filed with the Commission, File No. 1-11884).
4.5	— Sixth Supplemental Indenture dated as of October 14, 1997 to Indenture dated as of July 15, 1994 between the Company, as issuer, and The Bank of New York Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 2.11 to the Company’s 1997 Annual Report on Form 20-F filed with the Commission, File No. 1-11884).
4.6	— Seventh Supplemental Indenture dated as of March 16, 1998 to Indenture dated as of July 15, 1994 between the Company, as issuer, and The Bank of New York Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 2.12 to the Company’s 1997 Annual Report on Form 20-F filed with the Commission, File No. 1-11884).
4.7	— Eighth Supplemental Indenture dated as of March 16, 1998 to Indenture dated as of July 15, 1994 between the Company, as issuer, and The Bank of New York Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 2.13 to the Company’s 1997 Annual Report on Form 20-F filed with the Commission, File No. 1-11884).
4.8	— Ninth Supplemental Indenture dated as of February 2, 2001 to Indenture dated as of July 15, 1994 between the Company, as issuer, and The Bank of New York Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 2.10 to the Company’s 2000 Annual Report on Form 20-F filed with the Commission, File No. 1-11884).
4.9	— Tenth Supplemental Indenture dated as of February 2, 2001 to Indenture dated as of July 15, 1994 between the Company, as issuer, and The Bank of New York Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 2.11 to the Company’s 2000 Annual Report on Form 20-F filed with the Commission, File No. 1-11884).

4.10	— Eleventh Supplemental Indenture dated as of May 18, 2001 to Indenture dated as of July 15, 1994 between the Company, as issuer, and The Bank of New York Trust Company, N.A., as Trustee (incorporated by Reference to Exhibit 2.12 to the Company’s 2001 Annual Report on Form 20-F filed with the Commission, File No. 1-11884).
4.11	— Twelfth Supplemental Indenture dated as of May 9, 2003 to Indenture dated as of July 15, 1994 between the Company, as issuer, and The Bank of New York Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 2.13 to the Company’s 2003 Annual Report on Form 20-F filed with the Commission, File No. 1-11884).
4.12	— Thirteenth Supplemental Indenture dated as of November 21, 2003 to Indenture dated as of July 15, 1994 between the Company, as issuer, and The Bank of New York Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 2.14 to the Company’s 2003 Annual Report on Form 20-F filed with the Commission, File No. 1-11884.)
4.13	—Fourteenth Supplemental Indenture dated as of June 12, 2006 to Indenture dated as of July 15, 1994 between the Company, as issuer, and The Bank of New York Trust Company, N.A., as Trustee.
4.14	—Fifteenth Supplemental Indenture dated as of June 12, 2006 to Indenture dated as of July 15, 1994 between the Company, as issuer, and The Bank of New York Trust Company, N.A., as Trustee.
4.15	—Form of Indenture dated as of July 31, 2006 between the Company, as issuer, and The Bank of New York Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-3 (No. 333-136186) filed with the Commission on July 31, 2006).
4.16	—Indenture dated as of January 25, 2007 among the Company, as issuer, The Bank of New York, as trustee, transfer agent, principal paying agent and security registrar, and AIB/BNY Fund Management (Ireland) Limited, as Irish paying agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on January 26, 2007).
10.1	— Amended and Restated Registration Rights Agreement dated as of July 30, 1997 among the Company, A. Wilhelmsen AS., Cruise Associates, Monument Capital Corporation, Archinav Holdings, Ltd. and Overseas Cruiseship, Inc. (incorporated by reference to Exhibit 2.20 to the Company’s 1997 Annual Report on Form 20-F filed with the Commission, File No. 1-11884).
10.2	— Credit Agreement dated as of March 27, 2003 among the Company and various financial institutions and Citibank, N.A., as Administrative Agent and Amendment No. 1 thereto dated as of May 18, 2005 (incorporated by reference to Document No. 2 in the Company’s Form 6-K filed with the Commission on March 28, 2003 and Exhibit No. 10.1 to the Current Report on From 8-K filed with the Commission on May 24, 2005).
10.3	— Amendment No. 2 to Credit Agreement dated as of December 15, 2006, amending Credit Agreement dated as of March 27, 2003, as amended, among the Company and various financial institutions and Citibank, N.A., as Administrative Agent.
10.4	— Credit Agreement dated as of April 6, 2006 among the Company and various financial institutions and Citibank, N.A. as Administrative Agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on April 19, 2006).
10.5	— Amendment No. 1 to Credit Agreement dated as of December 15, 2006, amending Credit Agreement dated as of April 6, 2006, among the Company and various financial institutions and Citibank, N.A. as Administrative Agent.

10.6	—Credit Agreement dated as of November 7, 2006 among the Company, various financial institutions and Citibank, N.A. as Administrative Agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on November 8, 2006).
10.7	— Office Building Lease Agreement dated July 25, 1989 between Miami-Dade County and the Company, as amended (incorporated by reference to Exhibits 10.116 and 10.117 to the Company’s Registration Statement on Form F-1, File No. 33-46157, filed with the Commission).
10.8	— Office Building Lease Agreement dated January 18, 1994 between Miami-Dade County and the Company (incorporated by reference to Exhibit 2.13 to the Company’s 1993 Annual Report on Form 20-F filed with the Commission, File No. 1-11884).
10.9	— Lease by and between City of Wichita, Kansas and the Company dated as of December 1, 1997, together with First Supplemental Lease Agreement dated December 1, 2000 (incorporated by reference to Exhibit 4.7 to the Company’s 2002 Annual Report on Form 20-F filed with the Commission).
10.10	— Multi-Tenant Office Lease Agreement dated May 3, 2000 between the Company and Opus Real Estate National IV FL, L.L.C. (formerly Miramar 75, L.L.C.), together with four Amendments thereto dated June 1, 2000, November 20, 2000, October 11, 2001 and September 25, 2003 (incorporated by reference to Exhibit 4.6 to the Company’s 2003 Annual Report on Form 20-F filed with the Commission).
10.11	— Lease Agreement dated January 24, 2005 between the Company and Workstage-Oregon, LLC and Amendment No. 1 thereto dated April 19, 2005 (incorporated by reference to Exhibit 10.7 to the Company's 2004 Annual Report on Form 10-K filed with the Commission and Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2005 filed with the Commission).
10.12	— Lease dated August 30, 2006 between DV3 Addlestone Limited, Harmony Investments (Global) Limited and the Company.
10.13	— 1990 Stock Option Plan of the Company, as amended (incorporated by reference to Exhibit 4 to the Company’s Registration Statement on Form S-8, File No. 333-7290, filed with the Commission).
10.14	— 1995 Incentive Stock Option Plan of the Company, as amended (incorporated by reference to Exhibit 4 to the Company’s Registration Statement on Form S-8, File No. 333-84980, filed with the Commission).
10.15	— Royal Caribbean Cruises Ltd. 2000 Stock Award Plan, as Amended and Restated through September 18, 2006 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on December 8, 2005 and Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on September 22, 2006).
10.16	— Employment Agreement dated December 21, 2001 between the Company and Richard D. Fain (incorporated by reference to Exhibit 10.12 to the Company's 2004 Annual Report on Form 10-K filed with the Commission).
10.17	— Trust Agreement for Richard D. Fain dated as of June 30, 1994 between the Company and Gary Hammond, as Trustee, together with Amendment No. 1 dated as of September 30, 1998 (incorporated by reference to Exhibit 10.13 to the Company's 2004 Annual Report on Form 10-K filed with the Commission).
10.18	— Employment agreement dated March 10, 2005 between the Company and Luis E. Leon (incorporated by reference to Exhibit 10.15 to the Company's 2004 Annual Report on Form 10-K filed with the Commission).
10.19	— Employment Agreement dated April 25, 2005 between the Company and Adam M. Goldstein (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2005 filed with the Commission).

10.20	— Employment Agreement dated April 25, 2005 between Celebrity Cruises Inc. and Daniel J. Hanrahan (incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2005 filed with the Commission).
10.21	— Employment Agreement dated April 25, 2005 between the Company and Brian J. Rice (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2005 filed with the Commission.)
10.22	— Employment Agreement dated February 12, 2006 between the Company and Harri U. Kulovaara.
10.23	— Description of consulting arrangement between the Company and William K. Reilly (incorporated by reference to Exhibit 10.16 to the Company's 2004 Annual Report on Form 10-K filed with the Commission).
10.24	— Royal Caribbean Cruises Ltd. et. al. Board of Directors Non Qualified Deferred Compensation Plan, as Amended and Restated through December 6, 2005 (incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed with the Commission on December 8, 2005).
10.25	— Amendment to the Royal Caribbean Cruises Ltd. et. al. Board of Directors Non Qualified Deferred Compensation Plan dated as of December 12, 2006.
10.26	— Royal Caribbean Cruises Ltd. et. al. Non Qualified Deferred Compensation Plan Rabbi Trust (incorporated by reference to Exhibit 10.18 to the Company's 2004 Annual Report on Form 10-K filed with the Commission).
10.27	— Royal Caribbean Cruises Ltd. Executive Incentive Plan as amended as of December 12, 2006.
10.28	— Royal Caribbean Cruises Ltd. et. al. Non Qualified 401(k) Plan, as Amended and Restated through December 6, 2005 (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the Commission on December 8, 2005).
10.29	—Amendment to the Royal Caribbean Cruises Ltd. et. al. Non Qualified 401(k) Plan, dated as of December 12, 2006.
10.30	—Royal Caribbean Cruises Ltd. Supplemental Executive Retirement Plan as Amended and Restated through December 6, 2005 (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed with the Commission on December 8, 2005).
10.31	—Amendment to the Royal Caribbean Cruises Ltd. Supplemental Executive Retirement Plan dated as of December 12, 2006.
10.32	— Summary of Royal Caribbean Cruises Ltd. Board of Directors Compensation.
10.33	— Form of Royal Caribbean Cruises Ltd. 2000 Stock Award Plan Stock Option Certificate (incorporated by reference to Exhibit 10.25 to the Company's 2005 Annual Report on Form 10-K filed with the Commission).
10.34	— Form of Royal Caribbean Cruises Ltd. 2000 Stock Award Plan Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.26 to the Company's 2005 Annual Report on Form 10-K filed with the Commission).
12.1	— Statement regarding computation of fixed charge coverage ratio.
21.1	— List of Subsidiaries.
23.1	— Consent of PricewaterhouseCoopers LLP, an independent registered certified public accounting firm.
23.2	— Consent of Drinker Biddle & Reath LLP.
24	— Powers of Attorney.

— Certifications required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934.

— Certifications pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code.

ROYAL CARIBBEAN CRUISES LTD.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Report of Independent Registered Certified Public Accounting Firm	F-2
Consolidated Statements of Operations		F-4
Consolidated Balance Sheets		F-5
Consolidated Statements of Cash Flows		F-6
Consolidated Statements of Shareholders’ Equity		F-7
Notes to the Consolidated Financial Statements		F-8

Report of Independent Registered Certified Public Accounting Firm

To the Board of Directors and Shareholders

of Royal Caribbean Cruises Ltd.:

We have completed integrated audits of Royal Caribbean Cruises Ltd.’s 2006, 2005 and 2004 consolidated financial statements and of its internal control over financial reporting as of December 31, 2006, in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.

Consolidated financial statements

In our opinion, the consolidated financial statements listed in the index appearing under Item 15 present fairly, in all material respects, the financial position of Royal Caribbean Cruises Ltd. and its subsidiaries at December 31, 2006 and December 31, 2005, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2006 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 2 of the consolidated financial statements, the Company changed its method of accounting for dry docking costs in 2005.

Internal control over financial reporting

Also, in our opinion, management’s assessment, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A., that the Company maintained effective internal control over financial reporting as of December 31, 2006 based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control - Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the

F-2

company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Miami, Florida

February 28, 2007

F-3

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS


	Year Ended December 31,
	2006	2005	2004

	(in thousands, except per share data)

Passenger ticket revenues	$ 3,838,648	$ 3,609,487	$ 3,359,201
Onboard and other revenues	1,390,936	1,293,687	1,196,174

Total revenues	5,229,584	4,903,174	4,555,375


Cruise operating expenses
Commissions, transportation and other	917,929	858,606	822,206
Onboard and other	331,218	308,611	300,717
Payroll and related	501,874	510,692	487,633
Food	278,604	270,674	269,436
Fuel	480,187	367,864	251,886
Other operating	739,817	677,785	687,505

Total cruise operating expenses	3,249,629	2,994,232	2,819,383
Marketing, selling and administrative expenses	699,864	635,308	588,267
Depreciation and amortization expenses	421,645	402,069	394,136

	4,371,138	4,031,609	3,801,786

Operating Income	858,446	871,565	753,589

Other income (expense)
Interest income	15,238	9,129	9,208
Interest expense, net of interest capitalized	(267,861)	(269,750)	(309,977)
Other income	28,099	52,521	21,871

	(224,524 )	(208,100 )	(278,898 )

Income Before Cumulative Effect of a Change in Accounting Principle	633,922	663,465	474,691
Cumulative effect of a change in accounting Principle (Note 2)	-	52,491	-

Net Income	$ 633,922	$ 715,956	$ 474,691


Basic Earnings per Share:
Income before cumulative effect of a change in accounting principle	$ 3.01	$ 3.22	$ 2.39

Cumulative effect of a change in accounting principle (Note 2)	$ -	$ 0.25	$ -

Net income	$ 3.01	$ 3.47	$ 2.39

Diluted Earnings per Share:
Income before cumulative effect of a change in accounting principle	$ 2.94	$ 3.03	$ 2.26

Cumulative effect of a change in accounting principle (Note 2)	$ -	$ 0.22	$ -

Net income	$ 2.94	$ 3.26	$ 2.26

Pro Forma Amounts (assuming change in accounting principle was applied retrospectively) (Note 2) (unaudited):
Pro forma net income	$ 633,922	$ 663,465	$ 483,853

Pro forma basic earnings per share	$ 3.01	$ 3.22	$ 2.43

Pro forma diluted earnings per share	$ 2.94	$ 3.03	$ 2.30

The accompanying notes are an integral part of these financial statements.

F-4

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED BALANCE SHEETS


	As of December 31,
	2006	2005

	(in thousands, except share data)
Assets Current assets Cash and cash equivalents	$ 104,520	$ 125,385
Trade and other receivables, net	185,886	95,254
Inventories	76,969	57,803
Prepaid expenses and other assets	134,529	98,568

Total current assets	501,904	377,010
Property and equipment — at cost less accumulated depreciation and amortization	11,429,106	10,276,948
Goodwill — less accumulated amortization of $138,606	721,514	283,133
Other assets	740,564	318,680

	$13,393,088	$11,255,771


Liabilities and Shareholders’ Equity
Current liabilities
Current portion of long-term debt	$ 373,422	$ 600,883
Accounts payable	193,794	159,910
Accrued expenses and other liabilities	408,209	342,995
Customer deposits	896,943	884,994

Total current liabilities	1,872,368	1,988,782
Long-term debt	5,040,322	3,553,892
Other long-term liabilities	388,823	158,632

Commitments and contingencies (Note 12)

Shareholders’ equity
Common stock ($.01 par value; 500,000,000 shares authorized; 222,489,872 and 216,504,849 shares issued)	2,225	2,165
Paid-in capital	2,904,041	2,706,236
Retained earnings	3,639,211	3,132,286
Accumulated other comprehensive loss	(30,802)	(28,263)
Treasury stock ( 10,985,927 and 6,143,392 common shares at cost)	(423,100 )	(257,959 )

Total shareholders’ equity	6,091,575	5,554,465

	$13,393,088	$11,255,771

The accompanying notes are an integral part of these financial statements.

F-5

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Year Ended December 31,

	2006	2005	2004


	(in thousands)
Operating Activities Net income	$ 633,922	$ 715,956	$ 474,691
Adjustments:
Depreciation and amortization	421,645	402,069	394,136
Cumulative effect of a change in accounting principle	-	(52,491)	-
Gain on redemption of investment	-	(44,207)	-
Accretion of original issue discount on debt	17,902	45,718	52,562
Changes in operating assets and liabilities:
Increase in trade and other receivables, net	(38,855)	(19,349)	(3,256)
(Increase) decrease in inventories	(7,441)	2,457	(6,813)
Decrease (increase) in prepaid expenses and other assets	707	(5,009)	(17,196)
Decrease in accounts payable	(29,671)	(3,741)	(25,987)
Increase in accrued expenses and other liabilities	21,815	31,772	53,851
Increase in customer deposits	9,724	9,912	145,273
Accreted interest paid on LYONs repurchase	(121,199)	-	-
Other, net	39,957	28,273	9,730


Net cash provided by operating activities	948,506	1,111,360	1,076,991


Investing Activities Purchases of property and equipment	(1,180,579)	(429,898)	(630,670)
Purchases of notes from First Choice Holidays PLC	(100,000)	-	-
Purchase of Pullmantur, net of cash acquired	(553,312)	-	-
Purchases of short-term investments	-	(56,500)	(732,165)
Proceeds from sale of short-term investments	-	56,500	732,165
Proceeds from redemption of investment	-	348,070	-
Other, net	(15,187 )	(7,198 )	(1,840 )


Net cash used in investing activities	(1,849,078 )	(89,026 )	(632,510 )


Financing Activities Net proceeds from issuance of debt	2,933,915	390,000	225,000
Debt issuance costs	(10,004)	(5,512)	(3,352)
Repayments of debt, net	(1,785,773)	(1,564,715)	(361,386)
Dividends	(124,460)	(118,764)	(104,521)
Proceeds from exercise of common stock options	23,026	21,996	98,316
Purchases of treasury stock	(164,582)	(249,122)	-
Other, net	7,585	590	(46)


Net cash provided by (used in) financing activities	879,707	(1,525,527)	(145,989)

Net (decrease) increase in cash and cash equivalents	(20,865)	(503,193)	298,492
Cash and cash equivalents at beginning of year	125,385	628,578	330,086


Cash and cash equivalents at end of year	$ 104,520	$ 125,385	$ 628,578

Supplemental Disclosures
Cash paid during the year for:
Interest, net of amount capitalized	$ 376,817	$ 236,477	$ 266,037

Supplemental Schedule of Noncash Investing Activity

The Company purchased all of the capital stock of Pullmantur for approximately $558.9 million on November 14, 2006. In conjuction with the acquisition, liabilities were assumed as follows:

Fair value of assets acquired	$1,111,117
Cash paid for capital stock	(558,948)

Liabilities assumed	$ 552,169

The accompanying notes are an integral part of these financial statements.

F-6

ROYAL CARIBBEAN CRUISES LTD.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY


		Common Stock		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Shareholders' Equity

(in thousands)
Balances at January 1, 2004	$	1,961	$	2,100,612	$	2,162,195	$	5,846	$	(7,717)	$	4,262,897
Issuance under employee related plans		51		105,545		—		—		(560)		105,036
Common stock dividends		—		—		(103,621)		—		—		(103,621)
Changes related to cash flow derivative hedges		—		—		—		67,082		—		67,082
Minimum pension liability adjustment		—		—		—		(1,565)		—		(1,565)
Net income		—		—		474,691		—		—		474,691

Balances at December 31, 2004		2,012		2,206,157		2,533,265		71,363		(8,277)		4,804,520
Issuance under employee related plans		12		28,059		—		—		(560)		27,511
Purchases of treasury stock		—		—		—		—		(249,122)		(249,122)
Common stock dividends		—		—		(116,935)		—		—		(116,935)
Changes related to cash flow derivative hedges		—		—		—		(100,472)		—		(100,472)
Minimum pension liability adjustment		—		—		—		846		—		846
Debt converted to common stock		141		472,020		—		—		—		472,161
Net income		—		—		715,956		—		—		715,956

Balances at December 31, 2005		2,165		2,706,236		3,132,286		(28,263)		(257,959)		5,554,465
Issuance under employee related plans		12		42,031		—		—		(559)		41,484
Purchases of treasury stock		—		—		—		—		(164,582)		(164,582)
Common stock dividends		—		—		(126,997)		—		—		(126,997)
Changes related to cash flow derivative hedges		—		—		—		3,507		—		3,507
Adoption of FASB Statement No. 158		—		—		—		(6,981)		—		(6,981)
Minimum pension liability adjustment		—		—		—		834		—		834
Equity adjustment from foreign currency translation		—		—		—		101		—		101
Debt converted to common stock		48		155,774		—		—		—		155,822
Net income		—		—		633,922		—		—		633,922

Balances at December 31, 2006	$	2,225	$	2,904,041	$	3,639,211	$	(30,802)	$	(423,100)	$	6,091,575

Comprehensive income is as follows (in thousands):


	Year Ended December 31,

		2006		2005		2004


Net income	$	633,922	$	715,956	$	474,691
Changes related to cash flow derivative hedges		3,507		(100,472)		67,082
Minimum pension liability adjustment		834		846		(1,565)
Currency translation adjustment		101		-		-

Total comprehensive income	$	638,364	$	616,330	$	540,208

The following tables summarize activity in accumulated other comprehensive income (loss) related to derivatives

designated as cash flow hedges, minimum pension liability adjustment, adoption of SFAS No. 158 and the equity

adjustment from foreign currency translation (in thousands):


	Year Ended December 31,

		2006		2005		2004


Accumulated net (loss) gain on cash flow derivative hedges at beginning of year	$	(18,171)	$	82,301	$	15,219
Net (loss) gain on cash flow derivative hedges		(7,483)		(86,456)		91,251
Net gain (loss) reclassified into earnings		10,990		(14,016)		(24,169)

Accumulated net (loss) gain on cash flow derivative hedges at end of year	$	(14,664)	$	(18,171)	$	82,301

	Changes related to cash flow derivative hedges	Changes related to minimum pension liability adjustment	Other	Accumulated other comprehensive income (loss )
Accumulated other comprehensive loss at beginning of the year	$ (18,171)	$ (10,092)	$ —	$ (28,263)
Current-period change	3,507	834	(6,880)	(2,539)
Accumulated other comprehensive loss at end of year	$ (14,664)	$ (9,258)	$ (6,880)	$ (30,802)

The accompanying notes are an integral part of these financial statements.

F-7

ROYAL CARIBBEAN CRUISES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 1. General

Description of Business

We are a global cruise company. We operate three cruise brands, Royal Caribbean International, Celebrity Cruises and Pullmantur Cruises with 20, 9 and 5 cruise ships, respectively, at December 31, 2006. Our ships operate on a selection of worldwide itineraries that call on approximately 310 destinations. In addition, we charter one ship to Island Cruises, our joint venture with First Choice Holidays PLC (“First Choice”).

Basis for Preparation of Consolidated Financial Statements

The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States and are presented in United States dollars. Estimates are required for the preparation of financial statements in accordance with generally accepted accounting principles. Actual results could differ from these estimates. All significant intercompany accounts and transactions are eliminated in consolidation.

Note 2. Summary of Significant Accounting Policies

Change in Accounting Principle Related to Drydocking Costs

In the third quarter of 2005, we changed our method of accounting for drydocking costs from the accrual in advance to the deferral method. Under the accrual in advance method, estimated drydocking costs are accrued evenly over the period to the next scheduled drydock. Under the deferral method, drydocking costs incurred are deferred and charged to expense on a straight-line basis over the period to the next scheduled drydock. The deferral method is preferable because it eliminates the judgment needed to estimate drydocking costs in advance. The cumulative effect of the change on prior years of $52.5 million, or $0.22 per share on a diluted basis, was included in net income for the year ended December 31, 2005. Other than this one-time gain, the change did not have a material impact on our consolidated statement of operations or balance sheet.

Revenues and Expenses

Deposits received on sales of passenger cruises represent unearned revenue and are initially recorded as customer deposit liabilities on our balance sheet. Customer deposits are subsequently recognized as passenger ticket revenues, together with revenues from onboard and other goods and services and all associated direct costs of a voyage, upon completion of voyages with durations of ten days or less and on a pro rata basis for voyages in excess of ten days.

Cash and Cash Equivalents

Cash and cash equivalents include cash and marketable securities with original maturities of less than 90 days.

Inventories

Inventories consist of provisions, supplies and fuel carried at the lower of cost (weighted-average) or market.

F-8

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and amortization. We capitalize interest as part of the cost of acquiring certain assets. Improvement costs that we believe add value to our ships are capitalized as additions to the ship and depreciated over the improvements’ estimated useful lives. Costs of repairs and maintenance are charged to cruise operating expenses as incurred and commencing in 2005, drydocking costs are deferred and charged to expense on a straight-line basis over the period to the next scheduled drydock. The estimated cost and accumulated depreciation of refurbished or replaced ship components are written off and any resulting gain or loss is recognized in cruise operating expenses. We review long-lived assets for impairment whenever events or changes in circumstances indicate, based on estimated future cash flows, that the carrying amount of these assets may not be fully recoverable.

Depreciation of property and equipment is computed using the straight-line method over estimated useful lives of primarily 30 years for ships, net of a 15% projected residual value, and three to forty years for other property and equipment. Depreciation for assets under capital leases and leasehold improvements is computed using the shorter of the lease term or related asset life. (See Note 4. Property and Equipment .)

Goodwill

Goodwill represents the excess of cost over the fair value of net tangible and identifiable intangible assets acquired. We review goodwill for impairment at the reporting unit level annually or whenever events or changes in circumstances indicate that the carrying amount of goodwill may not be fully recoverable.

Intangible Assets

In connection with our acquisitions, we have acquired certain intangible assets of which value has been assigned to them based on our estimates with the assistance of appraisers engaged by management. Intangible assets that are deemed to have an indefinite life are not amortized, but are subject to periodic impairment testing at future periods in accordance with SFAS No. 142 (“Goodwill and Other Intangible Assets”). We review these intangible assets for impairment at the same time we review our goodwill for impairment or more frequently if impairment indicators arise. Other intangible assets assigned certain useful lives are amortized based on either an estimated weighted cash flows over their life or a straight-line basis over the life of the related contract.

Advertising Costs

Advertising costs are expensed as incurred except those costs, which result in tangible assets, such as brochures, which are treated as prepaid expenses and charged to expense as consumed. Advertising costs consist of media advertising as well as brochure, production and direct mail costs. Media advertising was $141.3 million, $139.1 million and $133.2 million, and brochure, production and direct mail costs were $89.5 million, $86.9 million and $82.2 million for the years 2006, 2005 and 2004, respectively .

Derivative Instruments

We enter into various forward, swap and option contracts to manage our interest rate exposure and to limit our exposure to fluctuations in foreign currency exchange rates and fuel prices. Generally these instruments are designated as hedges and are recorded on the balance sheet at their fair value. Our derivative instruments are not held for trading or speculative purposes.

At inception of the hedge relationship, a derivative instrument that hedges the exposure to changes in the fair value of a recognized asset or liability, or a firm commitment is designated as a fair value hedge. A derivative instrument that hedges a forecasted transaction or the variability of cash flows related to a recognized asset or liability is designated as a cash flow hedge.

F-9

Changes in the fair value of derivatives that are designated as fair value hedges are offset against changes in the fair value of the underlying hedged assets, liabilities or firm commitments. Changes in fair value of derivatives that are designated as cash flow hedges are recorded as a component of accumulated other comprehensive (loss) income until the underlying hedged transactions are recognized in earnings. The foreign-currency transaction gain or loss of our nonderivative financial instrument designated as a hedge of our net investment in our foreign operations are recognized as a component of accumulated other comprehensive income along with the associated cumulative translation adjustment of the foreign operation.

On an ongoing basis, we assess whether derivatives used in hedging transactions are “highly effective” in offsetting changes in fair value or cash flow of hedged items. If it is determined that a derivative is not highly effective as a hedge, changes in fair value of the derivatives are recognized in earnings immediately. The ineffective portion of hedges is recognized in earnings immediately.

Foreign Currency Translations and Transactions

We translate assets and liabilities of our foreign subsidiaries whose functional currency is the local currency, at exchange rates in effect at the balance sheet date. We translate revenues and expenses at weighted-average exchange rates for the period. Equity is translated at historical rates and the resulting cumulative foreign currency translation adjustments are included as a component of accumulated other comprehensive (loss) income, which is reflected as a separate component of shareholders’ equity. Exchange gains or losses arising from the remeasurement of monetary assets and liabilities denominated in a currency other than the functional currency of the entity involved are immediately included in our earnings, unless certain liabilities have been designated to act as a hedge of a net investment in a foreign operation. The majority of our transactions are settled in United States dollars. Gains or losses resulting from transactions denominated in other currencies are recognized in income at each balance sheet date.

Earnings Per Share

Basic earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during each period. Diluted earnings per share incorporates the incremental shares issuable upon the assumed exercise of stock options and conversion of potentially dilutive securities, including shares contingently issuable under our previously outstanding convertible debt instruments. In addition, net income is adjusted to add back the amount of interest recognized in the period associated with the dilutive securities. (See Note 8. Earnings Per Share. )

Stock-Based Employee Compensation

We have three stock-based compensation plans, which provide for awards to our officers, directors and key employees. The plans consist of a 1990 Employee Stock Option Plan, a 1995 Incentive Stock Option Plan and a 2000 Stock Award Plan. The 1990 Stock Option Plan and the 1995 Incentive Stock Option Plan terminated by their terms in March 2000 and February 2005, respectively. The 2000 Stock Award Plan, as amended, provides for the issuance of (i) incentive and non-qualified stock options, (ii) stock appreciation rights, (iii) restricted stock, (iv) restricted stock units and (v) performance shares of up to 13,000,000 shares of our common stock. During any calendar year, no one individual shall be granted awards of more than 500,000 shares. We awarded 204,154, 160,574, and 331,756 restricted stock units in 2006, 2005 and 2004 respectively. Options and restricted stock units outstanding as of December 31, 2006, vest in equal installments over three to five years and four to five years, respectively, from the date of grant. Generally, options and restricted stock units are forfeited if the recipient ceases to be a director or employee before the shares vest. Options are granted at a price not less than the fair value of the shares on the date of grant and expire not later than ten years after the date of grant.

In September 2006, the Compensation Committee amended the Company’s 2000 Stock Award Plan. The amendment extends to one year the period during which a participant must exercise non-qualified options following a termination of service. It also limits to one year the period for exercise of both qualified and non-qualified options following termination of service due to a participant’s death or disability. This amendment

F-10

is effective for options granted on or after September 18, 2006. The amendment did not have any impact on our December 31, 2006 consolidated financial statements.

We also provide an Employee Stock Purchase Plan to facilitate the purchase by employees of up to 800,000 shares of common stock. Offerings to employees are made on a quarterly basis. Subject to certain limitations, the purchase price for each share of common stock is equal to 90% of the average of the market prices of the common stock as reported on the New York Stock Exchange on the first business day of the purchase period and the last business day of each month of the purchase period. Shares of common stock of 18,116, 14,476 and 13,281 were issued under the ESPP at a weighted-average price of $36.00, $40.83 and $39.34 during 2006, 2005 and 2004, respectively.

Under an executive compensation program approved in 1994, we award to a trust 10,086 shares of common stock per quarter, up to a maximum of 806,880 shares.

Effective January 1, 2006, we adopted Statement of Financial Accounting Standard (“SFAS”) No. 123 (revised 2004), “Share-Based Payment,” (“SFAS 123R”). SFAS 123R requires the measurement and recognition of compensation expense at fair value of employee stock awards. Compensation expense for awards and related tax effects is recognized as they vest. Through December 31, 2005, we used the intrinsic value method to account for stock-based awards to our employees under APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and disclosed pro forma information as if we had applied the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”). We have adopted SFAS 123R using the modified prospective transition method in which we are recognizing compensation expense on the unvested portion of the awards over the remaining vesting period. Under this transition method, prior period results have not been restated. In addition, SFAS 123R requires us to estimate the amount of expected forfeitures in calculating compensation costs for all outstanding awards. Previously, we had accounted for forfeitures as they occurred. As of January 1, 2006, the cumulative effect of adopting the expected forfeiture method and the impact on cash flows was not significant.

The impact of adopting SFAS 123R was a reduction of our net income by approximately $11.3 million, or $0.05 on a basic and diluted earnings per share basis for the year ended December 31, 2006.

Total compensation expense recognized for employee stock based compensation for the year ended December 31, 2006 was $18.4 million, of which $13.8 million has been included within marketing, selling and administrative expenses and $4.6 million within payroll and related expenses.

The following table illustrates the effect on income before cumulative effect of a change in accounting principle, net income and earnings per share as if we had applied the fair value recognition provisions of SFAS 123 to such compensation (in thousands, except per share data):


	Year Ended December 31,
	2005	2004

Income before cumulative effect of a change in accounting principle	$663,465	$474,691
Deduct: Total stock-based employee compensation expense determined under fair value method for all awards	(9,732)	(9,502)

Pro forma income before cumulative effect of a change in accounting principle	653,733	465,189
Add: Interest on dilutive convertible notes	48,128	54,530

Pro forma income before cumulative effect of a change in accounting principle for diluted earnings per share	$701,861	$519,719

Net income, as reported	$715,956	$474,691
Deduct: Total stock-based employee compensation expense determined under fair value method for all awards	(9,732)	(9,502)

Pro forma net income	706,224	465,189

Add: Interest on dilutive convertible notes	48,128	54,530

Pro forma net income for diluted earnings per share	$754,352	$519,719

Weighted-average common shares outstanding	206,217	198,946
Dilutive effect of stock options and restricted stock awards	2,498	3,888
Dilutive effect of convertible notes	25,772	31,473

Diluted weighted-average shares outstanding	234,487	234,307

F-11

Earnings per share before cumulative effect of a change in accounting principle:
Basic — as reported	$ 3.22	$ 2.39
Basic — pro forma	$ 3.17	$ 2.34

Diluted — as reported	$ 3.03	$ 2.26
Diluted — pro forma	$ 2.99	$ 2.22
Earnings per share:
Basic — as reported	$ 3.47	$ 2.39
Basic — pro forma	$ 3.42	$ 2.34

Diluted — as reported	$ 3.26	$ 2.26
Diluted — pro forma	$ 3.22	$ 2.22

Diluted earnings per share did not include options to purchase 3.2 million shares for the year ended December 31, 2006 and 1.3 million for each of the years ended December 31, 2005 and December 31, 2004 because the effect of including them would have been antidilutive. Also, diluted earnings per share in 2005 did not include 0.2 million shares we received in 2006 in connection with the settlement of an Accelerated Share Repurchase (“ASR”) transaction because the effect of including them would have been antidilutive.

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model. The estimated fair value of stock options, less estimated forfeitures, is amortized over the vesting period using the graded-vesting method. The assumptions used in the Black-Scholes option-pricing model are as follows:

	2006	2005	2004

Dividend yield	1.4%	1.0%	1.1%
Expected stock price volatility	33.0%	48.8%	41.6%
Risk-free interest rate	4.5%	3.5%	3.0%
Expected option life	5 years	5 years	5 years

Upon the adoption of SFAS 123R, expected volatility was based on a combination of historical and implied volatilities. The risk-free interest rate is based on U.S. Treasury zero coupon issues with a remaining term equal to the expected option life assumed at the date of grant. The expected term was calculated based on historical experience and represents the time period options actually remain outstanding. We estimated

forfeitures based on historical pre-vesting forfeitures and shall revise those estimates in subsequent periods if actual forfeitures differ from those estimates. For purposes of calculating pro forma information for periods prior to fiscal 2006, we accounted for forfeitures as they occurred.

F-12

Stock options activity and information about stock options outstanding are summarized in the following tables:

Stock Options Activity	Number of Options	Weighted-Average Exercise Price	Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value ¹
			(years)	(in thousands)
Outstanding at January 1, 2006	6,858,134	$30.00	5.54	$103,283
Granted	950,243	44.03
Exercised	(1,082,792)	21.26
Canceled	(418,032)	42.35
Outstanding at December 31, 2006	6,307,553	32.85	5.41	$65,035
Options Exercisable at December 31, 2006	4,415,480	29.11		$60,370

¹ The intrinsic value represents the amount by which the fair value of stock exceeds the option exercise price.

Stock Options Outstanding

	As of December 31, 2006

	Outstanding				Exercisable

Exercise Price Range		Number of Options	Weighted-Average Remaining Life	Weighted-Average Exercise Price		Number of Options	Weighted-Average Exercise Price

$ 9.55 - $20.30		1,423,505	4.75 years	$12.05		1,363,355	$11.76
$21.71 - $28.88		1,200,575	3.92 years	$25.92		1,107,125	$26.23
$28.88 - $40.06		1,187,129	5.98 years	$37.41		719,186	$36.91
$40.06 - $52.95		2,496,344	6.23 years	$45.87		1,225,814	$46.43

		6,307,553	5.41 years	$32.85		4,415,480	$29.11

The weighted-average estimated fair value of stock options granted was $14.03, $20.37 and $13.10during the years ended December 31, 2006, 2005 and 2004 respectively. The total intrinsic value of stock options exercised during the years ended December 31, 2006, 2005 and 2004 was $22.3, $24.9 and $125.3 million, respectively. As of December 31, 2006, there was approximately $11.3 million of total unrecognized compensation cost, net of estimated forfeitures, related to stock options granted under our stock incentive plans which is expected to be recognized over a weighted-average period of 1.3 years.

Restricted stock units are converted into shares of common stock upon vesting on a one-for-one basis. The cost of these awards is determined using the fair value of our common stock on the date of the grant, and compensation expense is recognized over the vesting period. Restricted stock activity is summarized in the following table:

Restricted Stock Activity	Number of Awards	Weighted-Average Grant Date Fair Value

Non-vested share units at January 1, 2006	345,530	$42.67
Granted	204,154	$43.61
Vested	100,693	$40.94
Canceled	67,524	$43.05


Non-vested share units expected to vest at December 31, 2006	381,467	$43.56

The weighted-average estimated fair value of restricted stock units granted during the year ended December 31, 2005 and 2004 were $46.56 and $40.42, respectively. As of December 31, 2006, we had $6.5 million of total unrecognized compensation expense, net of estimated forfeitures, related to restricted stock unit grants, which will be recognized over the weighted-average period of 1.3 years.

F-13

Segment Reporting

Information by geographic area is shown in the table below. Passenger ticket revenues are attributed to geographic areas based on where the reservation is made.

	2006	2005	2004

Passenger ticket revenues:
United States	82%	79%	82%
All other countries	18%	21%	18%

Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R)” (“SFAS 158”). SFAS 158 requires an employer to recognize the over-funded or under-funded status of a defined benefit postretirement plan (other than a multi-employer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur in comprehensive income. SFAS 158 also requires the measurement of defined benefit plan assets and obligations as of the date of the employer’s fiscal year-end statement of financial position (with limited exceptions). SFAS 158 is effective as of the end of the fiscal year ending after December 15, 2006. The impact of adopting SFAS 158 resulted in a reclassification of prior service cost from intangible assets to accumulated other comprehensive income (loss) of approximately $7.0 million in our 2006 consolidated financial statements.

In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in the tax return. This interpretation is effective for fiscal years beginning after December 15, 2006. We do not expect that the adoption of FIN 48 will have a material impact on our 2007 consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. SFAS 157 defines fair value, establishes a formal framework for measuring fair value and expands disclosures about fair value measurements. We are currently evaluating the impact SFAS 157 may have on our consolidated financial statements.

F-14

Note 3. Business Combination

On November 14, 2006, we completed our acquisition of Pullmantur S.A. (“Pullmantur”), a Madrid-based cruise and tour operator. Pullmantur increases our presence in Spain and provides us with an opportunity to further grow our business in Europe and Latin America and to increase our product offerings. Pullmantur also provides us an opportunity for incremental guest, revenue and earnings growth. We purchased all of the capital stock of Pullmantur for approximately €436.3 million or approximately $558.9 million. For reporting purposes, we will be including Pullmantur’s results of operations on a two-month lag beginning with the first quarter of 2007. We have included Pullmantur’s balance sheet as of the acquisition date in our consolidated balance sheet as of December 31, 2006.

The acquisition was accounted for as a business purchase combination using the purchase method of accounting under the provisions of Statement of Financial Accounting Standards No. 141, "Business Combinations" ("SFAS 141"). The purchase price for the Pullmantur acquisition was allocated to tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date, with the excess allocated to goodwill. The allocation of the purchase price requires extensive use of accounting estimates, valuation methodologies employed by appraisers and management's judgment in the determination of fair values and estimated useful lives of tangible and identifiable intangible assets acquired and liabilities assumed.

We have not finalized the allocation of the purchase price to the net assets acquired in this acquisition. The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed, with reference to Pullmantur’s balance sheet as of the acquisition date. The amounts allocated to intangible assets, estimated useful lives and amortization methodologies are preliminary and are subject to the completion of an appraisal by management, with the assistance of appraisers engaged by management.

U.S. $ in thousands

	Total current assets		57,860
	Property and equipment (mostly ships)		380,600
	Other non-current assets		4,526
	Goodwill		425,530
	Other intangible assets		242,600
	Current portion of long-term debt		(14,897)
	Other current liabilities		(91,221)
	Long-term debt		(338,700)
	Other long-term liabilities		(107,350)
	Net assets acquired		558,948

Of the $242.6 million of acquired intangible assets, approximately $216.0 million was assigned to the value associated with the awareness and reputation of the Pullmantur brand among its customers and it is considered an indefinite life intangible asset. Amortizable intangible assets identified of approximately $26.6 million have a weighted-average useful life of approximately 2.2 years.

Note 4. Property and Equipment

Property and equipment consists of the following (in thousands):

	2006	2005

Land	$ 16,442	$ 7,056
Ships	13,225,184	11,952,626
Ships under construction	557,268	377,065
Other	584,641	512,904

	14,383,535	12,849,651
Less — accumulated depreciation and amortization	(2,954,429)	(2,572,703)

	$11,429,106	$10,276,948

Ships under construction include progress payments for the construction of new ships as well as planning, design, interest, commitment fees and other associated costs. We capitalized interest costs of $27.8 million, $17.7 million and $7.2 million for the years 2006, 2005 and 2004, respectively.

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Note 5. Other Assets

In March 2006, we purchased $100.0 million of notes issued by First Choice Holidays PLC (“First Choice”), our joint venture partner in Island Cruises. The notes bear interest at 6.0% and are due from First Choice in March 2009.

Variable Interest Entities

Financial Accounting Standard Board Interpretation No. 46 (Revised), Consolidation of Variable Interest Entities (“FIN46”), addresses consolidation by business enterprises of Variable Interest Entities (“VIEs”) in which an entity absorbs a majority of the entity’s expected residual returns, or both, as a result of ownership, contractual or other financial interests in the entity, which have one or both of the following characteristics: (1) the equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated support from other parties, which is provided through other interests that will absorb some or all of the expected losses of the entity; or (2) the equity investors lack one or more of the following essential characteristics of a controlling financial interest: (a) the direct or indirect ability to make decisions about the

entity’s activities through voting or similar rights; or (b) the obligation to absorb the expected losses of the entity if they occur, which makes it possible for the entity to finance its activities; or (c) the right to receive the expected residual returns of the entity if they occur, which is the compensation for the risk of absorbing the expected losses.

We have determined that one of our minority interests, a ship repair facility in which we invested in April 2001, is a VIE; however, we are not the primary beneficiary and accordingly we do not consolidate this entity. As of December 31, 2006, our investment in this entity including equity and loans, which is also our maximum exposure to loss, was approximately $43.4million.

In conjunction with our acquisition of Pullmantur, we obtained a 49% minority interest in Pullmantur Air, S.A.("Pullmantur Air"), a small air business that operates three aircraft in support of Pullmantur’s operations. We have determined Pullmantur Air is a VIE for which we are the primary beneficiary and in accordance with FIN46, we have consolidated the assets and liabilities of Pullmantur Air at their fair value. The assets and liabilities of Pullmantur Air are immaterial to our December 31, 2006 consolidated financial statements.

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Note 6. Long-Term Debt

Long-term debt consists of the following (in thousands):

	2006	2005

Unsecured revolving credit facility, LIBOR plus 0.875% and a commitment fee of 0.175% due 2010	$ 445,000	$ 135,000
Unsecured senior notes and senior debentures, 6.75% to 8.75%, due 2007 through 2016, 2018 and 2027	2,804,608	2,096,286
Liquid Yield Option™ Notes with yield to maturity of 4.875%, due 2021	-	531,857
Zero coupon convertible notes with yield to maturity of 4.75%, due 2021	-	137,942
€750 million unsecured Bridge Loan, EURIBOR plus 0.625%, due 2007	925,110	-
$570 million unsecured term loan, 3.77% due 2006 through 2013	529,286	-
$360 million unsecured term loan, LIBOR plus 1.0%, due 2006	-	270,000
$300 million unsecured term loan, LIBOR plus 0.8%, due 2009 through 2010	200,000	200,000
$225 million unsecured term loan, LIBOR plus 0.75%, due 2006 through 2012	192,848	225,000
€6.0 million unsecured revolving credit lines, EURIBOR plus 0.8% to 1.25% due 2007 through 2008	7,961	-
Unsecured term loans, LIBOR plus 0.7%, due 2010	200,000	200,000
Unsecured term loan, 8.0%, due through 2006	-	11,811
Term loan, 8.0%, due through 2010, secured by a certain Celebrity ship	-	172,979
Term loans, LIBOR plus 0.85%, due through 2008, secured by certain Celebrity ships	61,149	125,580
Capital lease obligations	47,782	48,320

	5,413,744	4,154,775
Less — current portion	(373,422 )	(600,883 )

Long-term portion	$5,040,322	$ 3,553,892

During 2006, we entered into and drew in full a $570.0 million unsecured term loan due through 2013 at a rate of 3.77%.

During 2006, we issued $550.0 million of 7.0% senior unsecured notes due 2013, at a price of 99.509% of par and $350.0 million of 7.25% senior unsecured notes due 2016, at a price of 99.690% of par.

During 2006, we paid $530.6 million to redeem in full the accreted balance of our outstanding Liquid Yield Option Notes™ (“LYONs”) due February 2, 2021. During 2006, holders our LYONs converted approximately $13.5 million of the accreted value of these notes into approximately 319,000 shares of common stock and cash for fractional shares.

During 2006, we prepaid a total of $153.8 million on an 8.0% term loan secured by a certain Celebrity ship. We borrowed $150.0 million on our unsecured revolving credit facility to prepay the term loan.

During 2006, we called for redemption all of our outstanding zero coupon convertible notes due May 18, 2021. Most holders of the notes elected to convert them into shares of our common stock, rather than redeem them for cash, resulting in the issuance of approximately 4.1 million shares during the redemption period. In addition to the 4.1 million shares issued related to the redemption, holders of our zero coupon convertible notes converted approximately $11.5 million of the accreted balance of these notes into approximately 369,000 shares of common stock and cash for fractional shares.

During 2006, we obtained a €750.0 million, or approximately $960.5 million, unsecured bridge loan, on which we drew €701.0 million, or approximately $925.1 million, to finance our acquisition of Pullmantur. The bridge loan has an original maturity of 364 days. We have classified the bridge loan as long-term debt at December 31, 2006 in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 6, Classification of Short-Term Obligations Expected to be Refinanced. We refinanced the bridge loan subsequent to year-end with a portion of the net proceeds from the €1.0 billion, or approximately $1.3, billion unsecured bond offering which occurred in January 2007. (See Note 14. Subsequent Events )

Under certain of our agreements, the contractual interest rate and commitment fee vary with our debt rating.

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The unsecured senior notes and senior debentures are not redeemable prior to maturity.

Our debt agreements contain covenants that require us, among other things, to maintain minimum net worth and fixed charge coverage ratio and limit our net debt-to-capital ratio. We are in compliance with all covenants as of December 31, 2006. Following is a schedule of annual maturities on long-term debt as of December 31, 2006 for each of the next five years (in thousands):

Year
2007	$373,422
2008	283,371
2009	265,113
2010	1,058,493
2011	619,735

Note 7. Shareholders’ Equity

In September 2005, we announced that we and an investment bank had finalized a forward sale agreement relating to an Accelerated Share Repurchase (“ASR”) transaction. The forward sale agreement matured in February 2006. As part of the ASR transaction, we purchased 5.7 million shares of our common stock from the investment bank at a price of $43.67 per share. Total consideration paid to repurchase such shares, including commissions and other fees, was approximately $249.1 million and was recorded in shareholders' equity as a component of treasury stock.

On June 2, 2006, we announced that we, and an investment bank had finalized a forward sale agreement relating to an Accelerated Share Repurchase (“ASR”) transaction. The forward sale agreement matured in August 2006. As part of the ASR transaction, we purchased 4.6 million shares of our common from the investment bank at a price of $35.99 per share. Total consideration paid to repurchase such shares, including commissions and other fees, was approximately $164.6 million and was recorded in shareholders' equity as a component of treasury stock.

We declared cash dividends on our common stock of $0.15 per share in each of the quarters of 2006. Cash dividends of $0.13 per share were declared in each of the first and second quarters of 2005 and $0.15 per share in each of the third and fourth quarters of 2005.

F-18

Note 8. Earnings Per Share

A reconciliation between basic and diluted earnings per share is as follows (in thousands, except per share data):


	Year Ended December 31,
	2006	2005	2004

Income before cumulative effect of a change in accounting principle	$633,922	$663,465	$474,691
Cumulative effect of a change in accounting principle (Note 2)	-	52,491	-

Net income	633,922	715,956	474,691
Interest on dilutive convertible notes	17,237	48,128	54,530

Net income for diluted earnings per share	$651,159	$764,084	$529,221

Weighted-average common shares outstanding	210,703	206,217	198,946
Dilutive effect of stock options and restricted stock awards	1,725	2,725	4,161
Dilutive effect of convertible notes	9,057	25,772	31,473

Diluted weighted-average shares outstanding	221,485	234,714	234,580

Basic earnings per share:
Income before cumulative effect of a change in accounting principle	$ 3.01	$ 3.22	$ 2.39
Cumulative effect of a change in accounting principle	$ -	$ 0.25	$ -
Net income	$ 3.01	$ 3.47	$ 2.39

Diluted earnings per share:
Income before cumulative effect of a change in accounting principle	$ 2.94	$ 3.03	$ 2.26
Cumulative effect of a change in accounting principle	$ -	$ 0.22	$ -
Net income	$ 2.94	$ 3.26	$ 2.26

Diluted earnings per share did not include options to purchase 3.2 million shares for the year ending December 31, 2006 and 1.3 million shares for each of the years ended December 31, 2005 and 2004 because the effect of including them would have been antidilutive.

Note 9. Retirement Plan

We maintain a defined contribution pension plan covering full-time shoreside employees who have completed the minimum period of continuous service. Annual contributions to the plan are based on fixed percentages of participants’ salaries and years of service, not to exceed certain maximums. Pension cost was $13.9 million, $12.8 million and $12.2 million for the years ended December 31, 2006, 2005 and 2004, respectively.

Note 10. Income Taxes

We and the majority of our subsidiaries are currently exempt from United States corporate tax on income from the international operation of ships pursuant to Section 883 of the Internal Revenue Code. Income tax expense related to our remaining subsidiaries was not significant for the years ended December 31, 2006, 2005 and 2004.

Final regulations under Section 883 were published on August 26, 2003, and were effective for the year ended December 31, 2005. These regulations confirmed that we qualify for the exemption provided by Section 883, but also narrowed the scope of activities which are considered by the Internal Revenue Service to be incidental to the international operation of ships. The activities listed in the regulations as not being

F-19

incidental to the international operation of ships include income from the sale of air and other transportation such as transfers, shore excursions and pre and post cruise tours. To the extent the income from such activities is earned from sources within the United States, such income will be subject to United States taxation. The application of these new regulations reduced our net income for the years ended December 31, 2006 and December 31, 2005 by approximately $6.3 million and $14.0 million, respectively.

Note 11. Financial Instruments

The estimated fair values of our financial instruments are as follows (in thousands):

	2006	2005

Cash and cash equivalents	$ 104,520	$ 125,385
Long-term debt (including current portion of long-term debt)	(5,474,988)	(4,368,874)
Foreign currency forward contracts in a net (loss) gain position	104,159	(115,415)
Interest rate swap agreements in a net receivable position	5,856	8,456
Fuel swap agreements in a net payable position	(20,456)	(78)

The reported fair values are based on a variety of factors and assumptions. Accordingly, the fair values may not represent actual values of the financial instruments that could have been realized as of December 31, 2006 or 2005, or that will be realized in the future and do not include expenses that could be incurred in an actual sale or settlement. Our financial instruments are not held for trading or speculative purposes.

Our exposure under foreign currency contracts, interest rate and fuel swap agreements is limited to the cost of replacing the contracts in the event of non-performance by the counterparties to the contracts, all of which are currently our lending banks. To minimize this risk, we select counterparties with credit risks acceptable to us and we limit our exposure to an individual counterparty. Furthermore, all foreign currency forward contracts are denominated in primary currencies.

Cash and Cash Equivalents

The carrying amounts of cash and cash equivalents approximate their fair values due to the short maturity of these instruments.

Long-Term Debt

The fair values of our senior notes and senior debentures were estimated by obtaining quoted market prices. The fair values of all other debt were estimated using discounted cash flow analyses based on market rates available to us for similar debt with the same remaining maturities.

Foreign Currency Contracts

The fair values of our foreign currency forward contracts were estimated using current market prices for similar instruments. Our exposure to market risk for fluctuations in foreign currency exchange rates relates to six ship construction contracts and forecasted transactions. We use foreign currency forward contracts to mitigate the impact of fluctuations in foreign currency exchange rates. As of December 31, 2006, we had foreign currency forward contracts in a notional amount of $3.8 billion maturing through 2009. As of December 31, 2006, the fair value of our foreign currency forward contracts related to the six ship construction contracts, which are designated as fair value hedges, was a net unrealized gain of approximately $106.3 million. At December 31, 2005, the fair value of our foreign currency forward contracts related to three ship construction contracts, designated as fair value hedges, was a net unrealized loss of approximately $103.4 million. The fair value of our foreign currency forward contracts related to the other ship construction contract at December 31, 2005, which was designated as a cash flow hedge, was an unrealized loss, of approximately $7.8 million. At December 31, 2006, approximately 11% of the aggregate cost of the ships was exposed to fluctuations in the euro exchange rate.

F-20

Hedge of Net Investment in a Foreign Operation

In conjunction with our acquisition of Pullmantur, we obtained a bridge loan with a notional amount of €750.0 million, or approximately $960.5 million, of which we drew €701.0 million, or approximately $925.1 million, to finance the acquisition. We have designated a portion of this bridge loan, approximately €478.8 million, or approximately $631.8 million, which is a nonderivative, as a hedge of our net investment in Pullmantur and, accordingly, have included approximately $18.7 million of foreign-currency transaction losses in the cumulative translation adjustment component of accumulated other comprehensive loss at December 31, 2006.

Interest Rate Swap Agreements

The fair values of our interest rate swap agreements were estimated based on quoted market prices for similar or identical financial instruments to those we hold. Our exposure to market risk for changes in interest rates relates to our long-term debt obligations and our operating lease for Brilliance of the Seas . We enter into interest rate swap agreements to modify our exposure to interest rate movements and to manage our interest expense and rent expense.

Market risk associated with our long-term fixed rate debt is the potential increase in fair value resulting from a decrease in interest rates. As of December 31, 2006, we had interest rate swap agreements, designated as fair value hedges, which exchanged fixed interest rates for floating interest rates in a notional amount of $175.0 million, maturing in 2010 through 2013.

Market risk associated with our long-term floating rate debt is the potential increase in interest expense from an increase in interest rates. As of December 31, 2006, we had an interest rate swap agreement, designated as a cash flow hedge, which, exchanges floating rate term debt for a fixed interest rate of 4.40% in a notional amount of $25.0 million, maturing in 2008.

Fuel Swap Agreements

The fair values of our fuel swap agreements were estimated based on quoted market prices for similar or identical financial instruments to those we hold. Our exposure to market risk for changes in fuel prices relates to the forecasted consumption of fuel on our ships. Historically, we have used fuel swap agreements to mitigate the impact of fluctuations in fuel prices. As of December 31, 2006 and 2005, we had fuel swap agreements, designated as cash flow hedges, to pay fixed prices for fuel with an aggregate notional amount of $205.3 million, maturing through 2008, and $92.4 million, maturing through 2007, respectively.

Note 12. Commitments and Contingencies

Capital Expenditures

As of December 31, 2006, we had two Freedom-class ships, and one unnamed class ship designated for Royal Caribbean International and three Solstice-class ships, on order for an additional capacity of approximately 21,150 berths. The aggregate cost of the ships is approximately $5.3 billion, of which we have deposited $438.4 million as of December 31, 2006. (See Note 11. Financial Instruments .)

As of December 31, 2006, we anticipated overall capital expenditures, including the six ships on order, will be approximately $1.3 billion for 2007, $1.8 billion for 2008, $2.0 billion for 2009, and $1.0 billion for 2010.

F-21

Litigation

In April 2005, a purported class action lawsuit was filed in the United States District Court of the Southern District of Florida alleging that Celebrity Cruises improperly requires its cabin stewards to share guest gratuities with assistant cabin stewards. The suit sought payment of damages, including penalty wages under the U.S. Seaman’s Wage Act. In March 2006 the Southern District of Florida dismissed the suit and held that the case should be arbitrated pursuant to the arbitration provision in Celebrity’s collective bargaining agreement. In April 2006, the plaintiff appealed the order to the U.S. 11th Circuit Court of Appeals. We are not able at this time to estimate the impact of this proceeding on us. However, we believe that we have meritorious defenses and we intend to vigorously defend against this action.

In January 2006, we partially settled a pending lawsuit against Rolls Royce and Alstom Power Conversion, co-producers of the Mermaid pod-propulsion system on Millennium-class ships, for the recurring Mermaid pod failures. Under the terms of the partial settlement, we received $38.0 million from Alstom and released them from the suit, which remains pending against Rolls Royce. The $38.0 million settlement resulted in a gain of $36.0 million, net of reimbursements to insurance companies, which we have recorded within other income in our consolidated statements of operations.

In June 2006, a federal court jury in New York awarded Celebrity Cruises approximately $193.0 million, exclusive of pre-judgment interest and attorneys fees, in a lawsuit against Essef Corp. for damages stemming from a 1994 outbreak of Legionnaires’ disease on one of Celebrity’s ships. The verdict is subject to appeal and, due to the ongoing nature of the proceedings, the ultimate financial benefit to Celebrity is undetermined at this time. Any gain from this verdict will only be recognized when the outcome is known with certainty.

In July 2006, a purported class action lawsuit was filed in the United States District Court for the Central District of California alleging that we failed to timely pay crew wages and failed to pay proper crew overtime. The suit seeks payment of damages, including penalty wages under the U.S. Seaman’s Wage Act and equitable relief damages under the California Unfair Competition Law. In December 2006, the District Court granted our motion to dismiss the claim and held that it should be arbitrated pursuant to the arbitration provision in Royal Caribbean’s collective bargaining agreement. In January 2007, the plaintiffs appealed the order to the United States Ninth Circuit Court of Appeals. We are not able at this time to estimate the impact of this proceeding on us. However, we believe that we have meritorious defenses and we intend to vigorously defend against this action.

We are routinely involved in other claims typical within the cruise vacation industry. The majority of these claims is covered by insurance. We believe the outcome of such claims, net of expected insurance recoveries, will not have a material adverse effect upon our financial condition, results of operations or liquidity.

F-22

Operating Leases

On July 5, 2002, we added Brilliance of the Seas to Royal Caribbean International’s fleet. In connection with this addition, we novated our original ship building contract and entered into an operating lease denominated in British pound sterling. In connection with the novation of the contract, we received $77.7 million for reimbursement of shipyard deposits previously made. The lease payments vary based on sterling LIBOR. The lease has a contractual life of 25 years; however, the lessor has the right to cancel the lease at years 10 and 18. Accordingly, the lease term for accounting purposes is 10 years. In the event of early termination at year 10, we have the option to cause the sale of the vessel at its fair value and use the proceeds toward the applicable termination obligation plus any unpaid amounts due under the contractual term of the lease. Alternatively, we can make a termination payment of approximately £126.0 million, or approximately $246.8 million based on the exchange rate at December 31, 2006, and relinquish our right to cause the sale of the vessel. This is analogous to a guaranteed residual value. This termination amount, which is our maximum exposure, has been included in the table below for noncancelable operating leases. Under current circumstances we do not believe early termination of this lease is probable.

In addition, we are obligated under other noncancelable operating leases primarily for offices, warehouses and motor vehicles. As of December 31, 2006, future minimum lease payments under noncancelable operating leases were as follows (in thousands):

Year
2007	$ 58,728
2008	56,652
2009	50,462
2010	49,932
2011	47,504
Thereafter (1)	307,524

	$ 570,802

(1)

Total expense for all operating leases amounted to $57.0 million, $57.9 million and $54.5 million for the years 2006, 2005 and 2004, respectively.

Other

F-23

At December 31, 2006, we have future commitments to pay for our usage of certain port facilities, marine consumables, services and maintenance contracts as follows (in thousands):

Year
2007	$ 138,511
2008	87,353
2009	42,846
2010	30,795
2011	25,582
Thereafter	103,242
	$ 428,329

Note 13. Related Parties

A. Wilhelmsen AS. and Cruise Associates collectively own approximately 35.9% of our common stock and are parties to a shareholders’ agreement which provides that our board of directors will consist of four nominees of A. Wilhelmsen AS., four nominees of Cruise Associates and our Chief Executive Officer. They have the power to determine, among other things, our policies and the policies of our subsidiaries and actions requiring shareholder approval.

Note 14. Subsequent Events

In January 2007, we issued € 1.0 billion, or approximately $1.3 billion, of 5.63% senior unsecured notes due 2014 at a price of 99.638% of par. The net proceeds from the offering were used to retire the €701.0 million, or approximately $925.1 million, drawn on the €750.0 million, or approximately $960.5 million, unsecured bridge loan facility obtained to finance our acquisition of Pullmantur. The remainder of the net proceeds, approximately €289.0 million, or approximately $374.8 million, were used to repay a portion of the outstanding balance on our unsecured revolving credit facility.

In February 2007, we entered into interest rate swap agreements that effectively change €1.0 billion of fixed rate debt with a weighted-average fixed rate of 5.63% to EURIBOR-based floating rate debt. We also entered into cross currency swap agreements that effectively change €300.0 million of floating EURIBOR-based debt to $389.1 million of floating LIBOR-based debt.

F-24

Note 15. Quarterly Selected Financial Data (Unaudited)

(In thousands, except per share data)


	First Quarter				Second Quarter				Third Quarter				Fourth Quarter

	2006		2005		2006		2005		2006		2005		2006			2005

	(in thousands, except per share data)
Total revenues	$	1,146,536	$	1,168,077	$	1,292,984	$	1,203,242	$	1,636,851	$	1,502,215	$	1,153,215		$	1,029,640

Operating income ¹	$	141,051	$	201,178	$	184,244	$	214,135	$	419,609	$	400,456	$	113,542		$	55,796

Income (loss) before cumulative effect of a change in accounting principle	$	119,499	$	137,118	$	122,427	$	155,240	$	345,372	$	374,711	$	46,624		$	(3,604)
Cumulative effect of a change in accounting principle ¹		-		52,491		-		-		-		-		-			-

Net income (loss)	$	119,499	$	189,609	$	122,427	$	155,240	$	345,372	$	374,711	$	46,624		$	(3,604)

Basic earnings (loss) per share:
Income (loss) before cumulative effect of a change in accounting principle	$	0.57	$	0.68	$	0.58	$	0.76	$	1.66	$	1.79	$	0.22		$	(0.02)
Cumulative effect of a change in accounting principle ¹		-		0.26		-		-		-		-			-		-

Net income (loss)	$	0.57	$	0.94	$	0.58	$	0.76	$	1.66	$	1.79	$	0.22		$	(0.02)

Diluted earnings (loss) per share:
Income (loss) before cumulative effect of a change in accounting principle	$	0.55	$	0.64	$	0.57	$	0.72	$	1.63	$	1.64	$	0.22		$	(0.02)
Cumulative effect of a change in accounting principle ¹		-		0.22		-		-		-		-		-			-

Net income (loss)	$	0.55	$	0.86	$	0.57	$	0.72	$	1.63	$	1.64	$	0.22		$	(0.02)

Dividends declared per share:	$	0.15	$	0.13	$	0.15	$	0.13	$	0.15	$	0.15	$	0.15		$	0.15

¹ In the third quarter of 2005, we changed our method of accounting for drydocking costs. ( See Note 2. Summary of Significant Accounting Policies )

F-25

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

The parties hereto mutually covenant and agree as follows:

(B)

By adding the following Section 114 to Article One:

(C)

By adding the following Section 115 to Article One:

(D)

By adding the following Section 311 to Article Three:

(E)

By adding the following Section 1008 to Article Ten:

(F)

By adding the following Section 1009 to Article Ten:

Section 1009. Restrictions on Sales and Leasebacks .

(G)

By adding the following Section 1010 to Article Ten:

Section 1010. Maintenance of Properties .

ROYAL CARIBBEAN CRUISES LTD.
By:	/s/ Thomas P. Martin
Name: Thomas P. Martin
Title: Senior Vice President and Treasurer

THE BANK OF NEW YORK TRUST COMPANY, N.A., as Trustee,
By:	/s/ Jason Merchant
Name: Jason Merchant
Title: Assistant Treasurer

/s/ Daniel T. Roose

Name: DANIEL T. ROOSE

Notary Public, State of New York

No. 01RO6139002

Qualified in New York County

Commission Expires Dec. 27, 2009

[seal]

Name: D. Dawes

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

The parties hereto mutually covenant and agree as follows:

"Attributable Debt" has the meaning specified in Section 1008.

"Funded Debt" has the meaning specified in Section 1009.

"Mortgage" has the meaning specified in Section 1009.

"Principal Property" has the meaning specified in Section 1008.

"Restricted Subsidiary" has the meaning specified in Section 1008.

"Secured Debt" has the meaning specified in Section 1008.

"Unrestricted Subsidiary" has the meaning specified in Section 1008.

(B)

By adding the following Section 114 to Article One:

Section 114. Consent to Jurisdiction and Service of Process .

(C)

By adding the following Section 115 to Article One:

Section 115. No Recourse Against Others .

(D)

By adding the following Section 311 to Article Three:

Section 311. Additional Senior Notes

(E)

By adding the following Section 1008 to Article Ten:

Section 1008. Restrictions on Secured Debt .

(F)

By adding the following Section 1009 to Article Ten:

Section 1009. Restrictions on Sales and Leasebacks .

(G)

By adding the following Section 1010 to Article Ten:

Section 1010. Maintenance of Properties .

ROYAL CARIBBEAN CRUISES LTD.

Name: Thomas P. Martin

Title: Senior Vice President and Treasurer

THE BANK OF NEW YORK TRUST

COMPANY, N.A., as Trustee,

By:

/s/ Jason Merchant

Name: Jason Merchant

Title: Assistant Treasurer

Name:

DANIEL T. ROOSE

Notary Public, State of New York

Qualified in New York County

Commission Expires Dec. 27, 2009

__________________________________

Exhibit 10.3

EXECUTION COPY

AMENDMENT NO. 2 TO CREDIT AGREEMENT

This AMENDMENT NO. 2 TO CREDIT AGREEMENT, dated as of December 15, 2006, is among ROYAL CARIBBEAN CRUISES LTD., a Liberian corporation (the “ Borrower ”), the various financial institutions as are parties to the Credit Agreement referred to below (collectively, the “Lenders”) and CITIBANK, N.A., as Administrative Agent (the “ Administrative Agent ”) for the Lenders.

PRELIMINARY STATEMENTS

(1) The Borrower, the Lenders and the Administrative Agent are parties to a Credit Agreement dated as of March 27, 2003, as amended by Amendment No. 1 dated as of May 18, 2005 (as further amended, restated, modified, supplemented or renewed from time to time, the “ Credit Agreement ”); and

(2) The Borrower, the Lenders and the Administrative Agent have agreed to amend the Credit Agreement as hereinafter set forth herein;

NOW, THEREFORE, the parties hereto hereby agree as follows:

SECTION 1. Amendments to the Credit Agreement . The Credit Agreement is, effective as of the date hereof and subject to the satisfaction of the conditions precedent set forth in Section 2, hereby amended in its entirety to read as set forth in Annex A hereto.

SECTION 2. Conditions of Effectiveness . This Amendment shall become effective as of the date first above written (the “ Amendment Effective Date ”) when and only if the Administrative Agent shall have received counterparts of this Amendment executed by the Borrower and the Required Lenders or, as to any of the Lenders, advice satisfactory to the Administrative Agent that such Lender has executed this Amendment.

SECTION 3. Representation and Warranty . To induce the Lenders to enter into this Amendment, the Borrower represents and warrants that, as of the Amendment Effective Date:

(a) The representations and warranties contained in Article VI of the Credit Agreement, as amended hereby (excluding, however the representations and warranties contained in Sections 6.10 and 6.13 of the Credit Agreement) are true and correct in all material respects except for those representations and warranties that are qualified by materiality or Material Adverse Effect, which shall be true and correct, on and as of the Amendment Effective Date, and

(b) No Default and no Prepayment Event and no event which (with notice or lapse of time or both) would become a Prepayment Event has occurred and is continuing.

SECTION 3. Reference to and Effect on the Credit Agreement and the Notes . (a) On and after the effectiveness of this Amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import referring to the Credit Agreement, and each reference in the Notes to “the Credit Agreement”, “thereunder”, “thereof” or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement, as amended by this Amendment.

(b) The Credit Agreement and the Notes, as specifically amended by this Amendment, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed.

(c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or the Administrative Agent under the Credit Agreement, nor constitute a waiver of any provision of the Credit Agreement.

SECTION 4. Costs and Expenses . The Borrower agrees to pay on demand all reasonable out-of-pocket costs and expenses of the Administrative Agent in connection with the preparation, execution, delivery and administration, modification and amendment of this Amendment and the other documents to be delivered hereunder (including the reasonable and documented fees and expenses of counsel for the Administrative Agent with respect hereto and thereto as agreed with the Administrative Agent) in accordance with the terms of Section 11.3 of the Credit Agreement.

SECTION 5. Execution in Counterparts . This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Amendment by telecopier shall be effective as delivery of a manually executed counterpart of this Amendment.

SECTION 6. Governing Law . This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York.

SECTION 7. Defined Terms . Capitalized terms not otherwise defined in the Amendment shall have the same meanings as specified in the Credit Agreement.

IN WITNESS WHEREOF , the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written.

THE BORROWER


	ROYAL CARIBBEAN CRUISES LTD.
	By	/s/ Antje M. Gibson
		Title: Vice President & Acting Treasurer


	CITIBANK, N.A., as Administrative Agent and as a Lender
	By	/s/ Anish M. Shah
		Title: Vice President


	DnB NOR BANK ASA
	By	/s/ Sanjiv Nayar
		Title: Senior Vice President


	ROYAL BANK OF SCOTLAND PLC
	By	/s/ Timothy J. McNaught
		Title: Managing Director


	BNP PARIBAS
	By	/s/ Duane Helkowski
		Title: Managing Director


	By	/s/ Shayn March
		Title: Director


	BANK OF AMERICA, N.A.
	By	/s/ Justin Lien
		Title: Vice President


	BARCLAYS BANK PLC (did not sign) COMMERZBANK AG, NEW YORK AND GRAND CAYMAN ISLANDS BRANCHES
	By	/s/ Edward C.a. Forsberg, Jr.
		Title: Senior Vice President & Manager


	By	/s/ Birgit Pacek
		Title: Assistant Cashier


	HSH NORDBANK AG
	By	/s/ S. Berger
		Title: Vice President


	By	/s/ Hay
		Title: Vice President


	JPMORGAN CHASE BANK, N.A.
	By	/s/ Donald S. Shokrian
		Title: Managing Director


	NORDEA BANK NORGE ASA
	By	/s/ Hans Chr. Kjelsrud
		Title: Executive Vice President


	By	/s/ Anne Engen
		Title: Vice President


	THE BANK OF NOVA SCOTIA
	By	/s/ Mark Sparrow
		Title: Director


	SCOTIABANC INC.
	By	/s/ William E. Zarrett
		Title: Managing Director


	KfW (formerly known as KREDITANSTALT FÜR WIEDERAUFBAU)
	By	/s/
		Title: Vice President


	By	/s/ Senior Project Manager



	BAYERISCHE HYPO AND VEREINSBANK AG
	By	/s/ Trennt
		Title:


	By	/s/ Gohning



	CREDIT SUISSE, CAYMAN ISLANDS BRANCH
	By	/s/ Ian Nalitt
		Title: Vice President


	By	/s/ Denise L. Alvarez
		Title: Associate


	GOLDMAN SACHS CREDIT PARTNERS L.P.
	By	/s/ Pedro Ramirez
		Title: Authorized Signatory


	MIZUHO CORPORATE BANK LTD.
	By	/s/
		Title: Deputy General Manager


	MORGAN STANLEY BANK (did not sign) REGIONS BANK
	By	/s/ Stephen hanas
		Title: Senior Vice President


	U.S. BANK NATIONAL ASSOCIATION
	By	/s/ Patrick H. McGraw, Jr.
		Title: Vice President

Annex A

EXECUTION COPY

U.S. $1,000,000,000

CREDIT AGREEMENT,

dated as of March 27, 2003

amended and restated as of December 15, 2006

ROYAL CARIBBEAN CRUISES LTD.,
as the Borrower,

and

CITIGROUP GLOBAL MARKETS INC. and NORDEA
as Co-Lead Arrangers

and

CITIBANK, N.A.
as Administrative Agent

and

NORDEA
as Syndication Agent

and

DNB NOR BANK ASA
as Documentation Agent

TABLE OF CONTENTS


		PAGE
	ARTICLE I

	DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1.	Defined Terms		1

SECTION 1.2.	Use of Defined Terms		11

SECTION 1.3.	Cross-References		11

SECTION 1.4.	Accounting and Financial Determinations		11

	ARTICLE II

	COMMITMENTS, BORROWING PROCEDURES AND NOTES

SECTION 2.1.	Commitment Amounts		12

SECTION 2.1.1.	Commitment of Each Lender		12

SECTION 2.1.2.	Lenders Not Permitted or Required To Make Loans Under Certain Circumstances		12

SECTION 2.1.3.	Defaulting Lenders		12

SECTION 2.2.	Reduction of Commitments		12

SECTION 2.2.1.	Optional		12

SECTION 2.2.2.	Mandatory		13

SECTION 2.3.	Borrowing Procedure		13

SECTION 2.4.	Election of Interest Periods		13

SECTION 2.5.	Funding		13

SECTION 2.6.	Notes		14

SECTION 2.7.	Increase in Combined Commitments		14

	ARTICLE III

	REPAYMENTS, PREPAYMENTS, INTEREST AND FEES


		PAGE

SECTION 3.1.	Repayments and Prepayments		15

SECTION 3.2.	Interest Provisions		15

SECTION 3.2.1.	Rates		15

SECTION 3.2.2.	Post-Maturity Rates		16

SECTION 3.2.3.	Payment Dates		16

SECTION 3.2.4.	Interest Rate Determination; Replacement Reference Lenders		16

SECTION 3.3.	Commitment Fees		17

SECTION 3.3.1.	Payment		17

SECTION 3.3.2.	Applicable Percentage		17

	ARTICLE IV

	CERTAIN LIBO RATE AND OTHER PROVISIONS

SECTION 4.1.	LIBO Rate Lending Unlawful		18

SECTION 4.2.	Deposits Unavailable		18

SECTION 4.3.	Increased LIBO Rate Loan Costs, etc.		19

SECTION 4.4.	Funding Losses		20

SECTION 4.5.	Increased Capital Costs		21

SECTION 4.6.	Taxes		21

SECTION 4.7.	Reserve Costs		23

SECTION 4.8.	Replacement Lenders, etc.		24

SECTION 4.9.	Payments, Computations, etc.		24

SECTION 4.10.	Sharing of Payments		25

SECTION 4.11.	Setoff		25

SECTION 4.12.	Use of Proceeds		25

	ARTICLE V

	CONDITIONS TO BORROWING


		PAGE

SECTION 5.1.	Initial Borrowing		26

SECTION 5.1.1.	Resolutions, etc.		26

SECTION 5.1.2.	Delivery of Notes		26

SECTION 5.1.3.	Ownership, etc. of Vessels		26

SECTION 5.1.4.	Opinions of Counsel		27

SECTION 5.1.5.	Closing Fees, Expenses, etc.		27

SECTION 5.2.	All Borrowings		27

SECTION 5.2.1.	Compliance with Warranties, No Default, etc.		27

SECTION 5.2.2.	Borrowing Request		27

SECTION 5.3.	All Borrowings		27

	ARTICLE VI

	REPRESENTATIONS AND WARRANTIES

SECTION 6.1.	Organization, etc.		28

SECTION 6.2.	Due Authorization, Non-Contravention, etc.		28

SECTION 6.3.	Government Approval, Regulation, etc.		28

SECTION 6.4.	Compliance with Environmental Laws		29

SECTION 6.5.	Validity, etc.		29

SECTION 6.6.	Financial Information		29

SECTION 6.7.	Intentionally Omitted		29

SECTION 6.8.	No Default, Event of Default or Prepayment Event		29

SECTION 6.9.	Litigation		29

SECTION 6.10.	Vessels		29

SECTION 6.11.	Subsidiaries		30

SECTION 6.12.	Obligations rank pari passu		30

SECTION 6.13.	Withholding, etc.		30

iii


		PAGE

SECTION 6.14.	No Filing, etc. Required		30

SECTION 6.15.	No Immunity		30

SECTION 6.16.	Pension Plans		30

SECTION 6.17.	Investment Company Act		31

SECTION 6.18.	Regulation U		31

SECTION 6.19.	Accuracy of Information		31

	ARTICLE VII

	COVENANTS

SECTION 7.1.	Affirmative Covenants		31

SECTION 7.1.1.	Financial Information, Reports, Notices, etc.		31

SECTION 7.1.2.	Approvals and Other Consents		32

SECTION 7.1.3.	Compliance with Laws, etc.		32

SECTION 7.1.4.	Vessels		33

SECTION 7.1.5.	Insurance		33

SECTION 7.1.6.	Books and Records		33

SECTION 7.2.	Negative Covenants		34

SECTION 7.2.1.	Business Activities		34

SECTION 7.2.2.	Indebtedness		34

SECTION 7.2.3.	Liens		34

SECTION 7.2.4.	Financial Condition		36

SECTION 7.2.5.	Investments		36

SECTION 7.2.6.	Consolidation, Merger, etc.		36

SECTION 7.2.7.	Asset Dispositions, etc.		37

SECTION 7.2.8.	Transactions with Affiliates		38


		PAGE

	ARTICLE VIII

	EVENTS OF DEFAULT

SECTION 8.1.	Listing of Events of Default		38

SECTION 8.1.1.	Non-Payment of Obligations		38

SECTION 8.1.2.	Breach of Warranty		38

SECTION 8.1.3.	Non-Performance of Certain Covenants and Obligations		38

SECTION 8.1.4.	Default on Other Indebtedness		38

SECTION 8.1.5.	Pension Plans		39

SECTION 8.1.6.	Bankruptcy, Insolvency, etc.		39

SECTION 8.1.7.	Ownership of Principal Subsidiaries		40

SECTION 8.2.	Action if Bankruptcy		40

SECTION 8.3.	Action if Other Event of Default		40

	ARTICLE IX

	PREPAYMENT EVENTS

SECTION 9.1.	Listing of Prepayment Events		40

SECTION 9.1.1.	Change in Ownership		40

SECTION 9.1.2.	Change in Board		41

SECTION 9.1.3.	Unenforceability		41

SECTION 9.1.4.	Approvals		41

SECTION 9.1.5.	Non-Performance of Certain Covenants and Obligations		41

SECTION 9.1.6.	Judgments		41

SECTION 9.1.7.	Condemnation, etc.		42

SECTION 9.1.8.	Arrest		42

SECTION 9.2.	Mandatory Prepayment		42


		PAGE

	ARTICLE X

	THE AGENTS

SECTION 10.1.	Actions		42

SECTION 10.2.	Funding Reliance, etc.		43

SECTION 10.3.	Exculpation		43

SECTION 10.4.	Successor		44

SECTION 10.5.	Loans by the Agents		44

SECTION 10.6.	Credit Decisions		45

SECTION 10.7.	Copies, etc.		45

SECTION 10.8.	Agency Fee		45

	ARTICLE XI

	MISCELLANEOUS PROVISIONS

SECTION 11.1.	Waivers, Amendments, etc.		45

SECTION 11.2.	Notices		46

SECTION 11.3.	Payment of Costs and Expenses		47

SECTION 11.4.	Indemnification		48

SECTION 11.5.	Survival		49

SECTION 11.6.	Severability		49

SECTION 11.7.	Headings		49

SECTION 11.8.	Execution in Counterparts, Effectiveness, etc.		49

SECTION 11.9.	Governing Law; Entire Agreement		50

SECTION 11.10.	Successors and Assigns		50

SECTION 11.11.	Sale and Transfer of Loans and Note; Participations in Loans and Note		50

SECTION 11.11.1.	Assignments		50

SECTION 11.11.2.	Participations		51


				PAGE
	SECTION 11.12.		Other Transactions			52

SECTION 11.13.		Forum Selection and Consent to Jurisdiction			52

SECTION 11.14.		Process Agent			53

SECTION 11.15.		Judgment			53

SECTION 11.16.		Waiver of Jury Trial			53


SHCEDULES

SCHEDULE I	—	Disclosure Schedule

EXHIBITS

Exhibit A	—	Form of Note

Exhibit B	—	Form of Borrowing Request

Exhibit C	—	Form of Interest Period Notice

Exhibit D-1	—	Form of Opinion of Michael. J. Smith, Esq.

Exhibit D-2	—	Form of Opinion of Watson, Farley & Williams

Exhibit E	—	Form of Lender Assignment Agreement

Exhibit F	—	Form of Commitment Increase Agreement

Exhibit G	—	Form of Added Lender Agreement

Exhibit H	—	Form of Opinion of Shearman & Sterling LLP

vii

CREDIT AGREEMENT

THIS CREDIT AGREEMENT, dated as of March 27, 2003 and amended and restated as of December 15, 2006, is among ROYAL CARIBBEAN CRUISES LTD., a Liberian corporation (the “ Borrower ”), the various financial institutions as are or shall become parties hereto (collectively, the “ Lenders ”) and CITIBANK, N.A. (“ Citibank ”), as administrative agent (in such capacity, the “ Administrative Agent ”) for the Lenders.

WITNESSETH:

WHEREAS, the Borrower desires to obtain Commitments from the Lenders pursuant to which Loans, in a maximum aggregate principal amount at any one time outstanding not to exceed $1,000,000,000 (subject to adjustment as provided herein), will be made to the Borrower from time to time prior to the Commitment Termination Date; and

WHEREAS, the Lenders are willing, on the terms and subject to the conditions hereinafter set forth (including Article V ), to extend such Commitments and make such Loans to the Borrower; and

WHEREAS, the proceeds of such Loans will be used for general corporate purposes, including capital expenditures, of the Borrower and its Subsidiaries but excluding use for the purpose of financing hostile acquisitions by the Borrower;

NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

SECTION 1.1. Defined Terms . The following terms (whether or not underscored) when used in this Agreement, including its preamble and recitals, shall, when capitalized, except where the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular and plural forms thereof):

“ Accumulated Other Comprehensive Income (Loss) ” means at any date the Borrower’s accumulated other comprehensive income (loss) on such date, determined in accordance with GAAP.

“ Added Lender ” is defined in Section 2.7.

“ Administrative Agent ” is defined in the preamble and includes each other Person as shall have subsequently been appointed as the successor Administrative Agent, and as shall have accepted such appointment, pursuant to Section 10.4.

“ Affiliate ” of any Person means any other Person which, directly or indirectly, controls, is controlled by or is under common control with such Person. A Person shall be deemed to be “controlled by” any other Person if such other Person possesses, directly or indirectly, power to

direct or cause the direction of the management and policies of such Person whether by contract or otherwise.

“ Agents ” means (a) the Administrative Agent and (b) Nordea and DnB in their respective capacities as agents under Article X, together with their respective successors (if any) in such capacity.

“ Agreement ” means, on any date, this Credit Agreement as originally in effect on the Effective Date and as thereafter from time to time amended, supplemented, amended and restated, or otherwise modified and in effect on such date.

“ Applicable Jurisdiction ” means the jurisdiction or jurisdictions under which the Borrower is organized, domiciled or resident or from which any of its business activities are conducted or in which any of its properties are located and which has jurisdiction over the subject matter being addressed.

“ Applicable Margin ” means, as of any date, the percentage per annum set forth below opposite the Senior Debt Rating on such date provided by S&P and Moody’s:


Senior Debt Rating
		Applicable
(S&P)	(Moody's)	Margin
BBB+ or higher	Baa1 or higher		0.50	%
BBB	Baa2		0.625	%
BBB-	Baa3		0.75	%
BB+	Ba1		1.00	%
BB	Ba2		1.25	%
BB- or lower	Ba3 or lower		1.75	%

provided that:

(a) if at any time the Senior Debt Rating provided by Moody’s differs from the Senior Debt Rating provided by S&P by one level, the Applicable Margin shall be the percentage per annum set forth opposite the higher of such two Senior Debt Ratings, except if the higher rating is BBB- or Baa3, then the Applicable Margin shall be 0.875%;

(b) if at any time the Senior Debt Rating provided by Moody’s differs from the Senior Debt Rating provided by S&P by more than one level, the Applicable Margin shall be the percentage per annum set forth opposite the rating one level below the higher of such two Senior Debt Ratings, except if the higher rating is BBB or Baa2, then the Applicable Margin shall be 0.875%;

(c) if at any time a Senior Debt Rating is provided by one of but not both Moody’s and S&P, the Applicable Margin shall be determined by reference to the Senior Debt Rating provided by the agency which gives such rating, except if the rating given is BBB- or Baa3, then the Applicable Margin shall be 0.875%; and

(d) if at any time no Senior Debt Rating is provided by Moody’s and no Senior Debt Rating is provided by S&P, the Applicable Margin shall be 1.75% per annum unless (i) within 21 days of being notified by the Administrative Agent that both Moody’s and S&P have ceased to give a Senior Debt Rating, the Borrower has obtained from at least one of such agencies a private implied rating for its senior debt or (ii) having failed to obtain such private rating within such 21-day period, the Borrower and the Lenders shall have agreed within a further 15-day period (during which period the Borrower and the Agents shall consult in good faith to find an alternative method of providing an implied rating of the Borrower’s senior debt) on an alternative rating method, which agreed alternative shall apply for the purposes of this Agreement.

“ Applicable Percentage ” is defined in Section 3.3.2 .

“ Approved Appraiser ” means any of the following: Barry Rogliano Salles, Paris, H Clarkson & Co. Ltd., London, R.S. Platou Shipbrokers, Norway, or Fearnley AS, Norway.

“ Assignee Lender ” is defined in Section 11.11.1 .

“ Authorized Officer ” means those officers of the Borrower authorized to act with respect to the Loan Documents and whose signatures and incumbency shall have been certified to the Administrative Agent by the Secretary or an Assistant Secretary of the Borrower.

“ Borrower ” is defined in the preamble.

“ Borrowing ” means Loans having the same Interest Period made on the same Business Day and pursuant to the same Borrowing Request in accordance with Section 2.1 .

“ Borrowing Request ” means a loan request and certificate duly executed by an Authorized Officer of the Borrower, substantially in the form of Exhibit B-1 hereto.

“ Business Day ” means any day which is neither a Saturday or Sunday nor a legal holiday on which banks are authorized or required to be closed in New York City, London or Frankfurt, and if the applicable Business Day relates to a Borrowing, Interest Period, prepayment or conversion, in each case with respect to any Loan bearing interest by reference to the LIBO Rate, on which dealings in deposits in Dollars are carried on in the London interbank market.

“ Capital Lease Obligations ” means obligations of the Borrower or any Subsidiary of the Borrower under any leasing or similar arrangement which, in accordance with GAAP, would be classified as capitalized leases.

“ Capitalization ” means, as at any date, the sum of (a) Net Debt on such date, plus (b) Stockholders’ Equity on such date.

“ Capitalized Lease Liabilities ” means the principal portion of all monetary obligations of the Borrower or any of its Subsidiaries under any leasing or similar arrangement which, in accordance with GAAP, would be classified as capitalized leases, and, for purposes of this Agreement and each other Loan Document, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP.

“ Cash Equivalents ” means all amounts other than cash that are included in the “cash and cash equivalents” shown on the Borrower’s balance sheet prepared in accordance with GAAP.

“ Closing Date ” is defined in Section 5.1 .

“ Code ” means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time.

“ Commitment ” means, relative to any Lender, such Lender’s obligation to make Loans pursuant to Section 2.1.1 .

“ Commitment Amount ” means, on any date, $1,000,000,000, as such amount shall be reduced from time to time pursuant to Section 2.2 or increased from time to time pursuant to Section 2.7 .

“ Commitment Fees ” is defined in Section 3.3 .

“ Commitment Termination Date ” means the earliest of:

(a) the Stated Maturity Date;

(b) the date on which the Commitment Amount is terminated in full or reduced to zero pursuant to Section 2.2; and

Upon the occurrence of any event described in clause (b) or (c) , the Commitments shall terminate automatically and without further action.

“ Commitment Termination Event ” means:

(a) any Default described in clauses (b) through (d) of Section 8.1.6 shall occur with respect to the Borrower;

(b) the occurrence and continuance of any Event of Default (other than as described in clause (a) above) and the giving of notice by the Administrative Agent, acting at the direction of the Required Lenders, to the Borrower that the Commitments have been terminated; or

(c) the occurrence and continuance of a Prepayment Event and the giving of notice by the Administrative Agent, acting at the direction of the Required Lenders, to the Borrower that the Commitments have been terminated.

“ Controlled Group ” means all members of a controlled group of corporations and all members of a controlled group of trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414(b) or 414(c) of the Code or Section 4001 of ERISA.

“ Default ” means any Event of Default or any condition, occurrence or event which, after notice or lapse of time or both, would constitute an Event of Default.

“ Disclosure Schedule ” means the Disclosure Schedule attached hereto as Schedule I .

“ DnB ” means DnB NOR Bank ASA.

“ Dollar ” and the sign “ $ ” mean lawful money of the United States.

“ Effective Date ” means the date this Agreement becomes effective pursuant to Section 11.8 .

“ Environmental Laws ” means all applicable federal, state, local or foreign statutes, laws, ordinances, codes, rules and regulations (including consent decrees and administrative orders) relating to the protection of the environment.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of ERISA also refer to any successor sections.

“ Event of Default ” is defined in Section 8.1 .

“ Existing Debt ” means the obligations of the Borrower or its Subsidiaries in connection with (i) the Lease Agreement, with respect to the vessel LEGEND OF THE SEAS, dated March 3, 1993 between G.I.E. Cruise Vision One and the Borrower, (ii) the Lease Agreement, with respect to the vessel SPLENDOUR OF THE SEAS, dated March 3, 1993 between G.I.E. Cruise Vision Two and the Borrower, (iii) the Loan Facility Agreement with respect to the vessel CENTURY, dated November 29, 1993 between KfW and Blue Sapphire Marine Inc., (iv) the Loan Facility Agreement with respect to the vessel GALAXY, dated November 29, 1993 between KfW and Esker Marine Shipping Inc,(v) the Loan Facility Agreement with respect to the vessel MERCURY, dated December 12, 1997 between KfW and Seabrook Maritime Inc., (vi) the Buyer Credit Agreement with respect to the vessel SUMMIT dated March 31, 2001 between Summit Inc., Societe Generale and Credit Agricole Indosuez, (vii) the Buyer Credit Agreement with respect to the vessel CONSTELLATION dated December 18, 2001 between Constellation Inc., Societe Generale and Credit Agricole Indosuez and (viii) the Bareboat Charterparty with respect to the vessel BRILLIANCE OF THE SEAS dated July 5, 2002 between Halifax Leasing (September) Limited and RCL (UK) LTD, and the replacement, extension, renewal or amendment of the foregoing without increase in the amount or change in any direct or contingent obligor of such obligations.

“ Existing Group ” means the following Persons: (a) A. Wilhelmsen AS., a Norwegian corporation (“ Wilhelmsen ”); (b) Cruise Associates, a Bahamian general partnership (“ Cruise ”); and (c) any Affiliate of either or both of Wilhelmsen and Cruise.

“ Existing Principal Subsidiaries ” means each Subsidiary of the Borrower that is a Principal Subsidiary on the Closing Date.

“ Federal Funds Rate ” means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.

“ Fiscal Quarter ” means any quarter of a Fiscal Year.

“ Fiscal Year ” means any annual fiscal reporting period of the Borrower.

“ Fixed Charge Coverage Ratio ” means, as of the end of any Fiscal Quarter, the ratio computed for the period of four consecutive Fiscal Quarters ending on the close of such Fiscal Quarter of:

(a) net cash from operating activities (determined in accordance with GAAP) for such period, as shown in the Borrower’s consolidated statement of cash flow for such period, to

(b) the sum of:

(i) dividends actually paid by the Borrower during such period (including, without limitation, dividends in respect of preferred stock of the Borrower); plus

(ii) scheduled payments of principal of all debt less New Financings (determined in accordance with GAAP, but in any event including Capitalized Lease Liabilities) of the Borrower and its Subsidiaries for such period.

“ F.R.S. Board ” means the Board of Governors of the Federal Reserve System or any successor thereto.

“ GAAP ” is defined in Section 1.4 .

“ Government-related Obligations ” means obligations of the Borrower or any Subsidiary of the Borrower under, or Indebtedness incurred by the Borrower or any Subsidiary of the Borrower to satisfy obligations under, any governmental requirement imposed by any Applicable Jurisdiction that must be complied with to enable the Borrower and its Subsidiaries to continue their business in such Applicable Jurisdiction, excluding , in any event, any taxes imposed on the Borrower or any Subsidiary of the Borrower.

“ Hedging Instruments ” means options, caps, floors, collars, swaps, forwards, futures and any other agreements, options or instruments substantially similar thereto or any series or combination thereof used to hedge interest, foreign currency and commodity exposures.

“ herein ”, “ hereof ”, “ hereto ”, “ hereunder ” and similar terms contained in this Agreement or any other Loan Document refer to this Agreement or such other Loan Document, as the case may be, as a whole and not to any particular Section, paragraph or provision of this Agreement or such other Loan Document.

“ Increased Commitment Date ” is defined in Section 2.7.

“ Increasing Lenders ” is defined in Section 2.7.

“ Indebtedness ” means, for any Person: (a) obligations created, issued or incurred by such Person for borrowed money (whether by loan, the issuance and sale of debt securities or the sale of property to another Person subject to an understanding or agreement, contingent or otherwise, to repurchase such property from such Person); (b) obligations of such Person to pay the deferred purchase or acquisition price of property or services, other than trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business so long as such trade accounts payable are payable within 180 days of the date the respective goods are delivered or the respective services are rendered; (c) Indebtedness of others secured by a Lien on the property of such Person, whether or not the respective indebtedness so secured has been assumed by such Person; (d) obligations of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for the account of such Person; (e) Capital Lease Obligations of such Person; (f) Indebtedness of others guaranteed by such Person; (g) obligations of such Person in respect of surety bonds and similar obligations; and (h) Hedging Instruments.

“ Indemnified Liabilities ” is defined in Section 11.4 .

“ Indemnified Parties ” is defined in Section 11.4 .

“ Interest Payment Date ” means any date on which interest is payable with respect to Loans pursuant to clause (c) of Section 3.2.3 .

“ Interest Period ” means, relative to any Loans, the period beginning on (and including) the date on which such Loan is made or continued pursuant to Section 2.3 or 2.4 and shall end on (but exclude) the day which numerically corresponds to such date one, three, six or twelve months thereafter or longer ( provided that any Interest Period longer than twelve months duration shall be subject to availability and the agreement of all the Lenders) or, if such month has no numerically corresponding day, on the last Business Day of such month, in either case as the Borrower may select in its relevant notice pursuant to Section 2.3 or 2.4 ; provided that:

(a) the Borrower shall not be permitted (i) to select Interest Periods to be in effect at any one time which have expiration dates occurring on more than 15 different dates or (ii) except to the extent provided in Section 2.4 , to have outstanding more than six one-month Interest Periods with respect to any Loan in any 12-month period (unless otherwise agreed to by the Required Lenders);

(b) Interest Periods commencing on the same date for Loans comprising part of the same Borrowing shall be of the same duration (without limiting the ability of the Borrower to have more than one Borrowing on the same date); and

(c) if such Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next following Business Day (unless such next following Business Day is the first Business Day of a calendar month, in which case such Interest Period shall end on the Business Day next preceding the first Business Day of such calendar month).

“ Interest Period Notice ” means a certificate duly executed by an Authorized Officer of the Borrower, substantially in the form of Exhibit C hereto.

“ Investment ” means, relative to any Person,

(a) any loan or advance made by such Person to any other Person (excluding commission, travel, expense and similar advances to officers and employees made in the ordinary course of business); and

(b) any ownership or similar interest held by such Person in any other Person.

“ Lender Assignment Agreement ” means a Lender Assignment Agreement substantially in the form of Exhibit F .

“ Lenders ” is defined in the preamble .

“ Lending Office ” means, relative to any Lender, the office of such Lender designated as such below its signature hereto or designated in a Lender Assignment Agreement or Assumption Agreement or such other office of a Lender as designated from time to time by notice from such Lender to the Borrower and the Administrative Agent, whether or not outside the United States, which shall be making or maintaining Loans of such Lender hereunder.

“ LIBO Rate ” means, relative to any Interest Period, the rate per annum of the offered quotation for deposits in Dollars for delivery on the first day of such Interest Period and for the duration thereof which appears on Telerate Page 3750 at or about 11:00 a.m. (London time) two Business Days before the commencement of such Interest Period; provided that:

(a) subject to Section 3.2.4 , if no such offered quotation appears on Telerate Page 3750 at the relevant time, the LIBO Rate shall be the rate per annum certified by the Administrative Agent to be the average of the rates quoted by the Reference Lenders as the rate at which each of the Reference Lenders was (or would have been) offered deposits of Dollars by prime banks in the London interbank eurocurrency market in an amount approximately equal to the amount of each such Reference Lender’s Loan for the relevant Borrowing and for a period approximately equal to such Interest Period; and

(b) for the purposes of determining the post-maturity rate of interest under Section 3.2.2 , the LIBO Rate shall be determined by reference to deposits on an overnight or call basis or for such other period or periods as the Administrative Agent may determine after consultation with the Lenders.

“ Lien ” means any security interest, mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), charge against or interest in property to

secure payment of a debt or performance of an obligation or other priority or preferential arrangement of any kind or nature whatsoever.

“ Loan ” is defined in Section 2.1.1 .

“ Loan Document ” means this Agreement and the Notes.

“ Material Adverse Effect ” means a material adverse effect on (a) the business, operations or financial condition of the Borrower and its Subsidiaries taken as a whole, (b) the rights and remedies of the Administrative Agent or any Lender under the Loan Documents or (c) the ability of the Borrower to perform its payment Obligations under the Loan Documents.

“ Material Litigation ” is defined in Section 6.9 .

“ Moody’s ” means Moody’s Investors Service, Inc.

“ Net Debt ” means, at any time, the aggregate outstanding principal amount of all debt (including, without limitation, the principal portion of all capitalized leases) of the Borrower and its Subsidiaries (determined on a consolidated basis in accordance with GAAP) less the sum of (without duplication);

(a) all cash on hand of the Borrower and its Subsidiaries; plus

(b) all Cash Equivalents.

“ Net Debt to Capitalization Ratio ” means, as at any date, the ratio of (a) Net Debt on such date to (b) Capitalization on such date.

“ New Financings ” means proceeds from:

(a) borrowed money (whether by loan or issuance and sale of debt securities), including drawings under this Agreement, and

(b) the issuance and sale of equity securities.

“ Note ” means a promissory note of the Borrower payable to any Lender, in the form of Exhibit A hereto (as such promissory note may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate Indebtedness of the Borrower to such Lender resulting from the outstanding Loans made by such Lender, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof.

“ Obligations ” means all obligations (monetary or otherwise) of the Borrower arising under or in connection with this Agreement and the Notes.

“ Organic Document ” means, relative to the Borrower, its certificate of incorporation and its by-laws.

“ Participant ” is defined in Section 11.11.2 .

“ Pension Plan ” means a “pension plan”, as such term is defined in section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a multiemployer plan as defined in section 4001(a)(3) of ERISA), and to which the Borrower or any corporation, trade or business that is, along with the Borrower, a member of a Controlled Group, may have liability, including any liability by reason of being deemed to be a contributing sponsor under section 4069 of ERISA.

“ Percentage ” means, relative to any Lender, the percentage set forth opposite its signature hereto or as set forth in the applicable Lender Assignment Agreement, as such percentage may be adjusted from time to time pursuant to Section 2.7 or Section 4.8 or pursuant to Lender Assignment Agreement(s) executed by such Lender and its Assignee Lender(s) and delivered pursuant to Section 11.11.1 .

“ Person ” means any natural person, corporation, partnership, firm, association, trust, government, governmental agency or any other entity, whether acting in an individual, fiduciary or other capacity.

“ Prepayment Event ” is defined in Section 9.1 .

“ Principal Subsidiary ” means any Subsidiary of the Borrower that owns a Vessel.

“ Quarterly Payment Date ” means the last day of each March, June, September, and December or, if any such day is not a Business Day, the next succeeding Business Day.

“ Reference Lenders ” means Citibank, DnB and Nordea and includes each replacement Reference Lender appointed by the Administrative Agent pursuant to Section 3.2.4 .

“ Required Lenders ” means, at any time, Lenders that, in the aggregate, hold more than 50% of the aggregate unpaid principal amount of the Loans or, if no such principal amount is then outstanding, Lenders that in the aggregate have more than 50% of the Commitments.

“ S&P ” means Standard & Poor’s, a division of The McGraw-Hill Companies, Inc.

Senior Debt Rating ” means, as of any date, (a) the implied senior debt rating of the Borrower for debt pari passu in right of payment and in right of collateral security with the Obligations as given by Moody’s and S&P or (b) in the event the Borrower receives an actual unsecured senior debt rating (apart from an implied rating) from Moody’s and/or S&P, such actual rating or ratings, as the case may be (and in such case the Senior Debt Rating shall not be determined by reference to any implied senior debt rating from either agency).

“ Stated Maturity Date ” means March 27, 2010.

“ Stockholders’ Equity ” means, as at any date, the Borrower’s stockholders’ equity on such date, excluding Accumulated Other Comprehensive Income (Loss), determined in accordance with GAAP, provided that any non-cash charge to Stockholders’ Equity resulting (directly or indirectly) from a change after the Effective Date in GAAP or in the interpretation thereof shall be disregarded in the computation of Stockholders’ Equity such that the amount of any reduction thereof resulting from such change shall be added back to Stockholders’ Equity.

“ Subsidiary ” means, with respect to any Person, any corporation of which more than 50% of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by such Person, by such Person and one or more other Subsidiaries of such Person, or by one or more other Subsidiaries of such Person.

“ Taxes ” is defined in Section 4.6 .

“ Telerate Page 3750 ” means the display designated as “Page 3750” on the Moneyline Telerate Service (or such other page as may replace Page 3750 on that service or such other service as may be nominated by the British Bankers’ Association as the information vendor for the purpose of displaying British Bankers’ Association Interest Settlement Rates for deposits in Dollars).

“ United States ” or “ U.S. ” means the United States of America, its fifty States and the District of Columbia.

“ Vessel ” means a passenger cruise vessel owned by the Borrower or one of its Subsidiaries.

“ Voting Stock ” means shares of capital stock of the Borrower of any class or classes (however designated) that have by the terms thereof normal voting power to elect the members of the Board of Directors of the Borrower (other than voting power upon the occurrence of a stated contingency, such as the failure to pay dividends).

SECTION 1.2. Use of Defined Terms . Unless otherwise defined or the context otherwise requires, terms for which meanings are provided in this Agreement shall, when capitalized, have such meanings when used in the Disclosure Schedule and in each Note, Borrowing Request, notice and other communication delivered from time to time in connection with this Agreement or any other Loan Document.

SECTION 1.3. Cross-References . Unless otherwise specified, references in this Agreement and in each other Loan Document to any Article or Section are references to such Article or Section of this Agreement or such other Loan Document, as the case may be, and, unless otherwise specified, references in any Article, Section or definition to any clause are references to such clause of such Article, Section or definition.

SECTION 1.4. Accounting and Financial Determinations . Unless otherwise specified, all accounting terms used herein or in any other Loan Document shall be interpreted, all accounting determinations and computations hereunder or thereunder (including under Section 7.2.4 ) shall be made, and all financial statements required to be delivered hereunder or thereunder shall be prepared, in accordance with United States generally accepted accounting principles (“ GAAP ”) consistently applied (or, if not consistently applied, accompanied by details of the inconsistencies); provided that if, as a result of any change in GAAP or in the interpretation thereof after the date of the financial statements referred to in Section 6.6 , there is a change in the manner of determining any of the items referred to herein that are to be determined by reference to GAAP, and the effect of such change would (in the reasonable opinion of the Borrower or the

Agents) be such as to affect the basis or efficacy of the covenants contained in Section 7.2.4 in ascertaining the financial condition of the Borrower or the consolidated financial condition of the Borrower and its Subsidiaries and the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate such change occurring after the date hereof in GAAP or the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), then such item shall for the purposes of such Sections of this Agreement continue to be determined in accordance with GAAP relating thereto as GAAP were applied immediately prior to such change in GAAP or in the interpretation thereof until such notice shall have been withdrawn or such provision amended in accordance herewith.

ARTICLE II

COMMITMENTS, BORROWING PROCEDURES AND NOTES

SECTION 2.1. Commitment Amounts . On the terms and subject to the conditions of this Agreement (including Article V), each Lender severally agrees to make Loans pursuant to the Commitments described in this Section 2.1.

SECTION 2.1.1. Commitment of Each Lender . From time to time on any Business Day occurring prior to the Commitment Termination Date, each Lender will make loans (relative to such Lender, its “ Loans ”) to the Borrower equal to such Lender’s Percentage of the aggregate amount of the Borrowing requested by the Borrower to be made on such day. The commitment of each Lender described in this Section 2.1.1 is herein referred to as its “ Commitment ”. On the terms and subject to the conditions hereof, the Borrower may from time to time borrow, prepay and reborrow Loans.

SECTION 2.1.2. Lenders Not Permitted or Required To Make Loans Under Certain Circumstances . No Lender shall be permitted or required to make any Loan if, after giving effect thereto, the aggregate outstanding principal amount of all Loans

(a) of all Lenders would exceed the Commitment Amount, or

(b) of such Lender would exceed such Lender’s Percentage of the Commitment Amount.

SECTION 2.1.3. Defaulting Lenders . If any Lender shall default in its obligations under Section 2.1 , the Agents shall, at the request of the Borrower, use reasonable efforts to find a bank or other financial institution acceptable to the Borrower to replace such Lender on terms acceptable to the Borrower and to have such bank or other financial institution replace such Lender.

SECTION 2.2. Reduction of Commitments . The Commitment Amount is subject to reduction from time to time pursuant to this Section 2.2 .

SECTION 2.2.1. Optional . The Borrower may, from time to time on any Business Day occurring after the time of the initial Borrowing hereunder, voluntarily

reduce the Commitment Amount; provided that all such reductions shall be made pro rata among the Lenders and shall require at least three Business Days’ prior notice to the Administrative Agent and be permanent, and any partial reduction of the Commitment Amount shall be in a minimum amount of $10,000,000 and in a multiple of $1,000,000. The Commitment Amount may not be reduced below the outstanding principal amount of the Loans.

SECTION 2.2.2. Mandatory . On and after the Commitment Termination Date, the Commitment Amount shall be zero.

SECTION 2.3. Borrowing Procedure . By delivering a Borrowing Request to the Administrative Agent on or before 11:00 a.m., New York time, on a Business Day, the Borrower may from time to time irrevocably request, on not less than two Business Days’ notice, that a Borrowing be made in a minimum amount of $10,000,000 and a multiple of $1,000,000, or in the unused amount of the Commitments. On the terms and subject to the conditions of this Agreement, each Borrowing shall be made on the Business Day specified in such Borrowing Request. On or before 11:00 a.m., New York time, on the Business Day specified in such Borrowing Request, each Lender shall, without any set-off or counterclaim, deposit with the Administrative Agent same day funds in an amount equal to such Lender’s Percentage of the requested Borrowing. Such deposit will be made to an account which the Administrative Agent shall specify from time to time by notice to the Lenders. To the extent funds are so received from the Lenders, the Administrative Agent shall, without any set-off or counterclaim, make such funds available to the Borrower on the Business Day specified in the relevant Borrowing Request by wire transfer of same day funds to the accounts the Borrower shall have specified in its Borrowing Request. No Lender’s obligation to make any Loan shall be affected by any other Lender’s failure to make any Loan.

SECTION 2.4. Election of Interest Periods . By delivering an Interest Period Notice to the Administrative Agent on or before 11:00 a.m., New York time, on a Business Day, the Borrower may from time to time irrevocably elect, on not less than two Business Days’ notice that all, or any portion in an aggregate minimum amount of $10,000,000 and a multiple of $1,000,000 (or the remaining amount of any Borrowing), of Loans be continued as Loans with an Interest Period of one, three, six or twelve months duration (or a longer duration, subject to availability and the agreement of all the Lenders); provided that each such continuation shall be pro rated among the applicable outstanding Loans of all Lenders. In the absence of delivery of an Interest Period Notice with respect to any Loan at least two Business Days before the last day of the then current Interest Period with respect thereto, such Loan shall, on such last day, automatically be continued as a Loan with an Interest Period of three-months’ duration.

SECTION 2.5. Funding . Each Lender may, if it so elects, fulfill its obligation to make or continue Loans hereunder by causing one of its foreign branches or Affiliates (or an international banking facility created by such Lender) to make or maintain such Loan; provided that such Loan shall nonetheless be deemed to have been made and to be held by such Lender, and the obligation of the Borrower to repay such Loan shall nevertheless be to such Lender for the account of such foreign branch, Affiliate or international banking facility.

SECTION 2.6. Notes . Each Lender’s Loans under its Commitment shall be evidenced by a Note payable to the order of such Lender in a maximum principal amount equal to such Lender’s Percentage of the original Commitment Amount. The Borrower hereby irrevocably authorizes each Lender to make (or cause to be made) appropriate notations on the grid attached to such Lender’s Note (or on any continuation of such grid), which notations, if made, shall evidence, inter alia, the date of, the outstanding principal of, and the interest rate and Interest Period applicable to the Loans evidenced thereby, provided that the failure of any Lender to make any such notations shall not limit or otherwise affect any Obligations of the Borrower.

SECTION 2.7. Increase in Combined Commitments (a) The Borrower shall have the right up to six months prior to the Stated Maturity Date, without the consent of the Lenders, by notice to the Administrative Agent, to effectuate from time to time an increase in the combined Commitments under this Agreement by adding to this Agreement one or more commercial banks or financial institutions (who shall, upon completion of the requirements of this Section 2.7 constitute “Lenders” hereunder) (an “ Added Lender ”), or by allowing one or more Lenders in their sole discretion to increase their respective Commitments hereunder (each an “ Increasing Lender ”), so that such added and increased Commitments shall equal the increase in the Commitment Amount effectuated pursuant to this Section 2.7 ; provided that (i) no added Commitment shall be less than $10,000,000, (ii) no increase in or added Commitments pursuant to this Section 2.7 shall result in combined Commitments exceeding $1,000,000,000, and (iii) no Lender’s Commitment shall be increased under this Section 2.7 without the consent of such Lender. The Borrower shall deliver to the Administrative Agent on or before the effective date of any increase in the Commitment Amount each of the following items with respect to each Added Lender and Increasing Lender:

(i) a written notice of the Borrower’s intention to increase the combined Commitments pursuant to this Section 2.7 , which shall specify each new Lender, if any, the changes in amounts of Commitments that will result, and such other information as is reasonably requested by the Administrative Agent;

(ii) documents in the form of Exhibit F or Exhibit G , as applicable, executed and delivered by each new Lender and each Lender agreeing to increase its Commitment, pursuant to which it becomes a party hereto or increases its Commitment, as the case may be; and

(iii) if requested by the applicable Lender, Notes or replacement Notes, as the case may be, executed and delivered by the Borrower.

(b) Upon receipt of any notice referred to in clause (a)(i) above, the Administrative Agent shall promptly notify each Lender thereof. Upon execution and delivery of such documents (the “ Increased Commitment Date ”), such new Lender shall constitute a “Lender” hereunder with a Commitment as specified therein, or such Lender’s Commitment shall increase as specified therein, as the case may be. Immediately upon the effectiveness of the addition of such Added Lender or the increase in the Commitment of such Increasing Lender under this Section 2.7 (i) the respective Percentages of the Lenders shall be deemed modified as appropriate to correspond to such changed combined Commitments, and (ii) if there are at such time outstanding any Loans, each Lender whose Percentage has been decreased as a result of the

increase in the combined Commitments shall be deemed to have assigned, without recourse, to each Added Lender and Increasing Lender such portion of such Lender’s Loans as shall be necessary to effectuate such adjustment in Percentages. Each Increasing Lender and Added Lender (A) shall be deemed to have assumed such portion of such Loans and (B) shall fund to each other Lender on the Increased Commitment Date the amount of Loans assigned by it to such Lender.

ARTICLE III

REPAYMENTS, PREPAYMENTS, INTEREST AND FEES

SECTION 3.1. Repayments and Prepayments . The Borrower shall repay in full the unpaid principal amount of each Loan upon the Stated Maturity Date. Prior thereto, the Borrower

(a) may, from time to time on any Business Day, make a voluntary prepayment, in whole or in part, of the outstanding principal amount of any Loans; provided that

(i) any such prepayment shall be made pro rata among all Loans included in the same Borrowing;

(ii) all such voluntary prepayments shall require at least three Business Days’ (or, if such prepayment is to be made on the last day of an Interest Period for such Loans, two Business Days’) prior written notice to the Administrative Agent; and

(iii) all such voluntary partial prepayments shall be in an aggregate minimum amount of $10,000,000 and a multiple of $1,000,000 (or the remaining amount of the Loans being prepaid);

(b) shall, on each date when any reduction in the Commitment Amount shall become effective, including pursuant to Section 2.2 , make a mandatory prepayment of all Loans equal to the excess, if any, of the aggregate outstanding principal amount of all Loans over the Commitment Amount as so reduced; and

(c) shall, immediately upon any acceleration of the Stated Maturity Date of any Loans pursuant to Section 8.2 or 8.3 or the mandatory repayment of any Loans pursuant to Section 9.2 , repay all Loans.

Each prepayment of any Loans made pursuant to this Section shall be without premium or penalty, except as may be required by Section 4.4 . No voluntary prepayment of principal of any Loans shall cause a reduction in the Commitment Amount.

SECTION 3.2. Interest Provisions . Interest on the outstanding principal amount of Loans shall accrue and be payable in accordance with this Section 3.2 .

SECTION 3.2.1. Rates . Loans shall accrue interest at a rate per annum during each Interest Period applicable thereto, equal to the sum of the LIBO Rate for such Interest Period plus the Applicable Margin. All Loans shall bear interest from and

including the first day of the applicable Interest Period to (but not including) the last day of such Interest Period at the interest rate determined as applicable to such Loan.

SECTION 3.2.2. Post-Maturity Rates . After the date any principal amount of any Loan is due and payable (whether on the Stated Maturity Date, upon acceleration or otherwise), or after any other monetary Obligation of the Borrower shall have become due and payable, the Borrower shall pay, but only to the extent permitted by law, interest (after as well as before judgment) on such amounts for each day during the period of such default at a rate per annum certified by the Administrative Agent to the Borrower (which certification shall be conclusive in the absence of manifest error) to be equal to the sum of (a) the Applicable Margin plus (b) the LIBO Rate plus (c) 2% per annum.

SECTION 3.2.3. Payment Dates . Interest accrued on each Loan shall be payable, without duplication:

(a) on the Stated Maturity Date therefor;

(b) on the date of any payment or prepayment, in whole or in part, of principal outstanding on such Loan (but only on the principal so paid or prepaid);

(c) on the last day of each applicable Interest Period (and, if such Interest Period shall exceed three months, on each date occurring at three-month intervals after the commencement of such Interest Period); and

(d) on that portion of any Loans the Stated Maturity Date of which is accelerated pursuant to Section 8.2 or Section 8.3 , immediately upon such acceleration.

Interest accrued on Loans or other monetary Obligations arising under this Agreement or any other Loan Document after the date such amount is due and payable (whether on the Stated Maturity Date, upon acceleration or otherwise) shall be payable upon demand.

SECTION 3.2.4. Interest Rate Determination; Replacement Reference Lenders . Each Reference Lender agrees to furnish to the Administrative Agent timely information for the purpose of determining the LIBO Rate in the event that no offered quotation appears on Telerate Page 3750 and the LIBO Rate is to be determined by reference to quotations supplied by the Reference Lenders. If any one or more of the Reference Lenders shall fail to furnish in a timely manner such information to the Administrative Agent for any such interest rate, the Administrative Agent shall determine such interest rate on the basis of the information furnished by the remaining Reference Lenders ( provided , that, if all of the Reference Lenders other than the Administrative Agent fail to supply the relevant quotations, the interest rate will be fixed by reference only to the quotation obtained by the Administrative Agent in its capacity as a Reference Lender). If a Reference Lender ceases for any reason to be able and willing to act as such, the Administrative Agent shall, at the direction of the Required Lenders and after consultation with the Borrower and the Lenders, appoint a replacement for such Reference Lender reasonably acceptable to the Borrower, and such replaced Reference Lender shall cease to be a Reference Lender hereunder. The Administrative Agent shall

furnish to the Borrower and to the Lenders each determination of the LIBO Rate made by reference to quotations of interest rates furnished by Reference Lenders.

SECTION 3.3. Commitment Fees . The Borrower agrees to pay to the Administrative Agent for the account of each Lender a commitment fee (the “ Commitment Fees ”) on such Lender’s Percentage of the average daily unused portion of the Commitment Amount, for the period (including any portion thereof when its Commitment is suspended by reason of the Borrower’s inability to satisfy any condition of Article V ) commencing on the Effective Date and continuing through the Commitment Termination Date, as set forth in this Section 3.3 .

SECTION 3.3.1. Payment .

(a) The Commitment Fees shall be payable by the Borrower in arrears on each Quarterly Payment Date, commencing with the first such date following the Effective Date and on the Commitment Termination Date.

(b) Each Commitment Fee shall be in an amount equal to the product of the Applicable Percentage for Commitment Fees, multiplied by the average daily unused portion of the Commitment Amount, multiplied by the actual number of days elapsed since the previous Quarterly Payment Date, divided by 360. Each payment of Commitment Fee shall be allocated by the Administrative Agent on the basis of each Lender’s Percentage of the unused portion of the Commitment Amount for the actual number of days elapsed since the previous Quarterly Payment Date.

SECTION 3.3.2. Applicable Percentage . On any Quarterly Payment Date (and subject to adjustment as provided below), the Applicable Percentage shall be the percentage per annum set forth below opposite the Senior Debt Rating on such date provided by S&P and Moody’s:



Senior Debt Rating		Applicable
(S&P)	(Moody’s)	Percentage
BBB+ or higher	Baa1 or higher	0.10%
BBB	Baa2	0.125%
BBB-	Baa3	0.15%
BB+	Ba1	0.20%
BB	Ba2	0.25%
BB- or lower	Ba3 or lower	0.375%

provided that:

(a) if at any time the Senior Debt Rating provided by Moody’s differs from the Senior Debt Rating provided by S&P by one level, the Applicable Percentage shall be the percentage per annum set forth opposite the higher of such two Senior Debt Ratings, except if the higher rating is BBB- or Baa3, then the Applicable Percentage shall be 0.175%;

(b) if at any time the Senior Debt Rating provided by Moody’s differs from the Senior Debt Rating provided by S&P by more than one level, the Applicable Percentage shall be the percentage per annum set forth opposite the rating one level below the higher of such two Senior Debt Ratings, except if the higher rating is BBB or Baa2, then the Applicable Percentage shall be 0.175%;

(c) if at any time a Senior Debt Rating is provided by one of but not both Moody’s and S&P, the Applicable Percentage shall be determined by reference to the Senior Debt Rating provided by the agency which gives such rating, except if the rating given is BBB- or Baa3, then the Applicable Percentage shall be 0.175%; and

(d) if at any time no Senior Debt Rating is provided by Moody’s and no Senior Debt Rating is provided by S&P, the Applicable Percentage shall be 0.375% per annum unless (i) within 21 days of being notified by the Administrative Agent that both Moody’s and S&P have ceased to give a Senior Debt Rating, the Borrower has obtained from at least one of such agencies a private implied rating for its senior debt or (ii) having failed to obtain such private rating within such 21-day period, the Borrower and the Lenders shall have agreed within a further 15-day period (during which period the Borrower and the Agents shall consult in good faith to find an alternative method of providing an implied rating of the Borrower’s senior debt) on an alternative rating method, which agreed alternative shall apply for the purposes of this Agreement.

ARTICLE IV

CERTAIN LIBO RATE AND OTHER PROVISIONS

SECTION 4.1. LIBO Rate Lending Unlawful . If the introduction of or any change in or in the interpretation of any law makes it unlawful, or any central bank or other governmental authority having jurisdiction over such Lender asserts that it is unlawful, for such Lender to make, continue or maintain any Loan bearing interest at a rate based on the LIBO Rate, the obligations of such Lender to make, continue or maintain any Loans bearing interest at a rate based on the LIBO Rate shall, upon notice thereof to the Borrower, the Administrative Agent and each other Lender, forthwith be suspended until the circumstances causing such suspension no longer exist, provided that such Lender’s obligation to make, continue and maintain Loans hereunder shall be automatically converted into an obligation to make, continue and maintain Loans bearing interest at a rate to be negotiated between such Lender and the Borrower that is the equivalent of the sum of the LIBO Rate for the relevant Interest Period plus the Applicable Margin or, if such negotiated rate is not agreed upon by the Borrower and such Lender within fifteen Business Days, a rate equal to the Federal Funds Rate from time to time in effect plus the Applicable Margin.

SECTION 4.2. Deposits Unavailable . If the Administrative Agent shall have determined that:

(a) Dollar deposits in the relevant amount and for the relevant Interest Period are not available to the Reference Lenders in their relevant market; or

(b) by reason of circumstances affecting the Reference Lenders’ relevant market, adequate means do not exist for ascertaining the interest rate applicable hereunder to LIBO Rate Loans,

then the Administrative Agent shall give notice of such determination (hereinafter called a “ Determination Notice ”) to the Borrower and each of the Lenders. The Borrower, the Lenders and the Administrative Agent shall then negotiate in good faith in order to agree upon a mutually satisfactory interest rate and interest period (or interest periods) to be substituted for those which would otherwise have applied under this Agreement. If the Borrower, the Lenders and the Administrative Agent are unable to agree upon an interest rate (or rates) and interest period (or interest periods) prior to the date occurring fifteen Business Days after the giving of such Determination Notice, the interest rate to take effect at the end of the Interest Period current at the date of the Determination Notice shall be equal to the sum of the Applicable Margin plus the Federal Funds Rate in effect from time to time.

SECTION 4.3. Increased LIBO Rate Loan Costs, etc . If a change in any applicable treaty, law, regulation or regulatory requirement or in the interpretation thereof or in its application to the Borrower, or if compliance by any Lender with any applicable direction, request, requirement or guideline (whether or not having the force of law) of any governmental or other authority insofar as it may be changed or imposed after the date hereof, shall:

(a) subject any Lender to any taxes, levies, duties, charges, fees, deductions or withholdings of any nature with respect to its Commitment or any part thereof imposed, levied, collected, withheld or assessed by any jurisdiction or any political subdivision or taxing authority thereof (other than taxation on overall net income and, to the extent such taxes are described in Section 4.6 , withholding taxes); or

(b) change the basis of taxation to any Lender (other than a change in taxation on the overall net income of such Lender) of payments of principal or interest or any other payment due or to become due pursuant to this Agreement; or

(c) impose, modify or deem applicable any reserve or capital adequacy requirements (other than the reserve costs described in Section 4.7 ) or other banking or monetary controls or requirements which affect the manner in which a Lender shall allocate its capital resources to its obligations hereunder or require the making of any special deposits against or in respect of any assets or liabilities of, deposits with or for the account of, or loans by, any Lender ( provided that such Lender shall, unless prohibited by law, allocate its capital resources to its obligations hereunder in a manner which is consistent with its present treatment of the allocation of its capital resources); or

(d) impose on any Lender any other condition affecting its Commitment or any part thereof,

and the result of any of the foregoing is either (i) to increase the cost to such Lender of making Loans or maintaining its Commitment or any part thereof, (ii) to reduce the amount of any payment received by such Lender or its effective return hereunder or on its capital or (iii) to cause such Lender to make any payment or to forego any return based on any amount received or

receivable by such Lender hereunder, then and in any such case if such increase or reduction in the opinion of such Lender materially affects the interests of such Lender, (A) the Lender concerned shall (through the Administrative Agent) notify the Borrower of the occurrence of such event and use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Lending Office if the making of such a designation would avoid the effects of such law, regulation or regulatory requirement or any change therein or in the interpretation thereof and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender and (B) the Borrower shall forthwith upon demand pay to the Administrative Agent for the account of such Lender such amount as is necessary to compensate such Lender for such additional cost or such reduction and ancillary expenses, including taxes, incurred as a result of such adjustment. Such notice shall (i) describe in reasonable detail the event leading to such additional cost, together with the approximate date of the effectiveness thereof, (ii) set forth the amount of such additional cost, (iii) describe the manner in which such amount has been calculated, (iv) certify that the method used to calculate such amount is the Lender’s standard method of calculating such amount, (v) certify that such request is consistent with its treatment of other borrowers that are subject to similar provisions, and (vi) certify that, to the best of its knowledge, such change in circumstance is of general application to the commercial banking industry in such Lender’s jurisdiction of organization or in the relevant jurisdiction in which such Lender does business. Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender pursuant to this Section for any increased costs or reductions incurred more than three months prior to the date that such Lender notifies the Borrower of the circumstance giving rise to such increased costs or reductions and of such Lender’s intention to claim compensation therefor; provided further that, if the circumstance giving rise to such increased costs or reductions is retroactive, then the three-month period referred to above shall be extended to include the period of retroactive effect thereof, but not more than six months prior to the date that such Lender notifies the Borrower of the circumstance giving rise to such cost or reductions and of such Lender’s intention to claim compensation therefor.

SECTION 4.4. Funding Losses . In the event any Lender shall incur any loss or expense by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to make, continue or maintain any portion of the principal amount of any Loan as a LIBO Rate Loan as a result of:

(a) any conversion or repayment or prepayment of the principal amount of any Loans on a date other than the scheduled last day of the Interest Period applicable thereto, whether pursuant to Section 3.1 or otherwise; or

(b) any Loans not being made in accordance with the Borrowing Request therefor due to the fault of the Borrower or as a result of any of the conditions precedent set forth in Article V not being satisfied,

then, upon the written notice of such Lender to the Borrower (with a copy to the Administrative Agent), the Borrower shall, within five Business Days of its receipt thereof, pay directly to such Lender such amount as will reimburse such Lender for such loss or expense. Such written notice shall include calculations in reasonable detail setting forth the loss or expense to such Lender.

SECTION 4.5. Increased Capital Costs . If any change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in of, any law or regulation, directive, guideline, decision or request (whether or not having the force of law) of any court, central bank, regulator or other governmental authority increases the amount of capital required to be maintained by any Lender or any Person controlling such Lender, and the rate of return on its or such controlling Person’s capital as a consequence of its Commitment or the Loans made by such Lender is reduced to a level below that which such Lender or such controlling Person would have achieved but for the occurrence of any such change in circumstance, then, in any such case upon notice from time to time by such Lender to the Borrower, the Borrower shall immediately pay directly to such Lender additional amounts sufficient to compensate such Lender or such controlling Person for such reduction in rate of return. Any such notice shall (i) describe in reasonable detail the capital adequacy requirements which have been imposed, together with the approximate date of the effectiveness thereof, (ii) set forth the amount of such lowered return, (iii) describe the manner in which such amount has been calculated, (iv) certify that the method used to calculate such amount is such Lender’s standard method of calculating such amount, (v) certify that such request for such additional amounts is consistent with its treatment of other borrowers that are subject to similar provisions and (vi) certify that, to the best of its knowledge, such change in circumstances is of general application to the commercial banking industry in the jurisdictions in which such Lender does business. In determining such amount, such Lender may use any method of averaging and attribution that it shall, subject to the foregoing sentence, deem applicable. Each Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Lending Office if the making of such a designation would avoid such reduction in such rate of return and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender pursuant to this Section for any increased costs or reductions incurred more than three months prior to the date that such Lender notifies the Borrower of the circumstance giving rise to such reductions and of such Lender’s intention to claim compensation therefor; provided further that, if the circumstance giving rise to such reductions is retroactive, then the three-month period referred to above shall be extended to include the period of retroactive effect thereof, but not more than six months prior to the date that such Lender notifies the Borrower of the circumstance giving rise to such reductions and of such Lender’s intention to claim compensation therefor.

SECTION 4.6. Taxes . All payments by the Borrower of principal of, and interest on, the Loans and all other amounts payable hereunder shall be made free and clear of and without deduction for any present or future income, excise, stamp or franchise taxes and other taxes, fees, duties, withholdings or other charges of any nature whatsoever imposed by any taxing authority, but excluding franchise taxes and taxes imposed on or measured by any Lender’s net income or receipts of such Lender and franchise taxes imposed in lieu of net income taxes or receipts, by the jurisdiction under the laws of which such Lender is organized or any political subdivision thereof or the jurisdiction of such Lender’s Lending Office or any political subdivision thereof or any other jurisdiction unless such net income taxes are imposed solely as a result of the Borrower’s activities in such other jurisdiction (such non-excluded items being called “ Taxes ”). In the event that any withholding or deduction from any payment to be made by the Borrower

hereunder is required in respect of any Taxes pursuant to any applicable law, rule or regulation, then the Borrower will:

(a) pay directly to the relevant authority the full amount required to be so withheld or deducted;

(b) promptly forward to the Administrative Agent an official receipt or other documentation satisfactory to the Administrative Agent evidencing such payment to such authority; and

(c) pay to the Administrative Agent for the account of the Lenders such additional amount or amounts as is necessary to ensure that the net amount actually received by each Lender will equal the full amount such Lender would have received had no such withholding or deduction been required.

Moreover, if any Taxes are directly asserted against the Administrative Agent or any Lender with respect to any payment received by the Administrative Agent or such Lender hereunder, the Administrative Agent or such Lender may pay such Taxes and the Borrower will promptly pay such additional amounts (including any penalties, interest or expenses) as is necessary in order that the net amount received by such person after the payment of such Taxes (including any Taxes on such additional amount) shall equal the amount such person would have received had not such Taxes been asserted.

Any Lender claiming any additional amounts payable pursuant to this Section agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Lending Office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts that may thereafter accrue and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender.

If the Borrower fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent, for the account of the respective Lenders, the required receipts or other required documentary evidence, the Borrower shall indemnify the Lenders for any incremental withholding Taxes, interest or penalties that may become payable by any Lender as a result of any such failure (so long as such amount did not become payable as a result of the failure of such Lender to provide timely notice to the Borrower of the assertion of a liability related to the payment of Taxes). For purposes of this Section 4.6 , a distribution hereunder by the Administrative Agent or any Lender to or for the account of any Lender shall be deemed a payment by the Borrower.

If any Lender is entitled to any refund, credit, deduction or other reduction in tax by reason of any payment made by the Borrower in respect of any tax under this Section 4.6 or by reason of any payment made by the Borrower pursuant to Section 4.3 , such Lender shall use reasonable efforts to obtain such refund, credit, deduction or other reduction and, promptly after receipt thereof, will pay to the Borrower such amount (plus any interest received by such Lender in connection with such refund, credit, deduction or reduction) as is equal to the net after-tax value to such Lender of such part of such refund, credit, deduction or reduction as such Lender

reasonably determines is allocable to such tax or such payment (less out-of-pocket expenses incurred by such Lender), provided that no Lender shall be obligated to disclose to the Borrower any information regarding its tax affairs or tax computations.

Each Lender (and each Participant) that is organized under the laws of a jurisdiction other than the United States agrees with the Borrower and the Administrative Agent that it will (a) provide to the Administrative Agent and the Borrower an appropriately executed copy of Internal Revenue Service Form W-8ECI certifying that any payments made to or for the benefit of such Lender or such Participant are effectively connected with a trade or business in the United States (or, alternatively, Internal Revenue Service Form W-8BEN, but only if the applicable treaty described in such form provides for a complete exemption from U.S. federal income tax withholding), or any successor form, on or prior to the date hereof (or, in the case of any assignee Lender or Participant, on or prior to the date of the relevant assignment or participation), and (b) notify the Administrative Agent and the Borrower if the certifications made on any form provided pursuant to this paragraph are no longer accurate and true in all material respects. For any period with respect to which a Lender (or Participant) has failed to provide the Borrower with the foregoing forms (other than if such failure is due to a change in law occurring after the date on which a form originally was required to be provided or if such form otherwise is not required hereunder) such Lender (or Participant) shall not be entitled to the benefits of this Section 4.6 with respect to Taxes imposed by reason of such failure.

SECTION 4.7. Reserve Costs . Without in any way limiting the Borrower’s obligations under Section 4.3 , the Borrower shall pay to each Lender on the last day of each Interest Period, so long as the relevant Lending Office of such Lender is required to maintain reserves against “Eurocurrency liabilities” under Regulation D of the F.R.S. Board, upon notice from such Lender, an additional amount equal to the product of the following for each Loan for each day during such Interest Period:

(i) the principal amount of such Loan outstanding on such day; and

(ii) the remainder of (x) a fraction the numerator of which is the rate (expressed as a decimal) at which interest accrues on such Loan for such Interest Period as provided in this Agreement (less the Applicable Margin) and the denominator of which is one minus any increase after the Effective Date in the effective rate (expressed as a decimal) at which such reserve requirements are imposed on such Lender minus (y) such numerator; and

(iii) 1/360.

Such notice shall (i) describe in reasonable detail the reserve requirement that has been imposed, together with the approximate date of the effectiveness thereof, (ii) set forth the applicable reserve percentage, (iii) certify that such request is consistent with such Lender’s treatment of other borrowers that are subject to similar provisions and (iv) certify that, to the best of its knowledge, such requirements are of general application in the commercial banking industry in the United States.

Each Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to avoid the requirement of maintaining such reserves (including by designating a different Lending Office) if such efforts would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender.

SECTION 4.8. Replacement Lenders, etc . If the Borrower shall be required to make any payment to any Lender pursuant to Section 4.3 , 4.4 , 4.5 , 4.6 or 4.7 , the Borrower shall be entitled at any time (so long as no Default and no Prepayment Event shall have occurred and be continuing) within 180 days after receipt of notice from such Lender of such required payment to (a) terminate such Lender’s Commitment and such Lender’s right to receive any Commitment Fee accruing after such termination and that portion of the Commitment Amount represented by such Lender’s Commitment (whereupon the Percentages of each other Lender shall automatically be adjusted to an amount equal to each such Lender’s ratable share of the remaining Commitment Amount), (b) prepay the affected portion of such Lender’s Loans in full, together with accrued interest thereon through the date of such prepayment ( provided that the Borrower shall not prepay any such Lender pursuant to this clause (b) without replacing such Lender pursuant to the following clause (c) until a 30-day period shall have elapsed during which the Borrower and the Agents shall have attempted in good faith to replace such Lender), and/or (c) replace such Lender with another bank reasonably acceptable to the Agents, provided that (i) each such assignment shall be either an assignment of all of the rights and obligations of the assigning Lender under this Agreement or an assignment of a portion of such rights and obligations made concurrently with another such assignment or other such assignments that together cover all of the rights and obligations of the assigning Lender under this Agreement and (ii) no Lender shall be obligated to make any such assignment as a result of a demand by the Borrower pursuant to this Section unless and until such Lender shall have received one or more payments from either the Borrower or one or more Assignee Lenders in an aggregate amount at least equal to the aggregate outstanding principal amount of the Loans owing to such Lender, together with accrued interest thereon to the date of payment of such principal amount and all other amounts payable to such Lender under this Agreement. Each Lender represents and warrants to the Borrower that, as of the date of this Agreement (or, with respect to any Lender not a party hereto on the date hereof, on the date that such Lender becomes a party hereto), there is no existing treaty, law, regulation, regulatory requirement, interpretation, directive, guideline, decision or request pursuant to which such Lender would be entitled to request any payments under any of Sections 4.3 , 4.4 , 4.5 , 4.6 and 4.7 to or for account of such Lender.

SECTION 4.9. Payments, Computations, etc . Unless otherwise expressly provided, all payments by the Borrower pursuant to this Agreement, the Notes or any other Loan Document shall be made by the Borrower to the Administrative Agent for the pro rata account of the Lenders entitled to receive such payment. All such payments required to be made to the Administrative Agent shall be made, without setoff, deduction or counterclaim, not later than 11:00 a.m., New York time, on the date due, in same day or immediately available funds through the New York Clearing House Interbank Payments System (or such other funds as may be customary for the settlement of international banking transactions in Dollars), to such account as the Administrative Agent shall specify from time to time by notice to the Borrower. Funds received after that time shall be deemed to have been received by the Administrative Agent on the next succeeding Business Day. The Administrative Agent shall promptly (but in any event on the same Business Day that the same are received or, as contemplated in the immediately

preceding sentence, deemed received) remit in same day funds to each Lender its share, if any, of such payments received by the Administrative Agent for the account of such Lender without any setoff, deduction or counterclaim. All interest and fees shall be computed on the basis of the actual number of days (including the first day but excluding the last day) occurring during the period for which such interest or fee is payable over a year comprised of 360 days. Whenever any payment to be made shall otherwise be due on a day which is not a Business Day, such payment shall (except as otherwise required by clause (c) of the definition of the term “ Interest Period ”) be made on the next succeeding Business Day and such extension of time shall be included in computing interest and fees, if any, in connection with such payment.

SECTION 4.10. Sharing of Payments . If any Lender shall obtain any payment or other recovery (whether voluntary, involuntary, by application of setoff or otherwise) on account of any Loan (other than pursuant to the terms of Sections 4.3 , 4.4 , 4.5 4.6 and 4.7 ) in excess of its pro rata share of payments then or therewith obtained by all Lenders, such Lender shall purchase from the other Lenders such participations in Loans made by them as shall be necessary to cause such purchasing Lender to share the excess payment or other recovery ratably with each of them; provided that if all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing Lender, the purchase shall be rescinded and each Lender which has sold a participation to the purchasing Lender shall repay to the purchasing Lender the purchase price to the ratable extent of such recovery together with an amount equal to such selling Lender’s ratable share (according to the proportion of (a) the amount of such selling Lender’s required repayment to the purchasing Lender to (b) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section may, to the fullest extent permitted by law, exercise all its rights of payment (including pursuant to Section 4.9 ) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this Section to share in the benefits of any recovery on such secured claim.

SECTION 4.11. Setoff . Upon the occurrence and during continuance of an Event of Default or Prepayment Event, each Lender shall have, to the extent permitted by applicable law, the right to appropriate and apply to the payment of the Obligations owing to it any and all balances, credits, deposits, accounts or moneys of the Borrower then or thereafter maintained with such Lender; provided that any such appropriation and application shall be subject to the provisions of Section 4.10 . Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such setoff and application made by such Lender; provided that the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff under applicable law or otherwise) which such Lender may have.

SECTION 4.12. Use of Proceeds . The Borrower shall apply the proceeds of each Borrowing in accordance with the fourth recital; without limiting the foregoing, no proceeds of any Loan will be used to acquire any equity security of a class which is registered pursuant to

Section 12 of the Securities Exchange Act of 1934 or any “margin stock”, as defined in F.R.S. Board Regulation U.

ARTICLE V

CONDITIONS TO BORROWING

SECTION 5.1. Initial Borrowing . The obligations of the Lenders to fund the initial Borrowing shall be effective on and as of the first date (the “ Closing Date ”) on which each of the conditions precedent set forth in this Section 5.1 shall have been satisfied.

SECTION 5.1.1. Resolutions, etc . The Administrative Agent shall have received from the Borrower:

(a) a certificate, dated the Closing Date, of its Secretary or Assistant Secretary as to the incumbency and signatures of those of its officers authorized to act with respect to this Agreement and each other Loan Document and as to the truth and completeness of the attached:

(x) resolutions of its Board of Directors then in full force and effect authorizing the execution, delivery and performance of this Agreement and each other Loan Document, and

(y) Organic Documents of the Borrower,

and upon which certificate each Lender may conclusively rely until it shall have received a further certificate of the Secretary of the Borrower canceling or amending such prior certificate; and

(b) a Certificate of Good Standing issued by the relevant Liberian authorities in respect of the Borrower.

SECTION 5.1.2. Delivery of Notes . The Administrative Agent shall have received, for the account of the respective Lenders, the Notes duly executed and delivered by the Borrower.

SECTION 5.1.3. Ownership, etc. of Vessels . The Administrative Agent shall have received the following with respect to each Vessel:

(a) evidence as to the ownership of such Vessel by the Borrower or a Principal Subsidiary;

(b) disclosure of all recorded Liens on such Vessel;

(d) evidence as to all required insurance being in effect with respect to such Vessel.

SECTION 5.1.4. Opinions of Counsel . The Administrative Agent shall have received opinions, dated the Closing Date and addressed to the Agents and each Lender, from:

(a) Michael J. Smith, Esq., counsel to the Borrower, substantially in the form of Exhibit D-1 hereto;

(b) Watson, Farley & Williams, counsel to the Borrower, as to Liberian Law and New York Law, substantially in the form of Exhibit D-2 hereto;

SECTION 5.1.5. Closing Fees, Expenses, etc . The Administrative Agent shall have received for its own account, or for the account of each Lender, as the case may be, all fees that the Borrower shall have agreed in writing to pay to the Administrative Agent (whether for its own account or for account of any of the Lenders) and all invoiced expenses of the Administrative Agent (including the agreed fees and expenses of counsel to the Administrative Agent) on or prior to the Closing Date.

SECTION 5.2. All Borrowings . The obligation of each Lender to fund any Loan on the occasion of any Borrowing (including the initial Borrowing) shall be subject to the satisfaction of each of the conditions precedent set forth in this Section 5.2 .

SECTION 5.2.1. Compliance with Warranties, No Default, etc . Both before and after giving effect to any Borrowing the following statements shall be true and correct:

(a) the representations and warranties set forth in Article VI (excluding, however, those contained in Sections 6.10 and 6.13 ) shall be true and correct in all material respects except for those representations and warranties that are qualified by materiality or Material Adverse Effect, which shall be true and correct, with the same effect as if then made; and

(b) no Default and no Prepayment Event and no event which (with notice or lapse of time or both) would become a Prepayment Event shall have then occurred and be continuing.

SECTION 5.2.2. Borrowing Request . The Administrative Agent shall have received a Borrowing Request for such Borrowing. Each of the delivery of a Borrowing Request and the acceptance by the Borrower of the proceeds of such Borrowing shall constitute a representation and warranty by the Borrower that on the date of such Borrowing (both immediately before and after giving effect to such Borrowing and the application of the proceeds thereof) the statements made in Section 5.2.1 are true and correct.

SECTION 5.3. All Borrowings . For purposes of determining compliance with the conditions specified in Section 5.1, each Lender shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Lenders unless an officer of the Administrative Agent responsible for the transactions contemplated by this Agreement shall have

received notice from such Lender prior to the date that the Borrower, by notice to the Lenders, designates as the proposed Closing Date, specifying its objection thereto. The Administrative Agent shall promptly notify the Lenders of the occurrence of the Closing Date.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES

To induce the Lenders and the Administrative Agent to enter into this Agreement and to make Loans hereunder, the Borrower represents and warrants to the Administrative Agent and each Lender as set forth in this Article VI as of the Closing Date and, except with respect to the representations and warranties in Section 6.10 and 6.13 , as of the date of each Borrowing after the Closing Date.

SECTION 6.1. Organization, etc . The Borrower and each of the Principal Subsidiaries is a corporation validly organized and existing and in good standing under the laws of its jurisdiction of incorporation; the Borrower is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the nature of its business requires such qualification, except where the failure to be so qualified would not have a Material Adverse Effect; and the Borrower has full power and authority, has taken all corporate action and holds all governmental and creditors’ licenses, permits, consents and other approvals necessary to enter into each Loan Document and to perform the Obligations.

SECTION 6.2. Due Authorization, Non-Contravention, etc . The execution, delivery and performance by the Borrower of this Agreement and each other Loan Document, are within the Borrower’s corporate powers, have been duly authorized by all necessary corporate action, and do not:

(a) contravene the Borrower’s Organic Documents;

(b) contravene any law or governmental regulation of any Applicable Jurisdiction except as would not reasonably be expected to result in a Material Adverse Effect;

(c) contravene any court decree or order binding on the Borrower or any of its property except as would not reasonably be expected to result in a Material Adverse Effect;

(d) contravene any contractual restriction binding on the Borrower or any of its property except as would not reasonably be expected to result in a Material Adverse Effect; or

(e) result in, or require the creation or imposition of, any Lien on any of the Borrower’s properties except as would not reasonably be expected to result in a Material Adverse Effect.

SECTION 6.3. Government Approval, Regulation, etc . No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or

other Person is required for the due execution, delivery or performance by the Borrower of this Agreement or any other Loan Document (except for authorizations or approvals not required to be obtained on or prior to the Closing Date that have been obtained or actions not required to be taken on or prior to the Closing Date that have been taken). Each of the Borrower and each Principal Subsidiary holds all governmental licenses, permits and other approvals required to conduct its business as conducted by it on the Closing Date, except to the extent the failure to hold any such licenses, permits or other approvals would not have a Material Adverse Effect.

SECTION 6.4. Compliance with Environmental Laws . The Borrower and each Principal Subsidiary is in compliance with all applicable Environmental Laws, except to the extent that the failure to so comply would not have a Material Adverse Effect.

SECTION 6.5. Validity, etc . This Agreement constitutes, and the Notes will, on the due execution and delivery thereof, constitute, the legal, valid and binding obligations of the Borrower enforceable in accordance with their respective terms, except as the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally or by general equitable principles.

SECTION 6.6. Financial Information . The consolidated balance sheet of the Borrower and its Subsidiaries as at December 31, 2005, and the related consolidated statements of operations and cash flows of the Borrower and its Subsidiaries, copies of which have been furnished to the Administrative Agent and each Lender, have been prepared in accordance with GAAP, and present fairly in all material respects the consolidated financial condition of the Borrower and its Subsidiaries as at December 31, 2005 and the results of their operations for the Fiscal Year then ended. Since December 31, 2005 there has been no material adverse change in the business, operations or financial condition of the Borrower and its Subsidiaries taken as a whole.

SECTION 6.7. Intentionally Omitted .

SECTION 6.8. No Default, Event of Default or Prepayment Event . No Default, Event of Default or Prepayment Event has occurred and is continuing.

SECTION 6.9. Litigation . There is no action, suit, litigation, investigation or proceeding pending or, to the knowledge of the Borrower, threatened against the Borrower or any Principal Subsidiary, that (i) except as set forth in filings made by the Borrower with the Securities and Exchange Commission in the Borrower’s reasonable opinion might reasonably be expected to materially adversely affect the business, operations or financial condition of the Borrower and its Subsidiaries (taken as a whole) (collectively, “ Material Litigation ”) or (ii) purports to affect the legality, validity or enforceability of the Loan Documents or the consummation of the transactions contemplated hereby.

SECTION 6.10. Vessels . Each Vessel is

(a) legally and beneficially owned by the Borrower or a Principal Subsidiary,

(b) registered in the name of the Borrower or such Principal Subsidiary under the flag identified in Item 6.10(b) of the Disclosure Schedule,

(d) free of all recorded Liens, other than Liens permitted by Section 7.2.3 ,

(e) insured against loss or damage in compliance with Section 7.1.5 , and

(f) except for Island Star, chartered exclusively to or operated exclusively by the Borrower or one of the Borrower’s wholly-owned Subsidiaries, except as otherwise permitted pursuant to Section 7.1.4 .

SECTION 6.11. Subsidiaries . The Borrower has no Subsidiaries on the Closing Date, except those Subsidiaries which are identified in Item 6.11 of the Disclosure Schedule. All Existing Principal Subsidiaries are designated with an asterisk in Item 6.11 of the Disclosure Schedule. All Existing Principal Subsidiaries are direct or indirect wholly-owned Subsidiaries of the Borrower, except to the extent any such Existing Principal Subsidiary or an interest therein has been sold in accordance with clause (b) of Section 7.2.7 or such Existing Principal Subsidiary no longer owns a Vessel.

SECTION 6.12. Obligations rank pari passu . The Obligations rank at least pari passu in right of payment and in all other respects with all other unsecured unsubordinated Indebtedness of the Borrower.

SECTION 6.13. Withholding, etc . As of the Closing Date, no payment to be made by the Borrower under any Loan Document is subject to any withholding or like tax imposed by any Applicable Jurisdiction.

SECTION 6.14. No Filing, etc. Required . No filing, recording or registration and no payment of any stamp, registration or similar tax is necessary under the laws of any Applicable Jurisdiction to ensure the legality, validity, enforceability, priority or admissibility in evidence of this Agreement or the other Loan Documents (except for filings, recordings, registrations or payments not required to be made on or prior to the Closing Date that have been made).

SECTION 6.15. No Immunity . The Borrower is subject to civil and commercial law with respect to the Obligations. Neither the Borrower nor any of its properties or revenues is entitled to any right of immunity in any Applicable Jurisdiction from suit, court jurisdiction, judgment, attachment (whether before or after judgment), set-off or execution of a judgment or from any other legal process or remedy relating to the Obligations (to the extent such suit, court jurisdiction, judgment, attachment, set-off, execution, legal process or remedy would otherwise be permitted or exist).

SECTION 6.16. Pension Plans . To the extent that, at any time after the Effective Date, there are any Pension Plans, no steps will have been taken to terminate any Pension Plan, and no contribution failure will have occurred with respect to any Pension Plan, in each case which could (a) give rise to a Lien under section 302(f) of ERISA and (b) result in the incurrence by the Borrower or any member of the Controlled Group of any material liability, fine or penalty.

SECTION 6.17. Investment Company Act . The Borrower is not an “investment company”, or a company “controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended.

SECTION 6.18. Regulation U . The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock, and no proceeds of any Loans will be used for a purpose which violates, or would be inconsistent with, F.R.S. Board Regulation U. Terms for which meanings are provided in F.R.S. Board Regulation U or any regulations substituted therefor, as from time to time in effect, are used in this Section with such meanings.

SECTION 6.19. Accuracy of Information . The financial and other information (other than financial projections or other forward looking information) furnished to the Administrative Agent and the Lenders in writing by or on behalf of the Borrower by its chief financial officer, treasurer or corporate controller in connection with the negotiation of this Agreement is, when taken as a whole, to the best knowledge and belief of the Borrower, true and correct and contains no misstatement of a fact of a material nature. All financial projections, if any, that have been furnished to the Administrative Agent and the Lenders in writing by or on behalf of the Borrower by its chief financial officer, treasurer or corporate controller in connection with this Agreement have been or will be prepared in good faith based upon assumptions believed by the Borrower to be reasonable at the time made (it being understood that such projections are subject to significant uncertainties and contingencies, many of which are beyond the Borrower’s control, and that no assurance can be given that the projections will be realized). All financial and other information furnished to the Administrative Agent and the Lenders in writing by or on behalf of the Borrower by its chief financial officer, treasurer or corporate controller after the date of this Agreement shall have been prepared by the Borrower in good faith.

ARTICLE VII

COVENANTS

SECTION 7.1. Affirmative Covenants . The Borrower agrees with the Administrative Agent and each Lender that, until all Commitments have terminated and all Obligations have been paid in full, the Borrower will perform the obligations set forth in this Section 7.1 .

SECTION 7.1.1. Financial Information, Reports, Notices, etc . The Borrower will furnish, or will cause to be furnished, to the Administrative Agent (with sufficient copies for distribution to each Lender) the following financial statements, reports, notices and information:

(a) as soon as available and in any event within 60 days after the end of each of the first three Fiscal Quarters of each Fiscal Year of the Borrower, a copy of the Borrower’s report on Form 10-Q (or any successor form) as filed by the Borrower with the Securities and Exchange Commission for such Fiscal Quarter, containing unaudited consolidated financial statements of the Borrower for such Fiscal Quarter (including a balance sheet and profit and loss statement) prepared in accordance with GAAP, subject to normal year-end audit adjustments;

(b) as soon as available and in any event within 120 days after the end of each Fiscal Year of the Borrower, a copy of the Borrower’s annual report on Form 10-K (or any successor form) as filed by the Borrower with the Securities and Exchange Commission for such Fiscal Year, containing audited consolidated financial statements of the Borrower for such Fiscal Year prepared in accordance with GAAP (including a balance sheet and profit and loss statement) and audited by PricewaterhouseCoopers LLC or another firm of independent public accountants of similar standing;

(c) together with each of the statements delivered pursuant to the foregoing clause (a) or (b), a certificate, executed by the chief financial officer, the treasurer or the corporate controller of the Borrower, showing, as of the last day of the relevant Fiscal Quarter or Fiscal Year compliance with the covenants set forth in Section 7.2.4 (in reasonable detail and with appropriate calculations and computations in all respects reasonably satisfactory to the Administrative Agent);

(d) as soon as possible after the occurrence of a Default or Prepayment Event, a statement of the chief financial officer of the Borrower setting forth details of such Default or Prepayment Event (as the case may be) and the action which the Borrower has taken and proposes to take with respect thereto;

(e) as soon as the Borrower becomes aware thereof, notice of any Material Litigation except to the extent that such Material Litigation is disclosed by the Borrower in filings with the SEC;

(f) as soon as the Borrower becomes aware thereof, notice of any event which, in its reasonable opinion, would be expected to materially adversely affect the business, operations or financial condition of the Borrower and its Subsidiaries taken as a whole;

(g) promptly after the sending or filing thereof, copies of all reports which the Borrower sends to all holders of each security issued by the Borrower, and all registration statements which the Borrower or any of its Subsidiaries files with the Securities and Exchange Commission or any national securities exchange; and

(h) such other information respecting the condition or operations, financial or otherwise, of the Borrower or any of its Subsidiaries as any Lender through the Administrative Agent may from time to time reasonably request.

SECTION 7.1.2. Approvals and Other Consents . The Borrower will obtain (or cause to be obtained) all such governmental licenses, authorizations, consents, permits and approvals as may be required for (a) the Borrower to perform its obligations under this Agreement and the other Loan Documents and (b) except to the extent that failure to obtain (or cause to be obtained) such governmental licenses, authorizations, consents, permits and approvals would not be expected to have a Material Adverse Effect, the operation of each Vessel in compliance with all applicable laws.

SECTION 7.1.3. Compliance with Laws, etc . The Borrower will, and will cause each of its Subsidiaries to, comply in all material respects with all applicable laws, rules,

regulations and orders, except (other than as described in clause (a) below) to the extent that the failure to so comply would not have a Material Adverse Effect, which compliance shall in any case include (but not be limited to):

(a) in the case of each of the Borrower and the Principal Subsidiaries, the maintenance and preservation of its corporate existence (subject to the provisions of Section 7.2.6 );

(b) in the case of the Borrower, maintenance of its qualification as a foreign corporation in the State of Florida;

(c) the payment, before the same become delinquent, of all taxes, assessments and governmental charges imposed upon it or upon its property, except to the extent being diligently contested in good faith by appropriate proceedings; and

(d) compliance with all applicable Environmental Laws.

SECTION 7.1.4. Vessels . The Borrower will (or will cause the applicable Principal Subsidiary to):

(a) cause each Vessel, except for Island Star, to be chartered exclusively to or operated exclusively by the Borrower or one of the Borrower’s wholly-owned Subsidiaries, provided that the Borrower or such Subsidiary may charter out (i) any Vessels representing not more than 25% of the berths of all Vessels to entities other than the Borrower and the Borrower’s wholly-owned Subsidiaries and (ii) any Vessel for a time charter not to exceed one year in duration; and

(b) cause each Vessel to be kept in such condition as will entitle her to classification by a classification society of recognized standing.

SECTION 7.1.5. Insurance . The Borrower will, or will cause one or more of its Subsidiaries to, maintain or cause to be maintained with responsible insurance companies insurance with respect to all of the material properties and operations of the Borrower and each Principal Subsidiary against such casualties, third-party liabilities and contingencies and in such amounts as is customary for other businesses of similar size in the passenger cruise line industry ( provided that in no event will the Borrower or any Subsidiary be required to obtain any business interruption, loss of hire or delay in delivery insurance) and will, upon request of the Administrative Agent, furnish to the Administrative Agent (with sufficient copies for distribution to each Lender) at reasonable intervals a certificate of a senior officer of the Borrower setting forth the nature and extent of all insurance maintained by the Borrower and the Subsidiaries and certifying as to compliance with this Section.

SECTION 7.1.6. Books and Records . The Borrower will, and will cause each of its Principal Subsidiaries to, keep books and records that accurately reflect all of its business affairs and transactions and permit the Administrative Agent and each Lender or any of their respective representatives, at reasonable times and intervals, to visit each of its offices, to discuss its financial matters with its officers and to examine any of its books or other corporate records.

SECTION 7.2. Negative Covenants . The Borrower agrees with the Administrative Agent and each Lender that, until all Commitments have terminated and all Obligations have been paid and performed in full, the Borrower will perform the obligations set forth in this Section 7.2 .

SECTION 7.2.1. Business Activities . The Borrower will not, and will not permit any of its Subsidiaries to, engage in any business activity other than those engaged in by the Borrower and its Subsidiaries on the date hereof and other business activities reasonably related thereto.

SECTION 7.2.2. Indebtedness . The Borrower will not permit any of the Existing Principal Subsidiaries to create, incur, assume or suffer to exist or otherwise become or be liable in respect of any Indebtedness, other than, without duplication, the following:

(a) Indebtedness secured by Liens of the type described in Section 7.2.3 ;

(b) Indebtedness owing to the Borrower or a wholly owned direct or indirect Subsidiary of the Borrower;

(c) Indebtedness incurred to finance, refinance or refund the cost (including the cost of construction) of assets acquired after the Closing Date; and

(d) Indebtedness in an aggregate principal amount not to exceed the amount specified therefor in Section 7.2.3(c) at any time outstanding.

SECTION 7.2.3. Liens . The Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any of its property, revenues or assets, whether now owned or hereafter acquired, except:

(a) Liens on the vessels SPLENDOUR OF THE SEAS, LEGEND OF THE SEAS, CENTURY, GALAXY, SUMMIT, CONSTELLATION and BRILLIANCE OF THE SEAS existing as of the Effective Date and securing the Existing Debt (and any Lien on SPLENDOUR OF THE SEAS, LEGEND OF THE SEAS, CENTURY, GALAXY, SUMMIT, CONSTELLATION or BRILLIANCE OF THE SEAS securing any refinancing of the Existing Debt, so long as such Vessel was subject to a Lien securing the Indebtedness being refinanced immediately prior to such refinancing);

(b) Liens on assets (including, without limitation, shares of capital stock of corporations and assets owned by any corporation that becomes a Subsidiary of the Borrower after the Effective Date) acquired after the Effective Date (whether by purchase, construction or otherwise) by the Borrower or any of its Subsidiaries (other than (x) an Existing Principal Subsidiary or (y) any other Principal Subsidiary which, at any time, after three months after the acquisition of a Vessel, owns a Vessel free of any mortgage Lien), which Liens were created solely for the purpose of securing Indebtedness representing, or incurred to finance, refinance or refund, the cost (including the cost of construction) of such assets, so long as (i) the acquisition of such assets is not otherwise prohibited by the terms of this Agreement and (ii) each such Lien is created within three months after the acquisition of the relevant assets;

(c) in addition to other Liens permitted under this Section 7.2.3 , Liens securing Indebtedness in an aggregate principal amount, together with (but without duplication of) Indebtedness permitted under Section 7.2.2(d) , at any one time outstanding not exceeding the greater of (determined at the time of creation of such Lien or the incurrence by any Existing Principal Subsidiary of such indebtedness, as applicable) (x) 3.5% of the total assets of the Borrower and its Subsidiaries taken as a whole as determined in accordance with GAAP as at the last day of the most recent ended Fiscal Quarter or (y) $225,000,000, provided that, with respect to each such item of Indebtedness, the fair market value of the assets subject to Liens securing such Indebtedness (determined at the time of the creation of such Lien) shall not exceed two times the aggregate principal amount of such Indebtedness (and for purposes of this clause (c), the fair market value of any assets shall be determined by (i) in the case of any Vessel, by an Approved Appraiser selected by the Borrower and (ii) in the case of any other assets, by an officer of the Borrower or by the board of directors of the Borrower);

(d) Liens on assets acquired after the Effective Date by the Borrower or any of its Subsidiaries (other than by (x) any Subsidiary that is an Existing Principal Subsidiary or (y) any other Principal Subsidiary which, at any time, owns a Vessel free of any mortgage Lien) so long as (i) the acquisition of such assets is not otherwise prohibited by the terms of this Agreement and (ii) each of such Liens existed on such assets before the time of its acquisition and was not created by the Borrower or any of its Subsidiaries in anticipation thereof;

(e) Liens on any asset of any corporation that becomes a Subsidiary of the Borrower (other than a corporation that also becomes a Subsidiary of an Existing Principal Subsidiary) after the Effective Date so long as (i) the acquisition or creation of such corporation by the Borrower is not otherwise prohibited by the terms of this Agreement and (ii) such Liens are in existence at the time such corporation becomes a Subsidiary of the Borrower and were not created by the Borrower or any of its Subsidiaries in anticipation thereof;

(f) Liens securing Government-related Obligations;

(g) Liens for taxes, assessments or other governmental charges or levies not at the time delinquent or thereafter payable without penalty or being diligently contested in good faith by appropriate proceedings;

(h) Liens of carriers, warehousemen, mechanics, materialmen and landlords incurred in the ordinary course of business for sums not overdue or being diligently contested in good faith by appropriate proceedings;

(i) Liens incurred in the ordinary course of business in connection with workers’ compensation, unemployment insurance or other forms of governmental insurance or benefits;

(j) Liens for current crew’s wages and salvage;

(k) Liens arising by operation of law as the result of the furnishing of necessaries for any Vessel so long as the same are discharged in the ordinary course of business or are being diligently contested in good faith by appropriate proceedings; and

(l) Liens on Vessels that:

(i) secure obligations covered (or reasonably expected to be covered) by insurance;

(ii) were incurred in the course of or incidental to trading such Vessel in connection with repairs or other work to such Vessel; or

(iii) were incurred in connection with work to such Vessel that is required to be performed pursuant to applicable law, rule, regulation or order;

provided that, in each case described in this clause (l) , such Liens are either (x) discharged in the ordinary course of business or (y) being diligently contested in good faith by appropriate proceedings.

SECTION 7.2.4. Financial Condition . The Borrower will not permit:

(a) Net Debt to Capitalization Ratio, as at the end of any Fiscal Quarter, to be greater than 0.625 to 1.

(b) Fixed Charge Coverage Ratio to be less than 1.25 to 1 as at the last day of any Fiscal Quarter.

(c) Stockholders’ Equity to be less than, as at the last day of any Fiscal Quarter, the sum of (i) $4,150,000,000 plus (ii) 50% of the consolidated net income of the Borrower and its Subsidiaries for the period commencing on January 1, 2006 and ending on the last day of the Fiscal Quarter most recently ended (treated for these purposes as a single accounting period, but in any event excluding any Fiscal Quarters for which the Borrower and its Subsidiaries have a consolidated net loss).

SECTION 7.2.5. Investments . The Borrower will not permit any of the Principal Subsidiaries to make, incur, assume or suffer to exist any Investment in any other Person other than

(a) the Borrower or any direct or indirect wholly owned Subsidiary of the Borrower; and

(b) other Investments by the Principal Subsidiaries in an aggregate amount not to exceed $25,000,000 at any time outstanding.

SECTION 7.2.6. Consolidation, Merger, etc . The Borrower will not, and will not permit any of its Subsidiaries to, liquidate or dissolve, consolidate with, or merge into or with, any other corporation, or purchase or otherwise acquire all or substantially all of the assets of any Person except:

(a) any such Subsidiary may liquidate or dissolve voluntarily into, and may merge with and into, the Borrower or any other Subsidiary, and the assets or stock of any Subsidiary may be purchased or otherwise acquired by the Borrower or any other Subsidiary; and

(b) so long as no Default has occurred and is continuing or would occur after giving effect thereto, the Borrower or any of its Subsidiaries may merge into any other Person, or any other Person may merge into the Borrower or any such Subsidiary, or the Borrower or any of its Subsidiaries may purchase or otherwise acquire all or substantially all of the assets of any Person, in each case so long as:

(i) after giving effect thereto, the Stockholders’ Equity of the Borrower and its Subsidiaries is at least equal to 90% of such Stockholders’ Equity immediately prior thereto; and

SECTION 7.2.7. Asset Dispositions, etc. The Borrower will not, and will not permit any of its Subsidiaries to, sell, transfer, contribute or otherwise convey, or grant options, warrants or other rights with respect to, any material asset (including accounts receivable and capital stock of Principal Subsidiaries) to any Person, except:

(a) sales of assets (including, without limitation, Vessels) so long as:

(i) the aggregate net book value of all such assets sold during each 12-month period commencing on the Closing Date, and each anniversary of the Closing Date, does not exceed an amount equal to the greater of (x) 7.5% of Stockholders’ Equity as at the end of the last Fiscal Quarter, and (y) $250,000,000, provided however , that in no event shall the aggregate net book value of fixed assets disposed over the life of the Agreement (determined as of the date of any such sale) exceed 25% of Stockholders’ Equity as at the end of the most recently completed fiscal quarter; and

(ii) to the extent any asset has a fair market value in excess of $25,000,000 the Borrower or Subsidiary selling such asset receives consideration therefor at least equal to the fair market value thereof (as determined in good faith by (x) in the case of any Vessel, the board of directors of the Borrower and (y) in the case of any other asset, an officer of the Borrower or its board of directors);

(b) sales of capital stock of any Principal Subsidiary of the Borrower so long as a sale of all of the assets of such Subsidiary would be permitted under the foregoing clause (a);

(d) sales of other assets in the ordinary course of business; and

(e) sales of assets between or among the Borrower and Subsidiaries of the Borrower.

SECTION 7.2.8. Transactions with Affiliates . The Borrower will not, and will not permit any of the Principal Subsidiaries to, enter into, or cause, suffer or permit to exist any arrangement or contract with any of its Affiliates (other than arrangements or contracts among the Borrower and its wholly-owned Subsidiaries) unless such arrangement or contract is on an arms’-length basis, provided that, to the extent that the aggregate fair value of the goods furnished or to be furnished or the services performed or to be performed under all such contracts or arrangements in any one Fiscal Year does not exceed $25,000,000, such contracts or arrangements shall not be subject to this Section 7.2.8 .

ARTICLE VIII

EVENTS OF DEFAULT

SECTION 8.1. Listing of Events of Default . Each of the following events or occurrences described in this Section 8.1 shall constitute an “ Event of Default ”.

SECTION 8.1.1. Non-Payment of Obligations . The Borrower shall default in the payment when due of any principal of or interest on any Loan, any Commitment Fee or the agency fee provided for in Section 10.8 , provided that, in the case of any default in the payment of any interest on any Loan or of any Commitment Fee, such default shall continue unremedied for a period of at least two Business Days after notice thereof shall have been given to the Borrower by any Lender; and provided further that, in the case of any default in the payment of such agency fee, such default shall continue unremedied for a period of at least ten days after notice thereof shall have been given to the Borrower by the Administrative Agent.

SECTION 8.1.2. Breach of Warranty . Any representation or warranty of the Borrower made or deemed to be made hereunder (including any certificates delivered pursuant to Article V ) is or shall be incorrect when made in any material respect.

SECTION 8.1.3. Non-Performance of Certain Covenants and Obligations . The Borrower shall default in the due performance and observance of any other agreement contained herein or in any other Loan Document (other than the covenants set forth in Section 7.2.4 ) and such default shall continue unremedied for a period of five days after notice thereof shall have been given to the Borrower by the Administrative Agent or any Lender (or, if (a) such default is capable of being remedied within 30 days (commencing on the first day following such five-day period) and (b) the Borrower is actively seeking to remedy the same during such period, such default shall continue unremedied for at least 35 days after such notice to the Borrower).

continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Indebtedness; or any other event shall occur or condition shall exist under any agreement or instrument evidencing, securing or relating to any such Indebtedness and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to cause or permit the holder or holders of such Indebtedness to cause such Indebtedness to become due and payable prior to its scheduled maturity; or any such Indebtedness shall be declared to be due and payable or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption or by voluntary agreement), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Indebtedness is required to be made, in each case prior to the scheduled maturity thereof. For purposes of determining Indebtedness for any Hedging Instrument, the principal amount of the obligations under any such instrument at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that the Borrower or any Principal Subsidiary would be required to pay if such instrument were terminated at such time.

SECTION 8.1.5. Pension Plans . Any of the following events shall occur with respect to any Pension Plan:

(a) the institution of any steps by the Borrower, any member of its Controlled Group or any other Person to terminate a Pension Plan if, as a result of such termination, the Borrower or any such member could be required to make a contribution to such Pension Plan, or could reasonably expect to incur a liability or obligation to such Pension Plan, in excess of $50,000,000; or

(b) a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA

and, in each case, such event shall continue unremedied for a period of five Business Days after notice thereof shall have been given to the Borrower by the Administrative Agent or any Lender (or, if (a) such default is capable of being remedied within 15 days (commencing on the first day of such five-Business-Day period) and (b) the Borrower is actively seeking to remedy the same during such period, such default shall continue unremedied for at least 15 days).

SECTION 8.1.6. Bankruptcy, Insolvency, etc .(a) The Borrower or any of the Principal Subsidiaries (or any of its other Subsidiaries to the extent that the relevant event described below would have a Material Adverse Effect) shall:

(a) generally fail to pay, or admit in writing its inability to pay, its debts as they become due;

(b) apply for, consent to, or acquiesce in, the appointment of a trustee, receiver, sequestrator or other custodian for it or any of its property, or make a general assignment for the benefit of creditors;

authorizes the Administrative Agent and each Lender to appear in any court conducting any relevant proceeding during such 30-day period to preserve, protect and defend their respective rights under the Loan Documents;

(d) permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding, in respect of the Borrower or any of such Subsidiaries, and, if any such case or proceeding is not commenced by the Borrower or such Subsidiary, such case or proceeding shall be consented to or acquiesced in by the Borrower or such Subsidiary or shall result in the entry of an order for relief or shall remain for 30 days undismissed, provided that the Borrower hereby expressly authorizes the Administrative Agent and each Lender to appear in any court conducting any such case or proceeding during such 30-day period to preserve, protect and defend their respective rights under the Loan Documents; or

(e) take any corporate action authorizing, or in furtherance of, any of the foregoing.

SECTION 8.1.7. Ownership of Principal Subsidiaries . Except as a result of a disposition permitted pursuant to clauses (a) or (b) of Section 7.2.7 , the Borrower shall cease to own beneficially and of record all of the capital stock of each Existing Principal Subsidiary.

SECTION 8.2. Action if Bankruptcy . If any Event of Default described in clauses (b) through (d) of Section 8.1.6 shall occur with respect to the Borrower, the Commitments (if not theretofore terminated) shall automatically terminate and the outstanding principal amount of all outstanding Loans and all other Obligations shall automatically be and become immediately due and payable, without notice or demand.

SECTION 8.3. Action if Other Event of Default . If any Event of Default (other than any Event of Default described in clauses (b) through (d) of Section 8.1.6 with respect to the Borrower) shall occur for any reason, whether voluntary or involuntary, and be continuing, the Administrative Agent, upon the direction of the Required Lenders, shall by notice to the Borrower declare all of the outstanding principal amount of the Loans and other Obligations to be due and payable and/or the Commitments (if not theretofore terminated) to be terminated, whereupon the full unpaid amount of such Loans and other Obligations shall be and become immediately due and payable, without further notice, demand or presentment, and/or, as the case may be, the Commitments shall terminate.

ARTICLE IX

PREPAYMENT EVENTS

SECTION 9.1. Listing of Prepayment Events . Each of the following events or occurrences described in this Section 9.1 shall constitute a “Prepayment Event”.

SECTION 9.1.1. Change in Ownership . Any Person other than a member of the Existing Group (a “ New Shareholder ”) shall acquire (whether through legal or beneficial

ownership of capital stock, by contract or otherwise), directly or indirectly, effective control over more than 30% of the Voting Stock and:

(a) the members of the Existing Group have (whether through legal or beneficial ownership of capital stock, by contract or otherwise) in the aggregate, directly or indirectly, effective control over fewer shares of Voting Stock than does such New Shareholder; and

(b) the members of the Existing Group do not collectively have (whether through legal or beneficial ownership of capital stock, by contract or otherwise) the right to elect, or to designate for election, at least a majority of the Board of Directors of the Borrower.

SECTION 9.1.2. Change in Board . During any period of 24 consecutive months, a majority of the Board of Directors of the Borrower shall no longer be composed of individuals:

(a) who were members of said Board on the first day of such period; or

(b) whose election or nomination to said Board was approved by a vote of at least two-thirds of the members of said Board who were members of said Board on the first day of such period; or

(c) whose election or nomination to said Board was approved by a vote of at least two-thirds of the members of said Board referred to in the foregoing clauses (a) and (b).

SECTION 9.1.3. Unenforceability . Any Loan Document shall cease to be the legally valid, binding and enforceable obligation of the Borrower (in each case, other than with respect to provisions of any Loan Document (i) identified as unenforceable in the form of the opinion of the Borrower’s counsel set forth as Exhibit D-1 or (ii) that a court of competent jurisdiction has determined are not material) and such event shall continue unremedied for 15 days after notice thereof has been given to the Borrower by any Lender.

SECTION 9.1.4. Approvals . Any material license, consent, authorization, registration or approval at any time necessary to enable the Borrower or any Principal Subsidiary to conduct its business shall be revoked, withdrawn or otherwise cease to be in full force and effect, unless the same would not have a Material Adverse Effect.

SECTION 9.1.5. Non-Performance of Certain Covenants and Obligations . The Borrower shall default in the due performance and observance of any of the covenants set forth in Section 7.2.4 .

SECTION 9.1.6. Judgments . Any judgment or order for the payment of money in excess of $50,000,000 shall be rendered against the Borrower or any of the Principal Subsidiaries by a court of competent jurisdiction and the Borrower or such Principal Subsidiary shall have failed to satisfy such judgment and either:

(a) enforcement proceedings in respect of any material assets of the Borrower or such Principal Subsidiary shall have been commenced by any creditor upon such judgment or order and shall not have been stayed or enjoined within five Business Days after the commencement of such enforcement proceedings; or

(b) there shall be any period of 10 consecutive Business Days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect.

SECTION 9.1.7. Condemnation, etc . Any Vessel or Vessels shall be condemned or otherwise taken under color of law and the same shall continue unremedied for at least 20 days, unless such condemnation or other taking would not have a Material Adverse Effect.

SECTION 9.1.8. Arrest . Any Vessel or Vessels shall be arrested and the same shall continue unremedied for at least 20 days, unless such arrest would not have a Material Adverse Effect.

SECTION 9.2. Mandatory Prepayment . If any Prepayment Event shall occur and be continuing, the Administrative Agent, upon the direction of the Required Lenders, shall by notice to the Borrower (a) require the Borrower to prepay in full on the date of such notice all principal of and interest on the Loans and all other Obligations (and, in such event, the Borrower agrees to so pay the full unpaid amount of each Loan and all accrued and unpaid interest thereon and all other Obligations) and (b) terminate the Commitments (if not theretofore terminated).

ARTICLE X

THE AGENTS

SECTION 10.1. Actions . Each Lender hereby appoints Citibank, and insofar as the other Agents have duties under this Agreement, each other Agent, as its agent under and for purposes of this Agreement, the Notes and each other Loan Document. Each Lender authorizes the Administrative Agent to act on behalf of such Lender under this Agreement, the Notes and each other Loan Document and, in the absence of other written instructions from the Required Lenders received from time to time by the Administrative Agent (with respect to which the Administrative Agent agrees that it will comply, except as otherwise provided in this Section or as otherwise advised by counsel), to exercise such powers hereunder and thereunder as are specifically delegated to or required of the Administrative Agent by the terms hereof and thereof, together with such powers as may be reasonably incidental thereto. Each Lender hereby indemnifies (which indemnity shall survive any termination of this Agreement) the Administrative Agent, pro rata according to such Lender’s Percentage, from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and disbursements of counsel) that be incurred by or asserted or awarded against, the Administrative Agent in any way relating to or arising out of this Agreement, the Notes and any other Loan Document or any action taken or omitted by the Administrative Agent under this Agreement, the Notes or any other Loan Document; provided that no Lender shall be liable for the payment of any portion of such claims, damages, losses, liabilities and expenses which have resulted from the Administrative Agent’s gross negligence or willful misconduct. Without

limitation of the foregoing, each Lender agrees to reimburse the Administrative Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including reasonable counsel fees) incurred by the Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, to the extent that the Administrative Agent is not reimbursed for such expenses by the Borrower. In the case of any investigation, litigation or proceeding giving rise to any such indemnified costs, this Section applies whether any such investigation, litigation or proceeding is brought by the Administrative Agent, any Lender or a third party. The Administrative Agent shall not be required to take any action hereunder, under the Notes or under any other Loan Document, or to prosecute or defend any suit in respect of this Agreement, the Notes or any other Loan Document, unless it is expressly required to do so under this Agreement or is indemnified hereunder to its satisfaction. If any indemnity in favor of the Administrative Agent shall be or become, in the Administrative Agent’s reasonable determination, inadequate, the Administrative Agent may call for additional indemnification from the Lenders and cease to do the acts indemnified against hereunder until such additional indemnity is given.

SECTION 10.2. Funding Reliance, etc . Unless the Administrative Agent shall have been notified by telephone, confirmed in writing, by any Lender by 5:00 p.m., New York time, on the day prior to a Borrowing that such Lender will not make available the amount which would constitute its Percentage of such Borrowing on the date specified therefor, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent and, in reliance upon such assumption, make available to the Borrower a corresponding amount. If and to the extent that such Lender shall not have made such amount available to the Administrative Agent, such Lender and the Borrower severally agree to repay the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date the Administrative Agent made such amount available to the Borrower to the date such amount is repaid to the Administrative Agent, at the interest rate applicable at the time to Loans comprising such Borrowing.

SECTION 10.3. Exculpation . Neither the Administrative Agent nor any of its directors, officers, employees or agents shall be liable to any Lender for any action taken or omitted to be taken by it under this Agreement or any other Loan Document, or in connection herewith or therewith, except for its own willful misconduct or gross negligence. Without limitation of the generality of the foregoing, the Administrative Agent (i) may treat the payee of any Note a the holder thereof until the Administrative Agent receives and accepts a Lender Assignment Agreement entered into by the Lender that is the payee of such Note, as assignor, and an Assignee Lender as provided in Section 11.11.1; (ii) may consult with legal counsel (including counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it and in accordance with the advice of such counsel, accountants or experts; (iii) makes no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, warranties or representations (whether written or oral) made in or in connection with this Agreement; (iv) shall not have any duty to ascertain or to inquire as to the performance, observance or satisfaction of any of the terms, covenants or conditions of this Agreement on the part of the Borrower or the existence at any time of any Default or Prepayment Event or to

inspect the property (including the books and records) of the Borrower; (v) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; and (vi) shall incur no liability under or in respect of this Agreement by action upon any notice, consent, certificate or other instrument or writing (which may be by telecopier) believed by it to be genuine and signed or sent by the proper party or parties.

SECTION 10.4. Successor . Any Agent may resign as such at any time upon at least 30 days’ prior notice to the Borrower and all Lenders, provided that any such resignation shall not become effective until a successor Agent for such resigning Agent has been appointed as provided in this Section 10.4 and such successor Agent has accepted such appointment ( provided that no successor Agent shall be appointed for any Agent, other than the Administrative Agent, if after giving effect to such Agent’s resignation there would still be two Agents). If any Agent at any time shall resign, the Required Lenders shall, subject to the immediately preceding proviso and subject to the consent of the Borrower (such consent not to be unreasonably withheld), appoint another Lender as a successor to such Agent which shall thereupon become such Agent’s successor hereunder ( provided that, in the case of a resignation of the Administrative Agent, the Required Lenders shall, subject to the consent of the Borrower unless an Event or Default or a Prepayment Event shall have occurred and be continuing (such consent not to be unreasonably withheld) offer to each of the other Agents in turn, in the order of their respective Commitment Amounts, the right to become successor Administrative Agent). If no successor Agent for any resigning Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the resigning Agent’s giving notice of resignation, then the resigning Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be one of the Lenders or, in the case of a resigning Administrative Agent, a commercial banking institution having a combined capital and surplus of at least $500,000,000 (or the equivalent in other currencies), subject, in each case, to the consent of the Borrower (such consent not to be unreasonably withheld). Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall be entitled to receive from the resigning Administrative Agent such documents of transfer and assignment as such successor Administrative Agent may reasonably request, and shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the resigning Administrative Agent, and the resigning Administrative Agent shall be discharged from its duties and obligations under this Agreement. After any resigning Administrative Agent’s resignation hereunder as the Administrative Agent, the provisions of:

(a) this Article X shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Administrative Agent under this Agreement; and

(b) Section 11.3 and Section 11.4 shall continue to inure to its benefit.

If a Lender acting as an Agent assigns its Loans to one of its Affiliates, such Agent may, subject to the consent of the Borrower (such consent not to be unreasonably withheld) assign its rights and obligations as Agent to such Affiliate.

SECTION 10.5. Loans by the Agents . Each Agent shall have the same rights and powers with respect to (x) the Loans made by it or any of its Affiliates, and (y) the Notes held by it or

any of its Affiliates as any other Lender and may exercise the same as if it were not an Agent. Each Agent and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or Affiliate of the Borrower as if such Agent were not an Agent hereunder and without any duty to account therefor to the Lenders. No Agent shall have any duty to disclose information obtained or received by it or any of its Affiliates relating to the Borrower or its Subsidiaries to the extent such information was obtained or received in any capacity other than as an Agent.

SECTION 10.6. Credit Decisions . Each Lender acknowledges that it has, independently of the Administrative Agent, each other Agent and each other Lender, and based on such Lender’s review of the financial information of the Borrower, this Agreement, the other Loan Documents (the terms and provisions of which being satisfactory to such Lender) and such other documents, information and investigations as such Lender has deemed appropriate, made its own credit decision to extend its Commitment. Each Lender also acknowledges that it will, independently of the Administrative Agent, each other Agent and each other Lender, and based on such other documents, information and investigations as it shall deem appropriate at any time, continue to make its own credit decisions as to exercising or not exercising from time to time any rights and privileges available to it under this Agreement or any other Loan Document.

SECTION 10.8. Agency Fee . The Borrower agrees to pay to the Administrative Agent for its own account an annual agency fee in an amount, and at such times, heretofore agreed to in writing between the Borrower and the Administrative Agent.

ARTICLE XI

MISCELLANEOUS PROVISIONS

SECTION 11.1. Waivers, Amendments, etc . The provisions of this Agreement and of each other Loan Document may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by the Borrower and the Required Lenders; provided that no such amendment, modification or waiver which would:

(a) modify any requirement hereunder that any particular action be taken by all the Lenders or by the Required Lenders shall be effective unless consented to by each Lender;

(b) modify this Section 11.1 , change the definition of “Required Lenders”, increase the Commitment of any Lender (other than pursuant to Section 2.7), reduce any

fees described in Article III or extend the Commitment Termination Date shall be made without the consent of each Lender;

(c) extend the due date for, or reduce the amount of, any scheduled repayment or prepayment of principal of or interest on any Loan (or reduce the principal amount of or rate of interest on any Loan) shall be made without the consent of each Lender; or

(d) affect adversely the interests, rights or obligations of the Administrative Agent in its capacity as such shall be made without consent of the Administrative Agent.

No failure or delay on the part of the Administrative Agent or any Lender in exercising any power or right under this Agreement or any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude any other or further exercise thereof or the exercise of any other power or right. No notice to or demand on the Borrower in any case shall entitle it to any notice or demand in similar or other circumstances. No waiver or approval by the Administrative Agent or any Lender under this Agreement or any other Loan Document shall, except as may be otherwise stated in such waiver or approval, be applicable to subsequent transactions. No waiver or approval hereunder shall require any similar or dissimilar waiver or approval thereafter to be granted hereunder.

SECTION 11.2. Notices . (a) All notices and other communications provided to any party hereto under this Agreement or any other Loan Document shall be in writing or by facsimile and addressed, delivered or transmitted to such party at its address, or facsimile number set forth below its signature hereto or set forth in the Lender Assignment Agreement or Assumption Agreement or at such other address, or facsimile number as may be designated by such party in a notice to the other parties; provided that notices, information, documents and other materials that the Borrower is required to deliver hereunder may be delivered to the Administrative Agent and the Lenders as specified in Section 11.2(b). Any notice, if mailed and properly addressed with postage prepaid or if properly addressed and sent by pre-paid courier service, shall be deemed given when received.

(b) So long as Citibank is the Administrative Agent, the Borrower may provide to the Administrative Agent all information, documents and other materials that it furnishes to the Administrative Agent hereunder or any other Loan Document (and any guaranties, security agreements and other agreements relating thereto), including, without limitation, all notices, requests, financial statements, financial and other reports, certificates and other materials, but excluding any such communication that (i) relates to a request for a new, or a conversion of an existing Borrowing or other extension of credit (including any election of an interest rate or interest period relating thereto), (ii) relates to the payment of any principal or other amount due hereunder or any other Loan Document prior to the scheduled date therefor, (iii) provides notice of any Default or Event of Default or (iv) is required to be delivered to satisfy any condition precedent to the effectiveness of the Agreement and/or any Borrowing or other extension of credit hereunder (all such non-excluded communications being referred to herein collectively as “ Communications ”), by transmitting the Communications in an electronic/soft medium in a format acceptable to the Administrative Agent to oploanswebadmin@ssmb.com; provided that any Communication requested pursuant to Section 7.1.1(h) shall be in a format acceptable to the Borrower and the Administrative Agent.

(1) The Borrower agrees that the Administrative Agent may make such items included in the Communications as the Borrower may specifically agree available to the Lenders by posting such notices, at the option of the Borrower, on Intralinks or e-Disclosure, the Administrative Agent’s internet delivery system that is part of SSB Direct, Global Fixed Income’s primary web portal (the “Platform”). Although the primary web portal is secured with a dual firewall and a User ID/Password Authorization System and the Platform is secured through a single user per deal authorization method whereby each user may access the Platform only on a deal-by-deal basis, the Borrower acknowledges that (i) the distribution of material through an electronic medium is not necessarily secure and that there are confidentiality and other risks associated with such distribution, (ii) the Platform is provided “as is” and “as available” and (iii) neither the Administrative Agent nor any of its Affiliates warrants the accuracy, adequacy or completeness of the Communications or the Platform and each expressly disclaims liability for errors or omissions in the Communications or the Platform. No warranty of any kind, express, implied or statutory, including, without limitation, any warranty of merchantability, fitness for a particular purpose, non-infringement of third party rights or freedom from viruses or other code defects, is made by the Administrative Agent or any of its Affiliates in connection with the Platform.

(2) The Administrative Agent agrees that the receipt of Communications by the Administrative Agent at its e-mail address set forth above shall constitute effective delivery of such Communications to the Administrative Agent for purposes hereunder and any other Loan Document (and any guaranties, security agreements and other agreements relating thereto).

(c) Each Lender agrees that notice to it (as provided in the next sentence) (a “ Notice ”) specifying that any Communications have been posted to the Platform shall constitute effective delivery of such Communications to such Lender for purposes of this Agreement. Each Lender agrees (i) to notify the Administrative Agent in writing (including by electronic communication) of such Lender’s e-mail address to which a Notice may be sent by electronic transmission on or before the date such Lender becomes a party to this Agreement (and from time to time thereafter to ensure that the Administrative Agent has on record an effective e-mail address for such Lender) and (ii) that any Notice may be sent to such e-mail address.

(d) Patriot Act . Each Lender hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001) (the “ Act ”)), that it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender to identify the Borrower in accordance with the Act

Notes or any other Loan Documents. The Borrower also agrees to reimburse the Administrative Agent and each Lender upon demand for all reasonable out-of-pocket expenses (including reasonable attorneys’ fees and legal expenses) incurred by the Administrative Agent or such Lender in connection with (x) the negotiation of any restructuring or “work-out”, whether or not consummated, of any Obligations and (y) the enforcement of any Obligations.

SECTION 11.4. Indemnification . In consideration of the execution and delivery of this Agreement by each Lender and the extension of the Commitments, the Borrower hereby indemnifies and holds harmless the Administrative Agent, each Lender and each of their respective Affiliates and their respective officers, advisors, directors and employees (collectively, the “ Indemnified Parties ”) from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and disbursements of counsel), joint or several, that may be incurred by or asserted or awarded against any Indemnified Party (including, without limitation, in connection with any investigation, litigation or proceeding or the preparation of a defense in connection therewith), in each case arising out of or in connection with or by reason of this Agreement, the Notes or the other Loan Documents or the transactions contemplated hereby or thereby or any actual or proposed use of the proceeds of the Loans (collectively, the “ Indemnified Liabilities ”), except to the extent such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted primarily from such Indemnified Party’s gross negligence or willful misconduct. In the case of an investigation, litigation or other proceeding to which the indemnity in this paragraph applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by the Borrower, any of its directors, security holders or creditors, an Indemnified Party or any other person or an Indemnified Party is otherwise a party thereto. Each Indemnified Party shall (a) furnish the Borrower with prompt notice of any action, suit or other claim covered by this Section 11.4 , (b) not agree to any settlement or compromise of any such action, suit or claim without the Borrower’s prior consent, (c) shall cooperate fully in the Borrower’s defense of any such action, suit or other claim (provided, that the Borrower shall reimburse such Indemnified Party for its reasonable out-of-pocket expenses incurred pursuant hereto) and (d) at the Borrower’s request, permit the Borrower to assume control of the defense of any such claim, other than regulatory, supervisory or similar investigations, provided that (i) the Borrower acknowledges in writing its obligations to indemnify the Indemnified Party in accordance with the terms herein in connection with such claims, (ii) the Borrower shall keep the Indemnified Party fully informed with respect to the conduct of the defense of such claim, (iii) the Borrower shall consult in good faith with the Indemnified Party (from time to time and before taking any material decision) about the conduct of the defense of such claim, (iv) the Borrower shall conduct the defense of such claim properly and diligently taking into account its own interests and those of the Indemnified Party, (v) the Borrower shall employ counsel reasonably acceptable to the Indemnified Party and at the Borrower’s expense, and (vi) the Borrower shall not enter into a settlement with respect to such claim unless either (A) such settlement involves only the payment of a monetary sum, does not include any performance by or an admission of liability or responsibility on the part of the Indemnified Party, and contains a provision unconditionally releasing the Indemnified Party and each other indemnified party from, and holding all such persons harmless, against, all liability in respect of claims by any releasing party or (B) the Indemnified Party provides written consent to such settlement (such consent not to be unreasonably withheld or delayed). Notwithstanding the Borrower’s election to assume the defense of such action, the Indemnified Party shall have the

right to employ separate counsel and to participate in the defense of such action and the Borrower shall bear the fees, costs and expenses of such separate counsel if (1) the use of counsel chosen by the Borrower to represent the Indemnified Party would present such counsel with an actual or potential conflict of interest, (2) the actual or potential defendants in, or targets of, any such action include both the Borrower and the Indemnified Party, and the Indemnified Party shall have concluded that there may be legal defenses available to it which are different from or additional to those available to the Borrower and determined that it is necessary to employ separate counsel in order to pursue such defenses (in which case the Borrower shall not have the right to assume the defense of such action on the Indemnified Party’s behalf), (3) the Borrower shall not have employed counsel reasonably acceptable to the Indemnified Party to represent the Indemnified Party within a reasonable time after notice of the institution of such action, or (4) the Borrower authorizes the Indemnified Party to employ separate counsel at the Borrower’s expense. The Borrower acknowledges that none of the Indemnified Parties shall have any liability (whether direct or indirect, in contract, tort or otherwise) to the Borrower or any of its security holders or creditors for or in connection with the transactions contemplated hereby, except to the extent such liability is determined in a final non-appealable judgment by a court of competent jurisdiction to have resulted primarily from such Indemnified Party’s gross negligence or willful misconduct. In no event, however, shall any Indemnified Party be liable on any theory of liability for any special, indirect, consequential or punitive damages (including, without limitation, any loss of profits, business or anticipated savings). If and to the extent that the foregoing undertaking may be unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law.

SECTION 11.5. Survival . The obligations of the Borrower under Sections 4.3 , 4.4 , 4.5 , 4.6 , 4.7 , 11.3 and 11.4 , and the obligations of the Lenders under Section 10.1 , shall in each case survive any termination of this Agreement, the payment in full of all Obligations and the termination of all Commitments. The representations and warranties made by the Borrower in this Agreement and in each other Loan Document shall survive the execution and delivery of this Agreement and each such other Loan Document.

SECTION 11.6. Severability . Any provision of this Agreement or any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or such Loan Document or affecting the validity or enforceability of such provision in any other jurisdiction.

SECTION 11.7. Headings . The various headings of this Agreement and of each other Loan Document are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or such other Loan Document or any provisions hereof or thereof.

SECTION 11.8. Execution in Counterparts, Effectiveness, etc . This Agreement may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. This Agreement shall become effective when counterparts hereof executed on behalf of the Borrower and each Lender (or notice thereof satisfactory to the Administrative Agent and the Borrower)

shall have been received by the Administrative Agent and the Borrower (or, in the case of any Lender, receipt of signature pages transmitted by facsimile) and notice thereof shall have been given by the Administrative Agent to the Borrower and each Lender.

SECTION 11.9. Governing Law; Entire Agreement . THIS AGREEMENT AND THE NOTES SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER, AND SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK. This Agreement, the Notes and the other Loan Documents constitute the entire understanding among the parties hereto with respect to the subject matter hereof and supersede any prior agreements, written or oral, with respect thereto.

SECTION 11.10. Successors and Assigns . This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; provided that:

(a) except to the extent permitted under Section 7.2.6 , the Borrower may not assign or transfer its rights or obligations hereunder without the prior written consent of the Administrative Agent and all Lenders; and

(b) the rights of sale, assignment and transfer of the Lenders are subject to Section 11.11 .

SECTION 11.11. Sale and Transfer of Loans and Note; Participations in Loans and Note . Each Lender may assign, or sell participations in, its Loans and Commitment to one or more other Persons in accordance with this Section 11.11 .

SECTION 11.11.1. Assignments . Any Lender,

(i) with the written consents of the Borrower and the Administrative Agent (which consents shall not be unreasonably delayed or withheld and which consent, in the case of the Borrower, shall be deemed to have been given in the absence of a written notice delivered by the Borrower to the Administrative Agent, on or before the fifth Business Day after receipt by the Borrower of such Lender’s request for consent, stating, in reasonable detail, the reasons why the Borrower proposes to withhold such consent) may at any time assign and delegate to one or more commercial banks or other financial institutions;

(ii) with notice to the Borrower and the Administrative Agent, but without the consent of the Borrower or the Administrative Agent, may assign and delegate (A) to any Lender, (B) to any of its Affiliates or (C) following the occurrence and during the continuance of an Event of Default or a Prepayment Event; and

(iii) may (without notice to the Borrower, the Administrative Agent or any other Lender and without payment of any fee) assign and pledge all or any portion of its Loans and Note to any Federal Reserve Bank as collateral security pursuant to Regulation A of the F.R.S. Board and any Operating Circular issued by such Federal Reserve Bank;

(each Person described in either of the foregoing clauses as being the Person to whom such assignment and delegation is to be made, being hereinafter referred to as an “ Assignee Lender ”),

all or any fraction of such Lender’s total Loans and Commitment (which assignment and delegation shall be of a constant, and not a varying, percentage of all the assigning Lender’s Loans and Commitment) in a minimum aggregate amount of $25,000,000 (or, if less, all of such Lender’s Loans and Commitment); provided that the Borrower and the Administrative Agent shall be entitled to continue to deal solely and directly with such Lender in connection with the interests so assigned and delegated to an Assignee Lender until:

(a) written notice of such assignment and delegation, together with payment instructions, addresses and related information with respect to such Assignee Lender, shall have been given to the Borrower and the Administrative Agent by such Lender and such Assignee Lender;

(b) Such Assignee Lender shall have executed and delivered to the Borrower and the Administrative Agent a Lender Assignment Agreement, accepted by the Administrative Agent; and

From and after the date that the Administrative Agent accepts such Lender Assignment Agreement, (x) the Assignee Lender thereunder shall be deemed automatically to have become a party hereto and to the extent that rights and obligations hereunder have been assigned and delegated to such Assignee Lender in connection with such Lender Assignment Agreement, shall have the rights and obligations of a Lender hereunder and under the other Loan Documents, and (y) the assignor Lender, to the extent that rights and obligations hereunder have been assigned and delegated by it, shall be released from its obligations hereunder and under the other Loan Documents, other than any obligations arising prior to the effective date of such assignment. In no event shall the Borrower be required to pay to any Assignee Lender at the time of the relevant assignment any amount under Sections 4.3 , 4.4 , 4.5 , 4.6 and 4.7 that is greater than the amount which it would have been required to pay had no such assignment been made. Within five Business Days after its receipt of notice that the Administrative Agent has received an executed Lender Assignment Agreement, the Borrower shall execute and deliver to the Administrative Agent (for delivery to the relevant Assignee Lender) a new Note evidencing such Assignee Lender’s assigned Loans and Commitment and, if the assignor Lender has retained Loans and a Commitment hereunder, a replacement Note in the principal amount of the Loans and Commitment retained by the assignor Lender hereunder (such Note to be in exchange for, but not in payment of, that Note then held by such assignor Lender). Each such Note shall be dated the date of the predecessor Note. The assignor Lender shall mark the predecessor Note “exchanged” and deliver it to the Borrower concurrently with the delivery by the Borrower of the new Note(s). Such assignor Lender or such Assignee Lender must also pay a processing fee to the Administrative Agent upon delivery of any Lender Assignment Agreement in the amount of $2,000 (and shall also reimburse the Administrative Agent for any reasonable out-of-pocket costs, including reasonable attorneys’ fees and expenses, incurred in connection with the assignment).

SECTION 11.11.2. Participations . Any Lender may at any time sell to one or more commercial banks or other financial institutions (each of such commercial banks and other

financial institutions being herein called a “ Participant ”) participating interests in any of its Loans, its Commitment, or other interests of such Lender hereunder; provided that:

(a) no participation contemplated in this Section 11.11 shall relieve such Lender from its Commitment or its other obligations hereunder;

(b) such Lender shall remain solely responsible for the performance of its Commitment and such other obligations;

(c) the Borrower and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement and each of the other Loan Documents;

(d) no Participant, unless such Participant is an Affiliate of such Lender, shall be entitled to require such Lender to take or refrain from taking any action hereunder or under any other Loan Document, except that such Lender may agree with any Participant that such Lender will not, without such Participant’s consent, take any actions of the type described in clause (b) or (c) of Section 11.1 ; and

(e) the Borrower shall not be required to pay any amount under Sections 4.3 , 4.4 , 4.5 , 4.6 and 4.7 that is greater than the amount which it would have been required to pay had no participating interest been sold.

The Borrower acknowledges and agrees that each Participant, for purposes of Sections 4.3 , 4.4 , 4.5 , 4.6 and clause (h) of 7.1.1 , shall be considered a Lender.

SECTION 11.12. Other Transactions . Nothing contained herein shall preclude the Administrative Agent or any Lender from engaging in any transaction, in addition to those contemplated by this Agreement or any other Loan Document, with the Borrower or any of its Affiliates in which the Borrower or such Affiliate is not restricted hereby from engaging with any other Person.

SECTION 11.13. Forum Selection and Consent to Jurisdiction . THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK FOR THE COUNTY OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND IRREVOCABLY AGREES, TO THE FULLEST EXTENT PERMITTED BY LAW, TO BE BOUND BY ANY FINAL JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT

REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT ANY PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN THE COURTS OF ANY JURISDICTION. TO THE EXTENT THAT THE BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OF FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE BORROWER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.

SECTION 11.14. Process Agent . If at any time the Borrower ceases to have a place of business in the United States, the Borrower shall appoint an agent for service of process (reasonably satisfactory to the Administrative Agent) located in New York City and shall furnish to the Administrative Agent evidence that such agent shall have accepted such appointment for a period of time ending no earlier than one year after the Commitment Termination Date.

SECTION 11.15. Judgment . (a) If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder in Dollars into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase Dollars with such other currency at Citibank’s principal office in London at 11:00 A.M. (London time) on the second Business Day preceding that on which final judgment is given.

(b) The obligation of the Borrower in respect of any sum due from it in any currency (the “ Primary Currency ”) to any Lender or the Administrative Agent hereunder shall, notwithstanding any judgment in any other currency, be discharged only to the extent that on the Business Day following receipt by such Lender or the Administrative Agent (as the case may be), of any sum adjudged to be so due in such other currency, such Lender or the Administrative Agent (as the case may be) may in accordance with normal banking procedures purchase the applicable Primary Currency with such other currency; if the amount of the applicable Primary Currency so purchased is less than such sum due to such Lender or the Administrative Agent (as the case may be) in the applicable Primary Currency, the Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify such Lender or the Administrative Agent (as the case may be) against such loss, and if the amount of the applicable Primary Currency so purchased exceeds such sum due to any Lender or the Administrative Agent (as the case may be) in the applicable Primary Currency, such Lender or the Administrative Agent (as the case may be) agrees to remit to the Borrower such excess.

SECTION 11.16. Waiver of Jury Trial . THE ADMINISTRATIVE AGENT, THE LENDERS AND THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN

DOCUMENT. EACH OF THE PARTIES HERETO ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR EACH OTHER PARTY ENTERING INTO THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT.

SCHEDULE I

DISCLOSURE SCHEDULE

Updated December 8, 2006

Item 6.10(b): Vessels


Vessel	Owner	Flag

Sovereign of the Seas	Sovereign of the Seas Shipping Inc.	Bahamian
Empress of the Seas	Nordic Empress Shipping Inc.	Bahamian
Monarch of the Seas	Monarch of the Seas Inc.	Bahamian
Majesty of the Seas	Majesty of the Seas Inc.	Bahamian
Grandeur of the Seas	Grandeur of the Seas Inc.	Bahamian
Rhapsody of the Seas	Rhapsody of the Seas Inc.	Bahamian
Enchantment of the Seas	Enchantment of the Seas Inc.	Bahamian
Vision of the Seas	Vision of the Seas Inc.	Bahamian
Voyager of the Seas	Voyager of the Seas Inc.	Bahamian
Island Star (formerly known as Horizon)	Fantasia Cruising Inc.	Bahamian
Zenith	Zenith Shipping Corporation	Bahamian
Century	Blue Sapphire Marine Inc.	Bahamian
Galaxy	Esker Marine Shipping Inc.	Bahamian
Mariner of the Seas	Mariner of the Seas Inc.	Bahamian
Mercury	Seabrook Maritime Inc.	Bahamian
Millennium	Millennium Inc.	Bahamian
Explorer of the Seas	Explorer of the Seas Inc.	Bahamian
Infinity	Infinity Inc.	Bahamian
Radiance of the Seas	Radiance of the Seas Inc.	Bahamian
Summit	Summit Inc.	Bahamian
Adventure of the Seas	Adventure of the Seas Inc.	Bahamian
Navigator of the Seas	Navigator of the Seas Inc.	Bahamian
Constellation	Constellation Inc.	Bahamian
Serenade of the Seas	Serenade of the Seas Inc.	Bahamian
Jewel of the Seas	Jewel of the Seas Inc.	Bahamian
Xpedition	Islas Galapagos Turismo y Vapores CA	Ecuador
Legend of the Seas	Legend of the Seas Inc.	Bahamian
Splendour of the Seas	Splendour of the Seas Inc.	Bahamian
Freedom of the Seas	Freedom of the Seas Inc.	Bahamian
Oceanic	Pullmantur Cruises Oceanic Ltd.	Malta
Blue Dream	Pullmantur Cruises Blue Dream, Ltd.	Malta
Blue Moon	Pullmantur Cruises Blue Moon, Ltd.	Malta
Sky Wonder	Pullmantur Cruises Sky Wonder, Ltd.	Malta
Holiday Dream	Pullmantur Cruises Holiday Dream, Ltd.	Malta

Item 6.11: Subsidiaries


Name of Subsidiary		Jurisdiction of Organization

Jewel of the Seas Inc. *		Liberia
Sovereign of the Seas Shipping Inc.*		Liberia
Viking Serenade Inc.		Liberia
Nordic Empress Shipping Inc.*		Liberia
Majesty of the Seas Inc.*		Liberia
Monarch of the Seas Inc.*		Liberia
Admiral Management Inc.		Liberia
GG Operations Inc.		Delaware
Island for Science Inc.		Indiana
Labadee Investments Ltd.		Cayman Islands
Societe Labadee Nord, S.A.		Haiti
Royal Caribbean Cruise Line A/S		Norway
Royal Caribbean Merchandise Inc.		Florida
Eastern Steamship Lines Inc.		Liberia
Grandeur of the Seas Inc.*		Liberia
Enchantment of the Seas Inc.*		Liberia
Rhapsody of the Seas Inc.*		Liberia
Vision of the Seas Inc. *		Liberia
Voyager of the Seas Inc.*		Liberia
Explorer of the Seas Inc.*		Liberia
Royal Celebrity Tours Inc.		Delaware
White Sand Inc.		Liberia
Radiance of the Seas Inc.*		Liberia
Adventure of the Seas Inc. *		Liberia
RCL (UK) Ltd.		U.K.
Navigator of the Seas Inc. *		Liberia
Northwest Adventures Inc.		Delaware
Serenade of the Seas Inc. *		Liberia
Royal Beverage Cruise Sales LLC		Delaware
Mariner of the Seas Inc. *		Liberia
Beverage Cruise Sales LLC		Texas
Celebrity Cruise Lines Inc.		Cayman Islands
Celebrity Cruises Holdings Inc.		Liberia
Cruise Mar Shipping Holdings Ltd.		Liberia
Seabrook Maritime Inc. *		Liberia
Esker Marine Shipping Inc. *		Liberia
Blue Sapphire Marine Inc. *		Liberia
Fantasia Cruising Inc. *		Liberia
Cruise Mar Investment Inc.		Liberia
Universal Cruise Holdings Ltd.		British Virgin Islands
Celebrity Cruises Inc.		Liberia
Fourth Transoceanic Shipping Co. Ltd.		Liberia
Zenith Shipping Corporation *		Liberia
Millennium Inc.*		Liberia


Name of Subsidiary		Jurisdiction of Organization

Infinity Inc.*		Liberia
Summit Inc.*		Liberia
Constellation Inc. *		Liberia
Fifth Transoceanic Shipping Company Ltd.		Liberia
Serenity Management Inc.		Liberia
Galapagos Cruises Inc.		Liberia
Islas Galapagos Turismo y Vapores C.A. *		Ecuador
Cape Liberty Cruise Port LLC		Delaware
Legend of the Seas Inc. *		Liberia
Splendour of the Seas Inc. *		Liberia
Harmony Investments (Global) Limited		U.K.
Tenth Avenue Holdings, S.A. de C.V.		Mexico
The Scholar Ship Program LLC		Delaware
Royal Caribbean Cruises Espana S.L.		Spain
Puerto de Cruceros y Marina de las Islas de la Bahia, S.A. de CV.		Honduras
Freedom of the Seas Inc. *		Liberia
RCL Holdings Cooperatief U.A.		The Netherlands
Pullmantur, S.A.		Spain
Pullmantur Cruises, S.L.		Spain
Pullmantur Cruises Oceanic Ltd.*		Malta
Pullmantur Cruises Blue Dream, Ltd.*		Malta
Pullmantur Cruises Blue Moon, Ltd.*		Malta
Pullmantur Cruises Sky Wonder, Ltd.*		Malta
Pullmantur Cruises Holiday Dream, Ltd.*		Malta
Pullmantur Cruises Ship Management, Ltd		Malta
Pullmantur Ship Management, Ltd.		Bahamas
Turismo E Viagens Unipessoal, LDA.		Portugal
Royal Caribbean Holdings de Espana S.L. **		Spain


*		Shipholding companies

**		In the process of being formed.

Exhibit 10.5

EXECUTION COPY

AMENDMENT NO. 1 TO CREDIT AGREEMENT

This AMENDMENT NO. 1 TO CREDIT AGREEMENT, dated as of December 15, 2006, is among ROYAL CARIBBEAN CRUISES LTD., a Liberian corporation (the “ Borrower ”), the various financial institutions as are parties to the Credit Agreement referred to below (collectively, the “Lenders”) and CITIBANK, N.A., as Administrative Agent (the “ Administrative Agent ”) for the Lenders.

PRELIMINARY STATEMENTS

(1) The Borrower, the Lenders and the Administrative Agent are parties to a Credit Agreement dated as of April 6, 2006 (as further amended, restated, modified, supplemented or renewed from time to time, the “ Credit Agreement ”); and

(2) The Borrower, the Lenders and the Administrative Agent have agreed to amend the Credit Agreement as hereinafter set forth herein;

NOW, THEREFORE, the parties hereto hereby agree as follows:

SECTION 3. Representation and Warranty . To induce the Lenders to enter into this Amendment, the Borrower represents and warrants that, as of the Amendment Effective Date:

(b) No Default and no Prepayment Event and no event which (with notice or lapse of time or both) would become a Prepayment Event has occurred and is continuing.

SECTION 4. Reference to and Effect on the Credit Agreement and the Notes . (a) On and after the effectiveness of this Amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import referring to the Credit Agreement, and each reference in the Notes to “the Credit Agreement”, “thereunder”, “thereof” or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement, as amended by this Amendment.

(b) The Credit Agreement and the Notes, as specifically amended by this Amendment, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed.

SECTION 5. Costs and Expenses . The Borrower agrees to pay on demand all reasonable out-of-pocket costs and expenses of the Administrative Agent in connection with the preparation, execution, delivery and administration, modification and amendment of this Amendment and the other documents to be delivered hereunder (including the reasonable and documented fees and expenses of counsel for the Administrative Agent with respect hereto and thereto as agreed with the Administrative Agent) in accordance with the terms of Section 11.3 of the Credit Agreement.

SECTION 6. Execution in Counterparts . This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Amendment by telecopier shall be effective as delivery of a manually executed counterpart of this Amendment.

SECTION 7. Governing Law . This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York.

SECTION 8. Defined Terms . Capitalized terms not otherwise defined in the Amendment shall have the same meanings as specified in the Credit Agreement.

IN WITNESS WHEREOF , the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written.

THE BORROWER


	ROYAL CARIBBEAN CRUISES LTD.
	By	/s/ Antje M. Gibson
		Title: Vice President & Acting Treasurer


	CITIBANK, N.A., as Administrative Agent and as a Lender
	By	/s/ Anish M. Shah
		Title: Vice President


	BNP PARIBAS
	By	/s/ Duane Helkowski
		Title: Managing Director


	By	/s/ Shayn March
		Title: Director


	DnB NOR BANK ASA
	By	/s/ Sanjiv Nayar
		Title: Senior Vice President


	By	/s/ erlend Bryn
		Title: Vice President


	NORDEA BANK NORGE ASA, GRAND CAYMAN BRANCH
	By	/s/ Hans Chr. Kjelsrud
		Title: Executive Vice President


	By	/s/ Anne Engen
		Title: Vice President


	ROYAL BANK OF SCOTLAND PLC
	By	/s/ Timothy J. McNaught
		Title: Managing Director


	SCOTIABANC INC.
	By	/s/ William E. Zarrett
		Title: Managing Director

	THE BANK OF NOVA SCOTIA
	By	/s/ Mark Sparrow
		Title: Director


	BARCLAYS BANK PLC (did not sign) CALYON
	By	/s/ G.O. Bygoat
		Title: Head of Shipping Office


	By	/s/ S. Pattonieri
		Title: Director


	REGIONS BANK
	By	/s/ Stephen Hanas
		Title: Senior Vice President


	BANK OF NEW YORK
	By	/s/ Burke Keabeay
		Title: Vice President


	COMERICA BANK (did not sign) JPMORGAN CHASE BANK, N.A.
	By	/s/ Donald S. Shokrian
		Title: Managing Director


	LLOYDS TSB BANK (did not sign) MIZUHO CORPORATE BANK, LTD.
	By	/s/
		Title: Deputy General Manager


	MORGAN STANLEY BANK (did not sign) SUMITOMO MITSUI BANKING CORPORATION
	By	/s/ Shigeru Tsuru
		Title: Joint General Manager


	U.S. BANK NATIONAL ASSOCIATION
	By	/s/ Patrick H. McGraw, Jr.
		Title: Vice President


	WELLS FARGO BANK, NATIONAL ASSOCIATION
	By	/s/ Kevin R. Leer
		Title: Vice President

Annex A

EXECUTION COPY

U.S. $570,000,000

CREDIT AGREEMENT,

dated as of April 6, 2006

amended and restated as of December 15, 2006

ROYAL CARIBBEAN CRUISES LTD.,
as the Borrower,

and

CITIGROUP GLOBAL MARKETS INC.
BNP PARIBAS SECURITIES CORP.
DNB NOR BANK ASA
and
NORDEA BANK NORGE ASA, GRAND CAYMAN BRANCH
as Co-Lead Arrangers

and

CITIGROUP GLOBAL MARKETS INC.
and
BNP PARIBAS SECURITIES CORP.
as Co-Bookrunners and

CITIBANK, N.A.
as Administrative Agent

and

BNP PARIBAS
as Syndication Agent

and

DNB NOR BANK ASA
NORDEA BANK NORGE ASA, GRAND CAYMAN BRANCH
and
THE ROYAL BANK OF SCOTLAND PLC
as Co-Documentation Agents

and

CITIBANK, N.A.
as FEC Counterparty

TABLE OF CONTENTS


	PAGE

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

SECTION 1.1. Defined Terms		1

SECTION 1.2. Use of Defined Terms		11

SECTION 1.3. Cross-References		12

SECTION 1.4. Accounting and Financial Determinations		12

ARTICLE II

COMMITMENTS, BORROWING PROCEDURES AND NOTES

SECTION 2.1. Commitments		12

SECTION 2.2. Reduction of Commitment Amount		13

SECTION 2.3. Borrowing Procedure		14

SECTION 2.4. Funding		14

SECTION 2.5. Notes		14

ARTICLE III

REPAYMENTS, PREPAYMENTS, INTEREST AND FEES

SECTION 3.1. Repayments and Prepayments		14

SECTION 3.2. Interest Provisions		15

SECTION 3.3. Commitment Fees		17

ARTICLE IV

CERTAIN LIBO RATE AND OTHER PROVISIONS

SECTION 4.1. LIBO Rate Lending Unlawful		17

SECTION 4.2. Deposits Unavailable		17

SECTION 4.3. Increased LIBO Rate Loan Costs, etc		18


	PAGE

SECTION 4.4. Funding Losses		19

SECTION 4.5. Increased Capital Costs		20

SECTION 4.6. Taxes		21

SECTION 4.7. Reserve Costs		22

SECTION 4.8. Replacement Lenders, etc		23

SECTION 4.9. Payments, Computations, etc		24

SECTION 4.10. Sharing of Payments		25

SECTION 4.11. Setoff		26

SECTION 4.12. Use of Proceeds		26

ARTICLE V

CONDITIONS TO BORROWING

SECTION 5.1. Effectiveness		26

SECTION 5.2. The Loans		27

SECTION 5.3. The Borrowing		28

ARTICLE VI

REPRESENTATIONS AND WARRANTIES

SECTION 6.1. Organization, etc		28

SECTION 6.2. Due Authorization, Non-Contravention, etc		28

SECTION 6.3. Government Approval, Regulation, etc		29

SECTION 6.4. Compliance with Environmental Laws		29

SECTION 6.5. Validity, etc		29

SECTION 6.6. Financial Information		29

SECTION 6.7. Intentionally Omitted		30

SECTION 6.8. No Default, Event of Default or Prepayment Event		30

SECTION 6.9. Litigation		30


	PAGE

SECTION 6.10. Vessels		30

SECTION 6.11. Subsidiaries		30

SECTION 6.12. Obligations rank pari passu		30

SECTION 6.13. Withholding, etc		31

SECTION 6.14. No Filing, etc. Required		31

SECTION 6.15. No Immunity		31

SECTION 6.16. Pension Plans		31

SECTION 6.17. Investment Company Act		31

SECTION 6.18. Regulation U		31

SECTION 6.19. Accuracy of Information		31

ARTICLE VII

COVENANTS

SECTION 7.1. Affirmative Covenants		32

SECTION 7.2. Negative Covenants		34

ARTICLE VIII

EVENTS OF DEFAULT

SECTION 8.1. Listing of Events of Default		39

SECTION 8.2. Action if Bankruptcy		41

SECTION 8.3. Action if Other Event of Default		41

ARTICLE IX

PREPAYMENT EVENTS

SECTION 9.1. Listing of Prepayment Events		41

SECTION 9.2. Mandatory Prepayment		43

iii


	PAGE

ARTICLE X

THE AGENTS

SECTION 10.1. Actions		43

SECTION 10.2. Funding Reliance, etc		44

SECTION 10.3. Exculpation		44

SECTION 10.4. Successor		45

SECTION 10.5. Loans by the Agents		45

SECTION 10.6. Credit Decisions		46

SECTION 10.7. Copies, etc		46

SECTION 10.8. Agency Fee; FEC Counterparty Fee		46

ARTICLE XI

MISCELLANEOUS PROVISIONS

SECTION 11.1. Waivers, Amendments, etc		46

SECTION 11.2. Notices		47

SECTION 11.3. Payment of Costs and Expenses		49

SECTION 11.4. Indemnification		49

SECTION 11.5. Survival		51

SECTION 11.6. Severability		51

SECTION 11.7. Headings		51

SECTION 11.8. Execution in Counterparts, Effectiveness, etc		51

SECTION 11.9. Governing Law; Entire Agreement		52

SECTION 11.10. Successors and Assigns		52

SECTION 11.11. Sale and Transfer of Loans and Note; Participations in Loans and Note		52

SECTION 11.12. Other Transactions		54

SECTION 11.13. Forum Selection and Consent to Jurisdiction		54


	PAGE

SECTION 11.14. Process Agent		55

SECTION 11.15. Judgment		55

SECTION 11.16. Waiver of Jury Trial		56



SCHEDULES

SCHEDULE I	-	Disclosure Schedule

SCHEDULE II	-	Repayment Schedule

EXHIBITS

Exhibit A	-	Form of Note

Exhibit B	-	Form of Borrowing Request

Exhibit C	-	Form of Opinion of Bradley Stein, Esq.

Exhibit D	-	Form of Opinion of Watson, Farley & Williams (New York) LLP

Exhibit E	-	Form of Lender Assignment Agreement

Exhibit F	-	Form of Opinion of Hannes Snellman

Exhibit G	-	Form of Opinion of Shearman & Sterling LLP

CREDIT AGREEMENT

THIS CREDIT AGREEMENT, dated as of April 6, 2006 and amended and restated as of December 15, 2006, is among ROYAL CARIBBEAN CRUISES LTD., a Liberian corporation (the “ Borrower ”), the various financial institutions as are or shall become parties hereto (collectively, the “ Lenders ”), CITIBANK, N.A., as counterparty to the FEC Interest Equalization Documents (as defined below) (“ FEC Counterparty ”), and CITIBANK, N.A. (“ Citibank ”), as administrative agent (in such capacity, the “ Administrative Agent ”) for the Lenders.

WITNESSETH:

WHEREAS, the Borrower desires to obtain Commitments from the Lenders pursuant to which Loans, in a maximum aggregate principal amount not to exceed $570,000,000 (subject to adjustment as provided herein), will be made to the Borrower on the Closing Date; and

WHEREAS, the Lenders are willing, on the terms and subject to the conditions hereinafter set forth (including Article V ), to extend such Commitments and make such Loans to the Borrower; and

WHEREAS, the proceeds of such Loans will be used to finance up to 80% of the contract price of the Freedom class vessel #1352 built by Aker Finnyards Inc. (the “ Purchased Vessel ”);

NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

“ Accumulated Other Comprehensive Income (Loss) ” means at any date the Borrower’s accumulated other comprehensive income (loss) on such date, determined in accordance with GAAP.

“ Agents ” means (a) the Administrative Agent and (b) BNP, DnB NOR, Nordea and RBS in their respective capacities as agents under Article X, together with their respective successors (if any) in such capacity.

“ Applicable Margin ” means, as of any date (x) so long as the FEC Interest Equalization Documents are in effect, the percentage per annum set forth below opposite the Senior Debt Rating on such date provided by S&P and Moody’s under the column “(CIRR)” (the “ CIRR Applicable Margin ”) and (y) if the FEC Interest Equalization Documents are not in effect, the percentage per annum set forth below opposite the Senior Debt Rating on such date provided by S&P and Moody’s under the column “(LIBO)” (the “ LIBO Applicable Margin ”):


Senior Debt Rating		Applicable Margin
(S&P)	(Moody's)	(CIRR)	(LIBO)

BBB+ or higher	Baa1 or higher	0.100%	0.500%
BBB	Baa2	0.200%	0.600%
BBB-	Baa3	0.300%	0.700%
BB+	Ba1	0.475%	0.875%
BB	Ba2	0.725%	1.125%
BB- or lower	Ba3 or lower	0.975%	1.375%

plus , in each case, at all times after the fifth anniversary of the Closing Date, an additional 0.075% per annum;

provided that:

(d) if at any time no Senior Debt Rating is provided by Moody’s and no Senior Debt Rating is provided by S&P, the Applicable Margin shall be the percentage per annum set forth opposite the Senior Debt Ratings of BB- or lower and Ba3 or lower unless (i) within 21 days of being notified by the Administrative Agent that both Moody’s and S&P have ceased to give a Senior Debt Rating, the Borrower has obtained from at least one of such agencies a private implied rating for its senior debt or (ii) having failed to obtain such private rating within such 21-day period, the Borrower and the Lenders shall have agreed within a further 15-day period (during which period the Borrower and the Agents shall consult in good faith to find an alternative method of providing an implied rating of the Borrower’s senior debt) on an alternative rating method, which agreed alternative shall apply for the purposes of this Agreement.

“ Approved Appraiser ” means any of the following: Barry Rogliano Salles, Paris, H Clarkson & Co. Ltd., London, R.S. Platou Shipbrokers, Norway, or Fearnley AS, Norway.

“ Assignee Lender ” is defined in Section 11.11.1 .

“ Authorized Officer ” means those officers of the Borrower authorized to act with respect to the Loan Documents to which it is a party and whose signatures and incumbency shall have been certified to the Administrative Agent by the Secretary or an Assistant Secretary of the Borrower.

“ BNP ” means BNP Paribas.

“ Borrower ” is defined in the preamble.

“ Borrowing ” means Loans made on the same Business Day and pursuant to the same Borrowing Request in accordance with Section 2.1 .

“ Borrowing Request ” means a loan request and certificate duly executed by an Authorized Officer of the Borrower, substantially in the form of Exhibit B hereto.

“ Business Day ” means any day which is neither a Saturday or Sunday nor a legal holiday on which banks are authorized or required to be closed in New York City or London or, if the FEC Interest Equalization is in effect, Helsinki, and if the applicable Business Day relates to the Borrowing, an Interest Period, prepayment or conversion, in each case with respect to any Loan bearing interest by reference to the LIBO Rate, on which dealings in deposits in Dollars are carried on in the London interbank market.

“ Capitalization ” means, as at any date, the sum of (a) Net Debt on such date, plus (b) Stockholders’ Equity on such date.

“ Capitalized Lease Liabilities ” means the principal portion of all monetary obligations of the Borrower or any of its Subsidiaries under any leasing or similar arrangement which, in accordance with GAAP, would be classified as capitalized leases, and, for purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP.

“ Cash Equivalents ” means all amounts other than cash that are included in the “cash and cash equivalents” shown on the Borrower’s balance sheet prepared in accordance with GAAP.

“ CIRR Applicable Margin ” is defined in the definition of “Applicable Margin”.

“ Closing Date ” means the date of the funding of the Loans in accordance with Section 2.3 , which date shall be no later than three months after the Effective Date.

“ Code ” means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time.

“ Commitment ” means, relative to any Lender, such Lender’s obligation to make a Loan pursuant to Section 2.1.1 .

“ Commitment Amount ” means, on any date, $570,000,000, as such amount shall be reduced from time to time pursuant to Section 2.2 .

“ Commitment Fees ” is defined in Section 3.3 .

“ Contracted Rate ” is defined in Section 3.2.5 .

“ Default ” means any Event of Default or any condition, occurrence or event which, after notice or lapse of time or both, would constitute an Event of Default.

“ Disclosure Schedule ” means the Disclosure Schedule attached hereto as Schedule I .

“ DnB NOR ” means DnB NOR Bank ASA.

“ Dollar ” and the sign “ $ ” mean lawful money of the United States.

“ Effective Date ” is defined in Section 5.1 .

“ Event of Default ” is defined in Section 8.1 .

“ Existing Debt ” means the obligations of the Borrower or its Subsidiaries in connection with (i) the Loan Facility Agreement with respect to the vessel CENTURY, dated November 29, 1993 between KfW and Blue Sapphire Marine Inc., (ii) the Loan Facility Agreement with respect to the vessel GALAXY, dated November 29, 1993 between KfW and Esker Marine Shipping Inc, (iii) the Loan Facility Agreement with respect to the vessel MERCURY, dated December 12, 1997 between KfW and Seabrook Maritime Inc., (iv) the Buyer Credit Agreement with respect to the vessel SUMMIT dated March 31, 2001 between Summit Inc., Societe Generale and Credit Agricole Indosuez and (v) the Bareboat Charterparty with respect to the vessel BRILLIANCE OF THE SEAS dated July 5, 2002 between Halifax Leasing (September) Limited and RCL (UK) LTD, and the replacement, extension, renewal or amendment of the foregoing without increase in the amount or change in any direct or contingent obligor of such obligations.

“ Existing Principal Subsidiaries ” means each Subsidiary of the Borrower that is a Principal Subsidiary on the Effective Date.

“ FEC ” means Finnish Export Credit Ltd., which is a Finnish ultimately state-owned limited liability company assigned to, among other things, administer the interest equalization scheme for officially supported export credits and ship financing in accordance with the terms of the Arrangement on Guidelines for Officially Supported Export Credits agreed between the countries which are members of the Organization for Economic Cooperation and Development, by virtue of the Finnish Act on the Interest Equalization of Officially Supported Export Credit (1137/1996), and its successors.

“ FEC Break Costs ” means any losses, costs or expenses which the FEC Counterparty has incurred or will incur as a result of or in connection with any termination of the FEC Interest Equalization on a date other than its originally scheduled termination date.

“ FEC CIRR Rate ” means 3.47% per annum.

“ FEC Cooperation Agreement ” means the cooperation agreement including FEC General Terms and Conditions entered into between FEC and the FEC Counterparty in relation to interest equalization transactions to be entered into by FEC and the FEC Counterparty.

“ FEC General Terms and Conditions ” means the general terms and conditions issued by FEC and dated January 30, 2003 in relation to interest equalization transactions entered into by FEC.

“ FEC Interest Equalization ” means the interest rate hedging arrangements made between FEC and the FEC Counterparty and in relation to the Loans in accordance with the FEC Interest Equalization Documents.

“ FEC Interest Equalization Documents ” means the FEC Interest Equalization Offer, each FEC ISDA Confirmation, the FEC ISDA Master Agreement, the FEC Cooperation Agreement, all other related agreements and documents entered into between FEC and the FEC Counterparty in relation to the Loans and/or on the basis of the FEC Interest Equalization Offer, each as may be amended from time to time.

“ FEC Interest Equalization Offer ” means the interest equalization offer issued by FEC in favor of the FEC Counterparty in relation to the Loans.

“ FEC ISDA Confirmation ” means the confirmation issued by the FEC Counterparty and accepted by FEC in relation to each interest equalization transaction entered into between the FEC Counterparty and FEC in relation to the Loans under the FEC Cooperation Agreement and the FEC ISDA Master Agreement.

“ FEC ISDA Master Agreement ” means the ISDA Master Agreement and the ISDA Schedule to the ISDA Master Agreement each entered into between the FEC Counterparty and FEC and dated as of September 14, 2004.

“ FEC Payment Amount ” is defined in Section 4.9(d ).

“ Fiscal Quarter ” means any quarter of a Fiscal Year.

“ Fiscal Year ” means any annual fiscal reporting period of the Borrower.

“ Fixed Charge Coverage Ratio ” means, as of the end of any Fiscal Quarter, the ratio computed for the period of four consecutive Fiscal Quarters ending on the close of such Fiscal Quarter of:

(a) net cash from operating activities (determined in accordance with GAAP) for such period, as shown in the Borrower’s consolidated statement of cash flow for such period, to

(b) the sum of:

(i) dividends actually paid by the Borrower during such period (including, without limitation, dividends in respect of preferred stock of the Borrower); plus

“ F.R.S. Board ” means the Board of Governors of the Federal Reserve System or any successor thereto.

“ GAAP ” is defined in Section 1.4 .

“ IEA Margin ” means 0.40% per annum, receivable from FEC under the FEC Interest Equalization Documents.

“ Indemnified Liabilities ” is defined in Section 11.4 .

“ Indemnified Parties ” is defined in Section 11.4 .

“ Interest Payment Date ” means any date on which interest is payable with respect to Loans pursuant to clause (c) of Section 3.2.3 .

“ Interest Period ” means, relative to any Loans, the period beginning on (and including) the date on which such Loan is made pursuant to Section 2.3 and shall end on (but exclude) the day which numerically corresponds to such date six months thereafter or, if such month has no numerically corresponding day, on the last Business Day of such month; provided that if such Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next following Business Day (unless such next following Business Day is the first Business Day of a calendar month, in which case such Interest Period shall end on the Business Day next preceding the first Business Day of such calendar month).

“ Interest Subsidy ” means the net payment by the FEC to the FEC Counterparty pursuant to the FEC Interest Equalization.

“ Investment ” means, relative to any Person,

(a) any loan or advance made by such Person to any other Person (excluding commission, travel, expense and similar advances to officers and employees made in the ordinary course of business); and

(b) any ownership or similar interest held by such Person in any other Person.

“ Lender Assignment Agreement ” means a Lender Assignment Agreement substantially in the form of Exhibit E .

“ Lenders ” is defined in the preamble .

“ LIBO Applicable Margin ” is defined in the definition of “Applicable Margin”.

amount approximately equal to the amount of each such Reference Lender’s Loan for the relevant Borrowing and for a period approximately equal to such Interest Period; and

“ Lien ” means any security interest, mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), charge against or interest in property to secure payment of a debt or performance of an obligation or other priority or preferential arrangement of any kind or nature whatsoever.

“ Loan ” is defined in Section 2.1.1 .

“ Loan Documents ” means this Agreement, the Notes and the FEC Interest Equalization Documents.

“ Material Adverse Effect ” means a material adverse effect on (a) the business, operations or financial condition of the Borrower or the Borrower and its Subsidiaries taken as a whole, (b) the rights and remedies of the Administrative Agent, any Lender or the FEC Counterparty under or in connection with the this Agreement or the Notes or (c) the ability of the Borrower to perform its payment Obligations under the Loan Documents to which it is a party.

“ Material Litigation ” is defined in Section 6.9 .

“ Moody’s ” means Moody’s Investors Service, Inc.

(a) all cash on hand of the Borrower and its Subsidiaries; plus

(b) all Cash Equivalents.

“ Net Debt to Capitalization Ratio ” means, as at any date, the ratio of (a) Net Debt on such date to (b) Capitalization on such date.

“ New Financings ” means proceeds from:

(a) borrowed money (whether by loan or issuance and sale of debt securities), including drawings under this Agreement and under the Credit Agreement dated as of March 27, 2003, as amended, among the Borrower, the lenders parties thereto and Citibank, N.A., as administrative agent; and

(b) the issuance and sale of equity securities.

“ Nordea ” means Nordea Bank Norge ASA, Grand Cayman Branch.

“ Note ” means a promissory note of the Borrower payable to any Lender, in the form of Exhibit A hereto (as such promissory note may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate Indebtedness of the Borrower to such Lender resulting from the outstanding Loan made by such Lender, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof.

“ Obligations ” means all obligations (monetary or otherwise) of the Borrower arising under or in connection with this Agreement and the Notes.

“ Organic Document ” means, relative to the Borrower, its certificate of incorporation and its by-laws.

“ Participant ” is defined in Section 11.11.2 .

“ Percentage ” means, relative to any Lender, the percentage set forth opposite its signature hereto or as set forth in the applicable Lender Assignment Agreement, as such percentage may be adjusted from time to time pursuant to Section 4.8 or pursuant to Lender Assignment Agreement(s) executed by such Lender and its Assignee Lender(s) and delivered pursuant to Section 11.11.1 .

“ Prepayment Event ” is defined in Section 9.1 .

“ Principal Subsidiary ” means any Subsidiary of the Borrower that owns a Vessel.

“ Purchased Vessel ” is defined in the third recital.

“ RBS ” means The Royal Bank of Scotland plc.

“ Reference Lenders ” means Citibank, BNP, DnB NOR, Nordea and RBS and includes each replacement Reference Lender appointed by the Administrative Agent pursuant to Section 3.2.4 .

“ S&P ” means Standard & Poor’s, a division of The McGraw-Hill Companies, Inc.

“ Senior Debt Rating ” means, as of any date, (a) the implied senior debt rating of the Borrower for debt pari passu in right of payment and in right of collateral security with the Obligations as given by Moody’s and S&P or (b) in the event the Borrower receives an actual unsecured senior debt rating (apart from an implied rating) from Moody’s and/or S&P, such actual rating or ratings, as the case may be (and in such case the Senior Debt Rating shall not be determined by reference to any implied senior debt rating from either agency).

“ Stated Maturity Date ” means the seventh anniversary of the Closing Date.

“ Taxes ” is defined in Section 4.6 .

“ United States ” or “ U.S. ” means the United States of America, its fifty States and the District of Columbia.

“ Vessel ” means a passenger cruise vessel owned by the Borrower or one of its Subsidiaries.

Borrowing Request, notice and other communication delivered from time to time in connection with this Agreement or the Notes.

SECTION 1.4. Accounting and Financial Determinations . Unless otherwise specified, all accounting terms used herein or in any Note shall be interpreted, all accounting determinations and computations hereunder or thereunder (including under Section 7.2.4 ) shall be made, and all financial statements required to be delivered hereunder or thereunder shall be prepared, in accordance with United States generally accepted accounting principles (“ GAAP ”) consistently applied (or, if not consistently applied, accompanied by details of the inconsistencies); provided that if, as a result of any change in GAAP or in the interpretation thereof after the date of the financial statements referred to in Section 6.6 , there is a change in the manner of determining any of the items referred to herein that are to be determined by reference to GAAP, and the effect of such change would (in the reasonable opinion of the Borrower or the Agents) be such as to affect the basis or efficacy of the covenants contained in Section 7.2.4 in ascertaining the financial condition of the Borrower or the consolidated financial condition of the Borrower and its Subsidiaries and the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate such change occurring after the date hereof in GAAP or the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), then such item shall for the purposes of such Sections of this Agreement continue to be determined in accordance with GAAP relating thereto as GAAP were applied immediately prior to such change in GAAP or in the interpretation thereof until such notice shall have been withdrawn or such provision amended in accordance herewith.

ARTICLE II

COMMITMENTS, BORROWING PROCEDURES AND NOTES

SECTION 2.1. Commitments . On the terms and subject to the conditions of this Agreement (including Article V), each Lender severally agrees to make a Loan pursuant to the Commitments described in this Section 2.1.

SECTION 2.1.1. Commitment of Each Lender . On the Closing Date, each Lender will make a loan (relative to such Lender, its “ Loan ”) to the Borrower equal to such Lender’s Percentage of the aggregate amount of the Borrowing requested by the Borrower to be made on such day. The commitment of each Lender described in this Section 2.1.1 is herein referred to as its “ Commitment ”. Any amount of the Loans that are prepaid or repaid may not be reborrowed.

SECTION 2.1.2. FEC . The parties hereto acknowledge the benefit of the FEC Interest Equalization and the commercial impact that the terms of the FEC Interest Equalization Documents have on the terms of this Agreement.

The parties hereto unconditionally and irrevocably agree that if the FEC Interest Equalization is for whatever reason, in whole or in part, suspended, terminated, cancelled or ceases to be available for whatever reason or the FEC Interest Equalization Documents cease to be in full force and effect for whatever reason, that the Loans will be provided to the Borrower on a LIBO Rate basis.

The parties hereto acknowledge that FEC has the right to terminate the payment of any Interest Subsidy and the right to terminate the FEC Interest Equalization if (a) the Borrower has used the proceeds of the Loans for a purpose other than the purpose agreed in the FEC Interest Equalization Documents; (b) the Borrower has in connection with the application for (i) the FEC Interest Equalization Offer or (ii) the Loans provided materially misleading information or concealed facts that are material when considering such application or acceptance of the FEC Interest Equalization Transaction; or (c) the Loans are transferred to a new borrower or the Purchased Vessel is transferred to a new owner without the consent of the Finnish Ministry of the Trade and Industry.

The parties hereto acknowledge and agree that if FEC terminates the payment of any Interest Subsidy pursuant to clause (a) or (b) in the immediately preceding paragraph, the Borrower is obligated to pay FEC upon FEC’s demand the amounts of Interest Subsidy together with interest, all amounts as more specifically set out in the FEC Cooperation Agreement and Section 6 b of the Finnish Act on Interest Equalization on Officially Supported Export and Ship Credits (1137/1996, as amended).

The parties hereto further acknowledge and agree that FEC may terminate the payment of any Interest Subsidy if (x) the Borrower fails to use its commercially reasonable efforts to co-operate and assist the Administrative Agent and the FEC Counterparty with respect to any obligations the FEC Counterparty may have under or in connection with the FEC Interest Equalization Documents, as so reasonably requested by the Administrative Agent or the FEC Counterparty or (y) the Borrower fails to use its commercially reasonable efforts to consent to amend this Agreement if such amendments are required by FEC or the FEC Interest Equalization Documents. The Administrative Agent shall provide an explanation from FEC as to the need for such amendments provided that FEC has provided such explanation to the Administrative Agent.

SECTION 2.2. Reduction of Commitment Amount . The Commitment Amount is subject to reduction from time to time pursuant to this Section 2.2 .

SECTION 2.2.1. Optional . The Borrower may, from time to time on any Business Day occurring prior to the Closing Date, voluntarily reduce the Commitment Amount; provided that all such reductions shall be made pro rata among the Lenders and shall require at least three Business Days’ prior notice to the Administrative Agent and be permanent, and any partial reduction of the Commitment Amount shall be in a minimum amount of $10,000,000 and in a multiple of $1,000,000.

SECTION 2.2.2. Mandatory . On and after the Closing Date, after giving effect to the Borrowing made on such date, the Commitment Amount shall be zero.

SECTION 2.3. Borrowing Procedure . By delivering a Borrowing Request to the Administrative Agent on or before 11:00 a.m., New York time, on a Business Day, the Borrower may irrevocably request, on not less than two Business Days’ notice, that a Borrowing be made in a minimum amount of $10,000,000 and a multiple of $1,000,000, or in the unused amount of the Commitments. On the terms and subject to the conditions of this Agreement, the Borrowing shall be made on the Business Day specified in such Borrowing Request. On or before 11:00 a.m., New York time, on the Business Day specified in the Borrowing Request, each Lender shall, without any set-off or counterclaim, deposit with the Administrative Agent same day funds in an amount equal to such Lender’s Percentage of the requested Borrowing. Such deposit will be made to an account which the Administrative Agent shall specify from time to time by notice to the Lenders. To the extent funds are so received from the Lenders, the Administrative Agent shall, without any set-off or counterclaim, make such funds available to the Borrower on the Business Day specified in the Borrowing Request by wire transfer of same day funds to the accounts the Borrower shall have specified in its Borrowing Request. No Lender’s obligation to make a Loan shall be affected by any other Lender’s failure to make a Loan.

SECTION 2.4. Funding . Each Lender may, if it so elects, fulfill its obligation to make or continue its Loan hereunder by causing one of its foreign branches or Affiliates (or an international banking facility created by such Lender) to make or maintain such Loan; provided that such Loan shall nonetheless be deemed to have been made and to be held by such Lender, and the obligation of the Borrower to repay such Loan shall nevertheless be to such Lender for the account of such foreign branch, Affiliate or international banking facility.

SECTION 2.5. Notes . Each Lender’s Loan under its Commitment shall be evidenced by a Note payable to the order of such Lender in a maximum principal amount equal to such Lender’s Percentage of the original Commitment Amount. The Borrower hereby irrevocably authorizes each Lender to make (or cause to be made) appropriate notations on the grid attached to such Lender’s Note (or on any continuation of such grid), which notations, if made, shall evidence, inter alia , the date of, the outstanding principal of, and the interest rate and Interest Period applicable to the Loan evidenced thereby, provided that the failure of any Lender to make any such notations shall not limit or otherwise affect any Obligations of the Borrower.

ARTICLE III

REPAYMENTS, PREPAYMENTS, INTEREST AND FEES

SECTION 3.1. Repayments and Prepayments . The Borrower shall repay the Loans in fourteen equal semi-annual installments on the last day of each Interest Period, as set forth on Schedule II hereto.

In addition, the Borrower

(a) may, from time to time on any Business Day, make a voluntary prepayment, in whole or in part, of the outstanding principal amount of the Loans; provided that

(i) any such prepayment shall be made pro rata among all Loans and applied in inverse order of maturity;

(ii) all such voluntary prepayments shall require at least three Business Days (or, if such prepayment is to be made on the last day of an Interest Period for the Loans, two Business Days) prior written notice to the Administrative Agent; and

(iii) all such voluntary partial prepayments shall be in an aggregate minimum amount of $10,000,000 and a multiple of $1,000,000 (or the remaining amount of the Loans being prepaid); and

(b) shall, immediately upon any acceleration of the Stated Maturity Date of the Loans pursuant to Section 8.2 or 8.3 or the mandatory repayment of the Loans pursuant to Section 9.2 , repay all Loans.

Each prepayment of any Loans made pursuant to this Section shall be without premium or penalty, except as may be required by Section 4.4 , provided that any prepayment under this Agreement shall be made subject to payment by the Borrower to the Administrative Agent (for the account of the FEC Counterparty) of any FEC Break Costs on written demand by the FEC Counterparty, which demand shall set forth the amount of the FEC Break Costs and reasonably detailed calculations thereof.

SECTION 3.2. Interest Provisions . Interest on the outstanding principal amount of Loans shall accrue and be payable in accordance with this Section 3.2 .

SECTION 3.2.1. Rates . (a) At all times while the FEC Interest Equalization is in effect, the Borrower shall pay interest on the Loans at a rate per annum during each Interest Period equal to the sum of the FEC CIRR Rate plus the CIRR Applicable Margin.

(b) At all times while the FEC Interest Equalization is not in effect, the Borrower shall pay interest on the Loans at a rate per annum during each Interest Period equal to the sum of the LIBO Rate for such Interest Period plus the LIBO Applicable Margin.

(c) All Loans shall bear interest from and including the first day of the applicable Interest Period to (but not including) the last day of such Interest Period at the interest rate determined as applicable to such Loan.

SECTION 3.2.2. Post-Maturity Rates . After the date any principal amount of any Loan is due and payable (whether on the maturity, upon acceleration or otherwise), or after any other monetary Obligation of the Borrower shall have become due and payable, the Borrower shall pay, but only to the extent permitted by law, interest (after as well as before judgment) on such amounts for each day during the period of such default at a rate per annum certified by the

Administrative Agent to the Borrower (which certification shall be conclusive in the absence of manifest error) to be equal to the sum of (a) the rate of interest applicable to Loans at such time pursuant to Section 3.2.1 above plus (c) 2% per annum.

SECTION 3.2.3. Payment Dates . Interest accrued on each Loan shall be payable, without duplication:

(a) on the Stated Maturity Date therefor;

(b) on the date of any payment or prepayment, in whole or in part, of principal outstanding on such Loan (but only on the principal so paid or prepaid);

(d) on that portion of any Loans the Stated Maturity Date of which is accelerated pursuant to Section 8.2 or Section 8.3 , immediately upon such acceleration.

Interest accrued on Loans or other monetary Obligations arising under this Agreement or any Note after the date such amount is due and payable (whether on maturity, upon acceleration or otherwise) shall be payable upon demand.

SECTION 3.2.5. Interest Indemnity . If Section 3.2.1(a) applies and the interest rate received by the Lenders (or by the FEC Counterparty or the Administrative Agent on their behalf) under the Loan Documents (taking into account any interest payment (including, without limitation, the IEA Margin) made by FEC pursuant to the FEC Interest Equalization) is less than the rate per annum determined by the Administrative Agent to be the sum of the LIBO Rate for such Interest Period plus the CIRR Applicable Margin plus the IEA Margin (such rate per annum being the “ Contracted Rate ”), then the Borrower will fully indemnify each Lender on demand by the Administrative Agent to the extent of what such Lender would have received by applying the

Contracted Rate, but only to the extent that there is no duplication with any other amounts payable hereunder.

SECTION 3.3. Commitment Fees . The Borrower agrees to pay to the Administrative Agent for the account of each Lender and FEC a commitment fee (the “ Commitment Fees ”) on the average daily unused portion of the Commitment Amount, for the period commencing on the Effective Date and continuing through the Closing Date, as set forth below:

(a) The Commitment Fees payable to the Lenders shall be payable by the Borrower on the Closing Date and shall be in an amount equal to the product of 0.20% per annum, multiplied by the average daily unused portion of the Commitment Amount, multiplied by the actual number of days elapsed from the date that is 15 days after the Effective Date to the Closing Date, divided by 360. Each payment of Commitment Fee to the Lenders shall be allocated by the Administrative Agent on the basis of each Lender’s Percentage of the unused portion of the Commitment Amount for the actual number of days elapsed.

(b) The Commitment Fee payable to FEC shall be payable by the Borrower on the Closing Date and shall be in an amount equal to the product of 0.10% per annum, multiplied by the average daily unused portion of the Commitment Amount, multiplied by the actual number of days elapsed from the date this Agreement is executed and delivered by the Borrower to the Closing Date, divided by 360.

ARTICLE IV

CERTAIN LIBO RATE AND OTHER PROVISIONS

SECTION 4.1. LIBO Rate Lending Unlawful . If the introduction of or any change in or in the interpretation of any law makes it unlawful, or any central bank or other governmental authority having jurisdiction over such Lender asserts that it is unlawful, for such Lender to make, continue or maintain any Loan bearing interest at a rate based on the LIBO Rate, the obligations of such Lender to make, continue or maintain any Loan bearing interest at a rate based on the LIBO Rate shall, upon notice thereof to the Borrower, the Administrative Agent and each other Lender, forthwith be suspended until the circumstances causing such suspension no longer exist, provided that such Lender’s obligation to make, continue and maintain its Loan hereunder shall be automatically converted into an obligation to make, continue and maintain a Loan bearing interest at a rate to be negotiated between such Lender and the Borrower that is the equivalent of the sum of the LIBO Rate for the relevant Interest Period plus the LIBO Applicable Margin or, if such negotiated rate is not agreed upon by the Borrower and such Lender within fifteen Business Days, a rate equal to the Federal Funds Rate from time to time in effect plus the LIBO Applicable Margin.

SECTION 4.2. Deposits Unavailable . If the Administrative Agent shall have determined that:

(a) Dollar deposits in the relevant amount and for the relevant Interest Period are not available to the Reference Lenders in their relevant market; or

(b) by reason of circumstances affecting the Reference Lenders’ relevant market, adequate means do not exist for ascertaining the interest rate applicable hereunder to LIBO Rate Loans,

then the Administrative Agent shall give notice of such determination (hereinafter called a “ Determination Notice ”) to the Borrower and each of the Lenders. The Borrower, the Lenders and the Administrative Agent shall then negotiate in good faith in order to agree upon a mutually satisfactory interest rate to be substituted for those which would otherwise have applied under this Agreement. If the Borrower, the Lenders and the Administrative Agent are unable to agree upon an interest rate (or rates) prior to the date occurring fifteen Business Days after the giving of such Determination Notice, the interest rate to take effect at the end of the Interest Period current at the date of the Determination Notice shall be equal to the sum of the LIBO Applicable Margin plus the Federal Funds Rate in effect from time to time.

(a) subject any Lender to any taxes, levies, duties, charges, fees, deductions or withholdings of any nature with respect to its Commitment or any part thereof (or in the case of the FEC Counterparty for purposes of Section 11.4(b), with respect to any payment made or received pursuant to the Loan Documents) imposed, levied, collected, withheld or assessed by any jurisdiction or any political subdivision or taxing authority thereof (other than taxation on overall net income and, to the extent such taxes are described in Section 4.6 , withholding taxes); or

(c) impose, modify or deem applicable any reserve or capital adequacy requirements (other than the reserve costs described in Section 4.7 ) or other banking or monetary controls or requirements which affect the manner in which a Lender shall allocate its capital resources to its obligations hereunder (or in the case of the FEC Counterparty for purposes of Section 11.4(b), under the Loan Documents) or require the making of any special deposits against or in respect of any assets or liabilities of, deposits with or for the account of, or loans by, any Lender ( provided that such Lender shall, unless prohibited by law, allocate its capital resources to its obligations hereunder in a manner which is consistent with its present treatment of the allocation of its capital resources); or

(d) impose on any Lender any other condition affecting its Commitment (or in the case of the FEC Counterparty for purposes of Section 11.4(b), it obligations under the Loan Documents),

and the result of any of the foregoing is either (i) to increase the cost to such Lender of making its Loan or maintaining its Commitment or any part thereof (or in the case of the FEC Counterparty for purposes of Section 11.4(b), performing its obligations under or in connection with the Loan Documents) , (ii) to reduce the amount of any payment received by such Lender or its effective return hereunder or on its capital or (iii) to cause such Lender to make any payment or to forego any return based on any amount received or receivable by such Lender hereunder, then and in any such case if such increase or reduction in the opinion of such Lender materially affects the interests of such Lender, (A) the Lender concerned shall (through the Administrative Agent) notify the Borrower of the occurrence of such event and use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Lending Office if the making of such a designation would avoid the effects of such law, regulation or regulatory requirement or any change therein or in the interpretation thereof and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender and (B) the Borrower shall forthwith upon demand pay to the Administrative Agent for the account of such Lender such amount as is necessary to compensate such Lender for such additional cost or such reduction and ancillary expenses, including taxes, incurred as a result of such adjustment. Such notice shall (i) describe in reasonable detail the event leading to such additional cost, together with the approximate date of the effectiveness thereof, (ii) set forth the amount of such additional cost, (iii) describe the manner in which such amount has been calculated, (iv) certify that the method used to calculate such amount is the Lender’s standard method of calculating such amount, (v) certify that such request is consistent with its treatment of other borrowers that are subject to similar provisions, and (vi) certify that, to the best of its knowledge, such change in circumstance is of general application to the commercial banking industry in such Lender’s jurisdiction of organization or in the relevant jurisdiction in which such Lender does business. Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender pursuant to this Section for any increased costs or reductions incurred more than three months prior to the date that such Lender notifies the Borrower of the circumstance giving rise to such increased costs or reductions and of such Lender’s intention to claim compensation therefor; provided further that, if the circumstance giving rise to such increased costs or reductions is retroactive, then the three-month period referred to above shall be extended to include the period of retroactive effect thereof, but not more than six months prior to the date that such Lender notifies the Borrower of the circumstance giving rise to such cost or reductions and of such Lender’s intention to claim compensation therefor.

(a) any conversion or repayment or prepayment of the principal amount of any Loans on a date other than the scheduled last day of an Interest Period, whether pursuant to Section 3.1 or otherwise; or

SECTION 4.5. Increased Capital Costs . If any change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in of, any law or regulation, directive, guideline, decision or request (whether or not having the force of law) of any court, central bank, regulator or other governmental authority increases the amount of capital required to be maintained by any Lender or any Person controlling such Lender, and the rate of return on its or such controlling Person’s capital as a consequence of its Commitment or the Loan made by such Lender (or in the case of the FEC Counterparty for purposes of Section 11.4(b), its obligations under the Loan Documents) is reduced to a level below that which such Lender or such controlling Person would have achieved but for the occurrence of any such change in circumstance, then, in any such case upon notice from time to time by such Lender to the Borrower, the Borrower shall immediately pay directly to such Lender additional amounts sufficient to compensate such Lender or such controlling Person for such reduction in rate of return. Any such notice shall (i) describe in reasonable detail the capital adequacy requirements which have been imposed, together with the approximate date of the effectiveness thereof, (ii) set forth the amount of such lowered return, (iii) describe the manner in which such amount has been calculated, (iv) certify that the method used to calculate such amount is such Lender’s standard method of calculating such amount, (v) certify that such request for such additional amounts is consistent with its treatment of other borrowers that are subject to similar provisions and (vi) certify that, to the best of its knowledge, such change in circumstances is of general application to the commercial banking industry in the jurisdictions in which such Lender does business. In determining such amount, such Lender may use any method of averaging and attribution that it shall, subject to the foregoing sentence, deem applicable. Each Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to designate a different Lending Office if the making of such a designation would avoid such reduction in such rate of return and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender pursuant to this Section for any increased costs or reductions incurred more than three months prior to the date that such Lender notifies the Borrower of the circumstance giving rise to such reductions and of such Lender’s intention to claim compensation therefor; provided further that, if the circumstance giving rise to such reductions is retroactive, then the three-month period referred to above shall be extended to include the period of retroactive effect thereof, but not more than six months prior to the date that such Lender notifies the Borrower of the circumstance giving rise to such reductions and of such Lender’s intention to claim compensation therefor.

(a) pay directly to the relevant authority the full amount required to be so withheld or deducted;

(b) promptly forward to the Administrative Agent an official receipt or other documentation satisfactory to the Administrative Agent evidencing such payment to such authority; and

(c) pay to the Administrative Agent for the account of the Lenders or the FEC Counterparty such additional amount or amounts as is necessary to ensure that the net amount actually received by each Lender or the FEC Counterparty will equal the full amount such Lender or the FEC Counterparty would have received had no such withholding or deduction been required.

Moreover, if any Taxes are directly asserted against the Administrative Agent, any Lender or the FEC Counterparty with respect to any payment received or paid by the Administrative Agent, such Lender or the FEC Counterparty hereunder or under or in connection with any other Loan Document, the Administrative Agent, such Lender or the FEC Counterparty may pay such Taxes and the Borrower will promptly pay such additional amounts (including any penalties, interest or expenses) as is necessary in order that the net amount received by such person after the payment of such Taxes (including any Taxes on such additional amount) shall equal the amount such person would have received had not such Taxes been asserted.

Any Person claiming any additional amounts payable pursuant to this Section agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Lending Office or, in the case of the FEC Counterparty but subject to the approval of FEC if the FEC Interest Equalization is then in effect, its location of operations, if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts that may thereafter accrue and would not, in the reasonable judgment of such Person, be otherwise disadvantageous to such Person.

If the Borrower fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent, for the account of the respective Lenders or the FEC Counterparty, the required receipts or other required documentary evidence, the Borrower shall

indemnify the Lenders and the FEC Counterparty for any incremental withholding Taxes, interest or penalties or expenses that may become payable by any Lender or the FEC Counterparty as a result of any such failure (so long as such amount did not become payable as a result of the failure of such Lender or the FEC Counterparty to provide timely notice to the Borrower of the assertion of a liability related to the payment of Taxes). For purposes of this Section 4.6 , a distribution hereunder by the Administrative Agent or any Lender or the FEC Counterparty to or for the account of any Lender or the FEC Counterparty shall be deemed a payment by the Borrower.

If any Lender or the FEC Counterparty is entitled to any refund, credit, deduction or other reduction in tax by reason of any payment made by the Borrower in respect of any tax under this Section 4.6 or by reason of any payment made by the Borrower pursuant to Section 4.3 , such Lender or the FEC Counterparty shall use reasonable efforts to obtain such refund, credit, deduction or other reduction and, promptly after receipt thereof (and, in the case of any such credit, utilization thereof), will pay to the Borrower such amount (plus any interest received by such Lender or the FEC Counterparty in connection with such refund, credit, deduction or reduction) as is equal to the net after-tax value to such Lender or the FEC Counterparty of such part of such refund, credit, deduction or reduction as such Lender or the FEC Counterparty reasonably determines is allocable to such tax or such payment, less out-of-pocket expenses incurred by such Lender or the FEC Counterparty, provided that no Lender or the FEC Counterparty shall be obligated to disclose to the Borrower any information regarding its tax affairs or tax computations.

(i) the principal amount of such Loan outstanding on such day; and

(ii) the remainder of (x) a fraction the numerator of which is the rate (expressed as a decimal) at which interest accrues on such Loan for such Interest Period as provided in this Agreement (less the LIBO Applicable Margin) and the denominator of which is one minus any increase after the Effective Date in the effective rate (expressed as a decimal) at which such reserve requirements are imposed on such Lender minus (y) such numerator; and

(iii) 1/360.

SECTION 4.8. Replacement Lenders, etc . If the Borrower shall be required to make any payment to any Lender pursuant to Section 4.3 , 4.4 , 4.5 , 4.6 or 4.7 , the Borrower shall be entitled at any time (so long as no Default and no Prepayment Event shall have occurred and be continuing) within 180 days after receipt of notice from such Lender of such required payment to (a) terminate such Lender’s Commitment and such Lender’s right to receive any Commitment Fee accruing after such termination and that portion of the Commitment Amount represented by such Lender’s Commitment (whereupon the Percentages of each other Lender shall automatically be adjusted to an amount equal to each such Lender’s ratable share of the remaining Commitment Amount), (b) prepay the affected portion of such Lender’s Loan in full, together with accrued interest thereon through the date of such prepayment ( provided that the Borrower shall not prepay any such Lender pursuant to this clause (b) without replacing such Lender pursuant to the following clause (c) until a 30-day period shall have elapsed during which the Borrower and the Agents shall have attempted in good faith to replace such Lender), and/or (c) replace such Lender with another bank reasonably acceptable to the Agents, provided that (i) each such assignment shall be either an assignment of all of the rights and obligations of the assigning Lender under this Agreement or an assignment of a portion of such rights and obligations made concurrently with another such assignment or other such assignments that together cover all of the rights and obligations of the assigning Lender under this Agreement and (ii) no Lender shall be obligated to make any such assignment as a result of a demand by the Borrower pursuant to this Section unless and until such Lender shall have received one or more payments from either the Borrower or one or more Assignee Lenders in an aggregate amount at least equal to the outstanding principal amount of the Loan owing to such Lender, together with accrued interest thereon to the date of payment of such principal amount and all other amounts payable to such Lender under this Agreement. Each Lender represents and warrants to the

Borrower that, as of the date of this Agreement (or, with respect to any Lender not a party hereto on the date hereof, on the date that such Lender becomes a party hereto), there is no existing treaty, law, regulation, regulatory requirement, interpretation, directive, guideline, decision or request pursuant to which such Lender would be entitled to request any payments under any of Sections 4.3 , 4.4 , 4.5 , 4.6 and 4.7 to or for account of such Lender.

SECTION 4.9. Payments, Computations, etc . (a) Unless otherwise expressly provided, all payments by the Borrower pursuant to this Agreement or the Notes shall be made by the Borrower to the Administrative Agent for the pro rata account of the Lenders entitled to receive such payment. All such payments required to be made to the Administrative Agent shall be made, without setoff, deduction or counterclaim, not later than 11:00 a.m., New York time, on the date due, in same day or immediately available funds through the New York Clearing House Interbank Payments System (or such other funds as may be customary for the settlement of international banking transactions in Dollars), to such account as the Administrative Agent shall specify from time to time by notice to the Borrower. Funds received after that time shall be deemed to have been received by the Administrative Agent on the next succeeding Business Day. The Administrative Agent shall promptly (but in any event on the same Business Day that the same are received or, as contemplated in the immediately preceding sentence, deemed received) remit in same day funds to each Lender its share, if any, of such payments received by the Administrative Agent for the account of such Lender without any setoff, deduction or counterclaim. All interest and fees shall be computed on the basis of the actual number of days (including the first day but excluding the last day) occurring during the period for which such interest or fee is payable over a year comprised of 360 days. Whenever any payment to be made shall otherwise be due on a day which is not a Business Day, such payment shall (except as otherwise required by clause (c) of the definition of the term “ Interest Period ”) be made on the next succeeding Business Day and such extension of time shall be included in computing interest and fees, if any, in connection with such payment.

(b) Unless the FEC Counterparty shall have been notified by telephone, confirmed in writing, by FEC, the Administrative Agent or the Borrower by 5:00 p.m., London time, on the day prior to the date an amount is to be paid to the FEC Counterparty under the Loan Documents that FEC, the Administrative Agent or the Borrower will not make available the amount required to be paid to the FEC Counterparty on the date specified therefor, the FEC Counterparty may assume that such Person has made such amount available to the FEC Counterparty and, in reliance upon such assumption, make available to the Administrative Agent or FEC, as the case may be, a corresponding amount. If and to the extent that such Person shall not have made such amount available to the FEC Counterparty, such Person and the recipient of such amount severally agree to pay to the FEC Counterparty forthwith on demand such corresponding amount together with an amount sufficient to indemnify the FEC Counterparty against any cost or loss it may have suffered or incurred by reason of its having paid out such amount prior to its receipt thereof and by reason of such amount and costs or losses not being paid to the FEC Counterparty forthwith upon demand.

(c) On receipt of any payment from FEC under or in connection with the FEC Interest Equalization Documents in respect of interest, the FEC Counterparty shall, subject to Section 4.9(b), be obliged to pay such amount to the Administrative Agent for the sole purpose of enabling the Borrower to satisfy its payment obligations under this Agreement, including, for

the avoidance of doubt, under Section 3.2.5. The FEC Counterparty shall make such amount available to the Administrative Agent (for the account of the Lenders) for same day value by transfer to such account as the Administrative Agent may from time to time notify the FEC Counterparty. On receipt of such amount from the FEC Counterparty, the Administrative Agent shall pay to the Lenders the portion of such amount which is to be paid to the Lenders.

(d) If the FEC Counterparty notifies the Administrative Agent that the FEC Counterparty is obliged to make a cash payment to FEC under the FEC Interest Equalization Documents (the “ FEC Payment Amount ”) by virtue of the FEC CIRR Rate and any other amount (including, without limitation, amounts paid in respect of withholding taxes) payable by the FEC Counterparty exceeding the sum of the LIBO Rate and the IEA Margin payable by FEC under the FEC Interest Equalization Documents, the Borrower and the Lenders hereby irrevocably direct the Administrative Agent, on receipt of the corresponding interest payment from the Borrower pursuant to Section 3.2 and subject to Section 4.9(b), to make available to the FEC Counterparty for same day value by transfer to such account as the FEC Counterparty may from time to time notify to the Administrative Agent, an amount equal to the FEC Payment Amount due to FEC under or in connection with the FEC Interest Equalization Documents.

(e) The FEC Counterparty shall make all payments to the Administrative Agent (for the account of the Lenders) or FEC under this Agreement free and clear of any deduction or withholding except for any that may be required by law. The FEC Counterparty shall have no obligation to increase any payment made by it under this Agreement in the event of any withholding or deduction being required by law to be made by it in respect of such payments.

SECTION 4.10. Sharing of Payments . If any Lender shall obtain any payment or other recovery (whether voluntary, involuntary, by application of setoff or otherwise) on account of any Loan (other than pursuant to the terms of Sections 4.3 , 4.4 , 4.5 , 4.6 and 4.7 ) in excess of its pro rata share of payments then or therewith obtained by all Lenders, such Lender shall purchase from the other Lenders such participations in Loans made by them as shall be necessary to cause such purchasing Lender to share the excess payment or other recovery ratably with each of them; provided that if all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing Lender, the purchase shall be rescinded and each Lender which has sold a participation to the purchasing Lender shall repay to the purchasing Lender the purchase price to the ratable extent of such recovery together with an amount equal to such selling Lender’s ratable share (according to the proportion of (a) the amount of such selling Lender’s required repayment to the purchasing Lender to (b) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section may, to the fullest extent permitted by law, exercise all its rights of payment (including pursuant to Section 4.9 ) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this Section to share in the benefits of any recovery on such secured claim.

SECTION 4.12. Use of Proceeds . The Borrower shall apply the proceeds of each Borrowing in accordance with the third recital; without limiting the foregoing, no proceeds of any Loan will be used to acquire any equity security of a class which is registered pursuant to Section 12 of the Securities Exchange Act of 1934 or any “margin stock”, as defined in F.R.S. Board Regulation U.

ARTICLE V

CONDITIONS TO BORROWING

SECTION 5.1. Effectiveness . The obligations of the Lenders to fund the initial Borrowing shall be effective on and as of the first date (the “ Effective Date ”) on which each of the conditions precedent set forth in this Section 5.1 shall have been satisfied.

SECTION 5.1.1. Resolutions, etc . The Administrative Agent shall have received from the Borrower:

(a) a certificate, dated the Effective Date, of its Secretary or Assistant Secretary as to the incumbency and signatures of those of its officers authorized to act with respect to this Agreement and each other Loan Document to which it is a party and as to the truth and completeness of the attached:

(x) resolutions of its Board of Directors then in full force and effect authorizing the execution, delivery and performance of this Agreement and each other Loan Document to which it is a party, and

(y) Organic Documents of the Borrower,

and upon which certificate each Lender may conclusively rely until it shall have received a further certificate of the Secretary of the Borrower canceling or amending such prior certificate; and

(b) a Certificate of Good Standing issued by the relevant Liberian authorities in respect of the Borrower.

SECTION 5.1.2. Delivery of Notes . The Administrative Agent shall have received, for the account of the respective Lenders, the Notes duly executed and delivered by the Borrower.

SECTION 5.1.3. Ownership, etc. of Vessels . The Administrative Agent shall have received the following with respect to each Vessel (other than the Purchased Vessel):

(a) evidence as to the ownership of such Vessel by the Borrower or a Principal Subsidiary;

(b) disclosure of all recorded Liens on such Vessel;

(d) evidence as to all required insurance being in effect with respect to such Vessel.

SECTION 5.1.4. Opinions of Counsel . The Administrative Agent shall have received opinions, dated the Effective Date and addressed to the Agents and each Lender, from:

(a) Bradley Stein, Esq., counsel to the Borrower, substantially in the form of Exhibit C hereto;

(b) Watson, Farley & Williams (New York) LLP, counsel to the Borrower, as to Liberian Law and New York Law, substantially in the form of Exhibit D hereto;

(c) Hannes Snellman, counsel to the Administrative Agent and the FEC Counterparty, as to Finnish Law, substantially in the form of Exhibit F hereto; and

(d) Shearman & Sterling LLP, counsel to the Administrative Agent, substantially in the form of Exhibit G hereto.

SECTION 5.1.6. FEC Matters . The FEC Counterparty shall have confirmed that all conditions precedent under the relevant FEC Interest Equalization Documents have been satisfied or waived to its satisfaction and that the relevant FEC Interest Equalization will apply to the Loans on terms satisfactory to the FEC Counterparty.

SECTION 5.2. The Loans . The obligation of each Lender to fund any Loan on the Closing Date shall be subject to the satisfaction of each of the conditions precedent set forth in this Section 5.2 .

SECTION 5.2.1. Compliance with Warranties, No Default, etc . Both before and after giving effect to such Borrowing the following statements shall be true and correct:

(a) the representations and warranties set forth in Article VI (excluding, however, those contained in Sections 6.10 and 6.13 ) shall be true and correct with the same effect as if then made; and

(b) no Default and no Prepayment Event and no event which (with notice or lapse of time or both) would become a Prepayment Event shall have then occurred and be continuing.

SECTION 5.3. The Borrowing . For purposes of determining compliance with the conditions specified in Section 5.1, each Lender shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Lenders unless an officer of the Administrative Agent responsible for the transactions contemplated by this Agreement shall have received notice from such Lender prior to the date that the Borrower, by notice to the Lenders, designates as the proposed Effective Date, specifying its objection thereto. The Administrative Agent shall promptly notify the Lenders of the occurrence of the Effective Date.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES

To induce the Lenders and the Administrative Agent to enter into this Agreement and to make Loans hereunder, the Borrower represents and warrants to the Administrative Agent and each Lender as set forth in this Article VI as of the Effective Date and, except with respect to the representations and warranties in Section 6.10 and 6.13 , as of the date of the Borrowing.

SECTION 6.2. Due Authorization, Non-Contravention, etc . The execution, delivery and performance by the Borrower of this Agreement and each other Loan Document to which it is a

party, are within the Borrower’s corporate powers, have been duly authorized by all necessary corporate action, and do not:

(a) contravene the Borrower’s Organic Documents;

(b) contravene any law or governmental regulation of any Applicable Jurisdiction except as would not reasonably be expected to result in a Material Adverse Effect;

(c) contravene any court decree or order binding on the Borrower or any of its property except as would not reasonably be expected to result in a Material Adverse Effect;

(d) contravene any contractual restriction binding on the Borrower or any of its property except as would not reasonably be expected to result in a Material Adverse Effect; or

(e) result in, or require the creation or imposition of, any Lien on any of the Borrower’s properties except as would not reasonably be expected to result in a Material Adverse Effect.

SECTION 6.3. Government Approval, Regulation, etc . No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or other Person is required for the due execution, delivery or performance by the Borrower of this Agreement or any other Loan Document to which it is a party (except for authorizations or approvals not required to be obtained on or prior to the Effective Date that have been obtained or actions not required to be taken on or prior to the Effective Date that have been taken). Each of the Borrower and each Principal Subsidiary holds all governmental licenses, permits and other approvals required to conduct its business as conducted by it on the Effective Date, except to the extent the failure to hold any such licenses, permits or other approvals would not have a Material Adverse Effect.

Fiscal Year then ended. Since December 31, 2005 there has been no material adverse change in the business, operations or financial condition of the Borrower and its Subsidiaries taken as a whole.

SECTION 6.7. Intentionally Omitted .

SECTION 6.8. No Default, Event of Default or Prepayment Event . No Default, Event of Default or Prepayment Event has occurred and is continuing.

SECTION 6.10. Vessels . Each Vessel is

(a) legally and beneficially owned by the Borrower or a Principal Subsidiary,

(b) registered in the name of the Borrower or such Principal Subsidiary under the flag identified in Item 6.10(b) of the Disclosure Schedule,

(d) free of all recorded Liens, other than Liens permitted by Section 7.2.3 ,

(e) insured against loss or damage in compliance with Section 7.1.5 , and

SECTION 6.11. Subsidiaries . The Borrower has no Subsidiaries on the Effective Date, except those Subsidiaries which are identified in Item 6.11 of the Disclosure Schedule. All Existing Principal Subsidiaries are designated with an asterisk in Item 6.11 of the Disclosure Schedule. All Existing Principal Subsidiaries are direct or indirect wholly-owned Subsidiaries of the Borrower, except to the extent any such Existing Principal Subsidiary or an interest therein has been sold in accordance with clause (b) of Section 7.2.7 or such Existing Principal Subsidiary no longer owns a Vessel.

SECTION 6.13. Withholding, etc . As of the Effective Date, no payment to be made by the Borrower under any Loan Document to which it is a party is subject to any withholding or like tax imposed by any Applicable Jurisdiction.

SECTION 6.14. No Filing, etc. Required . No filing, recording or registration and no payment of any stamp, registration or similar tax is necessary under the laws of any Applicable Jurisdiction to ensure the legality, validity, enforceability, priority or admissibility in evidence of this Agreement or the Notes (except for filings, recordings, registrations or payments not required to be made on or prior to the Effective Date that have been made).

information furnished to the Administrative Agent and the Lenders in writing by or on behalf of the Borrower by its chief financial officer, treasurer or corporate controller after the date of this Agreement shall have been prepared by the Borrower in good faith.

ARTICLE VII

COVENANTS

SECTION 7.1.1. Financial Information, Reports, Notices, etc . The Borrower will furnish, or will cause to be furnished, to the Administrative Agent (with sufficient copies for distribution to each Lender, the FEC Counterparty and FEC, as the case may be) the following financial statements, reports, notices and information:

(e) as soon as the Borrower becomes aware thereof, notice of any Material Litigation except to the extent that such Material Litigation is disclosed by the Borrower in filings with the SEC;

(h) within seven days after the delivery of the Purchased Vessel, (i) evidence as to the ownership of such Vessel by the Borrower or a Principal Subsidiary, (ii) disclosure of all recorded Liens on such Vessel, (iii) evidence of the class of such Vessel; and (iv) evidence as to all required insurance being in effect with respect to such Vessel; and

(i) such other information respecting (x) the condition or operations, financial or otherwise, of the Borrower or any of its Subsidiaries or (y) the transactions and documents related to the Purchased Vessel or the delivery of the Purchased Vessel, as any Lender, FEC (through the FEC Counterparty) or the FEC Counterparty through the Administrative Agent may from time to time reasonably request.

SECTION 7.1.2. Approvals and Other Consents . The Borrower will obtain (or cause to be obtained) all such governmental licenses, authorizations, consents, permits and approvals as may be required for (a) the Borrower to perform its obligations under this Agreement and the other Loan Documents to which it is a party and (b) except to the extent that failure to obtain (or cause to be obtained) such governmental licenses, authorizations, consents, permits and approvals would not be expected to have a Material Adverse Effect, the operation of each Vessel in compliance with all applicable laws.

SECTION 7.1.3. Compliance with Laws, etc . The Borrower will, and will cause each of its Subsidiaries to, comply in all material respects with all applicable laws, rules, regulations and orders, except (other than as described in clause (a) below) to the extent that the failure to so comply would not have a Material Adverse Effect, which compliance shall in any case include (but not be limited to):

(a) in the case of each of the Borrower and the Principal Subsidiaries, the maintenance and preservation of its corporate existence (subject to the provisions of Section 7.2.6 );

(b) in the case of the Borrower, maintenance of its qualification as a foreign corporation in the State of Florida;

(d) compliance with all applicable Environmental Laws.

SECTION 7.1.4. Vessels . The Borrower will (or will cause the applicable Principal Subsidiary to):

(b) cause each Vessel to be kept in such condition as will entitle her to classification by a classification society of recognized standing.

(a) Indebtedness secured by Liens of the type described in Section 7.2.3 ;

(b) Indebtedness owing to the Borrower or a wholly owned direct or indirect Subsidiary of the Borrower;

(c) Indebtedness incurred to finance, refinance or refund the cost (including the cost of construction) of assets acquired after the Closing Date; and

(d) Indebtedness in an aggregate principal amount not to exceed the amount specified therefor in Section 7.2.3(c) at any time outstanding.

(a) Liens on the vessels CENTURY, GALAXY, SUMMIT and BRILLIANCE OF THE SEAS existing as of the Effective Date and securing the Existing Debt (and any Lien on CENTURY, GALAXY, SUMMIT or BRILLIANCE OF THE SEAS securing any refinancing of the Existing Debt, so long as such Vessel was subject to a Lien securing the Indebtedness being refinanced immediately prior to such refinancing);