<PAGE> 1
MANUALLY SIGNED COPY
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended May 31, 1997
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________ to ___________
Commission file number: 000-24452
RMS TITANIC, INC.
(Exact name of registrant as specified in its charter)
Florida 59-2753162
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
17 Battery Place, Suite 203, New York, NY 10004
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 558-6300
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes No X
--- ---
The number of shares outstanding of the registrant's common stock on
July 18, 1997 was 16,192,119.
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<TABLE>
<CAPTION>
PAGE
NUMBER
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PART I
FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II
OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
</TABLE>
2
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The financial statements of RMS Titanic, Inc. (the "Company"), formerly
First Response Medical, Inc. ("FRM") included herein were prepared, without
audit, pursuant to rules and regulations of the Securities and Exchange
Commission. The Financial Statements include the assets acquired and liabilities
assumed from Titanic Ventures Limited Partnership ("TVLP") on May 4, 1993 (the
"Acquisition"). Since TVLP owns a controlling interest in FRM after the
Acquisition, the transaction has been accounted for as a "reverse acquisition"
with TVLP deemed to be the acquiring entity. Because certain information and
notes normally included in financial statements prepared in accordance with
generally accepted accounting principles were condensed or omitted pursuant to
such rules and regulations, these financial statements should be read in
conjunction with the financial statements and notes thereto included in the
audited financial statements of the Company for the year ended May 31, 1997 as
included in the Company's Form 8-K dated July 3, 1997.
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RMS TITANIC, INC.
(A DEVELOPMENT STAGE COMPANY)
<TABLE>
<CAPTION>
BALANCE SHEET
MAY 31, FEBRUARY 28,
1997 1997
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(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 106,390 $ 105,854
Accounts receivable 271,438 34,715
Refundable withholding tax -- 87,500
Other current assets 4,800 4,800
- ---------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 382,628 232,869
Artifacts Recovered, at cost 7,714,340 7,714,340
Deferred Income Tax Asset, net of valuation allowance of
$1,890,000 and $1,910,000, respectively -- --
Property and Equipment, net of accumulated depreciation
of $52,228 and $50,036, respectively 17,372 19,564
Other 38,611 38,611
- ---------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 8,152,951 $ 8,005,384
=========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Note payable $ 102,758 $ 128,530
Accounts payable and accrued liabilities 2,920,888 3,093,448
Deferred revenue 963,333 675,000
Loans payable to partners 45,000 45,000
- ---------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 4,031,979 3,941,978
- ---------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Common stock - $.0001 par value; authorized 30,000,000 shares,
issued and outstanding 16,177,128 shares 1,618 1,618
Additional paid-in capital 13,909,999 13,909,999
Deficit accumulated during the development stage (9,790,645) (9,848,211)
- ---------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY 4,120,972 4,063,406
- ---------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,152,951 $ 8,005,384
=========================================================================================================
</TABLE>
See Notes to Financial Statements
4
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RMS TITANIC, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
THREE-MONTH THREE-MONTH AUGUST 5, 1987
PERIOD ENDED PERIOD ENDED (INCEPTION) TO
MAY 31, MAY 31, MAY 31,
1997 1996 1997
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue:
Licensing fees -- -- $ 1,435,000
Exhibitions $ 377,320 -- 1,359,138
Sponsorship fees -- -- 150,000
Merchandise and other 28,354 $ 3,095 302,876
Sale of coal -- 47,725 124,859
- ----------------------------------------------------------------------------------------------------------------
Total revenue 405,674 50,820 3,371,873
- ----------------------------------------------------------------------------------------------------------------
Expenses:
General and administrative 345,916 256,139 7,847,511
Depreciation and amortization 2,192 2,072 117,661
Interest -- -- 916,732
Financing fees -- -- 387,012
Acquisition of Management Agreement Option -- -- 3,400,000
Settlement expense -- -- 221,715
Provision for uncollectible advances to affiliates -- -- 271,887
- ----------------------------------------------------------------------------------------------------------------
Total expenses 348,108 258,211 13,162,518
- ----------------------------------------------------------------------------------------------------------------
Net income (loss) $ 57,566 $ (207,391) $ (9,790,645)
================================================================================================================
Net income (loss) per common share $ .00 $ (.01) --
================================================================================================================
Weighted average number of common shares outstanding 16,177,128 16,137,128 --
================================================================================================================
</TABLE>
See Notes to Financial Statements
5
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RMS TITANIC, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
THREE-MONTH THREE-MONTH AUGUST 5, 1987
PERIOD ENDED PERIOD ENDED (INCEPTION) TO
MAY 31, MAY 31, MAY 31,
1997 1996 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 57,566 $(207,391) $(9,790,645)
- --------------------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization 2,192 2,072 117,661
Noncash financing costs -- -- 387,012
Acquisition of Management Agreement Option
for noncash consideration -- -- 3,400,000
Write-off of advances to affiliates -- -- 271,887
Noncash interest expense -- -- 886,202
Expenses paid by TVLP partners and TVLP affiliate
on behalf of TVLP -- -- 427,564
Reduction in artifacts recovered -- 3,974 11,010
Changes in operating assets and liabilities, net of effect from acquisition:
Decrease (increase) in accounts receivable (236,723) 17,690 (271,438)
Decrease (increase) in refundable withholding tax 87,500 (87,500) --
Increase in other current assets -- -- (4,800)
Increase in advances to TVLP affiliates -- -- (271,887)
Increase in other -- -- (38,611)
Increase in organization costs (fully amortized) -- -- (60,483)
(Decrease) increase in notes payable, accounts payable
and accrued liabilities (172,560) (74,110) 3,347,545
Increase in deferred revenue 288,333 400,000 963,333
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TOTAL ADJUSTMENTS (31,258) 262,126 9,164,995
- --------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 26,308 54,735 (625,650)
Cash flows from investing activities:
Artifact recovery costs, including related deposits -- -- (4,672,975)
Purchases of property and equipment -- -- (74,550)
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CASH USED IN INVESTING ACTIVITIES -- -- (4,747,525)
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(continued)
See Notes to Financial Statements
6
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RMS TITANIC, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
THREE-MONTH THREE-MONTH AUGUST 5, 1987
PERIOD ENDED PERIOD ENDED (INCEPTION) TO
MAY 31, MAY 31, MAY 31,
1997 1996 1997
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from financing activities:
Loans from TVLP partners -- -- $ 432,705
Proceeds from notes payable -- -- 650,000
Proceeds from issuance of common stock and capital
contributions -- -- 7,209,446
Stock issuance costs -- -- (1,150,707)
Repayment of advances from TVLP partner -- -- (475,000)
Repayment of notes payable $ (25,772) -- (1,186,879)
- ------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (25,772) 5,479,565
- ------------------------------------------------------------------------------------------------------------
Net increase in cash 536 $ 54,735 106,390
Cash at beginning of period 105,854 43,803 - 0 -
- ------------------------------------------------------------------------------------------------------------
Cash at end of period $ 106,390 $ 98,538 $ 106,390
============================================================================================================
</TABLE>
See Notes to Financial Statements
7
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RMS TITANIC, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 - The accompanying condensed financial statements of RMS Titanic,
Inc. (the "Company"), formerly First Response Medical, Inc.
("FRM"), include the assets acquired and the liabilities assumed
from Titanic Ventures Limited Partnership ("TVLP") on May 4,
1993 (the "Acquisition"). Since TVLP owns a controlling interest
in FRM after the Acquisition, the transaction has been accounted
for as a "reverse acquisition" with TVLP deemed to be the
acquiring entity. Accordingly, the historical financial statements
of TVLP prior to May 4, 1993 have been substituted for the
historical financial statements of FRM.
The accompanying financial statements contain all adjustments
necessary to present fairly the financial position of the
Company as of May 31, 1997 and its results of operations and
its cash flows for the three months ended May 31, 1997 and
1996. Results of operations for the three month period ended
May 31, 1997 are not necessarily indicative of the results
that may be expected for the year ending February 28, 1998.
Note 2 - Net income per share on common stock is based upon the weighted
average number of shares outstanding. The dilutive effect of
common stock equivalents is not material. For the calculation of
the net loss per share on common stock for the three months ended
may 31, 1996, options and warrants to purchase common stock
have been excluded from the computation of weighted average
shares outstanding since their inclusion would have an anti-dilutive
effect.
Note 3 - In April 1996, the Company entered into an agreement with CRE-
CO Finanz GmbH, a German company, for an exhibition of
Titanic artifacts in Europe from May 8, 1997 to November 8,
1997. Pursuant to the agreement, as amended, the Company will
receive two-thirds of the net profits, as defined, after the
recoupment of certain project expenses aggregating approximately
$2,700,000, as defined. Additionally, the Company has received
guaranteed exhibition fees of $460,000 as a non-refundable
advance against its share of the net profits, as defined. The
Company is recognizing such guaranteed fees ratably over the term
8
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RMS TITANIC, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
of the exhibition, and accordingly recognized $76,667 of such fees
during the quarter ended May 31, 1997. The $383,333 balance of such
fees has been included in deferred revenue in the accompanying
balance sheet at May 31, 1997.
In August 1996, the Company entered into an agreement with the City
of Memphis, Tennessee, for an exhibition of Titanic artifacts in
Memphis, Tennessee from April 3, 1997 to September 30, 1997. Pursuant
to the agreement, as amended, the Company will receive guaranteed
exhibition fees of $720,000 in installments between September 1996
and August 1, 1997, and will receive 65% of the net profits, as
defined, derived from ticket, merchandise and sponsorship revenue in
excess of $5,000,000. The Company is recognizing such guaranteed
exhibition fees ratably over the term of the exhibition, and
accordingly recognized $240,000 of such fees during the quarter ended
May 31, 1997. The $480,000 balance of such fees has been included in
deferred revenue in the accompanying balance sheet at May 31, 1997.
In October 1996 the Company entered into an agreement with the
National Maritime Center ("Nauticus"), a political subdivision of the
City of Norfolk, Virginia, for an exhibition of Titanic artifacts at
Nauticus from November 27, 1996 through March 31, 1997. Pursuant to
the agreement, the Company received one-third of revenues from the
sale of the first 150,000 tickets, as defined. In addition, the
Company received fifty (50%) percent of net profits, as defined, from
the sale of merchandise at the exhibition.
In December 1996, the Company entered into an agreement with Florida
International Museum, Inc. for an exhibition of Titanic artifacts in
St. Petersburg, Florida, from November 15, 1997 to May 15, 1998.
Pursuant to the agreement, the Company will receive exhibition
revenue from attendance fees ranging from $0.34 to $3.10 per
attendee, based upon the total number of attendees during the
exhibition term ("Attendance Fee"). In addition, the Company will
receive 10% of gross revenue, as defined, from the sale of
merchandise at the exhibition ("Gift Shop Fee"). The minimum combined
Attendance Fee and Gift Shop Fee
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RMS TITANIC, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
payable to the Company under the terms of the agreement is $300,000.
As of May 31, 1997, $100,000 of such minimum payment has been
received by the Company and has been included in deferred revenue in
the accompanying balance sheet.
In May 1997 the Company entered into an agreement with the RMS
Foundation, Inc. for the exhibition of artifacts, expedition
equipment, photographs and film footage from the 1996 Titanic
expedition aboard the Queen Mary in Long Beach, California from June
1, 1997 through January 5, 1998 (the "Queen Mary"). Pursuant to the
Queen Mary exhibition agreement, the Company will receive $2.00 per
ticket from the sale of the first 150,000 tickets and $3.00 per
ticket from the sale of more than 150,000 tickets. In addition, the
Company will receive fifty (50%) percent of net profits, as defined,
from the sale of merchandise at the Queen Mary exhibition, and fifty
(50%) of any sponsorship revenues.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion provides information to assist in the
understanding of the Company's financial condition and results of operations,
and should be read in conjunction with the financial statements and related
notes appearing elsewhere herein.
RESULTS OF OPERATIONS
FOR THE QUARTER ENDED MAY 31, 1997 VERSUS
THE QUARTER ENDED MAY 31, 1996
During the first quarter of its 1998 fiscal year (the "1998 fiscal
year"), the Company's revenues increased approximately 698% as compared to the
first quarter of its 1997 fiscal year (the "1997 fiscal year"). This increase
was principally attributable to the recognition of $316,667 of revenue during
the first quarter of the 1998 fiscal year of guaranteed fees for its Memphis,
Tennessee and Hamburg, Germany exhibitions, which are being recognized ratably
over the term of the such exhibitions, and the recognition of additional ticket
and merchandise revenues primarily from the exhibition at the National Maritime
Center (NAUTICUS) in Norfolk, Virginia, which closed on March 31, 1997. The
Company did not have any exhibition
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activities during the first quarter of its 1997 fiscal year. The Company's
general and administrative expenses increased approximately 35% during the first
quarter of its 1998 fiscal year as compared to the first quarter of its 1997
fiscal year, principally as a result of a combination of an increase of $135,000
for conservation expenses incurred in connection with preparation of the
Company's Titanic artifacts for its Memphis and Hamburg exhibitions, and a
decrease of approximately $40,000 in the Company's legal fees.
LIQUIDITY AND CAPITAL RESOURCES
Note payable as of May 31, 1997 represents the balance owed to LS
Capital Corporation, formerly Lone Star Casino Corporation ("LS Capital"),
pursuant to a promissory note executed in May 1993. As provided in a settlement
agreement to resolve legal proceedings to enforce such promissory note and
counterclaims and third-party claims asserted by the Company, the Company has
agreed to pay LS Capital $154,271.62 in twelve (12) equal monthly installments,
commencing as of January 15, 1997, subject to acceleration in the event that the
Company achieves certain levels of revenue during such period. The Company's
working capital commitments during its 1997 fiscal year also include lease
payments for principal offices in the base amount of $61,000 per annum, and
compensation to its executive officer. Additionally, the Company has agreed to
pay a financial consulting firm the sum of $3,000 per month for a period of one
year commencing April 15, 1997 for financial public relations services.
In connection with its 1994 expedition to the wreck site of the
Titanic, the Company entered into an agreement with IFREMER to charter equipment
and crew necessary to conduct research and recovery efforts. Pursuant to the
terms of such charter agreement, the Company had paid IFREMER the sum of
$300,000 and was obligated to pay an additional $700,000 in two installments of
$350,000 each payable on September 30 and December 1, 1994. The installment due
to IFREMER on September 30, 1994 was paid during the first quarter of the
Company's 1996 fiscal year, payment of the final $350,000 installment was
extended to October 1, 1995. During the 1996 fiscal year, the Company paid
$70,000 on account of such obligation, with the $280,000 balance thereof having
been paid subsequent to February 29, 1996. The source of such $280,000 payment
was from an entity with which the Company entered into an agreement for the
marketing of coal and the sale of cabins of cruise ships which accompanied the
Company on its 1996 research and recovery expedition, and this payment was made
as an advance against the Company's share of profits from Titanic coal sales and
sales of such cruise ship cabins. The $280,000 advance was reduced by
approximately $94,154 from the sale of coal during the year ended February 28,
1997, resulting in an unpaid balance of $185,846 as of May 31, 1997. There were
no profits from sale of cruise ship cabins for the 1996 expedition.
The Company entered into an agreement with IFREMER to charter equipment
and crew necessary to conduct a research and recovery expedition to the wreck
site of the Titanic in the Summer, 1996. Pursuant to the terms of such charter
agreement, the Company agreed to pay IFREMER 2,000,000 French francs
(approximately $400,000 U.S. Dollars) on or before June 20, 1996; 2,100,000
French francs (approximately $420,000 U.S.
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Dollars) on or before July 15, 1996; and the sum of $980,000, payable as
follows: (a) remittance of fifty (50%) of the wholesale price of any products
sold by the Company involving the 1996 expedition, up to a maximum of $480,000;
and (b) up to a maximum of $500,000 payable from the following sources: (i) $.50
per visitor to any exhibition organized by the Company; (ii) a lump sum of
$250,000 for the Memphis exhibition, payable prior to March 1, 1997; and (iii)
one-third of the Company's revenues received from any exhibition of artifacts
organized by a third party, as described. The agreement further provides that in
the event the payments from these sources do not amount to $980,000 within three
(3) years after September 1, 1996, any remaining balance shall be paid from the
Company's exhibition revenues, as defined above. All objects recovered during
the 1996 expedition will be the subject of a lien granted to IFREMER until the
Company pays all sums due and owing to IFREMER for the 1996 expedition. In April
1997 the Company paid IFREMER the sum of $125,000 on account of its 1996
expedition charter costs, leaving a balance of $125,000 due from the lump sum of
$250,000 from the Memphis exhibition. The Company has not paid IFREMER any
portion of the revenues received from the exhibition presented at the National
Maritime Center (NAUTICUS) from November 27, 1996 through March 31, 1997. The
Company and IFREMER have been pursuing negotiations for the restructuring of the
Company's obligations under the 1996 charter agreement so as to provide for the
payment of a percentage of revenues in installments that correspond to the
Company's future receipt of revenues from exhibitions, irrespective of whether
such exhibitions have been organized by the Company. No assurances can be given
that such negotiations will be successfully consummated.
The Company entered into an agreement for a television production
whereby the Company granted certain rights to the production companies for the
production and exploitation of audio and visual recordings related to the 1996
expedition. The Company's obligations to make the June and July 1996 payments to
IFREMER aggregating $820,000 were paid as part of the television production
budget. The Company is obligated to contribute $100,000 to such production,
$40,000 of which was satisfied through the grant of certain rights to present
information and images concerning the 1996 expedition on the Internet, and the
balance of $60,000 of which was due from the Company on April 16, 1997. Such
amount remains outstanding as of the date of this report. The Company has
retained the rights for commercial exploitation of recordings made at the
Titanic wreck site in a print format and certain royalty and other rights with
respect to the sale of home videos based upon the 1996 expedition. The Company
has also granted to the television production companies a right of first
negotiation with respect to the Company's next expedition to the Titanic wreck
site.
The Company's near term operating needs will be financed principally
from the advance distribution of revenues to the Company under its agreements
for exhibitions in Memphis, Tennessee; Hamburg, Germany; at the Queen Mary in
Long Beach, California; and in St. Petersburg, Florida. Under its exhibition
agreement with the City of Memphis, the Company is entitled to receive $270,000
on August 1, 1997, representing the balance of the guaranteed exhibition fees
payable to the Company. By agreement between the City
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of Memphis, the Company and LP3 Conservation ("LP3"), $100,000 of such $270,000
payment was to be advanced to LP3 for conservation services rendered in
connection with the preparation of artifacts for the Memphis exhibition through
the payment to LP3 of $0.25 per ticket sold to the Memphis exhibition. As a
consequence of such advance of $100,000, the Company is entitled to receive a
net amount of the remaining $170,000 from the City of Memphis on August 1, 1997.
In order to assist the Company in addressing operating needs between May 1, 1997
and August 1, 1997, LP3 has assigned to the Company its rights to receive
payment of $0.25 per ticket in consideration for the Company's agreement to
assign $100,000 of the $170,000 payment to be made by the City of Memphis to the
Company on August 1, 1997. Any additional sums to be paid by the City of Memphis
to the Company will be dependent upon the revenues derived from the Memphis
exhibition exceeding a threshold of $5,000,000, plus the actual out-of-pocket
expenses incurred by the City of Memphis in packing, shipping and insuring the
transit of the objects from Semur-en-Auxious, France, where the conservation
laboratory is located, to Memphis, Tennessee. Additionally, the Company's rights
to receive additional revenues from the Hamburg exhibition will depend upon the
revenues derived from such exhibition exceeding approximately $2,700,000. The
Company is entitled to receive $2.00 per ticket for the first 150,000 tickets
sold at the Queen Mary exhibition, and $3.00 per ticket for tickets in excess of
150,000, plus an amount equal to fifty (50%) of net merchandising revenues, as
defined. Additionally, the Company is entitled to receive an additional advance
of $50,000 from the Florida International Museum on November 15, 1997, and the
sum of $250,000 from CRE-CO Finanz GmbH on or before December 31, 1997 in the
event that an outstanding option to present an exhibition of the Company's
Titanic artifacts in Europe is exercised. Additionally, the sum of $150,000 will
be received on or before May 15, 1998 from the Florida International Museum. In
the event that cash flows are not adequate to satisfy the Company's future
operating needs, inclusive of payment of outstanding liabilities, additional
debt and/or equity financing will be required.
In order for the Company to design, construct and embark on the planned
Waterborne Exhibition, additional debt and/or equity financing will be required.
While management believes that such financing will be available, no assurances
can be given that the Company will be successful in its efforts to obtain
additional financing, or that such financing will be available on a satisfactory
timetable. If the Company is unable to arrange income producing exhibitions
similar to its land-based exhibitions in Memphis, Hamburg and Long Beach, or
funding for the planned worldwide touring exhibition is not obtained, there
could be a curtailment of the Company's long-term business activities and
material delays in the implementation of its business plans.
Until such time as the Company, if ever, presents the exhibition of its
artifacts on the Waterborne Exhibition, the Company could experience
difficulties or delays in making arrangements with third parties for the
presentation of exhibitions at land-based venues on terms that are acceptable
and satisfactory to the Company. The Company's ability to present such
exhibitions in association with third parties will be dependent upon the
agreement of such third parties to construct, market and operate the
exhibitions, or the
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Company having adequate financial resources to construct and/or operate the
exhibitions. Delays or difficulties in making arrangements for the presentation
of exhibitions at land-based venues could have a materially adverse affect upon
the Company's operations. Although the Company is seeking arrangements for the
presentation of "Titanic: The Exhibition" after its presentation at the Florida
International Museum ends on May 15, 1998 and for the presentation of "Titanic:
The Expedition" after its presentation ends at the Queen Mary on January 5,
1998, no assurances can be made that the Company will be successful in
effectuating such arrangements on terms that are acceptable or satisfactory to
the Company.
The Company could experience difficulties or delays in obtaining
financing for the Waterborne Exhibition, and if financing is obtained on terms
acceptable to the Company, could also experience difficulties or delays in the
construction of the Waterborne Exhibition is subject to all the delays and
uncertainties associated with construction projects generally. Additionally, the
Company has not made arrangements for the presentation of the Waterborne
Exhibition in specific ports and will need to obtain permits and approvals from
local governmental authorities. While management of the Company believes that
such arrangements will be available on terms and conditions acceptable to the
Company, and that the Company will satisfy requirements for such permits and
approvals, difficulties and delays could be encountered in securing prospective
sites and/or the requisite permits and approvals, which, in turn, could delay or
otherwise adversely impact the Company's revenue producing activities.
The Company has been seeking and intends to continue to seek debt
financing to fund as much of the Waterborne Exhibition as may be available on
terms satisfactory to the Company. In connection with any such debt financing
that may be obtained, no assurances of which can be given, the Company expects,
among other things, to be required to pledge its assets to a lender, to be
restricted in its ability to incur additional obligations, and/or to abide by
certain financial covenants.
The Company's strategy for presenting exhibitions of Titanic artifacts
is dependent upon making acceptable arrangements with third parties or hiring
personnel who are experienced and possess expertise in operation and marketing
exhibitions. Management of the Company believes that acceptable arrangements
with such personnel or third-parties can be made within time frames required to
implement the Company's exhibition strategies. However, no assurance can be made
that such personnel or third-parties will be available on satisfactory terms or
when needed by the Company. Delays or difficulties in engaging personnel or
third parties for the operations and marketing of exhibitions, including without
limitation the Waterborne Exhibition, could have a materially adverse affect
upon the Company's operations.
The Company's future business and operating results depend in
significant part upon the continued contributions of George Tulloch, the
Company's President. The Company does not maintain a key person life insurance
policy on Mr. Tulloch. The Company's future
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business and operating results also depends in significant part upon its ability
to attract and retain qualified additional management, marketing and support
personnel for its operations.
In order to protect its salvor-in-possession status and to prevent
third-parties from salvaging the Titanic wreck and wreck site, or interfering
with the Company's rights and ability to salvage the wreck and wreck site, the
Company may have to commence judicial proceedings against third-parties. Such
proceedings could be expensive and time-consuming. Additionally, the Company, in
order to maintain its salvor-in-possession status, needs to, among other things,
maintain a reasonable presence at the wreck through periodic expeditions. In
addition to the payment of the balance due to IFREMER for the Summer of 1996
Expedition, the Company will be required to incur the costs for future
expeditions so as to maintain its salvor-in-possession status. The Company's
ability to undertake future expeditions may be dependent upon the availability
of financing from the grant of licenses to produce television programming and/or
the grant of expedition sponsorship rights. No assurances can be given that such
financing will be available on satisfactory terms.
The amount spent by consumers on discretionary items, such as
entertainment activities and the purchase of merchandise, is dependent upon
consumers' levels of discretionary income, which may be adversely affected by
general or local economic conditions. A decrease in consumer spending on such
activities could have a material adverse effect on the Company's revenues from
exhibition activities and merchandising efforts.
To the extent that the Company has transactions outside of the United
States, the Company could be affected by nationalizations or unstable
governments or legal systems or intergovernmental disputes. These economic and
political uncertainties may affect the Company's results of operations,
especially to the extent that these matters affect the Company's exhibition
plans in Europe.
In connection with its activities outside of the United States, the
Company is exposed to the risk of currency fluctuations between the United
States dollar and certain foreign currency. If the value of the United States
dollar increases in relation to the foreign currency, the Company's potential
revenues from exhibition and merchandising activities outside of the United
States will be adversely affected. During the 1997 fiscal year, there were no
significant fluctuations in the exchange rates. Although the Company's financial
arrangements with IFREMER, the National Maritime Museum of Greenwich, England
and other entities have been based in whole or in part upon foreign currencies,
the Company has sought and will continue to seek to base its financial
commitments and understandings upon the United States dollar in its material
business transactions so as to minimize the adverse potential effect of currency
fluctuations.
15
<PAGE> 16
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULT UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
By written consent of a majority of shareholders dated May 1,
1997, Messrs. Gasparrini, Vitti, Duffy and Slavitt were removed as directors of
the Company. Such removal will become effective twenty (20) days after
distribution of an Information Statement in accordance with the provisions of
the Securities Act of 1934, as amended.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
10.1 Agreement dated May 23, 1997 between the Company and
RMS Foundation, Inc.
10.2 Amendment to Agreement dated April 15, 1996 between
the Company and CRE-CO Finanz GmbH.
10.3 Amendment to Agreement dated August 6, 1996 between
the Company and the City of Memphis.
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
None.
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
RMS TITANIC, INC.
(Registrant)
Dated: July 21, 1997 By: /s/ George Tulloch
--------------------------------------------
George Tulloch, Principal Executive Officer
and Acting Principal Accounting Officer
17
<PAGE> 18
EXHIBIT INDEX
Exhibit No. Description
10.1 Agreement dated May 23, 1997 between the Company and
RMS Foundation, Inc.
10.2 Amendment to Agreement dated April 15, 1996 between
the Company and CRE-CO Finanz GmbH.
10.3 Amendment to Agreement dated August 6, 1996 between
the Company and the City of Memphis.
27 Financial Data Schedule
<PAGE> 1
[Exhibit 10.1]
E X H I B I T I O N
A G R E E M E N T
THIS EXHIBITION AGREEMENT, entered into this 23rd day of May,
1997, by and between RMS Titanic, Inc., a corporation organized under the laws
of the State of Florida and having its principal place of business at 17 Battery
Place, New York, New York 10004 ("RMST") and RMS Foundation Inc., a California
not-for-profit corporation having its principal place of business at 1126 Queens
Highway, Long Beach, California 90802-6390 ("Queen Mary").
WHEREAS, RMST and Queen Mary wish to work in association with
one another to present an exhibition in Queen Mary of artifacts recovered by
RMST from the wreck site of the Titanic (the "Exhibition"), together with
supporting material, and
WHEREAS, RMST wishes to provide artifacts recovered from the
Titanic wreck site, together with supporting material, and Queen Mary wishes to
finance, design, construct and operate the Exhibition, subject to the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
conditions contained in this Agreement, the parties hereto agree as follows:
1. DEFINITIONS.
Except as otherwise indicated elsewhere in this Agreement, the
following words and expressions shall have the following meanings:
1.1 "Artifacts" shall mean the objects recovered during RMST's
1996 recovery expedition to the wreck site of the Titanic as enumerated on
Schedule A annexed hereto and approximately 10 objects in the ownership of RMST
recovered from the wreck site of the Titanic in RMST's 1987, 1993 or 1994
recovery expeditions, all as enumerated on Schedule B annexed hereto. Any
additions, deletions or modifications to Schedule A annexed hereto must be
mutually approved by RMST and Queen Mary.
1.2 "Exhibition Term" shall mean the period commencing June 1,
1997 and expiring on January 5, 1998.
1.3 "Project Expenses" shall include, all costs and expenses
authorized by Queen Mary of every kind and description incurred in establishing
and presenting the Exhibition (except as may be otherwise expressly set forth
herein), including, without limitation, design and fabrication of the
Exhibition, and operating the Exhibition.
<PAGE> 2
1.4 "Revenue" shall mean and include the aggregate of:
1.4.1 "Merchandising Revenue," which shall include all
revenues derived from the sale of RMST Merchandise (as defined
by Section 7.1 hereof) sold on the Queen Mary, minus sales
tax, credit card fees and check verification fees.
1.4.2 "Sponsorship Revenue," which shall include all revenues
derived from the granting of sponsorship or promotion rights
to third parties for the Exhibition.
1.4.3 "Ticket Revenue," which shall include all sums generated
by ticket sales for admission to the Exhibition, minus sales
tax, credit card fees, ticket outlet service fees, and check
verification fees.
1.5 "Supporting Material" to be supplied by RMST shall mean
material relating specifically to the recovery of the Artifacts recovered by
RMST from the wreck site of the Titanic, including but not limited to
photographs and video footage.
1.6 "Venue" shall mean the Queen Mary Seaport Complex in the
City of Long Beach, California.
2. THEMES AND DURATION OF THE EXHIBITION, AND RMST'S
CONSULTATION RIGHTS.
2.1 The parties agree that the Exhibition will principally
address RMST's 1996 recovery expedition to the Titanic wreck site and
conservation of the Artifacts.
2.2 The name of the Exhibition shall be "Titanic: The
Expedition."
2.3 The Exhibition is to be co-presented by Queen Mary and
RMST, and will be advertised and promoted in such manner as will reasonably give
recognition to RMST's co-production of the Exhibition.
2.4 Queen Mary and RMST acknowledge that work on the design
and construction of the Exhibition will commence following the execution of this
Agreement, and, subject to the terms of this Agreement, that Queen Mary will
have the responsibility for the design and construction of the Exhibition. In
connection with these matters, Queen Mary acknowledges that RMST has sought, and
intends to continue to seek, to preserve and promote the memory of the Titanic
with dignity and respect, and with due regard to Titanic's historical and
maritime significance. Queen Mary accordingly agrees that the Exhibition will be
designed and constructed in a manner that is consistent with RMST's desire to
preserve and promote the memory of the
2
<PAGE> 3
Titanic, as described above. In furtherance of the foregoing, Queen Mary agrees:
2.4.1 (a) The design and content of the Exhibition;
(b) the content of all marketing, advertising and public
relations materials; (c) the content of a guided or other tour
of the Exhibition to be produced by Queen Mary, as provided
elsewhere herein; and (d) and the content of a catalogue for
the Exhibition shall all be subject to review by RMST. Queen
Mary will cooperate with RMST and will not unreasonably
withhold its approval of changes as suggested by RMST.
2.4.2 Queen Mary will require its key design and
other specialist personnel to meet with representatives of
RMST to review the progress of preparation of the Exhibition.
2.4.3 Upon reasonable request of RMST, Queen Mary
will provide reasonable access for RMST representatives to
observe the construction of the Exhibition.
3. THE OBLIGATIONS OF QUEEN MARY.
Queen Mary agrees, and represents and warrants that it has
adequate financial resources, to pay the Project Expenses and to:
3.1 Obtain all rights, permits and licenses as may be
required, for presentation of the Exhibition in the Venue, and in connection
therewith, Queen Mary represents and warrants that all improvements of the Venue
will be completed sufficiently in advance of the opening of the Exhibition so as
to permit the Exhibition to commence as scheduled and to display the Artifacts
and present them in a manner that will allow the public to safely view them.
3.2 Develop and implement a marketing, advertising, promotion
and public relations plan for the Exhibition in consultation with RMST, for
which Queen Mary is committed to cause to have expended Two Hundred Thousand
($200,000) Dollars. or causing the placement of advertising having a value of
$200,000.
3.3 Develop and implement an admissions and sales program
including ticket sales, toll-free telephone sales, media and sales blitzes, box
office, group sales, and other means to maximize attendance at the Exhibition.
3.4 Be responsible for the care and storage of the Artifacts
and Supporting Material, including, but not limited to, conservation inspections
so as to protect the Artifacts from the elements, extreme lighting, temperature,
humidity, unauthorized photography, filming or videotaping, or handling by
unauthorized personnel in a manner that could damage the Artifacts.
3
<PAGE> 4
3.5 Provide full insurance coverage for the Artifacts as
indicated on Schedules A and B, but not to exceed Five Million ($5,000,000)
Dollars in assessed valuation, from the time the Artifacts are delivered by RMST
to Queen Mary until they are returned to RMST, and arrange to add RMST as an
additional insured on all liability and property insurance policies maintained
by Queen Mary, with proof thereof to be delivered to RMST promptly upon such
arrangements becoming effective, and in no event, not later than May 31, 1997.
Upon request of RMST, Queen Mary shall arrange to furnish RMST with a copy of
such insurance policies.
3.6 Be responsible for the installation and de-installation of
the Artifacts in the Exhibition.
3.7 Be responsible for all staffing and the operations of the
Exhibition so as to permit the Exhibition to be open to the general public on a
daily basis between the hours of 10:00 AM and 6:00 PM.
3.8 Be responsible for the security of the Artifacts and the
Supporting Material from the time the Artifacts and Supporting Material are
delivered by RMST to Queen Mary and until returned to RMST in accordance with
Section 3.9 hereof.
3.9 Be responsible for payment of all Artifact prepacking,
packing, handling, security, insurance, and the transportation thereof from The
National Maritime Center ("Nauticus") in Norfolk, Virginia to Queen Mary, and as
may be applicable, Artifact prepacking, packing, handling, security, insurance,
export and import customs charges and duties, and the international
transportation thereof from Semur-en-Auxious, France to Queen Mary, and for
their subsequent return to RMST in Long Beach, California within thirty (30)
days of the end of the Exhibition Term.
3.10 Provide secure, pest-free storage for shipping crates.
3.11 Use its best efforts to produce a guided tour for the
Exhibition.
3.12 Grant RMST a right of first refusal for the purchase of
any or all display cases, theatrical pieces, didactic panels, models, lighting
instruments, and other display items that may be developed or purchased by Queen
Mary for the Exhibition at a price equal to seventy-five (75%) percent of the
cost of the purchase or production thereof, with such right of first refusal to
be exercised no later than the close of the Exhibition and with Queen Mary to
furnish RMST with an itemized list of the foregoing items, including the cost
thereof, within thirty (30) days of the opening of the Exhibition. Payment for
such items shall be due in full upon RMST's acceptance of delivery of the items
at the Venue in an "as is" condition no later than thirty (30) days after the
end of the Exhibition Term.
3.13 Design, construct, market and operate the Exhibition
consistent with the standards of existing Queen Mary exhibits.
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<PAGE> 5
3.14 Lease from the City of Norfolk the display cases,
theatrical pieces, didactic panels, models, lighting instruments, and other
display items (collectively, the "Exhibitry") utilized in connection with the
presentation of "Titanic: The Expedition" at the National Maritime Center
("NAUTICUS"), Norfolk, Virginia for the Exhibition, and will be responsible for
arranging and paying for all costs and expenses related to the packing,
handling, security, insurance and transportation of the Exhibitry from Norfolk,
Virginia to Queen Mary and related to the return thereof from Queen Mary to
Norfolk, Virginia upon expiration of the Exhibition Term.
3.15 Queen Mary expressly acknowledges it does not claim and
represents and warrants that it shall not claim to have any rights, title or
interest in the ownership of the Artifacts or any rights to possess the
Artifacts during the Exhibition Term in accordance with the provisions of this
Agreement. Queen Mary hereby agrees to execute such financing statements on Form
UCC-1 and such other documents as RMST shall request to protect RMST's ownership
interests in the Artifacts.
4. RMST'S OBLIGATIONS.
RMST agrees to:
4.1 Make available such Supporting Material as and when Queen
Mary shall reasonably require following consultation with RMST, subject to
RMST's obligations to also make available Supporting Material for the exhibition
of Titanic artifacts in Memphis, Tennessee commencing on April 3, 1997, in St.
Petersburg, Florida commencing on November 15, 1997, and in Europe commencing on
or about May 1, 1997.
4.2 During the Exhibition Term, RMST shall not, and shall not
grant to any third parties any rights to, exhibit objects recovered from the
Titanic in North America, except for the exhibition of Titanic artifacts in
Memphis, Tennessee during the period from April 3, 1997 through September 30,
1997, in St. Petersburg, Florida during the period from November 15, 1997
through May 15, 1998, and in connection with a promotional book tour that is
planned for the period between October 1, 1997 and November 15, 1997, during
which two (2) objects may be displayed.
4.3 RMST represents and warrants that it has title and rights
to all of the Artifacts, free and clear of all liens and encumbrances that could
affect the ability of RMST to exhibit the Artifacts at Queen Mary during the
Exhibition Term, and agrees to indemnify and hold Queen Mary harmless from any
and all suits brought by other parties relating to RMST's rights, title and
interest to the Artifacts.
4.8 RMST shall arrange for the removal of the Artifacts within
thirty (30) days of the end of the Exhibition Term.
5
<PAGE> 6
5. COLLECTION, DIVISION AND PAYMENT OF REVENUES.
5.1 Ticket Revenue shall be divided between the parties as
follows: RMST shall receive $2.00 from the sale of the first 150,000 tickets to
the Exhibition and $3.00 from the sale of all tickets in excess of the first
150,000 tickets. For the purpose of the foregoing, any combined ticket that
permits a visitor to be admitted to the Exhibition and a Queen Mary exhibition
presented separate from the Exhibition shall be considered the sale of a ticket
to the Exhibition (the "Combined Ticket"). A separate entrance to the Exhibition
shall be established by Queen Mary so as to allow only purchasers of a ticket to
the Exhibition or a Combined Ticket to be admitted to the Exhibition. All Ticket
Revenue shall be collected by Queen Mary and RMST's share thereof shall be
remitted to RMST within seven (7) days of receipt thereof by Queen Mary.
5.2. Sponsorship Revenue shall be divided equally between the
parties, and shall be payable to and collectible by Queen Mary. RMST and Queen
Mary agree to jointly develop appropriate sponsorship packages for the
solicitation and procurement of sponsors for the Exhibition, and no sponsor
shall be entitled to rights and privileges other than those mutually agreed upon
by RMST and Queen Mary. Nothing in this Agreement shall be construed as
prohibiting or limiting the rights of either party to solicit, before, during
and after the Exhibition Term, sponsors for its exhibition activities apart from
the Exhibition, and both parties expressly acknowledge that neither party shall
have any right to share in any sponsorship revenues derived from either party's
other exhibition activities.
5.3 All Merchandising Revenue, less cost of goods sold and the
payroll of personnel which specifically staff an Exhibition Merchandise Shop,
such as cash register attendants and sales clerks, shall be divided equally
between the parties and shall be collected by Queen Mary, with RMST's share
thereof, to be paid to RMST in arrears on a monthly basis, with such payment to
be made within fifteen (15) days of the calendar end of each month. For purposes
of the foregoing, costs of good sold shall mean the cost that RMST or Queen Mary
pays to produce or purchase the goods.
5.4 Except for obligations pursuant to Section 11 hereof, RMST
shall not bear any responsibility for any financial losses that may be incurred
in connection with the presentation of the Exhibition.
5.5 Queen Mary shall furnish to RMST monthly accountings
regarding Ticket Revenue, Sponsorship Revenue and Merchandising Revenue no later
than fifteen (15) days after the close of the month covered by such accounting.
5.6 Except for obligations pursuant to Section 11 hereof,
Queen Mary shall not bear any responsibility or liability for any financial
losses that may be incurred by RMST.
5.7 (a) Queen Mary shall maintain all books of accounts and
all documents
6
<PAGE> 7
necessary to audit, review and verify Revenue. Queen Mary agrees to allow
authorized representatives of RMST to have reasonable access to such books and
records, and to make such copies thereof as such representatives shall
reasonably require. In the event that an audit reflects a five (5%) percent or
greater discrepancy from the accounting furnished by Queen Mary to RMST pursuant
to Section 5.5 hereof, then Queen Mary shall be responsible for payment of the
costs of such audit. RMST shall have the right to engage one or more agents, at
its own expense, to be present at all times or such times as RMST deems
appropriate, at the Exhibition ticket office and/or admissions entrance and/or
Exhibition or other gift shop operated pursuant hereto for purposes of obtaining
information concerning ticket sales and merchandise sales.
5.8 All Revenues collected by Queen Mary under the terms of
this Agreement shall be deposited in a special trust account established by RMS
Foundation for the joint benefit of both parties hereunder. The respective
shares of the parties' Ticket Revenue, Merchandise Revenue and Sponsorship
Revenue shall be simultaneously disbursed to each party from such trust account.
The trust account will be established in a bank designated by Queen Mary and
will require the signatures of at least one representative of Queen Mary and at
least one representative of RMST in order to effect withdrawals or other
disbursements of monies therefrom. Nothing in this Agreement shall be construed
as recognizing Queen Mary as the owner of any Revenues to which RMST is entitled
to distribution hereunder or as recognizing RMST as owner of any Revenues to
which Queen Mary is entitled to distribution hereunder.
6. MARKETING, ADVERTISING AND PUBLICITY.
6.1 RMST shall be fully consulted about and shall participate
in the scheduling and details of all marketing, advertising and publicity
activities relating to the Exhibition. RMST shall cooperate and not unreasonably
withhold its consent to, or unreasonably refuse to participate in, promotional
activities.
6.2 Queen Mary shall make available to RMST any advertising or
promotional material in advance of the utilization thereof by Queen Mary for the
marketing or promoting the Exhibition. RMST shall make available to Queen Mary
any advertising or promotional material in advance of the utilization thereof by
RMST for marketing or promoting the Exhibition.
6.3 Except as set forth below, no advertising, promotional or
other marketing materials may be used by Queen Mary without RMST's prior written
consent, which consent shall not be unreasonably withheld. RMST shall respond to
all such materials within one (1) business day of the receipt thereof. Queen
Mary agrees that the content of all advertising, promotional and marketing
materials will be consistent with RMST's desire to preserve and promote the
memory of Titanic, and that all advertising, promotional and marketing materials
that have been approved by RMST may be utilized by Queen Mary in other formats
without further approval of RMST so long as the substance thereof has not been
materially changed and is consistent with the first sentence of this Section
6.3. Queen Mary further agrees that all advertising, promotional or other
marketing materials which refer to the availability of a Combined Ticket (as
referred to in Section
7
<PAGE> 8
5.1 hereof) shall give at least equal prominence to the availability of tickets
for admission only to the Exhibition.
7. MERCHANDISING.
7.1 The parties agree that a gift shop shall be established
within the Exhibition (the "Exhibition Merchandise Shop") consisting of
approximately 300 square feet for the offer of merchandise related to the
Titanic, the Exhibition or RMST ("RMST Merchandise") and such other merchandise
as the parties shall mutually agree upon. All staff and equipment necessary for
the operation of the Exhibition Merchandise Shop shall be furnished by Queen
Mary. Queen Mary shall provide and replenish as needed an inventory of souvenir
apparel (T-shirts, polo shirts, sweat shirts, and caps), printed and audio
visual materials, such as posters, post cards, books and videotapes about the
Titanic, and other souvenir items, such as pencils, pens, mugs, and authentic
Titanic coal for purchase at the Exhibition Merchandise Shop. A reasonable
cross-section of the RMST Merchandise shall also be made available for sale at
the gift shop that customarily operates at Queen Mary. The items of merchandise
to be sold at the Merchandise Shop relating to or depicting the Titanic shall be
subject to RMST's consent, which consent shall not be unreasonably withheld,
based upon RMST's desire to preserve and promote the memory of the Titanic with
dignity and respect, and with due regard to Titanic's historical and maritime
significance.
7.2 To the extent that Queen Mary obtains the names and/or
addresses of the purchasers of merchandise at the Exhibition, a list of such
names and addresses shall be furnished to RMST. Both parties shall have the
right to use the list of such purchasers as they may respectively determine
thereafter, independent of, and without claims or rights, of the other party
hereto.
7.3 No merchandise derived from, related to or depicting the
Artifacts, Supporting Material or other property rights of RMST shall be offered
for sale or sold by Queen Mary through any outlet other than the Exhibition
Merchandise Shop and the merchandise shops that is customarily operated at Queen
Mary during the Exhibition Term, including, but not limited to, direct marketing
programs conducted by mail, telemarketing, any public or proprietary on-line
computerized interactive information retrieval network or system (the
"Internet"), or otherwise, without the express written consent of RMST.
7.4 Nothing in this Agreement shall be construed as
prohibiting or limiting the rights of RMST to market merchandise relating to the
Titanic through non-retail means throughout the world and through the
establishment of retail outlets outside of the City of Long Beach, California.
For purposes of the foregoing, the marketing of merchandise through the Internet
or through direct response, including but not limited to direct mail, promotions
shall be deemed to be non-retail marketing.
8. AUDIO VISUAL RIGHTS.
8
<PAGE> 9
8.1 Except for the purpose of promoting the Exhibition (the
"Promotional Work"), no television, video, film, music, photography or other
audio visual rights, including but not limited to, telecommunication mediums
such as the Internet, are granted by RMST to Queen Mary. The parties further
agree that the subject of the Promotional Work shall be limited to the
Exhibition, and that subject to RMST's prior written consent, a reasonable
portion of RMST's Supporting Material shall be made available for utilization in
the Promotional Work. All rights and title to photographs of the Artifacts and
RMST's Supporting Material shall be owned exclusively by RMST, and no rights or
interests therein are hereby conferred upon Queen Mary except as expressly set
forth in this Agreement. RMST shall have the right to approve the content and
form of the Promotional Work prior to the release thereof to the public, which
consent shall not be unreasonably withheld.
8.2 Any Internet site used by Queen Mary to promote or
advertise the Exhibition shall include a reference, on the initial screen
thereof, that the Exhibition is co-produced with RMST, and shall contain a
hypertext link to RMST's internet site at the first reference to RMST. Any
Internet site used by RMST shall include a reference, on the initial screen
thereof, that the Exhibition is being presented at Queen Mary, and shall contain
a hypertext link to the Internet site used by Queen Mary to promote or advertise
the Exhibition.
8.3 Queen Mary will refuse admission to the Exhibition to
anyone carrying, or who has within their control, sight or sound devices which
enable them to film or record the Exhibition, and will eject any person who
refuses to relinquish such sight and sound equipment prior to entering the
Exhibition.
9. TICKET SALES.
9.1 All ticket prices for the Exhibition shall be as follows:
Adults - $6.00; Seniors (60+) and military - $5.00; Youth (5-16 yrs.) - $5.00.
9.2 To the extent that Queen Mary obtains the names and/or
addresses of the purchasers of tickets for the Exhibition, a list of such names
and addresses shall be furnished to RMST. Both parties shall have the right to
use the list of such purchasers as they may respectively determine thereafter,
independent of, and without claims or rights, of the other party hereto.
10. PRE-RECORDED TOUR GUIDE.
Queen Mary shall have the right, but not the obligation, to
arrange for the prerecording at the Exhibition of a pre-recorded tour guide,
subject, however, to RMST's written approval thereof, which approval shall not
be unreasonably withheld. It is agreed that all persons attending the Exhibition
will be entitled to receive such pre-recorded tour guide without payment of
additional charges or fees.
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<PAGE> 10
11. INDEMNITIES.
11.1 RMST agrees to indemnify, defend and hold harmless Queen
Mary, its subsidiaries, parent companies, affiliates, agents, and assigns and
their respective agents, officers, employees, and directors, from and against
any and all losses, damages, liabilities, claims, demands, suits and expenses
that Queen Mary may incur or be liable for as a result of any claim, suit or
proceeding made or brought against Queen Mary based upon, arising out of, or in
connection with RMST's breach of any of its duties or obligations hereunder.
11.2 Queen Mary, as may be permitted by law, agrees to
indemnify, defend and hold harmless RMST, its subsidiaries, parent companies,
affiliates, agents, and assigns and their respective agents, officers,
employees, and directors, from and against any and all losses, damages,
liabilities, claims, demands, suits and expenses that RMST may incur or be
liable for as a result of any claim, suit or proceeding made or brought against
RMST based upon, arising out of, or in connection with Queen Mary's breach of
any of its duties or obligations hereunder.
11.3 Each party shall give the other party prompt notice of
any claim or suit coming within the purview of these indemnities. Upon the
written request of any indemnitee, the indemnitor shall assume the defense of
any claim, demand or action against such indemnitee, and shall upon the request
of the indemnitee, allow the indemnitee to participate in the defense thereof,
such participation to be at the expense of the indemnitee. Settlement by the
indemnitee without the indemnitor's prior written consent shall release the
indemnitor from the indemnity as to the claim, demand or action so settled.
12. TRADEMARK RIGHTS.
Neither party, by virtue of this Agreement, shall obtain or
claim any right, title or interest in or to the other's name, trademark or logo,
except the right to use as specified herein and hereby acknowledges and agrees
that all such use shall inure to the benefit of the respective owner.
13. OBLIGATIONS UPON TERMINATION.
13.1 Within thirty (30) days of termination of the Exhibition
Term, RMST at the request of Queen Mary shall forthwith return to Queen Mary or
otherwise dispose of as Queen Mary may direct all pamphlets, literature,
photographs, catalogues, advertising material, specifications, cost estimates
and other materials, documents and papers whatsoever belonging to Queen Mary and
sent to RMST relating to the Exhibition (other than correspondence between Queen
Mary and RMST) which RMST may have in its possession or under its control,
except that RMST shall have the right to retain one (1) copy of each of the
foregoing for archival purposes.
13.2 Within thirty (30) days of termination of the Exhibition
Term, Queen Mary at the request of RMST shall forthwith return to RMST or
otherwise dispose of as RMST may
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<PAGE> 11
direct all pamphlets, literature, contractual documentation, photographs,
catalogues, advertising material, specifications, cost estimates and other
materials, documents and papers whatsoever belonging to RMST and sent to RMST
relating to the Exhibition (other than correspondence between Queen Mary and
RMST) which Queen Mary may have in its possession or under its control, except
that Queen Mary shall have the right to retain one (1) copy of each of the
foregoing for archival purposes.
13.3 If either party brings an action against the other to
enforce any condition or covenant of this Agreement or for breach of its
obligations under this Agreement, the prevailing party shall be entitled to
recover from the other party its court costs and reasonable attorney's fees
incurred in such action.
14. MISCELLANEOUS.
14.1 Other Documents. Each of the parties hereto shall execute
and deliver such other and further documents and instruments, and take such
other and further actions, as may be reasonably requested of them for the
implementation and consummation of this Agreement and the transactions herein
contemplated.
14.2 Parties in Interest. This agreement shall be binding upon
and inure to the benefit of the parties hereto, and the successors and assigns
of all of them, but shall not confer, expressly or by implication, any rights or
remedies upon any other party.
14.3 Governing Law. This agreement is made and shall be
governed in all respects, including validity, interpretation and effect, by the
laws of the State of New York, USA, without recourse to its conflict of laws
principles. Any legal action or proceeding with respect to this Agreement may be
brought in the courts of the State of New York or of the United States of
America for the Southern District of New York, and, by execution and delivery of
this Agreement, Queen Mary and RMST hereby accepts for itself and in respect of
its property, generally and unconditionally, the jurisdiction of the aforesaid
courts. Queen Mary and RMST hereby irrevocably waive, in connection with any
such action or proceeding, (i) trial by jury, (ii) any objection, including,
without limitation, any objection to the laying of venue or based on the grounds
of forum non conveniens, which it may now or hereafter have to the bringing of
any such action or proceeding in such respective jurisdictions.
14.4 Notices. All notices required to be given under the terms
of this Agreement shall be in writing (including telegraphic, telex, and
facsimile transmissions, provided that a copy thereof is also sent by certified
or registered air mail on the same day as such telegraphic, telex or facsimile
transmission) and shall be deemed to have been duly given if delivered to the
addressee in person (and receipted on a copy of such notice), or transmitted, or
mailed by certified or registered air mail, return receipt requested, as
follows:
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If to RMST, addressed to:
RMS Titanic, Inc.
17 Battery Place
Suite 203
New York, New York
Attention: George Tulloch, President
If to Queen Mary, addressed to:
RMS Foundation Inc.
1126 Queens Highway
Long Beach, CA 90802-6390
Attention: Joseph Prevatil, President
All such notices shall be effective upon the delivery thereof to the addressee
in person or via telegraph, telex or facsimile, or if mailed, five (5) business
days after the deposit thereof in the mails. Any party may change their
respective addresses by giving notice as herein provided.
14.5 Entire Agreement. This Agreement contains the entire
agreement between the parties and supersedes all prior agreements,
understandings and writings between the parties with respect to the subject
matter hereof and thereof, including but not limited to any and all prior
agreements between RMST and Queen Mary concerning the exhibition of Titanic
artifacts at Queen Mary. Each party hereto acknowledges that no representations,
inducement, promises, or agreements, oral or otherwise, have been made by any
party, which are not embodied herein or in an exhibit hereto, and that no other
agreement, statement or promise may be relied upon or shall be valid or binding.
Neither this agreement nor any term hereof may be changed, waived, discharged or
terminated orally. This agreement may be amended or supplemented or any term
hereof may be changed, waived, discharged or terminated by an agreement in
writing signed by all parties hereto.
14.6 Assignability. This agreement shall not be assignable by
either party hereto without the written consent of the other party hereto.
14.7 Severability. If any provision of the Agreement shall be
held invalid or unenforceable, the remainder of this Agreement which can be
given effect without such invalid or unenforceable provision shall remain in
full force and effect. If any provision is held invalid or unenforceable with
respect to particular circumstances, it shall remain in full force and effect in
all other circumstances.
14.8 No Waiver. The waiver by any party hereto of any breach
or violation of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach.
12
<PAGE> 13
14.9 Force Majeure. If due to acts of God, insurrection, fire,
elements, national emergency, or any other similar cause outside of the
reasonable control of either party to this Agreement ("Force Majeure") the
Exhibition is canceled, delayed or the performance of either party under the
terms of this Agreement is made impossible, the parties agree that such
cancellation, postponement or failure to perform shall not be considered a
breach of this agreement. In such event, however, the parties agree to use their
best efforts to reschedule the Exhibition.
14.11 Publicity. Each of the parties agree that no press
announcement or press release in connection with this Agreement shall be made
unless the other party hereto shall have given its written consent to such
announcement (including the form thereof), which consent shall not be
unreasonably withheld.
14.12 Confidentiality. RMST and Queen Mary agree, as may be
permitted by law, not to divulge or permit or cause their officers, directors,
stockholders, employees or agents to divulge the substance of this Agreement
except to their representatives and attorneys or as may otherwise be required by
law in the opinion of counsel for the party required to make such disclosure.
Additionally, during and after the Term of this Agreement, neither RMST nor
Queen Mary shall disclose to anyone for any reason, without the prior written
consent of the other, any marketing plans, strategies, results or other
confidential information divulged to or learned by either party about the other
from any source whatsoever, unless and until such information has generally
become available to the public from sources other than the other party.
14.13 Independent Parties. Nothing in this Agreement is
intended to create, nor shall anything herein be construed or interpreted as
creating, an agency, a partnership, a joint venture or any other relationship
between RMST and Queen Mary except as expressly set forth herein, and both
parties understand that, except as expressly agreed to herein, each shall be
responsible for its own separate debts, obligations and other liabilities.
14.14 Remedies. Remedies provided to the parties by this
Agreement are not exhaustive or exclusive, but are cumulative of each other and
in addition to any other remedies the parties may have in law or equity.
14.15 Survival of Representations. The representations,
warranties, indemnification, and confidentiality provisions set forth in this
Agreement shall be continuing and shall survive the expiration of the Exhibition
Term.
14.14 Headings. The captions and headings used herein are for
convenience only and shall not be construed as a part of this agreement.
14.15 Counterparts. This agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute but one and the same document.
13
<PAGE> 14
IN WITNESS WHEREOF, the parties have executed this Agreement
and affixed their hands and seal the day and year first above written.
RMS TITANIC, INC. RMS FOUNDATION INC.
By: /s/George Tulloch /s/Joseph Prevatil
-------------------------- --------------------------
George Tulloch, President Joseph Prevatil, President
14
<PAGE> 15
SCHEDULE A
NO INV. OBJECT
87/0009.10-12/94 3 EGG PLATES
87/0014 BELL without MECHANISM
87/0109.1 Gillette RAZOR BLADE ENVELOPE
87/0205 LEATHER RAZOR STRAP
"HORSE SHELL"
87/0269.21/37 ONE PAGE LETTER
"Thos. Cook & Son."
87/0270 CLOTHES BRUSH
87/0317.1/2 FLAT WHITE FAIENCE
PLATE, COMPANY
DISHWARE
93/0077 HAND BASIN
94/0006 NICKEL KETTLE
94/0113 SMALL CRYSTAL POT w/
WHITE STAR LINE LOGO
94/0360 SMALL CUT CRYSTAL DECANTER
w/ WHITE STAR LOGO
96/0002 COFFEE CUP
96/0003 PIECE OF COAL
96/0004 CIDER(?) BOTTLE
96/0005 WINE BOTTLE
96/0006 JAR w/WHITE-BEIGE
FAIENCE
96/0007 WHITE FAIENCE PLATE
w/ BLUE DESIGN
96/0008 CHAMPAGNE BOTTLE w/
CORK
96/0009.A SILVER SOUP TUREEN
96/0012 TOOL HANDLE
<PAGE> 1
[Exhibit 10.2]
March 5, 1997
VIA TELECOPIER (0211) 32 93 06
Mr. Reinhard Esser
CRE
Ratinger Strasse 23
4000 Dusseldorf 1
Germany
Re: RMS Titanic, Inc./Voyager Factory GmbH
Dear Reinhard:
In furtherance of our discussions, I am writing to confirm that the
agreement dated April 15, 1996 between RMS Titanic, Inc. and CRE-CO Finanz GmbH
(the "Agreement") is amended so as to provide that "Project Expenses" shall
amount to the aggregate of: (a) $2,600,000, as set forth in the revised budget
transmitted by you to RMST on October 31, 1996, subject to the further
understanding that operating expenses will be increased as follows upon the
following attendance thresholds being attained:
300,000 tickets - 500,000 DM
350,000 tickets - 550,000 DM
400,000 tickets - 600,000 DM
450,000 tickets - 650,000 DM
500,000 tickets - 700,000 DM
550,000 tickets - 750,000 DM
600,000 tickets - 800,000 DM
650,000 tickets - 850,000 DM
700,000 tickets - 900,000 DM
and (b) the sum of $110,000 as will be paid by CRE to LP3 Laboratories ("LP3")
for the conservation of 71 objects for the exhibition in accordance with a
certain letter agreement dated February 3, 1997 which has been approved and
executed by CRE, RMST and LP3.
It is further understood that RMST will receive thirty (30%) percent of
the first $750,000 of "Sponsorship Revenue," as defined by Section 1.8.3 of the
Agreement, and that the seventy (70%) percent balance of the first $750,000
sponsorship revenues will be expended on
<PAGE> 2
Mr. Reinhard Esser
March 5, 1997
Page 2
marketing/public relations. Sponsorship revenues in excess of $750,000 will be
distributed in accordance with the Agreement.
With reference to the Pledge Agreement dated April 15, 1996 between CRE
and RMST and the Bailment Agreement dated April 15, 1996 between CRE, RMST and
Allan H. Carlin, CRE hereby consents to the release of restored currency bearing
artifact numbers 1-50 to RMST.
It is further understood that CRE will remit to RMST, within five (5)
days of the date of this letter, the sum of $87,500 which was withheld pending
tax clearance from the $350,000 Advance payable under the Agreement.
Except as set forth above, the Exhibition Agreement, Pledge Agreement
and Bailment Agreement shall remain in full force and effect.
Please signify your assent to the foregoing by countersigning and
returning to me a copy of this letter.
Very truly yours,
RMS TITANIC, INC.
By: /s/ George Tulloch
--------------------------------
George Tulloch, President
AGREED TO:
CRE - CO Finanz GmbH
By: /s/ Reinhard Esser
--------------------------------
Reinhard Esser, President
<PAGE> 1
[Exhibit 10.3]
May 5, 1997
VIA TELECOPIER (901) 576-1280
Mr. Jon K. Thompson
Director of Cultural Affairs
WONDERS
The Memphis International Cultural Series
One Convention Plaza
Memphis, Tennessee 38103
Re: EXHIBITION AGREEMENT WITH RMS TITANIC, INC.
Dear Jon:
In furtherance of our understandings and my memorandum to you
dated April 23, 1997, I am writing this letter to confirm our agreement that the
Exhibition Agreement dated August 8, 1996 between RMS Titanic, Inc. and the City
of Memphis is: (a) supplemented so as to provide that during the Exhibition
Term, RMST shall have the right to permit Queen Mary located in Long Beach,
California to exhibit the artifacts on the list annexed hereto from no earlier
than June 1, 1997 through January 5, 1998 in an exhibition having the
"Expedition" theme of the exhibition previously presented at the National
Maritime Center (Nauticus) in Norfolk, Virginia until March 31, 1997; and (b)
amended so as to provide in Section 5.3 thereof so as to change the Target
Revenues and respective share of the Excess as follows:
"5.3 In the event that the total of: (a) Sponsorship
Revenue raised in excess of the thresholds of $750,000 for
RMST and the City described in Section 5.2 hereof by either or
both parties; (b) Ticket Revenue; (c) Merchandising Revenue;
and (d) Ancillary Revenue exceed the sum of Five Million
($5,000,000) Dollars plus the verified, out-of-pocket costs
incurred by the City in connection with the Artifact
prepacking, packing, handling, security, insurance, export and
import customs charges and duties, and the international
transportation thereof from Semur-en-Auxois to the City
pursuant to Section 3.10 hereof (the "Target Revenue"), any
such excess (the "Excess") shall be divided
<PAGE> 2
Mr. Jon K. Thompson
May 5, 1997
Page 2
between the parties as follows: sixty-five (65%) thereof shall
be paid to RMST and thirty-five (35%) thereof shall be paid to
the City. RMST's share of the Excess shall be paid to RMST in
arrears on a monthly basis, with such payment to be made
within fifteen (15) days of the calendar end of each month.
Please countersign a copy of this letter to signify the City's
agreement thereto and return such countersigned copy to me via fax today. Thank
you.
RMS Titanic, Inc.
By: /s/ George Tulloch
--------------------------------
George Tulloch, President
City Of Memphis
By: /s/ Jon K. Thompson
------------------------------------------------
Jon K. Thompson, Director
Cultural Affairs of the City of Memphis
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