Vessel Conversion Agreement Dated 8/20/99

VESSEL CONVERSION AGREEMENT


HULL NUMBER: S-137


MAXIMUM PRICE: $6,454,432.00


REDELIVERY DATE: March 21, 2000 at Langley, Washington


CONTRACT


This Agreement entered into as of the 20th day of August 1999


BETWEEN


NICHOLS BROTHERS BOAT BUILDERS, INC.
(hereinafter called "BUILDER").


AND


THE DELTA QUEEN STEAMBOAT CO.
(hereinafter called "OWNER").


WITNESSETH:


ARTICLE I - SCOPE


A. All dates specified in this Agreement are material and of the essence
unless otherwise stated. Subject to the terms of this Agreement and in
exchange for the payment by OWNER to BUILDER on the Time and Materials
basis hereafter defined but not to exceed the sum of Six Million Four
Hundred Fifty Four Thousand Nine Hundred Four Hundred Thirty Two U.S.
Dollars ($6,454,432.00), BUILDER agrees, at its own risk and expense,
subject to and as qualified by the other terms and conditions of this
Agreement, to complete the scope of conversion work defined herein and
redeliver to OWNER afloat at the redelivery point specified in Article
II-D below, on or before the REDELIVERY DATE specified above, the M/V
Columbia Queen (hereinafter called the "Vessel") converted, outfitted,
trialed and issued a temporary Certificate of Inspection ("COI") by the
United States Coast Guard ("USCG") following ship conversion and outfit
approval by the USCG Marine Safety Center ("MSC") in accordance with
the following defined materials (collectively the "Contract Drawings"):


(1) A preliminary ship construction specification
("Preliminary Ship Construction Specification") prepared by the BUILDER
and agreed to by the OWNER consisting of 27 pages but which excludes
specifying the Interior of the Vessel;


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OWNER: /s/ JBA
BUILDER: /s/ MJN


(2) A package prepared by Hopeman Brothers Marine Interiors
("Hopeman"), a subcontractor of the OWNER whose work and
responsibilities are outside of the BUILDER's scope, agreed to by the
OWNER and BUILDER, to describe the Interior of the Vessel consisting of
74 pages of drawings and narrative matter amounting to an additional 12
pages (the "Interior Specification"), and when the capitalized work
"Interior" is used hereafter, it shall mean the Interior of the Vessel
as is defined in the Interior Specification;


(3) A preliminary and unfinalized general arrangement drawing
prepared by Rodney E. Lay & Associates (the "Architects"), the OWNER's
naval architects, and a drawing of the transverse sections prepared by
Andrea Piacentiai (together 5 pages called the "Preliminary GA");


(4) Additional technical drawings and accompanying technical
narrative explanation as yet unprepared by the Architects in final form
but which are listed in a 14 page writing for the conversion of the
Vessel and for all of its systems and outfit excluding the Interior to
be completed by the OWNER's Architects and agreed with the BUILDER
under paragraph D(1) of this Article I and when so prepared to be known
as the "Architects Technical Conversion Plans"; and


(5) A complete and final specification for the conversion and
outfit including systems of the Vessel excluding the Interior (the
"Final Ship Construction Specification"), as yet unprepared but to be
completed by the BUILDER and agreed with the OWNER under paragraph C of
this Article I.


A true and complete copy of the Preliminary Ship Construction
Specification, the Interior Specification, the Preliminary GA and the
writing listing the drawings to be the Architects Technical Conversion
Plans have been certified by the parties by initialing each page
thereof and reflecting the date of certification as concurrent with
execution of this Agreement and are sometimes referred to collectively
hereafter as the Preliminary Conversion Scope. The Architects Technical
Conversion Plans and the Final Ship Construction Specification when
completed shall be likewise certified and when so completed, approved
and certified shall together with the Interior Specification be
sometimes collectively referred to hereafter as the Final Conversion
Scope. Should Hopeman later prepare and the OWNER and BUILDER both
assent to a more detailed specification and description of the Interior
than that certified as of the date of this Agreement, then such later
and more detailed matter shall be reduced to writing, referred to
thereafter as the Final Interior Specification and considered within
the Final Conversion Scope, and be likewise certified.


Any Additional Work required of the BUILDER in the Architects Technical
Conversion Plans or in any such Final Interior Specification which is
additional to work required of or the capacity of systems to be
supplied by the BUILDER under the Preliminary Ship Construction
Specification and considering the Interior Specification certified as
of the date of this Agreement (specifically including, without
limitation, increased main


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OWNER: /s/ JBA
BUILDER: /s/ MJN


propulsion plant, electrical power generation requirements, or
increased HVAC system cooling or heating requirements) will be subject
to the provisions of Article VII hereof.


B. OWNER shall at the times hereafter specified pay BUILDER (i) the sum of
USD ___ per hour for all production and shipyard production management
and engineering time spent on the Vessel under this Agreement; (ii) the
BUILDER's actual cost (including freight and insurance in transit) to
purchase all materials, equipment, systems and to pay all subcontract
and professional work together with a markup of ___ thereon; and (iii)
the premiums for the builder's risk and ship repairer's liability
insurance coverages required of the BUILDER together with no markup;
all not to exceed $6,454,432 (the "Maximum Price") unless the Maximum
Price is increased pursuant to Article VII hereof. The BUILDER's scope
of work within the Maximum Price and presently defined in the
Preliminary Ship Construction Specification includes an allowance of
________ for types of support work identified in the Preliminary Ship
Construction Specification on the part of the BUILDER for Hopeman's
construction and installation of the Interior (hereafter the "Hopeman
Builder Support Allowance"). If the final total of the Builder's
charges under subclauses (i) through (iii) in this paragraph B upon
Redelivery including the net expense of all changes under Article VII
(the "Final Price") is less than the Maximum Price, the savings shall
be shared equally by OWNER and BUILDER and the amount of the Article
IV-B Redelivery Payment shall be adjusted accordingly. For the
avoidance of doubt, the OWNER may not assert that BUILDER having
accomplished one particular budgeted area of its work (such as, for
example, piping) for less than the BUILDER's budgeted sum for such area
operates, taken alone, to amount to a saving below the Maximum Price.
To the contrary, the Final Price is measured and computed as provided
in this paragraph and Article and under Article VII as a single
aggregate number for all BUILDER work, then to be measured as a single
Final Price number against the Maximum Price.


C. BUILDER agrees to furnish a suitable location at its shipyard for the
conversion of the Vessel, and all labor, tools, equipment, materials,
services and fees necessary for the conversion of said Vessel, except
for the construction and installation and outfit of the Interior and
except as otherwise indicated in the Preliminary or Final Conversion
Scope. BUILDER agrees by not later than September 10, 1999, to complete
and furnish to OWNER, for OWNER'S approval to be given or withheld
within ten days of receipt thereof, and not to be withheld
unreasonably, the Final Ship Construction Specification. The Final Ship
Conversion Specification shall, except for any additional work not
identified in the Preliminary Conversion Scope but identified by the
BUILDER, OWNER or any regulatory body as necessary for USCG or U.S.
Public Health Service ("USPHS") regulatory approvals and agreed to by
both BUILDER and OWNER (which shall be deemed "Additional Work"),
comport with the scope and quality and extent of conversion, outfit and
finish work for the Vessel presently defined in The Preliminary Ship
Construction Specification and the Preliminary GA and be consistent
with the Vessel's system performance requirements derived from the
Interior Specification (as distinguished from the Final Interior
Specification); and shall comply with and be to a level of detail
adequate for USCG MSC and USPHS regulatory approval for an overnight
USCG Subchapter H vessel restricted to operate in protected harbors and
navigable


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BUILDER: /s/ MJN


inland waterways excepting the Great Lakes. Work by the BUILDER under
this Agreement is based on the understanding that the OWNER intends to
operate the Vessel east of Astoria in the Columbia/Snake/Willamette
system.


D. (1) OWNER agrees to furnish, through the Architects selected and
engaged by Owner, to BUILDER for BUILDER'S approval, to be given or
withheld within ten days of receipt thereof, and not to be withheld
unreasonably, by September 10, 1999, the entirety of the Architects
Technical Conversion Plans completed to preliminary design level or to
any greater level of detail necessary for USCG MSC and USPHS regulatory
approval for an overnight USCG Subchapter H vessel restricted to
operate in navigable inland waterways east of Astoria in the
Columbia/Snake/Willamette system. Although the Interior Specification
and not the Architects Technical Conversion Plans will specify the
Interior, it shall be the responsibility of the Architects to include
in the Architects Technical Conversion Plans such fire load and other
safety aspects of the Interior as may be required by USCG for the USCG
approvals sought. The Architects Technical Conversion Plans shall,
except for any Additional Work identified by the Architects as
necessary for USCG or USPHS Vessel regulatory approvals (which shall be
included but noted as Additional Work), comport with the scope and
quality and extent of conversion, outfit and finish work for the Vessel
and her Interior presently defined in the Preliminary Conversion Scope
and shall comply with the requirements of the USCG and USPHS for
approval of an overnight USCG Subchapter H vessel to operate in
navigable inland waterways east of Astoria in the
Columbia/Snake/Willamette system. The OWNER and the Architects shall be
solely responsible to provide in the Architects Technical Conversion
Plans, and otherwise to notify the BUILDER in writing, of any changes
or measures not already provided for in the Preliminary Conversion
Scope which the OWNER desires or requires for accesses and measures
responsive to such if any of the ADA Accessibility Guidelines as may be
applicable to the Vessel and which, if so identified in the Architects
Technical Conversion Plans or otherwise, shall be subject to the
provisions of Article VII hereof together with any Additional Work
identified in the Architects Technical Conversion Plans. The BUILDER
shall have no responsibility for compliance with the ADA except to
faithfully perform and not deviate from the scope of work identified in
this Agreement. It shall be the responsibility of OWNER and the
Architects to apply and pay all fees for and make all necessary
submissions to USCG for MSC approval; but it shall be the
responsibility of BUILDER to furnish timely to OWNER or the Architects
all matters required of the BUILDER under this Agreement which are
necessary to support such USCG MSC approval process.


(2) Utilizing the Preliminary Conversion Scope documents and when
completed and certified the Final Conversion Scope documents, BUILDER
shall be responsible within the Maximum Price to prepare all Production
Drawings which are necessary or useful for the personnel and vendors
and subcontractors of the BUILDER to complete timely the conversion by
the Redelivery Date in accordance with the Final Conversion Scope,
except that this responsibility does not extend to preparing Production
Drawings for Hopeman's work to construct the Interior. The BUILDER
shall furnish any and all to-then completed Production Drawings
requested by OWNER or the Architects to assist in any USCG MSC or other
reviews, and BUILDER shall upon Redelivery furnish one copy


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OWNER: /s/ JBA
BUILDER: /s/ MJN


of all Production Drawings to the OWNER. BUILDER shall in addition be
responsible to prepare drawings which reflect the Vessel and all of her
converted systems as actually constructed, except for the Interior (the
"As-Built Drawings"), and shall furnish to OWNER upon Redelivery one
copy of the As-Built Drawings as are to-then completed and two copies
of all of the final As-Built Drawings within 90 days after Redelivery.


(3) If the Final Conversion Scope increases the amount of the Hopeman
Builder Support Allowance or the OWNER determines to have it include
any other contingency factor, the same shall be identified and the
Maximum Price shall be increased accordingly. In such event the cost of
any changes under Article VII shall not further increase the adjusted
Maximum Price unless, if at all, aggregate costs of changes net of
changes which decrease cost under Article VII exceed the amount of the
increased allowance and/or any such added contingency factor.


E. BUILDER will provide and install ready for use all parts, equipment
and appurtenances shown in the Final Conversion Scope and including
such OWNER Furnished Items as are identified in the Final Conversion
Scope but excepting all parts, equipment and appurtenances in the
Interior Specification. The OWNER shall supply the OWNER Furnished
Items identified in the Final Conversion Scope by the dates for the
same listed in the Final Conversion Scope (or such other dates as may
be later agreed in writing between OWNER and BUILDER). BUILDER shall
store, safeguard and handle all OWNER Furnished Items both prior to and
after placement on board and BUILDER shall allow sufficient working
area and time to allow the timely and safe installation of equipment
and loading of supplies by Redelivery.


F. BUILDER will allow OWNER and the OWNER Representative at all reasonable
times to examine the Vessel during conversion. The rights to inspect,
if and when exercised, shall not be deemed a waiver of BUILDER's
responsibilities hereunder, subject to the terms of Article XIII-B.


G. BUILDER shall, by not later than September 10, 1999, provide to
OWNER in writing for approval within five (5) business days, not to be
withheld unreasonably, an initial Construction Schedule. The
Construction Schedule shall be updated by BUILDER every thirty (30)
days thereafter if necessary to reflect changed circumstances as a
result of the Architects Technical Conversion Plans, any Final Interior
Specification, Additional Work, or changes or events otherwise arising
under Articles V or VII hereof. Any such updates to the Completion
Schedule shall identify any changes reasonably required from dates in
the Final Conversion Scope required for delivery by OWNER to BUILDER of
OWNER Furnished Items. It shall be the responsibility of OWNER to
insure that the construction and installation activities of Hopeman do
not interfere with so as to delay the BUILDER's ability to meet the
Construction Schedule. It shall be the responsibility of BUILDER timely
to provide the support in the Hopeman Builder Support Allowance and to
in good faith cooperate with the OWNER and its contractors.


H. BUILDER will do all work hereunder in a good and workman-like manner in
accordance with the Final Conversion Scope (and, in the interim, the
Preliminary Conversion Scope).


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OWNER: /s/ JBA
BUILDER: /s/ MJN


All material and equipment shall be in accordance with the Final
Conversion Scope (and, in the interim, the Preliminary Conversion
Scope).


I. Any dispute between OWNER and BUILDER as to whether the Builder has
legitimately identified Additional Work in the Final Ship Construction
Specification or whether either party has reasonably or unreasonably
withheld their approval under paragraphs C, D(1) or G of this Article I
shall be determined summarily pursuant to paragraph B of Article XI
hereof.


ARTICLE II - DELIVERY & REDELIVERY


A. OWNER shall, at its own expense and risk, transport and deliver the
Vessel afloat on her own bottom positioned above BUILDER's launch/haul
submerged apparatus to the BUILDER close inshore within Holmes Harbor
for conversion in accordance with the terms and conditions of this
Agreement to so arrive at the facility of the BUILDER no later than
September 21, 1999, and by such date the OWNER shall have performed the
OWNER's scope and extents of removal and preparatory work upon and
within the Vessel as are specified in the Preliminary Conversion Scope.
Upon delivery, the OWNER and the BUILDER shall execute a certificate of
delivery and release.


B. The BUILDER shall, at its own expense and risk, receive, store,
protect, and install aboard the Vessel all Owner Furnished Items
identified by the Final Conversion Scope (or, in the interim, the
Preliminary Conversion Scope). The BUILDER shall be liable to the OWNER
for any damage or loss of OWNER Furnished Items occurring during the
BUILDER's custody thereof except as otherwise provided in this
Agreement.


C. BUILDER agrees, subject to the other provisions of this Agreement, to
complete the conversion excepting the Interior and to redeliver the
Vessel to OWNER free and clear of all liens, claims and encumbrances,
except any arising by or through OWNER (including any of OWNER's
subcontractors and/or vendors); and OWNER agrees to accept Redelivery
and pay all unpaid sums due to the BUILDER under this Agreement upon
completion of conversion of the Vessel, satisfactory trials specified
in the Final Conversion Scope ("Trials"), and issuance of USCG
regulatory approvals for the Vessel as converted and a temporary COI
for her operation. It shall be the responsibility of the OWNER and not
the BUILDER to create and submit the Architects Technical Conversion
Plans to levels of detail and having content acceptable to MSC and
USCG, to specify and construct and install the Interior to levels and
in manners (including by selecting materials relative to fire load
calculations) likewise acceptable to MSC and USCG, and to demonstrate
to USCG the compliance and qualification of its crew and any of its
management and training and monitoring systems and facilities relating
to the Vessel which are necessary for issuance of the COI
(collectively, the "OWNER Regulatory Responsibilities"). If lack of
qualification, compliance or demonstration under the immediately
preceding sentence or if delay or default by OWNER or its Architects or
Hopeman under such OWNER Regulatory Responsibilities is the cause which
prevents one or more such issuances, OWNER shall pay BUILDER the
Redelivery


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OWNER: /s/ JBA
BUILDER: /s/ MJN


Payment notwithstanding the absence of such USCG regulatory approvals
and notwithstanding that a temporary or permanent COI has not been
issued.


D. BUILDER agrees to redeliver the Vessel to OWNER in accordance with this
Agreement at BUILDER's berth at Langley, Washington, safely afloat,
following satisfactory completion of Trials, on or before the
Redelivery Date specified on page 1 of this Agreement or such later
date as may be allowed by reason of changes in the Vessel under Article
VII hereof or Permitted Delays under Article V hereof.


E. The Vessel shall be inspected by OWNER at BUILDER's shipyard and during
Trials. BUILDER shall execute a Certificate of Completion and
Redelivery in a form reasonably acceptable to OWNER which certifies
compliance with and full performance of the obligations of the BUILDER
under this Agreement at the time of Redelivery for such Vessel. OWNER
shall accept the Vessel if it is completed in accordance with the Final
Conversion Scope and any changes performed in accordance with Article
VII hereof.


F. In the event that any work required of the BUILDER under this
Agreement is not in fact completed at the time BUILDER tenders the
Certificate of Completion and Redelivery, OWNER, shall have the option,
if it in its sole discretion deems the Vessel fit for service, to take
Redelivery of the Vessel and treat all "unfinished work" as a warranty
obligation of the BUILDER under Article IX. In that event, Builder's
Certificate of Completion and Redelivery shall specify all unfinished
work. The parties shall agree as to the amount to be withheld from the
Redelivery Payment and the Vessel shall be redelivered to OWNER upon
OWNER paying the undisputed amount to BUILDER and by withholding the
amount for "unfinished work" until such time that BUILDER completes the
"unfinished work" and OWNER accepts the "unfinished work" as complete.
BUILDER shall invoice OWNER for completion of "unfinished work" and,
provided the work meets the standards of the Final Conversion Scope,
OWNER shall, within ten (10) days of receipt of invoice, pay BUILDER.
If OWNER does not exercise such option, BUILDER shall completely finish
all contract work.


G. BUILDER shall furnish OWNER on redelivery of the Vessel a Bill of
Sale for the Vessel excepting the Interior, together with an assignment
of all warranties by makers and manufacturers and the originals of all
such warranties, and with such other documents as may be required by
law or by any other regulatory agency of the United States having
jurisdiction in the premises in order for OWNER to redocument the
Vessel (excepting that BUILDER has no such responsibility relating to
the Interior); and will assist OWNER, or its agent, in acquiring all
required information to enable OWNER to obtain all documentation
necessary to operate the Vessel as intended. However, it is understood
that the required USCG approved drawings, the Interior and the OWNER
Regulatory Responsibilities are the responsibility of the OWNER and/or
the Architects and/or Hopeman. Any expense in connection with
documentation of the Vessel shall be paid by OWNER.


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OWNER: /s/ JBA
BUILDER: /s/ MJN


ARTICLE III - DOWN PAYMENT


Before the date of this Agreement OWNER paid BUILDER the sum of
$150,000 US dollars towards the OWNER down payment. Concurrent with the
execution of this Agreement, OWNER shall pay BUILDER by wire transfer
to the bank and account designated by BUILDER the additional sum of
$815,765 which, together with the $150,000 so paid, equals $965,765 or
approximately 15% of the Maximum Price.


ARTICLE IV - SUBSEQUENT PAYMENTS


A. OWNER agrees to pay to BUILDER by wire transfer at the place and in the
manner specified in preceding Article III-A the following additional
Interim Installment Payments for such Vessel:


(i) 15% ($965,765) on September 2, 1999 provided that, by such date,
the Vessel has been hauled at BUILDER's ya ...