<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
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 March 31, 1998
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 16,482,571 shares as of
per share May 11, 1998
- 1 -
<PAGE>
STEINER LEISURE LIMITED
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
- ------------------------------
ITEM 1. Unaudited Financial Statements
Condensed Consolidated Balance Sheets as of December 31, 1997
and March 31, 1998 ............................................ 3
Condensed Consolidated Statements of Operations for the Three
Months ended March 31, 1997 and March 31, 1998................. 4
Condensed Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 1997 and March 31, 1998................. 5
Notes to Condensed Consolidated Financial Statements........... 6
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................... 9
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
- 2 -
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
--------------------
STEINER LEISURE LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, March 31,
ASSETS 1997 1998
------ ------------ ------------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $12,335,000 $12,786,000
Marketable securities 12,017,000 14,342,000
Accounts receivable 3,980,000 3,288,000
Inventories 4,949,000 5,678,000
Other current assets 958,000 1,642,000
----------- -----------
Total current assets 34,239,000 37,736,000
----------- -----------
PROPERTY AND EQUIPMENT, net 2,285,000 2,210,000
INTANGIBLE ASSETS, net - 675,000
OTHER ASSETS 613,000 584,000
----------- -----------
Total assets $37,137,000 $41,205,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 1,901,000 $ 2,616,000
Accrued expenses 5,941,000 3,992,000
Current portion of capital lease obligations 68,000 62,000
Income taxes payable 685,000 914,000
----------- -----------
Total current liabilities 8,595,000 7,584,000
----------- -----------
CAPITAL LEASE OBLIGATIONS, net of current portion 29,000 18,000
----------- -----------
MINORITY INTEREST - 15,000
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 16,239,000 shares in
1997 and 16,482,587 shares in 1998,
issued and outstanding 162,000 165,000
Additional paid-in capital 10,675,000 11,816,000
Accumulated other comprehensive income 171,000 266,000
Retained earnings 17,505,000 21,341,000
----------- -----------
Total shareholders' equity 28,513,000 33,588,000
----------- -----------
Total liabilities and shareholders' equity $37,137,000 $41,205,000
=========== ===========
The accompanying notes to condensed consolidated financial statements are an
integral part of these balance sheets.
- 3 -
<PAGE>
STEINER LEISURE LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998
(Unaudited)
Three Months Ended
March 31,
--------------------------
1997 1998
------------ ------------
REVENUES:
Services $11,832,000 $13,735,000
Products 7,828,000 9,200,000
----------- -----------
Total revenues 19,660,000 22,935,000
----------- -----------
COST OF SALES:
Cost of services 9,279,000 10,663,000
Cost of products 5,408,000 6,249,000
----------- -----------
Total cost of sales 14,687,000 16,912,000
----------- -----------
Gross profit 4,973,000 6,023,000
----------- -----------
OPERATING EXPENSES:
Administrative 911,000 1,075,000
Salary and payroll taxes 1,081,000 1,228,000
Amortization of intangibles 620,000 -
----------- -----------
Total operating expenses 2,612,000 2,303,000
----------- -----------
Income from operations 2,361,000 3,720,000
----------- -----------
OTHER INCOME (EXPENSE):
Interest income 161,000 332,000
Interest expense (4,000) (3,000)
----------- -----------
Total other income (expense) 157,000 329,000
----------- -----------
Income before provision for income taxes 2,518,000 4,049,000
PROVISION FOR INCOME TAXES: 222,000 213,000
----------- -----------
Net income $ 2,296,000 $ 3,836,000
=========== ===========
EARNINGS PER COMMON SHARE:
Basic $ 0.14 $ 0.24
=========== ===========
Diluted $ 0.14 $ 0.23
=========== ===========
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
- 4 -
<PAGE>
STEINER LEISURE LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998
(Unaudited)
Three Months Ended
March 31,
--------------------------
1997 1998
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,296,000 $ 3,836,000
Adjustments to reconcile net income to
net cash provided by operating activities-
Depreciation and amortization 781,000 218,000
Share options issued to nonemployees 7,000 -
(Increase) decrease in-
Accounts receivable 438,000 733,000
Inventories 262,000 (680,000)
Other current assets (36,000) (674,000)
Other assets (226,000) 26,000
Increase (decrease) in-
Accounts payable (639,000) 672,000
Accrued expenses 735,000 (1,953,000)
Income taxes payable (3,207,000) 213,000
Minority interest - 15,000
----------- -----------
Net cash provided by operating activities 411,000 2,406,000
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities (6,722,000) (2,320,000)
Capital expenditures (103,000) (130,000)
Acquisition of franchise rights - (675,000)
----------- -----------
Net cash used in investing activities (6,825,000) (3,125,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capital lease obligations (17,000) (18,000)
Payments on long-term debt (163,000) -
Net proceeds from stock option exercises - 1,144,000
----------- -----------
Net cash (used in) provided by
financing activities (180,000) 1,126,000
----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (21,000) 44,000
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (6,615,000) 451,000
CASH AND CASH EQUIVALENTS, beginning of period 13,625,000 12,335,000
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 7,010,000 $12,786,000
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for-
Interest $ 4,549 $ 3,426
=========== ===========
Income taxes $ 3,428,650 $ -
=========== ===========
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
- 5 -
<PAGE>
STEINER LEISURE LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) BASIS OF PRESENTATION OF INTERIM CONDENSED ONSOLIDATED INANCIAL STATEMENTS:
--------------------------------------------------------------------------
The unaudited condensed consolidated statements of operations for the three
months ended March 31, 1997 and 1998 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, 1997.
(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.
(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.
Intangible assets as of March 31, 1998 represent the cost of the intellectual
property acquired by the Company in connection with its investment in EBSC
International Limited, a Bahamian company ("EBSC"). Amortization of these
intangible assets commenced in April 1998, the month of the effective date of
the first area development agreement entered ito by EBSC (see Note 4).
(c) MINORITY INTEREST-
Minority interest represents the minority shareholders' proportional share of
the net assets of EBSC (see Note 4).
(d) 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
- 6 -
<PAGE>
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, CTO's income tax
liability resulting from the liquidation was approximately $3.2 million. The
entire $3.2 million estimated tax liability was paid during the first quarter of
1997.
(E) 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.
(F) EARNINGS PER SHARE-
Basic earnings per share is computed by dividing the net income available to
shareholders by the weighted average shares of outstanding common stock. The
calculation of diluted earnings per share is similar to basic earnings per share
except that the denominator includes dilutive common stock equivalents such as
stock options and warrants. The computation of weighted average common and
common equivalent shares used in the calculation of basic and diluted earnings
per share is as follows:
Three Months Ended
March 31,
--------------------------
1997 1998
------------ ------------
Weighted average shares outstanding
used in calculating basic earnings
per share 16,200,000 16,291,000
Dilutive common share equivalents 304,000 476,000
---------- ----------
Weighted average common and common
equivalent shares used in calculating
diluted earnings per share 16,504,000 16,767,000
========== ==========
(G) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS-
In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants ("ACSEC") issued Statement of Position
("SOP") 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use." SOP 98-1 establishes criteria for determining which
costs of developing or obtaining internal-use computer software should be
charged to expense and which should be capitalized. SOP 98-1 is effective for
all transactions entered into in fiscal years beginning after December 15, 1998.
Management does not believe that the adoption of SOP 98-1 will have a material
effect on the Company's financial position or results of operations.
In April 1998, the ACSEC issued SOP 98-5, "Reporting on the Costs of Start-Up
Activities." SOP 98-5 establishes standards for the reporting and disclosure of
start-up costs, including organization costs. SOP 98-5 is effective for
financial statements issued after December 15, 1998. Management does not believe
that the adoption of SOP 98-5 will have a material effect on the Company's
financial position or results of operations.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 131, "Disclosures about Segments of
an Enterprise and Related Information." SFAS No. 131 establishes standards for
the way that public companies report selected information about operating
segments in annual and interim financial reports to shareholders. It also
establishes standards for related disclosures about an enterprise's business
segments, products, services, geographic areas, and major customers. SFAS No.
131, which supersedes SFAS No. 14, "Financial Reporting for Segments of a
Business Enterprise," but retains the requirement
- 7 -
<PAGE>
to report information about major customers, requires that a public company
report financial and descriptive information about its reportable operating
segments. Generally, financial information is required to be reported on the
basis that it is used internally for evaluating segment performance and deciding
how to allocate resources to segments. SFAS No. 131 requires that a public
company report a measure of segment profit or loss, certain specific revenue and
expense items, and segment assets. SFAS No. 131 is effective as of December 31,
1998.
(4) ACQUISITIONS:
In January 1998, the Company, through EBSC, a Bahamian international business
company ("IBC"), owned 85% by the Company, acquired for $675,000 the
intellectual property (the "BSC Rights") relating to the Beautiful Skin Centres,
a group of Hong Kong day spas ("BSC"). The Company proposes to franchise the BSC
concept, initially in Hong Kong and, possibly, in other locations in Asia, and,
subsequently, elsewhere that the Company deems appropriate under the name
"Elemis Beautiful Skin Centre" or similar names. The initial franchise area
development agreement for the operation of Elemis Beautiful Skin Centres in Hong
Kong is with the seller of the BSC Rights (the "Seller"), which owns the
remaining 15% of EBSC.
(5) ACCRUED EXPENSES:
Accrued expenses consist of the following:
December 31, March 31,
1997 1998
------------ -----------
(Unaudited)
Operative commissions $1,059,000 $ 964,000
Guaranteed minimum rentals 2,235,000 740,000
Bonuses 769,000 486,000
Staff shipboard accommodations 227,000 251,000
Other 1,651,000 1,551,000
---------- ----------
$5,941,000 $3,992,000
========== ==========
(6) COMPREHENSIVE INCOME:
The Company adopted SFAS No. 130, "Reporting Comprehensive Income," effective
January 1, 1998. SFAS No. 130 establishes standards for reporting and disclosure
of comprehensive income and its components in financial statements. The
components of the Company's comprehensive income are as follows:
Three Months Ended
March 31,
-------------------------
1997 1998
----------- -----------
Net income $2,296,000 $3,836,000
Unrealized gain (loss) on marketable
securities, net of income taxes (26,000) 3,000
Foreign currency translation adjustments,
net of income taxes (55,000) 59,000
---------- ----------
Comprehensive income $2,215,000 $3,898,000
========== ==========
- 8 -
<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 84% of the Company's income for the first three months of
1998 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 7% of the Company's
pre-tax income for the first three months of 1998, will be subject to U.K. tax
rates (generally up to 33%).
Effective October 24, 1997 and April 28, 1998, the Board of Directors of
the Company approved 3-for-2 share splits, effected as share dividends,
effective for shareholders of record as of October 13, 1997 and April 14, 1998,
respectively (collectively, the "Share Splits"). All per share data and
references to numbers of common shares and the price thereof presented herein
have been, where appropriate, adjusted to give effect to the Share Splits.
- 9 -
<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
MARCH 31,
------------------
1997 1998
------ ------
Revenues:
Services............................. 60.2% 59.9%
Products............................. 39.8 40.1
------ -----
Total revenues..................... 100.0 100.0
----- -----
Cost of sales:
Cost of services..................... 47.2 46.5
Cost of products..................... 27.5 27.2
----- -----
Total cost of sales................ 74.7 73.7
----- -----
Gross profit 25.3 26.3
Operating expenses:
Administrative....................... 4.6 4.7
Salary and payroll taxes............. 5.5 5.4
Amortization of intangibles.......... 3.2 -
----- -----
Total operating expenses........... 13.3 10.1
----- -----
Income from operations............. 12.0 16.2
Other income............................ 0.8 1.4
----- -----
Income before provision for income taxes 12.8 17.6
Provision for income taxes.............. 1.1 0.9
----- -----
Net income.............................. 11.7% 16.7%
===== =====
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31,
1997
REVENUES. Revenues increased approximately 16.7%, or $3.2 million, to
$22.9 million in the first quarter of 1998 from $19.7 million in the first
quarter of 1997. Of this increase, $1.9 million was attributable to increases in
services provided on cruise ships and $1.3 million was attributable to increases
in sales of products. The increase in revenues for the first quarter of 1998
compared to the first quarter of 1997 was primarily attributable to an increase
of seven in the average number of ships in service with enhanced large spa
facilities and an increase of two in the average number of non-spa ships in
service over the first quarter of 1997. The Company had 798 shipboard staff
members in service on average in the first quarter of 1998 compared to 730
shipboard staff members in service on average in the first quarter of 1997.
Revenues per staff per day increased by 6.7% in the first quarter of 1998
compared to the first quarter of 1997.
COST OF SERVICES. Cost of services as a percentage of services revenue
decreased to 77.6% in the first quarter of 1998 from 78.4% in the first quarter
of 1997. This decrease was due to increases in productivity of onboard staff
during the first quarter of 1998 compared to the first quarter of 1997 and
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 services on cruise ships covered by an agreement which was renewed
in 1997 and became effective in the first quarter of 1998.
COST OF PRODUCTS. Cost of products as a percentage of products revenue
decreased to 67.9% in the first quarter of 1998 from 69.1% in the first quarter
of 1997. This decrease was due to increases in productivity of onboard staff
during the first quarter of 1998 compared to the first quarter of 1997, a
product price increase implemented during the first quarter of 1998 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 an agreement which was
renewed in 1997 and became effective in the first quarter of 1998.
- 10 -
<PAGE>
OPERATING EXPENSES. Operating expenses as a percentage of revenues
decreased to 10.1% in the first quarter of 1998 from 13.3% in the first quarter
of 1997 as a result of the 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 5.3% for the first quarter of 1998 from an overall
effective rate of 8.8% for the first quarter of 1997 is primarily due to an
increase in the proportion of the Company's income generated by non-taxable
subsidiaries. Without the amortization of intangibles, the overall effective
rate for the three months ended March 31, 1998 would have been 5.3% compared to
7.1% for the three months ended March 31, 1997.
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 1,863,000 of its common shares
pursuant to the initial public offering of its 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 three months of 1998, cash flow from operating activities
was $2.4 million, compared to $0.4 million (reflecting, among other things, the
$3.2 million CTO Tax Payment) for the first three months of 1997. At March 31,
1998, the Company had working capital of approximately $30.2 million compared to
$25.6 million at December 31, 1997.
The Company has agreed to commit a total of $3 million to design and
operate a luxury spa facility at the Atlantis resort complex of Sun
International Hotels Limited on Paradise Island in Nassau, The Bahamas. The
Company anticipates that such amount will be expended during the second, third
and fourth quarters of 1998. The above agreement is subject to the terms of a
definitive agreement to be executed by the parties.
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.
- 11 -
<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; the Company's limited experience in franchise, and other
land-based operations; 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, 1997, filed with the Securities and Exchange
Commission.
- 12 -
<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 IPO of its common shares at a price of $5.778 per share was
declared effective by the Securities and Exchange Commission. The IPO
commenced on November 13, 1996. A total of 1,863,000 common shares
(aggregate offering price of $10,764,000) were registered and sold on
behalf of the Company and a total of 9,605,790 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 IPO, after
deducting total expenses in the amount of $1,060,000, were approximately
$9,704,000. The IPO terminated, and all of the securities registered in
connection therewith were sold. The managing underwriters of the IPO were
Furman Selz LLC and Raymond James & Associates, Inc.
In connection with the IPO, 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 $304,255
The net proceeds to the Company from the IPO have been applied,
through March 31, 1998, 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) $3,043,207
The use of proceeds of the IPO 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.
- 13 -
<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
10.1(b) Second Amendment to Employment Agreement between Steiner
Leisure Limited and Clive E. Warshaw dated as of April 20,
1998.(1)
10.2(b) Second Amendment to Employment Agreement between Steiner
Leisure Limited and Leonard I. Fluxman dated as of December
19, 1997.(1)
10.4(b) Second Amendment to Employment Agreement between Steiner
Leisure Limited and Amanda Jane Francis dated as of April 20,
1998.(1)
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
March 31, 1998.
- ------------------------
(1) Management contract or compensatory plan or agreement.
- 14 -
<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: May 13, 1998
-----------------------------------
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)
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3.2 Amended and Restated Articles of Association of Steiner
Leisure Limited
10.1(b) Second Amendment to Employment Agreement between Steiner
Leisure Limited and Clive E. Warshaw dated as of April 20,
1998.
10.2(b) Second Amendment to Employment Agreement between Steiner
Leisure Limited and Leonard I. Fluxman dated as of December
19, 1997.
10.4(b) Second Amendment to Employment Agreement between Steiner
Leisure Limited and Amanda Jane Francis dated as of April 20,
1998.
27 Financial Data Schedule
<PAGE>
EXHIBIT 3.2
COMMONWEALTH OF THE BAHAMAS
New Providence
ADOPTED AS OF MARCH 27, 1998
- 15 -
<PAGE>
AMENDED AND RESTATED
ARTICLES OF ASSOCIATION
OF
STEINER LEISURE LIMITED
Harry B. Sands & Company
Counsel and Attorneys-at-Law
Chambers
Nassau, Bahamas
- 16 -
<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.
majority In excess of 50 percent.
- 17 -
<PAGE>
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 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.
- 18 -
<PAGE>
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 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.
- 19 -
<PAGE>
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.
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.
- 20 -
<PAGE>
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 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.
- 21-
<PAGE>
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 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
- 22 -
<PAGE>
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 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;
- 23 -
<PAGE>
(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 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
- 24 -
<PAGE>
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:
- 25 -
<PAGE>
(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, 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
- 26 -
<PAGE>
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
(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
- 27 -
<PAGE>
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.
(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
- 28 -
<PAGE>
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. The Board of Directors shall be divided into three classes designated
as Class I, Class II and Class III, respectively, and composed of one, two and
three individuals, respectively. Upon any change in the size of the Board of
Directors, each class shall consist of such number and identity of directors as
the Board of Directors shall determine. 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.
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
- 29 -
<PAGE>
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 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
- 30 -
<PAGE>
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 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.
- 31 -
<PAGE>
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.
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
- 32 -
<PAGE>
(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 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.
- 33 -
<PAGE>
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 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
- 34 -
<PAGE>
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 MARCH 27, 1998
------- -----------------------------
Date
- 35 -
<PAGE>
EXHIBIT 10.1(B)
SECOND AMENDMENT TO EMPLOYMENT
AGREEMENT DATED OCTOBER 17, 1996
This Amendment to Employment Agreement (the "Amendment") is made as of 20th
day of April, 1998 by and between STEINER LEISURE LIMITED, a Bahamas
international business company (the "Company"), and Clive E. Warshaw
("Employee").
WITNESSETH:
WHEREAS, the Company and Employee entered into an Employment Agreement
dated October 17, 1996, as amended by an amendment dated March 25, 1997 (the
"Employment Agreement"); and
WHEREAS, the Company and Employee desire to amend the Employment Agreement
as provided below.
NOW, THEREFORE, in consideration of the premises and mutual agreements
hereinafter contained, the parties hereto agree as follows:
1. COMPENSATION.
Section 3(a)(i) of the Employment Agreement is hereby amended so that, as
amended, it shall read as follows:
(a) SALARY, ETC. Commencing as of January 1, 1998, except as
otherwise expressly provided herein, the Company (or any Affiliate
thereof) shall pay to Employee during the term hereof compensation
as described in this Section 3(a), all of which shall be subject to
such deductions as may be required by applicable law or regulation.
(i) BASE SALARY. A base salary at the rate of (A) Three
Hundred Seventy Thousand Dollars [(U.S.) $370,000] for calendar year
("Year") 1998 and (B) no less than Three Hundred Seventy Thousand
Dollars [(U.S.) $370,000] for each Year thereafter during the term
of this Agreement, subject to review by the Compensation Committee
of the Board of Directors of the Company, payable in bi-weekly
installments (the "Base Salary").
2. EFFECTIVE DATE. The effective date of the amendments to the Employment
Agreement contained in this Amendment shall be January 1, 1998.
3. NO OTHER AMENDMENT. Except as set forth in this Amendment, all
provisions of the Employment Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the day and year first above written.
STEINER LEISURE LIMITED
/S/ CLIVE E. WARSHAW By:/S/ LEONARD I. FLUXMAN
- ------------------------- -------------------------------------
Clive E. Warshaw Leonard I. Fluxman,
Chief Operating Officer and
Chief Financial Officer
- 36 -
<PAGE>
EXHIBIT 10.2(B)
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to the Employment Agreement (the "Amendment") is made
as of the 19th day of December, 1997 by and between Steiner Leisure Limited, a
Bahamas international business company (the "Company"), and Leonard I. Fluxman
("Employee").
WITNESSETH:
WHEREAS, the Company and Employee entered into an Employment
Agreement dated October 23, 1996, amended March 25, 1997 (the "Employment
Agreement"); and
WHEREAS, the Company and Employee desire to amend the Employment
Agreement as provided below.
NOW, THEREFORE, in consideration of the premises and mutual
agreements hereinafter contained, the parties hereto agree as follows:
1. COMPENSATION. Section 3(a)(i) of the Employment Agreement
is hereby amended so that, as amended, it shall read as follows:
(a) SALARY, ETC. Commencing as of January 1, 1998, except as
otherwise expressly provided herein, the Company (or any Affiliate
thereof) shall pay to Employee during the term hereof compensation
as described in this Section 3(a), all of which shall be subject to
such deductions as may be required by applicable law or regulation.
(i) BASE SALARY. A base salary at the rate of (A) Two
Hundred Forty Thousand Dollars [(U.S.) $240,000.00] for calendar
year ("Year") 1998 and (B) no less than Two Hundred Forty Thousand
Dollars [(U.S.) $240,000.00] for each Year thereafter during the
term of this Agreement, subject to review by the Compensation
Committee of the Board of Directors of the Company, payable in
bi-weekly installments (the "Base Salary").
2. EFFECTIVE DATE. The effective date of the amendments to
the Employment Agreement contained in this Amendment shall be January 1, 1998.
3. NO OTHER AMENDMENT. Except as set forth in this Amendment,
all provisions of the Employment Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
as of the day and year first above written.
STEINER LEISURE LIMITED
/S/ LEONARD I. FLUXMAN By: /S/ CLIVE E. WARSHAW
- ------------------------------- ---------------------------------
Leonard I. Fluxman Clive E. Warshaw,
Chairman of the Board and
Chief Executive Officer
- 38 -
<PAGE>
EXHIBIT 10.4(B)
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to the Employment Agreement (this "Amendment") is
made as of 20th day of April, 1998 by and between STEINER TRANSOCEAN LIMITED, a
Bahamas international business company (the "Company"), and Amanda Jane Francis
("Employee").
WITNESSETH:
WHEREAS, the Company and Employee entered into an Employment
Agreement dated October 17, 1996, as amended by amendment dated March 25, 1997
(the "Employment Agreement"); and
WHEREAS, the Company and Employee desire to amend the Employment
Agreement as provided below.
NOW, THEREFORE, in consideration of the premises and mutual
agreements hereinafter contained, the parties hereto agree as follows:
1. COMPENSATION.
Sections 3(a)(i) of the Employment Agreement are hereby
amended so that, as amended, it shall read as follows:
(a) SALARY, ETC. Commencing as of January 1, 1998, except as
otherwise expressly provided herein, the Company (or any Affiliate
thereof) shall pay to Employee during the term hereof compensation
as described in this Section 3(a), all of which shall be subject to
such deductions as may be required by applicable law or regulation.
(i) BASE SALARY. A base salary at the rate of (A) One
Hundred Twenty-Six Thousand Dollars [(U.S.) $126,000.00] for
calendar year ("Year") 1997 and (B) no less than One Hundred
Twenty-Six Thousand Dollars [(U.S.) $126,000.00] for each Year
thereafter during the term of this Agreement, subject to review by
the Compensation Committee of the Board of Directors of the Company,
payable in bi-weekly installments (the "Base Salary").
2. EFFECTIVE DATE. The effective date of the amendment to the
Employment Agreement contained in this Amendment shall be January 1, 1998.
3. NO OTHER AMENDMENT. Except as set forth in this Amendment,
all provisions of the Employment Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
as of the day and year first above written.
STEINER TRANSOCEAN LIMITED
/S/ AMANDA JANE FRANCIS By:/S/ CLIVE E. WARSHAW
- ------------------------------ --------------------------------
Amanda Jane Francis Clive E. Warshaw,
Chairman of the Board and
Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED MARCH 1, 1998 (UNAUDITED) FINANCIAL STATEMENTS OF STEINER LEISURE
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 12,786,000
<SECURITIES> 14,342,000
<RECEIVABLES> 3,589,000
<ALLOWANCES> 301,000
<INVENTORY> 5,676,000
<CURRENT-ASSETS> 37,736,000
<PP&E> 5,197,000
<DEPRECIATION> 2,987,000
<TOTAL-ASSETS> 41,205,000
<CURRENT-LIABILITIES> 7,584,000
<BONDS> 0
0
0
<COMMON> 165,000
<OTHER-SE> 33,423,000
<TOTAL-LIABILITY-AND-EQUITY> 41,205,000
<SALES> 9,200,000
<TOTAL-REVENUES> 22,935,000
<CGS> 16,912,000
<TOTAL-COSTS> 19,215,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,000
<INTEREST-EXPENSE> 3,000
<INCOME-PRETAX> 213,000
<INCOME-TAX> 891,000
<INCOME-CONTINUING> 3,836,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,836,000
<EPS-PRIMARY> .24
<EPS-DILUTED> .23
</TABLE>
