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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
STEINER LEISURE LIMITED
(Exact name of Registrant as Specified in its Charter)
COMMISSION FILE NUMBER : 0-28972
COMMONWEALTH OF THE BAHAMAS 98-0164731
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
SUITE 104A, SAFFREY SQUARE
NASSAU, THE BAHAMAS NOT APPLICABLE
(Address of principal executive offices) (Zip Code)
(242) 356-0006
(Registrant's telephone number, including area code)
----------------------------------------------------------
(Former name, former address and former
fiscal year, if changed since last report)
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. [ X ] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
CLASS OUTSTANDING
Common Shares, par value (U.S.) $.01 10,799,990 shares as of
per share November 13, 1997
<PAGE>
STEINER LEISURE LIMITED
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets as of December 31, 1996
and September 30, 1997 (Unaudited)............................. 3
Condensed Consolidated Statements of Operations for the Three
and Nine Months ended September 30, 1996 (Unaudited) and
September 30, 1997 (Unaudited)................................. 4
Condensed Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 1996 (Unaudited) and September 30,
1997 (Unaudited)............................................... 5
Notes to Condensed Consolidated Financial Statements
(Unaudited).................................................... 6
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................... 8
PART II. OTHER INFORMATION
ITEM 2. Changes in Securities and Use of Proceeds...................... 13
ITEM 6. Exhibits and Reports on Form 8-K............................... 14
SIGNATURES............................................................. 15
EXHIBIT INDEX.......................................................... 16
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STEINER LEISURE LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, September 30,
ASSETS 1996 1997
------ ------------- -------------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $13,625,000 $ 9,773,000
Marketable securities - 10,370,000
Accounts receivable 3,413,000 3,255,000
Inventories 5,232,000 4,627,000
Other current assets 810,000 1,113,000
----------- ----------
Total current assets 23,080,000 29,138,000
PROPERTY AND EQUIPMENT, net 2,211,000 2,229,000
INTANGIBLE ASSETS, net 1,111,000 -
OTHER ASSETS 254,000 558,000
----------- -----------
Total assets $26,656,000 $31,925,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 2,041,000 $ 1,610,000
Accrued expenses 3,732,000 5,171,000
Current portion of capital lease obligations 106,000 83,000
Current maturities of long-term debt 217,000 -
Income taxes payable 4,389,000 654,000
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Total current liabilities 10,485,000 7,518,000
----------- -----------
CAPITAL LEASE OBLIGATIONS, net of current
portion 91,000 47,000
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COMMITMENTS
SHAREHOLDERS' EQUITY:
Preferred shares, $.01 par value;
10,000,000 shares authorized, none
issued and outstanding - -
Common shares, $.01 par value;
20,000,000 shares authorized,
and 10,800,000 shares issued and
outstanding at December 31, 1996
and September 30, 1997 108,000 108,000
Additional paid-in capital 10,496,000 10,503,000
Foreign currency translation adjustment 218,000 76,000
Retained earnings 5,258,000 13,674,000
Unrealized loss on investments - (1,000)
----------- -----------
Total shareholders' equity 16,080,000 24,360,000
----------- -----------
Total liabilities and shareholders' equity $26,656,000 $31,925,000
=========== ===========
The accompanying notes to condensed consolidated
financial statements are an integral part of these balance sheets.
<PAGE>
STEINER LEISURE LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
1996 1997 1996 1997
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
REVENUES:
Services $11,297,000 $13,307,000 $32,098,000 $36,944,000
Products 6,833,000 8,826,000 19,293,000 24,929,000
----------- ----------- ----------- -----------
Total revenues 18,130,000 22,133,000 51,391,000 61,873,000
----------- ----------- ----------- -----------
COST OF SALES:
Cost of services 8,538,000 10,342,000 24,537,000 28,975,000
Cost of products 4,837,000 6,045,000 14,092,000 17,009,000
----------- ----------- ----------- -----------
Total cost of sales 13,375,000 16,387,000 38,629,000 45,984,000
----------- ----------- ----------- -----------
Gross profit 4,755,000 5,746,000 12,762,000 15,889,000
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Administrative 907,000 989,000 2,249,000 2,828,000
Salary and payroll taxes 1,015,000 1,102,000 2,805,000 3,261,000
Amortization of intangibles 620,000 - 1,858,000 1,089,000
----------- ----------- ----------- -----------
Total operating expenses 2,542,000 2,091,000 6,912,000 7,178,000
----------- ----------- ----------- -----------
Income from operations 2,213,000 3,655,000 5,850,000 8,711,000
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest income 13,000 246,000 50,000 608,000
Interest expense (74,000) (4,000) (252,000) (12,000)
----------- ----------- ----------- -----------
Total other income (expense) (61,000) 242,000 (202,000) 596,000
----------- ----------- ----------- -----------
Income before provision
for income taxes 2,152,000 3,897,000 5,648,000 9,307,000
PROVISION FOR INCOME TAXES 433,000 419,000 1,412,000 891,000
----------- ----------- ----------- -----------
NET INCOME $ 1,719,000 $ 3,478,000 $ 4,236,000 $ 8,416,000
=========== =========== =========== ===========
NET INCOME PER SHARE $ 0.18 $ 0.31 $ 0.44 $ 0.76
=========== =========== =========== ===========
WEIGHTED AVERAGE SHARES
OUTSTANDING 9,558,000 11,115,000 9,558,000 11,062,000
=========== =========== =========== ===========
The accompanying notes to condensed consolidated
financial statements are an integral part of these statements.
</TABLE>
<PAGE>
STEINER LEISURE LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
(Unaudited)
Nine Months Ended
September 30,
-----------------------------
1996 1997
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,236,000 $ 8,416,000
Adjustments to reconcile net income to
net cash provided by operating activities-
Depreciation and amortization 2,271,000 1,617,000
Accretion of debt discount 114,000 -
Share options issued to nonemployees - 7,000
(Increase) decrease in-
Accounts receivable 1,520,000 82,000
Inventories (1,726,000) 498,000
Other current assets (36,000) (308,000)
Other assets (1,179,000) (299,000)
Increase (decrease) in-
Accounts payable 432,000 (392,000)
Accrued expenses 159,000 1,458,000
Income taxes payable - (3,690,000)
------------ ------------
Net cash provided by operating
activities 5,791,000 7,389,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments - (10,371,000)
Capital expenditures (6,000) (552,000)
Acquisitions, net of cash acquired 105,000 -
Advances to related parties (2,689,000) -
Collection of advances to related parties 202,000 -
------------ ------------
Net cash used in investing activities (2,388,000) (10,923,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capital lease obligations (37,000) (63,000)
Payments on long-term debt (1,904,000) (217,000)
Payments on advances from related parties (1,092,000) -
------------ ------------
Net cash used in financing activities (3,033,000) (280,000)
------------ ------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH - (38,000)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 370,000 (3,852,000)
CASH AND CASH EQUIVALENTS, beginning of period 1,397,000 13,625,000
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 1,767,000 $ 9,773,000
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for-
Interest $ 126,000 $ 12,000
============ ============
Income taxes $ 875,000 $ 4,579,000
============ ============
The accompanying notes to condensed consolidated
financial statements are an integral part of these statements.
<PAGE>
STEINER LEISURE LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) BASIS OF PRESENTATION OF INTERIM CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS:
The unaudited condensed consolidated statements of operations for the three and
nine months ended September 30, 1996 and 1997 reflect, in the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to fairly present the results of operations for the interim periods.
The results of operations for any interim period are not necessarily indicative
of results for the full year.
The year-end balance sheet data was derived from audited financial statements,
but does not include all disclosures required by generally accepted accounting
principles. The unaudited interim condensed consolidated financial statements
should be read in conjunction with the audited consolidated financial statements
included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996.
(2) ORGANIZATION:
Steiner Leisure Limited (including its subsidiaries where the context requires,
the "Company") and subsidiaries provide spa services and skin and hair care
products to passengers on board cruise ships worldwide. The Company,
incorporated in the Bahamas, commenced operations effective November 1995 with
the contributions of substantially all of the assets and certain of the
liabilities of the Maritime Division (the "Maritime Division") of Steiner Group
Limited, now known as STGR Limited ("Steiner Group"), a U.K. company and an
affiliate of the Company, and all of the outstanding common stock of Coiffeur
Transocean (Overseas), Inc. ("CTO"), a Florida corporation and a wholly owned
subsidiary of Steiner Group. The contributions of the net assets of the Maritime
Division and CTO were recorded at historical cost in a manner similar to a
pooling of interests.
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(A) MARKETABLE SECURITIES-
Marketable securities consist of investment grade commercial paper. The Company
accounts for marketable securities in accordance with Financial Accounting
Standards Board Statement No. 115, "Accounting for Certain Investments in Debt
and Equity Securities" and, accordingly, all such instruments are classified as
"available for sale" securities which are reported at fair value, with
unrealized gains and losses reported as a separate component of shareholders'
equity. As of September 30, 1997, the carrying value of marketable securities
approximates fair value.
(B) AMORTIZATION-
Intangible assets were amortized on a straight-line basis over a 3 year period
ended June 1, 1997. This period represented the approximate remaining life of
the acquired intangible assets of CTO, its concession agreements with cruise
lines.
<PAGE>
(C) INCOME TAXES-
The Company files separate tax returns for its domestic subsidiaries. In
addition, the Company's foreign subsidiaries file income tax returns in their
respective countries of incorporation, where required. The Company follows
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). SFAS No. 109 utilizes the liability method and deferred
taxes are determined based on the estimated future tax effects of differences
between the financial statement and tax bases of assets and liabilities given
the provisions of enacted tax laws. SFAS No. 109 permits the recognition of
deferred tax assets. Deferred income tax provisions and benefits are based on
the changes to the asset or liability from period to period.
In November 1996, the Company liquidated CTO. As a result, CTO's functions were
assumed by the Company and its cruise line agreements were assigned to the
Company. The liquidation of CTO was a taxable transaction for income tax
purposes. CTO was treated as if it had sold all of its assets at fair value on
the date of distribution of these assets to the Company. Based on the value of
the assets of CTO as determined by an independent appraiser, the Company has
estimated that CTO's income tax liability resulting from the liquidation is
approximately $3.2 million. The entire $3.2 million estimated tax liability was
paid during the first quarter of 1997.
(D) TRANSLATION OF FOREIGN CURRENCIES-
Assets and liabilities of foreign subsidiaries are translated at the rate of
exchange in effect at the balance sheet date; income and expenses are translated
at the average rates of exchange prevailing during the year. The related
translation adjustments are reflected in the accumulated translation adjustment
section of the consolidated balance sheets. Foreign currency gains and losses
resulting from transactions, including intercompany transactions, are included
in results of operations.
(4) ACCRUED EXPENSES:
Accrued expenses consist of the following:
December 31, September 30,
1996 1997
------------ -------------
(Unaudited)
Operative commissions $ 963,000 $ 1,017,000
Guaranteed minimum rentals 1,333,000 1,542,000
Bonuses 440,000 558,000
Staff shipboard accommodations 163,000 209,000
Other 833,000 1,845,000
------------ -----------
$ 3,732,000 $ 5,171,000
============ ===========
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
Steiner Leisure Limited is the leading provider of spa services and skin
and hair care products on board cruise ships worldwide. The Company, through its
predecessors, commenced operations on board cruise ships approximately 35 years
ago. Pursuant to cruise line concession agreements, the Company sells its
services and products to cruise passengers in return for payments to cruise
lines, which payments are based on a percentage of revenues or a minimum annual
rental or a combination of both. Certain cruise line concession agreements
provide for increases in the percentage of services and products revenues
payable as rent payments and/or, as the case may be, the amount of minimum
annual rental payments over the terms of such agreements. Rental payments may
also be increased under new agreements with cruise lines that replace expiring
agreements. In general, the Company has experienced increases in rental payments
upon entering into new agreements with cruise lines.
The Company is a Bahamian IBC. The Bahamas does not tax Bahamian IBCs. The
Company believes that income from its maritime operations will be foreign source
income, which will not be subject to United States or United Kingdom taxation.
More than 72% of the Company's income for the first nine months of 1997 is not
subject to United States or United Kingdom income tax. To the extent that the
Company's income from non-maritime operations increases at a rate in excess of
any increase in its maritime-related income, the percentage of the Company's
income subject to tax would increase. A United States subsidiary of the Company
provides administrative services to the maritime operations, and its earnings
from such activities will generally be subject to U.S. federal income tax at
regular corporate rates (generally up to 35%) and is subject to additional state
taxes and may be subject to local income, franchise and other taxes. Earnings
from Steiner Training Limited and Elemis Limited, United Kingdom subsidiaries of
the Company which accounted for a total of 19% of the Company's pre-tax income
for the first nine months of 1997, will be subject to U.K. tax rates (generally
up to 33%).
EARNINGS PER SHARE. Statement of Financial Accounting Standards No. 128,
"Earnings per Share" ("SFAS 128"), requires the disclosure of basic and diluted
earnings per share for periods ending after December 15, 1997. The computation
under SFAS No. 128 differs from the primary and fully diluted earnings per share
computed under APB Opinion No. 15 primarily in the manner in which potential
common stock is treated. Basic earnings per share is computed by dividing net
income by the weighted-average number of common shares outstanding. In the
computation of diluted earnings per share, the weighted-average number of common
shares outstanding is adjusted for the effect of all potential common stock. The
Company does not expect the adoption of this pronouncement to materially impact
earnings per share.
Effective October 24, 1997, the Board of Directors of the Company approved
a 3 for 2 share split, effected as a share dividend, effective for shareholders
of record as of October 13, 1997. All per share data presented has been
retroactively adjusted to give effect to the 3 for 2 share split.
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated, certain selected
income statement data expressed as a percentage of revenues:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
1996 1997 1996 1997
------- ------- ------- -------
Revenues:
Services............................ 62.3% 60.1% 62.5% 59.7%
Products............................ 37.7 39.9 37.5 40.3
------- ------- ------- -------
Total revenues.................... 100.0 100.0 100.0 100.0
------- ------- ------- -------
Cost of sales:
Cost of services.................... 47.1 46.7 47.7 46.8
Cost of products.................... 26.7 27.3 27.4 27.5
------- ------- ------- -------
Total cost of sales............... 73.8 74.0 75.1 74.3
------- ------- ------- -------
Gross profit 26.2 26.0 24.9 25.7
Operating expenses:
Administrative...................... 5.0 4.5 4.4 4.5
Salary and payroll taxes............ 5.6 5.0 5.5 5.3
Amortization of intangibles......... 3.4 - 3.6 1.8
------- ------- ------- -------
Total operating expenses.......... 14.0 9.5 13.5 11.6
------- ------- ------- -------
Income from operations............ 12.2 16.5 11.4 14.1
Other income (expense)................. (0.3) 1.1 (0.4) 0.9
------- ------- ------- -------
Income before provision for
income taxes........................ 11.9 17.6 11.0 15.0
Provision for income taxes............. 2.4 1.9 2.7 1.4
------- ------- ------- -------
Net income............................. 9.5% 15.7% 8.3% 13.6%
======= ======= ======= =======
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1996
REVENUES. Revenues increased approximately 22.1%, or $4.0 million, to
$22.1 million in the third quarter of 1997 from $18.1 million in the third
quarter of 1996. Of this increase, $2.0 million was attributable to increases in
services provided on cruise ships and $2.0 million was attributable to increases
in sales of products. The increase in revenues for the third quarter of 1997
compared to the third quarter of 1996 was primarily attributable to an increase
of five in the average number of ships in service with enhanced large spa
facilities, which generated greater aggregate revenues to the Company than the
aggregate revenues generated by the five non-spa ships on average which the
Company served in the third quarter of 1996, but did not serve in the third
quarter of 1997. The Company had 778 shipboard staff members in service on
average in the third quarter of 1997 compared to 708 shipboard staff members in
service on average in the third quarter of 1996. Revenues per staff per day
increased by 10.3% in the third quarter of 1997 compared to the third quarter of
1996.
COST OF SERVICES. Cost of services as a percentage of services revenue
increased to 77.7% in the third quarter of 1997 from 75.6% in the third quarter
of 1996. This increase was due to increases in rent allocable to services on
cruise ships covered by agreements which were renewed in 1996 and became
effective in the first quarter of 1997. This increase was partially offset by
increases in productivity of onboard staff during the third quarter of 1997
compared to the third quarter of 1996 as well as increased revenues on ships
where the Company is subject to minimum annual rental payments.
COST OF PRODUCTS. Cost of products as a percentage of products revenue
decreased to 68.5% in the third quarter of 1997 from 70.8% in the third quarter
of 1996. This decrease was due to increases in productivity of onboard staff
during the third quarter of 1997 compared to the third quarter of 1996 as well
as increased revenues on ships where the Company is subject to minimum annual
rental payments. This decrease was partially offset by increases in rent
allocable to products sales on cruise ships covered by agreements which were
renewed in 1996 and became effective in the first quarter of 1997.
<PAGE>
OPERATING EXPENSES. Operating expenses as a percentage of revenues
decreased to 9.5% in the third quarter of 1997 from 14.0% in the third quarter
of 1996 as a result of the increase in aggregate revenues generated from the
additional ships in service with enhanced large spa facilities during the third
quarter of 1997 over the aggregate revenues generated from non-spa ships in
service during the third quarter of 1996, which were not in service in the third
quarter of 1997. Additionally, operating expenses as a percentage of revenues
decreased due to a decrease in goodwill amortization as a result of the related
intangible assets becoming fully amortized during the second quarter of 1997.
PROVISION FOR INCOME TAXES. The provision for income taxes decreased to an
overall effective rate of 10.8% for the third quarter of 1997 from an overall
effective rate of 20.1% for the third quarter of 1996 due to the tax savings
realized as a result of the liquidation of CTO in the fourth quarter of 1996.
Without the amortization of intangibles and interest, the overall effective rate
for the three months ended September 30, 1997 would have been 10.8% compared to
15.3% for the three months ended September 30, 1996.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1996
REVENUES. Revenues increased approximately 20.4%, or $10.5 million, to
$61.9 million for the nine months ended September 30, 1997 from $51.4 million
for the nine months ended September 30, 1996. Of this increase, $4.9 million was
attributable to increases in services provided on cruise ships and $5.6 million
was attributable to increases in sales of products. The increase in revenues for
the first nine months of 1997 compared to the same period in the prior year was
primarily attributable to an increase of six in the average number of ships in
service with enhanced large spa facilities, which generated greater aggregate
revenues to the Company than the aggregate revenues generated by the seven
non-spa ships on average which the Company served during the first nine months
of 1996, but did not serve during the comparable period of 1997. The Company had
750 shipboard staff members in service on average during the nine months ended
September 30, 1997 compared to 689 shipboard staff members in service on average
during the nine months ended September 30, 1996. Revenues per staff per day
increased by 11.4% during the first nine months of 1997 compared to the
comparable period of 1996.
COST OF SERVICES. Cost of services as a percentage of services revenue
increased to 78.4% in the first nine months of 1997 from 76.4% for the first
nine months of 1996. This increase was due to an increase in rent allocable to
services on cruise ships covered by agreements which were renewed in 1996 and
became effective in the first quarter of 1997. This increase was partially
offset by increases in productivity of onboard staff during the third quarter of
1997.
COST OF PRODUCTS. Cost of products as a percentage of products revenue
decreased to 68.2% in the first nine months of 1997 from 73.0% for the first
nine months of 1996. This decrease was primarily due to the lower product costs
realized during the entire first nine months of 1997 as compared to the
realization of such lower costs for less than the entire first nine months of
1996 as a result of the Company's acquisition of the "Elemis" and "La Therapie"
product lines in March 1996 (previously supplied to the Company by third
parties), which was partially offset by an increase in rent allocable to
products sales on cruise ships covered by agreements which were renewed in 1996
and became effective in the first quarter of 1997.
OPERATING EXPENSES. Operating expenses as a percentage of revenues
decreased to 11.6% for the first nine months of 1997 from 13.5% for the first
nine months of 1996 as a result of the increase in aggregate revenues generated
from the additional ships in service with enhanced large spa facilities during
the first nine months of 1997 over the aggregate revenues generated from non-spa
ships in service during the first nine months of 1996, which were not in service
during the comparable period of 1997. Additionally, operating expenses as a
percentage of revenues decreased due to a decrease in goodwill amortization as a
result of the related intangible assets becoming fully amortized during the
period. These decreases were partially offset by an increase in administrative
expenses as a percentage of revenues related to compliance with the Company's
reporting obligations under the federal securities laws.
<PAGE>
PROVISION FOR INCOME TAXES. The provision for income taxes decreased to an
overall effective rate of 9.6% for the first nine months of 1997 from an overall
effective rate of 25.0% for the first nine months of 1996 due to the tax savings
realized as a result of the liquidation of CTO in the fourth quarter of 1996.
Without the amortization of intangibles and interest, the overall effective rate
for the nine months ended September 30, 1997 would have been 8.6% compared to
18.4% for the nine months ended September 30, 1996.
SEASONALITY
Although certain cruise lines have experienced moderate seasonality, the
Company believes that the introduction of cruise ships into service throughout a
year has mitigated the effect of seasonality on the Company's results of
operations. In addition, decreased passenger loads during slower months for the
cruise industry has not had a significant impact on the Company's revenues.
However, due to the Company's dependence on the cruise industry, the Company's
revenues may in the future be affected by seasonality.
LIQUIDITY AND CAPITAL RESOURCES
The business of the Company historically has been operated with cash
generated from operations, and borrowed funds have been utilized only for
acquisitions and limited capital expenditures.
In November 1996, the Company issued 1,242,000 (as adjusted to reflect the
3 for 2 share split in October 1997) of its common shares pursuant to the
initial public offering of common shares in November 1996 (the "IPO") (which
also included shares of a selling shareholder), which generated net proceeds of
approximately $9.7 million to the Company. Approximately $3.4 million of the net
proceeds were used to repay the remaining outstanding indebtedness assumed by
the Company in connection with the contribution to the capital of the Company of
the assets of the Maritime Division and the common stock of CTO. During the
first quarter of 1997, approximately $3.2 million of such proceeds were used to
pay the estimated United States federal and state income tax liability incurred
in connection with the liquidation of CTO (the "CTO Tax Payment"). The remaining
net proceeds, in the approximate amount of $3.1 million, will be used for
working capital purposes and have been invested in cash equivalents and high
grade commercial paper.
During the first nine months of 1997, cash flow from operating activities
was $7.4 million (reflecting, among other things, the $3.2 million CTO Tax
Payment), compared to $5.8 million for the first nine months of 1996. At
September 30, 1997, the Company had working capital of approximately $21.6
million compared to $12.6 million at December 31, 1996.
The Company believes that cash generated from operations, together with
the net proceeds received from the IPO, will be sufficient to satisfy its cash
requirements through at least the next twelve months. If the Company were to
engage in any significant acquisition, it may require additional financing from
a third party. The Company currently does not have any agreement with respect to
an acquisition.
INFLATION
The Company does not believe that inflation has had a material adverse
effect on revenues or results of operations. However, public demand for leisure
activities, including cruises, is influenced by general economic conditions,
including inflation. Periods of economic recession or high inflation,
particularly in North America where a number of cruise passengers reside, could
have a material adverse effect on the cruise industry, upon which the Company is
dependent.
<PAGE>
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
From time to time, including herein, the Company may publish
"forward-looking" statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Because such statements involve risks and uncertainties, actual
results may differ materially from those expressed or implied by such
forward-looking statements. Factors that could cause actual results to differ
materially from those expressed or implied by such forward-looking statements
include, but are not limited to, the following: the Company's dependence on
cruise line concession agreements of specified terms and that are terminable by
cruise lines with limited or no advance notice under certain circumstances; the
Company's dependence on the cruise industry and its being subject to the risks
of that industry; the Company's obligation to make certain minimum payments to
certain cruise lines irrespective of the revenues received by the Company from
passengers; the Company's dependence on a limited number of cruise lines and on
a single product manufacturer; the Company's dependence for its success on its
ability to recruit and retain qualified personnel; changes in the non-U.S. tax
status of the Company's principal subsidiary; changing competitive conditions;
changes in laws and government regulations applicable to the Company and the
cruise industry; and product liability or other claims against the Company by
customers of the Company's products or services. The risks to which the Company
is subject are more fully described under "Certain Factors That May Affect
Future Operating Results" in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996, filed with the Securities and Exchange
Commission.
<PAGE>
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On November 12, 1996, the Company's Registration Statement on Form
F-1 under the Securities Act of 1933, as amended, File No. 333-5266, with
respect to the initial public offering of its common shares at a price of
$13.00 per share (the "Offering") was declared effective by the Securities
and Exchange Commission. The Offering commenced on November 13, 1996. A
total of 828,000 common shares (aggregate offering price of $10,764,000)
were registered and sold on behalf of the Company and a total of 4,269,240
common shares (aggregate offering price of $55,500,120) were registered
and sold on behalf of a selling shareholder. The net proceeds to the
Company from the Offering, after deducting total expenses in the amount of
$1,067,613, were $9,696,387. The Offering terminated, and all of the
securities registered in connection therewith were sold. The managing
underwriters of the Offering were Furman Selz LLC and Raymond James &
Associates, Inc.
In connection with the Offering, the Company incurred the following
estimated expenses for the indicated purposes:
Underwriting discounts and
Commissions $753,480
Expenses paid to or for
Underwriters $ 2,265
Other expenses $311,868
The net proceeds to the Company from the Offering have been applied,
through September 30, 1997, in the following amounts toward the indicated
purposes:
Repayment of indebtedness $3,429,661
Payment of federal and state
estimated tax liability $3,231,132
Temporary investment (commercial
paper, AA+ and AAA rated,
through a commercial bank) $3,035,594
The use of proceeds of the Offering described above does not
represent a material change in the use of proceeds described in the
prospectus which formed a part of the Registration Statement.
None of the payments described above, other than those with respect
to repayment of indebtedness, represent direct or indirect payment to
directors, officers, general partners of the issuer or their associates;
persons owning ten percent or more of any class of equity securities of
the issuer; or affiliates of the issuer.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
The exhibits listed below have been filed as part of this Quarterly Report
on Form 10-Q.
3.2 Amended and Restated Articles of Association of Steiner Leisure
Limited
10.13 Form of Option Agreement Under Steiner Leisure Limited Amended
and Restated 1996 Share Option and Incentive Plan For Incentive
Stock Options.(1)
10.14 Form of Option Agreement Under Steiner Leisure Limited Amended and
Restated 1996 Share Option and Incentive Plan For Non-Qualified
Stock Options.(2)
11 Computation of Earnings Per Share
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the Company during the quarter ended
September 30, 1997.
- ------------------
(1) Management contract or compensatory plan or agreement. Executed by Leonard
Fluxman and Amanda Francis in connection with grants of options under the
indicated plan made in November 1996.
(2) Management contract or compensatory plan or agreement. Executed by Clive E.
Warshaw, Michele Steiner Warshaw and Sean Harrington in connection with
grants of options under the indicated plan made in November 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
Dated: November 14, 1997
STEINER LEISURE LIMITED
-----------------------------------
(Registrant)
/S/ CLIVE E. WARSHAW
-----------------------------------
Clive E. Warshaw
Chairman of the Board and Chief
Executive Officer
/S/ LEONARD I. FLUXMAN
-----------------------------------
Leonard I. Fluxman
Chief Operating Officer and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
EXHIBIT 3.2
COMMONWEALTH OF THE BAHAMAS
NEW PROVIDENCE
ADOPTED AS OF JULY 30, 1997
-------------------
AMENDED AND RESTATED
ARTICLES OF ASSOCIATION
OF
STEINER LEISURE LIMITED
Harry B. Sands & Company
Counsel and Attorneys-at-Law
Chambers
Nassau, Bahamas
<PAGE>
The International Business Companies Act
Company Limited by Shares
-------------------
AMENDED AND RESTATED ARTICLES OF ASSOCIATION
OF
STEINER LEISURE LIMITED
PRELIMINARY
1. In these Articles, if not inconsistent with the subject or context, the
words and expressions standing in the first column of the following table shall
bear the meanings set opposite them, respectively, in the second column thereof.
WORDS MEANINGS
the Act The International Business Companies Act 1989
(No. 2 of 1990)
these Articles These Amended and Restated Articles of
Association as originally framed or as from
time to time amended.
capital The sum of the aggregate par value of all
outstanding shares with par value of the Company
and shares with par value held by the Company as
treasury shares plus
(a) the aggregate of the amounts designated as
capital of all outstanding shares without
par value of the Company and shares without
par value held by the Company as treasury
shares, and
(b) the amounts as are from time to time
transferred from surplus to capital by
the directors.
Chairman of
the Board The Chairman of the Board of Directors of the
Company.
Company Steiner Leisure Limited
company Any company or corporation.
corporate office The office of the Company located at Suite
104A, Saffrey, Square, Nassau, The Bahamas.
directors Members of the Board of Directors of the
Company.
<PAGE>
majority In excess of 50 percent.
majority (or 66 2/3%)
of the Shareholders With respect to a vote of shareholders means
(i) a majority (or 66 2/3%, as applicable in the
context of the Article in question) of the
votes of the shareholders who were present
at the meeting and who voted and did not
abstain, or
(ii) a majority (or 66 2/3%, as applicable in
the context of the Article in question)
of the votes of the shareholders of each
class or series of shares which were
present at the meeting and entitled to
vote thereon as a class or series and who
voted and did not abstain and of a
majority (or 66 2/3%, as applicable in
the context of the Article in question)
of the votes of the remaining
shareholders entitled to vote thereon
present at the meeting and who voted and
did not abstain.
the Memorandum The Amended and Restated Memorandum of Association
of the Company as originally framed or as from
time to time amended.
person An individual, a company, a trust, the estate of a
deceased individual, a partnership, an
unincorporated association or other entity.
resolution
of directors A resolution (i) approved at a duly constituted
meeting of directors of the Company or of a
committee of directors of the Company by the
affirmative vote of a majority of the directors
present who voted and did not abstain or (ii)
consented to in writing by all directors or all
members of the committee, as the case may be.
resolution of
shareholders (a) A resolution approved at a duly
constituted meeting of the shareholders
of the Company by the affirmative vote of
(i) except where the votes of a larger
percentage of shareholders is
specifically provided for in these
Articles or in the Memorandum, a
majority of the votes of the
shareholders who were present at
the meeting and who voted and did
not abstain, or
(ii) except where the votes of a larger
percentage of shareholders is
specifically provided for in these
Articles or in the Memorandum, a
majority of the votes of the
shareholders of each class or
series of shares which were present
at the meeting and entitled to vote
thereon as a class or series and
who voted and did not abstain and
of a majority of the votes of the
remaining shareholders entitled to
vote thereon present at the meeting
and who voted and did not abstain.
the Seal The Common Seal of the Company.
Secretary The person holding the office of Secretary of the
Company or, in the absence of a Secretary, such
other officer of the Company who has similar
duties
<PAGE>
to the Secretary.
securities Shares and debt obligations of every kind, and
options, warrants and rights to acquire shares or debt
obligations.
shareholder A person who is a registered holder of shares in the
Company; a "member" under the Act.
share register The register of shares required to be kept pursuant
to Section 28 of the Act.
special meetings Meetings of the shareholders other than annual meetings.
surplus The excess, if any, at the time of the determination,
of the total assets of the Company over the aggregate
of its total liabilities, as shown in its books of
account, plus the Company's capital.
transfer agent Any person appointed by the directors to serve as
transfer agent and registrar of the shares of the
Company.
treasury
shares Shares of the Company that were previously issued but
were repurchased, redeemed or otherwise acquired
by the Company and not cancelled.
"Written" or any term of like import includes words typewritten, printed,
painted, engraved, lithographed, photographed or represented or reproduced by
any mode of representing or reproducing words in a visible form, including
telex, telefax, telegram, cable or other form of writing produced by electronic
communication.
Except as aforesaid any words or expressions defined in the Act shall bear the
same meaning in these Articles.
Whenever the singular or plural number, or the masculine, feminine or neuter
gender is used in these Articles, it shall equally, where the context admits,
include the others.
A reference in these Articles to voting or presence at a meeting in relation to
shares shall be construed as a reference to voting by shareholders holding the
shares except that it is the votes allocated to the shares that shall be counted
and not the number of shareholders who actually voted and a reference to shares
being present at a meeting shall be given a corresponding construction.
A reference to money in these Articles is a reference to the currency of the
United States of America unless otherwise stated.
SHARES
2. Every shareholder shall be entitled to one certificate for the shares
registered in such shareholder's name provided that in respect of shares held
jointly by several persons the Company shall not be bound to issue more than one
certificate, and delivery of a certificate for a share to one of several joint
shareholders shall be sufficient delivery to all.
3. If a certificate for shares is worn out or lost it may be renewed on
production of the worn out certificate or on satisfactory proof of its loss
together with such indemnity as may be required by the Secretary.
4. If several persons are registered as joint holders of any shares, any
one of such persons may give an effectual receipt for any dividend payable in
respect of such shares.
5. Subject to the provisions of these Articles and any resolution of
shareholders, the unissued shares of the Company shall be at the disposal of the
directors who may without prejudice to any rights previously conferred on
<PAGE>
the holders of any existing shares or class or series of shares, offer, allot,
grant options over or otherwise dispose of the shares to such persons, at such
times and upon such terms and conditions as the directors may determine.
6. Shares in the Company shall be issued for money, services rendered,
personal property (including other shares, debt obligations or other securities
in the Company), an estate in real property, a promissory note or other binding
obligation to contribute money or property or any combination of the foregoing
as shall be determined by the directors.
7. Shares in the Company may be issued for such amount of consideration as
the directors may from time to time determine, except that in the case of shares
with par value, the amount shall not be less than the par value and, in the
absence of fraud, the decision of the directors as to the value of the
consideration received by the Company in respect of the issue is conclusive
unless a question of law is involved. The consideration in respect of the shares
constitutes capital to the extent of the par value and the excess constitutes
surplus.
8. A share issued by the Company upon conversion of, or in exchange for,
another share or a debt obligation or other security in the Company, shall be
treated for all purposes as having been issued for money equal to the
consideration received or deemed to have been received by the Company in respect
of the other share, debt obligation or other security.
9. Treasury shares may be disposed of by the Company on such terms and
conditions (not otherwise inconsistent with these Articles) as the directors may
determine.
10. The Company may issue fractions of a share and a fractional share
shall have the same corresponding fractional liabilities, limitations,
preferences, privileges, qualifications, restrictions, rights and other
attributes of a whole share of the same class or series of shares.
11. Upon the issue by the Company of a share without par value, the
consideration in respect of the share constitutes capital to the extent
designated by the directors and the excess constitutes surplus, except that the
directors must designate as capital an amount of the consideration that is at
least equal to the amount that the share is entitled to as a preference, if any,
in the assets of the Company upon liquidation of the Company.
12. The Company may purchase, redeem or otherwise acquire and hold its own
shares but no purchase, redemption or other acquisition which shall constitute a
reduction in capital shall be made otherwise than in compliance with Articles 26
and 27.
13. Shares that the Company purchases, redeems or otherwise acquires
pursuant to Article 12 may be cancelled or held as treasury shares unless the
shares are purchased, redeemed or otherwise acquired out of capital and would
otherwise infringe upon the requirements of Articles 26 and 27. Upon the
cancellation of a share, the amount included as capital of the Company with
respect to that share shall be deducted from the capital of the Company.
14. Where shares in the Company are held by the Company as treasury shares
or are held by another company of which the Company holds, directly or
indirectly, shares having more than 50 percent of the votes in the election of
directors of the other company, such shares of the Company are not entitled to
vote or to have dividends paid thereon and shall not be treated as outstanding
for any purpose except for purposes of determining the capital of the Company.
15. No notice of a trust, whether expressed, implied or constructive,
shall be entered in the share register.
<PAGE>
TRANSFER OF SHARES
16. Subject to any limitations in the Memorandum, registered shares in the
Company may be transferred by a written instrument of transfer signed by the
transferor and containing the name and address of the transferee. The instrument
of transfer of any share in the Company shall be executed by the transferor (or
its duly authorized agent), and the transferor shall be deemed to remain the
holder of the shares until the name of the transferee is entered in the share
register in respect thereof. The transfer agent for the Company or the directors
shall determine if a form of transfer is acceptable in the case of any question
or dispute concerning a transfer.
17. The Company shall not be required to treat a transferee of a share in
the Company as a shareholder until the transferee's name has been entered in the
share register.
18. The Company, or any transfer agent on the application of the
transferor or transferee of a share in the Company, shall enter in the share
register the name of the transferee of the share except that (a) the directors
or the transfer agent may decline to register a transfer of shares unless the
instrument of transfer is accompanied by the certificate or certificates for the
shares and such other evidence as the directors or the transfer agent may
reasonably require to show the right of the transferor to make the transfer and
(b) the registration of transfers may be suspended and the share register closed
at such times and for such periods as the directors may from time to time
determine provided always that such registration shall not be suspended and the
share register closed for more than 60 days in any period of 12 months.
TRANSMISSION OF SHARES
19. The personal representative of a deceased shareholder, the guardian of
an incompetent shareholder or the trustee of a bankrupt shareholder shall be the
only persons recognized by the Company as having any title to the shares of such
shareholder but they shall not be entitled to exercise any rights as a
shareholder of the Company until they have proceeded as set forth in Articles 20
and 21. A person becoming entitled to shares by reason of the death,
incompetency or bankruptcy of the holder shall be entitled to the same dividends
and other advantages to which he or she would be entitled if he or she were the
registered holder of the shares, except that he or she shall not, before being
registered as a shareholder in respect of the shares, be entitled in respect of
such shares to exercise any right conferred by share ownership in relation to
meetings of the shareholders of the Company.
20. Any person becoming entitled by operation of law or otherwise to a
share or shares in consequence of the death, incompetence or bankruptcy of any
shareholder may be registered as a shareholder upon such evidence being produced
as may reasonably be required by the directors, the Secretary or any transfer
agent. An application by any such person to be registered as a shareholder shall
for all purposes be deemed to be a transfer of shares of the deceased,
incompetent or bankrupt shareholder and the directors shall treat it as such.
21. Any person who has become entitled to a share or shares in consequence
of the death, incompetence or bankruptcy of any shareholder may, instead of
being registered himself or herself, request in writing that some person to be
named by such person be registered as the transferee of such share or shares and
such request shall likewise be treated as if it were a transfer.
22. What amounts to incompetence on the part of a person is a matter to be
determined by the Bahamian courts under applicable law, having regard to all the
relevant evidence and the circumstances of the case.
REDUCTION OR INCREASE IN AUTHORIZED CAPITAL
23. Amendment to the Memorandum to increase or reduce the Company's
authorized capital must be approved by a majority of the shareholders.
24. The directors may amend the Memorandum to
(a) divide the shares, including issued shares of a class or
series into a larger number of
<PAGE>
shares of the same class or series; or
(b) combine the shares, including issued shares, of a class or
series into a smaller number of shares of the same class or
series, provided, however, that where shares are divided or
combined under (a) or (b) of this Article 24, the aggregate
par value of the new shares must be equal to the aggregate par
value of the original shares.
25. The capital of the Company may by a resolution of directors be
increased by transferring an amount of the surplus of the Company to capital,
and, subject to the provisions of Articles 26 and 27, the capital of the Company
may be reduced by transferring an amount of the capital of the Company to
surplus.
26. No reduction of capital shall be effected that reduces the capital of
the Company to an amount that immediately after the reduction is less than the
aggregate par value of all outstanding shares with par value and all shares with
par value held by the Company as treasury shares and the aggregate of the
amounts designated as capital of all outstanding shares without par value and
all shares without par value held by the Company as treasury shares that are
entitled a preference, if any, in the assets of the Company upon liquidation of
the Company.
27. No reduction of capital shall be effected unless the directors
determine that immediately after the reduction the Company will be able to
satisfy its liabilities as they become due in the ordinary course of its
business and that the realizable assets of the Company will not be less than its
total liabilities, other than deferred taxes, as shown in the books of the
Company and its remaining capital, and, in the absence of fraud, the decision of
the directors as to the realizable value of the assets of the Company is
conclusive, unless a question of law is involved.
28. Where the Company reduces its capital under these Articles the
Company may
(a) return to its shareholders any amount received by the
Company upon the issue of any of its shares;
(b) purchase, redeem or otherwise acquire its shares out of
capital; or
(c) cancel any capital that is lost or not represented by
assets having a realizable value.
MEETINGS OF SHAREHOLDERS
29. Annual meetings of the shareholders shall be held during each fiscal
year of the Company commencing in 1997. The date, time and place of annual
meetings of shareholders shall be as determined by the directors of the Company.
30. The directors of the Company or the Chairman of the Board may convene
special meetings of the shareholders of the Company at such times and in such
manner and places within or outside the Commonwealth of The Bahamas as the
directors consider necessary or desirable.
31. Upon the written request of shareholders holding more than 50 percent
of the outstanding voting shares in the Company the directors shall convene a
special meeting of the shareholders. If a special meeting is requested by such
shareholders, a written request, specifying the business proposed to be
transacted, shall be delivered personally or sent by first class mail or by
express delivery service such as, for example, Federal Express. Upon receipt of
such a request, the Secretary shall cause notice of such meeting to be given,
within 45 days after the date the request was delivered to the Secretary, to the
shareholders entitled to vote on such proposal, in accordance with the
provisions of these Articles. Except as provided below, if the notice is not
given by the Secretary within 45 days after the date the request was delivered
to the Secretary, then the person or persons requesting the meeting may specify
the time and place of the meeting and give notice thereof; provided, however,
that at least 10 days' notice of such meeting is required to be given to the
shareholders.
32. In order that the Company may determine the shareholders entitled to
notice of or to vote at any meeting of shareholders or any adjournment thereof
or entitled to receive payment of any dividend or other
<PAGE>
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of shares or for the purpose of
any other lawful action, the directors may fix, but shall not be required to so
fix, a record date; provided, however, that such record date shall not precede
the date upon which the action of the directors fixing such record date is
taken.
33. Whenever shareholders are required or authorized to take any action at
a meeting, a notice of such meeting, stating the place, day and hour of the
meeting and, in the case of a meeting other than an annual meeting, the purpose
or purposes for which the meeting is called shall be given no fewer than 10 days
before the date set for such meeting, either personally or by first-class mail,
by or at the direction of the Company's Chairman of the Board, Chief Executive
Officer or Secretary, to each shareholder of record entitled to vote at such
meeting. Such notice shall be deemed to be given when deposited in The Bahamas
postal system or the United States mail addressed to the shareholder, at the
shareholder's address as it appears on the share register of the Company, with
first-class postage prepaid thereon. Written waiver by a shareholder of notice
of a shareholders' meeting, signed by the shareholder, whether before or after
the time stated thereon, shall be equivalent to the giving of such notice.
Attendance of a shareholder at a meeting shall constitute a waiver of notice of
such meeting, except when the shareholder attends the meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully convened.
34. A meeting of shareholders held in contravention of the requirement in
Article 33 is valid if shareholders holding not less than 90 percent of the
total number of shares entitled to vote on all matters to be considered at the
meeting, or not less than 90 percent of the votes of each class or series of
shares where shareholders are entitled to vote thereon as a class or series
together with not less than 90 percent of the remaining votes, have agreed to
shorter notice of the meeting, or if all shareholders holding shares entitled to
vote on all or any matters to be considered at the meeting have waived notice of
the meeting, including by their presence at the meeting.
35. The inadvertent failure of the directors to give notice of a meeting
to a shareholder, or the fact that a shareholder has not received notice, does
not invalidate the meeting.
36. If a quorum pursuant to Article 42 is present at any meeting, (a) in
all matters other than the election of directors, the affirmative vote of the
majority of the shares present in person or represented by proxy at the meeting
and entitled to vote on the subject matter shall be the act of the shareholders,
and (b) directors shall be elected by a plurality of the votes of the shares
present in person or represented by proxy at the meeting and entitled to vote on
the election of directors, unless a different vote is required by these Articles
or the Memorandum or under applicable law, in which case such express provision
shall govern and control the decision of such question. Shareholders may act
only at meetings duly called and shareholders may not act by written consent or
otherwise outside of such meeting. Only those matters set forth in the notice of
a special meeting may be considered or acted upon at that meeting, unless
otherwise required by law.
37. Subject to Article 51, if shareholder approval is required (a) for the
adoption of any agreement for the merger of the Company with or into any other
entity or for the consolidation of the Company with or into any other entity or
(b) to authorize any sale, lease, exchange or other transfer of all or
substantially all of the assets of the Company to any person, the affirmative
vote of at least 66 2/3% of the shares entitled to vote thereon is required to
approve such transaction; provided, however, that if such transaction is
approved in advance by the directors, such transaction may be approved by the
affirmative vote of a majority of the shares entitled to vote thereon.
38. A shareholder may be represented at a meeting of shareholders by
a proxy who may speak and vote on behalf of the shareholder.
39. An instrument appointing a proxy shall be produced at such time before
the time for holding the meeting at which the person named in such instrument
proposes to vote and at such place as the directors or the Secretary may
designate.
40. Every proxy must be signed by the shareholder or such shareholder's
attorney in fact. No proxy shall be valid after the expiration of eleven (11)
months from the date thereof unless otherwise provided in the proxy. Every proxy
shall be revocable at the pleasure of the shareholder executing it, except as
otherwise provided by law. If a proxy expressly provides, any proxy-holder may
appoint in writing a substitute to act in such proxy-holder's
<PAGE>
place. An instrument appointing a proxy shall be in such form as the presiding
officer of the meeting shall deem acceptable.
41. The following shall apply in respect of joint ownership of shares:
(a) if two or more persons hold shares jointly, each of them may
be present in person or by proxy at a meeting of shareholders
and may speak as a shareholder, but each of the shares so held
jointly shall only represent a single share;
(b) if only one of the joint owners is present in person or by
proxy, such joint owner may vote on behalf of all joint
owners; and
(c) if two or more of the joint owners are present in person or by
proxy, they must vote as one.
42. A meeting of shareholders is duly constituted if, at the commencement
of the meeting, there are present in person or by proxy shareholders
representing more than one-half of the shares entitled to vote at the meeting.
43. If within one-half hour from the time appointed for the meeting a
quorum pursuant to Article 42 is not present, the meeting, if convened upon the
request of shareholders, shall be dissolved; in any other case it shall stand
adjourned to the next business day at the same time and place or to such other
day, time and place as the directors may determine and, if at the adjourned
meeting there are present within one-half hour from the time appointed for the
meeting in person or by proxy not less than one third of the votes of the shares
of each class or series of shares entitled to vote on the matters to be
considered by the meeting, those present shall constitute a quorum, but
otherwise the meeting shall be dissolved.
44. At every meeting of shareholders, the Chairman of the Board shall
preside as chairman of the meeting. If there is no Chairman of the Board or if
the Chairman of the Board is not present at the meeting, the directors present
shall choose one of the directors to be the chairman.
45. The chairman may, with the consent of the meeting, adjourn any meeting
from time to time, and from place to place, but no business shall be transacted
at any adjourned meeting other than the business left unfinished at the meeting
from which the adjournment took place.
46. At any meeting of the shareholders the chairman shall be responsible
for deciding in such manner as the chairman shall consider appropriate whether
any resolution has been carried or not and the result of the chairman's decision
shall be announced to the meeting and recorded in the minutes thereof. If the
chairman shall have any doubt as to the outcome of any resolution put to a vote,
the chairman may cause a poll to be taken of all votes cast upon such
resolution, and any business other than upon which a poll has been taken may
proceed pending the taking of the poll.
47. Any person other than an individual shall be regarded as one
shareholder and, subject to Article 48, the right of any individual to speak for
or represent such shareholder shall be determined by the law of the jurisdiction
where, and by the documents by which, the person is constituted or derives its
existence. In case of doubt, the directors may in good faith seek legal advice
from any qualified person and unless and until a court of competent jurisdiction
shall otherwise rule the directors may rely and act upon such advice without
incurring any liability to any shareholder.
48. Any person other than an individual which is a shareholder of the
Company may by resolution of its directors or other governing body authorize
such person as it thinks fit to act as its representative at any meeting of the
Company or of any class of shareholders of the Company, and the person so
authorized shall be entitled to exercise the same powers on behalf of the person
which he or she represents as that person could exercise if it were an
individual shareholder of the Company.
49. Directors of the Company may attend and speak at any meeting of
shareholders of the Company
<PAGE>
and at any separate meeting of the holders of any class or series of shares of
the Company.
50. At an annual meeting of the shareholders, only such business shall be
conducted as shall have been properly brought before the meeting. In addition to
any other applicable requirements, to be properly brought before an annual
meeting, business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the directors, (b) brought
before the meeting by or at the direction of the directors, or (c) otherwise
properly brought before the meeting by a shareholder. For business to be
properly brought before an annual meeting by a shareholder, the shareholder must
have given timely notice thereof in writing to the Secretary and be present at
the meeting. To be timely for the first annual meeting of shareholders after the
Company's initial public offering of its shares, a shareholder's notice must be
received at the corporate office of the Company not later than the later of (a)
the 75th day prior to the scheduled date of the annual meeting and (b) the 10th
day following the day on which public announcement of the date of such annual
meeting is first made by the Company. For all subsequent annual meetings, a
shareholder's notice shall be timely if received by the Company at its corporate
office not less than 75 days nor more than 120 days prior to the anniversary
date of the immediately preceding annual meeting (the "Anniversary Date");
provided, however, that in the event the annual meeting is scheduled to be held
on a date more than 30 days before the Anniversary Date or more than 60 days
after the Anniversary Date, a notice shall be timely if received by the Company
at its corporate office not later than the close of business on the later of (a)
the 75th day prior to the scheduled date of such annual meeting or (b) the 10th
day following the day on which public announcement of the date of such annual
meeting is first made by the Company. For purposes of these Articles, "public
announcement" shall mean (a) disclosure in a press release reported by the Dow
Jones News Service, Associated Press or comparable United States national news
service, (b) a report or other document filed publicly with the Securities and
Exchange Commission (including, without limitation, a Form 8-K) or (c) a letter
or report sent to shareholders of record of the Company at the time of the
mailing of such letter or report. A shareholder's notice to the Secretary shall
set forth as to each matter the shareholder proposes to bring before the annual
meeting (a) a brief description of the business desired to be brought before the
annual meeting, and the reasons for conducting such business at such annual
meeting, (b) the name and address, as they appear on the Company's books, of the
shareholder proposing such business, (c) the class and number of shares of the
Company which are beneficially owned by the shareholder, (d) the names of any
other beneficial owners of such shares, (e) any material interest of the
shareholder in such business and (f) the names and addresses of other
shareholders known by the shareholder proposing such business to support such
proposal and the class and numbers of shares beneficially owned by such
shareholders. Notwithstanding anything in these Articles to the contrary, no
business shall be conducted at an annual meeting except in accordance with the
procedures set forth in this Article 50. If the directors or a designated
committee thereof determines that any shareholder proposal was not made in a
timely fashion in accordance with the procedures of this Article 50 or that the
information provided in a shareholder's notice does not satisfy the information
requirements of this Article 50 in any material respect (a "Non-Compliance
Determination"), such proposal shall not be presented for action at the annual
meeting in question. If neither the directors nor such committee makes a
determination as to the validity of any shareholder proposal in the manner set
forth above, the presiding officer of an annual meeting shall determine whether
the shareholder proposal was made in accordance with the terms of this Article
50. If such presiding officer makes a Non-Compliance Determination with respect
to such proposal, such proposal shall not be presented for action at the annual
meeting in question. If the directors, a designated committee thereof or the
presiding officer determines that a shareholder proposal was made in accordance
with the requirements of this Article 50, the presiding officer shall so declare
at the annual meeting and ballots shall be provided for use at the meeting with
respect to such proposal.
BUSINESS COMBINATIONS WITH INTERESTED SHAREHOLDERS
51. Notwithstanding any other provisions of these Articles, the Company
shall not engage in any business combination with any interested shareholder for
a period of 3 years following the time that such shareholder became an
interested shareholder, unless:
(a) prior to such time the directors approved either the business
combination or the transaction which resulted in the
shareholder becoming an interested shareholder, or
(b) upon consummation of the transaction which resulted in the
shareholder becoming an interested shareholder, the
interested shareholder owned at least 85% of the voting
shares of the Company outstanding at the time the
transaction commenced, excluding for
purposes of determining the number of shares outstanding
those shares owned (i) by persons who are directors and also
officers of the Company and (ii) employee share plans in which
employee participants do not have the right to
determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer, or
(c) at or subsequent to such time the business combination is
approved by the directors and authorized at an annual or
special meeting of shareholders by the affirmative vote of at
least 66 2/3% of the shareholders excluding shares owned by
the interested shareholder.
52. The restrictions contained in Article 51 shall not apply if:
(a) the Company does not have a class of voting shares that is (i)
listed on a United States national securities exchange or (ii)
authorized for quotation on The Nasdaq Stock Market unless
either of the foregoing results from action taken, directly or
indirectly, by an interested shareholder or from a transaction
in which a person becomes an interested shareholder;
(b) a shareholder becomes an interested shareholder
inadvertently and (i) as soon as practicable divests itself
of ownership of sufficient shares so that the shareholder
ceases to be an interested shareholder and (ii) would not,
at any time within the 3 year period immediately prior to a
business combination between the Company and such
shareholder, have been an interested shareholder but for
the inadvertent acquisition of ownership;
(c) the business combination is proposed prior to the
consummation or abandonment of and subsequent to the
earlier of the public announcement or the notice required
hereunder of a proposed transaction which (i) constitutes
one of the transactions described in the second sentence of
this paragraph; (ii) is with or by a person who either was
not an interested shareholder during the previous 3 years
or who became an interested shareholder with the approval
of the directors or during the period described in
paragraph (d) of this Article 53; and (iii) is approved or
not opposed by a majority of the directors then in office
(but not less than 1) who were directors prior to any
person becoming an interested shareholder during the
previous 3 years or were recommended for election or
elected to succeed such directors by a majority of such
directors. The proposed transactions referred to in the
preceding sentence are limited to (x) a merger or
consolidation of the Company; (y) a sale, lease, exchange,
mortgage, pledge, transfer or other disposition (in one
transaction or a series of transactions), whether as part
of a dissolution or otherwise, of assets of the Company or
of any direct or indirect majority-owned subsidiary of the
Company (other than to any direct or indirect wholly-owned
subsidiary or to the Company) having an aggregate market
value equal to 50% or more of either that aggregate market
value of all of the assets of the Company determined on a
consolidated basis or the aggregate market value of all the
outstanding shares of the Company; or (z) a proposed tender
or exchange offer for 50% or more of the outstanding voting
shares of the Company. The Company shall give not less then
10 days' notice to all interested shareholders prior to the
consummation of any of the transactions described in
clauses (x) or (y) of the second sentence of this
paragraph; or
(d) the business combination is with an interested shareholder who
became an interested shareholder at a time when the
restrictions contained in Article 51 did not apply by reason
of any paragraph (a) of this Article 52.
53. As used in Articles 51, 52 and/or, as the case may be, 53, the
term:
(a) "affiliate" means a person that directly, or indirectly
through one or more intermediaries, controls, or is controlled
by, or is under common control with, another person.
(b) "associate," when used to indicate a relationship with any
person, means (i) any company,
<PAGE>
partnership, unincorporated association or other entity of
which such person is a director, officer or partner or is,
directly or indirectly, the owner of 20% or more of any
class of voting shares; (ii) any trust or other estate in
which such person has at least a 20% beneficial interest or
as to which such person serves as trustee or in a similar
fiduciary capacity; and (iii) any relative or spouse of such
person, or any relative of such spouse, who has the same
residence as such person.
(c) "business combination," when used in reference to the Company
and any interested shareholder of the Company, means:
(i) any merger or consolidation of the Company or
any direct or indirect majority-owned
subsidiary of the Company with (A) the
interested shareholder or (B) with any other
company, partnership, unincorporated association
or other entity if the merger or consolidation
is caused by the interested shareholder and
as a result of such merger or consolidation
Article 51 is not applicable to the surviving
entity;
(ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one
transaction or a series of transactions),
except proportionately as a shareholder of the
Company, to or with the interested shareholder,
whether as part of a dissolution or otherwise,
of assets of the Company or of any direct or
indirect majority-owned subsidiary of the
Company which assets have an aggregate market
value equal to 10% or more of either the
aggregate market value of all the assets of the
Company determined on a consolidated basis or
the aggregate market value of all the
outstanding shares of the Company;
(iii) any transaction which results in the issuance or
transfer by the Company or by any direct or
indirect majority-owned subsidiary of the
Company of any shares of the Company or of such
subsidiary to the interested shareholder,
except (A) pursuant to the exercise, exchange
or conversion of securities exercisable for,
exchangeable for or convertible into shares of
the Company or any such subsidiary which
securities were outstanding prior to the time
that the interested shareholder became such;
(B) pursuant to a dividend or distribution paid
or made, or the exercise, exchange or
conversion of securities exercisable for,
exchangeable for or convertible into shares of
the Company or any such subsidiary which
security is distributed, pro rata to all
holders of a class or series of shares of the
Company subsequent to the time the interested
shareholder became such; (C) pursuant to an
exchange offer by the Company to purchase
shares made on the same terms to all holders of
said shares; or (D) any issuance or transfer of
shares by the Company, provided however, that
in no case under (B) through (D), above, shall
there be an increase in the interested
shareholder's proportionate share of the shares
of any class or series of the Company or of the
voting shares of the Company;
(iv) any transaction involving the Company or any
direct or indirect majority-owned subsidiary of
the Company which has the effect, directly or
indirectly, of increasing the proportionate
share of the shares of any class or series, or
securities convertible into the shares of any
class or series of the Company or of any such
subsidiary which is owned by the interested
shareholder, except as a result of immaterial
changes due to fractional share adjustments or
as a result of any purchase or redemption of
any shares not caused, directly or indirectly,
by the interested shareholder; or
<PAGE>
(v) any receipt by the interested shareholder of
the benefit, directly or indirectly (except
proportionately as a shareholder of the
Company) of any loans, advances, guarantees,
pledges, or other financial benefits (other
than those expressly permitted in subparagraphs
(i)-(iv), above) provided by or through the
Company or any direct or indirect
majority-owned subsidiary of the Company.
(d) "control," including the term "controlling," "controlled
by" and "under common control with," means the possession,
directly or indirectly, of the power to direct or cause the
direction of the management and policies of a person,
whether through the ownership of voting shares, by
contract, or otherwise. A person who is the owner of 20% or
more of the outstanding voting shares of any company,
partnership, unincorporated association or other entity
shall be presumed to have control of such entity, in the
absence of proof by a preponderance of the evidence to the
contrary. Notwithstanding the foregoing, a presumption of
control shall not apply where such person holds voting
shares, in good faith and not for the purpose of
circumventing Article 51 as an agent, bank, broker,
nominee, custodian or trustee for one or more owners who do
not individually or as a group have control of such entity.
(e) "interested shareholder" means any person (other than the
Company and any direct or indirect majority-owned
subsidiary of the Company) that (i) is the owner of 15% or
more of the outstanding voting shares of the Company, or
(ii) is an affiliate or associate of the Company and was
the owner of 15% or more of the outstanding voting shares
of the Company at any time within the 3-year period
immediately prior to the date on which it is sought to be
determined whether such person is an interested
shareholder; and the affiliates and associates of such
person; provided, however, that the term "interested
shareholder" shall not include (x) any person who (A) owned
shares in excess of the 15% limitation set forth herein as
of the effective date of the Company's Registration
Statement on Form F-1 under the Securities Act of 1933, as
amended, with respect to its initial public offering of
shares and either (I) continued to own shares in excess of
such 15% limitation or would have but for action by the
Company or (II) is an affiliate or associate of the Company
and so continued (or so would have continued but for action
by the Company) to be the owner of 15% or more of the
outstanding voting shares of the Company at any time within
the 3-year period immediately prior to the date on which it
is sought to be determined whether such a person is an
interested shareholder or (B) acquired said shares from a
person described in (A), above, by gift, inheritance or in
a transaction in which no consideration was exchanged; or
(y) any person whose ownership of shares in excess of the
15% limitation set forth herein is the result of action
taken solely by the Company provided that such person shall
be an interested shareholder if thereafter such person
acquires additional voting shares of the Company, except as
a result of further corporate action not caused, directly
or indirectly, by such person. For the purpose of
determining whether a person is an interested shareholder,
the voting shares of the Company deemed to be outstanding
shall include shares deemed to be owned by the person
through application of paragraph (h) of this Article 53,
but shall not include any other unissued shares of the
Company which may be issuable pursuant to any agreement,
arrangement or understanding, or upon exercise of
conversion rights, warrants or options, or otherwise.
(f) "shares" means, with respect to any company or similar entity,
capital shares and, with respect to any other entity, any
equity interest.
(g) "voting shares" means, with respect to any company or similar
entity, shares of any class or series entitled to vote
generally in the election of directors and, with respect to
any other entity, any equity interest entitled to vote
generally in the election of the governing body of such
entity.
<PAGE>
(h) "owner," including the terms "own" and "owned" when used with
respect to any shares, means a person that individually or
with or through any of its affiliates or associates:
(i) beneficially owns such shares, directly or
indirectly; or
(ii) has (A) the right to acquire such shares
(whether such right is exercisable immediately
or only after the passage of time) pursuant to
any agreement, arrangement or understanding, or
upon the exercise of conversion rights,
exchange rights, warrants or options, or
otherwise; provided, however, that a person
shall not be deemed the owner of shares
tendered pursuant to a tender or exchange offer
made by such person or any of such person's
affiliates or associates until such tendered
shares are accepted for purchase or exchange;
or (B) the right to vote such shares pursuant
to any agreement, arrangement or understanding;
provided, however, that a person shall not be
deemed the owner of any shares because of such
person's right to vote such shares if the
agreement, arrangement or understanding to vote
such shares arises solely from a revocable
proxy or consent given in response to a proxy
or consent solicitation made to 10 or more
persons; or
(iii) has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting
(except voting pursuant to a revocable proxy or
consent as described in item (B) of clause (ii),
above), or disposing of such shares with any other
person that beneficially owns, or whose affiliates
or associates beneficially own, directly or
indirectly, such shares.
DIRECTORS
54. Subject to Article 60, the directors shall be elected by the
shareholders for such term as the shareholders determine.
55. The minimum number of directors shall be one and the maximum number
shall be seven, as may be determined from time to time by the Board of
Directors.
56. Each director shall hold office until such director's successor takes
office or until his earlier death, resignation or removal.
57. Commencing at such time as the Board of Directors of the Company shall
consist of seven directors, the Board shall be divided into three classes
designated as Class I, Class II and Class III, respectively, and composed of
two, two and three individuals, respectively. Upon any change in the size of the
Board of Directors, each class shall consist, as nearly as may be possible, of
one-third of the total number of directors constituting the entire Board of
Directors. The initial term of office of directors of Class I shall expire at
the next annual meeting of shareholders of the Company following the initial
filing of these Articles; the initial term of office of directors of Class II
shall expire at the second annual meeting of shareholders of the Company
following the initial filing of these Articles; the initial term of office of
the directors of Class III shall expire at the third annual meeting of
shareholders of the Company following the initial filing of these Articles. At
each annual meeting of shareholders, the successors to the class of directors
whose term shall then expire shall be elected to hold office for a term expiring
at the third succeeding annual meeting of shareholders.
58. Subject to any rights of the holders of Preferred Shares, if and when
issued, to elect directors and to remove any directors whom the holders of any
such shares have the right to elect, any director of the Company may be removed
from office (a) with or without cause by a vote of a majority of the directors
then in office or (b) with cause and by the affirmative vote of a majority of
the total votes which would be eligible to be cast by shareholders in the
election of such director.
<PAGE>
59. A director may resign such director's office by giving written notice
of such director's resignation to the Company and the resignation shall have
effect from the date the notice is received by the Company or from such later
date as may be specified in the notice.
60. The directors shall have power at any time, and from time to time, to
appoint any other qualified person or persons as a director, either to fill a
vacancy or as an addition to the board; provided, however, that the total number
of directors shall not at any time exceed the maximum number fixed by these
Articles.
61. A director elected to fill a vacancy resulting from an increase in the
number of directors shall hold office for a term that shall coincide with the
remaining term of the class of directors to which he or she is elected. A
director elected to fill a vacancy not resulting from an increase in the number
of directors shall have the same remaining term as that of his or her
predecessor. Except in the case of newly created directorships where the
directors fail to fill any such vacancy, shareholders may not fill vacancies on
the Board of Directors. In such event, the shareholders may do so at the next
annual or special meeting called for that purpose.
62. The directors may fix the emoluments of directors with respect to
services to be rendered in any capacity to the Company.
63. A director shall not be required to own shares of the Company.
64. A director of the Company may be or become a director or officer of,
or otherwise interested in, any company or other entity promoted by the Company
or in which the Company may be interested as a shareholder or otherwise, and no
such director shall be accountable to the Company for any remuneration or other
benefits received by such director as a director or officer of, or from such
director's interest in, such other Company unless the Company otherwise directs.
POWERS OF DIRECTORS
65. The business and affairs of the Company shall be managed by the
directors who may pay all expenses incurred preliminary to and in connection
with the formation and registration of the Company and may exercise all such
powers of the Company as are not by the Act or by the Memorandum or these
Articles required to be exercised by the shareholders of the Company, subject to
any delegation of such powers as may be authorized by these Articles or
applicable law.
66. The directors may appoint any person, including an individual who
is a director, to be an officer, agent or liquidator of the Company.
67. Every officer or agent of the Company has such powers and authority of
the directors, including the power and authority to affix the Seal, as are set
forth in these Articles or in a resolution of directors, appointing the officer
or agent.
68. Without limitation on the other powers of the directors under these
Articles or applicable law, the directors may from time to time, at their
discretion, raise or borrow or secure the payment of any sum or sums of money
for the purposes of the Company in such manner and upon such terms and
conditions in all respects as they think fit and in particular by the issue of
bonds, mortgages, debentures or debenture shares perpetual or otherwise, notes
or other obligations of the Company charged upon all or any part of the property
of the Company (both present and future).
69. The continuing directors may act notwithstanding any vacancy in
their body.
LIMITATION OF LIABILITY OF DIRECTORS
70. A director shall not be personally liable to the Company or the
shareholders for damages for breach
<PAGE>
of such director's duties as a director; provided, however, that such director
has acted honestly and in good faith with a view to the best interests of the
Company and has exercised the care, diligence and skill that a reasonably
prudent person would exercise in comparable circumstances. Neither repeal nor
modification of this Article 70, nor the adoption of any provision in these
Articles or in the Memorandum inconsistent with this Article 70, shall adversely
affect any right or protection afforded to a director by this Article 70 prior
to such repeal, modification or adoption of an inconsistent provision.
PROCEEDINGS OF DIRECTORS
71. The Directors shall hold an annual meeting each year as soon as
practicable after the annual meeting of the shareholders at the place where such
meeting of the shareholders was held or at such other place and time as to which
the directors and any new director nominees shall be notified prior to such
shareholders meeting for the purpose of consideration of business that may be
properly brought before the meeting. Except as aforesaid, no notice of any kind
to either old or new directors for such annual meeting shall be necessary.
72. Regular meetings, other than the annual meeting, of the directors may
be held without notice at such time and at such place as shall from time to time
be determined by the directors. Special meetings of the directors may be called
by any two directors or the Chairman of the Board on not less than 48 hours'
written notice to each director, either personally; by express delivery service
such as, for example, Federal Express; telegram or telefax; provided, however,
that express delivery service may only be used if it is reasonably calculated to
provide delivery of such notice no later than twelve (12) hours prior to such
meeting. Notice of any special meeting of the directors need not be given to any
director who signs a waiver of notice either before or after the meeting.
Attendance by a director at a special meeting shall constitute a waiver of
notice of such special meeting, except where a director attends a meeting for
the express purpose of objecting to the transaction of any business because such
special meeting is not lawfully convened.
73. A director shall be deemed to be present at a meeting of directors if
he or she participates by telephone or other electronic means and all directors
participating in the meeting are able to hear each other and recognize each
other's voice. A resolution in writing, in one or more parts, signed by all the
directors, shall be as valid and effectual as if it had been passed at a meeting
of the directors duly called and constituted.
74. A majority of all the directors then in office shall constitute a
quorum for the transaction of business. The affirmative vote of the majority of
directors present at a meeting where a quorum is present shall be the act of the
directors. If a quorum shall not be present at any meeting of the directors, a
majority of the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
75. If the Company shall have only one director the provisions herein
contained for meetings of the directors shall not apply but such sole director
shall have full power to represent and act for the Company in all matters as are
not by the Act or the Memorandum or these Articles required to be exercised by
the shareholders of the Company and, in lieu of minutes of a meeting, shall
record in writing and sign a note or memorandum of all matters requiring a
resolution of directors. Such a note or memorandum shall constitute sufficient
evidence of such resolution for all purposes.
76. At every meeting of the directors the Chairman of the Board shall
preside as chairman of the meeting. If there is no Chairman of the Board or if
the Chairman of the Board is not present at the meeting, the directors present
shall choose one of the directors to be chairman of the meeting.
77. The directors may delegate any of their powers to committees each
consisting of two or more directors as they think fit. Any committee so formed
shall, in the exercise of the powers so delegated, conform to any requirements
that may from time to time be made or imposed upon it by the directors. Meetings
of any committee may be called by any member thereof by the giving of not less
than 48 hours' written notice to each other committee member, either personally,
by express delivery service, such as, for example, Federal Express, telegram or
telefax; provided, however, that express delivery service may only be used if it
is reasonably calculated to provide delivery of such notice no later than 12
hours prior to such meeting. Notice of any meeting of a committee need not
<PAGE>
be given to any committee member who signs a waiver of notice either before or
after the meeting. Attendance by a committee member at a committee meeting shall
constitute a waiver of notice of such committee meeting, except where a
committee member attends a meeting for the express purpose of objecting to the
transaction of any business because such committee meeting is not lawfully
convened. The terms of Article 73 shall apply to the conduct of committee
meetings. The majority of the members of a committee shall constitute a quorum
for the transaction of business of that committee. The second and third
sentences of Article 74 shall apply to the conduct of committee meetings.
OFFICERS
78. The directors may appoint officers of the Company at such times as
shall be considered desirable. Such officers may consist of a Chairman of the
Board, a Chief Executive Officer, a Chief Operating Officer and one or more
Vice-Presidents, a Secretary and one more Assistant Secretaries and such other
officers as may from time to time be deemed desirable. Any number of offices may
be held by the same person. A director may serve as an officer of the Company.
79. The officers shall perform such duties as shall be prescribed at the
time of their appointment subject to any modification in such duties as may be
prescribed thereafter by the directors but in the absence of any specific
allocation of duties it shall be the responsibility of the Chairman of the Board
to preside at meetings of directors and shareholders and to manage the day to
day affairs of the Company and the other officers to perform such duties as may
be delegated to them by the directors or by the Chairman of the Board.
80. The officers of the Company shall hold office until their successors
are duly elected and qualified, but any officer elected or appointed by the
directors may, subject to the terms of any applicable employment agreement, be
removed at any time, with or without cause, by the directors. Any vacancy
occurring in any office of the Company may be filled by resolution of directors.
CONFLICT OF INTERESTS
81. Notwithstanding the provisions of Section 55 of the Act, if the
requirements of Article 82 are satisfied, no agreement or transaction between
the Company and one or more of its directors or liquidators, or any person in
which any director or liquidator has a financial interest or to whom any
director or liquidator is related, including as a director or liquidator of that
other person, is void or voidable for this reason only or by reason only that
the director or liquidator is present at the meeting of directors or liquidators
or at the meeting of the committee of directors or liquidators that approves the
agreement or transaction or that the vote or consent of the director or
liquidator is counted for that purpose.
82. An agreement or transaction referred to in Article 81 is valid if
(a) the material facts of the interest of each director or
liquidator in the agreement or transaction and his or her
interest in or relationship to any other party to the
agreement or transaction are disclosed in good faith or are
known by the other directors or liquidators; and
(b) the agreement or transaction is approved or ratified by a
majority of the disinterested directors or liquidators.
83. A director or liquidator who has an interest in any particular
business to be considered at a meeting of directors, liquidators or shareholders
may be counted for purposes of determining whether the meeting is duly
constituted.
<PAGE>
INDEMNIFICATION
84. Subject to Article 85, the Company shall indemnify to the fullest
extent permitted under Bahamian law, as against all expenses including legal
fees, and against all judgements, fines and amounts paid in settlement and
reasonably incurred in connection with legal, administrative or investigative
proceedings any person who
(a) is or was a party or is threatened to be made a party to any
threatened, pending or completed proceedings, whether civil,
criminal, administrative or investigative, by reason of the
fact that the person is or was a director, an officer or
liquidator of the Company; or
(b) is or was, at the request of the Company, serving as a
director, officer or liquidator of, or in any other capacity
is or was acting for, another company or a partnership, joint
venture, trust or other enterprise.
85. Article 84 only applies to a person referred to in that Article if the
person acted honestly and in good faith with a view to the best interests of the
Company and, in the case of criminal proceedings, the person had no reasonable
cause to believe that such person's conduct was unlawful. In addition,
indemnification shall not be available with respect to any claim against a
person referred to in Article 84 pursuant to the provisions of Section 16(b) of
the United States Securities Exchange Act of 1934, as amended, or any similar
provisions of any other United States federal or state statute or rule.
86. The decision of the directors as to whether the person acted honestly
and in good faith and with a view to the best interests of the Company and as to
whether the person had no reasonable cause to believe that such person's conduct
was unlawful, is in the absence of fraud, sufficient for the purposes of these
Articles, unless a question of law is involved.
87. The termination of any proceedings by any judgement, order,
settlement, convictions or the entering of a nolle prosequi does not, by itself,
create a presumption that the person did not act honestly and in good faith and
with a view to the best interests of the Company or that the person had
reasonable cause to believe that such person's conduct was unlawful.
88. If a person referred to in Article 84 has been successful in defense
of any proceedings referred to in that Article the person is entitled to be
indemnified against all expenses, including legal fees, and against all
judgements, fines and amounts paid in settlement and reasonably incurred by the
person in connection with the proceedings.
89. Expenses incurred in defending any of the proceedings described in
Article 84 shall be paid in advance of the final disposition of such proceeding
upon receipt of an undertaking by or on behalf of the person entitled to
indemnification under Article 84 to repay such amount, if it shall ultimately be
determined that such person is not entitled to be indemnified by the Company
under Article 84.
90. The indemnification under Article 84 with respect to any person shall
not limit or restrict in any way the power of the Company to indemnify or pay
expenses for such person in any other manner permitted by law or be deemed
exclusive of, or invalidate, any other right which such person may have or
acquire under any law, agreement, vote of shareholders or disinterested
directors, or otherwise.
91. The Company may purchase and maintain insurance in relation to any
person who is or was a director, an officer or a liquidator of the Company, or
who at the request of the Company is or was serving as a director, an officer or
a liquidator of, or in any other capacity is or was acting for, another company
or a partnership, joint venture, trust or other enterprise, against any
liability asserted against the person and incurred by the person in that
capacity, whether or not the Company has or would have had the power to
indemnify the person against the liability under Article 84.
92. The right of indemnification provided for herein (i) shall be deemed
to create contractual rights in favor of persons entitled to indemnification
hereunder; (ii) shall inure to the benefit of the heirs and legal
representatives of persons entitled to indemnification hereunder; and (iii)
shall be applicable to actions, suits and proceedings
<PAGE>
commenced after the original adoption date of these Articles of Association on
October 31, 1995, whether arising from acts or omissions occurring before or
after the adoption of this resolution.
93. If applicable Bahamian law is deemed at any time to permit broader
indemnification of the persons described in Article 84 than that provided for in
these Articles, then these Articles shall be deemed to be amended as of the time
that such broader indemnification is permitted to provide for such broader
indemnification.
94. Neither the repeal nor modification of any of Articles 84 through 93,
nor the adoption of any provision in these Articles or in the Memorandum
inconsistent with any of Articles 84 through 93, shall adversely affect any
right or protection afforded to any person described in Article 84 by any of
Articles 84 through 93 prior to such repeal, modification or adoption of an
inconsistent provision.
SEAL
95. The directors shall provide for the safe custody of the Seal. The
Seal, when affixed to any written instrument shall be witnessed by a director or
any other person so authorized from time to time by the directors. The directors
may provide for a facsimile of the Seal and of the signature of any director or
authorized person which may be reproduced by printing or other means on any
instrument and it shall have the same force and validity as if the Seal had been
affixed to such instrument and the same had been signed as hereinbefore
described. The directors may authorize the adoption and use of one or more
corporate seals for use outside the Commonwealth of The Bahamas.
DIVIDENDS
96. The Company may by a resolution of directors declare and pay dividends
in money, shares or other property but dividends shall only be declared and paid
out of surplus. In the event that dividends are paid in specie the directors
shall have responsibility for establishing and recording in the resolution of
directors authorizing the dividends, a fair and proper value for the assets to
be so distributed.
97. No dividend shall be declared and paid unless the directors determine
that immediately after the payment of the dividend the Company will be able to
satisfy its liabilities as they become due in the ordinary course of its
business and the realizable value of the assets of the Company will not be less
than the sum of its total liabilities, other than deferred taxes, as shown in
its books of account, and its capital. In the absence of fraud, the decision of
the directors as to the realizable value of the assets of the Company is
conclusive, unless a question of law is involved.
98. Notice of any dividend that may have been declared shall be given to
each shareholder in manner hereinafter mentioned and all dividends unclaimed for
3 years after having been declared may be forfeited by resolution of directors
for the benefit of the Company.
99. No dividend shall bear interest as against the Company and no dividend
shall be paid on shares described in Article 14.
ACCOUNTS AND BOOKS OF THE COMPANY
100. The directors shall from time to time determine whether and to what
extent and at what times and places and under what conditions or regulations the
accounts and books of the Company or any of them shall be open to inspection by
the shareholders not being directors, and no shareholder (not being a director)
shall have any right of inspecting any account or book or document of the
Company except as conferred by statute or authorized by the directors.
NOTICES
101. Any notice, information or written statement to be given by the
Company (including by the directors or any officer of the Company) to a
shareholder or the shareholders shall be deemed given when delivered
<PAGE>
personally, or when deposited into the mail addressed to shareholder at the
address shown in the share register or, when an alternate means of delivery is
deemed reasonable by the directors, when given on behalf of the Company to a
party outside of the Company with instructions to deliver such notice,
information or statement to a shareholder or the shareholders.
VOLUNTARY WINDING UP AND DISSOLUTION
102. The Company may voluntarily commence to wind up and dissolve by
resolution of shareholders or by resolution of directors.
AMENDMENT
103. These Articles may be amended by (a) the directors or (b) 66 2/3% of
the shareholders of each class or series entitled to vote thereon.
HEADINGS
104. The headings in these Articles have been inserted solely for
convenience of reference and neither constitute a part of these Articles nor
affect the meaning, interpretation or effect of any provision of these Articles.
GOVERNING LAW
105. Except as otherwise specifically provided for herein, Bahamian
law shall govern all aspects of these Articles.
ADOPTED JULY 30, 1997
---------------------------------------------------
Date
EXHIBIT 10.13
STEINER LEISURE LIMITED
SHARE OPTION AGREEMENT
This Agreement (this "Agreement") is made as of November 10, 1996, by and
between Steiner Leisure Limited, a Bahamas international business company (the
"Company"), and the undersigned employee ("Employee").
Pursuant to the Steiner Leisure Limited 1996 Share Option and Incentive
Plan (the "Plan"), the Company hereby grants to Employee, as of November 10,
1996, options (the "Options") to purchase ( ) __________ of the
Company's common shares, par value (U.S.) $.01 per share (the "Shares"), at
$13.00 per share (the "Exercise Price") upon the following terms and conditions.
Capitalized terms not otherwise defined herein shall have the same meaning as in
the Plan. The Options are intended to be incentive stock options under the
United States Internal Revenue Code of 1986, as amended (the "Code").
1. EXERCISE OF OPTIONS. The Options shall become exercisable in
accordance with the following schedule: one-third (rounded down, if necessary,
to the next whole number) shall become exercisable on November 10, 1997;
one-third (rounded down, if necessary, to the next whole number) shall become
exercisable on November 10, 1998; and one-third (rounded up, if necessary, to
the next whole number) shall become exercisable on November 10, 1999. The
Options shall expire on November 9, 2006.
2. TRANSFER AND EXERCISE. The Options are not transferable by Employee
other than as permitted under Section 422 of the Code and, in addition to the
other limitations set forth herein, are exercisable during the lifetime of
Employee only by Employee. The Options are exercisable by an Employee only while
Employee is in active employment with the Company or a Subsidiary or within
thirty (30) days after termination of such employment, except (i) during a
one-year period after Employee's death, where the Option is exercised by the
estate of Employee or by any person who acquired such Option by bequest or
inheritance; (ii) during a three-month period commencing on the date of the
Employee's termination of employment other than due to death, a Disability or by
the Company or a Subsidiary other than for cause; or (iii) during a one-year
period commencing on Employee's termination of employment on account of
Disability.
3. PROCEDURE FOR EXERCISE. The Options shall be exercisable by written
notice in the form attached hereto as Exhibit A (the "Exercise Notice"). Such
written notice shall be addressed to the Secretary of the Company, signed by the
Employee and delivered pursuant to Section 10, below. Options shall be deemed to
be exercised upon delivery to the Company of such written notice, upon which the
Company will issue and deliver to Employee the number of Shares as to which the
options were exercised. Notwithstanding the foregoing, Options may not be
exercised if the issuance of the Shares upon such exercise would constitute a
violation of any applicable federal or state securities or other law or
regulation or any requirement of the Nasdaq Stock Market, Inc. or other market
or exchange upon which the Shares may then be traded or listed (collectively,
the "Rules"). As a condition to the exercise of an Option, the Company may
require Employee to make such representations or warranties to the Company as
the Company may deem appropriate under the Rules.
4. PAYMENT OF EXERCISE PRICE.
The Exercise Price for the number of shares for which Options are
being exercised shall be paid on, or within ten (10) days after the date of
exercise:
<PAGE>
(i) in cash (by certified or bank cashier's check);
(ii) by tender to the Company of whole Shares then owned by the
Employee having a Fair Market Value (as defined below) on the
date of exercise at least equal to the Exercise Price;
(iii) a combination of the foregoing; or
(iv) on such other terms and conditions as the Compensation
Committee of the Company (or, if such committee is not in
existence, the Board of Directors of the Company; in either
case, hereinafter, the "Committee") may approve.
For purposes of this Agreement, "Fair Market Value" means the mean
of the high and low prices reported per Share as quoted on the Nasdaq National
Market or the Nasdaq Small Cap Market.
5. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, ETC. In the event of any
change in the outstanding Shares of the Company by reason of any share split,
share dividend, recapitalization, merger, consolidation, combination or exchange
of shares or other similar corporate change or in the event of any special
distribution to the shareholders, the Committee shall make such equitable
adjustments in the number of Shares and prices per Share applicable to the
Options as the Committee determines are necessary and appropriate. Any such
adjustment shall be conclusive and binding for all purposes of the Plan.
6. TAX WITHHOLDING. In order to enable the Company to meet any
applicable federal, state or local withholding tax requirements arising as a
result of the exercise of Options, Employee shall pay the Company the amount of
tax to be withheld or may elect to satisfy such obligation by delivering to the
Company other Shares owned by Employee prior to exercising the Options, or a
payment consisting of a combination of cash and such Shares, or by having the
Company withhold Shares that otherwise would be delivered to Employee pursuant
to the exercise of the Options for which the tax is being withheld. Such an
election shall be subject to the following: (i) the election shall be made in
such manner as may be prescribed by the Committee and (ii) the election shall be
made prior to the date to be used to determine the tax to be withheld and shall
be irrevocable. The value of any Share to be delivered or withheld by the
Company shall be the Fair Market Value on the date to be used to determine the
amount of tax to be withheld.
7. SHARES SUBJECT TO PLAN. The Shares awarded pursuant to the Plan are
subject to all of the terms and conditions of the Plan, the terms of which are
hereby expressly incorporated and made a part hereof. Any conflict between this
Agreement and the Plan shall be controlled by, and settled in accordance with
the terms of the Plan. Employee acknowledges that Employee has received, read
and understood the provisions of the Plan and agrees to be bound by its terms
and conditions.
8. INTERPRETATION. Any dispute regarding the interpretation of this
Agreement shall be submitted by Employee or by the Company forthwith to the
Committee, which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Committee shall be final and binding on the
Company and on Employee.
9. NOT A CONTRACT OF EMPLOYMENT. This Agreement shall not be deemed
to constitute an employment contract between the Company and Employee or to
be a consideration or an inducement for the employment of Employee.
10. NOTICES. Any notice required or permitted hereunder shall be given
in writing and deemed delivered when (i) personally delivered, (ii) sent by
facsimile transmission and a confirmation of the transmission is
<PAGE>
received by the sender, or (iii) three (3) days after being deposited for
delivery with a recognized overnight courier, such as Federal Express, and
addressed or sent, as the case may be, to the address or facsimile number set
forth below or to such other address or facsimile number as such party may in
writing designate.
11. FURTHER INSTRUMENTS. The parties agree to execute such
further instruments and to take such further actions as may be reasonably
necessary to carry out the purposes and intent of this Agreement.
12. ENTIRE AGREEMENT; GOVERNING LAW; SEVERABILITY. The Plan and
Exercise Notice are incorporated herein by reference. This Agreement, the Plan
and the Exercise Notice constitute the entire agreement of the parties and
supersede in their entirety all prior undertakings and agreements of the Company
and Employee with respect to the subject matter hereof, and shall be interpreted
in accordance with, and shall be governed by, the laws of The Bahamas, subject
to any applicable United States federal or state securities laws. Should any
provision of this Agreement be determined by a court of law to be illegal or
unenforceable, the other provisions shall nevertheless remain effective and
shall remain enforceable.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered as of the date first above written.
EMPLOYEE: STEINER LEISURE LIMITED
- -------------------------- By:-----------------------------------------
Leonard I. Fluxman
- -------------------------- Chief Operating Officer and
Print Name Chief Financial Officer
ADDRESS AND FACSIMILE NUMBER: ADDRESS AND FACSIMILE NUMBER:
c/o CT Maritime Services, L.C.
1007 North America Way, 4th Fl.
Miami, Florida 33132
Facsimile: (305) 372-9310
<PAGE>
EXHIBIT A
EXERCISE NOTICE
Steiner Leisure Limited
c/o CT Maritime Services, L.C.
1007 North America Way
4th Floor
Miami, Florida 33132
Attention: Secretary
1. EXERCISE OF OPTION. Effective as of the date indicated below, the
undersigned ("Employee") hereby elects to exercise __________ of the Employee's
options to purchase common shares (the "Shares") of Steiner Leisure Limited (the
"Company") under and pursuant to the Company's 1996 Share Option and Incentive
Plan (the "Plan") and the Share Option Agreement by and between the Company and
the Employee dated as of November 10, 1996 (the "Option Agreement").
<PAGE>
2. REPRESENTATIONS OF EMPLOYEE. Employee acknowledges that Employee has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions. References herein to this
"Agreement" include this Exercise Notice and the Plan, and the Option Agreement,
all of which are incorporated herein by reference as provided in Section 7,
below.
3. COMPLIANCE WITH SECURITIES LAWS. Notwithstanding any other provisions
of the Option Agreement to the contrary, Employee understands and acknowledges
that the exercise of any rights to purchase Shares is expressly conditioned upon
compliance with the Securities Act of 1933, as amended, all applicable state
securities laws and all applicable requirements of the Nasdaq Stock Market, Inc.
or other market or exchange on which the Shares may be traded or listed at the
time of their exercise. Employee agrees to cooperate with the Company to ensure
compliance with such laws and requirements.
4. TAX CONSULTATION. Employee understands that Employee may suffer adverse
tax consequences as a result of Employee's purchase or disposition of the
Shares. Employee represents that Employee has consulted with any tax consultants
Employee deems advisable in connection with the purchase or disposition of the
Shares and that Employee is not relying on the Company for any tax advice.
5. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights under
this Agreement to single or multiple assignees, and this Agreement shall inure
to the benefit of the successors and assigns of the Company. This Agreement
shall be binding upon Employee and his or her heirs, executors, administrators,
successors and assigns.
6. DELIVERY OF PAYMENT. Employee herewith delivers (or, within ten (10)
days after the date of exercise, will deliver) to the Company the full exercise
price for the Shares. Employee hereby elects to pay the full exercise price
(check the appropriate box):
|_| in cash or by check;
|_| by tender to the Company of Shares in accordance with
Section 4(ii) of the Option Agreement;
|_| by a combination of the foregoing.
7. ENTIRE AGREEMENT; GOVERNING LAW; SEVERABILITY. The Plan, and Option
Agreement are incorporated herein by reference. This Exercise Notice, the Plan
and the Option Agreement constitute the entire agreement of the parties and
supersede in their entirety all prior undertakings and agreements of the Company
and Employee with respect to the subject matter hereof, and shall be interpreted
in accordance with, and shall be governed by, the laws of The Bahamas, subject
to any applicable United States federal or state securities laws. Should any
provision of this Agreement be determined by a court of law to be illegal or
unenforceable, the other provisions shall nevertheless remain effective and
shall remain enforceable.
Submitted by: Accepted by:
EMPLOYEE: STEINER LEISURE LIMITED
- ------------------------------ By:-----------------------------------
Leonard I. Fluxman
- ------------------------------ Chief Operating Officer and
Print Name Chief Financial Officer
Date:-------------------------
EXHIBIT 10.14
STEINER LEISURE LIMITED
SHARE OPTION AGREEMENT
This Agreement (this "Agreement") is made as of November 10, 1996, by and
between Steiner Leisure Limited, a Bahamas international business company (the
"Company"), and the undersigned employee ("Employee").
Pursuant to the Steiner Leisure Limited 1996 Share Option and Incentive
Plan (the "Plan"), the Company hereby grants to Employee, as of November 10,
1996, options (the "Options") to purchase _______ ( ) of the Company's
common shares, par value (U.S.) $.01 per share (the "Shares"), at $13.00 per
share (the "Exercise Price") upon the following terms and conditions.
Capitalized terms not otherwise defined herein shall have the same meaning as in
the Plan.
1. EXERCISE OF OPTIONS. The Options shall become exercisable in
accordance with the following schedule: one-third (rounded down, if necessary,
to the next whole number) shall become exercisable on November 10, 1997;
one-third (rounded down, if necessary, to the next whole number) shall become
exercisable on November 10, 1998; and one-third (rounded up, if necessary, to
the next whole number) shall become exercisable on November 10, 1999. The
Options shall expire on November 9, 2006.
2. TRANSFER AND EXERCISE. The Options are transferable, subject to
restrictions under applicable laws, regulations and Rules (as defined in Section
3, below). The Options are exercisable by Employee only while Employee is in
active employment with the Company or a Subsidiary or within thirty (30) days
after termination of such employment, except (i) during the three-year period
after a participant's death, Disability or Retirement; (ii) during a three-year
period commencing on the date of Employee's termination of employment by the
Company or a subsidiary, other than for cause; (iii) during a three-year period
commencing on the date of termination by Employee, or the Company or a
Subsidiary, of employment after a Change in Control unless such termination of
employment is by the Company or a Subsidiary for cause; or (iv) if the Committee
(as defined in Section 4(iv), below) decides that it is in the best interest of
the Company to permit other exceptions.
3. PROCEDURE FOR EXERCISE. The Options shall be exercisable by written
notice in the form attached hereto as Exhibit A (the "Exercise Notice"). Such
written notice shall be addressed to the Secretary of the Company, signed by the
Employee and delivered pursuant to Section 10, below. Options shall be deemed to
be exercised upon delivery to the Company of such written notice, upon which the
Company will issue and deliver to Employee the number of Shares as to which the
options were exercised. Notwithstanding the foregoing, Options may not be
exercised if the issuance of the Shares upon such exercise would constitute a
violation of any applicable federal or state securities or other law or
regulation or any requirement of the Nasdaq Stock Market, Inc. or other market
or exchange upon which the Shares may then be traded or listed (collectively,
the "Rules"). As a condition to the exercise of an Option, the Company may
require Employee to make such representations or warranties to the Company as
the Company may deem appropriate under the Rules.
4. PAYMENT OF EXERCISE PRICE.
The Exercise Price for the number of shares for which Options are
being exercised shall be paid on, or within ten (10) days after the date of
exercise:
(i) in cash (by certified or bank cashier's check);
<PAGE>
(ii) by tender to the Company of whole Shares then owned by the
Employee having a Fair Market Value (as defined below) on the
date of exercise at least equal to the Exercise Price;
(iii) a combination of the foregoing; or
(iv) on such other terms and conditions as the Compensation
Committee of the Company (or, if such committee is not in
existence, the Board of Directors of the Company; in either
case, hereinafter, the "Committee") may approve.
For purposes of this Agreement, "Fair Market Value" means the mean
of the high and low prices reported per Share as quoted on the Nasdaq National
Market or the Nasdaq Small Cap Market.
5. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, ETC. In the event of any
change in the outstanding Shares of the Company by reason of any share split,
share dividend, recapitalization, merger, consolidation, combination or exchange
of shares or other similar corporate change or in the event of any special
distribution to the shareholders, the Committee shall make such equitable
adjustments in the number of Shares and prices per Share applicable to the
Options as the Committee determines are necessary and appropriate. Any such
adjustment shall be conclusive and binding for all purposes of the Plan.
6. TAX WITHHOLDING. In order to enable the Company to meet any applicable
federal, state or local withholding tax requirements arising as a result of the
exercise of Options, Employee shall pay the Company the amount of tax to be
withheld or may elect to satisfy such obligation by delivering to the Company
other Shares owned by Employee prior to exercising the Options, or a payment
consisting of a combination of cash and such Shares, or by having the Company
withhold Shares that otherwise would be delivered to Employee pursuant to the
exercise of the Options for which the tax is being withheld. Such an election
shall be subject to the following: (i) the election shall be made in such manner
as may be prescribed by the Committee and (ii) the election shall be made prior
to the date to be used to determine the tax to be withheld and shall be
irrevocable. The value of any Share to be delivered or withheld by the Company
shall be the Fair Market Value on the date to be used to determine the amount of
tax to be withheld.
7. SHARES SUBJECT TO PLAN. The Shares awarded pursuant to the Plan are
subject to all of the terms and conditions of the Plan, the terms of which are
hereby expressly incorporated and made a part hereof. Any conflict between this
Agreement and the Plan shall be controlled by, and settled in accordance with
the terms of the Plan. Employee acknowledges that Employee has received, read
and understood the provisions of the Plan and agrees to be bound by its terms
and conditions.
8. INTERPRETATION. Any dispute regarding the interpretation of this
Agreement shall be submitted by Employee or by the Company forthwith to the
Committee, which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Committee shall be final and binding on the
Company and on Employee.
9. NOT A CONTRACT OF EMPLOYMENT. This Agreement shall not be deemed
to constitute an employment contract between the Company and Employee or to
be a consideration or an inducement for the employment of Employee.
10. NOTICES. Any notice required or permitted hereunder shall be given in
writing and deemed delivered when (i) personally delivered, (ii) sent by
facsimile transmission and a confirmation of the transmission is received by the
sender, or (iii) three (3) days after being deposited for delivery with a
recognized overnight courier,
<PAGE>
such as Federal Express, and addressed or sent, as the case may be, to the
address or facsimile number set forth below or to such other address or
facsimile number as such party may in writing designate.
11. FURTHER INSTRUMENTS. The parties agree to execute such further
instruments and to take such further actions as may be reasonably necessary
to carry out the purposes and intent of this Agreement.
12. ENTIRE AGREEMENT; GOVERNING LAW; SEVERABILITY. The Plan and Exercise
Notice are incorporated herein by reference. This Agreement, the Plan and the
Exercise Notice constitute the entire agreement of the parties and supersede in
their entirety all prior undertakings and agreements of the Company and Employee
with respect to the subject matter hereof, and shall be interpreted in
accordance with, and shall be governed by, the laws of The Bahamas, subject to
any applicable United States federal or state securities laws. Should any
provision of this Agreement be determined by a court of law to be illegal or
unenforceable, the other provisions shall nevertheless remain effective and
shall remain enforceable.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered as of the date first above written.
EMPLOYEE: STEINER LEISURE LIMITED
- ------------------------- By:-----------------------------------------
Leonard I. Fluxman
- ------------------------- Chief Operating Officer and
Print Name Chief Financial Officer
ADDRESS AND FACSIMILE NUMBER: ADDRESS AND FACSIMILE NUMBER:
c/o CT Maritime Services, L.C.
1007 North America Way, 4th Fl.
Miami, Florida 33132
Facsimile: (305) 372-9310
<PAGE>
EXHIBIT A
EXERCISE NOTICE
Steiner Leisure Limited
c/o CT Maritime Services, L.C.
1007 North America Way
4th Floor
Miami, Florida 33132
Attention: Secretary
1. EXERCISE OF OPTION. Effective as of the date indicated below, the
undersigned ("Employee") hereby elects to exercise __________ of the Employee's
options to purchase common shares (the "Shares") of Steiner Leisure Limited (the
"Company") under and pursuant to the Company's 1996 Share Option and Incentive
Plan (the "Plan") and the Share Option Agreement by and between the Company and
the Employee dated as of November 10, 1996 (the "Option Agreement").
2. REPRESENTATIONS OF EMPLOYEE. Employee acknowledges that Employee has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions. References herein to this
"Agreement" include this Exercise Notice and the Plan, and the Option Agreement,
all of which are incorporated herein by reference as provided in Section 7,
below.
3. COMPLIANCE WITH SECURITIES LAWS. Notwithstanding any other provisions
of the Option Agreement to the contrary, Employee understands and acknowledges
that the exercise of any rights to purchase Shares is expressly conditioned upon
compliance with the Securities Act of 1933, as amended, all applicable state
securities laws and all applicable requirements of the Nasdaq Stock Market, Inc.
or other market or exchange on which the Shares may be traded or listed at the
time of their exercise. Employee agrees to cooperate with the Company to ensure
compliance with such laws and requirements.
4. TAX CONSULTATION. Employee understands that Employee may suffer adverse
tax consequences as a result of Employee's purchase or disposition of the
Shares. Employee represents that Employee has consulted with any tax consultants
Employee deems advisable in connection with the purchase or disposition of the
Shares and that Employee is not relying on the Company for any tax advice.
5. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights under
this Agreement to single or multiple assignees, and this Agreement shall inure
to the benefit of the successors and assigns of the Company. This Agreement
shall be binding upon Employee and his or her heirs, executors, administrators,
successors and assigns.
6. DELIVERY OF PAYMENT. Employee herewith delivers (or, within ten (10)
days after the date of exercise, will deliver) to the Company the full exercise
price for the Shares. Employee hereby elects to pay the full exercise price
(check the appropriate box):
|_| in cash or by check;
|_| by tender to the Company of Shares in accordance with
Section 4(ii) of the Option Agreement;
<PAGE>
|_| by a combination of the foregoing.
7. ENTIRE AGREEMENT; GOVERNING LAW; SEVERABILITY. The Plan, and Option
Agreement are incorporated herein by reference. This Exercise Notice, the Plan
and the Option Agreement constitute the entire agreement of the parties and
supersede in their entirety all prior undertakings and agreements of the Company
and Employee with respect to the subject matter hereof, and shall be interpreted
in accordance with, and shall be governed by, the laws of The Bahamas, subject
to any applicable United States federal or state securities laws. Should any
provision of this Agreement be determined by a court of law to be illegal or
unenforceable, the other provisions shall nevertheless remain effective and
shall remain enforceable.
Submitted by: Accepted by:
EMPLOYEE: STEINER LEISURE LIMITED
- ------------------------- BY:-----------------------------------
Leonard I. Fluxman
- ------------------------- Chief Operating Officer and
Print Name Chief Financial Officer
Date:
EXHIBIT 11
STEINER LEISURE LIMITED
COMPUTATION OF EARNINGS PER SHARE
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
1996 1997 1996 1997
---------- ---------- ---------- ----------
Net income $1,719,000 $3,478,000 $4,236,000 $8,416,000
========== ========== ========== ==========
Weighted average common shares
outstanding 9,558,000 10,800,000 9,558,000 10,800,000
Dilutive stock options - 315,000 - 262,000
---------- ---------- ---------- ----------
Weighted average number of
common shares and common
share equivalents for primary
earnings per share 9,558,000 11,115,000 9,558,000 11,062,000
Net income per share $ 0.18 $ 0.31 $ 0.44 $ 0.76
========== ========== ========== ==========
Primary and fully diluted net income per
share are the same for all periods presented.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) AT AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 9,773,000
<SECURITIES> 10,370,000
<RECEIVABLES> 3,255,000
<ALLOWANCES> 148,000
<INVENTORY> 4,627,000
<CURRENT-ASSETS> 29,138,000
<PP&E> 4,821,000
<DEPRECIATION> 2,592,000
<TOTAL-ASSETS> 31,925,000
<CURRENT-LIABILITIES> 7,518,000
<BONDS> 0
0
0
<COMMON> 108,000
<OTHER-SE> 26,481,000
<TOTAL-LIABILITY-AND-EQUITY> 31,925,000
<SALES> 24,929,000
<TOTAL-REVENUES> 61,873,000
<CGS> 17,009,000
<TOTAL-COSTS> 53,162,000
<OTHER-EXPENSES> 596,000
<LOSS-PROVISION> 85,000
<INTEREST-EXPENSE> 12,000
<INCOME-PRETAX> 9,307,000
<INCOME-TAX> 891,000
<INCOME-CONTINUING> 8,416,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,416,000
<EPS-PRIMARY> 0.76
<EPS-DILUTED> 0.76
</TABLE>
