As filed with the Securities and Exchange Commission on September 26, 1996
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
----------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
RTC CRUISES, LTD.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
CAYMAN ISLANDS
BRITISH WEST INDIES 4400 NOT APPLICABLE
(State or jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation) Classification Code Number) Identification No.)
RTC CRUISES, LTD.
GABLES WATERWAY EXECUTIVE CENTER
1390 SOUTH DIXIE HIGHWAY, SUITE 2114
CORAL GABLES, FLORIDA 33146
(305) 663-9072
(Address and telephone number of principal executive offices)
DOUGLAS H. MACGARVEY
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
RTC CRUISES, LTD.
GABLES WATERWAY EXECUTIVE CENTER
1390 SOUTH DIXIE HIGHWAY, SUITE 2114
CORAL GABLES, FLORIDA 33146
(305) 663-9072
(Name, address, and telephone number of agent for service)
Copies to:
LESLIE J. CROLAND, ESQ.
JEFF T. MIHM, ESQ.
LUCIO, MANDLER, CROLAND, BRONSTEIN & GARBETT, P.A.
701 BRICKELL AVENUE, SUITE 2000
MIAMI, FLORIDA 33131
(305) 579-0012
Approximate date of commencement of proposed sale
to public: As soon as practicable after the effective date
of this Registration Statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933 check the following box [X]
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
TITLE OF EACH PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
REGISTERED REGISTERED PER SHARE (1) PRICE(1) FEE
---------- ---------- ------------- ------------------ ------------
<S> <C> <C> <C> <C>
Convertible Redeemable Preferred
Stock, par value $.00003 per share 1,400,000 $5.00 $7,000,000 $2,413.80
Common Stock, par value $.00003
per share 1,400,000(2) -- -- --
TOTAL $2,413.80
=========
<FN>
- ----------------
(1) In accordance with Rule 457, the registration fee is based upon the
proposed offering price of the Convertible Redeemable Preferred Stock.
(2) Represents shares of Common Stock issuable upon conversion of the
Convertible Redeemable Preferred Stock. Pursuant to Rule 457, no
additional registration fee is required.
The Company hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Company shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
</FN>
</TABLE>
<PAGE>
Subject to Completion - Dated September 26, 1996
PROSPECTUS
1,400,000 SHARES OF CONVERTIBLE REDEEMABLE PREFERRED STOCK
RTC CRUISES, LTD.
RTC Cruises, Ltd. (the "Company") hereby offers for sale outside of the
United States (the "Offering") 1,400,000 shares of Convertible Redeemable
Preferred Stock, par value $.00003 per share (the "Preferred Stock"), at a
purchase price of $5.00.
From the closing of this Offering, the Company has the right to redeem
all or any part of the Preferred Stock at $7.50 per share, subject to the right
of the holders of the Preferred Stock to convert their shares of Preferred Stock
into Common Stock within seven days of receipt of the notice of conversion. The
Company also has the option to require all holders of Preferred Stock to convert
the Preferred Stock into Common Stock, if the closing bid price of the Common
Stock as quoted on the NASDAQ system or in the over-the-counter market is less
than $6.00 per share on any given day. The number of shares of Common Stock to
be received upon such conversion is determined by multiplying the number of
shares of Preferred Stock beneficially owned by each holder by $5.00 and then
divided by the closing bid price of the Common Stock as quoted on the NASDAQ
system or in the over-the-counter market on the day when such price was less
than $6.00 per share, discounted by 20%.
Holders of the Preferred Stock have the option, during each six months
from the closing of this Offering, to convert up to 25% of the shares of
Preferred Stock beneficially owned by each holder into shares of Common Stock.
In addition, all Preferred Stock will be automatically converted into Common
Stock two years from the closing of this Offering. The number of shares of
Common Stock issuable upon such conversions is calculated by multiplying the
number of shares of Preferred Stock to be converted by $5.00 and then divided by
the average closing bid price of the Common Stock as quoted on the NASDAQ system
or in the over-the-counter market for the five business days prior to the date
that the certificate evidencing the Preferred Stock is mailed to the Company's
transfer agent for conversion, discounted by 20%. In the case of an automatic
conversion, the average closing bid price of the Common Stock is based upon the
five business days trading price prior to the date of automatic conversion. See
"Description of Securities."
This Offering is being conducted by the Company on a "best efforts, all
or none" basis. All proceeds from the sale of the Preferred Stock will be placed
in an escrow account at __________________________________________ ("Escrow
Agent") until the earlier to occur of January 15, 1997 or the date that all of
the shares offered hereby are sold. The Company will be assisted in its efforts
to sell the Preferred Stock by London Manhattan International Ltd., a company
incorporated under the laws of The Commonwealth of the Bahamas ("London
Manhattan"). See "Certain Transactions-London Manhattan."
The Company intends to apply to list the Common Stock on the NASDAQ
SmallCap Market, ("NASDAQ") although there can be no assurances that an active
trading market will develop even if the securities are accepted for quotation.
Even if an active trading develops, the Company is still required to maintain
certain minimum criteria established by NASDAQ, of which there can be no
assurance that the Company will be able to do so. No trading market is expected
to develop for the Preferred Stock.
Prior to this Offering, there has been no public market for the
Preferred Stock or the Common Stock. The initial public offering price of the
Preferred Stock has been determined by the Company, and bears no relationship to
the book value of the Preferred Stock or the Common Stock or to any other
generally accepted criteria of value. See "Description of Securities."
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE
SUBSTANTIAL DILUTION AND SHOULD BE CONSIDERED ONLY BY PERSONS WHO CAN AFFORD THE
LOSS OF THEIR ENTIRE INVESTMENT. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER
THE MATTERS SET FORTH UNDER THE CAPTION "RISK FACTORS" COMMENCING ON PAGE 5 OF
THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PROCEEDS TO
PRICE TO PUBLIC COMMISSIONS(1) COMPANY(2)
--------------- -------------- ----------
Per Share $5.00 $.50 $4.50
---------- -------- ----------
Total $7,000,000 $700,000 $6,300,000
<PAGE>
(FOOTNOTES FROM PREVIOUS PAGE)
(1) In addition to paying a commission to London Manhattan equal to
10% of the gross proceeds of this Offering, the Company has agreed to:
(a) pay London Manhattan a nonaccountable expense allowance in an
amount equal to 3% of the gross proceeds of this Offering, (b) issue to
London Manhattan 376,000 shares of Common Stock, (c) issue to London
Manhattan warrants to purchase an additional 282,000 shares of Common
Stock, at an exercise price of $7.50 per share, which are exercisable
commencing six months from, and ending three years from, the closing of
this Offering, and (d) indemnify London Manhattan against certain
liabilities, including liabilities under the Securities Act of 1933.
See "Certain Transactions-London Manhattan."
(2) Before deducting estimated expenses of approximately $300,000
payable by the Company (including the nonaccountable expense allowance
of London Manhattan equal to 3% of the gross proceeds from this
Offering.)
SERVICE AND ENFORCEMENT OF LEGAL PROCESS
Although the Company is incorporated in Cayman Islands, British West
Indies, the Company does not expect that the ability of investors to enforce
civil liabilities under the U.S. federal securities laws is presently adversely
affected thereby since: (i) all of the Company's officers and directors are
residents of the United States; (ii) the Company's principal executive offices
are located in the United States; and (iii) a substantial portion of all of the
Company's assets are not located outside the United States. To the extent that
in the future a substantial portion of the Company's assets are located outside
the United States, investors may encounter difficulty in enforcing judgments of
U.S. courts predicated upon civil liability under the U.S. federal securities
laws, depending upon the laws of the particular jurisdiction in which such
assets are located.
ADDITIONAL INFORMATION
The Company does not presently file reports and other information with
the Securities and Exchange Commission (the "Commission"). Following completion
of this Offering, the Company intends to furnish its security holders with
annual reports containing audited financial statements and such interim reports
as the Company may determine to furnish or as may be required by law.
2
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND RELATED NOTES APPEARING ELSEWHERE IN
THIS PROSPECTUS. EACH PROSPECTIVE INVESTOR IS URGED TO READ THIS PROSPECTUS IN
ITS ENTIRETY. UNLESS OTHERWISE INDICATED HEREIN, ALL DOLLAR AMOUNTS ARE IN
UNITES STATES DOLLARS.
THE COMPANY
RTC Cruises, Ltd. (the "Company") is a development stage enterprise
that has been formed to operate and market a premium class cruise ship and land
tours in French Polynesia, popularly known as Tahiti, on a year round basis. The
Company, which will operate under the name Royal Tahitian Cruises, plans to
offer seven day cruises between the islands of Tahiti, Raiatea, Tahaa, Bora,
Huahine, Rangiaroa, and Moorea. The Company will also offer three, four and
seven day land vacation packages in conjunction with its cruises. The Company's
business strategy is to emphasize its French Polynesian destination as well as
the luxury and convenience of travelling by cruise ship. The Company believes
that French Polynesia is an ideal location to establish a cruise line. Tahiti
has a strong name recognition with the public and possesses a sub-tropical
climate with exotic islands relatively untouched by modern development.
Distances between island destinations are short, which will be traveled at night
to afford passengers the opportunity to experience the various islands and to
partake in onshore activities during the day. Although the Company is aware of
at least two companies that presently offer cruise services in Tahiti and one
ship presently under construction by another company, the Company believes that
the Tahitian market is underdeveloped and that, in any event, the Company will
be able to compete effectively against these better capitalized and established
competitors. The Company, however, will periodically review its cruise itinerary
and may deploy its vessel in other areas if financially attractive opportunities
develop.
Passenger fares for a seven day cruise are expected to range from
$1,600 to $2,400 (not including airfare), although the Company may in the future
be required to adjust these fares due to competitive pressures. The Company will
perform all marketing services for the cruise line. The Company believes that by
operating year round in a single geographical area it will develop a strong
market awareness of its product and will avoid the expenses associated with
multiple destination programs that require the repositioning of the vessel from
one geographic region to another.
The Company intends to charter a cruise ship from Concorde Shipping,
Ltd., a Cayman Islands, British West Indies corporation in which Douglas H.
MacGarvey and Thomas G. Rader, directors and the principal stockholders of the
Company, own 50% of the outstanding stock, and commence operations upon the
completion of this Offering. The remaining 50% of the stock of Concorde is owned
by Herbert Peintner, who was granted options by Messrs. MacGarvey and Rader to
purchase an aggregate of 1,065,333 shares of Common Stock from them. The Company
may also attempt to charter or acquire additional cruise ships and to engage in
other cruise line related activities if the Company is successful in completing
this Offering and thereafter obtains the necessary funds either from operations
or from additional financing of which there can be no assurance. See "Proposed
Business-Possible Additional Activities."
The Company was originally incorporated in July 1994 as a Florida
corporation with the name of Royal Tahitian Cruises, Inc. and was continued in
the Cayman Islands, British West Indies on August 23, 1996. Its principal
executive offices are presently located at 1390 South Dixie Highway, Suite 2114,
Coral Gables, Florida 33146, and its telephone number is (305) 663-9072.
3
<PAGE>
<TABLE>
<CAPTION>
THE OFFERING
<S> <C>
Securities Offered ...................................1,400,000 shares of Preferred Stock.
Securities Outstanding Prior to Offering..............No shares of Preferred Stock and 3,442,000 shares of Common Stock. An
additional 376,000 shares of Common Stock are issuable to London
Manhattan upon completion of this Offering.
Securities Outstanding After Offering.................1,400,000 shares of Preferred Stock and 3,818,000 shares of
Common Stock.
Use of Proceeds ......................................Proceeds estimated to be approximately $6,000,000 are intended to be used
to charter a passenger cruise vessel, purchase capital equipment, for
marketing and advertising, payment of salaries, including officers' salaries,
start-up expenses, overhead, general and administrative expenses, and
working capital. See "Use of Proceeds" and "Plan of Operation."
Risk Factors and Dilution ............................An investment in the securities offered hereby is highly speculative,
involves significant risks and immediate and substantial dilution. See "Risk
Factors" and "Dilution."
Proposed NASDAQ Symbol................................Common Stock - RTCCF
</TABLE>
SELECTED FINANCIAL INFORMATION
The following information for the 12-month period ended May 31, 1996
and cumulative from July 5, 1994 (incorporation) through May 31, 1996 has been
summarized from the financial statements of the Company included elsewhere in
this Prospectus (other than the pro forma information) and should be read in
conjunction with such financial statements and the notes thereto:
SUMMARY OF DEVELOPMENT STAGE ACTIVITIES
CUMULATIVE FROM JULY 5, 1994
YEAR ENDED (INCORPORATION) THROUGH
MAY 31, 1996 MAY 31, 1996
------------ ----------------------------
Net Loss ............................. 191,136.00 $ 364,181
Net Loss Per Share ................... (.06)
Weighted Average Shares Outstanding .. 3,435,944
SUMMARY OF BALANCE SHEET
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
MAY 31, 1996 MAY 31, 1996(1) MAY 31, 1996(2)
------------ --------------- ---------------
<S> <C> <C> <C>
Total Assets 1,650 219,650 6,219,650
Total Liabilities 362,859 362,859 362,859
Deficit Accumulated During Development Stage (364,181) (392,181) (392,181)
Stockholders' Equity (Deficiency) (361,209) (143,209) 5,856,791
<FN>
- -----------------
(1) Gives effect to the issuance of 188,000 shares of Common Stock to
London Manhattan Communications L.L.C. valued at $1.00 per share for
strategic business services to be provided over two years under a
consulting agreement, the issuance of 30,000 shares in a private
placement offering at $1.00 per share and the issuance of 28,000 shares
in a private placement offering at $.01 per share to four persons,
including two directors of the Company.
(2) Gives effect to the proceeds from the sale of Common Stock offered
hereby, net of approximately $1,000,000 in offering expenses, in the
amount of $6,000,000.
</FN>
</TABLE>
4
<PAGE>
RISK FACTORS
Prospective investors should carefully consider, along with the other
information contained in this Prospectus, the following risk factors relating to
the Company, the cruise line industry in general and this Offering.
1. RECENT FORMATION; NO OPERATING HISTORY; REQUIREMENTS FOR
COMMENCEMENT OF OPERATIONS
The Company was originally incorporated in Florida in July 1994, and
continued in the Cayman Islands, British West Indies in August 1996. The Company
has not begun actual cruise line operations, has had no sales to date and will
not have any revenues until such time as a passenger cruise vessel is chartered
and the Company commences marketing efforts and ticket sales, which are
anticipated to occur 90 days after the closing of this Offering. The Company
will incur substantial expenses until it commences passenger cruise line
operations. The Company is also subject to all of the risks inherent in the
creation of a new business. There can be no assurance that the Company's efforts
will result in a commercially viable business or that the Company will ever
operate at a profit. The Company's ability to deliver quality services at a
competitive price is uncertain. Further, the level of acceptance of the
Company's services by consumers and the travel and tourism industry cannot be
predicted. As a result of its small size and capitalization and lack of
operating history, the Company is particularly susceptible to adverse effects of
changing economic conditions and consumer tastes, competition, and other
contingencies beyond the Company's control. Due to changing circumstances, the
Company may be forced to change dramatically or even terminate its planned
operations.
2. LOSSES FROM OPERATIONS AND NEED FOR FINANCING
Since the Company's incorporation in July 1994 through to May 31, 1996,
the Company incurred a net loss of $364,181 and has not generated any revenues.
The Company estimates that the net proceeds from this Offering and operating
cash flow from its cruise ship operation will be sufficient to satisfy its
anticipated cash requirements for a period of approximately 12 months following
the consummation of this Offering. The Company believes a passenger load factor
of 65% will be required to operate profitably. In the event that proceeds from
this Offering prove to be insufficient, and the Company does not generate
sufficient cash flow from operations to satisfy cash requirements, the Company
may find itself in the position in which it may be required to seek additional
equity or debt financing to support its ongoing operations. No assurance can be
given that such funds, if required, will be available on terms that are
satisfactory to the Company, if they are available at all. If the Company is
unable to obtain such financing when needed, the Company may be forced to cease
its operations. See "Use of Proceeds" and "Plan of Operation."
In their opinion regarding their audit of the Company's financial
statements, the Company's independent accounting firm has stated that because
the Company has been dependent upon an affiliate of the Company to support its
development activities and has incurred losses since inception, substantial
doubts are raised about the Company's ability to continue as a going concern.
The Company's financial statements do not include any adjustments that might
result from the outcome of this uncertainty. See "Certain Transactions-Officers
and Directors" and the financial statements and related notes appearing
elsewhere in this Prospectus.
3. COMPETITION
The cruise ship business is highly competitive. The Company will be in
competition with approximately 134 passenger cruise ships operating worldwide
and owned by approximately 33 different cruise lines, the vast majority of which
have established their positions in the market and have substantially greater
resources that the Company. In Tahiti, the Company is aware of two firms that
currently offer luxury cruises on large sailing vessels and one cruise line that
is presently constructing a vessel for operation in the area. Each of these
firms is significantly larger than the Company and has greater financial and
other resources than the Company. Although the Company expects to compete with
these firms by operating a traditional passenger vessel (i.e., without sails) at
lower cruise fares that the Company believes will be more attractive and
familiar to older passengers which comprise the largest segment of the cruise
market, no assurances can be given that the Company will be successful in its
efforts to compete against established and better capitalized firms. See
"Proposed Business-Competition."
5
<PAGE>
4. OPERATING LEVERAGE
The cruise industry is characterized by a high degree of operating
leverage. Specifically, fixed costs represent the major portion of a cruise
line's operating expenses and cannot be significantly reduced when outside
factors, such as a downturn in the economy or competition, cause reduction in
load factors or passenger fares. While the Company believes that its estimated
fixed costs will be reasonable and manageable given its planned operations, the
Company may not be able to reduce or decrease these costs on a timely basis in
the event that passenger levels drop or fares must be lowered because of poor
economic conditions or competitive pressures. The Company will be dependent upon
passenger revenues to meet the expenses of chartering and operating its vessel.
Accordingly, no assurances can be given that the results of the Company's
operations will not be affected adversely by competition, unsatisfactory
occupancy percentages or accidents, or that the Company will be able to operate
profitably.
5. CHARTER AND DELIVERY OF THE SHIP
The charter and delivery of a passenger cruise vessel suitable for the
Company's operations is contingent upon the successful completion of this
Offering. The Company will charter a passenger cruise vessel from Concorde
Shipping, Ltd. ("Concorde"), a Cayman Islands, British West Indies corporation,
50% of the stock of which is owned by Messrs. Thomas G. Rader and Douglas H.
MacGarvey, who are the principal stockholders of the Company. The other 50% of
the stock of Concorde is owned by Herbert Peintner. Such affiliated company does
not presently own or charter any cruise ships. See Risk Factor No. 17 herein.
After Concorde has identified and purchased or chartered a vessel suitable for
the Company's plan of operations, the Company will charter such vessel from
Concorde pursuant to a charter party agreement to be entered into between the
Company and Concorde. The Company has been advised by Concorde that such vessel
should be located and available for charter by the Company by no later than the
Fall of 1997. No assurance, however, can be given that Concorde will deliver a
suitable vessel on a timely basis or at all. In such event, the Company would
not be able to begin operations and could suffer material adverse consequences.
The Company will not own any cruise ships. Consequently, after the
expiration of the term of the charter party agreement, the Company may be unable
to renew the charter. If the Company has not expanded its cruise line activities
through additional charters or the acquisition or construction of other ships,
it will be unable to engage in cruise line activities.
6. AVAILABILITY AND PRICE OF ENERGY
One of the major expenses of operating cruise ships is the cost of
fuel. Future increases in the cost of fuel would significantly increase the cost
of cruise ship operations. Although cruise lines historically have been able to
raise prices to cover higher fuel costs, economic and political conditions in
certain areas of the world make it difficult to predict whether fuel will
continue to be available at prices that will make operation of the Company's
cruise ship economically viable.
7. CERTAIN RISKS OF OPERATIONS
The Company's operations may be adversely affected by numerous factors,
some of which are common to all business and some of which are unique to the
cruise line industry. Such factors include, among others: (i) labor disturbances
or strikes, either by shipboard employees or land-based personnel, causing a
delay or forcing the cancellation of cruises; (ii) government regulatory orders
or rules adversely affecting the Company's operations; (iii) severe damages to
the Company's cruise ship as a result of natural or man-made causes, which would
temporarily or permanently prevent the ship from operating; and (iv) decreased
demand for luxury items such as cruises during economic recessions.
8. LICENSE TO OPERATE IN TAHITI
The Company has not yet received its license from the Government of
French Polynesia to operate a passenger cruise vessel in French Polynesia.
However, the Company has received a commitment from the Government of French
Polynesia to license the Company to operate a passenger cruise vessel in French
Polynesia for a period of five years from the commencement of the Company's
operations if the Company complies with certain conditions, including, but not
limited to, providing a minimum of 12 jobs for local residents, training a
minimum of three local residents per year, promoting local entertainment and
activities companies through information made available aboard the Company's
vessel, and buying approximately $512,000
6
<PAGE>
of products locally. Although the Company believes that it will be able
to comply with all conditions precedent to the issuance of a license to operate
in French Polynesia, there can be no assurances that such license will
ultimately be issued to the Company, or if the license is issued, that it can be
renewed on terms satisfactory to the Company.
9. LIABILITY CLAIMS
The Company faces an inherent risk of exposure to liability claims in
the event that the operation of its cruise ships results in accidents or other
adverse effects. While the Company will attempt to take appropriate precautions,
there can be no assurance that it will avoid exposure to material liability
claims. The Company intends to purchase liability insurance for its ship if
available at reasonable rates. No assurance can be given, however, that the
Company will be able to obtain or maintain adequate liability insurance at
reasonable rates. Failure to maintain adequate insurance could place the Company
at great financial risk in the event of accidents and could adversely affect the
Company's ability to do business. Further, even if the Company were to maintain
adequate insurance, adverse publicity from accidents could have a material
adverse effect on the Company's business.
10. IMMEDIATE SUBSTANTIAL DILUTION
Investors participating in this Offering will incur an immediate and
substantial dilution of $3.91 per share. See "Dilution."
11. NO ASSURANCE OF PUBLIC MARKET
Prior to this Offering, no public market for the Preferred Stock or
Common Stock existed. The Company intends to file an application to list the
Common Stock on the NASDAQ Small Cap Market. Such market's minimum listing
requirements include minimum total assets of $4,000,000, total stockholders
equity of $2,000,000 and registration of the Common Stock under the Securities
Exchange Act of 1934 (the "1934 Act"). Prior to such listing, it is anticipated
that the Common Stock will be eligible for trading on the NASD Electronic
Bulletin Board. As compared with other markets, an investor may find it more
difficult to dispose of or obtain accurate quotations for the price of
securities traded on the NASD Electronic Bulletin Board. In addition, if the
trading price of the Common Stock is less than $5.00 per share, trading in the
Common Stock would also be subject to certain rules promulgated under the 1934
Act, which require additional disclosure by broker-dealers in connection with
any trades involving a stock defined as a penny stock (generally, any non-NASDAQ
equity security that has a market price of less than $5.00 per share, subject to
certain exceptions). Such rules require the delivery, prior to any penny stock
transaction, of a disclosure schedule explaining the penny stock market and the
risks associated therewith, and impose various sales practice requirements on
broker-dealers who sell penny stock to persons other than established customers
and accredited investors. For these types of transactions, the broker-dealer
must make a special suitability determination for the purchaser and have
received the purchaser's written consent to the transaction prior to sale. The
additional burdens imposed upon broker-dealers by such requirements may
discourage broker-dealers from effecting transactions in the Common Stock, which
could severely limit the market liquidity of the Common Stock and the ability of
persons to sell the Preferred Stock, the Common Stock, or both.
12. ARBITRARY DETERMINATION OF OFFERING PRICE
The price at which the Preferred Stock is being offered to potential
investors has been arbitrarily determined by the Company, and bears no
relationship to the book value of the Preferred Stock or the Common Stock or to
any other generally accepted criteria of value. The offering price of $5.00 per
share is substantially in excess of the net tangible book value of the Common
Stock.
13. NO DIVIDENDS
The Company has not paid any cash dividends since its inception, does
not anticipate paying any cash dividends in the foreseeable future and intends
to retain earnings, if any, to provide funds for general corporate purposes and
the expansion of the Company's cruise line business. Any future dividends will
be dependent upon the earnings of the Company, its financial requirements and
other relevant factors. In addition, pursuant to a shareholder loan agreement
among Thomas G. Rader, International Maritime Group, Inc., the Company and
Douglas H. MacGarvey, the Company is precluded from making
7
<PAGE>
any distribution of cash dividends to its stockholders until all principal and
accrued interest owed to Mr. Rader is repaid. As of July 31, 1996, the Company
borrowed $392,373 from Mr. Rader under the shareholder loan agreement. See
"Certain Transactions-Officers and Directors."
14. RELIANCE ON PRINCIPAL OFFICERS AND NEED TO RETAIN ADDITIONAL EXECUTIVE
OFFICERS
The Company is largely dependent upon the continued services of Douglas
H. MacGarvey, the Chairman of the Board of Directors and Chief Executive Officer
of the Company. The loss of the services of Mr. MacGarvey before a qualified
replacement is retained could have a material adverse effect on the Company and
its future prospects. Although Mr. MacGarvey has a five-year employment
agreement with an option to extend the agreement for an additional five years,
there can be no assurance that Mr. MacGarvey will remain employed with the
Company during the term of his agreement. See "Certain Transactions-Officers and
Directors."
Prior to commencing cruise line operations, the Company intends to hire
a President, a Controller, one senior sales/marketing executive and four sales
executives plus 25 to 30 administrative employees. Although the Company does not
believe that it will encounter inordinate difficulty in attracting and retaining
qualified personnel to fill these and other positions, no assurance can be given
that the Company will be able to do so. Any inability on the Company's part in
attracting and retaining qualified personnel would adversely affect the
Company's development and growth. See "Plan of Operations."
15. CONTROL BY PRINCIPAL STOCKHOLDERS
Douglas H. MacGarvey and Thomas G. Rader, the principal stockholders of
the Company, own 92.8% of the shares of Common Stock. After the completion of
this Offering, such persons will own approximately 83.7% of the outstanding
Common Stock and taking into account the issuance of 1,400,000 shares of
Preferred Stock offered hereby, approximately 61.3% of all of the outstanding
voting securities of the Company. Herbert Peintner has options to acquire
one-third of the shares of Common Stock owned by Messrs. MacGarvey and Rader.
See "Principal Stockholders." Since the Company's Memorandum of Association does
not provide for cumulative voting rights, Messrs. MacGarvey and Rader will be in
a position to elect all of the Company's directors and to control the Company.
16. DISCRETION IN USE OF PROCEEDS
The Company presently intends to use the net proceeds of this Offering
for the purposes set forth in "Use of Proceeds." The Company, however, retains
broad discretion to adjust the application and allocation of the net proceeds of
this Offering in order to address changed circumstances and opportunities. As a
result, the success of the Company will be dependent upon the discretion and
judgment of the management of the Company with respect to the application and
allocation of the net proceeds of this Offering.
17. CONFLICT OF INTEREST REGARDING CHARTER PARTY AGREEMENT
The Company intends to charter a passenger cruise vessel from Concorde
in which Douglas H. MacGarvey, the Company's Chairman of the Board and Chief
Executive Officer, and Thomas G. Rader, the Company's Vice-Chairman of the
Board, own 50% of the outstanding shares. The other 50% of the stock of Concorde
is owned by Herbert Peintner, who has been granted an option by each of Messrs.
MacGarvey and Rader to acquire an aggregate of 1,065,333 shares of Common Stock
owned by them. The Company anticipates that it will be obligated to make charter
payments of approximately $10,000 to $15,000 per day depending on the level of
charter services provided to the Company by Concorde under the charter party
agreement. While the Company believes that its contemplated agreement with
Concorde will contain commercially reasonable terms comparable to those which
would be available from unaffiliated parties, there can be no assurance that the
Company will not suffer material adverse consequences from the inherent conflict
of interest and lack of arms-length negotiations with Concorde. Further, in the
event that disputes arise between Concorde and the Company, resolutions of such
disputes, whether through legal action or otherwise, could be severely
complicated by Messrs. MacGarvey, Rader and Peintner having significant
interests in both companies.
8
<PAGE>
18. BOARD OF DIRECTORS AUTHORITY TO ISSUE PREFERRED STOCK
The Company's Memorandum of Association authorizes the issuance of
10,000,000 shares divided into 8,600,000 shares of Common Stock and 1,400,000
shares of Preferred Stock. If this Offering is completed, there will be issued
and outstanding 3,818,000 shares of Common Stock and 1,400,000 shares of
Preferred Stock, leaving a balance of shares of capital stock authorized to be
issued by the Company of 4,782,000, including the 1,000,000 shares of Common
Stock reserved for issuance under the Company's 1996 Stock Option Plan. These
shares may be issued as "blank check" preferred stock with such designations,
rights and preferences as may be determined from time to time by the Company's
Board of Directors, or a combination of Common Stock and "blank check" preferred
stock totalling 8,600,000 shares. The Board of Directors is empowered, without
action by the stockholders, to issue additional shares of preferred stock with
dividend, liquidation, conversion, voting, or other rights which could adversely
affect the voting power or other rights of the holders of the Preferred Stock
and Common Stock. In the event of issuance, the preferred stock could be
utilized, under certain circumstances, as a method of discouraging, delaying, or
preventing a change of control in the Company. See "Description of Securities."
19. SHARES ELIGIBLE FOR FUTURE SALE AND REGISTRATION RIGHTS
Of the 3,442,000 shares of Common Stock outstanding as of the date of
this Prospectus, 246,000 shares of Common Stock were issued pursuant to Rule 504
promulgated under the 1933 Act and are therefore unrestricted and 3,196,000
shares of restricted Common Stock are deemed to have been held by affiliates of
the Company for more than two years and can be sold by such affiliates in
accordance with Rule 144 promulgated under the Securities Act of 1933 (the "1933
Act"). See "Principal Stockholders." In general, under Rule 144, a person,
including an affiliate, who has beneficially owned shares of Common Stock for at
least two years is entitled to sell, within any three-month period, a number of
shares that does not exceed the greater of 1% of the total number of outstanding
shares of the same class, or if the Common Stock is quoted on NASDAQ, the
average weekly trading volume during the four calendar weeks preceding the sale.
A person who has not been an affiliate of the Company for at least three months
immediately preceding the sale and who has beneficially owned shares of Common
Stock for at least three years is entitled to sell such shares under Rule 144
without regard to any of the volume limitations described herein. No prediction
can be made as to the effect, if any, that sales of shares or the availability
of such shares will have on the market price of the Common Stock prevailing from
time to time. In addition, upon completion of this Offering, the Company will
issue to London Manhattan warrants to purchase 282,000 shares of Common Stock.
London Manhattan will have the right to demand registration of such shares. The
Company also intends to register the 1,000,000 shares of Common Stock reserved
for issuance pursuant to the Company's 1996 Stock Option Plan. See
"Management-Stock Option Plan" and "Certain Transactions-London Manhattan." The
possibility that substantial amounts of Common Stock may be sold in the public
market may adversely affect the prevailing market prices for the Common Stock
and could impair the Company's ability to raise capital in the future through
the sale of equity securities.
20. PREFERRED STOCK SUBJECT TO REDEMPTION AND MANDATORY CONVERSION
The Company has the option, at any time, to redeem all or any part of
the Preferred Stock at $7.50 per share, subject to the right of the holders of
the Preferred Stock to convert their shares of Preferred Stock into Common Stock
within seven days of receipt of the Company's notice of conversion. The Company
could exercise its right to redeem the Preferred Stock at a time when holders
thereof would prefer to retain ownership of the Preferred Stock in order to
convert their shares of Preferred Stock at a later date into more shares of
Common Stock that would be obtained at the time of the redemption notice.
Further, if the closing bid price of the Common Stock as quoted on the NASDAQ
system or on the over-the-counter market is less than $6.00 per share on any
given day, the Company also has the right to require all holders of Preferred
Stock to convert such securities into Common Stock. The number of shares of
Common Stock to be received upon such conversion is determined by multiplying
the number of shares of the Preferred Stock beneficially owned by each holder
thereof by $5.00 and then divided by the closing bid price of the Common Stock
as quoted on the NASDAQ system or in the over-the-counter market on the day when
such price was less than $6.00 per share, discounted by 20%. By requiring
holders of the Preferred Stock to convert their shares of Preferred Stock into
Common Stock whenever the market price of the Common Stock is less than $6.00,
the Company limits the number of shares of Common Stock into which the Preferred
Stock is convertible, thereby limiting an investor's ability to benefit from the
discount feature of the Preferred Stock.
9
<PAGE>
21. BEST EFFORTS OFFERING; ESCROW OF INVESTORS' FUNDS
The shares of Preferred Stock are being offered by the Company on a
"best efforts, all or none" basis. All of the shares offered hereby must be sold
or none of them will be sold. Since this Offering is being made on a "best
efforts" basis, there can be no assurance that any of the Preferred Stock will
be sold and no commitment exists by any person to purchase all or any of the
shares of Preferred Stock. Consequently, subscribers' funds may be escrowed and
then returned without interest thereon or deduction therefrom in the event all
of the Preferred Stock offered hereby is not sold by January 15, 1997. Investors
will not have the use of any subscription funds during the subscription period.
22. CONVERSION OF PREFERRED STOCK WILL HAVE DILUTIVE EFFECT ON MARKET
Holders of Preferred Stock have the option, every six months from the
date that the Preferred Stock is initially issued, to convert up to 25% of the
shares of the Preferred Stock beneficially owned by each holder into shares of
Common Stock, the number of which is calculated by multiplying the number of
shares of Preferred Stock to be converted by $5.00 and then divided by the
average closing bid price of the Common Stock as quoted on the NASDAQ system or
on the over-the-counter market for the five business days prior to the date that
the certificate evidencing the Preferred Stock is mailed to the Company's
transfer agent for conversion, discounted by 20%. Further, all of the Preferred
Stock will be automatically converted into Common Stock two years from the date
of the closing of this Offering. The number of shares of Common Stock to be
received upon such automatic conversion is determined by multiplying the number
of shares of the Preferred Stock beneficially owned by each holder thereof by
$5.00 and then divided by the average closing bid price of the Common Stock as
quoted on the NASDAQ system or in the over-the-counter market for the five
business days prior to the date of automatic conversion. Accordingly, a number
of shares of Preferred Stock may be converted at a time when such conversion
will have a material adverse effect on the market price of the Common Stock. See
"Description of Securities."
23. TAX STATUS OF THE COMPANY
The Company will be a Controlled Foreign Corporation ("CFC") if Herbert
Peintner does not fully exercise the options granted to him by Messrs. MacGarvey
and Rader. See "Certain Transactions-Officers and Directors." In the event that
Mr. Peintner does not fully exercise such options and the Company remains a CFC
for United States income tax purposes, then certain United States stockholders
of the Company (i.e. any United States persons owning, directly or indirectly,
10% or more of the voting securities of the Company), will be subject to United
States taxation on such stockholder's pro-rata share of the Company's Subpart F
income. The amount of the United States stockholder's pro-rata share of the
Company's Subpart F income is deemed to be distributed to such stockholder and
includable in the stockholder's gross income whether or not there has been an
actual distribution of cash from the Company to its stockholders. A United
States stockholder of the Company would then be required to pay taxes on income
which has not been received. See "Certain Tax Considerations."
Although the Company does not anticipate that it will be deemed to be a
passive foreign investment company ("PFIC"), it is conceivable that at some time
the Company will so qualify. In the event that the Company is designated a PFIC
for U.S. income tax purposes,then any individual who is a United States citizen
or resident who owns stock in the Company will be potentially subject to
interest charges that may be imposed on dividend distributions from the Company
and that if imposed may materially increase the tax cost of the dividend to the
stockholder. See "Certain Tax Considerations-Passive Foreign Investment
Company."
24. BOARD APPROVAL OF THE ACQUISITION OF SHARES OF COMMON STOCK BY CERTAIN
STOCKHOLDERS
In accordance with the Articles of Association of the Company, all
transfers of shares of capital stock of the Company are subject to the approval
of the Board of Directors at their sole discretion. This provision has been
incorporated into the Company's Articles of Association in order to ensure that
the Company does not become a Controlled Foreign Corporation, as such term is
defined in the United States Internal Revenue Code. See Risk Factor No. 23 and
"Certain Tax Considerations." Although not intended as such, this provision may
discourage or prevent a change in control of the Company. As a result, the
Company's stockholders may be deprived of an opportunity to sell their
securities at a higher market price, which, at least temporarily, typically
accompanies attempts to acquire control of a company through a tender offer,
open market purchases or otherwise.
10
<PAGE>
USE OF PROCEEDS
The Company estimates that the net proceeds of this Offering, after
deducting commissions and other expenses of the Offering to be paid by the
Company (including legal, accounting and printing costs), will be approximately
$6,000,000. The Company intends to use these proceeds for the purposes and in
the approximate amounts set forth below:
AMOUNT PERCENTAGE
------ ----------
Charter of Vessel(1) $2,000,000 33.3%
Ship Start-up Expenses(2) 1,000,000 16.7%
General and Administrative
Expenses and Overhead(3) 500,000 8.3%
Officers' Salaries (4) 200,000 3.3%
Marketing and Advertising(5) 1,200,000 20.0%
Working Capital(6) 1,010,000 16.9%
Repayment of Indebtedness to Stockholder(7) 90,000 1.5%
TOTAL NET PROCEEDS $6,000,000 100%
========== =====
(1) Letter of credit to be issued in favor of Concorde to guarantee the
Company's performance under the charter party
agreement. See "Proposed Business-Charter of Vessel."
(2) Prepaid insurance expenses, cost of the ship's positioning voyage to
Tahiti and salaries of the on-board ship personnel.
(3) Employee salaries, and general overhead, including office equipment,
furnishings and data processing equipment.
(4) Represents anticipated salaries to be paid for a period of six months
from the Closing of this Offering to the Chief Executive Officer and
one of the other executive officers to be hired during such period.
(5) Includes marketing materials, advertising, business travel for
attendance at trade shows and conventions and entertainment expenses.
(6) Working capital will be utilized by the Company to enhance and
otherwise stabilize cash flow during the Company's development stage,
such that any shortfalls between operating revenues and costs will be
covered by working capital. Although the Company prefers to retain its
working capital in reserve, the Company may be required to expend part
or all of these proceeds as financial demands dictate.
(7) Represents the estimated amount to be repaid to Thomas G. Rader, the
Vice-Chairman of the Board of the Company, who will be advancing funds
to the Company pursuant to a shareholder loan agreement to cover the
Company's expenses relating to this Offering. See "Certain
Transactions-Officers and Directors."
The amounts set forth above represent the Company's best estimate of
its allocation of proceeds of this Offering based upon the Company's current
plans. The actual allocation of proceeds may vary substantially from these
estimates depending upon economic conditions and the success, if any, of the
Company proposed business.
Pending application of the net proceeds of the Offering, such funds
will be invested in short-term bank certificates of deposit, interest bearing
savings accounts, United States government obligations or other short-term
interest bearing investments.
The Company believes that the net proceeds from this Offering, along
with the anticipated cash flow from operations, will be sufficient to meet its
expected cash requirements for a period of at least 12 months following the
consummation of this Offering.
DILUTION
Persons purchasing the Preferred Stock offered hereby will experience
immediate and substantial dilution in their investment in the Company.
"Dilution" is the reduction in the value of a purchaser's investment and
represents the difference between the public offering price and the net tangible
book value per share immediately upon completion of this Offering.
11
<PAGE>
At May 31, 1996, the Company had a negative net tangible book value of
$(361,209) or $(.11) per share of Common Stock. Net tangible book value per
share represents the Company's total tangible assets less total liabilities,
divided by the number of outstanding shares of Common Stock.
Assuming the sale of 1,400,000 shares of Preferred Stock and conversion
to Common Stock, less commissions and estimated offering expenses, the pro forma
net tangible book value of the Company at May 31, 1996 would have been
$5,856,791 or $1.09 per share of Common Stock. This represents an immediate
increase in net tangible book value of $1.19 per share to existing stockholders
and an immediate dilution of $3.91 per share to new investors.
<TABLE>
<CAPTION>
The following table illustrates this dilution on a per share basis:
<S> <C> <C>
Public Offering Price............................................... 5.00
May 31, 1996 Net Tangible Book Value Per Share...................... $ (.11)
Increase Attributable to Post Balance Sheet Transactions(1)......... .01
--------
Net Tangible Book Value Before Offering............................. (.10)
Increase Per Share Attributable to New Investors ................... 1.19
--------
Pro Forma Net Tangible Book Value After Offering ................... 1.09
----------
Dilution Per Share to New Investors................................. $3.91
<FN>
- ---------------
(1) Subsequent to May 31, 1996, the Company issued 188,000 shares of
Common Stock to London Manhattan Communications L.L.C. valued at $1.00
per share for strategic business services. Additionally, 30,000 shares
and 28,000 shares were issued in a private placement at $1.00 and $.01
per share, respectively. These transactions increased the net tangible
book value before the Offering to $(331,209) or $(.10) per share of
Common Stock.
</FN>
</TABLE>
The following table sets forth, as of September 25, 1996, the number of
shares of Common Stock purchased from the Company, the total consideration paid
and the average price per share paid by present stockholders and by new
investors purchasing shares in this Offering (assuming a conversion of Preferred
Stock to Common Stock):
<TABLE>
<CAPTION>
NUMBER OF PERCENT TOTAL PERCENT AVERAGE
SHARES OF TOTAL CONSIDERATION OF TOTAL PRICE
PURCHASED SHARES PAID CONSIDERATION PER SHARE
--------- -------- ------------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Present stockholders ...... 3,442,000 71% $ 30,280 0.4% $ .009
New investors ............. 1,400,000 29 7,000,000 99.6 5.00
Total . . ................ 4,842,000 100% $7,030,280 100.0%
========= ====== ========== =======
</TABLE>
PLAN OF OPERATION
Since the Company was incorporated in July 1994, it has developed its
plan to operate and market a premium class passenger cruise vessel in French
Polynesia. To date, the Company has not generated any revenues and has funded
its expenses through loans of $392,373 from Thomas G. Rader, the Vice-Chairman
of the Board of the Company. For a description of the Company's loan agreement
with Mr. Rader, See "Certain Transactions-Officers and Directors." If the
Company successfully completes this Offering by January 15, 1997, the
termination date of this Offering, an event for which there can be no
assurances, the Company intends to use the estimated net proceeds of $6 million
to fund the expenditures required in connection with the commencement of
passenger cruise operations in French Polynesia. See "Use of Proceeds." In such
event, the Company expects to commence passenger cruise operations and thereby
generate revenues to support operating expenditures by no later than the Fall of
1997. However, the actual commencement date of cruise line operations may be
delayed beyond the Fall of 1997, depending primarily on the date the Company is
able to charter and take delivery of a passenger ship suitable for its needs.
Furthermore, the Company's operating losses since inception, negative working
capital and stockholders' capital deficiency raise substantial doubt about the
Company's ability to continue as a going concern.
12
<PAGE>
Upon the completion of this Offering, the Company plans to begin
pre-operating activities by chartering a premium class vessel, developing sales
brochures and promotional materials, advertising the Company's cruise
operations, leasing office space, and managing other administrative matters such
as acquiring an order processing system. To complete these tasks, the Company
plans to hire a senior marketing/sales executive, a controller, four sales
executives and 22 administrative employees. The administrative staff, which will
be located in the Company's offices in Miami, Florida, will take reservations,
issue tickets, process all accounting requirements, process all marketing
requirements and provide general support to the four sales executives.
The Company will also hire a president, a vice president of hotel
services and a general manager, all of whom will be located in French Polynesia
to oversee the Company's day-to-day operations during both the pre-operating
period and after the Company commences its Tahitian passenger cruises.
Approximately 30 days prior to commencing passenger cruise operations, the
Company intends to hire approximately 48 persons for on-board ship operations
during the repositioning voyage to Tahiti of the vessel chartered by the
Company. A staff of approximately 130 additional persons will be hired at the
time the Company commences full passenger cruise operations, in order to manage
on-board ship operations, including the on-board hotel product and other
passenger services at all ports-of-call in French Polynesia.
It is anticipated that the Company will commence full passenger cruise
operations approximately 30 days after taking delivery of the vessel, which is
presently anticipated to occur by the Fall of 1997. The Company believes that
the net proceeds from the Offering and operating cash flow from its cruise ship
operation will be adequate to fund the Company's operations for a period of at
least 12 months from the completion of this Offering. The Company believes a
passenger load factor of 65% will be required in order to operate profitably.
However, further financing may be required by the Company if the Company's
operations do not generate sufficient revenues to cover operating expenses. No
assurance can be given that such funds, if required, will be available on terms
that are satisfactory to the Company, if they are available at all. If the
Company is unable to obtain such financing when needed, the Company may be
forced to cease its operations.
The Company does not expect to spend material amounts on research and
development during its development stage of operations.
PROPOSED BUSINESS
GENERAL
RTC Cruises, Ltd. (the "Company") was originally incorporated in July
1994 as a Florida corporation with the name of Royal Tahitian Cruises, Inc. and
was continued under the laws of the Cayman Islands, British West Indies, on
August 23, 1996. Since its original incorporation, the Company has developed its
plan to operate and market a premium class cruise ship and land tours in French
Polynesia, more commonly referred to as Tahiti.
The Company plans to offer seven day cruises between the islands of
Tahiti, Raiatea, Tahaa, Bora Bora, Huahine, Rangiaroa, and Moorea. The Company
will also offer three, four and seven day land vacation packages in conjunction
with its cruises. The Company's business strategy is to emphasize its French
Polynesian destination as well as the luxury and convenience of travelling by
cruise ship. The Company believes that French Polynesia is an ideal location to
establish a cruise line. Tahiti has a strong name recognition with the public
and possesses a sub-tropical climate with exotic islands relatively untouched by
modern development. Distances between island destinations are short, which will
be traveled at night to afford passengers the opportunity to experience the
various islands and to partake in onshore activities during the day. Although
the Company is aware of at least two companies that presently offer cruise
services in Tahiti and one ship presently under construction, the Company
believes that this market is underdeveloped and that, in any event, the Company
will be able to compete effectively against these better capitalized and
established competitors. See "Proposed Business-Competition." The Company,
however, will periodically review its cruise itinerary and may deploy its vessel
in other areas if financially attractive opportunities develop.
Passenger fares for a seven day cruise are expected to range from
$1,600 to $2,400 (not including airfare), although the Company may in the future
be forced to adjust these fares due to competitive pressures. The Company will
perform all marketing services for the cruise line. The Company believes that it
will develop a strong market awareness of its product and reduce its operating
costs by operating year-round in a single geographical area.
13
<PAGE>
After the completion of this Offering, the Company intends to charter a
cruise ship from Concorde, a Cayman Islands, British West Indies corporation in
which Douglas H. MacGarvey and Thomas G. Rader, directors and principal
stockholders of the Company, own 50% of the outstanding stock, and commence
operations. The remaining 50% of the stock of Concorde is owned by Herbert
Peintner, who was granted an option by each of Messrs. MacGarvey and Rader to
purchase an aggregate of 1,065,333 shares of Common Stock from them. See
"Proposed Business-Charter of Vessel," and "Principal Stockholders." The Company
may also attempt to charter or acquire additional cruise ships and to engage in
other cruise line related activities if the Company is successful in completing
this Offering and thereafter obtains the necessary funds either from operations
or from additional financing, of which there can be no assurance.
THE CRUISE VESSEL
The Company intends to charter a 450 to 550 passenger cruise ship in
the premium class from Concorde. Cruises are generally divided into three
classes: standard, premium and luxury. Standard class cruises are characterized
by shorter itineraries (one to seven days), standard cabins, double seatings at
meals and passenger fares of less than $250 per person per day. Premium class
cruises typically offers 7 to 10 day vacation plans ranging in price from $250
to $450 per person per day, diversified worldwide itineraries, two seating
dining and attention to product quality. Luxury class service offers cruises
from seven days to up to three months with the highest quality of service, large
cabins, and single seating dining. The passenger fares on luxury cruises
typically exceeds $450 per person per day.
The premium class vessel that the Company seeks to charter would
typically have the following features: four to six passenger decks, a swimming
pool, a health club, a casino, a duty free shop, three to four bars, a dining
area sufficient to accommodate all passengers in one sitting, a boutique, a
beauty parlor, a main lounge for live entertainment as well as standard
facilities and amenities traditionally offered on standard cruise ships.
The Company intends to offer premium quality on-board entertainment,
service and cuisine aboard the ship. Consistent with the Company's business
strategy of emphasizing its cruise destination, the on-board activities will
include entertainment featuring French Polynesian performers and lectures by
guest speakers covering the history, culture and geography of French Polynesia
and several other Polynesian cultures. Cruise personnel primarily will be
Pacific Basin country nationals and will include some Tahitians. The Company
plans to offer a restaurant with one-sitting dining, a service typically offered
by luxury cruises.
The Company presently intends to offer its passengers "sous vide"
cuisine primarily as dinner entrees. Sous vide cuisine is vacuumed packed frozen
gourmet food. The Company presently intends to serve sous vide cuisine because
it is easy to ship and store and is prepared by rethermalizing the vacuumed
sealed product in simmering hot water for several minutes. By utilizing such
product, the Company will be able to hire fewer on-board chefs, thereby reducing
the Company's operating expenses. The Company presently intends to purchase the
sous vide cuisine from Qusine Sous Vide, Inc., a Vermont corporation controlled
by Messrs. Rader and MacGarvey. The Company believes that the price it will pay
for the sous vide cuisine will be comparable to the price which could have been
negotiated with an unaffiliated third party. The Company also believes that the
quality of sous vide cuisine will meet the demands of its cruise passengers.
However, if such food does not satisfy its cruise passengers, the Company will
revise its menu to accommodate passenger tastes.
The Company's vessel will comply with all international licensing
standards for passenger cruise vessels, including the International Convention
Regarding Safety of Life at Sea (S.O.L.A.S.), as developed by the International
Maritime Organization. All required classification certificates will be in force
in accordance with the international rules of shipping and managed by a
recognized vessel classification society. The Company further intends to obtain
protection and indemnity insurance for the vessel as well as coverage for
passage money due to loss of hire in the event the vessel is unable to operate
during scheduled cruise periods due to loss or damage arising from certain
covered perils, such as fire and mechanical breakdowns. In addition, it is
anticipated that the chartered vessel will be covered by policies for war risk,
hull and machinery and oil pollution. No assurance can be given, however, that
the Company will be able to obtain or maintain adequate insurance at reasonable
rates. Failure to maintain adequate insurance could place the Company at great
financial risk in the event of accidents and adversely affect the Company's
ability to do business. Further, even if the Company were to maintain adequate
insurance, adverse publicity from accidents could have a material adverse effect
on the Company's business.
14
<PAGE>
THE CRUISE MARKET
Since its modern inception in the 1970's, cruising has grown in
popularity in the United States and abroad. According to statistics compiled by
the Cruise Line International Association ("CLIA"), the number of North American
passengers embarking on deep-water cruises of two or more days since 1970 is
estimated to be 53 million and has increased from 1.4 million in 1980 to 4.5
million in 1994. This represents a 8.6% annual average rate of growth for the 14
year period. CLIA foresees continued growth in passenger volumes and has
predicted that by the year 2000 as many as 8 million people a year will be
taking cruises. Presently, the fastest growing segments of the business are the
three to four day and the six to eight day cruises and the premium/luxury class
of products as a percentage of available berths.
The Company's primary market will be passengers from the United States.
North Americans presently account for approximately 81% of the world cruise
market for cruises of three days or more. On the demand side, the Company
believes that there exists a potential customer pool for the Company's premium
cruise product of over 4.5 million people in the United States, based upon CLIA
age, income and propensity guidelines.
The cruise industry has sought to keep pace with increased demand by
constructing new and larger passenger ships. At least 28 ships are scheduled for
launching by 1998, of which all but four are 1,000 to 2,000 passenger vessels.
Despite some concerns in the industry over potential over-capacity, the
passenger cruise industry has been strong, and load factors over the past
several years have been high, ranging from 80% to 95%. Passenger capacity of
100% is generally considered in the cruise industry to mean all passenger cabins
are occupied with two passengers per cabin.
The Company believes its primary market will be persons who have
previously taken cruises and are 50 to 70 years old. CLIA statistics indicate
that this market is 50% of the 53 million people who have cruised between 1970
and 1994. CLIA statistics further reflect that over 50%, or 2.6 million of the
4.5 million people who cruised in 1994, took a one-week cruise, which is the
proposed length of the Company's cruise itinerary.
COMPETITION
The passenger cruise industry is highly competitive. Worldwide , there
were approximately 134 passenger ships owned by approximately 33 cruise lines at
the end of 1994, the vast majority of which have established their positions in
the market place and are owned by companies that have financial resources
substantially greater than the Company. Recent increases in capacity in the
industry have created a highly competitive environment both in terms of
passenger bookings and fare discounts. Although the Company believes that demand
for cruises is currently strong, there is no assurance that such demand will
continue, or that the Company will be able to compete successfully for cruise
passengers.
The cruise market in Tahiti is, to the Company's knowledge, presently
only serviced by two passenger vessels--the Wind Song and Club Med 2. The Wind
Song is a four-masted sailing vessel operated by Windstar Sail Cruises, a
Holland America Line Company. Operating in French Polynesia since 1985, the Wind
Song has a capacity of approximately 150 passengers and advertised fares ranging
from $2,795 to $2,995 per person per week, plus airfare, exclusive of premiums
for peak travel time and discounts for early ticket purchases. The Club Med 2 is
a five-masted sailing vessel operated by Club Mediterranee. The Club Med 2 has a
capacity of approximately 400 passengers and advertised fares ranging from
$2,100 to $2,500 per person per week, plus airfare. The Club Med 2 commenced
service in Tahiti in 1995 for a six month period each year and operating from
Noume, New Caledonia the other six months of each year. Management of the
Company is not aware whether Club Med 2 will continue to operate from Tahiti on
a permanent basis. The Company is also aware of at least one firm, Exploration
Cruises, which previously offered cruises in Tahiti but which has since ceased
to do business there. It is the Company's understanding that a 330 passenger
luxury cruise ship is being constructed for operation in French Polynesia in
1998. The vessel will be operated by Radisson Seven Seas Cruises ("Radisson"), a
company which currently operates three luxury cruise vessels. The Company
believes cruise prices for this vessel will be significantly higher than those
offered by the Company.
The Wind Song and the Club Med 2 are targeted at younger, affluent
consumers looking for a sailing experience but with the comfort and convenience
of a modern cruise vessel. It is the Company's understanding that the ship which
will be operated by Radisson Seven Seas Cruises will be marketed to luxury
cruise consumers who are generally 50 years of age and
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older and have taken luxury cruises frequently over the past five years. The
Company intends to compete with the Wind Song, the Club Med 2 and Radisson by
offering a traditional passenger cruise vessel (i.e., no sails) of premium
class, which the Company believes will be more familiar and attractive to
experienced cruise passengers over the age of 50 years who wish to avoid the
more formal and structured atmosphere of luxury vessels and are not attracted to
sailing vessels. Worldwide, customers over the age of 50 account for
approximately 50% of cruise passengers. In addition, the Company believes that
it will be able to offer a similar one-week cruise experience to the Wind Song,
Club Med 2 and Radisson at a lower price.
Cruise lines also compete with other vacation alternatives, and the
Company will be competing with air, sea, land and combination packages from a
variety of sources. The Company will seek to penetrate the cruise and
alternative vacation markets with competitive pricing and a marketing and
advertising campaign which will emphasize the excitement and adventure of
cruising, the attractive and exotic waters of the Tahitian destination and other
factors.
LICENSE AND DESCRIPTION OF TAHITI
The Company has not yet obtained a license from the Government of
French Polynesia to operate a passenger cruise vessel in French Polynesia.
However, the Company has received a written commitment from the Government of
French Polynesia to license the Company to operate a passenger cruise vessel in
French Polynesia for a period of five years from the commencement of the
Company's operations, if the Company complies with certain conditions,
including, but not limited to, providing a minimum of 12 jobs for local
residents, training a minimum of three local residents per year, promoting local
entertainment and activities companies through information made available aboard
the Company's vessel, and buying approximately $512,000 of products locally. The
license to be entered into with the Government of French Polynesia will exempt
the Company from import duties and taxes for passenger ships (except for port
toll taxes and airport dues), corporate income tax, bonding requirements for
passenger ships, and will permit a foreign flagged vessel to operate in Tahitian
waters. All such benefits will be for a term of five years, except for the
exemption from payroll taxes for Tahitian employees, which will run for a term
of 24 months. Although the Company believes that it will be able to comply with
all conditions precedent to the issuance of a license to operate in French
Polynesia, there can be no assurances that such license will ultimately be
issued to the Company, or if the license is issued, that it can be renewed on
terms satisfactory to the Company.
Located seven and one-half hours by air from Los Angeles in the Pacific
Ocean midway between Peru and Japan, French Polynesia is comprised of five
archipelagoes with 130 islands covering an area of 2 million square miles equal
to the size of Europe. The largest of these is the island of Tahiti in the
Society Islands archipelagoes, where the capital city of Papeete is located. The
total population is approximately 216,000, with over 130,000 inhabitants on the
island of Tahiti. The islands are 10 hours behind Greenwich Mean Time, the same
as the State of Hawaii.
French Polynesia has been a French Overseas Territory since 1957 and
has been internally autonomous since 1984. As such, it is headed by a High
Commissioner representing the French Republic. French Polynesia has its own
democratically elected President and Parliament. Tourism is the primary industry
and Tahiti is accordingly serviced by a number of international airlines,
including Air France, Air Outre Mer (AOM), Air New Zealand, Hawaiian Airlines
and Lan Chile. In 1993, almost 150,000 persons visited the islands. The United
States produced 31% of the visitors, followed by France (21%), Japan (11%),
Germany (6.5%) , Australia (5%) and New Zealand (3.6%). A number of other
countries produced the balance of the visitors to French Polynesia. French and
Tahitian are the official languages, although English is spoken in the hotels
and shops servicing tourists.
SALES AND MARKETING
Sales and marketing efforts will be concentrated in the United States
in the northeast, midwest, and west coast, especially California. The Company
intends to engage four sales executives experienced in the sales and marketing
of cruise vessels to develop sales through retail travel agents, tour operators,
specialty group travel companies and charters. An additional sales person will
be engaged to specialize in developing travel industry stand-by business.
Because the majority of cruise sales are made through travel agents, the Company
will initiate a campaign aimed at familiarizing travel agents with the Company
and its cruises. There will also be a heavy emphasis on tour operators who
market the Tahiti destination.
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Marketing efforts will consist of:
(1) Brochures--The Company will publish color brochures containing full
description of the vessel, ports visited, on board activities and
applicable rates.
(2) Media Advertising--The advertising message will be communicated
through trade publications to travel agents and through national
magazines and newspapers to travel agents and the public.
(3) Public Relations--The Company will issue press releases, hold
seminars and will seek to have major articles appear in the trade and
public press.
(4) Direct Mail--To support the group travel program, mail solicitation
will be initiated to members of various organizations such as alumni
associations and professional groups.
The sales and marketing efforts will be coordinated from the Company's
principal offices in Florida.
CHARTER OF VESSEL
The Company intends to charter a passenger cruise vessel from Concorde
Shipping Ltd. ("Concorde"), a Cayman Islands company, 50% of the stock of which
is owned by Douglas MacGarvey, the Company's Chairman of the Board and Chief
Executive Officer, and Thomas Rader, the Company's Vice-Chairman of the Board.
The other 50% of the stock of Concorde is owned by Herbert Peintner. Mr.
Peintner has presently exercisable options to acquire one-third of the shares of
Common Stock owned by Messrs. MacGarvey and Rader. See "Principal Stockholders."
Concorde does not presently own or charter any passenger vessels. After
Concorde has identified and purchased (or chartered from the owner) a vessel
suitable for the Company's needs, the Company will charter such vessel from
Concorde pursuant to the terms and conditions of a charter party agreement to be
entered into between the Company and Concorde. The charter party agreement will
set forth the charter fee to be paid by the Company to charter the vessel as
well as the division of responsibility between Concorde and the Company. No such
agreement presently exists.
The amount of the charter fee will depend upon the type of charter
provided by Concorde to the Company. In the event that Concorde makes a
"bareboat" charter available to the Company, it is anticipated that the charter
fees for a vessel acceptable to the Company would be approximately $10,000 to
$15,000 per day. In general, a bareboat charter is one where the charterer is
provided the vessel and is responsible for the personnel for the vessel, pays
all costs relating to operation, maintenance and insurance. The term of the
charter is anticipated to be for five years with an option on the Company's part
to extend the charter for an additional five years. Although the Company
believes the terms of the charter party agreement will contain comparable terms
to those which could have been negotiated with an unaffiliated third party,
there can be no assurance that the Company will not suffer material adverse
consequences from the inherent conflict of interest and lack of arms-length
negotiations with Concorde. In the event that disputes arise between Concorde
and the Company, resolutions of such disputes, whether through legal action or
otherwise, could be complicated by Messrs. MacGarvey, Rader and Peintner having
an interest in both companies.
Concorde has advised the Company that as part of any charter party
agreement, the Company will be required to obtain a letter of credit in favor of
Concorde in order to guarantee the Company's performance under such agreement.
It is anticipated that the letter of credit will need to cover six months
charter payments or approximately $2 million. If for any reason the Company does
not make timely payments of its monthly charter fee, Concorde will be able to
draw against the letter of credit, which will then have to be restored to the
original amount by the Company.
POSSIBLE ADDITIONAL ACTIVITIES
Provided that the Company obtains the necessary funds either from
operations or from additional financing, of which there can be no assurance, the
Company may, to the extent opportunities are available, expand its operations
and engage in other activities that would be compatible with its passenger
cruise operations. The Company may expand its operations by chartering or
purchasing additional vessels. No specific plans with respect to additional
financing have yet been formulated.
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Additional financing would be required to expand the Company's activities and
there can be no assurances that the Company's operations can be expanded.
PROPERTIES
The Company presently conducts all of its operations in approximately
600 square feet of office space located at 1360 South Dixie Highway, Suite 2114,
Coral Gables, Florida 33146. The office space is leased in the name of
International Maritime Group, Inc. ("IMG"), a company controlled by Douglas H.
MacGarvey, the Chief Executive Officer of the Company. The Company is not liable
under the terms of the lease but fully reimburses IMG for all expenditures
incurred under the lease amounting to approximately $700 per month. The lease
expires in April 1997. The Company will likely require a larger space (estimated
at approximately 5,000 square feet) in South Florida shortly prior to the
commencement of cruise line operations. The Company believes that there is an
adequate supply of commercial space in the South Florida area to accommodate
this need.
EMPLOYEES
During the pre-operating stage, the Company expects to have
approximately 30 employees, including the Chief Executive Officer, who has
already been hired, the president, controller, one senior sales/marketing
executive, four sales executives and 22 administrative staff employees. The
Company believes that such employees will be sufficient to meet its needs during
the pre-operating stage of the Company and that none will be covered by a
collective bargaining agreement. At the time the Company commences full
passenger cruise operations, the Company will hire approximately 178 additional
employees, in order to manage on-board ship operations. See "Plan of
Operations." The Company believes that it will not encounter inordinate
difficulty in attracting and retaining qualified personnel.
LEGAL PROCEEDINGS
The Company is not party to any pending legal proceedings, and to the
best of its knowledge and belief, none is contemplated or threatened.
CERTAIN TAX CONSIDERATIONS
The following discussion summarizes certain U.S. federal income tax
consequences to the Company and to the U.S. persons holding the Company's equity
securities. This discussion is a summary for general information only, and it is
not a complete analysis of the tax considerations that may be applicable to the
Company or to a prospective investor. This discussion also does not address the
tax consequences that may be relevant to income of the Company other than from
the international operation of ships, as defined in the U.S. Internal Revenue
Code of 1986 (the "Code"), nor to particular categories of the Company's
stockholders subject to special treatment under certain federal income tax laws,
such as dealers in securities, tax exempt entities, banks, insurance companies
and foreign individuals and entities. In addition, it does not describe any tax
consequences arising out of the tax laws of any state, locality or foreign
jurisdiction. The discussion is based upon currently existing provisions of the
Code, existing and proposed regulation thereunder and current administrative
rulings and court decisions. All of the foregoing are subject to change and any
such change could affect the continuing validity of this discussion. In
connection with the foregoing, investors should be aware that the Tax Reform Act
of 1986, as amended (hereinafter, the "1986 Tax Act") changed significantly the
U.S. federal income tax rules applicable to the Company and, in certain cases,
to certain holders of its Common Stock, including the principal stockholders.
Although the relevant provisions of the 1986 Tax Act are discussed herein, those
provisions have not yet been subject of extensive administrative or judicial
interpretation. Accordingly, there can be no assurances that such interpretation
will not have an adverse impact on an investment in the Company's equity
securities.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO
PARTICULAR TAX CONSEQUENCES TO THEM OF ANY INVESTMENT IN THE COMPANY'S EQUITY
SECURITIES, INCLUDING THE APPLICATION OF FEDERAL, STATE, LOCAL AND FOREIGN TAX
LAWS.
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TAXATION OF THE COMPANY
U.S. TAXATION
Since the Company is governed under the laws of the Cayman Islands,
British West Indies, it will be considered to be a foreign corporation for
purposes of U.S. income taxation. This is so regardless of the composition of
the stockholders of the Company or the location of its management.
Foreign corporations are subject to U.S. taxation under two different
regimens. First under IRC Section 881(a), (section references are to the
Internal Revenue Code of 1986, as amended (IRC), or to the Treasury Regulations
issued thereunder (Treas. Reg.) by the Department of the Treasury), a foreign
corporation is subject to U.S. taxation on its fixed, determinable, annual or
periodic (FDAP) income from U.S. sources. The tax rate imposed by this section
is 30% of the U.S. source FDAP received by the Company without deductions of any
kind. FDAP income is generally thought of as passive, investment type income
such as dividends, interest, rents and royalties that are not connected (as that
term is defined in the Code) to any U.S. trade or business. Since the Company
will be earning income from its business activities, these provisions, if
applicable at all, should have minimal impact on the Company.
Foreign corporations are also potentially subject to U.S. taxation at
the net rates of Section 11 (applicable to U.S. corporations) and the 30% branch
profits tax of IRC Section 884 imposed on a foreign corporation's net after tax
earnings. These taxes are applied to a foreign corporation's income that is
deemed to be effectively connected to the conduct (by such foreign corporation)
of a United States trade or business. Since the Company will have management
offices in the United States as well as offices through which marketing,
reservation, and sales activities are conducted, it is likely that the Company,
to some extent, will be deemed to be conducting a U.S. trade or business.
However, in the Company's case, the above taxes should not apply. Under
IRC Section 863(c)(3), the Company is deemed to be earning transportation income
from its cruise activities. Under IRC Section 863(c)(1) and (c)(2) such income
is "US source" transportation income only if the transportation activity begins
and/or ends in the United States. In the case of the Company, the cruises
neither begin nor end in the United States. Accordingly, the Company should be
deemed to be earning "foreign source" transportation income from its cruises in
French Polynesia.
A foreign corporation's foreign source income is deemed to be
effectively connected to a U.S. trade or business (and hence subject to U.S.
taxation) only under the limited circumstances described in IRC Section
864(c)(4). IRC Section 864(c)(4)(A) provides that unless the foreign
corporation's foreign source income is described in subsection (B) (dealing with
dividends, interest, rents and royalties and income from the sale of inventory)
or subsection (C), (dealing with foreign insurance companies), it will not be
deemed to be effectively connected to the conduct of a U.S. trade or business.
Since the Company will be earning foreign source transportation income which is
not a class of income described in the above sections, its income should not be
deemed to be effectively connected and therefore should be free from U.S.
taxation under the above cited sections.
FOREIGN INCOME TAXATION
The Cayman Islands - There are presently no taxes imposed on profit,
income, capital gains, or appreciations of the Company and no taxes are
currently imposed in the Cayman Islands on profit, income, capital gains, or
appreciations of the holders of the Company's securities or in the nature of
estate duty, inheritance or a capital transfer tax.
French Polynesia - Ordinarily, corporate income taxes are imposed by
the Government of French Polynesia on the type of activities proposed by the
Company. However as part of the license to be issued to the Company, the
Government of French Polynesia has agreed, among other things, to waive such
taxes for a period of five years in order to induce the Company to operate in
the territory. See "Proposed Business-License and Description of Tahiti." Absent
such a waiver the income of the Company will be subject to taxation in French
Polynesia.
U.S. TAXATION OF THE COMPANY'S STOCKHOLDERS
DIVIDENDS. Generally, a United States person whose holdings of a
foreign corporation's stock (including shares such person is considered to own
under applicable constructive ownership rules) is less than 10% of the Company's
outstanding stock generally is not required to recognize income by reason of the
Company's earnings until such earnings have
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been distributed. Dividends paid by the Company to such a stockholder will be
taxable to such stockholder as dividend income to the extent of the Company's
current or accumulated earnings and profits. Such dividends generally will not
be eligible for any dividends-received deduction.
However, if the Company is a Controlled Foreign Corporation ("CFC") (as
that term is defined in IRC Section 957) then certain types of income earned by
the Company would be immediately subject to U.S. taxation in the hands of any
"U.S. Shareholder" of the Company regardless of whether there was an actual cash
distribution to such shareholder. A U.S. Shareholder is defined as a United
States citizen or resident who owns (or is considered to own) 10% or more of the
Company's voting power on the last day of such taxable year on which the
Company's is a CFC.
If the Company is a CFC for an uninterrupted period of 30 days during
any taxable year, a U.S. Shareholder of the Company will generally be required
to include in ordinary income his pro rata share of the Company's "Subpart F
income" for that taxable year and, in addition, certain other items, including,
under certain circumstances, the Company's increase in earnings invested in
United States Property, and amounts of previously excluded Subpart F income
withdrawn by the Company from investment in certain shipping and related assets,
whether or not any amounts are actually distributed to stockholders. (The
Company's stockholders who are not U.S. Shareholders will not be affected by the
CFC and Subpart F income provisions).
"Subpart F income" includes among other things, "foreign base shipping
income," which is defined to include income derived from using or chartering a
vessel in foreign commerce or from the sale, exchange or other disposition of a
vessel. Accordingly, if the Company is a CFC, all but an insubstantial part of
the Company's earnings is expected by the Company to be "Subpart F income" which
will be taxable currently to the Company's U.S. Shareholders to the extent of
their pro rata share. This is so regardless of whether there in fact was a cash
distribution of those earnings to the Company's stockholders. Earnings and
profits of the Company already included in income by a U.S. Shareholder by
reason of the CFC provisions discussed above are not again included in income by
such U.S. Shareholder or his assignee when an actual distribution is made. Other
distributions by the Company by way of dividends with respect to the Common
Stock out of current or accumulated earnings and profits will be taxed to a U.S.
Shareholder as ordinary income.
The Company believes that Herbert Peintner will exercise the options
issued to him by Messrs. MacGarvey and Rader. See "Principal Stockholders" and
"Certain Transactions-Officers and Directors." If such options are fully
exercised,the Company believes that it will not be a CFC. In addition, because
the Board of Directors of the Company has the right to approve transfers of
capital stock, the Company does not believe that, in the future, it will become
a CFC after Mr. Peintner fully exercises such options. However, Mr. Peintner may
not exercise the options in full. Moreover, due to the complex nature of the
attribution rules and the possibility of inter-stockholders purchases and sales,
as well as the unpredictability of the affects of the conversion ratios of the
Preferred Stock into Common Stock as well as other unforeseen events, it is
conceivable that at some future time the Company may become a CFC.
DISPOSITIONS OF COMMON STOCK. In general, any gain or loss on the sale
or exchange of Common Stock of the Company by a stockholder will be capital gain
or loss, provided such stock is held as a capital asset. However, if contrary to
the Company's expectations, the Company has been a CFC, any person who was a
U.S. Shareholder of the Company at any time during the five year period ending
on the date of sale or exchange (or a distribution liquidation) when the Company
was a CFC may be required to treat all of a portion of the gain from a sale or
exchange of Common Stock as ordinary income (to the extent of his proportionate
share of certain earnings and profits of the Company's) rather than as capital
gain. Any capital gain or loss recognized on a sale or exchange of Common Stock
will be long-term capital gain or loss if the stockholder has held the Common
Stock for more than one year.
PASSIVE FOREIGN INVESTMENT COMPANY. A passive foreign investment
company ("PFIC") is any foreign corporation if (i) 75% or more of its gross
income for its tax year is passive income, or (ii) the average percentage of
assets held by the corporation during the tax year which produce, or are held
for production of, passive income is at least 50%, IRC Sections 1296(a)(l) and
1296(a)(2). If a company is deemed to be a PFIC, then any U.S. person who owns
shares in the company may be subject to the interest charges imposed on the
"excess distributions" (as that term is defined in IRC Section 1291) received by
the stockholder of the company. In effect, in addition to the normal tax that
applies on the dividend distribution, annual interest is charged on that tax for
the time that it has been deferred (i.e. for the period of time between when the
money was earned by the company and the time it was distributed to its
stockholders as a dividend). This could have the result of significantly
increasing the amount of total tax payable as a result of receiving a dividend
distribution from the Company.
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Moreover, if at any time during the taxpayer's holding period for stock
in a foreign company, that company or its predecessor was a PFIC which was not a
qualified electing fund, the taxpayer's stock is treated as stock in a PFIC.
This rule applies even though the company no longer qualifies as a PFIC. The
above rule does not apply, however, if the taxpayer elects to recognize gain as
of the last day of the last tax year for which the company was a PFIC or if the
stockholder elects to treat the company as a "Qualifying Electing Fund."
For the "asset" test of a PFIC, an asset is characterized as passive if
it has generated (or is reasonably expected to generate in the reasonably
foreseeable future) passive income in the hands of the foreign corporation. Cash
and other current assets readily convertible into cash, including the working
capital of an active business, are passive assets. In applying the tests
described above, tangible personal property leased by a foreign company for a
term of at least 12 months is treated as though it were owned by the company.
The rule which treats leased property as though it were owned by the leasee does
not apply (i) if the lessor is a related person or (ii) a principal purpose of
leasing the property is to avoid the PFIC provisions or the CFC excess passive
assets provisions.
In the Company's case, after this Offering, the sole asset of the
Company (for purposes of this test) will be cash, a passive asset. Its sole
income until cruises begin will be interest off the working capital, passive
income. Therefore, unless the below described exception applies, the Company
will be a PFIC.
However, a foreign company that is starting up in business is excluded
from PFIC classification for its first tax year in which it has gross income
(its start-up year) if (i) no predecessor was a PFIC, (ii) it can demonstrate to
the Internal Revenue Service that it will not be a PFIC for either of the first
two tax years after the start-up year; and (iii) it is not in fact a PFIC for
either of those first two years. IRC Section 1297(b)(2). Based on this
exception, the Company believes that it can avoid being classified as a PFIC.
However, the rules governing this area are extremely complex and there is no
guarantee that PFIC status will be avoided.
If the Company is a PFIC in the start-up phase, a U.S. person who is a
stockholder in a foreign company that was a PFIC may elect to remove the PFIC
taint from that stock by recognizing gain on that stock as if it were sold for
its fair market value on the last day of the taxable year in which the Company
was a PFIC. Alternatively, the interest charge on distributions can be avoided
if the stockholder makes an election to treat the company as a Qualified
Electing Fund. In such case, the stockholder of the Company who makes such an
election will include the following in gross income: (i) as ordinary income,
such stockholder's pro rata share of the ordinary earnings of such fund for such
year, and (ii) as long-term capital gain, such stockholder's pro rata share of
the net capital gain of such fund for such year, whether or not there is a
distribution from the Company.
OTHER ANTI-DEFERRAL RULES. The United States also imposes various
anti-tax deferral rules to passive foreign investment companies, personal
holding companies, foreign personal holding companies, foreign investment
companies, and foreign corporations unreasonably accumulating taxable United
States earnings. These rules can apply to the foreign corporation, and to a U.S.
Shareholder of a foreign corporation, even if the foreign corporation is not a
CFC, and even if the foreign corporation is publicly traded. Where applicable,
these rules can directly cause the stockholder to be taxed on the undistributed
income of the foreign corporation, or they can impose an interest charge on a
U.S. Shareholder's deferred tax liability when dividends are actually received
or the foreign corporation's stock is sold; or they can impose an additional tax
on the foreign corporation on its undistributed income, thereby practically
forcing current dividend distributions. However, these rules generally do not
apply where substantially all of a foreign corporation's activities consist of
conducting an active business rather than earning a passive income. The Company
therefore does not believe that any of these rules will apply to the Company.
However, these rules are quite technical and depend heavily on factual
determinations, and thus conceivably could apply at some time in the future.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table set forth certain information regarding the
executive officers and directors of the Company:
NAME AGE POSITION
---- --- --------
Douglas H. MacGarvey 54 Chairman of the Board ,
Chief Executive Officer,
and Secretary
Thomas G. Rader 50 Vice-Chairman of the Board
and Treasurer
Ronald Kurtz 54 Director
Albert W. Van Ness, Jr. 53 Director
DOUGLAS H. MACGARVEY, one of the founders of the Company, has served as
the Chairman of the Board, Chief Executive Officer and Secretary of the Company
since its inception in July 1994. Mr. MacGarvey was also the Treasurer of the
Company from incorporation until September 1996. Since June 1996, Mr. MacGarvey
has been the President and a principal stockholder of Qusine Sous Vide, Inc., a
specialty food manufacturing firm. Since 1991, he has served as the President of
International Maritime Group, Inc., a consulting firm which is owned by Mr.
MacGarvey and specializes in advising cruise line companies with respect to
acquisitions, development, marketing and business plans, and other
cruise-related transactions. Mr. MacGarvey has more than 20 years of experience
in the cruise and travel industries, which includes senior management positions
with five cruise line companies. From December 1989 to August 1991, Mr.
MacGarvey was the president and chief executive officer of Sea Escape Cruises.
During the period from 1986 to 1989, he founded and served as the president of
two cruise line start-up companies, Tropic Cruise Line Ltd. and Sea
Venture/Tropicana Cruises. From 1972 to 1986, Mr. MacGarvey held various
management positions with Regency Cruises and Cunard Line Limited, respectively.
THOMAS G. RADER is one of the founders of the Company and has been a
Vice-Chairman of the Board of Directors of the Company since its incorporation
and Treasurer since September 1996. Since 1982, Mr. Rader has been the President
of Rader Railcar, Inc. in Denver, Colorado, which custom designs and builds
unique railcars for tourism applications. Since 1994, he has also served as a
director of First American Railways, Inc. which is developing passenger rail
service in the South and Central Florida tourist markets. Mr. Rader has more
than 20 years of experience in the travel and tourism industry. Since June 1996,
Mr. Rader has been the Chairman of the Board of Directors and a principal
stockholder of Qusine Sous Vide, Inc. From 1970 to 1975, he served as vice
president and director of Sheraton Hawaii (a subsidiary of ITT-Sheraton
Corporation) and from 1978 to 1982 he served as vice president and general
manager of Holland America/Westours (a division of Holland America Line, Inc.).
In 1982, he founded Tour Alaska, a privately-held Alaska tour company, which he
subsequently sold to the corporate parent of Princess Cruises, Inc. The Alaska
Visitor's Association named Mr. Rader "Man of the Year" in 1989.
RONALD KURTZ was appointed a Director of the Company in September 1996.
Since 1991, Mr. Kurtz has been the President and Chief Executive Officer of
Management Resource Group, Inc., a Florida corporation that provides strategic
management and marketing consulting services for companies primarily in the
travel and hospitality industry. Prior thereto, Mr. Kurtz was the Senior Vice
President of Windstar Cruises, Inc. (1987 through 1989), President of Sea
Goddess Cruises (1982 through 1986) and Senior Vice President of Marketing and
Sales for Norwegian Cruise Lines (1980 through 1981), all of which are in the
cruise line business.
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ALBERT W. VAN NESS, JR. was appointed a Director of the Company in
September 1996. Since October 1992, Mr. Van Ness has served as the President of
Club Quarters, L.L.C., a hotel development and management company. From June
1990 until October 1992, Mr. Van Ness served as a Director Consultant of
Managing People Productivity, a consulting firm. From 1982 until June 1990, Mr.
Van Ness held various executive officer positions with Cunard Line Limited, a
travel and lodging company, including Executive Vice President and Chief
Executive Officer of the Cunard Leisure Division and Managing Director and
President of the Hotels and Resorts Division. Prior thereto, Mr. Van Ness served
as the President of Seatrain Intermodal Services, Inc., a transportation
company. Since December 1995, Mr. Van Ness has been a director of Consolidated
Delivery and Logistics, Inc., a public company engaged in the same day package
delivery business.
EXECUTIVE COMPENSATION
Set forth below is certain information concerning the compensation paid
to the Company's chief executive officer for the fiscal year ended May 31, 1996.
No executive officer of the Company received compensation in excess of $100,000
for such fiscal year.
SUMMARY COMPENSATION TABLE
The following table provides the cash and other compensation paid or
accrued by the Company to its chief executive officer for the fiscal year ended
May 31, 1996:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------- ----------------------
SECURITIES
RESTRICTED UNDERLYING
FISCAL OTHER ANNUAL STOCK STOCK LTIP ALL OTHER
NAME YEAR SALARY BONUS COMPENSATION AWARDS OPTIONS PAYOUTS COMPENSATION
---- ------ ------ ----- ------------- ------ ------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Douglas H. MacGarvey(1) 1996 $81,826 0 $0 0 0 0 0
<FN>
- ------------------
(1) See "Executive Compensation-Employment Agreement."
</FN>
</TABLE>
EMPLOYMENT AGREEMENT
Since July 1994, the Company has had a verbal agreement with
International Maritime Group, Inc. ("IMG") whereby IMG, through the efforts of
Mr. MacGarvey, manages the Company's operations. The Company pays IMG $7,000 per
month for such services, and IMG distributes such amount to Mr. MacGarvey. After
the closing of this Offering, the verbal agreement will be replaced with the
written employment agreement described in the following paragraph.
On September 11, 1996, Mr. MacGarvey, the Chairman of the Board of
Directors and Chief Executive Officer of the Company, entered into a five-year
employment agreement with the Company. Under the agreement, which will become
effective upon the closing of this Offering, the Company will be required to pay
Mr. MacGarvey a base annual salary of $200,000, which will increase annually by
the increase in the consumer price index. The Company will also be obligated to
pay Mr. MacGarvey a quarterly bonus in an amount equal to 3% of the Company's
quarterly operating income as determined in accordance with generally accepted
accounting principles. Mr. MacGarvey will also be provided with an automobile
expense allowance of $600 per month. Mr. MacGarvey's employment agreement is
renewable at the option of the Company for an additional five-year term.
STOCK OPTION PLAN
In September 1996, the Board of Directors of the Company adopted the
Company's 1996 Stock Option Plan (the "Plan"). The Plan provides for the grant
by the Company of options to purchase up to an aggregate of 1,000,000 of the
Company's authorized but unissued shares of Common Stock (subject to adjustment
in certain cases including stock splits, recapitalizations and reorganizations)
to officers, directors, consultants, and other persons rendering services to the
Company. No options have been issued under the Plan. The Company, however,
intends to register all shares of Common Stock issuable under the Plan with the
Commission on Form S-8.
23
<PAGE>
The purposes of the Plan are to provide incentive to employees,
including officers, directors and consultants of the Company, to encourage such
persons to remain in the employ of the Company and to attract to the Company
persons of experience and ability. The Plan terminates on April 15, 2006.
Options granted under the Plan may be either incentive stock options
within the meaning of the Internal Revenue Code of 1986, as amended ("incentive
options"), or options that do not qualify as incentive options ("nonqualified
options"). The exercise price of incentive options must be at least equal to the
fair market value of the shares of Common Stock on the date of grant; provided,
however, that the exercise price of any incentive option granted to any person
who, at the time of the grant of the option, owns stock aggregating 10% or more
of the total combined voting power of the Company or of any parent or subsidiary
of the Company ("Ten Percent Shareholder"), must not be less than 110% of the
fair market value of such shares on the date of grant of the incentive option.
No incentive option may be granted under the Plan to any individual if the
aggregate fair market value of the shares (determined as of the time the option
is granted) which vest (i.e. first become exercisable) during any calendar year,
under all incentive options held by such optionee exceeds $100,000. There is no
limitation on the amount of nonqualified stock options which may be granted to
any participant in the Plan. Options may be granted under the Plan for terms of
up to ten years; provided, however, that the term of any incentive option
granted to any Ten Percent Shareholder, may not exceed five years. Options
granted under the Plan to officers, directors or employees of the Company may be
exercised only while the optionee is employed or retained by the Company.
However, options which are exercisable at the time of termination may be
exercised within three months of the date of termination, and twelve months
after termination of the employment relationship or directorship if such
termination was by reason of death or permanent disability of the optionee.
LIMITATION OF DIRECTORS' LIABILITY
Pursuant to the Company's Articles of Association, the Company will
indemnify the directors and officers of the Company from and against all
actions, proceedings, costs, charges, losses, damages and expenses incurred in
connection with such person's service as a director or officer, unless the
director or officer incurs such actions, proceedings, costs, charges, losses,
damages and expenses as a result of his or her willful neglect or a default of
his or her obligations to the Company.
Insofar as indemnification for liabilities arising under the 1933 Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provision, or otherwise, the Company has been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the 1933 Act and is, therefore, unenforceable.
PRINCIPAL STOCKHOLDERS
The following table sets forth the beneficial ownership of the Common
Stock as of September 20, 1996 by: (i) each of the Company's officers and
directors; (ii) each person who is known by the Company to own beneficially more
than 5% of the outstanding shares of Common Stock; and (iii) all of the
Company's officers and directors as a group:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF SHARES OWNED PERCENTAGE OF CLASS
BENEFICIAL OWNER BENEFICIALLY BEFORE OFFERING AFTER OFFERING(1)
- ---------------- ------------ --------------- -----------------
<S> <C> <C> <C>
Douglas H. MacGarvey 1,598,000(2) 46.4 41.8
c/o RTC Cruises, Ltd.
1390 South Dixie Highway
Suite 2114
Coral Gables, FL 33146
Thomas G. Rader 1,598,000(2) 46.4 41.8
c/o RTC Cruises, Ltd.
1390 South Dixie Highway
Suite 2114
Coral Gables, FL 33146
24
<PAGE>
Ronald Kurtz 10,000 * *
c/o RTC Cruises, Ltd.
1390 South Dixie Highway
Suite 2114
Coral Gables, FL 33146
Albert W. Van Ness, Jr 10,000 * *
c/o RTC Cruises, Ltd.
1390 South Dixie Highway
Suite 2114
Coral Gables, FL 33146
Herbert Peintner 1,066,333(2)(3) 31.0 27.9
Moon Bay Development
P.O. Box 866
Grand Cayman, British West Indies
London Manhattan 188,000 5.5 4.9
Communications L.L.C
360 West 22nd St., Suite 16B
New York, N.Y 10011
All officers and directors as a 3,216,000(2) 93.4 84.2
group (4 persons)
<FN>
- ----------
* Represents less than one percent of the then-outstanding Common Stock.
(1) Does not take into account the conversion of the Preferred Stock into
Common Stock, but does include the 376,000 shares of Common Stock to be
issued to London Manhattan International, Ltd. at the closing of this
Offering. See "Certain Transactions-London Manhattan" and "Description
of Securities."
(2) Messrs. MacGarvey and Rader have each granted Mr. Peintner a presently
exercisable option to purchase an aggregate of 1,065,333 shares of
Common Stock owned by them. See "Certain Transactions-Officers and
Directors."
(3) Includes 1,065,333 shares of Common Stock that Mr. Peintner has the
option to acquire from Messrs. MacGarvey and Rader and 1,000 shares
of Common Stock owned by Mr. Peintner.
</FN>
</TABLE>
CERTAIN TRANSACTIONS
OFFICERS AND DIRECTORS
When the Company was formed in July 1994, 100 shares of Common Stock
were issued for nominal consideration to each of Douglas H. MacGarvey and Thomas
G. Rader. On September 11, 1996, the Company was recapitalized, which resulted
in Messrs. MacGarvey and Rader each owning 1,598,000 shares of Common Stock.
Since July 1994, Douglas H. MacGarvey has had a verbal employment
compensation arrangement with the Company, whereby he has been receiving $7,000
per month for his services as Chief Executive Officer of the Company. After the
completion of this Offering, Mr. MacGarvey's compensation will be based on a
five-year written employment agreement with the Company. For a description of
such agreement, see " Executive Compensation- Employment Agreement."
On September 11, 1996, the Company entered into a five-year consulting
agreement with Thomas G. Rader, the Vice-Chairman of the Board of the Company.
During the term of the agreement, Mr. Rader will provide such consulting
services as the Chief Executive Officer or the Board of Directors of the Company
may, from time to time, request. Such services will include all aspects of the
management and operation of the Company, including, but not limited to,
international and domestic sales and marketing, management information systems,
and strategic planning to develop the Company's business and increase revenues.
In consideration for such services, Mr. Rader will be entitled to receive annual
compensation of $100,000 payable exclusively in shares of Common Stock. The
value of the Common
25
<PAGE>
Stock will be determined by taking the average of the daily market price of the
Common Stock as reported by the exchange or over-the-counter market on which the
Common Stock may then be listed. The Company, at its expense, has agreed to
register all of the shares to be issued to Mr. Rader with the Commission.
On July 1, 1994, Thomas G. Rader, International Maritime Group, Inc., a
company owned by Douglas H. MacGarvey, the Company and Mr. MacGarvey entered
into a shareholder loan agreement, pursuant to which Mr. Rader has agreed to
advance monies to or for the benefit and use of the Company from time to time.
All loans made to the Company pursuant to this agreement accrue interest at the
rate of 6% per year without compounding of interest. As of July 31, 1996, the
Company has borrowed $392,373 from Mr. Rader under the agreement. The Company
may repay loans made to it under this agreement at such time as the Company has
available cash flow after the repayment of its current obligations, the creation
of adequate reserves and taking into account any other restrictions or covenants
in any bank or other investment documents. All principal and accrued interest
owed to Mr. Rader by the Company must be repaid prior to any distribution of
dividends to the stockholders of the Company. All principal and accrued interest
shall be payable upon the demand of Mr. Rader on or after January 15, 1999.
In September 1996, Ronald Kurtz and Albert W. Van Ness, Jr., two
directors of the Company, each purchased 10,000 shares of Common Stock at a
purchase price of $.01 per share.
On September 12, 1996, Douglas H. MacGarvey and Thomas G. Rader,
executive officers, directors and the principal stockholders of the Company,
granted Herbert Peintner, a citizen of Austria and resident of the Cayman
Islands, a three-year option to purchase an aggregate of 1,065,333 shares of
Common Stock owned by Messrs. MacGarvey and Rader. The aggregate purchase price
for such shares is $5,326.68, or $.005 per share. Under the terms of the option
agreements with Mr. Peintner, the Company will not change its capital structure
without the written consent of Mr. Peintner and no shares of capital stock,
warrants or other stock rights will be issued to Mr. MacGarvey or Mr. Rader
without the written consent of Mr. Peintner. The option agreements may, at the
discretion of Messrs. MacGarvey and Rader, be extended for consecutive one year
periods.
LONDON MANHATTAN
On September 4, 1996, the Company entered into a consulting agreement
with London Manhattan Communications L.L.C., an Arizona limited liability
company ("London Manhattan (Arizona)"). The Company retained London Manhattan
(Arizona) to perform services related to strategic business matters, including,
but not limited to, short-range and long-term strategic planning, advising the
Company with respect to the recruitment and employment of key executives,
providing recommendations to the Company regarding additional services and
products to be offered by the Company, and assisting in establishing and
advising the Company with respect to shareholder meetings and shareholder
relations. In consideration for the services to be rendered to the Company by
London Manhattan (Delaware), the Company issued 188,000 shares of Common Stock
to London Manhattan (Arizona) pursuant to Rule 504 promulgated under the 1933
Act. In addition, the Company has agreed to pay London Manhattan (Arizona) a
monthly fee of $10,000, commencing after the closing of the Offering. London
Manhattan (Arizona) will be responsible for using a portion of such fee to
retain a reputable financial public relations firm to provide services for the
Company. The agreement is for an initial term of 24 months, subject to the right
of the Company to cancel the agreement on or after January 15, 1997, in the
event that this Offering is not completed. London Manhattan (Arizona) is
controlled by James V. Hackney and Christopher d'Arnaud-Taylor, who is the
brother of Geoffrey Taylor. Geoffrey Taylor controls London Manhattan
International Limited. Christopher d'Arnaud Taylor owns no stock in London
Manhattan International Limited, and his brother, Geoffrey Taylor, owns no
stock in London Manhattan (Arizona).
On September 4, 1996, the Company entered into an investment banking
agreement with London Manhattan International Ltd., a company incorporated under
the laws of the Commonwealth of the Bahamas ("London Manhattan"). Under the
agreement, London Manhattan is acting as the exclusive agent of the Company with
respect to structuring and coordinating this Offering. If this Offering is
completed, the Company has agreed to pay London Manhattan a sales commission of
10% and a nonaccountable expense allowance of 3% of the gross proceeds of this
Offering. In addition, if this Offering is completed, the Company will issue to
London Manhattan 376,000 restricted shares of Common Stock and warrants to
purchase an additional 282,000 restricted shares of Common Stock. Such warrants
are exercisable commencing six months after the closing of this Offering for a
period of 36 months from such closing. The exercise price of the warrants will
be $7.50 per share. Commencing six months from, and ending three years from, the
closing of this Offering, London Manhattan shall have the right to demand
registration with the Commission of the 282,000
26
<PAGE>
shares of Common Stock underlying the warrants. London Manhattan has agreed to
pay all costs and expenses associated with such registration, including, but not
limited to, all reasonable legal and accounting fees relating thereto.
The investment banking agreement between the Company and London
Manhattan provides for a reciprocal indemnification between the parties against
certain liabilities, including liabilities under the 1933 Act. The agreement
further provides that if this Offering is completed, London Manhattan shall have
a right of first refusal for the period of the earlier to occur of the
termination of the agreement or two years from the date of the agreement to
assist the Company in any private placement of its debt securities or equity
securities.
The Company has also granted London Manhattan, for the term of the
agreement, the right to nominate one person to serve on the Board of Directors
of the Company. London Manhattan has not named such a nominee as of the date
hereof.
The foregoing is a summary of the principal terms of the investment
banking agreement between the Company and London Manhattan and does not purport
to be complete. References made to a copy of the investment banking agreement,
which is on file as an exhibit to the Registration Statement of which this
Prospectus is a part.
DESCRIPTION OF SECURITIES
The authorized capital of the Company consists of 10,000,000 shares,
Common Stock, par value $.00003 per share, divided into 8,600,000 shares of
Common Stock and 1,400,000 shares of Preferred Stock. The following summary of
certain provisions of the Company's securities does not purport to be complete
and is subject to, and qualified in its entirety by, the provisions of the
Company's Memorandum of Association and Articles of Association, copies of which
have been incorporated by reference in this Registration Statement, of which
this Prospectus forms a part.
COMMON STOCK
As of September 25, 1996, there were 3,442,000 shares of Common Stock
issued and outstanding to 37 stockholders of record.
The holders of Common Stock are entitled to one vote for each share of
record on all matters submitted to a vote of stockholders. Subject to
preferences that may be applicable to any outstanding shares of preferred stock,
the holders of Common Stock are entitled to receive ratably such dividends, if
any, as may be declared by the Board of directors out of funds legally available
for the payment of dividends. In the event of a liquidation, dissolution or
winding up of the Company, the holders of Common Stock are entitled to share
ratably in all assets remaining after payment of liabilities and liquidation
preferences of any outstanding shares of Preferred Stock. Holders of Common
Stock have no preemptive rights or rights to convert their Common Stock into any
other securities. There are no redemption or sinking fund provisions applicable
to the Common Stock. All outstanding shares of Common Stock are fully paid and
are non-assessable.
PREFERRED STOCK
27
<PAGE>
The Company is authorized to issue 1,400,000 shares of convertible
redeemable preferred stock, par value $.00003 per share (the "Preferred Stock"),
as part of this Offering. The following is a summary of the principal features
of the Preferred Stock.
The Preferred Stock is entitled to a preference with respect to the
liquidation or a distribution of the assets of the Company over the Common
Stock. In the event of any such liquidation or distribution of assets, the
holders of the Preferred Stock will receive $5.00 per share of Preferred Stock
before the holders of the Common Stock receive any distribution of the Company's
assets. Except as otherwise stated herein, the rights and preferences of the
holders of the Preferred Stock are identical to the rights and preferences of
the holders of the Common Stock.
The holders of the Preferred Stock have the option, during each six
months from the date that this Offering is completed, to convert up to 25% of
the shares of the Preferred Stock beneficially owned by each holder into shares
of Common Stock. In addition, all of the Preferred Stock will be automatically
converted into Common Stock two years after the closing of this Offering. The
number of shares of Common Stock into which the Preferred Stock is convertible
is calculated by multiplying the number of shares of Preferred Stock to be
converted by $5.00, and is then divided by the average closing bid price of the
Common Stock as quoted on the NASDAQ system or in the over-the-counter market
for, in the case of a periodic conversion, the five days prior to the date that
the certificate evidencing the Preferred Stock is mailed to the Company's
transfer agent for conversion, discounted by 20%. In the case of an automatic
conversion, the average closing bid price of the Common Stock is determined
based upon the five business days trading price prior to the date of automatic
conversion.
The Company has the option, at any time, to redeem all or any part of
the Preferred Stock at $7.50 per share, subject to the right of the holders of
the Preferred Stock to convert their shares of Preferred Stock into common stock
within seven days of receipt of the Company's notice of conversion. If the
closing bid price of the Common Stock as quoted on the NASDAQ system or the
over-the-counter market is less than $6.00 per share on any given day, the
Company also has the option to require all holders of Preferred Stock to convert
such securities into Common Stock. The number of shares of Common Stock to be
received upon conversion shall be determined by multiplying the number of shares
of Preferred Stock beneficially owned by each holder thereof by $5.00 and is
then divided by the closing bid price of the Common Stock as quoted on the
NASDAQ system or in the over-the-counter market on the day when such price was
less than $6.00, discounted by 20%.
Pursuant to the Company's Memorandum of Association, the Board of
Directors presently has the authority, without further action by the
stockholders, to issue up to 4,782,000 shares of Common Stock, preferred stock
with terms identical to the Preferred Stock being offered hereby, or preferred
stock upon such terms as the Board of Directors may determine in one or more
series and with the designations, powers, preferences, privileges, and relative
participating, optional or special rights and the qualifications, limitations or
restrictions thereof, including dividend rights, conversion rights, voting
rights, terms of redemption and liquidation preferences, any or all of which may
be greater than the rights of the Common Stock and the Preferred Stock offered
hereby. The Board of Directors, without action by the stockholders, can issue
undesignated preferred stock with voting, conversion or other rights that could
adversely affect the voting power and other rights of the holders of Common
Stock and the Preferred Stock offered hereby. Undesignated preferred stock could
thus be issued quickly with terms calculated to delay or prevent a change in
control of the Company or make removal of management more difficult.
Additionally, the issuance of undesignated preferred stock may have the effect
of decreasing the market price of the Common Stock, if any market should
develop, and may adversely affect the voting and other rights of the holders of
Common Stock. At present, there are no shares of undesignated preferred stock
outstanding.
SHARES ELIGIBLE FOR FUTURE SALE
Of the 3,442,000 shares of Common Stock outstanding as of the date of
this Prospectus, 246,000 shares of Common Stock were issued pursuant to Rule 504
promulgated under the 1933 Act and are therefore unrestricted and 3,196,000
shares of restricted Common Stock are deemed to have been held by affiliates of
the Company for more than two years and can be sold by such affiliates in
accordance with Rule 144. In general, under Rule 144, a person, including an
affiliate, who has beneficially owned shares of Common Stock for at least two
years is entitled to sell, within any three-month period, a number of shares
that does not exceed the greater of 1% of the total number of outstanding shares
of the same class, or if the Common Stock is quoted on NASDAQ, the average
weekly trading volume during the four calendar weeks preceding the sale. A
person who has not been an affiliate of the Company for at least three months
immediately preceding the sale and who has beneficially owned shares of Common
Stock for at least three years is entitled to sell such shares under Rule 144
without regard to any of the volume limitations described herein. No prediction
can be made as to the effect, if any, that sales of shares or the availability
of such shares will have on the market price of the Common Stock prevailing from
time to time. In addition, upon completion of this Offering, the Company will
issue to London Manhattan warrants to purchase 282,000 shares of Common Stock.
London Manhattan will have the right to demand registration of such shares. The
Company also intends to register the 1,000,000 shares of Common Stock reserved
for issuance pursuant to the Company's 1996 Stock Option Plan. See
"Management-Stock Option Plan" and "Certain Transactions-London Manhattan." The
possibility that substantial amounts of Common Stock may be sold in the public
market may adversely affect the prevailing market prices for the Common Stock
and could impair the Company's ability to raise capital in the future through
the sale of equity securities.
28
<PAGE>
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the securities of the Company is
American Stock Transfer & Trust Company, 40 Wall Street, New York, New York
10005.
DETERMINATION OF PUBLIC OFFERING PRICE
Prior to this Offering, there has been no public market for the
Preferred Stock or the Common Stock. The initial public offering price for the
Preferred Stock has been determined by the Company. Among the factors considered
by the Company were an analysis of the industry in which the Company is engaged,
the present state of the Company's business, the Company's financial condition,
the Company's prospects, an assessment of management, the general condition of
the securities market at the time of this offering and the demand for similar
securities of comparable companies. The public offering price of the Preferred
Stock does not necessarily bear any relationship to assets, earnings, book value
or other criteria of value which may be applicable to the Company.
LEGAL MATTERS
The validity of the Preferred Stock will be passed upon by Charles
Adams, Ritchie and Duckworth, Zephyr House, Mary Street, Grand Cayman, Cayman
Islands, British West Indies. Lucio, Mandler, Croland, Bronstein & Garbett,
P.A., 701 Brickell Avenue, Suite 2000, Miami, Florida 33131 has acted as counsel
to the Company with respect to certain matters of U.S. law in connection with
this Offering. Leslie J. Croland, a stockholder in such firm, beneficially owns
1,000 shares of Common Stock.
EXPERTS
The financial statements included in this Prospectus and in the
Registration Statement have been audited by BDO Seidman, LLP, independent
certified public accountants, to the extent and for the periods set forth in
their report (which contain an explanatory paragraph regarding the Company's
ability to continue as a going concern) appearing elsewhere herein and in the
Registration Statement, and is included in reliance upon such report given
upon the authority of said firm as experts in auditing and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Commission an SB-2 Registration
Statement under the 1933 Act with respect to the securities offered by this
Prospectus. This Prospectus does not contain all of the information set forth in
the Registration Statement and exhibits, to all of which reference is hereby
made. Statements contained in this Prospectus as to the contents of any contract
or other document referred to are not necessarily complete. With respect to each
such contract or document filed or incorporated by reference as an exhibit to
the Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement shall be deemed to
be qualified in its entirety by such reference. All of such documents may be
inspected without charge at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549.
29
<PAGE>
RTC CRUISES, LTD.
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
PAGE
----
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS..........................F-2
BALANCE SHEET...............................................................F-3
STATEMENTS OF OPERATIONS....................................................F-4
STATEMENTS OF STOCKHOLDERS' CAPITAL DEFICIENCY..............................F-5
STATEMENTS OF CASH FLOWS....................................................F-6
SUMMARY OF ACCOUNTING POLICIES..............................................F-7
NOTES TO FINANCIAL STATEMENTS...............................................F-9
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of RTC Cruises, Ltd.
(A Development Stage Company)
Miami, Florida
We have audited the accompanying balance sheet of RTC Cruises, Ltd., (a
development stage company) as of May 31, 1996, and the related statements of
operations, stockholders' capital deficiency and cash flows for the year ended
May 31, 1996, the period from July 5, 1994 (incorporation) to May 31, 1995
and for the cumulative period from July 5, 1994 (incorporation) to May 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of RTC Cruises, Ltd., at May 31,
1996 and the results of its operations and its cash flows for the year ended May
31, 1996, the period from July 5, 1994 (incorporation) to May 31, 1995 and
for the cumulative period from July 5, 1994 (incorporation) to May 31, 1996
in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. The Company is a development stage enterprise.
As discussed in Note 1 to the financial statements, the Company's operating
losses since inception, negative working capital and stockholders' capital
deficiency raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans concerning these matters are also described in
Note 1. The financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
BDO Seidman, LLP
Miami, Florida
August 26, 1996, except for Note 5
which is as of September 11, 1996
F-2
<PAGE>
RTC CRUISES, LTD.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
MAY 31,
1996
---------
ASSETS
CURRENT
Employee advance $ 1,000
DEPOSITS 650
---------
$ 1,650
=========
LIABILITIES AND STOCKHOLDERS' CAPITAL DEFICIENCY
CURRENT LIABILITIES
Accrued interest $ 20,825
LOANS FROM RELATED PARTIES (Note 3) 342,034
---------
TOTAL LIABILITIES 362,859
---------
STOCKHOLDERS' CAPITAL DEFICIENCY (Notes 4 and 5)
Preferred stock, $.00003 par value; 1,400,000
authorized; none issued --
Common stock, $.00003 par value; 8,600,000 shares
authorized; 3,196,000 shares outstanding 100
Additional paid-in capital 2,872
Deficit accumulated during the development stage (364,181)
---------
Total stockholders' capital deficiency (361,209)
---------
$ 1,650
=========
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
AND NOTES TO FINANCIAL STATEMENTS.
F-3
<PAGE>
<TABLE>
<CAPTION>
RTC CRUISES, LTD.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE PERIOD
FROM JULY 5, 1994 CUMULATIVE FROM
YEAR (INCORPORATION) JULY 5, 1994
ENDED TO (INCORPORATION)
MAY 31, MAY 31, TO MAY 31,
1996 1995 1996
----------- ----------------- ---------------
<S> <C> <C> <C>
OPERATING EXPENSES:
Management fees (Note 3) $ 81,826 $ 78,392 $ 160,218
General and administrative 26,126 32,153 58,279
Legal fees 22,000 27,912 49,912
Consulting fees 11,824 25,312 37,136
Interest (Note 3) 16,053 4,773 20,826
Rent (Note 3) 8,307 4,503 12,810
Expenses from offerings not completed 25,000 -- 25,000
----------- ----------- -----------
Total expenses 191,136 173,045 364,181
----------- ----------- -----------
NET LOSS, representing deficit accumulated
during the development stage $ (191,136) $ (173,045) $ (364,181)
=========== =========== ===========
Weighted average
number of common
shares outstanding 3,435,944 3,435,944 --
----------- ----------- -----------
Net loss per common share $ (.06) $ (.05) --
=========== =========== ===========
</TABLE>
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
AND NOTES TO FINANCIAL STATEMENTS.
F-4
<PAGE>
<TABLE>
<CAPTION>
RTC CRUISES, LTD.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' CAPITAL DEFICIENCY
DEFICIT
ACCUMULATED
COMMON STOCK ADDITIONAL DURING THE
-------------------------- PAID-IN DEVELOPMENT
SHARES AMOUNT CAPITAL STAGE TOTAL
--------- --------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Initial capitalization (Note 4(a)) 3,196,000 $ 100 $ -- $ -- $ 100
Capital contribution (Note 4(b)) -- -- 2,872 -- 2,872
Net (loss) -- -- -- (173,045) (173,045)
--------- --------- --------- --------- ---------
Balance at May 31, 1995 3,196,000 100 2,872 (173,045) (170,073)
NET (LOSS) -- -- -- (191,136) (191,136)
--------- --------- --------- --------- ---------
BALANCE AT MAY 31, 1996 3,196,000 $ 100 $ 2,872 $(364,181) $(361,209)
========= ========= ========= ========= =========
</TABLE>
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES AND NOTES TO FINANCIAL STATEMENTS.
F-5
<PAGE>
<TABLE>
<CAPTION>
RTC CRUISES, LTD.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE PERIOD
FROM JULY 5, 1994 CUMULATIVE FROM
YEAR (INCORPORATION) JULY 5, 1994
ENDED TO (INCORPORATION)
MAY 31, MAY 31, TO MAY 31,
1996 1995 1996
--------- ---------------- ---------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
NET LOSS $(191,136) $(173,045) $(364,181)
Adjustments to reconcile net loss to cash
flows (used) in operating activities:
Compensation through issuance of stock -- 100 100
Increase in employee advance (900) (100) (1,000)
Increase in deposits -- (650) (650)
Increase in accrued interest 16,052 4,773 20,825
--------- --------- ---------
Net cash (used) in operating activities (175,984) (168,922) (344,906)
--------- --------- ---------
FINANCING ACTIVITIES:
Loans from related parties 175,984 166,050 342,034
Contributions to capital -- 2,872 2,872
--------- --------- ---------
Net cash provided by financing activities 175,984 168,922 344,906
--------- --------- ---------
Net increase in cash -- -- --
Cash, beginning of period -- -- --
--------- --------- ---------
Cash, end of period $ -- $ -- $ --
========= ========= =========
</TABLE>
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
AND NOTES TO FINANCIAL STATEMENTS.
F-6
<PAGE>
RTC CRUISES, LTD.
(A DEVELOPMENT STAGE COMPANY)
SUMMARY OF ACCOUNTING POLICIES
ORGANIZATION AND
BUSINESS
RTC Cruises, Ltd., was originally incorporated in 1994, in the state of Florida
and continued in the Cayman Islands, British West Indies in August 1996 . The
Company was organized for the purpose of developing and marketing a passenger
cruise vessel in French Polynesia. Since inception, the Company's efforts have
been devoted to the development of its principal product and raising capital.
The Company has not received any revenues from the sale of its services.
Accordingly, through the date of these financial statements, the Company is
considered to be in the development stage and the accompanying financial
statements represent those of a development stage enterprise.
ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
INCOME TAXES
The Company has incurred losses since inception and accordingly has not provided
for income taxes.
NET LOSS PER
COMMON SHARE
Net loss per common share is based on the weighted average number of shares of
common stock outstanding, as adjusted for the effects of the application of
Securities and Exchange Commission Staff Accounting Bulletin (SAB) No. 83.
Pursuant to SAB No. 83, common stock issued by the Company at a price less than
the contemplated public offering price is treated as outstanding for all periods
presented.
F-7
<PAGE>
RTC CRUISES, LTD.
(A DEVELOPMENT STAGE COMPANY)
SUMMARY OF ACCOUNTING POLICIES
FUTURE ACCOUNTING
PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 121 "Accounting for Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS No.
121"). SFAS No. 121 requires, among other things, impairment loss of assets to
be held and gains or losses from assets that are expected to be disposed of be
included as a component of income from continuing operations before taxes on
income. The Company has adopted SFAS No. 121 as of June 1, 1995 and its
implementation did not have a material effect on the financial statements.
In October 1995, FASB issued SFAS No. 123 "Accounting for Stock Based
Compensation." SFAS No. 123 established a fair value method for accounting for
stock-based compensation plans. The Company will apply the provisions of SFAS
No. 123 involving any transaction for stock-based compensation.
F-8
<PAGE>
RTC CRUISES, LTD.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
1. GOING CONCERN
AND LIQUIDITY
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. This basis of accounting contemplates the
recovery of the Company's assets and the satisfaction of its liabilities in the
normal course of operations. Through May 31, 1996, the Company has incurred
losses totalling $364,181 and at May 31, 1996 has negative working capital and a
stockholders' capital deficit. These matters raise substantial doubt regarding
the Company's ability to continue as a going concern, and the financial
statements do include any adjustments that may result from the outcome of this
uncertainty. The Company's ability to continue as a going concern and,
ultimately, complete its development activities operations is dependent upon
obtaining additional financing and successfully completing the development of
its product. As discussed in Note 5, the Company has entered into an
agreement with an investment banker, on a "best efforts" basis, for a public
offering of preferred stock, that if successfully completed, management believes
will provide sufficient funds for approximately 12 months. However, there can be
no assurance that the Company will not encounter substantial delays and
unexpected expenses relating to research, development, production and marketing
or other unforeseen difficulties, which may cause the Company to require
additional funding to accomplish its business plan.
2. INCOME TAXES
At May 31, 1996, the Company has temporary differences relating to the basis
differentials in the carrying amounts, substantially pertaining to start up
costs and accrued interest on related party loans, for financial reporting and
income tax purposes aggregating approximately $364,000.
Realization of any portion of the approximate $137,000 deferred tax assets
arising from the available temporary differences, is not considered more likely
than not and, accordingly, a valuation allowance has been established for the
full amount of such asset.
Effective August 1996, the Company will be governed under the laws of the Cayman
Islands, British West Indies, and will be considered a foreign corporation for
purposes of U.S. taxation.
F-9
<PAGE>
RTC CRUISES, LTD.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
3. RELATED PARTY
TRANSACTIONS
As of May 31, 1996, the Company had borrowed $342,034 from a shareholder of the
Company. The loan bears interest at 6% and is payable at such time as the
Company has available cash flow after the repayment of its current obligations,
or after January 15, 1999, on demand. Subsequent to May 31, 1996, the Company
borrowed an additional $50,339 from this shareholder. It is not practical to
determine the fair value of the loan since it is a related party payable.
The office space occupied by the Company is leased in the name of an affiliated
company. The Company is not liable under the terms of the lease but fully
reimburses the affiliate for all expenditures incurred under the lease; such
amounts approximate $700 a month. The lease expires April 1997.
The Company intends to charter for five years, a passenger cruise vessel and
purchase meals from affiliated companies that are owned by the Company's
principal shareholders. The Company anticipates that the charter fees will
approximate $10,000 to $15,000 a day. In addition, the Company will be required
to obtain a $2 million letter of credit in favor of this affiliate to cover six
months of charter payments.
The Company has a verbal management agreement with a related Company owned by an
officer-shareholder to provide the services of a chief executive officer to the
Company. The term of the agreement is for the period in which the Company is in
the development stage. Under the terms of the agreement, the related Company is
entitled to receive $84,000 per year. (See Note 5(e)).
4. STOCKHOLDERS'
CAPITAL
DEFICIENCY
a) During 1994, the Company issued 100 shares of common stock in return for
$100 in services as the initial capitalization of the Company. On
September 11, 1996, the Company increased its authorized capital from 100
shares, $1 par value to 10,000,000 shares, $.00003 par value and the
existing shareholders converted 100 shares of their then owned common
stock into 3,196,000 newly authorized $.00003 par value shares of common
stock. The components of stockholders' capital deficiency have been
retroactively adjusted to reflect the foregoing transaction.
b) During 1995, the Company received $2,872 in additional capital
contributions.
F-10
<PAGE>
RTC CRUISES, LTD.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
5. SUBSEQUENT
EVENTS
a) On September 4, 1996, the Company entered into an agreement with an
investment banking firm in connection with raising equity, on a best
effort basis, through the sale of 1,400,000 shares of convertible
redeemable preferred stock, par value $.00003 per share, at a price of
$5.00 per share (Offering). Under the agreement, the investment banking
firm will act as exclusive agent of the Company with respect to
structuring and coordinating the Offering. If this Offering is completed,
the Company will raise $7,000,000 and has agreed to pay a 10% sales
commission and a 3% non-accountable expense allowance ($910,000) of the
proceeds raised to the investment banking firm and issue the investment
firm 376,000 shares of common stock plus warrants to purchase an
additional 282,000 shares of common stock at $7.50 per share.
b) On September 4, 1996, the Company entered into an agreement to
retain the services of a consulting company, which is owned by the brother
of the owner of the investment banking firm referred to in 5(a) above, to
perform services related to strategic business matters. In consideration
for the services rendered, the consulting company was issued 188,000
shares of common stock. In addition, the Company has agreed to pay the
consulting company a monthly fee of $10,000 commencing on the 10th day
following the closing of the Offering. The agreement is for an initial
term of 24 months, subject to the right of the Company to cancel the
agreement on or after January 15, 1997, in the event that the Offering is
not completed.
c) In September 1996, the Company sold 30,000 shares of $.00003 par value,
common stock for $1.00 per share.
d) In September 1996, the Company sold 28,000 shares of $.00003 par value,
common stock for $.01 per share to certain officers and directors of the
Company.
e) On September 11, 1996, the Company entered into a five year employment
agreement with a principal shareholder, who is also the Company's Chairman
of the Board and Chief Executive Officer, which will become effective upon
the closing of the Offering. The agreement
F-11
<PAGE>
RTC CRUISES, LTD.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
will continue for successive five year terms, unless cancelled by either
party. Under the agreement, he will receive a base salary of $200,000,
which will increase annually based upon increases in the consumer price
index. The Company will be obligated to pay quarterly bonuses in an amount
equal to 3% of the Company's quarterly operating income (as defined). In
addition, he will be provided an automobile expense allowance of $600 per
month.
On the same date, the Company entered into a five year consulting
agreement with another of its principal shareholders who is also Vice
Chairman of the Board, which will become effective upon the closing of the
Offering. The agreement will continue for successive five year terms,
unless cancelled by either party. During the term of the agreement, the
consultant will be entitled to annual compensation of $100,000, payable
exclusively in shares of the Company's common stock.
f) In September 1996, the Board of Directors of the Company adopted the
Company's 1996 Stock Option Plan (the "Plan"). The Plan provides for the
grant by the Company of options to purchase up to an aggregate of
1,000,000 of the Company's common stock (subject to adjustment in certain
cases including stock splits, recapitalizations and reorganizations) to
officers, directors, consultants, and other persons rendering services to
the Company. Options granted may be either "incentive stock options,"
within the meaning of Section 422A of the Internal Revenue Code, or
non-qualified options. No options have been issued under the Plan.
The purposes of the Plan are to provide incentives to employees, including
officers, directors and consultants of the Company, to encourage such
persons to remain in the employ of the Company and to attract to the
Company persons of experience and ability. The Plan terminates on April
15, 2006.
F-12
<PAGE>
RTC CRUISES, LTD.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
6. CONTINGENCY
The Company has not yet received its license from the Government of French
Polynesia to operate a passenger cruise vessel in French Polynesia. However, the
Company has received a commitment from the Government of French Polynesia to
license the Company to operate a passenger cruise vessel in French Polynesia for
a period of five years from the commencement of the Company's operations, if the
Company complies with certain conditions including, but not limited to,
providing a minimum of 12 jobs for local residents, training a minimum of three
local residents per year, promoting local entertainment and activities companies
through information made available aboard the Company's vessel, and buying
approximately $512,000 of products locally. Although the Company believes that
it will be able to comply with all conditions precedent to the issuance of a
license to operate in French Polynesia, there can be no assurances that such
license will ultimately be issued to the Company, or if the license is issued,
that it can be renewed on terms satisfactory to the Company.
F-13
<PAGE>
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITY
OTHER THAN THE SECURITIES OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE ANY
IMPLICATION THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE
SUBSEQUENT TO ITS DATE.
-------------
TABLE OF CONTENTS
PAGE
----
Prospectus Summary...........................................................3
Risk Factors.................................................................5
Use of Proceeds.............................................................11
Dilution....................................................................11
Plan of Operation...........................................................12
Proposed Business...........................................................13
Certain Tax Consideration ................................................ 18
Management..................................................................22
Executive Compensation......................................................23
Principal Stockholders......................................................24
Certain Transactions........................................................25
Description of Securities...................................................27
Legal Matters...............................................................29
Experts.....................................................................29
Additional Information ................................................... 29
Index to Financial Statements..............................................F-1
-------------
Until __________________, 1996 (25 days after the date of this Prospectus),
all broker-dealers effecting transactions in the registered securities, whether
or not participating in this distribution, may be required to deliver a
Prospectus. This is in addition to the obligation of dealers to deliver a
Prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
1,400,000 SHARES
OF CONVERTIBLE REDEEMABLE
PREFERRED STOCK
RTC CRUISES, LTD.
-----------------
PROSPECTUS
-----------------
_________________, 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to the Company's Memorandum of Association, the Company will
indemnify the directors and officers of the Company from and against all
actions, proceedings, costs, charges, losses, damages and expenses incurred in
connection with such person's service as a director or officer, unless the
director or officer incurs such actions, proceedings, costs, charges, losses,
damages and expenses as a result of his or her willful neglect or a default of
his or her obligations to the Company.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Expenses in connection with the issuance and distribution of the
securities being registered will be borne by the Registrant and are estimated as
follows:
Securities and Exchange Commission registration fee....... $ 2,413.80
NASDAQ filing fee ........................................ $10,000.00
Legal fees and expenses................................... $50,000.00
Blue Sky expenses......................................... $ 1,500.00
Accounting fees and expenses.............................. $17,000.00
Printing fees............................................. $ 3,000.00
Transfer Agent's fees..................................... $ 2,000.00
Miscellaneous............................................. $ 4,000.00
Total.............................................. $89,913.80*
* All amounts except the Commission registration fee are estimated.
ITEM 26. RECENT SALE OF UNREGISTERED SECURITIES.
Described below is information regarding all securities that have been
issued by the Company since its incorporation:
When the Company was incorporated in July 1994, Douglas H. MacGarvey
and Thomas G. Rader were each issued, for nominal consideration, 100 shares of
the Company's common stock. In September 1996, the Company was recapitalized and
each of the 100 shares issued to Messrs MacGarvey and Rader were converted into
1,598,000 shares of Common Stock. These transactions were considered exempt from
the registration requirements of the 1933 Act under Section 4(2) of the 1933 Act
since the transactions did not involve any public offering.
Pursuant to Rule 504 promulgated under the 1933 Act, the Company in
September 1996 sold 30,000 shares of Common Stock to 30 persons for $1.00 per
share, 28,000 shares of Common Stock to four persons for $.01 per share and
188,000 shares to London Manhattan Communications L.L.C. for strategic business
services to be provided over a two-year period under a consulting agreement.
II-1
<PAGE>
<TABLE>
<CAPTION>
ITEM 27. EXHIBITS.
EXHIBIT DESCRIPTION
- ------- ----------
<S> <C>
3.1 Memorandum of Association.
3.2 Articles of Association.
4.1 Form of Preferred Stock certificate.*
4.2 Form of Common Stock certificate.*
5 Opinion and Consent of Charles Adams, Ritchie and Duckworth. *
10.1 Employment Agreement, dated September 11, 1996, between the Company and Douglas H. MacGarvey.
10.2 Consulting Agreement, dated September 4, 1996, between the Company and Thomas G. Rader.
10.3 Shareholder Loan Agreement, dated July 1, 1994, among Thomas G. Rader, International Maritime
Group, Inc., the Company and Douglas H. MacGarvey.
10.4 Stock Purchase Option, dated September 12, 1996, between Douglas H. MacGarvey and Herbert
Peintner.
10.5 Stock Purchase Option, dated September 12, 1996, between Thomas G. Rader and Herbert Peintner.
10.6 Consulting Agreement, dated September 4, 1996, between the Company and London Manhattan
Communications L.L.C.
10.7 Investment Banking Agreement, dated September 4, 1996, between the Company and London Manhattan
International Limited ("London Manhattan International").
10.8 Form of Warrant to be issued to London Manhattan International pursuant to Exhibit 10.6 hereof.
10.9 Form of Escrow Agreement to be entered into between the Company and the Escrow Agent.
10.10 1996 Stock Option Plan and Forms of Stock Option Agreements.
10.11 Decree from the President of the Government of French Polynesia regarding License for the Company
and Letter from the Head of the Tourism Department.
23 Consent of BDO Seidman, LLP
24 Reference is made to the Signature section of this Registration Statement for the Power of Attorney
contained therein.
27 Financial Data Schedule. (For SEC purposes only).
<FN>
- ---------------------
* To be filed by amendment to this Registration Statement.
</FN>
</TABLE>
II-2
<PAGE>
ITEM 28. UNDERTAKINGS.
(a) The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
provided, however, that paragraphs (a) (1) (i) and (a) (1) (ii) do not apply if
the registration statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in that Act and will be governed by the final adjudication
of such issue.
(d) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
requirements of filing on Form SB-2 and authorized this Registration Statement
to be signed on its behalf by the undersigned, in the City of Miami, State of
Florida on September 25, 1996.
Registrant: RTC CRUISES, LTD.
By: /s/ DOUGLAS H. MACGARVEY
----------------------------
Douglas H. MacGarvey
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that RTC Cruises, Ltd., and each person
whose signature appears below, constitutes and appoints Douglas H. MacGarvey and
Thomas G. Rader, and each of them, his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution for him and in his
name or in the name of the Company and in any and all capacities, to sign any
and all amendments to the Form SB-2 Registration Statement under the Securities
Act of 1933, as amended, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto each said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises as full to all items and purposes as they
might or could do in person, hereby ratifying and confirming all that each said
attorney-in-fact and agent or his substitute or substitutes may lawfully do or
cause to be done by virtue thereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ DOUGLAS H. MACGARVEY Chairman of the Board, September 25, 1996
- ------------------------------ Chief Executive Officer,
Douglas H. MacGarvey and Secretary(principal
executive, financial
and accounting officer)
/s/ THOMAS G. RADER Vice Chairman of the Board September 25, 1996
- ------------------------------ and Treasurer
Thomas G. Rader
/s/ RONALD KURTZ Director September 25, 1996
- ------------------------------
Ronald Kurtz
/s/ ALBERT W. VAN NESS, JR. Director September 25, 1996
- ------------------------------
Albert W. Van Ness, Jr.
II-4
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
3.1 Memorandum of Association.
3.2 Articles of Association.
10.1 Employment Agreement, dated September 11, 1996, between the Company and Douglas H. MacGarvey.
10.2 Consulting Agreement, dated September 4, 1996, between the Company and Thomas G. Rader.
10.3 Shareholder Loan Agreement, dated July 1, 1994, among Thomas G. Rader, International Maritime
Group, Inc., the Company and Douglas H. MacGarvey.
10.4 Stock Purchase Option, dated September 12, 1996, between Douglas H. MacGarvey and Herbert
Peintner.
10.5 Stock Purchase Option, dated September 12, 1996, between Thomas G. Rader and Herbert Peintner.
10.6 Consulting Agreement, dated September 4, 1996, between the Company and London Manhattan
Communications L.L.C.
10.7 Investment Banking Agreement, dated September 4, 1996, between the Company and London Manhattan
International Limited ("London Manhattan International").
10.8 Form of Warrant to be issued to London Manhattan International pursuant to Exhibit 10.6 hereof.
10.9 Form of Escrow Agreement to be entered into between the Company and the Escrow Agent.
10.10 1996 Stock Option Plan and Forms of Stock Option Agreements.
10.11 Decree from the President of the Government of French Polynesia regarding License for the Company
and Letter from the Head of the Tourism Department.
23 Consent of BDO Seidman, LLP.
27 Financial Data Schedule. (For SEC purposes only).
</TABLE>
THE COMPANIES LAW (1995 REVISION)
COMPANY LIMITED BY SHARES
AMENDED AND RESTATED
MEMORANDUM OF ASSOCIATION
OF
RTC CRUISES, LTD.
------------------
1. The name of the Company is RTC Cruises, Ltd.
2. The Registered Office of the Company shall be at the offices of Moore
Stephens, "Cayside," Shedden Road, P.O. Box 1782, George Town, Cayman
Islands, British West Indies.
3. Subject to the following provisions of this Memorandum, the objects
for which the Company is established are unrestricted.
4. Subject to the following provisions of this Memorandum, the Company
shall have and be capable of exercising all the functions of a natural
person of full capacity irrespective of any question of corporate
benefit, as provided by Section 26(2) of The Companies Law (1995
Revision).
5. Nothing in this Memorandum shall permit the Company to carry on a
business for which a licence is required under the laws of the Cayman
Islands unless duly licensed.
6. If the Company is exempted, it shall not trade in the Cayman Islands
with any person, firm or corporation except in furtherance of the
business of the Company carried on outside the Cayman Islands; provided
that nothing in this clause shall be construed as to prevent the Company
effecting and concluding contracts in the Cayman Islands, and exercising
in the Cayman Islands all of its powers necessary for the carrying on of
its business outside the Cayman Islands.
7. The liability of each member is limited to the amount from time to
time unpaid on such member's shares.
8. The share capital of the Company is US$300.00 divided into 8,600,000
common shares of a nominal or par value of US$.00003 each and 1,400,000
convertible redeemable preferred shares of nominal or par value of
US$.00003 each.
THE COMPANIES LAW (1995 REVISION)
COMPANY LIMITED BY SHARES
ARTICLES OF ASSOCIATION
OF
RTC CRUISES, LTD.
________________________
1. TABLE A
1.01 The regulations in Table A in the Schedule to the Companies Law (1995
Revision) do not apply to this company.
2. INTERPRETATION
2.01 In these Articles where the context permits:
"Articles" means these Articles of Association as altered from
time to time;
"Auditors" means the auditors for the time being of the Company;
"business day" means a day in which the banks in New York and
Miami, Florida are both open for the transaction of business;
"circular resolution" means a resolution passed in accordance
with these Articles without a meeting;
"class meeting" means a separate meeting of the holders of a
class of shares;
"clear days" in relation to notice of a meeting means days
falling after the day on which notice is given or deemed to be
given and before the day of the meeting;
"Company" means the above-named company;
"Directors" means the directors, or the sole director, for the
time being of the Company;
"holder" in relation to a share of the Company means the member
or members for the time being registered in the Register as the
holder of the share;
"month" means calendar month;
"NASDAQ system" means that market for the trading of securities
operated by the group of North American
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securities dealers and others commonly referred to "NASDAQ" and,
in the case of reference herein, specifically refers to the
"NASDAQ" SmallCap Market" in which trading in securities is
carried on under the NASDAQ management;
"ordinary resolution" means a resolution passed at a general
meeting (or, if so specified, a class meeting) of the Company by
a simple majority of the votes cast, or a circular resolution;
"over-the-counter market" refers to trading carried out through
facilities of brokers and market makers in North America not
conducted in an open call-out manner on an established exchange
and when referred to herein is a reference to such trading done
other than within the NASDAQ system;
"paid-up" means paid-up or credited as paid-up;
"Public Offering" means an offering of shares of the Company
pursuant to a Prospectus being prepared by the Company in
September 1996 for issuance upon Securities and Exchange
Commission filing, and "closing of the Public Offering" means
the date upon which the Company receives the money derived from
the Public Offering;"
"Register" means the register of members of the Company;
"Registered Office" means the registered office for the time
being of the Company;
"Seal" means the common seal or any official or duplicate seal
of the Company;
"Secretary" means the secretary or assistant secretary for the
time being of the Company;
"share" includes a fraction of a share;
"special resolution" means a resolution passed at a general
meeting (or, if so specified, a class meeting) of the Company by
a majority of two thirds of the votes cast, as provided in the
Statute, or a circular resolution;
"Statute" means the Companies Law (1995 Revision) of the Cayman
Islands and every modification or re-enactment thereof for the
time being in force;
"written" and "in writing" import all methods of representing,
reproducing or communicating words or numerals in permanent
visible form, including printing, lithography, photography,
telecopying and telexing;
"year" means calendar year.
2.02 In these Articles where the context permits:
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(a)Words importing the singular number include the plural and vice
versa;
(b)Words importing the masculine gender include the feminine gender
and vice versa;
(c)Words importing persons include companies or associations or bodies
of persons, corporate or unincorporate;
(d)The word "may" is permissive; the word "shall" is imperative;
(e)A reference to a statutory provision shall be deemed to include any
amendment or re-enactment thereof.
2.03 Subject as aforesaid, words defined or used in the Statute have the
same meaning in these Articles.
2.04 The headings in these Articles are for ease of reference only and
shall not affect the construction or interpretation of these Articles.
3. PRELIMINARY
3.01 The Company may commence business immediately upon registration
pursuant to the Statute.
3.02 The Company may ratify any contract or other transaction entered into
in its name or on its behalf prior to registration.
3.03 The preliminary expenses of incorporating the Company shall be paid by
the Company, including any expenses concerned with the issue of shares
by the Company or with any contract or transaction ratified pursuant
to the foregoing Sub-Article. The preliminary expenses may be charged
to income or capital or amortised over any period as the Directors
think fit.
4. CLASSIFICATION OF SHARES
4.01 The share capital of the Company is US$300.00 divided into 8,600,000
common shares of a nominal or par value of US$.00003 each and
1,400,000 convertible redeemable preferred shares ("preferred shares")
of nominal or par value of US$.00003 each.
4.02 The rights attached to the preferred shares and the common shares of
the Company shall be as follows:
(a) Subject to the Statute, and to the right of the conversion in
Subarticle 4.02(c), the Company shall be entitled to redeem all
or any part of the preferred shares issued and outstanding by
giving notice of its intention to do so at a redemption price of
US$7.50 per preferred share;
(b) The Company shall have the right to require holders of preferred
shares to convert their shares into common shares
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in the event that the Closing Bid Price for the common shares as
quoted on the NASDAQ system or the over-the-counter market is
less than US$6.00 per share on any given business day (the
"conversion date"). The number of common shares to be received
upon conversion shall be determined by multiplying the number of
preferred shares beneficially owned by each holder by US$5.00,
then dividing that figure by the Closing Bid Price of the common
shares as quoted on the NASDAQ system or on the over-the- counter
market on the conversion date, then discounting that figure by
20% and rounding to the nearest whole number.
(c) The holders of preferred shares shall have the right
(i) within seven days of receipt of a redemption notice under
Subarticle 4.02(a) to convert their preferred shares into
common shares; and
(ii) once during each six month period after the closing of the
Public Offering to convert up to 25% of the preferred shares
beneficially owned by them into shares of common stock.
The number of common shares to be received upon conversion shall
be determined by multiplying the number of preferred shares to be
converted by US$5.00, then dividing that figure by the average
Closing Bid Price of the common shares as quoted on the NASDAQ
system for the five business days prior to the date that the
certificate evidencing the preferred shares is mailed to the
Company's transfer agent for conversion, then discounting by 20%
and rounding to the nearest whole number.
(d) All preferred shares in issue shall be converted into common
shares on the date two years after the closing of the Public
Offering (the "automatic conversation date"). The number of
common shares to be received upon conversion shall be determined
by multiplying the number of preferred shares to be converted by
US$5.00 then dividing the sum by the average Closing Bid Price of
the common shares as quoted on the NASDAQ system or on the
over-the-counter market for the five business days prior to the
automatic conversion date and rounding to the nearest whole
number.
(e) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company, then,
before any distribution or payment shall be made to the holders
of any common shares, the holders of preferred shares will be
entitled to receive an amount in cash equal to US$5.00 for each
preferred share outstanding, together with an amount in cash
equal to all accrued and unpaid dividends thereon to the date
fixed for liquidation, dissolution or winding up. After payment
of the full amount of the liquidation preference to each holder
of preferred shares, such holder will not be entitled to any
further participation in distribution of the assets of the
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Company the balance of the distribution shall be made to the
holders of the common shares equally amongst them.
(f) The holders of preferred and common shares shall be entitled to
one vote per share on all matters to be voted on by the
shareholders of the Company.
4.03 The procedure to be followed in relation to a redemption or conversion
referred to in Subarticle 4.02 may be set by the Directors from time
to time.
4.04 The unissued common shares of the Company may from time to time be
divided or sub-divided into such classes, or reclassified, and be
issued with such preferred, deferred or other special rights,
privileges, restrictions or obligations, whether in regard to
dividend, voting, transfer, forced sale, conversion, winding-up
entitlement or otherwise as the Directors think fit. This Subarticle
is without prejudice to other provisions of these Articles restricting
the variation of rights attached to shares already in issue.
4.05 The rights attached to any class of shares may (unless otherwise
provided by the terms of issue of the shares of that class), whether
or not the Company is being wound up, be varied or abrogated with the
sanction of a special resolution passed at a class meeting of the
holders of the shares of that class. The rights conferred upon the
holders of the shares of any class shall, unless otherwise expressly
provided by the terms of issue of the shares of that class, be deemed
not to be varied by the creation or issue of further shares ranking
equally with them.
5. ISSUE OF SHARES
5.01 Subject to any directions of the Company in general meeting and
subject to any special rights of shares already issued, all shares in
the Company for the time being unissued shall be under the control of
the Directors who may issue and dispose of the same (including the
issue or grant of options, warrants and other rights, renounceable or
otherwise, in respect of shares) at such times, to such persons, on
such terms and in such manner as they think fit, provided that no
share shall be issued at a discount except in accordance with the
Statute.
5.02 Save as expressly provided by its terms of issue, no share shall
confer on the holder any pre-emptive or other right in respect of any
further shares that may be issued.
5.03 Fractions of a share may be issued if the Directors think fit. The
holder of a whole share (or a fraction of a share), if fully paid-up,
may divide it into fractions for the purpose of a transfer, redemption
or other disposition, provided that, without the prior approval of the
Directors, the holder may only create a fraction which can be
expressed as a whole number of hundredths of a whole share. Subject to
the terms of issue of the fraction, or of the whole share from which
it was derived, a fraction of a
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share shall carry the corresponding fraction of all the attributes of
a whole share.
5.04 Subject to the Statute, shares need not have distinguishing numbers.
5.05 The Directors may pay or authorise payment of a commission to any
person in consideration of his subscribing or agreeing to subscribe
(whether absolutely or conditionally) for any shares in the Company,
or procuring or agreeing to procure subscriptions (whether absolute or
conditional) for any shares in the Company, but a commission exceeding
ten percent of the price at which the shares are issued, or to be
issued, shall not be paid without the sanction of an ordinary
resolution.
6. REGISTER OF MEMBERS AND RECORD DATES
6.01 The Register shall be kept in accordance with the Statute. If the
Company is exempted the Register may be kept outside the Cayman
Islands at such place as the Directors shall appoint.
6.02 The Company may keep one or more duplicates of the Register in such
place or places as the Directors think fit but in the event of a
discrepancy the main Register shall prevail.
6.03 The Company shall not be bound to register more than four persons as
the joint holders of any share.
6.04 Except as otherwise expressly provided by these Articles or as
required by law or as ordered by a court of competent jurisdiction no
person shall been titled to recognition by the Company as holding any
share upon any trust and the Company shall not be bound by, or be
compelled in any way to recognise, (even when having notice thereof)
any equitable, contingent, future or partial interest in any share or
any other right in respect of any share except an absolute right to
the entirety of the share in the holder. If, notwithstanding this
Article, notice of any trust is at the holder's request entered in the
Register or on a share certificate in respect of a share, then, except
as aforesaid:
(a) such notice shall be deemed to be solely for the holder's
convenience;
(b) the Company shall not be required in any way to recognise any
beneficiary, or the beneficiary, of the trust as having an
interest in the share or shares concerned;
(c) the Company shall not be concerned with the trust in any way, as
to the identity or powers of the trustees, the validity, purposes
or terms of the trust, the question of whether anything done in
relation to the shares may amount to a breach of trust or
otherwise; and
(d) the holder shall keep the Company fully indemnified against any
liability or expense which may be incurred or suffered
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as a direct or indirect consequence of the Company entering
notice of the trust in the Register or on a share certificate and
continuing to recognise the holder as having an absolute right to
the entirety of the share or shares concerned.
6.05 The Company may, without the necessity of giving any notice, close the
Register for any period or periods not exceeding in the aggregate
forty-five days in each year.
6.06 In lieu of or apart from closing the Register the Directors may fix a
date as the record date for determining members entitled to receive
notice of a general meeting or a class meeting or for determining
members entitled to vote at any such meeting or for determining
members entitled to receive a dividend or other distribution or for
determining members for any other purpose; but, unless so fixed, the
record date shall be as follows:
(a) as regards the entitlement to receive notice of a meeting or
notice of any other matter, the date of despatch of the notice;
(b) as regards the entitlement to vote at a meeting, and any
adjournment thereof, the date of the original meeting;
(c) as regards the entitlement to a dividend or other distribution,
the date of the Directors' resolution declaring the same.
7. SHARE CERTIFICATES
7.01 Share certificates shall be in such form as the Directors determine
provided that a share certificate shall specify the name of the holder
and the number and class of shares to which it relates and the amount
paid up thereon. Share certificates may not be issued in bearer form.
7.02 Every person whose name is entered as a member in the Register shall
be entitled on request to one certificate for all his shares of each
class or, upon payment of a fee not exceeding ten United States
dollars per additional certificate, to several certificates, each
representing a part of his holding. A member whose holding of shares
has been reduced by transfer, redemption or otherwise shall be
entitled on request to a certificate for the balance.
7.03 In the case of joint holders the Company shall not be bound to issue
more than one share certificate; and delivery of the certificate to
one of the holders shall be sufficient delivery to all the holders.
7.04 A member wishing to exercise his rights, if any, to transfer, redeem
or convert shares in accordance with these Articles may do so only
upon surrendering to the Company the share certificate(s), if any,
representing such shares.
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7.05 If a share certificate is damaged or defaced or alleged to have been
lost, stolen or destroyed, a new certificate representing the same
shares may be issued to the holder upon request subject to delivery up
of the old certificate or, if alleged to have been lost, stolen or
destroyed, compliance with such conditions as to evidence and
indemnity and the payment of expenses of the Company in connection
with the request (including the investigation of evidence) as the
Directors think fit.
8. TRANSFER OF SHARES
8.01 Transfers of shares shall be in writing in any usual or common form
in use in the Cayman Islands or in any other form approved by the
Directors.
8.02 A share transfer shall be signed by or on behalf of the transferor
and, in the case of partly paid shares, by the transferee also.
8.03 The transferor of a share shall be deemed to remain the holder of the
share until the name of the transferee is entered into the Register in
respect thereof.
8.04 Subject to any special terms of issue of the shares, the Directors
may in their absolute discretion decline to register a transfer of
shares without assigning any reason therefor. If the Directors decline
to register a transfer, they shall notify the transferee within sixty
days after their decision.
8.05 In the case of a transfer of shares issued subject to special
restrictions or requirements as to transfer the Directors may, as a
condition of approval or registration, require the transferor to
reimburse the Company for all expenses incurred in connection with the
transfer.
8.06 The registration of transfers shall be suspended during any period in
which the Register is closed in accordance with these Articles.
9. TRANSMISSION OF SHARES
9.01 Following the death of a member the survivor or survivors where the
deceased was a joint holder, and the legal personal representatives of
the deceased where he was a sole holder, shall be the only persons
recognised by the Company as having any title to the shares previously
held by the deceased, but nothing in this Article shall release the
estate of the deceased from any liability in respect of shares which
had been held by him, whether solely or jointly.
9.02 A person becoming entitled to a share by reason of the death or
bankruptcy of the holder or otherwise by operation of law may upon
producing such evidence of his title as the Directors may require,
elect either to be registered himself as the holder of the share or to
make such transfer of the share as the holder could have made, but in
either case the Directors shall have the
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same right to decline or suspend registration as they would have had
in the case of a transfer by the holder. An election pursuant to this
Sub-Article to be registered as holder shall be made in writing signed
by or on behalf of the person making the election.
9.03 A person entitled to make an election pursuant to the foregoing
Sub-Article shall, pending election, have the right to receive (and to
give a good discharge for) all monies payable in respect of the share,
the same right (if any) as the holder to call for the redemption of
the share, and the same right as the holder to enter into an agreement
for the purchase of the share by the Company; but such person shall
not be entitled to receive notice of, or attend or vote at, general
meetings or class meetings of the Company nor, save as aforesaid, to
any of the rights or privileges of a member; and the Directors may at
any time give him notice requiring election pursuant to the foregoing
Sub-Article and, if there is no election within ninety days of the
notice, the Directors may thereafter withhold all monies payable in
respect of the share until such time as the election is made.
10. REDEMPTION OF SHARES
10.01 Subject to the Statute, the Company is hereby authorised to issue
shares which are to be redeemed or are liable to be redeemed at the
option of the Company or the holder; but, save for shares declared to
be redeemable by the Memorandum of Association, the Directors shall
not issue redeemable shares without the sanction of an ordinary
resolution.
10.02 The Company is hereby authorised to make payments in respect of the
redemption of its shares out of capital or out of any other account or
fund which can be authorised for this purpose in accordance with the
Statute.
10.03 Unless fixed by the ordinary resolution sanctioning its issue the
redemption price of a redeemable share, or the method of calculation
thereof, shall be fixed by the Directors at or before the time of
issue;
10.04 Unless otherwise provided or directed by the ordinary resolution
sanctioning the issue of the shares concerned:
(a) every share certificate representing a redeemable share shall
indicate that the share is redeemable;
(b) in the case of shares redeemable at the option of the holder a
redemption notice from the holder may not be revoked without the
agreement of the Directors;
(c) at the time or in the circumstances specified for redemption the
redeemed shares shall be cancelled and shall cease to confer on
the holder any right or privilege, without prejudice to the right
to receive the redemption price, which price shall become payable
so soon as it can with due despatch be calculated, but subject to
surrender of
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the relevant share certificate for cancellation (and reissue in
respect of any balance);
(d) the redemption price may be paid in any manner authorised by
these Articles for the payment of dividends;
(e) a delay in payment of the redemption price shall not affect the
redemption but, in the case of a delay of more than thirty days,
interest shall be paid for the period from the due date until
actual payment at a rate which the Directors, after due enquiry,
estimate to be representative of the rates being offered by class
A banks in the Cayman Islands for thirty day deposits in the same
currency;
(f) the Directors may exercise as they think fit the powers
conferred on the Company by Section 36(5) of the Statute (payment
out of capital) but only if and to the extent that the redemption
could not otherwise be made (or not without making a fresh issue
of shares for this purpose);
(g) subject as aforesaid, the Directors may determine as they think
fit all questions that may arise concerning the manner in which
the redemption of the shares shall or may be effected.
10.05 No share may be redeemed unless it is fully paid-up.
11. PURCHASE OF SHARES BY THE COMPANY
11.01 Subject to the Statute, and with the sanction of an ordinary
resolution authorising the manner and terms of purchase, the Directors
may on behalf of the Company purchase any share of the Company
(including a redeemable share) by agreement with the holder or
pursuant to the terms of issue of the share, and may make payments in
respect of such purchase out of capital or out of any other account or
fund which can be authorised for this purpose in accordance with the
Statute.
11.02 Shares purchased by the Company shall be cancelled and shall cease to
confer any right or privilege on the seller.
11.03 No share may be purchased by the Company unless it is fully paid-up.
12. CALLS ON SHARES AND FORFEITURE
12.01 If a share has been issued partly paid (or nil paid), then, subject to
the terms of issue, the Directors may from time to time make calls
upon the holder in respect of the monies unpaid on the share, whether
in respect of the nominal value or the premium (if any), and, subject
as aforesaid:-
(a) the holder shall be given written notice of the call;
(b) the date for payment of the call shall be not less than thirty
days after the date of the notice of call;
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(c) payment of the call shall be made at the Registered Office or
such other place as shall be specified in the notice of call;
(d) a call may be made payable by installments;
(e) a call may be revoked or postponed;
(f) the Directors may differentiate between holders of different
shares as to the time or amount of calls;
(g) if full payment pursuant to a call is not made on or before the
due date, interest may in the Directors' discretion be charged at
a rate not exceeding ten percent per annum;
(h) if payment pursuant to a call is not made on or before the due
date, the Directors may, in addition to interest under the
foregoing paragraph, require the holder to indemnify the Company
for any expenses incurred by reason of non-payment, including
expenses incurred in enforcing the Company's rights under these
Articles;
(i) the joint holders of a share shall be jointly and severally
liable for all calls (and interest and other monies due in
respect of calls) on the share;
(j) a holder may not require the Company to make a call on his shares
or, in the absence of a call, pay up any amount unpaid on his
shares, but the Directors may accept advances from the holder to
be applied against future calls on such terms as to interest and
repayment as the Directors may determine.
12.02 Any sum which by the terms of issue of a share becomes payable upon
issue or at any fixed date, whether in respect of the nominal value of
the share or by way of premium, shall for the purposes of these
Articles be deemed to have been duly called and to be immediately
payable and, in the event of non- payment, all the provisions of these
Articles as to the payment of interest, forfeiture or otherwise shall
apply as if such sum had become payable by virtue of a call duly made
and notified.
12.03 If full payment pursuant to a call is not made on or before the due
date, the Directors may at any time thereafter give the holder a
forfeiture notice stating the amount which remains unpaid (including
any accrued interest and expenses owed to the Company by reason of
non-payment) and appointing the day, not less than fourteen days after
the date of the forfeiture notice, on which the shares shall be
forfeited unless payment of the stated amount has by then been paid in
full. If the stated amount has not by then been paid in full the
shares shall be forfeited accordingly.
12.04 In the event of forfeiture the holder shall cease to be a member in
respect of the forfeited shares and shall cease to have any
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right, title or interest in or to the shares but shall remain liable
for all amounts due before forfeiture; and the Company may enforce
such liability without making any allowance for the value of the
shares at the time of forfeiture.
12.05 A forfeited share shall become the property of the Company and may be
sold, re-allotted or otherwise disposed of for the benefit of the
Company to such person or persons, upon such terms and in such manner
as the Directors think fit. Without limiting the foregoing generality,
the Directors may determine whether and to what extent the share shall
be treated as paid-up by payments made, or credited as made, thereon
prior to forfeiture.
12.06 At any time before the sale, re-allotment or other disposal of a
forfeited share the Directors may cancel the forfeiture on such terms
as they think fit.
12.07 A note in the Register or a certificate under the hand of the
Secretary that a share has been forfeited at a stated time shall be
conclusive evidence of those facts in favour of any person to whom the
share is sold, re-allotted or disposed of, and his title to the share
shall not be affected by any irregularity or invalidity in the
proceedings in reference to the forfeiture, sale, re-allotment or
disposal.
13. LIEN ON SHARES
13.01 The Company shall have a first and paramount lien and charge on all
shares, whether or not fully paid-up, for all the debts and
obligations of the holder (or, in the case of joint holders, of any
one or more of the joint holders) but the Directors may at any time
waive the lien generally or as regards any particular debt or
obligation or category of debts or obligations.
13.02 The registration of a transfer of shares shall operate as a waiver of
the Company's lien thereon in respect of the debts or obligations of
the transferor.
13.03 The Company's lien on a share shall extend to all dividends and other
monies and benefits payable in respect of the share.
13.04 The Company may sell any share on which the Company has a lien if an
amount secured by the lien is presently payable but not until the
expiration of fourteen days after written notice to the holder stating
and demanding payment of the said amount and stating the Directors'
intention of effecting a sale.
13.05 A sale by the Company pursuant to the foregoing Sub-Article shall be
effected in such manner as the Directors think fit; and the Directors
may authorise some person to do and execute such transfers and other
documents and things on behalf of the holder as may appear to the
Directors necessary or desirable for the purpose of carrying out the
sale and entering the purchaser or purchasers in the Register.
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13.06 The proceeds of a sale by the Company pursuant to this Article shall
be applied in payment of the amount secured by the lien which is
presently payable and the balance, if any, shall be paid to the person
who was the holder of the shares before the sale unless there are
debts or obligations of that person, not presently payable, which were
secured by the lien on the shares, in which case the Company shall
have the same lien and charge on the said balance of the proceeds of
sale as it had on the shares.
14. ALTERATION OF CAPITAL
14.01 Subject to the Statute the Company may from time to time by ordinary
resolution alter the conditions of its Memorandum of Association to
increase its share capital by new shares of such amount as it thinks
expedient or, if the Company is exempted and has shares without par
value, increase its share capital by such number of shares without
nominal or par value, or increase the aggregate consideration for
which its shares may be issued, as it thinks expedient. All new shares
shall be subject to the provisions of these Articles concerning calls,
forfeiture, lien, transfer, transmission, disposal by the Directors
and otherwise as the original shares.
14.02 Subject to the Statute, the Company may from time to time by ordinary
resolution alter the conditions of its Memorandum of Association to:
(a) consolidate and divide all or any of its share capital into
shares of larger amount than its existing shares;
(b) subdivide its shares or any of them into shares of an amount
smaller than that fixed by the Memorandum of Association; or
(c) cancel shares which at the date of the passing of the resolution
have not been taken or agreed to be taken by any person, and
diminish the amount of its share capital by the amount of the
shares so cancelled or, in the case of shares without par value,
diminish the number of shares into which its capital is divided.
For the avoidance of doubt it is declared that paragraphs (a) and (b)
above do not apply if the Company is an exempted company and its
shares have no par value.
14.03 Subject to the Statute, the Company may from time to time by special
resolution reduce its share capital in any way or alter any conditions
of its Memorandum of Association relating to share capital.
15. ALTERATION OF REGISTERED OFFICE, NAME AND OBJECTS
15.01 Subject to the Statute, the Company may by resolution of its Directors
change the location of its Registered Office.
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15.02 Subject to the Statute, the Company may from time to time by special
resolution change its name or alter its objects or make any other
alteration to its Memorandum of Association for which provision has
not been made elsewhere in these Articles.
16. GENERAL MEETINGS
16.01 The Company shall in each year hold a general meeting as its Annual
General Meeting, provided that, if the Company is an exempted company,
it may by ordinary resolution determine that no Annual General Meeting
need be held in a particular year or years or indefinitely. The time
and place of Annual General Meetings shall be determined by the
Directors.
16.02 General meetings other than Annual General Meetings shall be called
Extraordinary General Meetings. The Directors may call or authorise
the calling of an Extraordinary General Meeting whenever they think
fit.
17. REQUISITION OF GENERAL MEETINGS
17.01 The Directors shall call an Extraordinary General Meeting on the
requisition of members holding at the date of the requisition not less
than one tenth in number of the issued shares of the Company for the
time being carrying the right to vote at general meetings of the
Company. To be effective the requisition shall state the objects of
the meeting, shall be in writing, signed by the requisitionists, and
shall be deposited at the Registered Office. The requisition may
consist of several documents in like form each signed by one or more
requisitionists.
17.02 If the Directors do not within twenty-one days from the date of the
requisition duly proceed to call an Extraordinary General Meeting, the
requisitionists, or any of them representing more than one half of the
total voting rights of all of them, may themselves convene an
Extraordinary General Meeting; but any meeting so called shall not be
held more than ninety days after the requisition. An Extraordinary
General Meeting called by requisitionists shall be called in the same
manner, as nearly as possible, as that in which general meetings are
to be called by the Directors.
18. NOTICE OF GENERAL MEETINGS
18.01 At least fourteen clear days notice in writing shall be given of a
general meeting to all members entitled as at the record date for the
notice provided that:
(a) an Extraordinary General Meeting may be called by shorter notice
(but not shorter than two clear days) if so agreed by a member or
members (or their proxies or representatives) holding in the
aggregate, as at the record date for the meeting, shares
conferring the right to cast seventy-five percent of the votes
that could be cast on a poll if all members so entitled attended
the meeting;
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(b) an Annual General Meeting or an Extraordinary General Meeting may
be held without notice and without observing any of the
requirements or provisions of these Articles concerning general
meetings if so agreed by all the members (or their proxies or
representatives) entitled as at the date of the meeting to attend
and vote at general meetings;
and agreement for the purposes of the foregoing paragraphs (a) or (b)
may be reached before, during or within thirty days after the meeting
concerned.
18.02 The notice of a general meeting shall specify:
(a) the place, the day and the hour of the meeting and, if different,
the record date for determining members entitled to attend and
vote; and
(b) the general nature of any special business to be conducted at the
meeting; and for this purpose all business shall be deemed
special which is transacted at an Extraordinary General Meeting,
and also all business that is transacted at an Annual General
Meeting with the exception of the consideration and approval of
the report of the Directors, the financial statements of the
Company and the report of the Auditors (if any), and the election
or re-election of the Auditors and approval of their
remuneration.
18.03 The Directors and the Auditors, if any, shall be entitled to receive
notice of, and to attend and speak at, any general meeting of the
Company.
18.04 The accidental omission to give notice to, or the non-receipt of
notice by, any person entitled to receive notice shall not invalidate
the proceedings at any general meeting.
19. PROCEEDINGS AT GENERAL MEETINGS
19.01 No business shall be transacted at any general meeting unless a quorum
of members is present at the time when the meeting proceeds to
business; a Member or Members present in person or by proxy holding in
the aggregate not less than one third of the issued shares entitled to
vote as at the record date for the meeting shall constitute a quorum.
19.02 If within half an hour from the time appointed for a meeting a quorum
is not present, the meeting, if convened upon the requisition of
members, shall be dissolved and in any other case it shall stand
adjourned to the same day in the next week at the same time and place
or to such other time or such other place as the Directors may
determine and, if at the adjourned meeting a quorum is not present
within half an hour from the time appointed for the meeting, the
member or members present shall be a quorum.
19.03 The chairman, if any, of the board of Directors shall preside as
chairman at every general meeting of the Company; or, if there is no
such chairman or if he shall not be present at the time
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appointed for the meeting, or if he is unwilling to act, the Directors
present shall elect one of their number to be chairman of the meeting;
or, if no Directors are present at the time appointed for the meeting
or no Director is willing to act as chairman, then the members present
shall choose one of their number to be chairman of the meeting.
19.04 The chairman may, with the consent of any general meeting duly
constituted, and shall if so directed by the meeting, adjourn the
meeting from time to time and from place to place, but no business
shall be transacted at any adjourned meeting except business which
might lawfully have been transacted at the meeting from which the
adjournment took place. When a meeting is adjourned for thirty days or
more, notice of the adjourned meeting shall be given as in the case of
an original meeting; save as aforesaid it shall not be necessary to
give any notice of an adjournment or of the business to be transacted
at an adjourned general meeting.
19.05 At any general meeting a resolution put to the vote of the meeting
shall be decided on a show of hands unless before or on the
declaration of the result of the show of hands a poll is demanded by
the chairman or any member entitled to vote, present in person or by
proxy. Unless a poll is so demanded, a declaration by the chairman
that a resolution has on a show of hands been carried, or carried
unanimously, or by a particular majority, or lost, and an entry to
that effect in the book containing the minutes of the proceedings of
the Company shall be conclusive evidence of the fact without proof of
the number or proportion of the votes recorded in favour of or against
such resolution.
19.06 If any votes are counted which ought not to have been counted, or
which might have been rejected, the error shall not vitiate the
resolution unless pointed out at the same meeting, or at any
adjournment thereof, and not in that case unless in the opinion of the
chairman (whose decision shall be final and conclusive) it is of
sufficient magnitude to vitiate the resolution.
19.07 If a poll is duly demanded, it shall be taken in such manner as the
chairman directs. Without limiting the foregoing generality, the
chairman may direct the use of ballot or voting papers, may appoint
scrutineers and, subject to the next Sub-Article, may adjourn the
meeting to some other time or place for the purpose of conducting the
poll or declaring its result. The result of the poll shall be deemed
to be the resolution of the meeting at which the poll was demanded.
19.08 A poll demanded on the election of a chairman and a poll demanded on a
question of adjournment shall be taken forthwith. In any other case
the poll shall be taken not more than thirty days after the date of
the meeting or adjourned meeting at which the poll was demanded.
19.09 The demand for a poll shall not prevent the continuance of a
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meeting for the transaction of any business other than the question on
which the poll has been demanded.
19.10 The demand for a poll may be withdrawn at any time before the taking
of the poll, but in that case the chairman or any other member
entitled to vote may then demand a poll.
9.11 In the case of an equality of votes, whether on a show of hands
or on a poll, the chairman of the meeting at which the show of hands
takes place or at which the poll is demanded shall be entitled to a
second or casting vote.
20. VOTES OF MEMBERS
20.01 Subject to any special rights or restrictions for the time being
attached to any shares or any class of shares, every member as at the
record date who is present in person or by proxy shall have:
(a) on a show of hands one vote; and
(b) on a poll one vote for each whole share (and a corresponding
fraction of a vote for every fraction of a share) registered in
his name in the Register as at the record date, provided that a
partly paid share shall confer a fraction of a vote according to
the proportion borne by the amount paid-up on the share to the
total issue price (including share premium, if any).
20.02 In the case of joint holders the vote of the senior who tenders
a vote, whether in person or by proxy, shall be accepted to the
exclusion of the votes of the other joint holders, and for this
purpose seniority shall be determined by the order in which the
names of the holders stand in the Register.
20.03 A member shall not be entitled to attend or vote at general
meetings if and as long as any call or other sum in respect of
shares is presently payable by him.
20.04 Subject to production of such evidence as the Directors may
require, a member of unsound mind, or in respect of whom an order
has been made by any court in the Cayman Islands or elsewhere
having jurisdiction in lunacy may vote on a show of hands or on a
poll by his committee, receiver, curator bonis, guardian or other
person appointed by the court, and any such committee, receiver,
curator bonis, guardian or other person may vote by proxy.
20.05 No objection shall be raised to the qualification of any voter
except at the general meeting at which the vote objected to is
given or tendered or at any adjournment thereof, and every vote
not disallowed at such general meeting or adjournment shall be
valid for all purposes. Any such objection made in due time shall
be referred to the chairman of the meeting whose decision shall
be final and conclusive.
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20.06 On a poll a member entitled to more than one vote need not, if he
votes, use all his votes or cast all the votes he uses in the same
way.
20.07 A corporation, whether formed in the Cayman Islands or elsewhere,
which is a member may authorise such person as it thinks fit to act as
its representative at any general meeting of the Company and the
person so authorised shall be entitled to exercise the same voting and
other powers on behalf of the corporation which he represents as the
corporation could exercise if it were an individual member of the
Company. A corporation whose representative is present at a meeting
shall itself be deemed to be present in person at the meeting and
shall be counted towards the quorum. Nothing in this Article shall be
construed as preventing a corporation from appointing a proxy.
21. PROXIES
21.01 The appointment of a proxy shall be by written instrument under the
hand of the appointor or his attorney duly authorised in writing or,
if the appointor is a corporation, either under the corporation's seal
or under the hand of an officer or attorney duly authorised.
21.02 A proxy need not be a member of the Company.
21.03 The instrument appointing a proxy may be in any usual or common form
or otherwise acceptable to the chairman of the meeting for which the
instrument is first presented.
21.04 The instrument appointing a proxy may contain restrictions or
directions as to the manner in which, or the matters upon which, the
proxy may vote, but subject thereto the proxy may vote on any matter
in such manner as the proxy thinks fit and may exercise the same
powers as his appointor could exercise if present, including the power
to demand a poll.
21.05 The instrument appointing a proxy may be expressed to be for a
particular meeting or particular meetings or to be effective generally
until revoked. An appointment for a particular meeting or meetings
shall be presumed, in the absence of clear provision to the contrary,
to extend to any adjournment of such meeting or meetings.
21.06 The instrument appointing a proxy (and any power of attorney or other
authority under which it is signed, or a notarially certified copy of
such authority) shall be deposited at the Registered Office or at such
other place as is specified for that purpose in the notice of meeting;
and such deposit shall be made no later than the time for holding the
meeting, provided that the Directors may in giving notice of the
meeting stipulate that instruments of proxy shall be deposited up to
forty-eight hours before the time for holding the meeting. Such
deposit may be made by telecopier transmission, but may be disallowed
at or before the meeting by the Directors or the chairman of the
meeting if in his or their opinion there are material doubts as
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to authenticity or content. The chairman of the meeting may at his
discretion direct that the deposit of an instrument of proxy (or other
requisite document) shall be deemed to have been duly made, if
satisfied that the instrument of proxy duly signed (or other requisite
document) is in the course of transmission to the Company.
21.07 A proxy shall have no powers, as such, at any meeting at which his
appointor is present in person or, being a corporation, by a duly
authorised representative. If two or more proxies are present at a
meeting and in accordance with their terms of appointment seek to vote
on the same matter in respect of the same shares, the chairman shall
in his absolute discretion decide which vote to accept and which vote
or votes to disallow, or he may disallow all such votes.
21.08 The Directors may at the expense of the Company send to the members
instruments of proxy (with or without prepaid postage for their
return) for use at any general meeting, either in blank or (but only
if such instruments are sent to all members entitled to attend and
vote) nominating one or more Directors or other persons.
21.09 All resolutions passed at a general meeting shall, notwithstanding
that it is afterwards discovered that there was some defect in the
appointment of a proxy or that the appointment had been revoked or
otherwise terminated prior to the meeting, be as valid as if every
such proxy had been and remained duly appointed.
22. CIRCULAR RESOLUTIONS OF THE MEMBERS
22.01 A resolution in writing, in one or more counterparts, signed by all
the members for the time being entitled to receive notice of and
attend and vote at general meetings (or, being corporations, by their
duly authorised representatives) shall be as valid and effective as if
the same had been passed at a general meeting of the Company duly
called and held, and shall satisfy any requirement of these Articles
for a resolution to be passed by the Company in general meeting.
23. CLASS MEETINGS
23.01 All the provisions of these Articles regulating Extraordinary General
Meetings (as to call, requisition, notice, proceedings, votes,
proxies, circular resolutions and otherwise) apply equally to class
meetings save only that references to members shall be construed as
references to members holding shares of the relevant class.
24. APPOINTMENT OF DIRECTORS
24.01 By ordinary resolution the Company may set a lower limit or an upper
limit on the number of Directors and may from time to time
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vary any such limit; subject as aforesaid, there shall be at least one
Director and there shall be no upper limit.
24.02 There shall be no shareholding qualification for Directors unless
prescribed by special resolution.
24.03 The first Directors shall be appointed in writing by the subscribers
of the Memorandum of Association or a majority of them.
24.04 The Directors may from time to time appoint any person to be a
Director, either to fill a casual vacancy or as an addition to the
existing Directors, subject to any upper limit on the number of
Directors prescribed pursuant to this Article.
24.05 The Company may from time to time by ordinary resolution appoint any
person to be a Director and may in like manner remove any Director
from office, whether or not appointing another in his stead.
24.06 An appointment of a Director may be on terms that the Director shall
automatically retire from office (unless he has sooner vacated office)
at the next or a subsequent Annual General Meeting or upon any
specified event or after any specified period; but no such term shall
be implied in the absence of express provision.
24.07 Without prejudice to other provisions of these Articles for the
retirement or removal of Directors, the office of a Director shall be
vacated:
(a) if he resigns as Director by notice to the Company in writing
signed by him;
(b) if he dies, becomes bankrupt or makes any arrangement or
composition with his creditors generally; or
(c) if he becomes of unsound mind or an order for his detention is
made under the Mental Health Law or any analogous law of a
jurisdiction outside the Cayman Islands.
25. REMUNERATION OF DIRECTORS
25.01 Subject to any direction that may be given by the Company in general
meeting, the remuneration of the Directors shall be in such amount or
at such rate, and upon such terms as the Directors may from time to
time determine. Special remuneration may be agreed with or given to
any Director who has undertaken, or is required to undertake, any
special work, service or mission beyond the ordinary routine work of a
Director.
25.02 An Alternate Director shall not be remunerated as such by the Company
provided that he may, if the Directors think fit, be remunerated for
any special work, service or mission beyond the ordinary routine work
of a Director or Alternate Director.
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26. TRANSACTIONS WITH DIRECTORS
26.01 A Director may hold any other executive or non-executive office or
place of profit in or under the Company, other than the office of
Auditor, on such terms as to tenure, remuneration, indemnity and
otherwise as the Directors may determine.
26.02 A Director may act by himself or his firm in a professional capacity
for the Company and shall be entitled to the same remuneration,
indemnity and other privileges as if he were not a Director.
26.03 A Director may be a member or director or hold any other executive or
non-executive office or place of profit in or under any company or
association promoted by the Company or in which the Company may be
interested or associated, and may exercise and enjoy the rights,
privileges and benefits of any such position without being accountable
in any way to the Company.
26.04 No person shall be disqualified from the office of Director by, or be
prevented by such office from, contracting with the Company, either as
vendor, purchaser or otherwise, nor shall any such contract (or any
other contract or arrangement entered into by or on behalf of the
Company in which a Director shall be in any way interested) be liable
to be avoided, nor shall any Director be liable to account to the
Company for any profit realised by any such contract or arrangement;
but the nature of his interest shall be disclosed by him at the
meeting of the Directors at which the question of entering into the
contract or arrangement is first taken into consideration or, if the
Director was not at that time interested in the proposed contract or
arrangement, then at the next meeting of the Directors held after he
becomes so interested.
26.05 A Director may vote in respect of any contract, arrangement or other
matter which may be proposed, notwithstanding that he has an interest
therein provided that the nature of his interest shall have been
disclosed to the Directors prior to the Directors' resolution.
26.06 For the avoidance of doubt it is declared that a Director shall be
regarded as having an interest in any matter in which he has a duty
conflicting with his duty to the Company, and also in any proposal to
ratify a contract or transaction entered into by him in the name or on
behalf of the Company prior to its registration.
26.07 A general notice that a Director is a shareholder, director or officer
of, or otherwise interested in, a specified company or association and
is to be regarded as interested in any transaction with such company
or association shall be a sufficient disclosure for the purposes of
this Article and thereafter it shall not be necessary to give any
further notice relating to a particular transaction with that company
or association.
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26.08 The Company may from time to time by ordinary resolution impose and
vary rules more or less restrictive of Directors having conflicting
interests.
26.09 The provisions of this Article concerning Directors apply equally to
Alternate Directors. For the purposes of this Article an interest of a
Director shall be deemed to be an interest of his Alternate Director,
and vice versa.
27. ALTERNATE DIRECTORS AND PROXIES
27.01 A Director may at any time appoint any person (including another
Director) to be his Alternate Director and may at any time terminate
such appointment. An appointment and a termination of appointment
shall be by notice in writing signed by the Director and deposited at
the Registered Office or delivered at a meeting of the Directors.
27.02 The appointment of an Alternate Director shall determine on the
happening of any event which, if he were a Director, would cause him
to vacate such office or if his appointor ceases for any reason to be
a Director.
27.03 An Alternate Director shall be entitled to receive notices of meetings
of the Directors and shall be entitled to attend and vote as a
Director at any such meeting at which his appointor is not personally
present and generally at such meeting to perform all the functions of
his appointor as a Director; and for the purposes of the proceedings
at such meeting these Articles shall apply as if he (instead of his
appointor) were a Director, save that he may not himself appoint an
Alternate Director or a proxy.
27.04 If an Alternate Director is himself a Director or attends a meeting of
the Directors as the Alternate Director of more than one Director, his
voting rights shall be cumulative.
27.05 Unless the Directors determine otherwise, an Alternate Director may
also represent his appointor at meetings of any committee of the
Directors on which his appointor serves; and the provisions of this
Article shall apply equally to such committee meetings as to meetings
of the Directors.
27.06 If so authorised by express provision in his notice of appointment, an
Alternate Director may join in a circular resolution of the Directors
adopted pursuant to these Articles and his signature of such
resolution shall be as effective as the signature of his appointor.
27.07 Save as provided in these Articles an Alternate Director shall not, as
such, have any power to act as a Director or to represent his
appointor and shall not be deemed to be a Director for the purposes of
these Articles.
27.08 A Director who is not present at a meeting of the Directors, and whose
Alternate Director (if any) is not present at the meeting, may be
represented at the meeting by a proxy duly appointed, in
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which event the presence and vote of the proxy shall be deemed to be
that of the Director. All the provisions of these Articles regulating
the appointment of proxies by members shall apply equally to the
appointment of proxies by Directors.
28. PROCEEDINGS OF DIRECTORS
28.01 A meeting of the Directors for the time being at which a quorum is
present (or, if there is a sole Director, such Director) shall be
competent to exercise all or any of the powers and discretions by or
under these Articles for the time being vested in or exercisable by
the Directors generally.
28.02 Except as otherwise provided by these Articles, the Directors shall
meet together for the dispatch of business, convening, adjourning and
otherwise regulating their meetings as they think fit.
28.03 A Director may, and on the request of a Director the Secretary shall,
at any time summon a meeting of the Directors. Notice thereof shall be
given to each Director and Alternate Director in writing or by
telephone or orally. Not less than five clear days notice shall be
given save that all the Directors (or their Alternate Directors) may
waive notice of the meeting at, before or after the meeting is held.
28.04 A meeting of the Directors may be held, and any Director may
participate in a meeting, by means of a conference telephone or
similar communications equipment by means of which all persons
participating in the meeting are capable of hearing each other; and
such participation shall be deemed to constitute presence in person at
the meeting.
28.05 The quorum necessary for the transaction of business at a meeting of
the Directors may be fixed by the Directors and, unless so fixed at
any other number, shall be two or, if there is only one Director for
the time being in office, one.
28.06 For the avoidance of doubt it is declared that an Alternate Director
shall not be entitled to attend or vote at a meeting of the Directors
or be counted towards the quorum if his appointor be present; and the
proxy of a Director shall not be so entitled or counted if either the
appointing Director or his Alternate Director be present.
28.07 The Directors may at any time elect a chairman and, if they think fit,
a deputy chairman and may determine the period for which they
respectively are to hold office. Subject to any such determination,
the Directors may at any time remove a chairman or deputy chairman
from office. A chairman or deputy chairman shall automatically cease
to hold office if for any reason he ceases to hold office as a
Director.
28.08 Questions arising at a meeting of the Directors shall be decided by a
majority of the votes cast. In the case of an equality of votes, the
chairman shall have a second or casting vote.
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28.09 The continuing Directors may act notwithstanding any vacancy in their
body but, if and so long as their number is reduced below the number
fixed by or pursuant to these Articles as the minimum number of
Directors or as the necessary quorum for meetings of Directors, the
continuing Directors may act for the purpose of increasing the number
of Directors to the requisite number, or of summoning a general
meeting of the Company, but for no other purpose.
28.10 All resolutions passed and other acts done by any meeting of the
Directors or of a committee of Directors shall, notwithstanding that
it is afterwards discovered that there was some defect in the
appointment of any Director, Alternate Director or proxy, or that they
or any of them were disqualified or had otherwise ceased to hold
office, be as valid as if every such person had been duly appointed
and qualified and continued to hold the office or position of
Director, Alternate Director or proxy, as the case may be. This
Article shall apply equally to a case in which there was no
appointment as to the case in which there was a defective appointment.
28.11 A Director who is present at a meeting of the Directors at which
action on any matter is taken shall be presumed to have assented to
the action unless his dissent shall be entered in the minutes of the
meeting or he shall file his written dissent with the person acting as
the secretary of the meeting before the adjournment thereof or shall
send his written dissent to the Registered Office immediately after
the meeting, provided that this right of dissent shall not apply in
the case of a Director who voted in favour of the action.
28.12 A resolution in writing, in one or more counterparts, 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 held.
28.13 If the Company is exempted, at least one meeting of the Directors
shall be held in the Cayman Islands in each year and, if in any year
no such meeting has theretofore been held, it shall be held without
the necessity of notice at the registered office at noon on the first
Monday in December or, if that is not a business day in the Cayman
Islands, on the next day which is a business day.
29. MINUTES AND REGISTERS
29.01 In accordance with the Statute the Directors shall cause minutes to be
kept of all resolutions and proceedings of members, whether at general
meetings, class meetings or otherwise, and of Directors or managers
(if any), or committees of Directors (if any), whether at meetings or
otherwise. Such minutes shall be kept in writing at the Registered
Office or at such other location as the Directors may determine.
29.02 The minutes of a meeting, whether of the members or the Directors or a
committee of the Directors, when signed by the
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person acting as the chairman of the meeting or by the person acting
as the chairman of the next following meeting, shall until the
contrary be proved be accepted as conclusive evidence of the matters
stated in the minutes.
29.03 The Directors shall cause to be kept at the Registered Office the
register of Directors and officers and the register of mortgages and
charges required by the Statute. Alternate Directors shall be entered
in the register of Directors and officers.
30. POWERS OF DIRECTORS
30.01 The business of the Company shall be managed by the Directors, who may
exercise all such powers of the Company as are not by the Statute or
these Articles required to be exercised by the Company in general
meeting, subject nevertheless to any regulations, not inconsistent
with the Statute or these Articles, prescribed by the Company in
general meeting. No such regulations made by the Company in general
meeting may invalidate any prior act of the Directors. This
Sub-Article is without prejudice to the provisions of these Articles
permitting delegation by the Directors.
30.02 Notwithstanding that the Statute or the Memorandum of Association may
permit the Company to pursue objects or exercise powers which are
charitable or benevolent or otherwise independent of the financial
interests of the Company itself, the Directors shall not without the
sanction of a special resolution pursue any such objects or exercise
any such powers, provided that:
(a) this Sub-Article does not apply to the declaration or payment of
dividends, the redemption or purchase of shares or the conferring
of other benefits upon members in accordance with these Articles;
(b) The Directors on behalf of the Company may pay or procure the
payment of gratuities, pensions and other benefits to persons who
are or were officers or employees of the Company or any
associated company, or widows or other dependents of such
persons, whether or not the Company has any legal obligation to
do so;
(c) this Sub-Article does not apply to an action which, though it
may in itself be gratuitous, is considered by the Directors to be
in the financial interests of the Company;
(d) if there is any reasonable doubt as to whether an action is
prohibited by this Sub-Article, the Directors' decision, if made
in good faith, shall be conclusive.
30.03 The Directors may exercise all the powers of the Company to borrow
money and to mortgage or charge its undertaking, property and uncalled
capital or any part thereof by way of fixed charge, floating charge or
other form of encumbrance, and to issue debentures, debenture stock
and other securities whether
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outright or as security for any debt, liability or obligation of the
Company or of any third party. In the case of a charge over the
uncalled capital of the Company or any part of it, the Directors may
delegate to the charge holder (or any person acting as his trustee or
appointed by him) the power to make calls on members in respect of
such uncalled capital and to sue in the name of the Company or
otherwise for the recovery of monies becoming due in respect of calls
and to give valid receipts for such monies; and such powers shall be
assignable if expressed to be so.
30.04 All cheques, promissory notes, drafts, bills of exchange and other
negotiable instruments and all receipts for monies paid to the Company
shall be signed, drawn, accepted, endorsed or otherwise executed in
such manner as the Directors may from time to time determine.
31. SECRETARY
31.01 The Secretary shall, and one or more assistant secretaries may, be
appointed by the Directors for such terms, at such remuneration and
upon such conditions as the Directors think fit. Notwithstanding the
terms or conditions of appointment, the Secretary and any assistant
secretary may at any time be removed from office by the Directors.
31.02 Subject to any contrary term or condition of his appointment, an
assistant secretary may exercise or perform any task or power
conferred upon the Secretary by the Statute, by these Articles or by
resolution of the Directors, but shall comply with any proper
direction which may be given by the Secretary.
31.03 A provision of the Statute or of these Articles requiring or
authorising anything to be done by or to a Director and the Secretary
shall not be satisfied by its being done by or to the same person
acting both as Director and as or in place of the Secretary.
32. COMMITTEES, OFFICERS, ATTORNEYS AND MANAGERS
32.01 The Directors may delegate any of their powers and discretions to
committees consisting of such of their number as the Directors think
fit and may at any time revoke any such delegation or discharge any
such committee either wholly or in part. Every committee so formed
shall in the exercise of the powers and discretions delegated to it
conform to any regulations that may from time to time be imposed upon
it by the Directors. All acts done by any such committee in conformity
with such regulations and in fulfillment of the purposes for which it
is appointed, but not otherwise, shall have the like force and effect
as if done by the Directors. Subject to any regulations made by the
Directors for this purpose, the meetings and proceedings of such
committees shall be governed by the provisions of these Articles
concerning the meetings and proceedings of the Directors, including
provisions for circular resolutions.
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32.02 The Directors may on behalf of the Company appoint from their own
number or otherwise such officers to perform such duties, to exercise
such powers and discretions and upon such terms as the Directors think
fit; but an officer of the Company may at any time be removed from
office by the Directors. Without limiting the generality of the
foregoing, the Directors may on behalf of the Company appoint a
president or chief executor officer or both, either of whom may
alternatively be referred to as the managing director as the Directors
may designate from time to time and may appoint a secretary and a
treasurer.
32.03 The Directors may on behalf of the Company by power of attorney under
the Seal appoint any person or persons, whether nominated directly or
indirectly by the Directors, to be the attorney or attorneys of the
Company for such purposes and with such powers and discretions (not
exceeding those vested in or exercisable by the Directors) and for
such period and subject to such conditions as the Directors may think
fit; and any such attorney, if so authorised, may execute deeds and
instruments on behalf of the Company under his own hand and seal which
shall bind the Company and have the same effect as if under the Seal
of the Company.
32.04 The Directors may on behalf of the Company appoint such managers,
custodians and agents with such duties, powers, and discretions and
upon such terms as the Directors think fit.
32.05 Any delegation by the Directors pursuant to this Article may be on
terms permitting sub-delegation.
33. SEAL
33.01 The Seal shall only be used by the authority of the Directors or of a
committee of the Directors authorised by the Directors in that behalf;
and, until otherwise determined by the Directors, the Seal shall be
affixed in the presence of a Director or the Secretary or an assistant
secretary or some other person authorised for this purpose by the
Directors or the committee of Directors.
33.02 Notwithstanding the foregoing Sub-Article the Seal may without further
authority be affixed by way of authentication to any document required
to be filed with the Registrar of Companies in the Cayman Islands, and
may be so affixed by any Director, Secretary or assistant secretary of
the Company or any other person or institution having authority to
file the document as aforesaid.
33.03 The Company may have one or more duplicate Seals, as permitted by the
Statute; and, if the Directors think fit, a duplicate Seal may bear on
its face the name of the country, territory, district or place where
it is to be used.
34. DIVIDENDS AND RESERVES
34.01 Subject to these Articles and subject to any direction of the Company
in general meeting, the Directors may on behalf of the
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Company declare and pay dividends (including interim dividends) at
such times and in such amounts as they think fit. For the avoidance of
doubt it is declared that, subject as aforesaid, the Directors may, if
it appears to them fair and equitable to do so, fix as the record date
for a dividend a date prior to the declaration of the dividend.
34.02 Dividends may be declared and paid out of the profits of the Company,
realised or unrealised, or from any reserve set aside from profits
which the Directors determine is no longer needed, or not in the same
amount. With the sanction of an ordinary resolution dividends may also
be declared and paid out of share premium account or any other fund or
account which can be authorised for this purpose in accordance with
the Statute.
34.03 The Directors may before declaring a dividend set aside such sums as
they think fit as a reserve or reserves for any proper purpose.
Pending application, such sums may be employed in the business of the
Company or invested, and need not be kept separate from other assets
of the Company. The Directors may also, without placing the same to
reserve, carry forward any profit which they decide not to distribute.
34.04 Subject to these Articles and subject to any special dividend rights
or restrictions for the time being attached to any shares or class of
shares, if a dividend is declared:
(a) every share shall confer on the holder as at the record date the
right to participate in the dividend; and
(b) the dividend shall be declared and paid according to the amounts
(other than share premium) paid up on shares as at the record
date or, if the Company is an exempted company and its shares
have no par value, then on an equal per share basis.
34.05 The Directors may deduct from any dividend all sums of money
presently payable by the holder to the Company, whether in respect of
shares or otherwise; and the Directors may retain any dividend on
shares over which the Company has a lien for any obligation presently
due.
34.06 Any dividend or other monies payable in respect of shares may be paid
by cheque or warrant sent through the post directed to the registered
address of the holder or, in the case of joint holders, the holder who
is first named in the Register in respect of the shares; but this
Sub-Article is without prejudice to any other method of payment which
the Directors may think appropriate and, in the case of joint holders,
payment to any one or more of them shall be a good discharge to the
Company.
34.07 No dividend shall bear interest against the Company.
34.08 With the sanction of an ordinary resolution of the Company (or, as
regards a dividend payable in respect of a class of shares, an
ordinary resolution passed at a class meeting) the Directors may
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determine that a dividend shall be paid wholly or partly by the
distribution of specific assets (which may consist of the shares or
securities of any other company) and may settle all questions
concerning such distribution. Without limiting the foregoing
generality the Directors may fix the value of such specific assets,
may determine that cash payments shall be made to some members in lieu
of specific assets and may vest any such specific assets in trustees
on such terms as the Directors think fit.
34.09 With the sanction of an ordinary resolution of the Company (or, as
regards a dividend payable in respect of a class of shares, an
ordinary resolution passed at a class meeting) the Directors may
determine that:
(a) the persons entitled to participate in the dividend shall have a
right of election to accept shares of the Company credited as
fully paid in satisfaction of all or (if the Directors so specify
or permit) part of their dividend entitlement; or
(b) a dividend shall be satisfied in whole or specified part by an
issue of shares of the Company credited as fully paid up, subject
to a right of election on the part of persons entitled to
participate in the dividend to receive their dividend entitlement
wholly or (if the Directors so permit) partly in cash;
and in either event the Directors may determine all questions that
arise concerning the right of election, notification thereof to
members, the basis and terms of issue of shares of the Company and
otherwise.
35. SHARE PREMIUM ACCOUNT
35.01 Subject to any direction from the Company in general meeting, the
Directors may on behalf of the Company exercise all the powers and
options conferred on the Company by the Statute in regard to the
Company's share premium account, save that unless expressly authorised
by other provisions of these Articles the sanction of an ordinary
resolution shall be required for any application of the share premium
account in paying dividends to members.
36. CAPITALISATION ISSUES
36.01 With the sanction of an ordinary resolution of the Company the
Directors may on behalf of the Company appropriate any sum standing to
the credit of the share premium account or capital redemption reserve
or any sum of profits available for dividend purposes (or credited to
any reserve set aside from profits which the Directors determine is no
longer needed, or not in the same amount) to members in the
proportions in which such sum would have been divisible amongst them
if distributed by way of dividend, and to apply such sum on their
behalf in paying up in full unissued shares to be issued to the
members in the said proportions. The Directors may determine all
questions that
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arise concerning a capitalisation issue including the basis and terms
of issue.
37. BOOKS OF ACCOUNT
37.01 The Directors shall cause proper books of account to be kept with
respect to:
(a) all sums of money received or expended by the Company and the
matters in respect of which the receipt or expenditure takes
place;
(b) all sales and purchases of goods by the Company;
(c) the assets and liabilities of the Company;
and proper books of account shall not be deemed to be kept with
respect to the matters aforesaid if there are not kept such books as
are necessary to give a true and fair view of the state of the
Company's affairs and to explain its transactions. Such books shall be
kept at such place or places as the Directors determine.
37.02 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 book of the Company or any of them shall
be open to the inspection of members not being Directors; and no
member (not being a Director) shall have any right of inspecting any
account or book or document of the Company except as authorised by the
Directors or by the Company in general meeting.
37.03 Subject to any waiver by the Company in general meeting of the
requirements of this Sub-Article, the Directors shall lay before the
Company in general meeting, or circulate to members, financial
statements in respect of each financial year of the Company,
consisting of:
(a) a profit and loss account giving a true and fair view of the
profit or loss of the Company for the financial year; and
(b) a balance sheet giving a true and fair view of the state of
affairs of the Company at the end of the financial year;
together with a report of the Directors reviewing the business of the
Company during the financial year. The financial statements and the
Directors' report, together with the auditor's report, if any, shall
be laid before the Company in general meeting, or circulated to
members, no later than 180 days after the end of the financial year.
37.04 The financial year of the Company shall commence on 1st January of
each year (or, in the case of the first financial year, the date of
registration) and shall end on 31st December of each year but, subject
to any direction of the Company in general meeting, the Directors may
from time to time prescribe some other period to be the financial
year, provided that the Directors may not
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without the sanction of an ordinary resolution prescribe or allow any
financial year longer than eighteen months.
38. AUDIT
38.01 The Company in general meeting may appoint Auditors to hold office
until the conclusion of the next Annual General Meeting or earlier
removal from office by the Company in general meeting; whenever there
are no Auditors appointed as aforesaid the Directors may appoint
Auditors to hold office until the conclusion of the next Annual
General Meeting or earlier removal from office by the Company in
general meeting. Unless fixed by the Company in general meeting the
remuneration of the Auditors shall be as determined by the Directors.
Nothing in this Article shall be construed as making it obligatory to
appoint Auditors.
38.02 The Auditors shall make a report to the members on the accounts
examined by them and on every set of financial statements laid before
the Company in general meeting, or circulated to members, pursuant to
this Article during the Auditors' tenure of office.
38.03 The Auditors shall have right of access at all times to the Company's
books, accounts and vouchers and shall be entitled to require from the
Company's Directors and officers such information and explanations as
the Auditors think necessary for the performance of the Auditors'
duties; and, if the Auditors fail to obtain all the information and
explanations which, to the best of their knowledge and belief, are
necessary for the purposes of their audit, they shall state that fact
in their report to the members.
38.04 The Auditors shall be entitled to attend any general meeting at which
any financial statements which have been examined or reported on by
them are to be laid before the Company and to make any statement or
explanation they may desire with respect to the financial statements.
39. WINDING-UP
39.01 In the winding-up of the Company, subject to any special rights or
restrictions for the time being attached to any shares or any class of
shares, the assets available for distribution amongst the members as
such shall be distributed according to the amounts (other than share
premium) paid up on shares held by them.
39.02 In the winding-up of the Company the liquidator may, with the sanction
of a special resolution, determine that any winding-up distribution
shall be made in whole or part by the distribution of specific assets.
40. INDEMNITY
40.01 The Directors and officers of the Company and any trustee for the time
being acting in relation to any of the affairs of the Company and
every former director, officer or trustee and their respective heirs,
executors, administrators and personal
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representatives (each of such persons being referred to in this
Article as "indemnified party") shall be indemnified out of the assets
of the Company from and against all actions, proceedings, costs,
charges, losses, damages and expenses which they or any of them shall
or may incur or sustain by reason of any act done or omitted in or
about the execution of their duties in their respective offices or
trusts, except any which an indemnified party shall incur or sustain
by or through his own wilful neglect or default; no indemnified party
shall be answerable for the acts, omissions, neglects or defaults of
any other Director, officer or trustee, or for joining in any receipt
for the sake of conformity, or for the solvency or honesty of any
banker or other persons with whom any moneys or effects belonging to
the Company may be lodged or deposited for safe custody, or for any
insufficiency of any security upon which any monies of the Company may
be invested, or for any other loss or damage due to any such cause as
aforesaid or which may happen in or about the execution of his office
or trust unless the same shall happen through the wilful neglect or
default of such indemnified party.
41. NOTICES
41.01 Save as otherwise expressly provided in these Articles, notices by the
Company pursuant to these Articles shall be in writing and may be
given personally or by sending the notice by post, telex, telecopy or
any other method of written communication; and, subject as aforesaid:
(a) when sent by post the notice shall be deemed given sixty hours
(or one hundred and twenty hours, if overseas) after posting the
notice, postage pre-paid, properly addressed (by airmail, if
overseas);
(b) a notice sent by telex or telecopy shall be deemed given
immediately upon despatch properly addressed;
(c) in any other case (other than delivery in person) the notice
shall be deemed given at such time as the Directors estimate the
notice should reach the addressee in the ordinary course.
41.02 A notice to a member may be addressed to him at his address shown in
the Register. In the case of joint holders of a share, notice may be
given to the holder first named in the Register in respect of the
share, but notice to any of the joint holders shall be deemed notice
to all.
41.03 Notice may be given by the Company to the person or persons whom the
Company has been advised are entitled to a share or shares in
consequence of the death or bankruptcy of a member or otherwise by
operation of law, addressed to them by name, or by the title of
representatives of the deceased, or trustee of the bankrupt, or by any
like description at the address supplied for that purpose by the
persons claiming to be so entitled, or at the option of the Company by
giving the notice in any manner in which
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the same might have been given if the death, bankruptcy or other event
had not occurred.
42. ALTERATION OF ARTICLES
42.01 Subject to the Statute, the Company may from time to time by special
resolution alter or amend these Articles in whole or in part.
Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and effective this
11th day of September 1996, by and between RTC Cruises, Ltd., a corporation
organized under the laws of the Cayman Islands (the "Company"), with its
principal place of business located at 1390 South Dixie Highway, Building II,
Suite 2114, Miami, Florida 33146, and Douglas H. MacGarvey, with a mailing
address of 1390 South Dixie Highway, Building II, Suite 2114, Miami, Florida
33146, (the "Executive").
RECITALS
A. The Company and the Executive desire to enter into an employment
relationship and believe it to be in their mutual interest to set forth in
writing the terms and conditions thereof.
B. This Agreement shall govern the employment relationship between the
parties from the date hereof.
NOW THEREFORE, in consideration of the mutual promises and covenants
contained herein, the receipt and sufficiency of which is hereby acknowledged by
the parties, the parties hereby agree as follows:
1. EMPLOYMENT. The Company hereby agrees to employ the Executive, and
the Executive hereby agrees to be employed by the Company in accordance with and
pursuant to the terms and conditions set forth below.
2. EMPLOYMENT TERM; DUTIES AND ACCEPTANCE.
(a) The Company shall employ the Executive, for the Employment
Period, as defined in Section 4 below, as its Chief Executive Officer. The
Executive shall devote his full time and attention to his duties and to use his
best efforts in and to the faithful performance of his duties hereunder, subject
to the general direction and control of the Board of Directors of the Company.
(b) The Executive hereby agrees to contribute his best skills and
services at all times to the Company. The Executive agrees to diligently and
competently perform the duties and responsibilities assigned to him by the Board
of Directors of the Company.
3. COMPENSATION AND BENEFITS.
(a) COMPENSATION. As compensation for all duties to be rendered by
the Executive hereunder,the Company agrees to pay to the Executive during the
Employment Period the following:
<PAGE>
(i) A salary (the "Annual Salary") at the rate of Two Hundred
Thousand Dollars ($200,000) per annum. The Annual Salary shall increase on each
anniversary date of the commencement of the Employment Period by an amount equal
to the increase in the Consumer Price Index. Consumer Price Index as used herein
shall mean the Consumer Price Index shown on the U.S. City Average for all urban
consumers, as promulgated by the Bureau of Labor Statistics of the U.S.
Department of Labor, using the year 1967 as the base of 100. In the event that
the Consumer Price Index referred to herein ceases to incorporate a significant
number of the items as currently set forth therein, or if a substantial change
is made in the method of establishing said Consumer Price Index,then the
Consumer Price Index shall be adjusted to the figure that would have resulted
had no change occurred in the manner of computing the Consumer Price Index. In
the event that the Consumer Price Index is not available, then the Board of
Directors may select, in its discretion, another index which measures the cost
of living increase in a manner similar to the Consumer Price Index, or may, in
its sole discretion, otherwise determine the annual increase in the Executive's
Annual Salary, but in no event greater than an amount which exceeds twenty
percent (20%) of the Executive's prior year's Annual Salary.
(ii) A quarterly bonus (the "Quarterly Bonus") equal to three
percent (3%) of the Company's quarterly operating income as determined in
accordance with generally acceptable accounting standards. The Quarterly Bonus
shall be payable for each fiscal quarter of the Company during the Employment
Period and shall be paid to the Executive within 90 days of the close of each
such fiscal quarter.
(b) INSURANCE AND REIMBURSEMENT. The Executive shall be eligible,
subject to the terms and conditions of each plan or program, to participate, at
the expense of the Company, in such group medical health, accident, disability
and life insurance and medical reimbursement programs as are made generally
available from time to time by the Company to other senior executives and such
other fringe benefit programs, including, but not limited to, retirement plans,
deferred compensation and stock option plans, which may be adopted by the
Company from time to time.
(c) EXPENSE REIMBURSEMENT. The Company shall reimburse the Executive
for his reasonable out-of-pocket expenses and costs incurred in connection with
the performance of his services hereunder, upon presentation of proper vouchers
and documentary support therefor in accordance with the Company's usual and
customary practices and procedures.
(d) VACATION. During the term of this Agreement, the Executive shall
be entitled to four (4) weeks of paid vacation time per year. The time or times
at which the Executive will be permitted to take such vacation time shall be
determined by the mutual agreement of the Company and the Executive. Vacation
time not taken by fiscal year end may be accumulated and used not more than one
year from the end of such fiscal year.
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(e) AUTOMOBILE. During the term of this agreement, the Executive
shall be provided with a monthly automobile allowance of $600.
4. TERM AND TERMINATION.
(a) TERM. Unless sooner terminated pursuant to the provisions of
this Section 4, the initial term of this Agreement shall be a period of five (5)
years commencing on the date that the Company completes its contemplated
U.S.$7,000,000 initial public offering of convertible redeemable preferred stock
(the "Employment Period"). Thereafter, unless sooner terminated pursuant to the
provisions of this Section 4, this Agreement shall continue for successive
five-year terms, unless either party cancels the Agreement by written notice to
the other party of their intent to cancel. In order to be effective, notices of
intent to cancel must be delivered to the other party not later than 120 days
prior to the end of any five-year term hereunder.
(b) TERMINATION. Notwithstanding anything contained herein to the
contrary, the Company shall have the right to terminate this Agreement and the
Executive's employment hereunder at any time for Cause (as defined hereafter).
For purposes of this Agreement, "Cause" means the following:
(i) a material breach or violation by the Executive of any
provision of this Agreement or the failure of the Executive to materially
perform his duties or responsibilities hereunder (unless said material default
is caused by a physical or mental infirmity or disability which renders
Executive incapable of performing the customary duties for which the Executive
was employed) after the Executive has been given at least thirty (30) days prior
written notice together with an opportunity to cure said breach, violation or
failure during such thirty (30) day period; or
(ii) actions by the Executive constituting fraud and/or
embezzlement; or
(iii) in the event that Executive becomes incapable, for more
than a six (6) month period, of performing the customary duties for which
Executive was employed due to a physical or mental infirmity or disability, or
as a result of Executive's death.
The right of the Company to so terminate this Agreement and Executive's
employment hereunder pursuant to this Section 4(b) shall be exercisable by the
Company upon the giving of written notice to the Executive specifying the
grounds for such termination. Such termination shall be effective upon the
giving of such written notice by the Company subject to the cure period provided
in this Section 4. Except as set forth in the next sentence, if the Executive is
terminated for Cause, the Executive shall only be compensated through the date
of his termination and the provisions set forth in Sections 5 and 6 hereof shall
remain in full force and effect. If the Executive's termination is the result of
the happening of an event under subsection (iii) above, then notwithstanding the
termination of this Agreement for Cause,the Company shall pay to the Executive,
or to the
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estate of the Executive, an amount equal to the Executive's Annual Salary for
the one (1) year period subsequent to the Executive's termination of Employment.
The provisions of this subsection shall survive the termination of this
Agreement.
5. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
The Executive hereby acknowledges and agrees that the duties and
services to be performed by the Executive hereunder are special and unique and
that, by reason of and/or as a result of his employment hereunder, the Executive
will acquire, make use of and/or add to confidential information of a special
and unique nature and value relating to certain records, secrets, documentation,
ledgers and general information, accounts receivable and payable ledgers,
customer lists, prospective customer lists, financial and other records of
and/or with respect to the Company, its subsidiaries and affiliates, customers
and other similar matters (all such information, together with that certain
information described herein, being hereinafter referred to as "Confidential
Information"). The Executive further acknowledges and agrees that the
Confidential Information is of great value to the Company and/or its
subsidiaries and affiliates and that it is reasonably necessary to protect the
Confidential Information and the goodwill of the Company and/or its subsidiaries
and affiliates. Accordingly, the Executive hereby agrees that:
(a) NON-DISCLOSURE AND NON-SOLICITATION. The Executive will not, at
any time, directly or indirectly, except in connection with the Executive's
employment hereunder or as otherwise authorized by the Board of Directors of the
Company for the benefit of the Company:
(i) divulge to any person, firm or corporation other than the
Company (hereinafter referred to as "Third Parties"), or use or cause or
authorize any Third Parties to use, the Confidential Information or any other
information relating to the business or interests of the Company which the
Executive knows or should know is regarded as confidential and valuable by the
Company and/or its subsidiaries and affiliates (whether or not any of the
foregoing information is actually novel or unique or is actually known to
others), except as required by law; or
(ii) solicit or cause or authorize to be solicited, directly or
indirectly, for or on behalf of himself or any Third Parties, any business
competitive to the business of the Company and/or its subsidiaries and
affiliates from Third Parties who are, at any time within one (1) year prior to
the expiration of the term of this Agreement, customers of the Company and/or
its subsidiaries and affiliates; or
(iii) accept, cause or authorize to be accepted, directly or
indirectly, for or on behalf of himself or the Third Parties, any business
competitive to the business of the Company or its subsidiaries and affiliates
from any such customers of the Company and/or its subsidiaries and affiliates;
or
(iv) solicit, cause or authorize to be solicited, directly or
indirectly, for employment for or on behalf of himself or any Third Parties, any
persons who are, at any
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time within one (1) year prior to the expiration of the terms of this Agreement,
employees of the Company or its subsidiaries and affiliates in an executive
capacity.
(b) RETURN OF RECORDS. Upon the termination of his employment with
the Company for any reason whatsoever, the Executive shall forthwith deliver or
cause to be delivered to the Company any and all Confidential Information,
including drawings, notebooks, keys, data and other documents and materials
belonging to the Company and/or its subsidiaries and affiliates which is in his
possession or under his control relating to the Company and/or its subsidiaries
and affiliates, and will deliver to the Company upon such termination of
employment any other property of the Company and/or its subsidiaries and
affiliates which is in his possession or under his control.
(c) PROPRIETARY INFORMATION. The Executive understands and agrees
that all Proprietary Information (as defined hereafter) conceived by him either
alone or with others or provided to him by the Company and/or its subsidiaries
and affiliates or others is the sole and exclusive property of the Company
and/or its subsidiaries and affiliates. For purposes of this Agreement,
"Proprietary Information" means any information relating to the business of the
Company and/or its subsidiaries and affiliates that has not previously been
publicly released by duly authorized representative of the Company and/or its
subsidiaries and affiliates and shall include, without limitation, information
included in all drawings, designs, plans, proposals, marketing and sales
programs, financial information, costs, pricing information, customer
information and all methods, concepts or ideas in or reasonably related to the
business of the Company and/or its subsidiaries and affiliates.
(d) SPECIFIC PERFORMANCE. The Executive hereby acknowledges and
agrees that the services to be rendered by him to the Company hereunder are of a
special and unique nature and that it would be very difficult or impossible to
measure the damages resulting from a breach of this Agreement. The Executive
hereby further acknowledges and agrees that the restrictions herein are
reasonable and necessary for the protection of the business and the goodwill of
the Company and its subsidiaries and affiliates and that a violation by the
Executive of any such covenant will cause irreparable damage to the Company
and/or its subsidiaries and affiliates. The Executive therefore agrees that any
breach or threatened breach by him of any provisions of this Section 5 shall
entitle the Company and/or its subsidiaries and affiliates, in addition to any
other legal remedy available to them, to apply to any court of competent
jurisdiction for a temporary and permanent injunction of any other applicable
decree of specific performance, without any bond or security being required
thereof, in order to enjoin such breach or threatened breach. The parties
understand and intend that each provision and restriction agreed to in this
Section 5 shall be construed as separate and divisible from every other
provision and restriction and that the unenforceability of any one provision or
restriction shall not limit the enforceability, in whole or in part, of any
other provision or restriction and that one or more of all of such provisions or
restrictions may be enforced, in whole or in part, as the circumstances
warranty.
(e) SURVIVAL OF SECTION. The provisions of this Section 5 shall
survive the termination of this Agreement.
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6. AGREEMENT NOT-TO-COMPETE. The Executive hereby agrees, to the extent
permitted by law, that during the twelve (12) month period subsequent to the
date of termination of his employment with the Company hereunder, the Executive
shall not engage in any activity directly competitive with the Company's
business whether alone, as a partner, or as an officer, director, employee,
agent, consultant or shareholder of any other entity, or as a trustee, fiduciary
or other representative of any other person or entity. For purposes hereof, a
cruise line company that offers cruises from or to ports or other destinations
that are different than such ports or destinations serviced by the Company at
the time of the termination of this Agreement shall not be deemed to be an
activity directly competitive with the Company's business. For purposes hereof,
a port or destination that is more than 200 miles from another port or
destination shall be deemed be a different port or destination. Thus, by way of
example, if at the time of termination of this Agreement, the Company offers
cruise line services exclusively in French Polynesia, the Executive is not
prohibited by this Section 6 from being employed by a cruise line company that
operates in the Caribbean and not French Polynesia. In the event of a breach or
threatened breach by the Executive of the covenants contained in this Section 6,
the Executive acknowledges that the Company will not have an adequate remedy at
law and that the Company shall be entitled to such equitable and injunctive
relief as may be available to restrain the Executive from the violation of the
provisions hereof. Nothing herein shall be construed as prohibiting the Company
from pursuing any other remedies available to it for breach or threatened
breach, including the recovery of damages from the Executive. The Executive
acknowledges and agrees that the covenants contained in this Section are of the
essence in this Agreement, that each of the covenants is reasonable and
necessary to protect and preserve the interests and properties of the Company
and the business of the Company, and that irreparable loss and damage will be
suffered by the Company should the Executive breach any of such covenants. The
provisions of this Section shall survive the termination of this Agreement.
7. KEY-MAN LIFE INSURANCE.
The Company may, at any time and from time to time, make application
for one or more policies of life insurance on the life of the Executive, which
policies shall name the Company as the beneficiary thereof. The Executive hereby
acknowledges and agrees that he shall have no interest whatsoever in any such
policies and that any amounts paid thereon will inure solely to the benefit of
the Company and not to the estate of the Executive. The Executive hereby agrees
to cooperate with the Company in obtaining any such insurance, including
submitting to physical examinations at a reasonable time or times, if required,
and completing applications furnished by insurers for such purposes.
8. GENERAL PROVISIONS.
(a) NO ASSIGNMENT; BINDING NATURE OF AGREEMENT. The Executive may
not at any time assign this Agreement nor any right or interest hereunder.
Except as otherwise herein provided, this Agreement shall be binding upon and
inure to the benefit of the parties hereto, the Executive's legal representative
and the Company's successors and assigns.
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(b) THE TERM "COMPANY". For purposes of this Agreement, the term
"Company" shall mean and include subsidiaries, parents and affiliated companies
of the Company in existence from time to time.
(c) NOTICES. All notices, requests, claims, demands, and other
communications under this Agreement shall be in writing and shall be deemed to
have been given or made upon the earliest to occur of: (i) receipt, if made by
personal service, (ii) two (2) days after dispatch if made by reputable
overnight courier service, (iii) upon the delivering party's receipt of a
written confirmation of a transmission made by cable, by telecopy, by facsimile,
by telegram or by telex, or (iv) seven (7) days after being mailed by registered
mail (postage prepaid, return receipt requested) to the respective parties at
the following addresses:
If to the Company: RTC Cruises, Ltd.
1390 South Dixie Highway, Suite 2114
Miami, Florida 33146
If to Executive: Douglas H. MacGarvey
c/o 1390 South Dixie Highway, Suite 2114
Miami, Florida 33146
(d) ENTIRE AGREEMENT; NO AMENDMENTS. This Agreement together with
any attached schedules, exhibits and other documents delivered pursuant hereto,
constitute the entire agreement of the parties and supersede all prior
agreements and undertakings, both written and oral, between the parties, or any
of them, with respect to the subject matter hereof. This Agreement may not be
changed, modified, extended, renewed or supplemented and no provision hereof may
be waived, except by an instrument in writing signed by the party against whom
enforcement of any change, modification, extension, renewal, supplement or
waiver is sought.
(e) GOVERNING LAW; SEVERABILITY. This Agreement shall be governed by
and construed in accordance with the laws of the State of Florida. The
invalidity of any portion of this Agreement shall not affect the enforceability
of the remaining portions of this Agreement or any part thereof, all of which
are inserted herein conditionally on their being valid in law. In the event that
any portion or portions contained herein shall be invalid, this Agreement shall
be construed so as to make such portion or portions valid or, if such
construction is not legally possible, as if such invalid portion or portions had
not been inserted.
(f) WAIVER. Failure to insist upon strict compliance with any of the
terms, covenants or conditions hereof shall not be deemed a waiver or
relinquishment of any such terms, covenants or conditions, nor shall any waiver
or relinquishment of any right or power hereunder at any one time or more times
be deemed a waiver or relinquishment of such right or power at any other time or
times.
7
<PAGE>
(g) ATTORNEYS' FEES; JURISDICTION AND VENUE. Should it become
necessary for any party to institute legal action to enforce the terms and
conditions of this Agreement, the successful party will be awarded reasonable
attorneys' fees at all trial and appellate levels, expenses and costs. Any suit,
action or proceeding with respect to this Agreement shall be brought in the
courts of Dade County in the State of Florida or in the U.S. District Court for
the Southern District of Florida. The parties hereto hereby accept the exclusive
jurisdiction of those courts for the purpose of any such suit, action or
proceeding. Venue for any such action, in addition to any other venue permitted
by statute, will be Dade County, Florida. The parties hereto hereby irrevocably
waive, to the fullest extent permitted by law, any objection that any of them
may now or hereafter have to delaying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or any judgment entered by any
court in respect thereof brought in Dade County, Florida, and hereby further
irrevocably waive any claim that any such suit, action or proceeding brought in
Dade County, Florida has been brought in an inconvenient forum.
(h) HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(i) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original and all of which together
will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date written above.
RTC CRUISES, LTD.
By:/s/DOUGLAS H. MACGARVEY
----------------------------------------
Name: Douglas H. Macgarvey
--------------------------------------
Title: Chairman and Chief Executive Officer
-------------------------------------
EXECUTIVE:
/s/DOUGLAS H. MACGARVEY
-------------------------------------------
Douglas H. MacGarvey
8
Exhibit 10.2
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (this "Agreement") is entered into as of this
11th day of September 1996 by and between RTC Cruises, Ltd., a company organized
under the laws of the Cayman Islands (the "Company") and Thomas G. Rader, with a
mailing address of 10700 East 40th Avenue, Denver, Colorado 80239 (the
"Consultant").
W I T N E S S E T H:
A. The Company is a development stage entity, intending to operate and
market a luxury class cruise ship in French Polynesia (the "Business").
B. The Company desires to engage the Consultant to render services to the
Company in connection with its Business, and Consultant desires to provide such
services, on the terms and conditions set forth below.
NOW THEREFORE, in consideration of the mutual promises and covenants
contained herein, the receipt and sufficiency of which is hereby acknowledged by
the parties, the parties hereby agree as follows:
1. CONSULTING ENGAGEMENT. The Company agrees to engage the Consultant
to render consulting and advisory services in connection with the Company's
Business, and the Consultant accepts engagement by the Company as a consultant,
upon the terms and conditions set forth herein.
2. DUTIES OF CONSULTANT. During the term of this Agreement,
Consultant shall provide to the best of his abilities such consulting services
as the Chief Executive Officer or the Board of Directors may, from time to time
request. Without limiting the generality of the foregoing, it is intended that
such consulting work shall pertain to all aspects of the management and
operation of the Company, including, but not limited to, international and
domestic sales and marketing, management information systems, and strategic
planning to develop the Business and increase revenues.
3. TERM. The term of this Agreement shall be for a period of five (5)
years commencing on the date that the Company completes its contemplated
U.S.$7,000,000 initial public offering of convertible redeemable preferred
stock. Thereafter, this Agreement shall continue for successive five-year terms,
unless either party cancels the Agreement by written notice to the other party
of their intent to cancel. In order to be effective, notices of intent to cancel
must be delivered to the other party not later than 120 days prior to the end of
any five-year term hereunder.
4. COMPENSATION. During the term of this Agreement, Consultant shall
be entitled to receive annual compensation of $100,000 payable exclusively in
shares of the Company's voting common stock ("Common Stock"). Within 10 days of
each anniversary date of this Agreement during its term, the Company shall issue
to Consultant the number
<PAGE>
of whole shares (the "Shares") of Common Stock having a market value equal as
possible to $100,000. For purposes hereof, the market value of the Common Stock
shall be determined, for any given year, based on the average of the daily
market price (as defined in the next sentence) of the Common Stock during the
thirty-day period preceding each anniversary date. The daily market price of the
Common Stock shall be the average of the closing asked and bid price of the
Common Stock as reported by the exchange or over-the-counter market on which the
Common Stock may then be listed. In the event that the Common Stock is no longer
traded on a stock exchange or over-the-counter market, then the market value of
the Common Stock shall be the greater of: (i) per share book value of the Common
Stock as of the last day preceding the anniversary date as determined in
accordance with generally accepted accounting principles by a nationally
recognized independent public accounting firm mutually acceptable to the Company
and Consultant; or (ii) the fair market value of the Common Stock as determined
in good faith by the Board of Directors of the Company. Consultant hereby
represents that he will receive the Shares for his own account, for investment
purposes only and not for the account of any other person or for distribution,
assignment or resale to others. No other person has or will have a direct or
indirect beneficial interest in the Shares. Consultant agrees that the Shares
may deemed "restricted securities" within the meaning of Rule 144(a)(3)
promulgated under the Securities Act of 1933 (the "Act"). Consultant understands
that he may not sell or dispose of the Shares unless the Shares are registered
under the Act and any applicable state securities laws, or an exemption
therefrom is available to Consultant. The Company may cause a legend in
substantially the following form to be placed on the certificate(s) representing
the Shares:
The securities represented by this certificate can only be transferred
in compliance with the Securities Act of 1933, as amended, and
applicable state securities laws. Such securities may not be sold or
otherwise disposed of in the absence of an effective registration
statement unless, in the opinion of counsel to the Company, such
registration is not then required.
5. STATUS OF CONSULTANT. This Agreement calls for the performance of
services of the Consultant as an independent contractor and the Consultant will
not be considered an employee of the Company for any purpose. The Consultant
shall have no authority to act on behalf of or to bind the Company in any manner
whatsoever. The Consultant shall be solely responsible for any and all federal,
state or local filings and payments in connection with payments made pursuant to
this Agreement.
6. SERVICE FOR OTHERS. The Consultant may, during the term of this
Agreement, perform services for any other person or firm, without the Company's
prior approval, provided the Consultant conducts himself in accordance with the
covenants set forth in Section 7 below, and provided such other services do not
interfere with the Consultant's performance of his duties as required under this
Agreement.
2
<PAGE>
7. CONFIDENTIAL MATTERS. The Consultant agrees that during his
engagement as a consultant with the Company and subsequent to the termination of
his engagement as a consultant with the Company, he will not use for his own
account, or release or divulge or make known for any reason or purpose, any
information not otherwise publicly available whatsoever relating to the Company
or confidential information about the Company to any other person or persons
whatsoever without the prior written consent of the Company. The Consultant is
aware and acknowledges that he will have access to confidential information by
virtue of his engagement with the Company and he agrees to keep such information
confidential at all times. The type of confidential information covered by this
section shall include, but is not limited to, customer and supplier lists
(prospective, current, and former), financial information, pricing information,
marketing information, trade secrets, and proprietary services, processes and
products performed or provided by the Company to or for customers or clients.
Further, the Consultant agrees not to use for himself or for any person,
corporation or other entity the Company's confidential information.
Notwithstanding the foregoing, any information which (i) the Company provides
and which is in the public domain prior to disclosure hereunder, (ii) is
required to be disclosed under applicable law, shall not be deemed
"confidential" for purposes of this Agreement.
8. DOCUMENTS AND INFORMATION. The Consultant agrees that following
the termination of the consulting engagement with the Company pursuant to this
Agreement, he shall immediately deliver and surrender to the Company all
materials of any nature relating to the Company in his possession.
9. INJUNCTION WITHOUT BOND. In the event there is a breach by the
Consultant of the provisions of Sections 7 or 8 hereof, the Company shall be
entitled to a temporary and permanent injunction without bond to restrain the
Consultant from engaging in the activities prohibited in Sections 7 or 8 above,
and the Company will be entitled to reimbursement for all costs and expenses,
including reasonable attorneys' fees, in connection therewith.
10. INDEMNIFICATION.
(a) BY THE CONSULTANT. The Consultant agrees to indemnify and
hold harmless the Company, including without limitation, the Company's agents,
members of its Board of Directors, officers and employees from any and all
liability, losses, claims, damages, costs, causes of action, judgments or
settlements arising therefrom, including reasonable attorneys' fees caused or
asserted to be caused, directly or indirectly, by or as a result of any breach
of the terms of this Agreement by the Consultant, or caused by gross negligence,
or intentional acts or omissions of the Consultant in the performance of his
duties hereunder.
(b) BY THE COMPANY. The Company agrees to indemnify and hold
harmless the Consultant from any and all liability, losses, claims, damages,
costs, causes of action,
3
<PAGE>
judgments or settlements arising therefrom, including reasonable attorneys' fees
caused or asserted to be caused, directly or indirectly, by or as a result of
any breach of the terms of this Agreement by the Company, or caused by gross
negligence or intentional acts or omissions by the officers, directors or
employees of the Company.
11. GENERAL PROVISIONS.
(a) NO ASSIGNMENT; BINDING NATURE OF AGREEMENT. The Consultant
may not at any time assign this Agreement nor any right or interest hereunder.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto, the Consultant's legal representatives and the Company's successors and
assigns.
(b) THE TERM "COMPANY". For purposes of this Agreement, the term
"Company" shall, where appropriate, mean and include subsidiaries, parents and
affiliated companies of the Company in existence from time to time.
(c) NOTICES. All notices, requests, claims, demands, and other
communications under this Agreement shall be in writing and shall be deemed to
have been given or made upon the earliest to occur of: (a) receipt, if made by
personal service, (b) two (2) days after dispatch if made by reputable overnight
courier service, (c) upon the delivering party's receipt of a written
confirmation of a transmission made by cable, by telecopy, by facsimile, by
telegram or by telex, or (d) seven (7) days after being mailed by registered
mail (postage prepaid, return receipt requested) to the respective parties at
the following addresses:
If to the Company: RTC Cruises, Ltd.
1390 South Dixie Highway
Suite 2114
Coral Gables, Florida 33146
Attn: Chief Executive Officer
If to Consultant: Thomas G. Rader
10700 East 40th Avenue
Denver, Colorado 80239
(d) ENTIRE AGREEMENT; NO AMENDMENTS. This Agreement together with
any attached schedules, exhibits and other documents delivered pursuant hereto,
constitute the entire agreement of the parties and supersede all prior
agreements and undertakings, both written and oral, between the parties, or any
of them, with respect to the subject matter hereof. This Agreement may not be
changed, modified, extended, renewed or supplemented and no provision hereof may
be waived, except by an instrument in writing signed by the party against whom
enforcement of any change, modification, extension, renewal, supplement or
waiver is sought.
4
<PAGE>
(e) GOVERNING LAW; SEVERABILITY. This Agreement shall be governed
by and construed in accordance with the laws of the State of Florida. The
invalidity of any portion of this Agreement shall not affect the enforceability
of the remaining portions of this Agreement or any part thereof, all of which
are inserted herein conditionally on their being valid in law. In the event that
any portion or portions contained herein shall be invalid, this Agreement shall
be construed so as to make such portion or portions valid or, if such
construction is not legally possible, as if such invalid portion or portions had
not been inserted.
(f) WAIVER. Failure to insist upon strict compliance with any of
the terms, covenants or conditions hereof shall not be deemed a waiver or
relinquishment of any such terms, covenants or conditions, nor shall any waiver
or relinquishment of any right or power hereunder at any one time or more times
be deemed a waiver or relinquishment of such right or power at any other time or
times.
(g) ATTORNEYS' FEES; JURISDICTION AND VENUE. Should it become
necessary for any party to institute legal action to enforce the terms and
conditions of this Agreement, the successful party will be awarded reasonable
attorneys' fees at all trial and appellate levels, expenses and costs. Any suit,
action or proceeding with respect to this Agreement shall be brought in the
courts of Dade County in the State of Florida or in the U.S. District Court for
the Southern District of Florida. The parties hereto hereby accept the exclusive
jurisdiction of those courts for the purpose of any such suit, action or
proceeding. Venue for any such action, in addition to any other venue permitted
by statute, will be Dade County, Florida. The parties hereto hereby irrevocably
waive, to the fullest extent permitted by law, any objection that any of them
may now or hereafter have to delaying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or any judgment entered by any
court in respect thereof brought in Dade County, Florida, and hereby further
irrevocably waive any claim that any such suit, action or proceeding brought in
Dade County, Florida has been brought in an inconvenient forum.
(h) HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(i) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original and all of which together
will constitute one and the same instrument.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date written above.
RTC CRUISES, LTD.
By: /s/ DOUGLAS H. MACGARVEY
______________________________________
Name: Douglas H. MacGarvey
_____________________________________
Title:Chairman and Chief Executive Officer
____________________________________
CONSULTANT
/s/THOMAS G. RADER
__________________________________________
Thomas G. Rader
6
EXHIBIT 10.3
SHAREHOLDER LOAN AGREEMENT
ROYAL TAHITIAN CRUISES LOANS
This SHAREHOLDER LOAN AGREEMENT is by and between Royal Tahitian Cruises,
Inc., a Florida corporation ("Borrower"), the Borrower's corporate agent
International Maritime Group, Inc, a Florida corporation ("IMG") and Thomas G.
Rader, a Colorado resident and shareholder of the Borrower ("Lender") with the
joinder of Douglas H. Mac Garvey, and is dated as of this lst day of July, 1994.
WITNESSETH
WHEREAS, the Thomas Rader and Douglas H. Mac Garvey (the "Principals")
have agreed each contribute to the possible development and promotion of a
cruise project known to them as "Royal Tahitian Cruises" generally in the form
of money by the one and by way of personal effort by the other, respectively in
the order mentioned; and
WHEREAS, the Principals expect to create and operate this new business
venture in the corporation which is the Borrower in which they or their
respective assigns are to be shareholders; and
WHEREAS, the Borrower does not and did not have offices, a business banking
account or any employees at the inception of the business venture research and
development; and
WHEREAS, IMG has suitable offices, office equipment and services and one or
bank accounts the use of which IMG is willing to allow the Borrower without
cost.
NOW THEREFORE in consideration of the mutual promises and commitments of
the Principals and by the agreement of the Borrower, IMG and the Lender, it is
agreed as follows:
1. EQUITY PARTY PROJECT DEVELOPMENT LOANS. Mr. Rader as Lender has
advanced and will advance monies to or for the benefit and use of the Borrower
(the "Loan") from time to time as the Borrower, IMG and Mr. Mac Garvey may
request and recommend, subject to his sole and absolute discretion to continue
funding such requests. The Lender's loan open account shall accrue interest from
the date of receipt of each loan tranche by the Borrower at the rate of six
percent (6%) per year without compounding of interest, until repaid or until
other terms are agreed. As of May 31, 1996 the funds advanced by the Lender or
on behalf of the Lender to or on behalf of the Borrower, together with the
interest accrued at said six percent was $362,859.
<PAGE>
Shareholdcr Loan Agreement PAGE 2
Royal Tahitian Cruises
2. INTENTION FOR REPAYMENT-DEMAND DATE. The parties agree but shall not be
legally bound to the repayment of the loan balance including accrued interest at
such time as the Borrower or other investment entity, holding company or parent
that may own or be the entity for the ROYAL TAHITIAN CRUISES project has
available cash flow after the payment of its current obligations, the creation
of adequate reserves, and taking into account any restrictions or covenants in
any bank or other investment documents. In the event of such available cash
flow, the Borrower shall apply such funds, to the extend so available, to the
repayment of the loan balance including interest, which payments shall first
apply to interest and thereafter to principal. Between the Borrower and the
Principals it is their intention that the Lender's monies with interest shall be
repaid prior to any distribution of monies as dividends to the Principals or
other shareholders of the Borrower. However, the legal obligation of the
Borrower for repayment of the funds advanced and interest thereon, until and
unless otherwise agreed to in writing, shall be for the repayment upon demand on
or after January 15, 1999.
3. SUBORDINATION OF LOAN BALANCE DEBT. The Lender agrees that the obligations of
the Borrower to the Lender for the monies advanced and for interest thereon is
to be subordinated to, and the Lender agrees to affimatively provide in writing
from time to time its subordination of all obligations of the Borrower to the
Lender arising hereunder, which subordination or subordinations shall be in
favor of any institutional lenders advancing funds to the Borrower, whether
secured or unsecured, and the Lender agrees that until and unless the debts of
the Borrower to any such institutional lenders shall have been fully repaid, the
Lender shall not seek and will not accept any monies from the Borrower for or in
respect to the debt arising from the loans made or to be made hereunder.
4. ROLE OF IMG AS BORROWER'S AGENT. The Lender and the Borrower agree that the
Lender may disburse funds under this agreement to IMG and that monies advanced
by the Lender may be placed in and co-mingled with monies of IMG in accounts
solely in the name of IMG. The Borrower and IMG agree that IMG may receive and
co-mingle its funds with funds of IMG and others, and further, that IMG will
maintain accounts and make periodic reports to the Borrower of the sources and
uses of Borrower funds including those received from the Lender and that the
only disbursements of Borrower funds in the hands of IMG will be for the benefit
of the Borrower and the ROYAL TAHITIAN CRUISES project. At such time as the
Borrower may elect to establish its own account or accounts for the deposit of
the Borrower's monies including the Borrower's balance in the hands of IMG and
any future loan tranches obtained from the Lender, IMG agrees transfer, and will
promptly remit to the Borrower or to the Borrower's bank all unspent funds of
the Borrower as established on the accounts of IMG. IMG shall not be entitled to
any compensation for the use of its
<PAGE>
Shareholder Loan Agreement PAGE 3
Royal Tahitian Cruises
accounts, its offices or other office services except as may be separately
agreed in writing between the parties.
5. NO OBLIGATION OF IMG OR MR. MAC GARVEY. The parties agree that neither IMG
nor Mr. Mac Garvey shall have any obligation to the Lender for any funds
advanced to or for the benefit of the Borrower, it being agreed that all such
advances are for and shall be deemed to have been received by the Borrower and
applied to the Borrowers business whether or not such application can be
established by written evidence.
DONE as of the date first written above.
LENDER
/s/ Thomas G. Rader
----------------------------------
Thomas G. Rader
Royal Tahitian Cruises, Inc.
By: /s/ Douglas H. MacGarvey
-------------------------------
International Maritime Group, Inc.
By: /s/ Douglas H. MacGarvey
-------------------------------
THE PRINCIPAL:
By: /s/ Douglas H. MacGarvey
-------------------------------
EXHIBIT 10.4
STOCK PURCHASE OPTION
(RTC Cruises Common Stock Optioned to Herbert Peitner)
The undersigned, Douglas H. MacGarvey, ("Shareholder"), being the owner of
l,598,000 shares of the authorized and issued capital stock of RTC CRUISES,
LTD., a Cayman Islands company (the "Company"), on this 12th day of September,
1996, does by these presents hereby irrevocably grant and convey personally and
exclusively to HERBERT PEINTNER, a resident of Grand Cayman ("Optionee"), for
and in exchange for the consideration hereafter stated, an absolute option for
the purchase of, and purchase option rights in five hundred thirty two thousand
six hundred sixty seven (532,667) shares of common stock of the Company
exercisable as provided herein and for the price herein stated.
NOW THEREFORE, in consideration of ten dollars and other value
consideration, the Shareholder and the Optionee agree as follows:
1. OPTION IN SHARES. The Shareholder does hereby give the Optionee an
irrevocable right to purchase all or part of the five hundred thirty two
thousand six hundred sixty seven (532,667) shares of fully paid and
non-assessable common stock of the Company issued to and owned by the
Shareholder (the "Option Shares") upon the notice set forth herein for the
option exercise purchase price equal to the par value of the shares to be
purchased, to wit:-- One half of one cent (US) per share which is two thousand
six hundred sixty three dollar thirty four cents ($2,663.34) for all 532,667
shares. This right of purchase (the "Option") shall be effective from the date
hereof to and through September 15, 1999, and thereafter for extended periods of
one year consecutively unless, ninety (90) days prior to the expiration period,
the Shareholder shall have given the Optionee written notice to the address
given below, subject to the Optionee's satisfaction of the Optionee's Covenants
set forth below.
2. EXERCISE OF OPTION. The option to purchase the Shares may be exercised
one or more times until all of the Option Shares have been purchased by the
Optionee's giving the Shareholder written notice of the exercise of the Option
together with (a) notice of the number of shares to be purchased, (b) the names
of the person or persons (including corporations) to whom the shares are to be
transferred, (c) information and evidence of the nationality of such person,
persons or the beneficial owner or owners of corporate entities to whom the
shares are to be issued, and (d) by tendering to the Shareholder a Full Release
signed by the Optionee in respect of all claims against the Shareholder and the
officers and directors of the Company effective thorough the date of conveyance
of the Shares. The Shareholder thereafter in exchange for the payment of the
purchase price for that number of shares in respect to which the Option is being
exercised shall convey that said number of the Option Shares to such person or
persons so named in the Notice of Exercise of Option.
<PAGE>
Stock Option Page 2
RTC Cruises, Ltd. Shares
3. OPTIONEE'S ACKNOWLEDGMENTS. The Optionee acknowledges the directors of
the Company may in their absolute discretion decline to register any transfer of
the capital stock of the Company and may do so without assisgning any reason
therefore, and that if the directors of the Company refuse to register a
transfer they shall notify the transferee within two months of such refusal, and
that this right to refuse to register the transfer of shares applies to all of
the capital stock of the Company including the Option Shares. In the event the
directors decline to register the transfer of the capital stock to the Optionee
or its assigns pursuant to this Option the Optionee shall be solely responsible
for obtaining a transferee which the directors of the Company will not decline
to register a transfer to of shares of the Company's capital stock.
4. COMPANY CAPITAL STOCK, OWNERSHIP OF SHARES, VOTING & DIVIDENDS. The
Shareholder covenants that no change in the capital structure of the company
shall be made during the term of this Option without the written consent of the
Optionee and that no shares, warrants or other stock rights shall be issued to
the Shareholder other than for fair consideration without the written consent of
the Optionee. At all times during the life of the Option the Shareholder shall
own, free and clear of all liens and without any pledge or other encumbrance all
of the Option Shares or so many of the original Option Shares which have not
been purchased by the Optionee or his assignee. All shares transferred to the
Optionee upon the exercise of the Option shall be fully-paid and non-assessable.
The Shareholder shall be free to vote any and all of the Option Shares at all
times until such shares are transferred to the Optionee after exercise of the
Option, and any dividends, whether in cash, in kind or in the form of securities
of the Company or of any other entity, and any other consideration issued by the
Company in respect to the Option Shares shall be the exclusive property of the
Shareholder until and unless the Option shall have been exercised and the shares
in question actually transferred to the Optionee after payment of the purchase
price.
5. SHARES LEGENDS. The Shareholder does hereby agree that he shall cause
the Option Shares to be separately issued apart from any other shares of the
Company's capital stock that the Shareholder may own and that the Share
Certificate or Certificates for the Option Shares (including any replacement
Share Certificate that may issued for the remainder of the Option Shares after
an exercise of the Option in respect to less than all of the Option Shares)
shall be endorsed on the reverse side the following Stock Legend, to wit:--
THE SHARES OF CAPITAL STOCK OF RTC CRUISES, LTD, A CAYMAN COMPANY, AS
REPRESENTED BY AND AS SHOWN ON THE FRONT OF THIS CERTIFICATE ARE SUBJECT TO
AN OPTION FOR PURCHASE IN FAVOR OF HERBERT PEINTNER PURSUANT TO A CERTAIN
STOCK PURCHASE OPTION DATED SEPTEMBER 12, 1996, A COPY OF WHICH MAY BE
OBTAINED FROM ATTORNEY GLENN G. KOLK OF MIAMI, FL. AND PURSUANT TO SAID
STOCK PURCHASE OPTION THE SHARES REPRESENTED BY THIS CERTIFICATE ARE NOT TO
BE SOLD, TRANSFERRED
<PAGE>
Stock Option Page 3
RTC Cruises, Ltd.Shares
ENCUMBERED OR PLEDGED WITHOUT THE WRITTEN CONSENT OF THE OPTIONEE, HERBERT
PEINTNER.
6. ESCROW OF SHARE CERTIFICATE(S). The Shareholder does hereby agree to
place in escrow with attorney Glenn G. Kolk of Florida, the Share Certificate
or Certificates representing the Option Shares including any replacement or
substitute Certificates issued after a transfer of less than all of the Option
Shares, which Certificate or Certificates shall be held by him in escrow for the
duration of the option term subject only to his release of them to the Company's
stock transfer agent as and when the Optionee exercised the purchase option in
whole or in part.
7. NO HEIRS, SUCCESSORS AND ASSIGNS OF THE OPTIONEE. In the event of the
death or disability of the Optionee this option shall automatically terminate
and be of no further force and effect. This Option shall not be assigned,
transferred or pledged and any purported assignment, transfer, pledge or other
conveyance, whether by operation of law, proceeding in bankruptcy or for the
benefit of creditors or of descent shall cause this Option to automatically
terminate and be of no further force and effect. It is specifically agreed that
this Option and the exercise thereof shall be personal to Herbert Peintner and
shall not survive him nor shall it survive any personal disability, legal or
otherwise which leads to the appointment of trustee, representative, receivers
or other third party for him or empowers any third person to act for or on his
behalf nor shall it survive any disability, legal or otherwise which continues
for a period of 120 days of more, unless after due notice to the Shareholder,
the Shareholder waives this clause in respect to such disability. A waiver in
respect to one disability or notice of disability shall not extend to any other
disability or any other or subsequent further notice of disability whether or
not related to the cause or circumstances of the original or previous
disabilities or notices of disability.
8. FORMALITIES. This Stock Option and the covenants contained herein shall
be interpreted and enforced in accordance with the law of the Cayman Islands and
the Company and the Optionee do hereby submit to the jurisdiction of the courts
in the Cayman Islands, B.W.I, and will cause counsel in the Cayman Islands to
accept process directed to them or either of them in any action brought under or
relating to this contract. The Optionee shall have no obligation to appear, and
neither the Company nor the Shareholder shall initiate nor continue any action
against the Optionee other than on Grand Cayman, B.W.I.
9. NOTICES: Notice to the Shareholder shall be given at 502 Brickell Key
Drive, #1606, Mami, FL (fax 305-374-4010). Notice to the Optionee shall be given
in care of Truman Bodden, Solicitors, Post Office Box 866, George Town, Grand
Cayman, B.W.I.(fax copy to (809) 947-3098).
<PAGE>
Stock Option Page 4
RTC Cruises, Ltd. Shares
Done as of the date written above.
SHAREHOLDER
/s/ Douglas H. MacGarvey
------------------------
Douglas H. MacGarvey
OPTIONEE
/s/ Herbert Peintner
--------------------
Herbert Peintner
EXHIBIT 10.5
STOCK PURCHASE OPTION
(RTC Cruises Common Stock Optioned to Herbert Peintner)
The undersigned, Thomas G. Rader, ("Shareholder"), being the owner of
1,598,000 shares of the authorized and issued capital stock of RTC CRUISES,
LTD., a Cayman Islands company (the "Company"), on this 12th day of September,
1996, does by these presents hereby irrevocably grant and convey personally and
exclusively to HERBERT PEINTNER, a resident of Grand Cayman ("Optionee"), for
and in exchange for the consideration hereafter stated, an absolute option for
the purchase of, and purchase option rights in five hundred thirty two thousand
six hundred sixty seven (532,667) shares of common stock of the Company
exercisable as provided herein and for the price herein stated.
NOW THEREFORE, in consideration of ten dollars and other value
consideration, the Shareholder and the Optionee agree as follows:
1. OPTION IN SHARES. The Shareholder does hereby give the Optionee an
irrevocable right to purchase all or part of the five hundred thirty two
thousand six hundred sixty seven (532,667) shares of fully paid and
non-assessable common stock of the Company issued to and owned by the
Shareholder (the "Option Shares") upon the notice set forth herein for the
option exercise purchase price equal to the par value of the shares to be
purchased, to wit:-- One half of one cent (US) per share which is two thousand
six hundred sixty three dollar thirty four cents ($2,663.34) for all 532,667
shares. This right of purchase (the "Option") shall be effective from the date
hereof to and through September 15, 1999, and thereafter for extended periods of
one year consecutively unless, ninety (90) days prior to the expiration period,
the Shareholder shall have given the Optionee written notice to the address
given below, subject to the Optionee's satisfaction of the Optionee's Covenants
set forth below.
2. EXERCISE OF OPTION. The option to purchase the Shares may be
exercised one or more times until all of the Option Shares have been purchased
by the Optionee's giving the Shareholder written notice of the exercise of the
Option together with (a) notice of the number of shares to be purchased, (b) the
names of the person or persons (including corporations) to whom the shares are
to be transferred, (c) information and evidence of the nationality of such
person, persons or the beneficial owner or owners of corporate entities to whom
the shares are to be issued, and (d) by tendering to the Shareholder a Full
Release signed by the Optionee in respect of all claims against the Shareholder
and the officers and directors of the Company effective thorough the date of
conveyance of the Shares. The Shareholder thereafter in exchange for the payment
of the purchase price for that number of shares in respect to which the Option
is being exercised shall convey that said number of the Option Shares to such
person or persons so named in the Notice of Exercise of Option.
<PAGE>
Stock Option Page 2
RTC Cruises, Ltd. Shares
3. OPTIONEE'S ACKNOWLEDGMENTS. The Optionee acknowledges the directors
of the Company may in their absolute discretion decline to register any transfer
of the capital stock of the Company and may do so without assigning any reason
therefor, and that if the directors of the Company refuse to register a transfer
they shall notify the transferee within two months of such refusal, and that
this right to refuse to register the transfer of shares applies to all of the
capital stock of the Company including the Option Shares. In the event the
directors decline to register the transfer of the capital stock conveyed to the
Optionee or its assigns pursuant to this Option the Optionee shall be solely
responsible for obtaining a transferee which the directors of the Company will
not decline to register a transfer to of shares of the Company's capital stock.
4. COMPANY CAPITAL STOCK, OWNERSHIP OF SHARES, VOTING & DIVIDENDS. The
Shareholder covenants that no change in the capital structure of the Company
shall be made during the term of this Option without the written consent of the
Optionee and that no shares, warrants or other stock rights shall be issued to
the Shareholder other than for fair consideration without the written consent of
the Optionee. At all times during the life of the Option the Shareholder shall
own, free and clear of all liens and without any pledge or other encumbrance all
of the Option Shares or so many of the original Option Shares which have not
been purchased by the Optionee or his assignee. All shares transferred to the
Optionee upon the exercise of the Option shall be full-paid and non-assessable.
The Shareholder shall be free to vote any and all of the Option Shares at all
times until such shares are transferred to the Optionee after exercise of the
Option, and any dividends, whether in cash, in kind or in the form of securities
of the Company or of any other entity, and any other consideration issued by the
Company in respect to the Option Shares shall be the exclusive property of the
Shareholder until and unless the Option shall have been exercised and the shares
in question actually transferred to the Optionee after payment of the purchase
price.
5. SHARES LEGENDS. The Shareholder does hereby agree that he shall
cause the Option Shares to be separately issued apart from any other shares of
the Company's capital stock that the Shareholder may own and that the Share
Certificate or Certificates for the Option Shares (including any replacement
Share Certificate that may issued for the remainder of the Option Shares after
an exercise of the Option in respect to less than all of the Option Shares)
shall be endorsed on the reverse side the following Stock Legend, to wit:--
THE SHARES OF CAPITAL STOCK OF RTC CRUISES, LTD. A CAYMAN COMPANY, AS
REPRESENTED BY AND AS SHOWN ON THE FRONT OF THIS CERTIFICATE ARE SUBJECT TO AN
OPTION FOR PURCHASE IN FAVOR OF HERBERT PEINTNER PURSUANT TO A CERTAIN STOCK
PURCHASE OPTION DATED SEPTEMBER 12 1996, A COPY OF WHICH MAY BE OBTAINED FROM
ATTORNEY GLENN G. KOLK OF MIAMA, FL, AND PURSUANT TO SAID STOCK PURCHASE OPTION
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE NOT TO BE SOLD, TRANSFERRED,
<PAGE>
Stock Option Page 3
RTC Cruises, Ltd. Shares
ENCUMBERED OR PLEDGED WITHOUT THE WRITTEN CONSENT OF THE OPTIONEE, HERBERT
PEINTNER.
6. ESCROW OF SHARE CERTIFICATE(S). The Shareholder does hereby agree to
place in escrow with attorney Glenn G. Kolk of Miami, Florida, the Share
Certificate or Certificates representing the Option Shares including any
replacement or substitute Certificates issued after a transfer of less than all
of the Option Shares, which Certificate or Certificates shall be held by him in
escrow for the duration of the option term subject only to his release of them
to the Company's stock transfer agent as and when the Optionee exercised the
purchase option in whole or in part.
7. NO HEIRS, SUCCESSORS AND ASSIGNS OF THE OPTIONEE. In the event of
the death or disability of the Optionee this option shall automatically
terminate and be of no further force and effect. This Option shall not be
assigned, transferred or pledged and any purported assignment, transfer, pledge
or other conveyance, whether by operation of law, proceeding in bankruptcy or
for the benefit of creditors or of descent shall cause this Option to
automatically terminate and be of no further force and effect. It is
specifically agreed that this Option and the exercise thereof shall be personal
to Herbert Peintner and shall not survive him nor shall it survive any personal
disability, legal or otherwise which leads to the appointment of trustee,
representative, receiver, or other third party for him or empowers any third
person to act for or on his behalf nor shall it survive any disability, legal or
otherwise which continues for a period of 120 days of more, unless after due
notice to the Shareholder, the Shareholder waives this clause in respect to such
disability. A waiver in respect to one disability or notice of disability shall
not extend to any other disability or any other or subsequent further notice of
disability whether or not related to the cause or circumstances of the original
or previous disabilities or notices of disability.
8. FORMALITIES. This Stock Option and the covenants contained herein
shall be interpreted and enforced in accordance with the law of the Cayman
Islands and the Company and the Optionee do hereby submit to the jurisdiction of
the courts in the Cayman Islands, B.W.I., and will cause counsel in the Cayman
Islands to accept process directed to them or either of them in any action
brought under or relating to this contract. The Optionee shall have no
obligation to appear, and neither the Company nor the Shareholder shall initiate
nor continue any action against the Optionee other than on Grand Cayman, B.W.T.
9. NOTICES: Notice to the Shareholder shall be given at 502 Brickell
Key Drive, #1606, Miami, FL (fax 305-374-4010). Notice to the Optionee shall be
given in care of Truman Bodden, Solicitors, Post Office Box 866, George Town,
Grand Cayman, B.W.L (fax copy to (809) 947-3098).
<PAGE>
STOCK OPTION Page 4
RTC Cruises, Ltd. Shares
Done as of the date written above.
SHAREHOLDER
/s/ Thomas G. Rader
-----------------------------
Thomas G. Rader
OPTIONEE
/s/ Herbert Peintner
-----------------------------
Herbert Peintner
Exhibit 10.6
CONSULTING AGREEMENT
THIS AGREEMENT is made as of this 4th day of September 1996 by and between RTC
CRUISES LTD., a Cayman Islands, British West Indies company with a place of
business at 1390 South Dixie Highway, Suite 2114, Coral Gables, Florida 33146
and its permitted assigns (together "RTC") and LONDON MANHATTAN COMMUNICATIONS
L.L.C. an Arizona limited liability company with a place of business at Suite
16B, 360 West 22nd Street, New York NY 10011 ("LMC").
W I T N E S S E T H:
WHEREAS, LMC desires to be retained to render extensive on-going
general business advisory services to RTC; and
WHEREAS, RTC is expected to receive substantial benefits from such
advisory services therefore desires to retain LMC to provide such advisory
services; and
WHEREAS, RTC wishes to compensate LMC for such advisory services.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto hereby agree
as follows:
1. RETENTION OF LMC. RTC hereby retains LMC to perform advisory services related
to strategic business matters as set forth herein, and LMC hereby accepts such
retention. In this regard, subject to the terms set forth below, LMC shall
furnish to RTC such strategic advice and recommendations with respect to such
aspects of the business and affairs of RTC as RTC shall, from time to time,
reasonably request upon reasonable notice. In addition, LMC shall hold itself
ready to assist RTC in evaluating and negotiating particular contracts or
transactions for RTC's proposed business, corporate acquisitions, commercial
arrangements and operations, if requested to do so by RTC, upon reasonable
notice.
2. DUTIES.
During the term of this Agreement, LMC shall, upon the request of RTC,
provide advice to, undertake for and consult with RTC concerning management,
operations expansion and retrenchment, marketing consulting, strategic planning,
international activities, corporate organization and structure, and shareholder
relations, and shall review and advise RTC regarding its overall progress, needs
and condition. LMC agrees to provide on a timely basis the following enumerated
services plus any additional services contemplated thereby:
(a) Advise RTC in connection with its short range and long term
strategic planning to fully develop and enhance RTC's assets, resources,
products and services;
<PAGE>
(b) Evaluate expanding the scope of RTC's activities and operations on
an international basis;
(c) Advise RTC relative to the recruitment and employment of key
executives consistent with the expansion of operations of RTC;
(d) Advise and recommend to RTC additional services and products to be
sold by RTC;
(e) Assist in establishing and advising RTC with respect to shareholder
meetings and shareholder relationships.
3. COMPENSATION TO LMC. For services to be rendered hereunder by LMC to RTC
pursuant to paragraph 1 and 2 herein, LMC shall immediately receive 188,000
shares (the "Shares") of the common stock, par value $.00003 per share, of RTC,
pursuant to Rule 504 promulgated under the Securities Act of 1933. LMC agrees to
acquire the Shares for investment and will not dispose of the Shares in the
absence of registration thereof or the availability of an applicable exemption
under the Securities Act of 1933. Commencing on the tenth day of the month after
RTC completes the equity financing referred to in that certain investment
banking agreement, dated on the date hereof, between RTC and London Manhattan
International, Ltd. and by the tenth day of each month thereafter, RTC shall pay
LMC a monthly fee to such firm of $10,000 per month for the full term of 24
months, subject to Section 10 hereof regarding earlier termination of this
Agreement. As part of this monthly compensation, LMC will be responsible for
paying the fees and expenses of a reputable financial public relations firm
which is retained to provide services for LMC. The payment of such $10,000 shall
commence after RTC enters into a written agreement with such public relations
firm.
4. AVAILABILITY OF LMC. All obligations of LMC contained herein shall be subject
to LMC's reasonable availability for such performance, in view of the nature of
the requested service and the amount of notice received. LMC shall devote such
time and effort to the performance of its duties hereunder as LMC shall
determine is reasonably necessary for such performance and in accordance with
commercially reasonable standards. LMC may look to such others for such factual
information, investment recommendations, economic advice and/or research, upon
which to base its advice to RTC hereunder, as it shall deem appropriate. RTC
shall furnish to LMC all information relevant to the performance by LMC of its
obligations under this Agreement, or particular projects as to which LMC is
acting as advisor, which will permit LMC to know all facts material to the
advice to be rendered (including any business plans, feasibility studies,
valuations and periodic reports filed with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934, and all material or
information reasonably requested by LMC. In the event that RTC fails or refuses
to furnish any such material or information reasonably requested by LMC, and
thus prevents or impedes LMC's performance hereunder, any inability of LMC to
perform shall not be a breach of its obligations hereunder. Likewise, LMC shall
furnish to RTC any information it has in its possession related to the
performance of its services hereunder.
2
<PAGE>
5. OTHER ACTIVITIES. Nothing contained in this Agreement shall limit or restrict
the right of LMC or of any partner, employee, agent or representative of LMC, to
be a partner, director, officer, employee, agent or representative of, or to
engage in, any other business, whether of a similar nature or not, nor to limit
or restrict the right of LMC to render services of any kind to any other
corporation, firm, individual or association, except with respect to any entity
whose business is directly or indirectly competitive to that of RTC.
6. CONFIDENTIAL INFORMATION. LMC will hold in confidence any confidential
information which RTC provides to LMC pursuant to this Agreement unless RTC
gives LMC permission in writing to disclose such confidential information to a
specific third party. Notwithstanding the foregoing, LMC shall not be required
to maintain confidentiality with respect to information (i) which is or becomes
part of the public domain; (ii) of which it had independent knowledge prior to
disclosure and so advises RTC in writing within 5 business days of the receipt
of such information; (iii) which comes into the possession of LMC in the normal
and routine course of its own business from and through independent
non-confidential sources; or (iv) which is required to be disclosed by LMC by
governmental requirements. If LMC is requested or required (by oral questions,
interrogatories, request for information or document subpoenas, civil
investigative demands, or similar process) to disclose any confidential
information supplied to it by RTC, or the existence of other negotiations in the
course of its dealings with RTC or its representatives, LMC shall, unless
prohibited by law, promptly notify RTC of such request(s) so that RTC may seek
an appropriate protective order.
7. INDEMNIFICATIONS. RTC and LMC agree to indemnify and hold each other harmless
including their respective partners, employees, agents, representatives and
controlling persons (and the officers, directors, employees, agents,
representatives and controlling persons of each of them) from and against any
and all losses, claims, damages, liabilities, costs and expenses (and all
actions, suits, proceedings or claims in respect thereof) and any legal or other
expenses in giving testimony or furnishing documents in response to a subpoena
or otherwise (including, without limitation, the cost of investigating,
preparing or defending any such action, suit, proceeding or claim, whether or
not in connection with any action, suit, proceeding or claim in which either RTC
or LMC is a party), as and when incurred, directly or indirectly, caused by,
relating to, based upon or arising out of their respective obligations under the
Agreement. This paragraph shall survive the termination of this Agreement for a
period of two years.
8. INDEPENDENT CONTRACTOR.
LMC and RTC hereby acknowledge that LMC is an independent contractor.
LMC shall not hold itself out as, nor shall it take any action from which others
might infer that it is a partner, agent or joint venturer of RTC.
9. NON-WAIVER. The failure or neglect of the parties hereto to insist, in any
one or more instances, upon the strict performance of any of the terms and
conditions of this Agreement, or
3
<PAGE>
their waiver of strict performance of any of the terms and conditions of this
Agreement, shall not be construed as a waiver or relinquishment in the future of
such term or condition, but the same shall continue in full force and effect.
10. TERM. This Agreement is for a term of 24 months, subject to the right of RTC
to cancel this Agreement on or after January 15, 1997 in the event that LONDON
MANHATTAN INTERNATIONAL, LTD. has not been able to raise $7,000,000 of Equity
Financing by such time. Either party hereto shall also have the right to
terminate this Agreement in the event the other party hereto has breached its
material obligations hereunder. Paragraphs 6 and 7 shall survive the expiration
or termination of this Agreement under all circumstances.
11. NOTICES. Any notices hereunder shall be sent to RTC and to LMC by registered
or certified mail, postage prepaid, or by overnight mail or telecopier, and
shall be deemed to have been given when deposited in the United States mail.
Notice shall be deemed to have been given if sent to the respective party at the
address set forth on the signature page hereof or such other address as a party
so advises the other party in accordance with this notification.
12. MISCELLANEOUS.
i. This Agreement has been made in the State of Florida and shall be
construed and governed in accordance with the laws thereof
without giving effect to provisions thereof governing conflicts
of law.
ii. This Agreement contains the entire agreement between the parties,
may not be altered or modified, except in writing and signed by
the party to be charged thereby, and supersedes any and all
previous agreements between the parties relating to the subject
matter hereof.
iii. This Agreement shall be binding upon the parties hereto, the
indemnified parties referred to in Section 7, and their
respective heirs, administrators, successors and permitted
assigns.
iv. This Agreement may be signed in separate counterparts, each of
which shall be deemed an original and all of which together shall
constitute one and the same instrument.
4
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the date first above written.
LONDON MANHATTAN RTC CRUISES LTD.
COMMUNICATIONS, L.L.C..
By: /s/ Brendan Metcalfe By: /s/ Douglas H. MacGarvey
-------------------- --------------------------------
360 West 22nd Street 1390 South Dixie Highway, Suite 2114
Suite 16B Coral Gables, Florida 33146
New York, New York 10011 Telephone: (305) 663-9072
Telephone and Facsimile: (305) 892-9512 Facsimile: (305) 663-9521
5
Exhibit 10.7
INVESTMENT BANKING AGREEMENT
THIS AGREEMENT is made as of this 4th day of September 1996 by and
between RTC CRUISES LTD., a Cayman Islands, British West Indies company with a
place of business at 1390 South Dixie Highway, Suite 2114, Coral Gables, Florida
33146 and its permitted assigns (together "RTC") and LONDON MANHATTAN
INTERNATIONAL LIMITED., a company incorporated under the laws of the
Commonwealth of the Bahamas with a place of business at Charlotte House,
Charlotte Street, P.O. Box N-341, Nassau, Bahamas ("London Manhattan").
W I T N E S S E T H:
WHEREAS, London Manhattan intends to provide financial advisory
services to RTC pursuant to the terms contained herein;
WHEREAS, RTC wishes to compensate London Manhattan for such financial
advisory services;
WHEREAS, RTC is expected to receive substantial benefit by way of such
financial advisory services;
WHEREAS, RTC desires to retain London Manhattan to provide the
financial advisory services set forth herein and to make itself available on a
right of first refusal basis to provide further financial advisory services for
RTC's subsequent financial requirements; and
WHEREAS, London Manhattan desires to be retained to render such
financial advisory services.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto hereby agree
as follows:
1. RETENTION OF LONDON MANHATTAN. RTC hereby retains London Manhattan
exclusively to perform, and London Manhattan shall perform, advisory services
related to RTC's contemplated equity financing, as described in Exhibit "A"
attached hereto (the "Financing"). Subject to the conditions contained herein,
London Manhattan shall furnish to RTC financial advice and recommendations with
respect to such aspects of the business and affairs of RTC as RTC shall, from
time to time, reasonably request upon reasonable notice. In addition, London
Manhattan shall hold itself ready to assist RTC in evaluating and negotiating
particular contracts or transactions and in arranging the Financing.
If London Manhattan is successful in assisting RTC in completing the
Financing and RTC plans to privately place any debt securities or equity
securities prior to the expiration or termination of this Agreement (each of
such transactions being hereinafter referred to as a "Secondary Financing
Transaction"), then RTC shall provide written notice (the "Notice") of a
Secondary Financing Transaction to London Manhattan. If London Manhattan advises
RTC in writing of its willingness to act as a financial advisor within 10 days
after receipt of the Notice, but RTC and London Manhattan are unable to agree
upon the compensation to be paid by RTC
<PAGE>
to London Manhattan and/or the terms and conditions of the Secondary Financing
Transaction within 20 days after London Manhattan's receipt of the Notice, RTC
may engage any third party to act as financial advisor in connection with the
Secondary Financing Transaction; provided, however, that RTC does not agree to
pay to such financial advisor compensation substantially similar to that
proposed by London Manhattan and/or agree to terms and conditions of the
Financing Transaction that are substantially similar to those proposed by London
Manhattan.
2. EXCLUSIVE AGENT. RTC hereby appoints London Manhattan as the
exclusive agent for RTC to structure, arrange and coordinate the Financing. The
Financing shall be undertaken in accordance with applicable SEC rules and
regulations. This exclusive arrangement shall terminate on January 15, 1997,
unless RTC has completed the Financing by such date. If the Financing is
completed by January 15, 1997, London Manhattan shall have the right to nominate
one person to serve on the Board of Directors of RTC for the term of this
Agreement.
3. BEST EFFORTS OF LONDON MANHATTAN. London Manhattan accepts such
engagement as RTC's exclusive agent for the Financing and agrees to use its best
efforts to structure, arrange for and coordinate completion of the Financing.
4. REGISTRATION STATEMENT. RTC will take the steps necessary to prepare
a Registration Statement on the appropriate form as prescribed under the
Securities Act of 1933 (the "1933 Act"), together with the exhibits and
including the related Prospectus and filing the same with the Washington office
of the Securities and Exchange Commission. When the Registration Statement
becomes effective, it will comply in all material respects with the provisions
of the 1933 Act and the rules and regulations promulgated thereunder and will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or otherwise necessary to make the
statements therein not misleading. This representation and warranty shall apply
to all statements contained in the Registration Statement or the Prospectus
except those statements made in reliance upon a writing to RTC by London
Manhattan expressly for the purpose of such reliance and inclusion. London
Manhattan hereby represents and warrants to RTC that any information so
furnished by London Manhattan will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or otherwise necessary to make any such statement therein not misleading. RTC
shall provide London Manhattan (at RTC's expense) with such number of copies of
the Registration Statement as shall be reasonably requested by London Manhattan.
5. NASDAQ LISTING. RTC will use its best efforts to have its common
stock, par value $.00003 per share, listed for quotation on the NASDAQ SmallCap
market and will use its best efforts to maintain such listing for not less than
5 years, provided, however, that RTC may withdraw the listing of such stock on
the NASDAQ SmallCap market no earlier than 12 months from the date that the
Securities and Exchange Commission declares RTC's Registration Statement
effective if RTC lists such shares on either the American Stock Exchange or the
New York Stock Exchange.
6. SUSPENSION OR OTHER PROCEEDINGS. It is understood that RTC and
London Manhattan will each advise the other party immediately (and confirm
promptly in writing) of the initiation of (or the receipt of any threat to
initiate) any steps or proceedings which would impair
2
<PAGE>
or prevent the right to offer any of the Company's securities described in
Exhibit "A" attached hereto, or of the issuance of any "suspension order" or
other prohibition preventing or impairing the proposed Financing by the
Securities and Exchange Commission or any other regulatory authority.
7. COMPENSATION TO LONDON MANHATTAN. If the Financing is completed by
January 15, 1997 in accordance with the terms set forth in Exhibit "A," RTC
shall contemporaneously with such closing issue to London Manhattan 376,000
restricted shares of RTC's common stock, par value $.00003 per share, and
warrants to purchase an additional 282,000 restricted shares of RTC's common
stock. Such warrants shall be in form and substance acceptable to RTC and London
Manhattan and shall be exercisable commencing six months after the closing of
the Financing for a period of 36 months from such closing. Such warrants shall
be exercisable at an exercise price of $7.50 per share. The stock and warrants
to be issued to London Manhattan pursuant to this Section 7 shall be fully
assignable at the sole discretion of London Manhattan, subject to applicable
law. It is understood and agreed by the parties hereto that if RTC is able to
offer and sell less than the number of shares set forth in Exhibit "A" attached
hereto at a price per share in excess of the purchase price set forth in Exhibit
"A" attached hereto, then the number of shares of RTC's common stock and
warrants to be issued to London Manhattan pursuant to this Section 7 shall be
proportionately reduced and the exercise price of such warrants shall be
proportionately increased. Such adjustment shall take into consideration the
188,500 shares of RTC's common stock issued to London Manhattan Communications
L.L.C. under that certain consulting agreement of even date herewith.
Commencing six months from, and ending three years from, the closing of
the Financing, London Manhattan shall have the right to demand registration with
the Securities and Exchange Commission of the 282,750 shares of RTC's common
stock underlying the warrants issued to London Manhattan pursuant to this
Section. After RTC's receipt of London Manhattan's written demand for such
registration, RTC shall proceed to file with the Securities and Exchange
Commission a registration statement under the 1933 Act on such form as RTC shall
select. RTC will use its best efforts to cause such registration statement to
become effective as soon as practicable following its receipt of such demand;
provided, however, that RTC will not be required (a) to file any registration
statement on more than one occasion or (b) to file any registration statement
during any period of time (not to exceed six months) when RTC is contemplating
an underwritten offering of its securities and, in the judgment of the managing
underwriter thereof, such filing would have a material adverse effect on the
contemplated offering. London Manhattan shall pay all costs and expenses
associated with such registration, including, but not limited to, all reasonable
legal and accounting fees relating thereto. London Manhattan shall pay all such
fees and expenses within 30 days of a receipt of invoice therefor, it being
understood and agreed by the parties hereto that RTC shall not cause the
registration statement to be declared effective by the Securities and Exchange
Commission unless and until all outstanding fees and expenses are paid by London
Manhattan. In addition, London Manhattan shall provide RTC with such information
with respect to the shares of common stock covered by the registration
statement, the plans for the proposed disposition thereof, and such other
information as shall in the opinion of counsel for RTC be necessary to enable
RTC to include in such registration statement (or any amendment or supplement
thereto) all material facts
3
<PAGE>
required to be disclosed with respect to London Manhattan and the manner in
which it intends to dispose of the shares of common stock covered by the
registration statement.
Contemporaneously with the closing of the Financing, RTC shall pay
London Manhattan a commission of 10% and a non-accountable expense allowance of
3% of the total amount of the proceeds of the Financing. Nothing contained
herein to the contrary shall prohibit London Manhattan from receiving any
additional compensation under Section 8 hereof.
For Secondary Financing Transactions undertaken by RTC with the
assistance of London Manhattan, an investment banking fee may be agreed between
the parties on an ad hoc basis. In addition, if RTC shall, within (24) months of
the date of this Agreement, consummate any Secondary Financing Transaction with
any party, who was first introduced to RTC by London Manhattan, then in the
absence of a written agreement to the contrary, RTC shall pay to London
Manhattan a fee with respect to such transaction calculated as 7% of the
aggregate value of each of such Secondary Financing Transactions. "Aggregate
Value" of the Secondary Financing Transactions shall be the gross value of the
consideration paid to RTC for the common stock of RTC sold in such Secondary
Financings Transaction and is independent of any third party brokerage
commissions, if any, paid or payable by RTC in connection with such financings.
8. GENERAL SERVICES OF LONDON MANHATTAN. London Manhattan shall hold
itself ready to assist RTC in evaluating and negotiating particular contracts or
transactions and in arranging financing for RTC's proposed business acquisitions
and operations, if requested to do so by RTC, upon reasonable notice, and will
undertake such evaluations, negotiations and financings upon prior written
agreement as to additional compensation to be paid by RTC to London Manhattan
with respect to such evaluations, negotiations and financings.
9. AVAILABILITY OF LONDON MANHATTAN. All obligations of London
Manhattan contained herein shall be subject to London Manhattan's reasonable
availability for such performance, in view of the nature of the requested
service and the amount of notice received. London Manhattan shall devote such
time and effort to the performance of its duties hereunder as London Manhattan
shall determine is reasonably necessary for such performance and in accordance
with commercially reasonable standards. London Manhattan may look to such others
for such factual information, investment recommendations, economic advice and/or
research, upon which to base its advice to RTC hereunder, as it shall deem
appropriate. RTC shall furnish to London Manhattan all information relevant to
the performance by London Manhattan of its obligations under this Agreement, or
particular projects as to which London Manhattan is acting as advisor, which
will permit London Manhattan to know all facts material to the advice to be
rendered (including any business plans, feasibility studies, valuations and
periodic reports filed with the Securities and Exchange Commission pursuant to
the Securities Exchange Act of 1934), and all material or information reasonably
requested by London Manhattan. In the event that RTC fails or refuses to furnish
any such material or information reasonably requested by London Manhattan, and
thus prevents or impedes London Manhattan's performance hereunder, any inability
of London Manhattan to perform shall not be a breach of its obligations
hereunder. Likewise, London Manhattan shall furnish to RTC any information it
has in its possession related to the performance of its services hereunder.
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<PAGE>
10. 1934 ACT REGISTRATION. RTC will prepare and file a Registration
Statement with the Securities and Exchange Commission pursuant to Section 12(g)
of the Securities and Exchange Act of 1934, as soon as possible. Such
Registration Statement shall be declared effective contemporaneously with the
effectiveness of the 1933 Act Registration Statement.
11. OTHER ACTIVITIES. Nothing contained in this Agreement shall limit
or restrict the right of London Manhattan or of any partner, employee, agent or
representative of London Manhattan, to be a partner, director, officer,
employee, agent or representative of, or to engage in, any other business,
whether of a similar nature or not, nor to limit or restrict the right of London
Manhattan to render services of any kind to any other corporation, firm,
individual or association, except with respect to any entity whose business is
directly or indirectly competitive to that of RTC.
12. CONFIDENTIAL INFORMATION. London Manhattan will hold in confidence
any confidential information which RTC provides to London Manhattan pursuant to
this Agreement unless RTC gives London Manhattan permission in writing to
disclose such confidential information to a specific third party.
Notwithstanding the foregoing, London Manhattan shall not be required to
maintain confidentiality with respect to information (i) which is or becomes
part of the public domain; (ii) of which it had independent knowledge prior to
disclosure and so advises RTC in writing within 5 business days of the receipt
of such information; (iii) which comes into the possession of London Manhattan
in the normal and routine course of its own business from and through
independent non-confidential sources; or (iv) which is required to be disclosed
by London Manhattan by governmental requirements. If London Manhattan is
requested or required (by oral questions, interrogatories, request for
information or document subpoenas, civil investigative demands, or similar
process) to disclose any confidential information supplied to it by RTC, or the
existence of other negotiations in the course of its dealings with RTC or its
representatives, London Manhattan shall, unless prohibited by law, promptly
notify RTC of such request(s) so that RTC may seek an appropriate protective
order. This Section shall survive the termination of this Agreement under all
circumstances.
13. INDEMNIFICATION BY RTC. RTC shall indemnify, defend and hold London
Manhattan and each officer, director, employee and agent of London Manhattan,
and each person, if any, who controls London Manhattan within the meaning of
Section 15 of the 1933 Act, free and harmless from and against any and all
losses, claims, demands, liabilities and expenses (including reasonable legal or
other expenses incurred by London Manhattan and such persons in connection with
defending or investigating any such claim or liabilities whether or not
resulting in any liability to London Manhattan or such persons) which London
Manhattan or such persons may incur under the 1933 Act or any statute or at
common law or otherwise, but only to the extent that such losses, claims,
demands, liabilities and expenses shall arise out of or be based upon a
violation or alleged violation of the federal and state securities laws or
regulations, including any untrue statement or alleged untrue statement of a
material fact contained in the 1933 Act Registration Statement or Prospectus or
in any amendment to either of them, or shall arise out of or be based upon any
omission or alleged omission to state therein a material fact required to be
stated in such Registration Statement or Prospectus, in any amendment to either
of them or necessary to make the statements in any of the foregoing not
misleading; provided, however, that this indemnity agreement shall not apply to
any such losses, claims, demands,
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<PAGE>
liabilities or expenses arising out of or based upon any violation of any
federal or state securities law or regulation by London Manhattan, or arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact contained in such Registration Statement or the Prospectus or in
any amendment to either of them, or arising out of or based upon the omissions
or alleged omission to state therein any material fact required to be stated
therein or necessary to make the statements therein not misleading, which untrue
statement or omission was made in reliance upon information furnished in writing
to RTC by London Manhattan expressly for use in such Registration Statement or
Prospectus or in any amendment to either of them.
The indemnity agreement by RTC in favor of London Manhattan set forth
in this Section 13 shall neither be deemed nor construed to protect London
Manhattan against any liability it may have to RTC or its securities holders to
which London Manhattan would otherwise be subject by reason of willful
misfeasance or nonfeasance, bad faith or gross negligence in the performance of
its duties or by reason of its reckless disregard of its obligations and duties
under this Agreement.
London Manhattan shall give RTC an opportunity to participate in the
defense or preparation of the defense of any action brought against London
Manhattan or any controlling person of London Manhattan or any other person
indemnified under this Section 13 to enforce any such loss, claim, demand,
liability or expense, and RTC shall have the right to so participate in (and, to
the extent that it shall wish to direct) the defense thereof at RTC's own
expense. This agreement of RTC under the indemnity set forth in this Section is
expressly conditioned upon notice of such action having been sent by London
Manhattan or controlling person, as the case may be, to RTC by letter, as
provided in this Agreement, within 20 days after the commencement of such action
against London Manhattan, controlling person(s) or other defendants, such notice
being accompanied either by copies of papers served or filed in connection with
such action or by a statement of the nature of the action to the extent known to
London Manhattan, controlling person(s) or other defendants. Failure to notify
RTC as herein provided of the commencement of any such action shall relieve RTC
of its liability under this indemnity, but failure to notify RTC as herein
provided shall not relieve RTC from any liability which it may have to London
Manhattan, any controlling person thereof or others otherwise than on account of
the indemnity agreement contained in this Agreement.
14. INDEMNIFICATION BY LONDON MANHATTAN. London Manhattan agrees to
indemnify and hold harmless RTC and each director, officer, employee and agent
of RTC and each person, if any, who controls RTC within the meaning of Section
15 of the 1933 Act, from and against any and all losses, claims, demands,
liabilities and expenses arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in the 1933 Act
Registration Statement or Prospectus or in any amendment to either of them, or
the omission or alleged omission to state therein any material fact required to
be stated therein or necessary to make the statements therein not misleading,
but only to the extent such losses, claims, demands, liabilities and expenses
result from the use of written information furnished to RTC by London Manhattan
for use in the preparation of such Registration Statement or Prospectus or in
any amendment to either of them.
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RTC shall give London Manhattan an opportunity to participate in the
defense or preparation of the defense of any action brought against RTC to
enforce any such loss, claim, demand, liability or expense, and RTC shall have
the right to so participate in (and, to the extent that it shall wish, to
direct) the defense of such action at the London Manhattan's own expense, but
such defense shall be conducted by counsel of recognized standing and
satisfactory to RTC or such controlling person or persons, defendant or
defendants in such litigation. London Manhattan's liability under the indemnity
set forth in this Section is expressly conditioned upon notice of any such
action having been sent by RTC by letter, as provided in this Agreement, within
20 days after the commencement of such action against RTC, such notice being
accompanied either by copies of papers served or filed in connection with such
action or a statement of the nature of the action to the extent known to RTC.
Failure to notify London Manhattan as herein provided of the commencement of any
such action shall relieve London Manhattan of its liability under this
indemnity, but failure to notify London Manhattan as herein provided shall not
relieve London Manhattan from any liability which it may have to RTC or the
stockholders thereof otherwise than on account of the indemnity agreement
contained in this Section.
15. INDEMNITY PROVISIONS NOT EXCLUSIVE. The provisions of Section 13,
14, and 17 shall not in any way prejudice any right which London Manhattan may
have against RTC or which RTC may have against London Manhattan under any
statute, other than the 1933 Act, at common law or otherwise.
16. SURVIVAL. The indemnity agreements contained in Sections 13, 14,
15, and 17 shall survive the closing of the Financing or other termination of
this Agreement and shall inure to the benefit of RTC and London Manhattan and
the successors of any of them and shall be valid regardless of any investigation
made by or on behalf of London Manhattan or RTC.
17. CONTRIBUTION. In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for in
Sections 13 and 14 is applicable in accordance with its terms but for any reason
is held to be unavailable for RTC or London Manhattan, RTC and London Manhattan
will contribute to the total losses, claims, liabilities, expenses and damages
(including any investigative, legal and other expenses reasonably incurred in
connection with, and any amount paid in settlement of, any action or any claims
asserted, but after deducting any contribution received by RTC from persons
other than London Manhattan, such as persons who control RTC within the meaning
of the 1933 Act, officers of RTC who signed the 1933 Act Registration Statement
and directors of RTC who also may be liable for contribution) to which RTC and
London Manhattan may be subject in such proportion so that London Manhattan is
responsible for the commission appearing on the cover of the 1933 Act Prospectus
and RTC is responsible in such proportion as shall be appropriate to reflect the
relative benefits received by RTC. If, but only if, the allocation provided by
the foregoing sentence is not permitted by applicable law, the allocation of
contribution shall be made in such proportion as is appropriate to reflect not
only the relative benefits referred to in the foregoing sentence but also the
relative fault of RTC, on the one hand, and London Manhattan on the other, with
respect to the statements or omissions which resulted in such loss, claim,
liability, expense or damage, or action in respect thereof, as well as any other
relevant equitable considerations with respect to such offering. Such relative
fault shall be determined by reference to whether the
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<PAGE>
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by RTC or
London Manhattan, the intent of the parties and their relative knowledge, access
to information and opportunity to correct or prevent such statement or omission.
RTC and London Manhattan agree that it would not be just and equitable if
contributions pursuant to this Section were to be determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, liability, expense or
damage, or action in respect thereof, referred to above in this Section shall be
deemed to include, for purpose of this Section, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section, London Manhattan shall be required to contribute any amount in excess
of the commission received by it, and no person found guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) will be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section, any person who controls a party
to this Agreement within the meaning of the 1933 Act will have the same rights
to contributions as that party, and each officer of RTC who signed the 1933 Act
Registration Statement will have the same rights to contribution as RTC, subject
in each case to the provisions hereof. Any party entitled to contribution,
promptly after receipt of notice of commencement of any action against such
party in respect of which a claim for contribution may be made under this
Section, will notify any such party or parties from whom contribution may be
sought, but the omission so to notify will not relieve the party or parties from
whom contribution may be sought from any other obligation it or they may have
under this Section. No party will be liable for contribution with respect to any
action or claim settled without its written consent (which consent will not be
unreasonably withheld).
18. NON-WAIVER. The failure or neglect of the parties hereto to insist,
in any one or more instances, upon the strict performance of any of the terms
and conditions of this Agreement, or their waiver of strict performance of any
of the terms and conditions of this Agreement, shall not be construed as a
waiver or relinquishment in the future of such term or condition, but the same
shall continue in full force and effect.
19. TERM. This Agreement is for an initial term of (24) months, subject
to the right of RTC to cancel this Agreement on or after January 15, 1997 in the
event that RTC has not been able to complete the Financing by such time. This
Agreement may also be terminated by a party if the other party hereto is in
breach of its material obligations hereunder.
20. NOTICES. Any notices hereunder shall be sent to RTC and to London
Manhattan by registered or certified mail, postage prepaid, or by overnight mail
or telecopier, and shall be deemed to have been given when deposited in the
United States mail addressed to the respective party's address on the signature
page of this Agreement.
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21. MISCELLANEOUS.
(a) This Agreement has been made in the State of Florida and shall
be construed and governed in accordance with the laws thereof without giving
effect to its provisions governing conflicts of law.
(b) This Agreement contains the entire agreement between the
parties, may not be altered or modified, except in writing and signed by the
party to be charged thereby, and supersedes any and all previous agreements
between the parties relating to the subject matter hereof.
(c) This Agreement may be signed in counterparts, each of which
shall be deemed to be an original and all of which together shall constitute one
and the same agreement.
22. AUTHORITY OF RTC AND LONDON MANHATTAN. RTC and London Manhattan
represent and warrant to each other that each such corporation has all necessary
corporate power and authority to execute and deliver this Agreement, to perform
their respective obligations hereunder and to consummate the transactions
contemplated hereby and that the execution and delivery of this Agreement by
each party and the consummation by London Manhattan and RTC of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action and no other corporate action on the part of RTC and London
Manhattan is necessary to authorize this Agreement or to consummate the
transactions contemplated herein.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the date first above written.
LONDON MANHATTAN RTC CRUISES LTD.
INTERNATIONAL LIMITED
By: /s/ Robert Stoodley By: /s/ Douglas H. MacGarvey
------------------ -------------------------
Charlotte House, Charlotte Street, 1390 South Dixie Highway, Suite 2114
P.O. Box N-341 Coral Gables, Florida 33146
Nassau, Bahamas Telephone: (305) 663-9072
Telephone and Facsimile: (305) 892-9512 Facsimile: (305) 663-9521
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EXHIBIT "A"
1. The authorized capital of RTC consists of Fifty Thousand Dollars
divided into 10,000,000 shares of common stock, par value $.00003 per share (the
"Common Stock"), of preferred stock, par value $.00003 per share (the "Preferred
Stock"), or a combination of Common Stock and Preferred Stock as the Board of
Directors of RTC may determine. As at the date of this Agreement, RTC has
3,760,000 shares of Common Stock issued and outstanding.
2. RTC will offer and attempt to sell 1,400,000 shares of its
convertible redeemable preferred stock, par value $.00003 per share (the
"Convertible Preferred Stock"), entirely outside of the United States with the
assistance of London Manhattan, pursuant to the terms and conditions of the
investment banking agreement between RTC and London Manhattan. The purchase
price of the Preferred Stock will be $5.00 per share (the "Purchase Price"). The
Convertible Preferred Stock will not be listed for quotation on the NASDAQ
SmallCap market.
3. The Convertible Preferred Stock is entitled to a preference solely
with respect to the liquidation of the assets of the RTC over the Common Stock.
In all other respects, holders of the Convertible Preferred Stock will have the
same rights as holders of Common Stock.
4. The holders of the Convertible Preferred Stock shall have the
option, every six months from the date that the Preferred Stock is initially
issued, to convert up to 25% of the shares of the Convertible Preferred Stock
beneficially owned by each holder into shares of Common Stock, the number of
which is calculated by multiplying the number of shares of the Convertible
Preferred Stock to be converted by the Purchase Price and the result of such
multiplication is then divided by the average closing bid price of the Common
Stock as quoted on the NASDAQ system or in the over-the-counter market for the
five days prior to the date that the certificate evidencing the Convertible
Preferred Stock is mailed to the Company's transfer agent for conversion
discounted by 20%. All of the Convertible Preferred Stock will be automatically
converted into Common Stock two years from the date that the Convertible
Preferred Stock is initially issued.
5. RTC has the option, at any time, to redeem all or any part of the
Convertible Preferred Stock at $7.50 per share, subject to the right of the
holders of the Convertible Preferred Stock to convert their shares of the
Convertible Preferred Stock into Common Stock upon receipt of RTC's notice of
conversion.
6. If the closing bid price of the Common Stock as quoted on the NASDAQ
system or in the over-the-counter market is less than $6.00 per share on any
given day, RTC shall have the option to require all holders the Convertible
Preferred Stock to convert such securities into Common Stock. The number of
shares of Common Stock to be received upon such conversion shall be determined
by multiplying the number of shares of the Convertible Preferred Stock
beneficially owned by each holder thereof by the Purchase Price and the result
of such multiplication is then divided by the average closing bid price of the
Common Stock as quoted on the NASDAQ system for the five days prior to the date
that the closing bid price of the Common Stock was below $6.00 discounted by
20%.
EXHIBIT 10.8
THIS WARRANT MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED PRIOR TO ____________ ___,
199___. THE REGISTERED HOLDER OF THIS WARRANT BY ITS ACCEPTANCE HEREOF, AGREES
THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS WARRANT PRIOR TO THAT DATE OTHER
THAN TO AN OFFICER OR PARTNER OF SUCH HOLDER.
NOT EXERCISABLE PRIOR TO ____________ ___, 199__. VOID AFTER 5:00 P.M.
EASTERN TIME ____________ ___, 199__.
WARRANT
For the Purchase of up to 282,000 shares of Common Stock,
par value U.S.$.005 per share
of
RTC Cruises, Ltd.
THIS CERTIFIES THAT, for adequate consideration the receipt of which is
hereby acknowledged, London Manhattan International Ltd. ("London Manhattan"),
its successors or assigns as provided herein (the "Holder") is entitled to at
any time or from time to time at or after ___________ ___, 199__ and at or
before 5:00 p.m., Eastern Time, __________ ___, 199__ (the "Termination Date"),
but not thereafter, to subscriber for, purchase and receive 282,000 fully paid
and nonassessable shares of common stock, par value U.S.$.00003 per share
("Common Stock"), of RTC Cruises, Ltd. (the "Company") at a price of U.S.$7.50
per share ("Exercise Price") upon presentation and surrender of this Warrant and
upon payment of the Exercise Price for such of the shares of Common Stock at the
principal office of the Company. If the Termination Date is a day on which
United States banking institutions are authorized by law to close, then this
Warrant may be exercised in accordance with the terms herein on the next
succeeding day which is not such a day on which banking institutions are
authorized by law to close. During the period ending on the Termination Date,
the Company agrees not to take any action that would terminate the Warrants.
The Exercise Price may be paid in cash or by cashiers check.
Upon exercise of this Warrant, the form of election attached hereto
must be duly executed and the instructions for registration of the shares of
Common Stock acquired by such exercise must be completed. If the subscription
rights represented hereby shall not be exercised at or before 5:00 p.m., Eastern
Time, on the Termination Date, then, from and after such date and time, this
Warrant shall become and be void without further force or effect, and all rights
represented hereby shall cease and expire.
The Holder of this Warrant, by its acceptance hereof, agrees that it
will not sell, transfer, assign or hypothecate this Warrant prior to ___________
___, 1997 to anyone other than an officer of such Holder. Subsequent to that
date, this Warrant may be assigned by the Holder in whole or in part by
execution by the Holder of the form of assignment, a copy of which is attached
hereto, to officers of the Holder. In the event of any assignment made as
aforesaid,
<PAGE>
the Company, upon request and surrender of this Warrant by the Holder at the
principal office of the Company accompanied by payment of all transfer taxes, if
any, payable in connection therewith, shall execute and deliver a new Warrant or
Warrants of like tenor to the appropriate assignee expressly evidencing the
right to purchase the aggregate number of shares of Common Stock purchasable
hereunder or such portion of such aggregate number as shall be contemplated by
any such agreement.
Notwithstanding anything herein to the contrary, each certificate for
securities purchased under this Warrant shall bear a legend as follows:
"The securities represented by this certificate have not been
registered under the United States Securities Act of 1933 ("the Act").
The securities may not be offered for sale, sold or otherwise
transferred except pursuant to an effective registration statement
under the Act, or pursuant to an exemption from registration under the
Act, the availability of which is to be established to the satisfaction
of the Company."
The Warrant Holder agrees for itself and all subsequent owners, that
before any disposition is made of any shares purchased pursuant to the Warrant,
the owner shall give written notice to the Company describing briefly the manner
of any such proposed disposition. The shares shall not be transferred unless and
until (i) the Company has received an opinion of counsel for such owners,
acceptable to the Company, that the securities may be sold pursuant to an
exemption from registration under the Securities Act of 1933 (the "1933 Act"),
or (ii) a Registration Statement relating to such securities has been filed by
the Company and made effective by the Securities and Exchange Commission (the
"Commission").
Subject to the above, this Warrant may be exercised or assigned in
whole or in part. In the event of the exercise or assignment hereof in part
only, upon surrender of this Warrant for cancellation, together with the duly
executed exercise or assignment and funds sufficient to pay any transfer tax,
the Company shall cause to be delivered to the Holder without charge a new
warrant of like tenor to this Warrant in the name of the Holder evidencing the
right of the Holder to purchase the number of shares of Common Stock purchasable
hereunder as to which this Warrant has not been exercised or assigned.
Upon receipt of the Company of evidence satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant and of reasonably satisfactory
indemnification, the Company shall execute and deliver a new warrant of like
tenor and date. The Company at all times shall keep a record of the holders of
the Warrant.
The Company upon request, and subject to the availability of audited
financial statements which would comply with Regulation S-B or S-X under the
1933 Act, as applicable, agrees to register on one separate occasion the
securities underlying the Warrant and will file on such occasion a registration
statement or a post-effective amendment to a registration statement, or
Notification under Form 1-A, whichever is appropriate, under the 1933 Act,
covering the
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<PAGE>
securities underlying the Warrant. Such request must be made at any time during
a period of three years beginning six months from the effective date of the
public offering referred to above, but shall only be available and effective if
the shares underlying the Warrant are not then covered by a current registration
statement. In connection with the request the Holder shall bear all expenses
attendant to registering the securities. The Company agrees to use its best
efforts to cause the filing required herein to become effective to qualify or
register the shares of Common Stock underlying the Warrant.
In no event shall this Warrant (or the shares of Common Stock issuable
upon full or partial exercise hereof) be offered or sold except in conformity
with the 1933 Act.
This Warrant shall be governed by, and construed in accordance with,
the laws of Florida, without regard to its conflicts of laws principles or
rules.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officers and to be sealed with the seal of the Company as of
this ___ day of ____________ 1996.
RTC CRUISES, LTD.
By:
____________________________
( S E A L )
By:
_____________________________
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<PAGE>
FORM TO BE USED TO EXERCISE WARRANT:
RTC Cruises, Ltd.
1390 South Dixie Highway, Suite 2114,
Coral Gables, Florida 33146
Date:________________________
The Undersigned hereby elects irrevocably to exercise the Warrant granted to it
by that certain Warrant dated __________________ ____, 1996, and to purchase
__________ shares of Common Stock of RTC Cruises, Ltd. called for thereby, and
hereby makes payment of $__________ (at the rate of $7.50 per share of Common
Stock) in payment of the Exercise Price pursuant thereto. Please issue the
shares as to which this Warrant is exercised in accordance with the instructions
given below.
__________________________________
Signature
__________________________________
Signature Guaranteed
INSTRUCTIONS FOR REGISTRATION OF COMMON STOCK
Name
______________________________________________________________________
(Print in Block Letters)
Address
______________________________________________________________________
<PAGE>
FORM TO BE USED TO ASSIGN WARRANT:
ASSIGNMENT
(To be executed by the registered Holder to effect a transfer of the within
Warrant:)
FOR VALUE RECEIVED, ___________________________________________________________
does hereby sell, assign and transfer unto ____________________________________
the right to purchase ______________ shares of Common Stock of RTC Cruises, Ltd.
evidenced by that certain Warrant dated _________________________________ .
Dated:_______________________
__________________________________
Signature
__________________________________
Signature Guaranteed
NOTICE: The signature to the form to exercise or form to assign must correspond
with the name as written upon the face of the within Warrant in every particular
without alteration or enlargement or any change whatsoever, and must be
guaranteed by a bank, other than a savings bank, or by a trust company or by a
firm having membership on a registered national securities exchange.
EXHIBIT 10.9
LETTER ESCROW AGREEMENT
________________, 1996
______________________
______________________
______________________
______________________
Attention: Corporate Trust Department
Ladies and Gentlemen:
RTC Cruises, Ltd. (the "Company") will be attempting to sell 1,400,000
shares of convertible redeemable preferred stock, par value $.00003 per share
(the "Preferred Stock"), of the Company on a "best efforts, all or none" basis.
The Preferred Stock will be offered for sale outside of the United States at
$5.00 per share pursuant to a registration statement on Form SB-2 (the
"Registration Statement") filed with the Securities and Exchange Commission (the
"SEC") on ________________, 1996. Unless all 1,400,000 shares of Preferred Stock
have been sold or paid for by January 15, 1997, the offering will be withdrawn
and all subscribers' funds will be refunded without interest or any deduction
therefrom.
1. DEFINED TERMS: The terms set forth below shall have the respective meanings
set opposite such terms:
"Business Day" - Any day except Saturday, Sunday, a legal holiday in the City of
Miami, or a day on which banking institutions in the City of Miami are
authorized or required by law or Executive Order to be closed.
"Company" - RTC Cruises, Ltd., a Cayman Islands corporation.
"Escrow Agent" or "you" - ___________________________ N.A.
"Escrowed Funds" - The funds transmitted to the Escrow Agent and held in escrow
under the terms and conditions herein set forth.
"Registration Statement" - The Registration Statement filed with the SEC on
________________, 1996 as amended, covering 1,400,000 shares of Preferred Stock.
<PAGE>
2. TERMS OF ESCROW. At or before the time of making the initial deposit
of funds in escrow hereunder, you will be notified in writing by the Company of
the effective date of the Registration Statement. The gross proceeds from the
sale of the Preferred Stock will be deposited with you on the terms and
conditions hereinafter set forth.
Subscribers to the Preferred Stock of the Company will be instructed to
remit the purchase price directly to you in the form of checks, drafts or other
instruments for the payment of money, payable to the order of
"____________________________, ___________ for RTC Cruises, Ltd." The
requirements of this paragraph shall apply to all subscriber payments.
The aforesaid payment instruments are to be collected by you, but only
if properly endorsed or otherwise in such form as shall permit collection by you
in the ordinary course of business, and the proceeds thereof, together with all
cash, if any, delivered to you hereunder, are to be held in escrow until you are
notified in writing by the Company that the public offering of the Preferred
Stock has been terminated.
If by 5:00 P.M., __________ time, on January 15, 1997, there shall not
have been deposited with the Escrow Agent the principal sum of $7,000,000, then
you shall issue and deliver by ordinary mail your checks to each person named in
the list of subscribers, to the address shown on such list or confirmations, for
the full amount set forth thereon, without interest or any deduction whatsoever.
You shall also notify the Company of your distribution of the Escrowed Funds
received, and distribution shall be made only in respect of such Escrowed Funds
in hand with you at such time.
Subject to customary check holding periods, upon collection by you of
$7,000,000 (which represents the proceeds from the sale of 1,400,000 shares of
Preferred Stock), you shall promptly notify the Company of such fact in writing.
You shall continue to hold such funds received by you from the sale of the
Preferred Stock until receipt of written instructions from the Company that the
public offering of the Preferred Stock has been terminated and as to the
disposition of the Escrowed Funds. Such written instructions shall include a
breakdown of the amount to be disbursed to: (i) the Company, and (ii) such other
persons or entities as you are instructed in writing by the Company. Upon the
disbursement of the Escrowed Funds in accordance with such written instructions
(or upon the disbursement of the Escrowed Funds to the persons named in the
subscriber's lists), the Escrow Account is to be closed and you will be under no
further responsibility with respect to this Escrow Agreement.
3. CONCERNING THE ESCROW AGENT: It is understood and agreed further that the
Escrow Agent's duties described above are purely ministerial in nature, and to
induce the Escrow Agent to act hereunder, it is further agreed by the
undersigned that:
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(a) The Escrow Agent shall not be under any duty or responsibility to
enforce payment of the purchase price of any Preferred Stock
subscribed to pursuant to the public offering and sale contemplated
therein.
(b) The Escrow Agent shall not have any obligation to accept any lists
of subscribers hereunder unless the same are accompanied by cash,
checks, wire transfers, drafts or other instruments for the payment
of money, which are immediately negotiable and collectible.
(c) The Escrow Agent shall not be responsible for the collection of any
check, draft or other instrument for the payment of money delivered
to it hereunder, but the Escrow Agent shall promptly return to a
subscriber any item upon which payment is refused and shall
promptly notify the Company.
(d) The Escrow Agent shall not be under any duty to give the Escrowed
Funds held by it hereunder any greater degree of care than it gives
its own similar property.
(e) This Escrow Agreement expressly sets forth all the duties of the
Escrow Agent with respect to any and all matters pertinent hereto.
No implied duties or obligations shall be read into this Escrow
Agreement against the Escrow Agent. The Escrow Agent shall not be
bound by the provisions of an agreement except this Escrow
Agreement.
(f) The Escrow Agent shall not be liable, except for its own gross
negligence or willful misconduct or breach of any provision of this
Agreement. Except with respect to claims based upon such gross
negligence or willful misconduct or breach of any provision of this
Escrow Agreement that are successfully asserted against the Escrow
Agent, the Company shall indemnify and hold harmless the Escrow
Agent (and any successor Escrow Agent) from and against any and all
losses, liabilities, claims, actions, damages and expenses,
including reasonable attorneys' fees and disbursements, arising out
of and in connection with this Escrow Agreement.
(g) The Escrow Agent shall be entitled to rely upon any order,
judgment, certification, demand, notice, instrument or other
writing delivered to it hereunder without being required to
determine the authenticity or the correctness of any fact stated
therein or the propriety or validity or the service thereof. The
Escrow Agent may act in reliance upon any instrument or signature
believed by it to be genuine and may assume that any person
purporting to give notice or receipt or advice or make any
statement or execute any document in connection with the provisions
hereof has been duly authorized to do so.
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<PAGE>
(h) The Escrow Agent may act pursuant to the written advice of counsel
with respect to any matter relating to this Escrow Agreement and
shall not be liable for any action taken or omitted in good faith
in accordance with such advice.
(i) The Escrow Agent makes no representations as to the validity,
value, genuineness or the collectability of any document or
instrument held by or delivered to it.
(j) The Escrow Agent (and any successor Escrow Agent) may at any time
resign as such by delivering the Escrowed Funds to any successor
Escrow Agent designated by the Company in writing, or to any court
of competent jurisdiction, whereupon the Escrow Agent shall be
discharged of and from any and all further obligations arising in
connection with this Escrow Agreement. The resignation of the
Escrow Agent will take effect on the earlier of (i) the appointment
of a successor (including a court of competent jurisdiction): (ii)
the day which is 30 days after the date of delivery of its written
notice of resignation to the Company. If at that time the Escrow
Agent has not received a designation of a successor Escrow Agent,
the Escrow Agent's sole responsibility after that time shall be to
safekeep the Escrowed Funds until receipt of a designation of a
successor Escrow Agent or a disposition instruction from both the
Company or a final order of a court of competent jurisdiction.
(k) In the event of any disagreement between the Company and a third
party resulting in adverse claims or demands being made in
connection with the Escrowed Funds, or in the event that the Escrow
Agent in good faith is in doubt as to what action it should take
hereunder, the Escrow Agent shall be entitled to retain the
Escrowed Funds until the Escrow Agent shall have received (i) a
final non-appealable order of a court of competent jurisdiction
directing delivery of the Escrowed Funds; or (ii) a written
agreement executed by the other parties hereto directing delivery
of the Escrowed Funds, in which event the Escrow Agent shall
disburse the Escrowed Funds in accordance with such order or
agreement. Any court order referred to in (i) above shall be
accompanied by a legal opinion of counsel for the presenting party
satisfactory to the Escrow Agent to the effect that said order is
final and nonappealable. The Escrow Agent shall act on such court
order and legal opinion without further question.
(l) The Company and the Escrow Agent hereby irrevocably submit to the
jurisdiction of any court sitting in _______________________, in
any action or proceeding arising out of or relating to this Escrow
Agreement, and the parties hereby irrevocably agree that all claims
in respect of such action or proceeding shall be heard and
determined in such court. Such parties hereby consent to and grant
to any such court jurisdiction over the persons
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<PAGE>
of such parties and over the subject matter of any such dispute
and agree that delivery or mailing of any process or other papers
in connection with any such action or proceeding in the manner
provided herein, or in such other manner as may be permitted by
law, shall be valid and sufficient service thereof.
4. INVESTMENT OF ESCROWED FUNDS: The Escrow Agent shall be entitled to hold and
invest Escrowed Funds in a ________________________ account and all interest
thereon shall be for the benefit of the Company.
5. COMPENSATION: For ordinary services in accordance with this Escrow Agreement,
the Escrow Agent shall be entitled to a fee of $_________ and reasonable
expenses.
6. NOTICES: All notices and communications hereunder shall be in writing, or by
telegram if promptly confirmed in writing, and shall be effective and sufficient
in all respects if delivered or sent by certified or registered mail, return
receipt requested, at the following addresses, or in either case at such address
as the party addressed may otherwise designate in writing to the other parties:
If to the Escrow Agent: __________________________
__________________________
__________________________
__________________________
Attention:________________
If to the Company: RTC Cruises, Ltd.
1390 South Dixie Highway
Suite 2114
Coral Gables, Florida 33146
Attention:________________
7. CONSTRUCTION: This Escrow Agreement shall be governed by and construed in
accordance with the internal laws of ________________________, without reference
to its laws as to conflicts of law.
8. BINDING EFFECT: This Escrow Agreement shall be binding upon and inure solely
to the benefit of the parties hereto and their respective successors and
assigns, and shall not be enforceable by or inure to the benefit of any third
party, and, except as provided in paragraph 3(j) with respect to the resignation
by the Escrow Agent, no party may assign any of its rights or obligations under
this Escrow Agreement without the written consent of the other parties.
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<PAGE>
9. MODIFICATIONS: This Escrow Agreement may only be modified by a writing signed
by all the parties hereto, and no waiver of any provision hereunder shall be
effective unless assigned in writing by the party to be charged.
If the foregoing comports with your understanding of our agreement, please
indicate your acceptance hereof by executing this Letter Escrow Agreement in the
space set forth below.
Very truly yours,
RTC CRUISES, LTD.
By:________________________________
Douglas H. MacGarvey
This Escrow Agreement is accepted as of the date first written above.
___________________________________
By:________________________________
Authorized Signatory
6
EXHIBIT 10.10
RTC CRUISES, LTD.
1996 STOCK OPTION PLAN
1. PURPOSE. The purpose of the 1996 Stock Option Plan of RTC
CRUISES, LTD. is to provide incentive to employees, including officers,
directors and consultants of the Corporation, as defined below, to encourage
such individuals proprietary interest in the Corporation, to encourage such
individuals to remain in the employ of the Corporation, and to attract to the
Corporation individuals of experience and ability.
2. DEFINITIONS.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Committee" shall mean the Committee appointed by the Board
in accordance with Section 4 of the Plan.
(d) "Common Stock" shall mean Company's common stock, par value
$.00003 per share.
(e) "Company" shall mean RTC Cruises, Ltd., a company organized
under the laws of the Cayman Islands.
(f) "Corporation" shall mean and include the Company and any
parent or subsidiary corporation thereof, within the meaning of Section 425 of
the Code.
(g) "Disability" shall mean the condition of an Employee who is
unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than twelve (12) months, all within the meaning of Section 22(e)(3) of
the Code.
(h) "Employee" shall mean any individual (including an officer or
a director) who is an employee of the Corporation (within the meaning of Section
422A(a)(2) of the Code and the regulations thereunder).
(i) "Exercise Price" shall mean the price per Share of
Common Stock, determined by the Board or Committee, at which an Option may be
exercised.
(j) "Fair Market Value" of a Share of Common Stock as of a
specified date shall mean the closing price of a Share on the principal
securities exchange on which such Shares are traded on the day immediately
preceding the date as of which Fair Market Value is being determined, or on the
next preceding date on which such Shares are traded if no Shares were traded on
such immediately preceding day, or if the Shares are not traded on a securities
exchange, Fair
<PAGE>
Market Value shall be deemed to be the average of the high bid and low asked
prices of the Shares in the over-the-counter market on the day immediately
preceding the date as of which Fair Market Value is being determined or on the
next preceding date on which such high bid and low asked prices were recorded.
If the Shares are not publicly traded, Fair Market Value shall be determined by
the Board or Committee. In no case shall Fair Market Value be less than the par
value of a Share of the Common Stock, and in no event shall Fair Market Value be
determined with regard to restrictions other than restrictions which, by their
terms, will never lapse.
(k) "Incentive Stock Option" shall mean an Option described in
Code section 422A(b).
(l) "Nonstatutory Stock Option" shall mean an Option which is not
an Incentive Stock Option.
(m) "Option" shall mean a stock option granted pursuant to the
Plan.
(n) "Optionee" shall mean a person to whom an Option has been
granted.
(o) "Plan" shall mean this 1996 Stock Option Plan.
(p) "Purchase Price" shall mean the Exercise Price times the
number of whole Shares with respect to which an Option is exercised.
(q) "Share" shall mean one share of Common Stock.
(r) "Ten Percent Shareholder" shall mean any Employee who, at the
time of the grant of an Option, owns (or is deemed to own, under Sections
422A(b)(6) and 425(d) of the Code) more than ten percent of the total combined
voting power of all classes of outstanding stock of the Corporation.
3. EFFECTIVE DATE. This Plan shall becom effective upon adoption by
the Board of Directors of the Company. In order for an Option under the Plan to
be accorded Incentive Stock Option treatment under the Code, this Plan must be
approved by the Company's stockholders at a duly-held meeting of the Company's
stockholders within 12 months after the date the Plan was adopted by the Board.
All Incentive Stock Options granted under the Plan are made contingent upon such
stockholder approval of the Plan. If stockholder approval is not obtained within
such period, all Incentive Stock Options previously granted under the Plan shall
be deemed to be, and treated under the Code as, a Nonstatutory Stock Option.
4. ADMINISTRATION. The Plan shall be administered by the Board or a
Committee appointed by the Board consisting of not less than two members. The
Board may from time to time remove members from, or add members to, the
Committee. Vacancies on the Committee, however caused, shall be filled by the
Board. The Board or Committee shall from time to time at its discretion shall
determine who shall be granted Options, the number of Shares to be optioned
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<PAGE>
to each and the designation of such Options as Incentive Stock Options or
Nonstatutory Stock Options. The interpretation and construction by the Board or
the Committee of any provisions of the Plan or of any Option granted thereunder
shall be binding and conclusive on all Optionees and their legal representatives
and beneficiaries.
5. ELIGIBILITY. Any Employee may be granted Incentive Stock Options
under the Plan and any Employee or officer, director, consultant of or other
person rendering services to, the Corporation may be granted Nonstatutory Stock
Options under the Plan if, in each instance, the Board or Committee determines
that such person performs services of special importance to the management,
operation and development of the business of the Corporation.
6. STOCK. The stock subject to Options granted under the Plan shall
be Shares of authorized but unissued or reacquired Common Stock. The aggregate
number of Shares which may be issued under Options exercised under this Plan
shall not exceed 1,000,000. The number of Shares subject to Options outstanding
under the Plan at any time may not exceed the number of Shares remaining
available for issuance under the Plan. In the event that any Option outstanding
under the Plan expires for any reason or is terminated, the Shares allocable to
the unexercised portion of such Option shall again be available for grant of
Options under the Plan. The limitations established by this Section 6 shall be
subject to adjustment upon the occurrence of the events specified and in the
manner provided in Section 9 hereof.
7. TERMS AND CONDITIONS OF OPTIONS. Options granted pursuant to the
Plan shall be evidenced by written agreements in such form as the Board or the
Committee shall from time to time determine, which agreements shall comply with
and be subject to the following terms and conditions:
(a) DATE OF GRANT. Each Option shall specify its effective date
(the "date of grant"), which shall be the date specified by the Board or
Committee in its action relating to the grant of the Option, but which date
shall not be earlier than the date of the determination by the Board or
Committee to grant such Option nor more than thirty days after such date.
(b) NUMBER OF SHARES. Each Option shall state the number of
Shares to which it pertains and shall provide for the adjustment thereof in
accordance with the provisions of Section 9 hereof.
(c) EXERCISE PRICE. Each Option shall state the Exercise Price,
which price shall be determined by the Board or Committee, provided however,
that the Exercise Price (i) in the case of an Incentive Stock Option granted to
an Employee who is not a Ten Percent Shareholder, shall not be less than the par
value nor less than the Fair Market Value of the Shares to which the Option
relates on the date of grant, (ii) in the case of an Incentive Stock Option
granted to an Employee who is a Ten Percent Shareholder, shall not be less than
the par value nor less than 110% of the Fair Market Value of the Shares to which
the Option relates on the date of grant, and (iii) in the case of a Nonstatutory
Stock Option granted to any Employee or officer or director of the Corporation,
shall not be less than the par value of the Shares to which the Option relates.
The Exercise Price
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<PAGE>
of an Option shall be subject to adjustment in accordance with Section 9 hereof.
The Company may, at its discretion, permit the cashless exercise of Options in
accordance with the procedures and restrictions established by the Board or the
Committee.
(d) EXERCISE OF OPTIONS AND MEDIUM AND TIME OF PAYMENT. To
exercise an Option, the Optionee shall give written notice to the Company
specifying the number of Shares to be purchased and accompanied by payment in
cash or by certified check of the full Purchase Price therefor and the amount of
any withholding tax obligation of the Corporation as described in Section 14(a)
hereof. No Share shall be issued until full payment therefor has been made.
(e) TERM AND EXERCISE OF OPTIONS; NON-TRANSFERABILITY OF
INCENTIVE STOCK OPTIONS. Subject to Section 10 hereof, Options may be exercised
as determined by the Board or Committee and as stated in the written agreement
evidencing the Option, provided, however, that no Incentive Stock Option granted
to an Employee who is not a Ten Percent Shareholder shall be exercisable after
the expiration of ten (10) years from the date it is granted, and no Incentive
Stock Option granted to an Employee who is a Ten Percent Shareholder shall be
exercisable after the expiration of five (5) years from the date it is granted.
In addition, the aggregate fair market value (determined at the time an
Incentive Stock Option is granted) of Shares with respect to which Incentive
Stock Options are exercisable for the first time by an Optionee during any
calendar year (under this Plan and all other plans maintained by the
Corporation) shall not exceed $100,000. During the lifetime of the Optionee, an
Incentive Stock Option shall be exercisable only by the Optionee and shall not
be assignable or transferable. In the event of the Optionee's death, no
Incentive Stock Option shall be transferable by the Optionee otherwise than by
will or by the laws of descent and distribution. Restrictions on the transfer of
Nonstatutory Stock Options, if any, shall be determined by the Board and set
forth in each Nonstatutory Stock Option Agreement.
(f) TERMINATION OF EMPLOYMENT. In the event that an Optionee
shall cease to be employed by the Corporation for any reason, such Optionee (or
the heirs or legatees of such Optionee, if applicable) shall have the right,
subject to the restrictions of Subsection (e) hereof, to exercise the Option at
any time within three (3) months after such termination of employment (twelve
(12) months if the termination was due to the death or Disability of the
Optionee or, in the case of a Nonstatutory Stock Option, retirement) to the
extent that, on the day preceding the date of termination of employment, the
Optionee's right to exercise such Option had accrued pursuant to the terms of
the option agreement pursuant to which such Option was granted, and had not
previously been exercised.
For this purpose, the employment relationship will be treated as
continuing intact while the Optionee is on military leave, sick leave or other
bona fide leave of absence (to be determined in the sole discretion of the Board
and, in the case of an Optionee who has received an Incentive Stock Option, only
to the extent permitted under Section 422A of the Code and the regulations
promulgated thereunder). Moreover, in the case of an Optionee who has been
granted an Incentive Stock Option, employment shall, in no event, be deemed to
continue beyond the ninetieth (90th) day after the Optionee ceased active
employment, unless the Optionee's reemployment rights are guaranteed by statute
or by contract.
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<PAGE>
(g) RIGHTS AS A SHAREHOLDER. An Optionee or, in the case of an
Incentive Stock Option, a transferee of a deceased Optionee or, in the case of a
Nonstatutory Stock Option, a permitted transferee shall have no rights as a
shareholder with respect to any Shares covered by his or her Option until the
date of the issuance of a stock certificate for such Shares. No adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distributions or other rights for which the record date is
prior to the date such stock certificate is issued, except as provided in
Section 9.
(h) MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject to
the terms and conditions and within the limitations of the Plan, the Board or
Committee may modify, extend or renew outstanding Options granted under the
Plan, or accept the exchange of outstanding Options (to the extent not
theretofore exercised) for the granting of new Options in substitution therefor.
Notwithstanding the foregoing, however, no modification of an Option shall,
without the consent of the Optionee, alter or impair any rights or obligations
under any Option theretofore granted under the Plan. Moreover, in the case of
any modification, extension or renewal of an Incentive Stock Option, all of the
requirements set forth herein shall apply in the same manner as though a new
Incentive Stock Option had been granted to the Optionee on the date of such
modification, extension or renewal, but only if such modification, extension or
renewal is treated, under Section 425(h) of the Code, as the granting of a new
option.
(i) IDENTIFICATION OF OPTION. Each Option granted under the Plan
shall clearly identify its status as an Incentive Stock Option or Nonstatutory
Stock Option.
(j) OTHER PROVISIONS. The option agreements authorized under the
Plan shall contain, in addition to those provisions provided in Section 7(e)
hereof, such other provisions not inconsistent with the terms of the Plan,
including, without limitation, restrictions upon the exercise of any Option, and
restrictions upon the transfer of Shares received upon exercise of Options, as
the Board or Committee shall deem advisable.
8. TERM OF PLAN. Options may be granted pursuant to the Plan ten
years from the date the Plan is approved by the Company's stockholders pursuant
to Section 3 hereof.
9. RECAPITALIZATION. Subject to any required action by the
shareholders and the last sentence of subsection 7(h) hereof, the number of
Shares covered by this Plan as provided in Section 6, the number of Shares
covered by each outstanding Option, and the Exercise Price thereof shall be
proportionately adjusted for any increase or decrease in the number of issued
Shares resulting from a subdivision or consolidation of Shares, stock split, or
the payment of a stock dividend.
Subject to any required action by the shareholders of the Company and
the last sentence of Subsection 7(h) hereof, if the Company shall be the
surviving corporation in any merger or consolidation, each outstanding Option
shall pertain and apply to the securities to which a holder of the number of
Shares subject to the Option would have been entitled. A dissolution or
liquidation of the Company or a merger or consolidation in which the Company is
not the surviving corporation shall cause each outstanding Option to terminate,
unless the agreement of
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<PAGE>
merger or consolidation shall otherwise provide, provided that each Optionee
shall, in such event, have the right immediately prior to such dissolution or
liquidation, or merger or consolidation in which the Company is not the
surviving corporation to exercise the Option in whole or in part, subject to
limitations on exercisability of Options under Sections 7(e) and (f) hereof.
In the event of a change in the Common Stock as presently constituted,
which is limited to a change of all of its authorized shares with par value into
the same number of shares with a different par value or without par value, the
shares resulting from any such change shall be deemed to be Shares of Common
Stock within the meaning of the Plan.
To the extent that the foregoing adjustments relate to stock or
securities of the Company, such adjustments shall be made by the Board or
Committee, whose determination in that respect shall be final, binding and
conclusive.
Except as hereinbefore expressly provided in this Section 9, the
Optionee shall have no rights by reason of any subdivision or consolidation of
shares of stock of any class, stock split, or the payment of any stock dividend
or any other increase or decrease in the number of shares of stock of any class
or by reason of any dissolution, liquidation, merger, or consolidation or
spin-off of assets or stock of another corporation, and any issue by the Company
of shares of stock of any class or securities convertible into shares of stock
of any class, shall not affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of Shares subject to the Option.
The grant of an Option pursuant to the Plan shall not affect in any way
the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its
business or assets.
10. SECURITIES LAW REQUIREMENTS. No Shares shall be issued upon the
exercise of any Option unless and until the Company has determined that: (i) it
and the Optionee have taken all actions required to register the Shares under
the Securities Act of 1933 or perfect an exemption from the registration
requirements thereof (including the furnishing by the Optionee of an appropriate
investment letter); (ii) any applicable listing requirement of any stock
exchange on which the Common Stock is listed has been satisfied; and (iii) any
other applicable provision of state or Federal law has been satisfied.
11. AMENDMENT OF THE PLAN. The Board or Committee may, insofar as
permitted by law, from time to time, with respect to any Shares at the time not
subject to Options, suspend or discontinue the Plan or revise or amend it in any
respect whatsoever except that, without approval of the shareholders of the
Company, no such revision or amendment shall:
(a) Increase the number of Shares subject to the Plan; or
(b) Change the designation in Section 5 of the Plan of the class
of Employees eligible to receive options.
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<PAGE>
(c) Amend this Section 11 to defeat its purpose.
12. APPLICATION OF FUNDS. The proceeds received by the Company from
the sale of Common Stock pursuant to the exercise of an Option will be used for
general corporate purposes or as otherwise determined by the Board.
13. NO OBLIGATION TO EXERCISE OPTION. The granting of an Option shall
impose no obligation upon the Optionee to exercise such Option.
14. WITHHOLDING.
(a) Nonstatutory Options. Whenever Shares are to be delivered
upon exercise of a Nonstatutory Option, the Corporation shall be entitled to
require as a condition of delivery that the Optionee remit to the Corporation an
amount sufficient to satisfy the Corporation's federal, state and local
withholding tax obligations with respect to the exercise of the Option.
(b) Incentive Stock Options. The acceptance of Shares upon
exercise of an Incentive Stock Option shall constitute an agreement by the
Optionee (unless and until the Corporation shall notify the Optionee that it is
relieved, in whole or in part, of its obligations under this Section 14(b)) (i)
to notify the Corporation if any or all of such Shares are disposed of by the
Optionee within two years from the date the Option was granted or within one
year from the date the Shares were transferred to the Optionee pursuant to this
exercise of the Option, and (ii) to remit to the Corporation, at the time of and
in the case of any such disposition, an amount sufficient to satisfy the
Corporation's federal, state and local withholding tax obligations with respect
to such disposition, whether or not, as to both (i) and (ii), the Optionee is in
the employ of the Corporation at the time of such disposition.
15. GOVERNING LAW. The Plan shall be governed by the laws of the State
of Florida.
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<PAGE>
Optionee: __________________
Grant: ___________________
RTC CRUISES, LTD.
INCENTIVE
STOCK OPTION AGREEMENT
UNDER THE
1996 STOCK OPTION PLAN
OPTION AGREEMENT dated as of ________________________________________
between RTC Cruises, Ltd., a company organized under the laws of the Cayman
Islands (the "Company"), and __________________________________________________
residing at _____________________________________________________ (the
"Optionee").
The Company has adopted the 1996 Stock Option Plan (the "Plan"), a copy
of which is attached hereto, and desires to grant to the Optionee the Incentive
Stock Option provided for herein, all subject to the terms and conditions of the
Plan. Capitalized terms used herein and not defined have the same meanings as
set forth in the Plan.
IT IS AGREED as follows:
1. GRANT OF OPTION. The Company hereby grants to the Optionee on the
date hereof the right and option to purchase (subject to adjustment pursuant to
Section 9 of the Plan) an aggregate of ____________ of its shares of Common
Stock (the "Shares") at an option price per Share of $_______ as an Incentive
Stock Option (the "Option").
2. OPTION PERIOD. The Option granted hereby shall expire five (5) years
after the date of grant first set forth above subject to earlier termination as
provided in the Plan.
3. EXERCISE OF OPTION.
A. The Optionee may not exercise the Option hereby granted until one
(1) year after the date of grant first set forth above. From and after such
date, the Optionee may exercise the Option hereby granted to the extent of fifty
(50%) percent thereof in any year on a cumulative basis; i.e., if during the
second year that the Option hereby granted may be exercised, no portion of such
Option has been exercised, the Optionee can exercise the Option to the extent of
one-hundred (100%) percent in the second year that such Option may be exercised.
B. The Optionee may exercise the Option, or any portion thereof, by
delivering to the Company a written notice duly signed by the Optionee in the
form attached hereto as Exhibit A stating the number of Shares that the Optionee
has elected to purchase, and accompanied by payment
<PAGE>
(in cash or by certified check) of an amount equal to the sum of (i) the full
purchase price for the Shares to be purchased, plus (ii) any withholding tax
required to be paid pursuant to Section 14(a) of the Plan. Within twenty days
after receipt by the Company of such notice and payment, the Company shall
(subject to Section 10 of the Plan) issue the Shares in the name of the Optionee
and deliver the certificate therefor to the Optionee. No Shares shall be issued
until full payment therefor and any withholding tax has been made, and the
Optionee shall have none of the rights of a shareholder in respect of such
Shares until they are issued.
4. EMPLOYMENT. Nothing contained in this Option Agreement shall confer
upon the Optionee any right to be employed by the Company nor prevent the
Company from terminating its current relationship with the Optionee at any time,
with or without cause. If the Optionee's current relationship with the Company
is terminated for any reason, the Option shall be exercisable only as to those
Shares immediately purchasable by the Optionee at the date of termination and,
subject to Section 2 hereof, thereafter as provided in the Plan.
5. NON-TRANSFERABILITY OF OPTION. The Option shall not be transferable
other than by will or by the laws of descent and distribution, and may be
exercised during the Optionee's lifetime only by him or her.
6. TAX STATUS. The Company makes no representation or warranty
whatsoever to the Optionee as to the tax consequences of the grant or exercise
of the Option or of the disposition of Shares acquired thereunder.
7. INCORPORATION OF PLAN. The Option granted hereby is subject to, and
governed by, all the terms and conditions of the Plan, which are hereby
incorporated by reference. This Agreement, including the Plan incorporated by
reference herein, is the entire agreement among the parties hereto with respect
to the subject matter hereof and supersedes all prior agreements and
understandings. In the case of any conflict between the terms of this Agreement
and the Plan, the provisions of the Plan shall control.
8. PURCHASE FOR INVESTMENT. As a condition to the exercise in whole or
in part of the Option hereby granted, each written notice of election shall
include a representation by the Optionee that the Shares are being purchased for
investment and not for distribution or resale.
9. NOTICES. Any notice to be given by the Optionee hereunder shall be
sent to the Company at its principal executive offices, and any notice from the
Company to the Optionee shall be sent to the Optionee at his address set forth
above; all such notices shall be in writing and shall be delivered in person or
by registered or certified mail. Either party may change the address to which
notices are to be sent by notice in writing given to the other in accordance
with the terms hereof.
10. GOVERNING LAW. This Option Agreement shall be governed by the laws
of the State of Florida.
2
<PAGE>
11. NOTICE OF EARLY DISPOSITION - INCENTIVE STOCK OPTIONS. The Optionee
hereby agrees to notify the Company of any early disposition of Shares as stated
in Section 14(b)(i) of the Plan.
RTC CRUISES, LTD.
By:____________________________________
______________(NAME) its________(TITLE)
OPTIONEE:
________________________________________
(Name)
3
<PAGE>
EXHIBIT A
PURCHASE FORM
(To be signed and delivered to
RTC Cruises, Ltd. upon exercise of the Option)
The undersigned, the holder of the foregoing Incentive Stock Option,
hereby irrevocably elects to exercise the purchase rights represented by such
Option, and to purchase thereunder __________________ shares of common stock,
par value of $.00003 of RTC Cruises, Ltd. ("Shares") and herewith makes payment
of $__________ ($______ per share) therefor, plus $__________ ($______ per
share) for withholding tax, if any, required pursuant to Section 14(a) of the
Plan and requests that the Certificates for the Shares be issued in the name(s)
of, and delivered to ___________________________________ whose address(es)
is/are____________________________________________ .
The undersigned hereby represents that the Shares being purchased by
the exercise of this Option are being purchased for investment only and not with
a view towards the sale, transfer, or distribution thereof.
The undersigned hereby agrees to notify RTC Cruises, Ltd. of any early
disposition of the Shares, and agrees to pay any additional withholding tax due
in connection therewith, all in accordance with Section 14(b) of the Plan.
__________________________________
__________________________________
__________________________________
__________________________________
Dated: ____________________________, 19__
__________________________________
<PAGE>
Optionee: _______________________
Grant: _________________________
RTC CRUISES, LTD.
NONSTATUTORY
STOCK OPTION AGREEMENT
UNDER THE
1996 STOCK OPTION PLAN
OPTION AGREEMENT dated as of ________________________________________
between RTC Cruises, Ltd., a company organized under the laws of the Cayman
Islands (the "Company"), and
___________________________________ residing at________________________________
(the "Optionee").
The Company has adopted the 1996 Stock Option Plan (the "Plan"), a copy
of which is attached hereto, and desires to grant to the Optionee the
Nonstatutory Stock Option provided for herein, all subject to the terms and
conditions of the Plan. Capitalized terms used herein and not defined have the
same meanings as set forth in the Plan.
IT IS AGREED as follows:
1. GRANT OF OPTION. The Company hereby grants to the Optionee on the
date hereof a Nonstatutory Stock Option (the "Option") to purchase (subject to
adjustment pursuant to Section 9 of the Plan) an aggregate of_________________
of its shares of Common Stock (the "Shares") at an option price per Share of
$________.
2. OPTION PERIOD. The Option granted hereby shall expire on ___________
subject to earlier termination as provided in the Plan.
3. EXERCISE OF OPTION.
A. The Optionee may immediately exercise the Option, or any
portion thereof, until ________________.
B. The Optionee may exercise the Option, or any portion
thereof, by delivering to the Company a written notice duly signed by the
Optionee in the form attached hereto as Exhibit A stating the number of Shares
that the Optionee has elected to purchase, and accompanied by payment (in cash
or by certified check) of an amount equal to the sum of (i) the full purchase
price for the Shares to be purchased, plus (ii) any withholding tax required to
be paid pursuant to Section 14(a) of the Plan. After receipt by the Company of
such notice and payment, the Company shall (subject to Section 10 of the Plan)
issue the Shares in the name of the Optionee and deliver the certificate
therefor to the Optionee. No Shares shall be issued until full payment therefor
and any withholding tax has been made, and the Optionee shall have none of the
rights of a shareholder in respect of such Shares until they are issued.
4. EMPLOYMENT. Nothing contained in this Option Agreement shall
confer upon the Optionee any right to be employed by the Company nor prevent the
Company from terminating its
<PAGE>
current relationship with the Optionee at any time, with or without cause. If
the Optionee's current relationship with the Company is terminated for any
reason, the Option shall be exercisable only as to those Shares immediately
purchasable by the Optionee at the date of termination and, subject to Section 2
hereof, thereafter as provided in the Plan.
5. NON-TRANSFERABILITY OF OPTION. The Option shall not be
transferable other than by will or by the laws of descent and distribution, and
may be exercised during the Optionee's lifetime only by him or her.
6. TAX STATUS. The Company makes no representation or warranty
whatsoever to the Optionee as to the tax consequences of the grant or exercise
of the Option or of the disposition of Shares acquired thereunder.
7. INCORPORATION OF PLAN. The Option granted hereby is
subject to, and governed by, all the terms and conditions of the Plan, which are
hereby incorporated by reference. This Agreement, including the Plan
incorporated by reference herein, is the entire agreement among the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements and understandings. In the case of any conflict between the terms of
this Agreement and the Plan, the provisions of the Plan shall control.
8. PURCHASE FOR INVESTMENT. As a condition to the exercise in
whole or in part of the Option hereby granted, each written notice of election
shall include a representation by the Optionee that the Shares are being
purchased for investment and not for distribution or resale.
9. NOTICES. Any notice to be given by the Optionee hereunder shall
be sent to the Company at its principal executive offices, and any notice from
the Company to the Optionee shall be sent to the Optionee at his address set
forth above; all such notices shall be in writing and shall be delivered in
person or by registered or certified mail. Either party may change the address
to which notices are to be sent by notice in writing given to the other in
accordance with the terms hereof.
10. GOVERNING LAW. This Option Agreement shall be governed by the
laws of the State of Florida.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first above written.
RTC CRUISES, LTD.
By: _______________________________________
_______________(NAME) its___________(TITLE)
OPTIONEE:
___________________________________________
(NAME)
2
<PAGE>
EXHIBIT A
PURCHASE FORM
(To be signed and delivered to
RTC Cruises, Ltd. upon exercise of the Option)
The undersigned, the holder of the foregoing Nonstatutory Stock Option,
hereby irrevocably elects to exercise the purchase rights represented by such
Option, and to purchase thereunder ____________ shares of common stock, par
value of $.00003 of RTC Cruises, Ltd. ("Shares") and herewith makes payment of
$_________ ($_____ per share) therefor, plus $__________ ($_____ per share) for
withholding tax, if any, required pursuant to Section 14(a) of the Plan and
requests that the Certificates for the Shares be issued in the name(s) of, and
delivered to_____________________________________ whose address(es) is/are
_________________________________________________.
The undersigned hereby represents that the Shares being purchased by
the exercise of this Option are being purchased for investment only and not with
a view towards the sale, transfer, or distribution thereof.
The undersigned hereby agrees to notify RTC Cruises, Ltd. of any early
disposition of the Shares, and agrees to pay any additional withholding tax due
in connection therewith, all in accordance with Section 14(b) of the Plan.
_____________________________________
_____________________________________
_____________________________________
_____________________________________
Dated: ________________________, 19
_____________________________________
3
EXHIBIT 10.11
GOVERNMENT FRENCH REPUBLIC
OF FREEDOM - EQUALITY - BROTHERHOOD
FRENCH POLYNESIA
- -------------------------------------------------------------------------------
PRESIDENT'S DECREE No. 1092/CM of October 19, 1995
OFFICE
NOR: STO 95 00404 AC
Granting the benefit of the incentive provisions applicable to
passenger ships operating interisland tourist cruises in French
Polynesia, to the "Royal Tahitian Cruise" Company with respect to its
passenger ship.
THE PRESIDENT OF THE GOVERNMENT
OF
FRENCH POLYNESIA
IN VIEW OF modified law No. 84-820 of September 6, 1984 establishing
the statute of the Territory of French Polynesia;
IN VIEW OF modified Decree No. 622/PR of April 4, 1991 establishing the
appointment of the Vice-President and other Ministers of the Government
of the Territory of French Polynesia;
IN VIEW OF modified Resolution No. 94-17/AT of March 10, 1994 defining
the general framework of the incentive provisions applicable to
passenger ships operating interisland tourist cruises in French
Polynesia;
IN VIEW OF Decree No. 763/CM of July 18, 1995 establishing the
conditions of the lodging and examining of applications for the benefit
of incentive provisions applicable to passenger ships operating
interisland tourist cruises in French Polynesia;
IN VIEW OF the application lodged on October 7, 1994.
The Council of Ministers, after having deliberated in its session of
September 20, 1995
HAS LAID DOWN THE FOLLOWING
ARTICLE 1: - The benefit of the incentive provisions applicable to
passenger ships operating interisland tourist cruises in French
Polynesia as established by above-mentioned Resolution No. 94-17 AT of
March 10, 1994 is granted to the "Royal Tahitian Cruise" Company for
the purpose of operating its passenger ship under the conditions
defined by this order;
<PAGE>
ARTICLE 2: - Pursuant to Article 4 of above-mentioned Resolution No.
94-17 the "Royal Tahitian Cruise" Company benefits, with respect to its
cruise ship, from a derogation to the flag monopoly for a five year
period;
ARTICLE 3: - Pursuant to Articles 5 and 6 of above-mentioned Resolution
No. 94-17, the "Royal Tahitian Cruise" Company benefits from:
a) the temporary admission treatment with full suspension of import
duties and taxes, with an exemption of bond with respect to the
passenger ship, granted for a five year period;
b) the exemption treatment for all of the duties and taxes, the
liquidation of which is devolved upon the Customs Department, with the
exception of the port toll tax and airport dues effective from June
1996. The exemption bears on the fueling with oil products, the
supplies required for the operations, the functioning and maintenance
of the passenger ship and the stores;
ARTICLE 4: - Pursuant to Article 7 of above-mentioned Resolution No.
94-17, the "Royal Tahitian Cruise" Company benefits from a guarantee of
stability with respect to the tax arrangements and the exemption
relating to the payment of the business license, the tax applying to
corporation and the income from investment capital for a five year
period.
ARTICLE 5: - Pursuant to Article 9 of above-mentioned Resolution No.
94-17, the "Royal Tahitian Cruise" Company benefits from the repayment
of the employer's share of the payroll taxes for a period of 24 months.
The ceiling put on the said amount is FCP 10,800,000.
ARTICLE 6: - Pursuant to Articles 11 and 12 of above-mentioned
Resolution 94-17, the "Royal Tahitian Cruise" Company is entitled to
benefit from the aide provided for the vocational training of the
locally recruited staff.
ARTICLE 7: - Pursuant to Articles 13, 14 and 15 of above-mentioned
Resolution 94-17, the "Royal Tahitian Cruise" Company is entitled to
benefit from the aide granted for tourist promotion as part of the
"Tahiti Tourisme" Economic Interest Group budget and within the limits
of the credits allows.
ARTICLE 8: - The validity of this Decree is made conditional on the
signing of an agreement between the Territory and the "Royal Tahitian
Cruise" Company.
<PAGE>
ARTICLE 9: - The Minister for Finance and Administrative Reform is
responsible for the implementation of this Decree which will be
published in the Official Journal of French Polynesia.
Established on October 19, 1995 in Papeete
By the President of the
Territorial Government
For the President
Gaston Flosse, unable to attend
The Vice-President
Edouard Fritch
Signed: Patrick Peaucellier Stamped
Minister for Finance
and Administrative Reforms
DUPLICATES:
PR 1
AT 1
SGG 1
SCM 2
REC 1
JOPF 1
MFR 1
MEC 1
DE 1
CESC 1
AA 1
AEFP 1
CD 1
CUSTOMS 1
FC 1
STT 3
DP1 3
Int u/c DPI 1
(transmittal
AR) - HC 1
===
24
<PAGE>
P R E S I D E N C E GOUVERNMENT
__________ de la
POLYNESIE FRANCAISE
SERVICE DU TOURISME
----------
Piha Toro'a Tereraa Ratere
----
THE HEAD OF THE TOURISM DEPARTMENT
to
Mr. Douglas H. MacGarvey
Fax: 0013056639521
Dear Mr. MacGarvey,
You will find enclosed a copy of administrative decision, n(degree)
1092/CM dated October 19, 1995. This decision grants the company "Royal Tahitian
Cruises" for its cruising passenger ship incentive benefit arrangements
applicable to passenger ships operating tourist cruises inside the waters of
French Polynesia.
This order must be authenticated by an agreement between the company
Royal Tahitian Cruises and the Territory. The proposed agreement is ready and
includes among your individual obligations the following main points:
- - to provide a minimum of 12 jobs to be filled through local recruiting (on
shore or aboard the ship); - to participate in the training of a minimum of
three local trainees per year; - to promote local entertainment and activities
companies through information made available aboard the ship; - and to buy a
certain amount of products locally which include 45 millions FCP of specifically
local products.
However, before the final drafting of this agreement, I would like you
to please offer me precise information on the following points: - the type and
characteristics of the vessel to be put in operation in French Polynesia and its
financial guarantee; - the definitive schedule to be used and particularly the
Papeete departing dates and times; - the type of transport to be used in
bringing clients to French Polynesia; - and the date that the ship will begin
operating in French Polynesia.
I would like to thank you in advance for providing me with such
information.
Sincerely,
Gerard Vanizette
EXHIBIT 23
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
RTC Cruises, Ltd.
Miami, Florida
We hereby consent to the use in the Prospectus constituting a part of
this Registration Statement of our report dated August 26, 1996 (except for Note
5 which is as of September 11, 1996), relating to the financial statements of
RTC Cruises, Ltd., which is contained in that Prospectus. Our report contains an
explanatory paragraph indicating that there exists substantial doubt about the
Company's ability to continue as a going concern.
We also consent to the reference to us under the caption "Experts" in
the Prospectus.
BDO Seidman, LLP
Miami, Florida
September 25, 1996
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<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-END> MAY-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
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<CURRENT-ASSETS> 1,650
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<BONDS> 342,034
0
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<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
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<OTHER-EXPENSES> 191,136
<LOSS-PROVISION> 0
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