As filed with the Securities and Exchange Commission on October 10, 1996
Registration No. 333-12769
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
----------------
AMENDMENT NO. 1 ON FORM S-1 TO
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 65-0613844
(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 per share.
From the closing of this Offering, the Company has the right, 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, par value $.00003 per share (the
"Common Stock") within seven days of receipt of the notice of redemption.
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 the conversion of
Preferred Stock will be the lesser of either (a) one share of Common Stock for
each share of Preferred Stock, or (b) that number of shares determined 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% and rounded to
the nearest whole number. 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."
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
<TABLE>
<CAPTION>
SUMMARY OF DEVELOPMENT STAGE ACTIVITIES
YEARS ENDED MAY 31, CUMULATIVE FROM JULY 5, 1994
------------------------ (INCORPORATION) THROUGH
1995 1996 MAY 31, 1996
---- ---- ----------------------------
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales ..................................... $ -- -- --
Selling, general and administrative expenses .. 173,045 191,136 (364,181)
Net Loss ...................................... $ (173,045) (191,136) (364,181)
Loss per common share:
Net loss .................................... $ (.05) (.06) --
Average common shares ......................... 3,435,944 3,435,944 --
BALANCE SHEET DATA
PRO FORMA
ACTUAL ACTUAL PRO FORMA AS ADJUSTED
MAY 31, 1995 MAY 31, 1996 MAY 31, 1996(1) MAY 31, 1996(2)
------------ ------------ --------------- ---------------
<S> <C> <C> <C> <C>
Total Assets 750 1,650 219,650 6,219,650
Long-term debt 166,050 342,034 342,034 342,034
Deficit Accumulated During Development Stage (173,045) (364,181) (392,181) (392,181)
Stockholders' Equity (Deficiency) (170,073) (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."
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.
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.
9
<PAGE>
20. 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.
21. 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."
22. 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 "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's 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>
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
SUMMARY OF DEVELOPMENT STAGE ACTIVITIES
YEARS ENDED MAY 31, CUMULATIVE FROM JULY 5, 1994
------------------------ (INCORPORATION) THROUGH
1995 1996 MAY 31, 1996
---- ---- ----------------------------
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales ..................................... $ -- -- --
Cost of sales ................................. -- -- --
Gross profit .................................. -- -- --
Selling, general and administrative expenses .. 173,045 191,136 (364,181)
Net Loss ...................................... $ (173,045) (191,136) (364,181)
Loss per common share:
Net loss .................................... $ (.05) (.06) --
Average common shares ......................... 3,435,944 3,435,944 --
Dividends...................................... $ -- -- --
BALANCE SHEET DATA
PRO FORMA
ACTUAL ACTUAL PRO FORMA AS ADJUSTED
MAY 31, 1995 MAY 31, 1996 MAY 31, 1996(1) MAY 31, 1996(2)
------------ ------------ --------------- ---------------
<S> <C> <C> <C> <C>
Total Assets 750 1,650 219,650 6,219,650
Long-term debt 166,050 342,034 342,034 342,034
Deficit Accumulated During Development Stage (173,045) (364,181) (392,181) (392,181)
Stockholders' Equity (Deficiency) (170,073) (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>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
Development Stage Activities and Liquidity
The Company is in its development stage, and it has had no cruise
operations. The Company has not had any revenue from operations and it has had
accumulated losses of $364,181 for the period from July 5, 1994 (incorporation)
through May 31, 1996. The Company expects such losses to continue as least
through commencement of its full cruise operations in the Fall of 1997, and
perhaps thereafter. Since inception through May 31, 1996, the Company's
activities have been funded by borrowings from a stockholder of the Company, the
cash proceeds from which have totaled $342,034. See "Certain Transactions-
Officers and Directors." On September 4, 1996, the Company entered into an
agreement with an investment banking firm in connection with raising equity
through this 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. See "Certain Transactions-London Manhattan."
The Company anticipates commencing full cruise service in the Fall of
1997. Until full service is commenced, the Company does not expect to generate
any material earned voyage revenues; nevertheless, if this Offering is
successful, then during the next twelve months the Company expects to have
significant capital expenditures for the charter of a vessel, ship start up
costs, and significant operating expenses for salaries and marketing. See "Use
of Proceeds."
Period July 5, 1994 (Incorporation) to May 31, 1995
The Company was initially capitalized with $100 in services and
received capital contributions of $2,872. During the period the Company borrowed
$166,050 from a stockholder. The aggregate funds were primarily used to pay
management fees, legal fees, consulting fees and general and administrative
expenses, all of which related to development activities for the passenger
cruise vessel and capital raising activities.
Year Ended May 31, 1996
The Company explored various financing alternatives; however, no
additional capital was raised during this period. Instead, it borrowed an
additional $175,984 from a stockholder in order to support its operations.
During this period, the Company had a net loss of $191,136, of which $25,000
were expenses of an offering of securities which was terminated prior to
commencing any efforts to offer securities to prospective investors. The
remainder of the expenses related to management fees, legal fees, consulting
fees and general and administrative expenses all of which related to development
activities for the passenger cruise vessel and capital raising activities.
Subsequent to May 31, 1996
On September 11, 1996, the Company increased its authorized capital
from 100 shares, par value $1.00 per share, to 10,000,000 shares, par value
$.00003 per share, and the existing stockholders converted 100 shares of their
then-owned common stock into 3,196,000 newly authorized shares of Common Stock.
The components of stockholders' capital deficiency have been retroactively
adjusted to reflect the foregoing transaction.
In September 1996, the Company sold 30,000 shares of Common Stock for
$1.00 per share and 28,000 shares of Common Stock for $.01 per share to certain
investors in a private placement. The Company also issued 188,000 shares of
Common Stock in connection with an agreement to retain the services of a
consulting company. These shares were reflected in the weighted average number
of shares 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.
Liquidity
At May 31, 1996, the Company has incurred losses totaling $364,181, and
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. In order to attain full service operations, the Company's future cash
requirements will be significant. The Company plans to use the funds of this
Offering, if successful, to (i) pay the expenses in connection with the
commencement of the operations of the cruise ship and (ii) provide working
capital to support the Company's initial operations to the extent that cash flow
from such operations is insufficient. The Company intends to obtain a $2,000,000
letter of credit in order to guarantee its anticipated charter hire payments for
approximately six months and expects to incur an additional $1,000,000 in ship
start up expenses. The Company anticipates paying, to an affiliate, charter fees
of approximately $10,000 to $15,000 a day for the vessel. See "Proposed
Business-Charter of Vessel."
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 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.
The Company expects the net proceeds from this Offering (approximately
$6,000,000) to be sufficient to enable the Company to commence cruise line
operations within twelve months, approximately the Fall of 1997. There can be no
assurance, however, that operations will in fact commence as scheduled. In
addition, unanticipated problems may arise which may necessitate the need for
additional financing until the Company can generate revenues sufficient to meet
operating expenses. Further, there can be no assurance that the Company will not
experience adverse changes in its business prospects, its proposed operations,
or in the transportation or tourism industries, or the U.S. economy.
Realization of any portion of the approximate $137,000 deferred tax asset at May
31, 1996, resulting from the future amortization of start up costs and accrued
interest on related party loans, is not considered more likely than not and,
accordingly, a valuation allowance has been established for the full amount of
such asset.
As of May 31, 1996, the Company had borrowed $342,034 from a stockholder 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. See "Certain Transactions- Officers and
Directors."
Future Accounting Pronouncement
The Company will be required to apply the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 123 "Accounting for Stock Based Compensation."
This statement establishes 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.
12
<PAGE>
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.
22
<PAGE>
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,
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 Company has the right, 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 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, issuable upon the conversion of
Preferred Stock will be the lesser of either (a) one share of Common Stock for
each share of Preferred Stock, or (b) that number of shares determined 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% and rounded to
the nearest whole number. 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.
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
<PAGE>
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 and the conversion features thereof have 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 S-1 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 SHEETS..............................................................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 sheets of RTC Cruises, Ltd., (a
development stage company) as of May 31, 1996 and 1995, 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 1995, 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 October 10, 1996
F-2
<PAGE>
RTC CRUISES, LTD.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
MAY 31, MAY 31,
1996 1995
--------- ----------
ASSETS
<S> <C> <C>
CURRENT
Employee advance $ 1,000 100
DEPOSITS 650 650
--------- ----------
$ 1,650 750
========= ==========
LIABILITIES AND STOCKHOLDERS' CAPITAL DEFICIENCY
CURRENT LIABILITIES
Accrued interest $ 20,825 4,773
LOANS FROM RELATED PARTIES (Note 3) 342,034 166,050
--------- ----------
TOTAL LIABILITIES 362,859 170,823
--------- ----------
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 100 100
Additional paid-in capital 2,872 2,872
Deficit accumulated during the development stage (364,181) (173,045)
--------- ----------
Total stockholders' capital deficiency (361,209) (170,073)
--------- ----------
$ 1,650 750
========= ==========
</TABLE>
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 and 1995, the Company had borrowed $342,034 and $166,050
respectively, 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. Of the 10,000,000 shares, 1,400,000 shares are $.00003 par value
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. 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.
g) On October 10, 1996, the shareholders adopted a special resolution that
changed the preferred stock conversion rights so that the number of shares
of Common Stock issuable upon the conversion will be the lesser of either
(a) one share of Common Stock for each share of Preferred Stock, or (b)
that number of shares determined 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 defined) discounted by 20%.
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
Selected Financial Data..................................................... 4
Risk Factors.................................................................5
Use of Proceeds.............................................................11
Dilution....................................................................11
Management's Discussion and Analysis of Financial Condition.................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 13. 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 14. 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 15. 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 16. 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 10.7 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 Power of Attorney**
27 Financial Data Schedule. (For SEC purposes only).
<FN>
- ---------------------
* To be filed by amendment to this Registration Statement.
**Previously filed with the Registration Statement.
</FN>
</TABLE>
II-2
<PAGE>
ITEM 17. 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
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Amendment No. 1 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Miami, State of Florida, on October 10, 1996.
Registrant: RTC CRUISES, LTD.
By: /s/ DOUGLAS H. MACGARVEY
----------------------------
Douglas H. MacGarvey
Chief Executive Officer
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, October 10, 1996
- ------------------------------ Chief Executive Officer,
Douglas H. MacGarvey and Secretary (principal
executive, financial
and accounting officer)
/s/ * Vice Chairman of the Board October 10, 1996
- ------------------------------ and Treasurer
Thomas G. Rader
/s/ * Director October 10, 1996
- ------------------------------
Ronald Kurtz
/s/ * Director October 10, 1996
- ------------------------------
Albert W. Van Ness, Jr.
/s/ DOUGLAS H. MACGARVEY
- ------------------------------
*By: Douglas H. MacGarvey
Attorney-in-Fact
II-4
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
3.2 Articles of Association.
10.7 Investment Banking Agreement, dated September 4, 1996, between the Company and London Manhattan
International Limited ("London Manhattan International").
23 Consent of BDO Seidman, LLP.
27 Financial Data Schedule. (For SEC purposes only).
</TABLE>
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;
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(b) 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 the lesser of (a) one share of common stock for each share of
preferred stock, or (b) that number of shares 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.
(c) 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 the lesser
of (a) one share of common stock for each share of preferred
stock, or (b) that number of shares 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.
(d) 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.
(e) 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 10.7
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
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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
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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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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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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.
6
<PAGE>
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
7
<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.
8
<PAGE>
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
9
<PAGE>
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 as the lesser of either (a) one share of Common Stock for
each share of Preferred Stock, or (b) 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.
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 October 10, 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
October 10, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> MAY-31-1996 MAY-31-1995
<PERIOD-END> MAY-31-1996 MAY-31-1995
<CASH> 0 0
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 1,000 100
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 1,650 750
<CURRENT-LIABILITIES> 20,825 4,773
<BONDS> 342,034 166,050
0 0
0 0
<COMMON> 100 100
<OTHER-SE> (361,309) (173,073)
<TOTAL-LIABILITY-AND-EQUITY> 1,650 750
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 191,136 173,045
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (191,136) (173,045)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (191,136) (173,045)
<EPS-PRIMARY> (.06) (.05)
<EPS-DILUTED> 0 0
</TABLE>
