<PAGE> 1
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 November 30, 1996
[ ] 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 X No
--- ---
The number of shares outstanding of the registrant's common stock on
January 17, 1997 was 16,137,119.
<PAGE> 2
<TABLE>
<CAPTION>
PAGE
NUMBER
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 12
PART II
OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
</TABLE>
2
<PAGE> 3
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 as reported on Form 10-K for the
Company's fiscal year ended February 29, 1996.
3
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RMS TITANIC, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
<TABLE>
<CAPTION>
NOVEMBER 30, FEBRUARY 28,
1996 1996
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 14,717 $ 43,803
Accounts receivable 30,608 19,510
Refundable withholding tax 87,500
Other current assets 14,372 10,000
------------ ------------
TOTAL CURRENT ASSETS 147,197 73,313
Artifacts Recovered, at cost 7,714,709 5,922,350
Deferred Income Tax Asset, net of valuation allowance of
$1,980,000 and $1,640,000, respectively
Property and Equipment, net of accumulated depreciation
of $47,547 and $41,333, respectively 22,053 26,182
Other 38,611 38,611
------------ ------------
TOTAL ASSETS $ 7,922,570 $ 6,060,456
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 126,050 $ 126,050
Accounts payable and accrued liabilities 3,041,335 2,023,574
Deferred revenue 550,000
Loans payable to partners 45,000 45,000
------------ ------------
TOTAL CURRENT LIABILITIES 3,762,385 2,194,624
------------ ------------
Stockholders' Equity:
Common stock - $.0001 par value; authorized 30,000,000 shares,
issued and outstanding 16,137,128 shares 1,614 1,614
Additional paid-in capital 13,869,963 13,869,963
Deficit accumulated during the development stage (9,711,392) (10,005,745)
------------ ------------
STOCKHOLDERS' EQUITY 4,160,185 3,865,832
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,922,570 $ 6,060,456
============ ============
</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
AUGUST 5, 1987
THREE-MONTH PERIOD THREE-MONTH PERIOD NINE-MONTH PERIOD NINE-MONTH PERIOD (INCEPTION) TO
ENDED NOVEMBER 30, ENDED NOVEMBER 30, ENDED NOVEMBER 30, ENDED NOVEMBER 30, NOVEMBER 30,
1996 1995 1996 1995 1996
------------------ ----------------- ------------------ ------------------ --------------
<S> <C> <C> <C> <C> <C>
Revenue:
Licensing fees $ 860,000 $ 1,435,000
Exhibitions $ 14,916 $ 57,758 14,916 $ 547,493 880,715
Merchandise and other 4,888 4,160 12,794 114,969 260,925
Sponsorship fees 150,000 150,000
Sale of coal 18,657 84,753 115,458
------------ ------------ ----------- ----------- ------------
Total revenue 38,461 61,918 1,122,463 662,462 2,842,098
------------ ------------ ----------- ----------- ------------
Expenses:
General and administrative 262,160 166,486 821,896 563,923 7,244,021
Depreciation and amortization 2,070 3,089 6,214 9,267 112,980
Interest 13,826 915,875
Financing fees 6,667 387,012
Acquisition of Management
Agreement Option 3,400,000
Settlement expense 35,000 221,715
Provision for uncollectible
advances to affiliates 271,887
------------ ------------ ----------- ----------- ------------
Total expenses 264,230 169,575 828,110 628,683 12,553,490
Net income (loss) $ (225,769) $ (107,657) $ 294,353 $ 33,779 $ (9,711,392)
============ ============ =========== =========== ============
Net income (loss) per common
share $ (.01) $ (.01) $ .02 $ .00
============ ============ =========== =========== ============
Weighted average common shares
outstanding 16,137,128 16,136,628 16,137,128 15,734,485
============ ============ =========== =========== ============
</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
NINE-MONTH NINE-MONTH AUGUST 5, 1987
PERIOD ENDED PERIOD ENDED (INCEPTION) TO
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1996 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 294,353 $ 33,779 $(9,711,392)
----------- ----------- -----------
Adjustments to reconcile net income (loss) to net
cash provided by (used in)operating activities:
Depreciation and amortization 6,214 9,267 112,980
Noncash financing costs 6,667 387,012
Acquisition of Management Agreement Option
for noncash consideration 3,400,000
Write-off of advances to affiliates 271,887
Noncash interest expense 4,500 886,202
Expenses paid by TVLP partners and TVLP affiliate
on behalf of TVLP 427,564
Reduction in artifacts recovered 7,641 10,641
Changes in operating assets and liabilities,
net of effect from acquisition:
Decrease (increase) in accounts receivable (11,098) 39,532 (30,608)
Increase in refundable withholding tax (87,500) (87,500)
Decrease (increase) in other current assets (4,372) 10,631 (14,372)
Increase in advances to TVLP affiliates (271,887)
Increase in other assets (38,611)
Increase in organization costs (fully amortized) (60,483)
(Decrease) increase in note payable, accounts
payable and accrued liabilities 37,761 (480,394) 3,399,730
Increase in deferred revenue 550,000 550,000
----------- ----------- -----------
TOTAL ADJUSTMENTS 498,646 (409,797) 8,942,555
----------- ----------- -----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 792,999 (376,018) (768,837)
----------- ----------- -----------
Cash flows from investing activities:
Artifact recovery costs, including related deposits (820,000) (4,672,975)
Purchases of property and equipment (2,085) (74,550)
----------- ----------- -----------
CASH USED IN INVESTING ACTIVITIES (822,085) (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
NINE-MONTH NINE-MONTH AUGUST 5, 1987
PERIOD ENDED PERIOD ENDED (INCEPTION) TO
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1996 1995 1996
----------- ----------- -----------
<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 $ 921,956 7,209,446
Stock issuance costs (1,150,707)
Repayment of advances from TVLP partner (475,000)
Repayment of notes payable (492,165) (1,135,365)
----------- ----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 429,791 5,531,079
----------- ----------- -----------
Net increase (decrease) in cash $ (29,086) 53,773 14,717
Cash at beginning of period 43,803 531 - 0 -
----------- ----------- -----------
Cash at end of period $ 14,717 $ 54,304 $ 14,717
=========== =========== ===========
</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 November 30, 1996 and its results of operations
and its cash flows for the three months and nine months ended
November 30, 1996 and 1995. Results of operations for the
three and nine month periods ended November 30, 1996 are not
necessarily indicative of the results that may be expected for
the year ending February 28, 1997.
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 November 30, 1996 and 1995, 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 - The Company has entered into an agreement with CRE-CO Finanz
GmbH, a German company, for an exhibition of Titanic artifacts
in Europe in 1997. Pursuant to the agreement, the Company will
receive two-thirds of the net profits, as defined, after the
recoupment of certain project expenses, as defined. During the
six months ended August 31, 1996 the Company received a
$350,000 advance against the Company's share of
8
<PAGE> 9
RMS TITANIC, INC.
(A DEVELOPMENT STAGE COMPANY
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
profits, less a 25% ($87,500) refundable withholding tax. The
advance is secured by a lien on the currency recovered from
the Titanic until the artifacts are delivered. Such exhibition
profit advance is included in deferred revenue in the
accompanying November 30, 1996 balance sheet.
The Company has 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, the Company will receive $720,000
in installments between September 1996 and August 1, 1997, and
will receive two-thirds of the net profits, as defined,
derived from ticket, merchandise and sponsorship revenues in
excess of $4,850,000. During the three months ended November
30, 1996, the Company was paid $200,000 pursuant to such
agreement. Such amount is included in deferred revenue in the
accompanying November 30, 1996 balance sheet.
During the three months ended November 30, 1996, the Company
has 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 will receive one-third
of revenues from the sale of the first 150,000 tickets and
fifty (50%) percent of revenues from the sale of more than
150,000 tickets, as defined. In addition, the Company will
receive fifty (50%) percent of net profits, as defined, from
the sale of merchandise at the exhibition, and fifty (50%) of
sponsorship revenues net of the difference, if any, between
$500,000 expended by Nauticus for the design, construction and
marketing of the exhibition and Nauticus' share of ticket
revenues and net profits from the sale of merchandise at the
exhibition, as defined.
Note 4 - The Company is a named defendant in a lawsuit commenced in
the Supreme Court of the State of New York, County of New
York on or about September 22, 1994 (Glenville Properties
9
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RMS TITANIC, INC.
(A DEVELOPMENT STAGE COMPANY
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Incorporated v. RMS Titanic, Inc. et al., 94/127087). The
plaintiff therein alleges Lone Star Casino Corporation ("Lone
Star") has assigned to it Lone Star's rights under a
promissory note (the "Note") executed by the Company in favor
of Lone Star in May, 1993, certain security interests granted
to Lone Star in connection therewith, and other contractual
rights related thereto. The complaint alleges, inter alia,
that the Company breached its obligations owed under the Note
and its obligations under the agreement granting a security
interest to Lone Star, misrepresented the value of the
property which is the subject of such security interest, and
interfered with rights under the agreements relating to the
grant of such security interest. The relief sought is an award
of compensatory damages approximating $360,000, punitive
damages of a minimum of $1,080,000, and declaratory and
injunctive relief. The Company denied the material allegations
of the Complaint and asserted counterclaims for a judgment
declaring the promissory note paid and additional
counterclaims and third-party claims seeking an award of
compensatory and punitive damages. This action has been
settled, subject to the execution of definitive settlement
documents. Pursuant to the settlement, the Company will pay to
Lone Star $154,271.62 in twelve (12) equal monthly
installments commencing as of January 15, 1997, subject to
acceleration if the Company achieves certain revenue levels
("Threshold Amounts") during such twelve month period. The
Company has agreed to issue 15,000 shares of its Common Stock
in escrow, with such shares to be either released in 5,000
shares increments to Lone Star in the event such Threshold
Amounts are not achieved as of the end of the Company's
quarterly periods, or to be cancelled in the event such
Threshold Amounts are achieved. Additionally, affiliates of
Lone Star have agreed to release the Company from liabilities
amounting to approximately $40,000, and the Company has agreed
to issue 40,000 unregistered shares of Common Stock to Lone
Star.
On February 20, 1996, a third-party filed a motion pursuant to
Rule 60(b) of the Federal Rules of Civil Procedure in the
10
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RMS TITANIC, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
United States District Court for the Eastern District of
Virginia motion for an order rescinding the June 7, 1994 award
to the Company of salvor-in-possession status with respect to
the Titanic (R.M.S. Titanic, Inc. v. The Wrecked and Abandoned
Vessel believed to be the RMS TITANIC, in rem, No. 2:93cv902).
By order entered May 10, 1996, such motion was denied and the
Court modified its June 7, 1994 order awarding
salvor-in-possession status to the Company to the extent of
requiring the Company to file more frequent periodic reports
as to the status of its activities. On August 13, 1996, the
Court amended such May 10, 1996 order so as to include the
award of exclusive rights to photograph the Titanic within the
award of salvor-in-possession status. The third-party has
filed a notice of appeal from such May 10, 1996 and August 13,
1996 orders, and the Company has filed a cross-appeal with
respect to the Court having granted standing to such
third-party. Subsequent to November 30, 1996, such appeals and
cross-appeal were dismissed pursuant to an agreement between
the parties which provided such third-party has assigned to
the Company all of the rights to certain television
productions, video footage and photographs from the 1987
expedition to the Titanic wreck site. Additionally, the
Company has licensed to such third party certain footage from
the 1987 and 1993 expeditions to the Titanic wreck for
incorporation into a television program, in consideration for
which the Company will receive a production fee of $75,000 in
installments, as defined.
11
<PAGE> 12
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 NOVEMBER 30, 1996 VERSUS
THE QUARTER ENDED NOVEMBER 30, 1995
FOR THE NINE MONTHS ENDED NOVEMBER 30, 1996 VERSUS
THE NINE MONTHS ENDED NOVEMBER 30, 1995
During the third quarter of the Company's 1997 fiscal year and the
first nine months of its 1997 fiscal year, the Company's total revenues
decreased approximately 38% and increased approximately 69%, respectively, as
compared to the corresponding periods of its 1996 fiscal year. These changes
were principally attributable to the Company having earned licensing fees of
$860,000 during the second quarter of its 1997 fiscal year related to the
production and exploitation of audio and visual recordings with respect to the
Company's expedition to the Titanic wreck site during the Summer of 1996 (the
"Summer of 1996 Expedition"), and $150,000 from the granting of sponsorship
rights with respect to the Summer of 1996 expedition, as compared to no revenues
during the first nine months of the 1996 fiscal year from licensing or
sponsorship fees. Additionally, the Company earned revenue of $84,753 from the
sale of coal during the first nine months of its 1997 fiscal year, of which
$18,657 was earned during the third quarter, as compared to no revenue from the
sale of coal during the first nine months of the 1996 fiscal year. During the
third quarter and first nine months of its 1997 fiscal year, the Company earned
exhibition revenue of $14,916 from its exhibition at the National Maritime
Center ("Nauticus") in Norfolk, Virginia, which opened on November 27, 1996 as
compared to exhibition revenue of $57,758 and $547,493 during the third quarter
and first nine months of the 1996 fiscal year, respectively, from the Company's
exhibition at the National Maritime Museum, Greenwich, England which commenced
in October 1994 and concluded on October 1, 1995. In addition, during the third
quarter and first nine months of its 1997 fiscal year, the Company had
merchandise and other revenue of $4,888 and $12,794, respectively, as compared
to $4,160 and $114,969 for the third quarter and first nine months of its 1996
fiscal year, most of which was derived from the merchandising activities in
conjunction with the National Maritime Museum exhibition.
The Company's general and administrative expenses increased
approximately 57% during the third quarter of its 1997 fiscal year as compared
to the third quarter of its 1996 fiscal year, and increased approximately 46%
during the first nine months of its 1997 fiscal year as compared to the first
nine months of its 1996 fiscal year. Such increases were
12
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primarily attributable to expenses of $100,000 related to the production of
audio and visual recordings of the Summer of 1996 Expedition, travel
expenditures related to the Summer of 1996 Expedition, an increase in legal fees
attributable to a legal challenge to the Company's salvor-in-possession status,
and conservation expenses incurred in connection with artifacts to be included
in the Company's exhibition activities. Interest expenses decreased 100% during
the first nine months of the Company's 1997 fiscal year as compared to the first
nine months of its 1996 fiscal year, primarily as a result of the reduction of
notes payable. Financing fees attributable to notes payable decreased 100%
during the first six months of the Company's 1997 fiscal year as compared to the
first nine months of its 1996 fiscal year.
The Company has entered into an agreement with the City of Memphis,
Tennessee for the presentation of an exhibition of Titanic artifacts in Memphis,
Tennessee from April 3, 1997 through September 30, 1997. Pursuant to the
exhibition agreement, the City of Memphis is responsible for payment of all
costs and expenses related to the design, construction and operation of the
exhibition. Additionally, pursuant to the agreement, the Company will receive
$720,000 in installments between September 1996 and August 1, 1997, and will
also receive two-thirds of the net profits, as defined, derived from ticket,
merchandise and sponsorship revenues in excess of $4,850,000. The Memphis
exhibition will display in themed galleries approximately 300 artifacts
recovered between 1987 and 1994 by the Company.
Additionally, the Company has entered into an agreement with the
National Maritime Center ("Nauticus"), a political subdivision of the City of
Norfolk, Virginia, to exhibit artifacts, expedition equipment, photographs and
film footage from the 1996 Titanic expedition from November 27, 1996 through
March 31, 1997 (the "Norfolk Exhibition"). Approximately twenty (20) unrestored
artifacts recovered during the Summer of 1996 expedition (including a telegraph,
a large silver soup tureen, binoculars in a leather case, a ship's whistle and a
porthole) and ten (10) conserved artifacts from prior expeditions will be
displayed at the Norfolk Expedition, together with a life-size rendition of the
20 ton section of the Titanic hull that the Company sought to raise from the
debris field surrounding the Titanic wreck site during the Summer of 1996
Expedition, a two-ton flotation bag used in artifact recovery operations, and a
full-size replica of a three-ton light tower that the Company utilized to
illuminate portions of the wreck during the Summer of 1996 Expedition. Pursuant
to the Norfolk Exhibition Agreement, Nauticus is responsible for payment of all
costs and expenses related to the design, construction and operation of the
exhibition. The Company will receive one-third of revenues from the sale of the
first 150,000 tickets and fifty (50%) of revenues from the sale of more than
150,000 tickets, as defined. In addition, the Company will receive fifty (50%)
percent of net profits, as defined, from the sale of merchandise at the Norfolk
Exhibition, and fifty (50%) of sponsorship revenues net of the difference, if
any, between $500,000 expended by Nauticus for the design, construction and
marketing of the exhibition and Nauticus' share of ticket revenues and net
profits from the sale of merchandise at the exhibition, as defined.
13
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LIQUIDITY AND CAPITAL RESOURCES
Notes payable as of November 30, 1996 represent approximately $126,000
(excluding accrued interest of approximately $25,000) owed to Lone Star Casino
Corporation ("Lone Star") pursuant to a promissory note executed in May 1993.
Pursuant to 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 Lone Star $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. See Part II, Item 1 of this report. The Company's 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. Material contingencies include the outcome of pending
lawsuits. The Company has agreed to pay $200,000 to LP3 for conservation of the
artifacts to be exhibited at the Memphis exhibition from the $720,000 to be paid
to the Company pursuant to the Memphis exhibition agreement, $50,000 of which
was paid to LP3 during the quarter ended November 30, 1996.
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 has 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 an advance against the Company's share of profits from Titanic coal sales
and sales of cabins of cruise ships which accompanied the Company on its 1996
research and recovery expedition. The $280,000 was reduced by approximately
$85,000 from the sale of coal during the nine months ended November 30, 1996.
There were no profits from sale of cruise ship cabins for the 1996 expedition.
The Company cannot forecast when, if ever, reimbursement of such 1994 charter
expenses will be made to the Company by RMS Foundation, Inc. (an unrelated
entity) which had undertaken to provide such funding under its agreement for the
exhibition planned at the Queen Mary Seaport Complex in Long Beach, California,
or when, if ever, construction and fabrication of such exhibit will commence.
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. Dollars) on or before July 15, 1996;
and the sum of $980,000, payable as follows: (a)
14
<PAGE> 15
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. 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 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 is due from
the Company on April 16, 1997. 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.
Apart from the Company's obligations to IFREMER in connection with its
1996 research and recovery expedition, the Company's near term operating needs
will be financed principally from the advance distribution of profits paid to
the Company under its agreement for the exhibition of Titanic artifacts in
Europe in 1997, revenues from the Norfolk Exhibition, payment of exhibition fees
to the Company for the Memphis Exhibition, and revenues from its sale of
merchandise through direct marketing activities. The Company expects its
conservation expenses to increase in the twelve months commencing December 1,
1996 as a result of the need to prepare artifacts for exhibition in Europe and
Memphis. 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.
With respect to its long-term exhibition plans, the Company is
exploring the possibility of arranging other income producing exhibitions
similar to the prelude exhibition at the National Maritime Museum, or the
Norfolk, Memphis and planned 1997 European exhibitions, without the need for
substantial additional capital, prior to the commencement of the planned
worldwide touring Waterborne Exhibition.
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
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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 the
prelude exhibition at the National Maritime Museum, or the Norfolk, Memphis and
planned 1997 European exhibitions, 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.
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 first nine months of its 1997
fiscal year, there were no significant fluctuations in the exchange rates.
Although the Company's financial arrangements with the National Maritime Museum
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.
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.
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 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.
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The lawsuit previously reported commenced against the Company in the
Supreme Court of the State of New York, County of New York on or about September
22, 1994 (Glenville Properties Incorporated v. RMS Titanic, Inc. et al.,
94/127087) has been settled, subject to the execution of definitive settlement
documents. Pursuant to the settlement, the Company will pay to an affiliate of
the plaintiff $154,271.62 in twelve (12) equal monthly installments commencing
as of January 15, 1997, subject to acceleration if the Company achieves certain
revenue levels ("Threshold Amounts") during such twelve month period. The
Company has agreed to issue 15,000 shares of its Common Stock in escrow, with
such shares to be either released in 5,000 shares increments to Lone Star in the
event such Threshold Amounts are not achieved as of the end of the Company's
quarterly periods, or to be cancelled in the event such Threshold Amounts are
achieved.
The appeal and cross-appeal in the legal proceedings in the United
States District Court for the Eastern District of Virginia previously reported
pertaining to the motion of a third-party seeking an order rescinding the
salvor-in-possession status of the Company will be voluntarily dismissed
pursuant to an agreement which provides for the such third-party's assignment to
the Company of all of the rights to certain television productions, video
footage and photographs from the from the 1987 expedition to the Titanic wreck
site. Additionally, the Company has licensed to such third party certain footage
from the 1987 and 1993 expeditions to the Titanic wreck for incorporation into a
television program, in consideration for which the Company will receive a
production fee of $75,000 in installments, as defined.
There has been no other material change in litigation reported in the
Company's Annual Report on Form 10-K for its fiscal year ended February 29,
1996.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULT UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
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ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
10.2 Agreement dated October 9, 1996 between the Company
and the National Maritime Center Authority.
(b) REPORTS ON FORM 8-K
None.
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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: January 21, 1997 By: /s/ George Tulloch
------------------------------------------
George Tulloch, Principal Executive
Officer
Dated: January 21, 1997 By: /s/ Nicholas Vitti
------------------------------------------
Nicholas Vitti, Principal Accounting
Officer
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<PAGE> 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 9th day of October, 1996
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 The National Maritime Center
Authority, a political subdivision of the Commonwealth of Virginia having its
principal place of business at One Waterside Drive, Norfolk, Virginia 23510
("Nauticus").
WHEREAS, RMST and Nauticus wish to work in association with one another
to present an exhibition in Nauticus 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 Nauticus 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 Nauticus.
1.2 "Exhibition Term" shall mean the period commencing November 27,
1996 (or such earlier date as may be mutually agreed upon by the parties) and
expiring on March 31, 1997.
1.3 "Pennec" shall refer to Stephane Pennec of LP3 Conservation, 8
Rue de Tanneries, 21140 Semur-en-Auxois, France;
1.4 "Project Expenses" shall include, all costs and expenses
authorized by Nauticus 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
1.5 "Revenue" shall mean and include the aggregate of:
1.5.1 "Merchandising Revenue," which shall include all
revenues derived from the sale of RMST merchandise (as defined in
Section 7.1 hereof) sold at Nauticus or at satellite merchandise sites
in the metropolitan area of Norfolk, Virginia pursuant to Section 7.3
hereof, minus sales tax, credit card fees and check verification fees.
1.5.2 "Sponsorship Revenue," which shall include all revenues
derived from the granting of sponsorship or promotion rights to third
parties for the Exhibition. For purposes of the foregoing, the City of
Norfolk and the Virginia Waterfront Commission shall not be deemed
sponsors.
1.5.3 "Ticket Revenue," which shall include all sums generated
by ticket sales at the Exhibition and through authorized ticket sale
outlets, minus sales tax, admissions tax, credit card fees, ticket
outlet service fees, and check verification fees.
1.6 "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.
1.7 "Venue" shall mean the building known as The National Maritime
Center or NAUTICUS in the City of Norfolk.
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 "Expeditions to the
Titanic," or such other name mutually agreed upon by the parties.
2.3 The Exhibition is to be co-presented by Nauticus 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 Nauticus 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 Nauticus will have
the responsibility for the design and construction of the Exhibition. In
connection with these matters, Nauticus acknowledges that
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<PAGE> 3
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. Nauticus 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
Titanic, as described above. In furtherance of the foregoing, Nauticus 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 Nauticus, as provided elsewhere herein; and (d) and the
content of a catalogue for the Exhibition shall all be subject to review
by RMST. Nauticus will cooperate with RMST and make such changes as are
required by RMST as will not increase the cost of the design and
construction of the Exhibition beyond the $300,000 budget and will not
delay the opening date of November 27, 1996, or increase the cost of the
marketing, advertising and public relations activities beyond the
$200,000 budget.
2.4.2 Nauticus 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, Nauticus will provide
reasonable access for RMST representatives to observe the construction
of the Exhibition.
3. THE OBLIGATIONS OF NAUTICUS.
Nauticus agrees to pay all 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,
Nauticus 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 properly display the
Artifacts and present them in a manner that will allow the public to safely
view them.
3.2 Develop and implement a comprehensive marketing, advertising,
promotion and public relations plan for the Exhibition in consultation with
RMST, for which Nauticus 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, with any donated advertising media, such as television
advertising time, to be valued by mutual agreement of the parties.
3.3 Develop and implement a comprehensive admissions and sales
program including ticket sales, toll-free telephone sales, media and sales
blitzes, box office, group sales,
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<PAGE> 4
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. Nauticus
shall not be responsible for any damage to Artifacts that arises from a
condition or conduct that RMST has approved in advance in writing.
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
Nauticus until they are returned to RMST.
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 daily operations of
the Exhibition.
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 Nauticus and until returned to RMST in accordance with
Section 3.10 hereof.
3.9 Be responsible for payment of all Artifact prepacking, packing,
handling, security, insurance, export and import customs charges and duties,
and the international transportation thereof from Semur-en-Auxois to Nauticus
and for their subsequent return to RMST in Norfolk, Virginia 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 publish an Exhibition catalogue, which
shall be sold at the Exhibition's Merchandise Shop to be established in
accordance with Section 7.1 hereof or at satellite merchandise shops described
in Section 7.3 hereof.
3.12 Use its best efforts to produce a guided tour for the
Exhibition to be available on Monday through Friday during the Term.
3.13 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 by Nauticus for the
Exhibition at a price equal to seventy-five (75%) percent of the cost of the
production thereof, with such right of first refusal to be exercised no later
than the close of the Exhibition and with Nauticus 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
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<PAGE> 5
the Exhibition Term.
3.14 Design, construct, market and operate the Exhibition to the
highest standards possible and in the same manner as previous "NAUTICUS"
exhibitions.
4. RMST's OBLIGATIONS.
RMST agrees to:
4.1 Arrange for the Artifacts to be transported for delivery to
Nauticus on or before November 1, 1996, and RMST represents and warrants that
delivery thereof will be made on a timely basis, subject to the fulfillment of
Nauticus' obligations pursuant to Section 3.9 hereof.
4.2 Make available such Supporting Material as and when Nauticus
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 or about April 3, 1997
and in Europe commencing on or about May 1, 1997.
4.3 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.
4.4 Subject to RMST's obligations to use its best efforts to assist
Memphis, Tennessee in obtaining permission from IFREMER for the inclusion of
IFREMER's one-third scale model of its submersible "Nautile" (the "Model") at
the Memphis exhibition described in Section 4.2 hereof, RMST shall assist
Nauticus in obtaining permissions from IFREMER for the inclusion of the Model
at the Exhibition.
4.5 Subject to the fulfillment of Nauticus' obligations pursuant to
Section 3.9 hereof and the approval of Nauticus, which approval shall not be
unreasonably withheld, arrange for all Artifact prepacking, packing, handling,
security, insurance, export and import customs charges and duties, and the
international transportation thereof from Semur-en-Auxois to Nauticus and for
their subsequent delivery to RMST in Norfolk, Virginia within thirty (30) days
of the end of the Exhibition Term. In connection with the foregoing, RMST shall
supply pest free storage crates for the transportation of the Artifacts.
4.6 RMST shall use its best efforts, subject to the availability of
funding from one or more third parties, to produce a film having a length of
approximately 26 minutes for presentation in the main theater of Nauticus (the
"Film"). In the event that the Film is presented, a separate admission of $2.00
per person shall be charged, $0.50 of which shall be retained by Nauticus and
the balance of $1.50 thereof shall be remitted to RMST on the same terms as the
remittance of Ticket Revenue pursuant to Section 5.1 hereof.
4.7 RMST represents and warrants that it has title and rights to
all of the
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<PAGE> 6
Artifacts, free and clear of all liens and encumbrances that could affect the
ability of RMST to exhibit the Artifacts at Nauticus during the Exhibition
Term.
4.8 RMST shall arrange for the packing and removal of the Artifacts
within thirty (30) days of the end of the Exhibition Term.
5. COLLECTION, DIVISION AND PAYMENT OF REVENUES.
5.1 Ticket Revenue from the sale of the first 150,000 tickets to the
Exhibition, not including tickets sold to school groups, shall be divided
between the parties as follows: two-thirds (2/3) thereof shall be paid to
Nauticus and one-third (1/3) thereof shall be paid to RMST. Except as set forth
below with respect to Ticket Revenue derived from school groups, all Ticket
Revenue from the sale of more than 150,000 tickets shall be divided equally
between the parties. Two-thirds (2/3) of all Ticket Revenue derived from school
groups shall be paid to Nauticus and one-third (1/3) thereof shall be paid to
RMST, except that RMST shall receive, in lieu of the foregoing, the sum of One
($1.00) per student for each student group that has been booked as of September
23, 1996 to be admitted to Nauticus during the Exhibition Term. All Ticket
Revenue shall be collected by Nauticus and RMST's share thereof shall be
remitted to RMST within seven (7) days of receipt thereof by NAUTICUS.
5.2 Sponsorship Revenue shall be divided equally between the parties,
and shall be payable to and collectible to Nauticus; provided, however, in the
event that Nauticus' share of Ticket Revenue and Merchandising Revenue shall
not equal the aggregate of up to $500,000 expended for design, construction and
marketing of the Exhibition, then Sponsorship Revenue shall first be applied to
the payment to Nauticus of the difference between $500,000 and Nauticus' share
of Ticket Revenue and Merchandising Revenue, and the balance of any Sponsorship
Revenues shall be divided equally between the parties. Subject to the
foregoing, RMST's share of Sponsorship Revenue shall be remitted to RMST within
seven (7) days of the end of the Exhibition Term or Nauticus' recoupment of
such $500,000 from Ticket Revenue and Merchandising Revenue, whichever is
earlier. RMST and Nauticus 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 Nauticus. 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 the RMST Merchandise Shop, such as cash
register attendants and sales clerks, shall be divided equally between the
parties and shall be collected by Nauticus, with RMST's share thereof, plus
costs of goods, 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
pays to
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<PAGE> 7
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 Nauticus 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. RMST
shall furnish Nauticus monthly accountings regarding costs of goods within
seven (7) days after the close of the month covered by such accounting.
5.6 Except for obligations pursuant to Section 11 hereof, Nauticus
shall not bear any responsibility or liability for any financial losses that
may be incurred by RMST.
5.7 (a) Nauticus shall maintain all books of accounts and all
documents necessary to audit, review and verify Revenue. Nauticus 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 Nauticus to
RMST pursuant to Section 5.5 hereof, then Nauticus shall be responsible for
payment of the costs of such audit.
(b) RMST shall maintain all books of accounts and all documents
necessary to audit, review and verify cost of goods sold for which RMST
furnishes accounting pursuant to Section 5.5 hereof. RMST agrees to allow
authorized representatives of Nauticus 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 RMST to Nauticus pursuant
to Section 5.5 hereof, then Nauticus shall be responsible for payment of the
costs of such audit.
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 Nauticus shall make available to RMST any advertising or
promotional material in advance of the utilization thereof by Nauticus for the
marketing or promoting the Exhibition. RMST shall make available to Nauticus
any advertising or promotional material in advance of the utilization thereof
by RMST for marketing or promoting the Exhibition.
6.3 No advertising, promotional or other marketing materials may be
used by
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<PAGE> 8
Nauticus without RMST's prior written consent, which consent shall not be
unreasonably withheld.
7. MERCHANDISING.
7.1 The parties agree that a gift shop shall be established within
the Exhibition (the "Exhibition Merchandise Shop") consisting of approximately
400 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 Nauticus.
RMST shall provide and replenish as needed an adequate 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. Any remaining
inventory of RMST Merchandise at the expiration of the Exhibition Term shall be
the sole property of RMST, and Nauticus shall have no obligation to make any
payment for the costs of such goods. A reasonable cross-section of the RMST
Merchandise shall also be made available for sale at the gift shop that
customarily operates at Nauticus. 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 Nauticus 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 Nauticus through any outlet other than the
Merchandise Shop or at satellite merchandise sites in the metropolitan area of
Norfolk, Virginia 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 related to the Titanic
through non-retail means throughout the world and through retail means outside
of the Commonwealth of Virginia.
8. AUDIO VISUAL RIGHTS.
8.1 Except for: (a) the purpose of the theater presentations to be
made pursuant
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to Section 4.5 hereof; and, (b) the purpose of promoting the Exhibition (the
"Promotional Work"), no television, video, film, music, photograph or other
audio visual rights, including but not limited to, telecommunication mediums
such as the Internet, are granted by RMST to Nauticus. 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 Nauticus 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 Nauticus 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 Nauticus, and shall contain a hypertext link
to the Internet site used by Nauticus to promote or advertise the Exhibition.
8.3 Nauticus 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 -- $12.95; Seniors (60+) and military -- $11.95; Youth (5-16 yrs.) --
$9.95; members of Nauticus as of the date of this Agreement -- $5.95; members
of groups that rent all or a portion of the facilities of Nauticus during the
Exhibition Term (at Nauticus' usual and customary rental rates) who are
admitted to the Exhibition -- $.5.95. Except with respect to groups that rent a
portion of the facilities of Nauticus, a ticket for admission to the Exhibition
will include admission to all other attractions and public facilities in
Nauticus. Nauticus reserves the right to adjust or change any and all rates as
may be required to properly market the Exhibition. RMST acknowledges that
Nauticus has booked one group which has rented the entire Nauticus facilities
for the evening of December 23, 1996, and no separate charges will be made to
such group for admission to the Exhibition, and no portion of such rental
charge will be payable to RMST.
9.2 To the extent that Nauticus 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.
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10. PRE-RECORDED TOUR GUIDE.
Nauticus shall have the right, but not the obligation, to arrange for
the pre-recording 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.
11. INDEMNITIES.
11.1 RMST agrees to indemnify, defend and hold harmless Nauticus,
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
Nauticus may incur or be liable for as a result of any claim, suit or
proceeding made or brought against Nauticus based upon, arising out of, or in
connection with RMST's breach of any of its duties or obligations hereunder.
11.2 Nauticus, 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 Nauticus'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 Nauticus shall forthwith return to Nauticus or otherwise
dispose of as Nauticus may direct all pamphlets, literature, photographs,
catalogues, advertising material, specifications,
10
<PAGE> 11
cost estimates and other materials, documents and papers whatsoever belonging to
Nauticus and sent to RMST relating to the Exhibition (other than
correspondence between Nauticus 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,
Nauticus at the request of RMST shall forthwith return to RMST or otherwise
dispose of as RMST may 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 Nauticus and RMST) which Nauticus may have in its possession or under
its control, except that Nauticus 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 United States of America for the Eastern District of Virginia,
and, by execution and delivery of this Agreement, Nauticus and RMST hereby
accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. Nauticus 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
11
<PAGE> 12
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:
If to RMST, addressed to:
RMS Titanic, Inc.
17 Battery Place
Suite 203
New York, New York
Attention: George Tulloch, President
If to Nauticus, addressed to:
The National Maritime Center - NAUTICUS
One Waterside Drive
Norfolk, VA 23510
Attention: David T. Guersney, Jr., 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. 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.
12
<PAGE> 13
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.
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 Nauticus 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 Nauticus 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 Nauticus 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.
13
<PAGE> 14
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.
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. THE NATIONAL MARITIME CENTER
AUTHORITY
By: /s/ George Tulloch /s/ David T. Guernsey
------------------------------ -----------------------------------
George Tulloch, President David T. Guernsey, Jr., President
ATTEST: ATTEST:
14
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