<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, 1998
[ ] 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
January 15, 1999 was 16,187,119.
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PAGE
NUMBER
PART I
FINANCIAL INFORMATION
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 19
Item 2. Changes in Securities 20
Item 3. Defaults Upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20
Signatures 21
2
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The financial statements of RMS Titanic, Inc. (the "Company") included
herein were prepared, without audit, pursuant to rules and regulations of the
Securities and Exchange Commission. 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 February 28, 1998 as included in
the Company's Form 8-K dated June 15, 1998.
3
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<TABLE>
<CAPTION>
RMS TITANIC, INC.
BALANCE SHEET
=======================================================================================================================
NOVEMBER 30, FEBRUARY 28,
1998 1998
- -----------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 998,555 $ 1,000,269
Accounts receivable 617,346 640,760
Refundable withholding tax 429,022 45,848
Other current assets 7,600 -
- -----------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 2,052,523 1,686,877
Artifacts Recovered, at cost 9,181,340 7,700,340
Deferred Income Tax Asset, net of valuation allowance of $486,000
and $503,000, respectively - -
Property and Equipment, net of accumulated depreciation
of $387,771 and $73,207, respectively 1,263,951 652,599
Other Assets 39,694 38,880
- -----------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $12,537,508 $10,078,696
=======================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 2,012,998 $ 2,483,200
Income taxes payable 149,880 143,960
Deferred revenue - 14,943
- -----------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 2,162,878 2,642,103
=======================================================================================================================
Stockholders' Equity:
Common stock - $.0001 par value; authorized 30,000,000 shares,
issued and outstanding 16,187,128 shares 1,619 1,619
Additional paid-in capital 13,915,748 13,915,748
Accumulated deficit (3,542,737) (6,480,774)
- -----------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY 10,374,630 7,436,593
- -----------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $12,537,508 $10,078,696
=======================================================================================================================
</TABLE>
See Notes to Financial Statements
4
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<TABLE>
<CAPTION>
RMS TITANIC, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
====================================================================================================================================
THREE-MONTH PERIOD THREE-MONTH PERIOD NINE-MONTH PERIOD NINE-MONTH PERIOD
ENDED NOVEMBER 30, ENDED NOVEMBER 30, ENDED NOVEMBER 30, ENDED NOVEMBER 30,
1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue:
Exhibitions and related merchandise sales $ 991,008 $ 1,283,131 $ 4,161,538 $ 2,721,335
Licensing fees -- 91,888 3,481,591 97,196
Merchandise and other 118,694 17,005 548,225 60,997
Sale of coal 70,094 7,257 193,560 20,243
- ------------------------------------------------------------------------------------------------------------------------------------
Total revenue 1,179,796 1,399,281 8,384,914 2,899,771
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Cost of coal sold 7,517 -- 19,000 --
Cost of merchandise sold 35,347 -- 35,347 --
General and administrative 488,901 214,701 1,353,680 875,526
Depreciation and amortization 79,115 2,069 164,565 6,291
Expedition costs attributable to licensing fees -- -- 1,845,000 --
Impairment loss on exhibitry equipment -- -- 150,000 --
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 610,880 216,770 3,567,592 881,817
- ------------------------------------------------------------------------------------------------------------------------------------
Income before other income 568,916 1,182,511 4,817,322 2,017,954
Other income -- 23,980 5,000 61,580
- ------------------------------------------------------------------------------------------------------------------------------------
Income from operations 568,916 1,206,491 4,822,322 2,079,534
Interest income 11,581 3,263 37,792 3,263
- ------------------------------------------------------------------------------------------------------------------------------------
Income before provision for income taxes 580,497 1,209,754 4,860,114 2,082,797
Provision for income taxes 221,514 -- 1,922,077 --
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $ 358,983 $ 1,209,754 $ 2,938,037 $ 2,082,797
====================================================================================================================================
Basic income per common share $ .02 $ .07 $ .18 $ .13
====================================================================================================================================
Weighted-average number of shares outstanding 16,187,128 16,183,831 16,187,128 16,180,146
====================================================================================================================================
See Notes to Financial Statements
</TABLE>
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<TABLE>
<CAPTION>
RMS TITANIC, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
=============================================================================================================
NINE-MONTH NINE-MONTH
PERIOD ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1998 1997
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,938,037 $ 2,082,797
- -------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 164,565 6,291
Impairment loss on exhibitry equipment 150,000 --
Rights granted in satisfaction of accrued liability -- (60,000)
Financing fees -- 5,750
Other (76,500) --
Amortization of deferred revenue -- (1,205,000)
Noncash exhibition revenue (750,000) --
Reduction in artifacts recovered 19,000 --
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 23,413 (97,549)
(Increase) decrease in other current assets (7,600) 4,800
(Increase) decrease in refundable withholding tax (383,174) 87,500
Increase in other assets (814) (270)
Decrease in accounts payable and accrued liabilities (470,201) (692,509)
Increase in income taxes payable 5,920 --
(Decrease) increase in deferred revenue (14,943) 655,000
- -------------------------------------------------------------------------------------------------------------
TOTAL ADJUSTMENTS (1,340,334) (1,295,987)
- -------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,597,703 786,810
- -------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Artifact recovery costs (1,500,000) --
Purchases of property and equipment (99,417) (3,400)
- -------------------------------------------------------------------------------------------------------------
CASH USED IN INVESTING ACTIVITIES (1,599,417) (3,400)
- -------------------------------------------------------------------------------------------------------------
Cash flows used in financing activity - repayment of notes payable -- (102,848)
- -------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (1,714) 680,562
Cash and cash equivalents at beginning of period 1,000,269 105,854
- -------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 998,555 $ 786,416
=============================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for income taxes $ 1,900,000 --
=============================================================================================================
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITY:
Noncash purchases of property and equipment $ 826,500 --
=============================================================================================================
See Notes to Financial Statements
6
</TABLE>
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RMS TITANIC, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 - The accompanying financial statements contain all
adjustments necessary to present fairly the financial position
of the Company as of November 30, 1998 and its results of
operations and its cash flows for the three and nine months
ended November 30, 1998 and 1997. Results of operations for
the three and nine month periods ended November 30, 1998 are
not necessarily indicative of the results that may be expected
for the year ending February 28, 1999.
Note 2 - In February 1997, Statement of Financial Accounting
Standards ("SFAS") No. 128, Earnings per Share, was issued.
SFAS No. 128 requires dual presentation of basic earnings
(loss) per share ("EPS") and diluted EPS on the face of all
statements of earnings issued after December 15, 1997 for all
entities with complex capital structures. Basic EPS is
computed as net earnings divided by the weighted-average
number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution that could occur from
common shares issuable through stock-based compensation
including stock options, restricted stock awards, warrants and
other convertible securities. The adoption of SFAS No. 128 had
no effect on the restatement of the net income per common
share for the three and nine months ended November 30, 1997.
Diluted EPS is not presented for the three and nine months
ended November 30, 1998 and 1997 since the dilutive effect of
potential common shares is not material.
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. The agreement, as amended, extended the exhibition
through September 30, 1998. Pursuant to the agreement, as
amended, the Company received two-thirds of the net profits,
after recoupment of certain project expenses through February
28, 1998 and $2.00 per visitor until May 1, 1998, as defined.
For the period subsequent from May 1, 1998, the Company
receives two-thirds of net profits, after recoupment of
certain project expenses, plus a percentage of merchandise
revenues, as defined. The term of this exhibition ended on
September 30, 1998.
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 and further extended the exhibition
to May 31, 1998. Pursuant to the agreement, the Company
received 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, as defined. In addition,
the Company received 10% of gross revenue, as defined, from
the sale
7
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RMS TITANIC, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
of merchandise at the exhibition.
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 (the "Queen Mary") from June 1, 1997 through
January 5, 1998 (the "Initial Term"). In January 1998, the
agreement was amended and the exhibition was extended through
February 5, 1998, was further extended through September 7,
1998, and has been extended on a month-to-month basis
thereafter (the "Extension Term"). Pursuant to the Queen Mary
exhibition agreement, the Company will receive, from the sale
up to 150,000 tickets, $2.00 per ticket during the Initial
Term and $2.50 per ticket during the Extension Term, 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.
The Company has entered into an agreement with Resource Plus
and Event Management International ("EMI"), a division of the
World Trade Center Boston, for the presentation of more than
250 artifacts in Boston, Massachusetts from July 1, 1998
through on or about November 15, 1998. Pursuant to the
exhibition agreement, EMI is responsible for payment of all
costs and expenses related to the design, construction,
operation and marketing of the exhibition. Pursuant to the
exhibition agreement, the Company will receive two-thirds
(2/3) and EMI will receive one-third (1/3) of the net profits,
after recoupment of certain project expenses, as defined. The
agreement further provided that the ownership interest of
certain exhibitry and equipment aggregating $750,000 was
transferred to the Company as of August 31, 1998, in
satisfaction of the minimum exhibition fees due to the
Company. This exhibition closed on November 29, 1998. The
Company earned no exhibition fees in excess of the minimum.
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RMS TITANIC, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
The Company has entered into an agreement with Titanic
Exhibition Japan Inc. ("TEJI") for the exhibition of
approximately 200 Titanic artifacts in six (6) venues in Japan
commencing on or about July 20, 1998 and ending on or about
July 1, 1999. Pursuant to the exhibition agreement, TEJI has
agreed to pay the conservator of the Company's artifacts
$321,000 for the conservation and restoration of artifacts to
be displayed in the exhibition. The exhibition agreement
further provides that TEJI will pay to the Company the greater
of $3.00 per attendee or 50% of the profits, as defined.
The Company entered into an agreement with IFREMER for the
charter of equipment and crews to conduct the Company's fifth
expedition to the Titanic wreck site in August 1998 (the
"Summer of 1998 Expedition"). Pursuant to the agreement, the
Company agreed to pay IFREMER the sum of $1,460,000 in
addition to a previously paid deposit of $200,000. Such sum
included $480,000 that was due and owing to IFREMER for the
Company's 1996 expedition to the Titanic. The Company agreed
to pay $1,260,000 of such charter costs prior to the
commencement of the Summer of 1998 Expedition, with the
$200,000 balance to be paid upon the conclusion of the
expedition. Pursuant to the agreement between the Company and
its audio-visual licensee for the Summer of 1998 Expedition,
the Company's audio-visual licensee paid $1,150,000 of such
charter costs on behalf of the Company. In July 1998, the
Company paid the sum of $80,000 to IFREMER pursuant to the
charter agreement. The balance of $200,000 payable by the
Company to IFREMER under the charter agreement was paid
subsequent to November 30, 1998. All objects recovered during
the Summer of 1998 Expedition were the subject of a lien
granted to IFREMER. Such lien has been released subsequent to
November 30, 1998.
9
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RMS TITANIC, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
The Company and an unrelated television production company
entered into an agreement whereby the Company granted certain
rights to the production company for the production and
exploitation of audio and visual recordings with respect to
the Summer of 1998 Expedition (the "Productions"). In
consideration of the granting of such rights, the television
production company, among other things, agreed to pay the cost
for chartering equipment and crew necessary for the Summer of
1998 Expedition, including, but not limited to, $1,150,000 of
the costs for chartering IFREMER's equipment and crew and an
aggregate of $2,195,000 of additional equipment and crew from
other unrelated third-parties on behalf of the Company. Of
this $2,195,000, the Company has charged to operations
$1,845,000 during the fiscal quarter ended August 31, 1998,
representing costs attributable to the licensing agreements.
The Company has retained the rights for commercial
exploitation of recordings made at the Titanic wreck site in a
print format and electronic media format, and certain royalty
and other rights with respect to the marketing and sale of
home videos based upon the Summer of 1998 Expedition.
Note 4 - The Company is a named defendant in a lawsuit
commenced in the United States District Court for the Eastern
District of Virginia) on or about May 4, 1998 (Haver v. RMS
Titanic, Inc., Civil Action No.: 2:98cv507). The plaintiff
therein seeks a declaratory judgment permitting him to
participate in a photographic expedition to the wreck of the
Titanic known as Operation Titanic. This action does not
challenge the Company's salvor-in-possession status. On or
about May 4, 1998, the Company instituted a motion for a
preliminary injunction in the United States District Court for
the Eastern District of Virginia against Deep Ocean
Expeditions, Mike McDowell, Bakers World Travel, Quark
Expedition, Ralph White, Don Walsh, Alfred S. McLaren,
WildWings, and Mr. Haver, all of whom are involved in
Operation Titanic, seeking an order enjoining such parties
from conducting their proposed photographic expedition.
(R.M.S. Titanic, Inc. v. The Wrecked and Abandoned Vessel,
etc. believed to be the RMS Titanic, in rem, Civil Action No.
2:93cv902). The United States District Court for the Eastern
District of Virginia has previously held, in August 1996, that
RMS Titanic, Inc. had the right to exclude others from taking
photographs of the wreck and to control entry in to the wreck
site. The Court's ruling to that effect also states that the
Company has the right to exclude others from the wreck site
regardless
10
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RMS TITANIC, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
of whether the Company is at the wreck site while other groups
attempt to visit the site. Pursuant to stipulation, the action
commenced by Mr. Haver and the Company's motion for a
preliminary injunction have been consolidated. By Order dated
June 23, 1998, the Court granted the Company's motion for a
preliminary injunction enjoining certain parties from visiting
the wreck site to view and photograph the wreck. Certain of
the enjoined parties have appealed the Order to the U.S. Court
of Appeals for the Fourth Circuit. By order entered on July
17, 1998, a motion to stay the Order pending determination of
the appeal was denied by the U.S. Court of Appeals. Such
appeal is pending determination following oral argument in
October 1998.
The Company is a named defendant in a lawsuit commenced in the
United States District Court for the Southern District of New
York on or about December 16, 1997 (Lindsay v. The Wrecked and
Abandoned Vessel RMS Titanic, et al., in rem, and RMS Titanic,
Inc. et al., No. 97Civ9248), as disclosed in the Company's
report on Form 8-K dated June 15, 1998. The plaintiff alleges
therein, inter alia, that he rendered certain services to the
Company in connection with its 1996 expedition to the Titanic
wreck site and in particular connection with the alleged
production film, video and still images of the Titanic
illuminated by certain light towers. The relief sought
includes an accounting and a judgment declaring the plaintiff
a co-salvor of the 1996 expedition and awarding him, in
specie, the underwater, film, video and still photographs
allegedly obtained by plaintiff from the use of the light
towers. The plaintiff also seeks an award of compensatory
damages of up to approximately $500,000 and punitive damages
in excess of $2,000,000 based upon claims of breach of
contract, fraudulent misrepresentation, money lent, quantum
meruit and conversion. Management of the Company has filed an
answer denying the essential allegations of the complaint,
intends to defend itself vigorously, and to assert
counterclaims seeking compensatory and punitive damages
against the plaintiff based upon, among other things, claims
that the plaintiff has wrongfully removed and retained
property owned by the Company, has wrongfully interfered with
contractual relations with third parties, and has violated the
Company's copyright to the images obtained with the light
towers. In connection with this action, the parties agreed,
without further order of the court, coins and currency
recovered from the Titanic located within the Southern
District of New York (the "District") as of December 18, 1997
would not be removed from the District, and would not be sold,
liened or otherwise
11
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RMS TITANIC, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
encumbered. The Company filed a motion to dismiss the
complaint and/or transfer it to the Eastern District of
Virginia. By order dated September 1, 1998, the Court granted
the Company's motion to dismiss the plaintiff's claim for an
accounting, vacated the above agreement between the parties
with respect to disposition of the coins and currency without
order of the court, and otherwise denied the Company's motion
to dismiss and/or transfer the action. This action is now in
the stage of discovery proceedings.
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, 1998 VERSUS
THE QUARTER ENDED NOVEMBER 30, 1997
FOR THE NINE MONTHS ENDED NOVEMBER 30, 1998 VERSUS
THE NINE MONTHS ENDED NOVEMBER 30, 1997
During the third quarter and the first nine months of its 1999 fiscal
year (the "1999 fiscal year"), the Company's revenues decreased approximately
16% and increased approximately 189%, respectively, as compared to the third
quarter and the first nine months of its 1998 fiscal year (the "1998 fiscal
year"). These changes were principally attributable to a decrease of
approximately 100% and an increase of approximately 3,482 in licensing fees
during the third quarter and first nine months of the 1999 fiscal year,
respectively, as compared to the corresponding periods of the 1998 fiscal year.
These changes were primarily a result of the Company having earned licensing
fees of approximately $3,345,000 during the second quarter of the 1999 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 1998 (the "Summer of 1998 Expedition"). The Company's revenue from
exhibitions and related merchandise sales decreased approximately 23% during the
third quarter of the 1999 fiscal year as compared to the third quarter of the
1998 fiscal year, and increased approximately 53% during the first nine months
of the 1999 fiscal year as compared to the first nine months of the 1998 fiscal
year. This change during the respective three and nine month periods were
primarily attributable to the scope of the Company's exhibition activities
during the first quarter of the 1999 fiscal year as compared to the first
quarter of the 1998 fiscal year. Revenue from merchandise, book and other
activities increased
12
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approximately 773% and approximately 799% during the third quarter and first
nine months of the 1999 fiscal year, respectively, as compared with the
corresponding periods of the 1998 fiscal year. These changes resulted primarily
from the recognition of revenues during the 1999 fiscal year from a book
published in conjunction with unrelated third parties and revenue derived from
the sale of merchandise through the Company's web site
(http://www.titanic-online.com). The Company's revenue from the sale of coal
increased approximately 865% and approximately 856% during the third quarter and
first nine months of the 1999 fiscal year, respectively, as compared to the
corresponding periods of the 1998 fiscal year. These changes derived primarily
from increases in the amount of coal sold through the Company's web site, in the
merchandise shops of the Company's United States exhibitions, and through other
direct marketing activities.
The Company's cost of coal sold increased during the third quarter of
the 1999 fiscal year as compared to the third quarter of the 1998 fiscal year,
and increased during the first nine months of the 1999 fiscal year as compared
to the first nine months of the 1998 fiscal year, approximately 100%, with such
cost relating to the volume of sales in the respective periods. The Company's
general and administrative expenses increased approximately 128% during the
third quarter of the 1999 fiscal year as compared to the third quarter of the
1998 fiscal year, and increased approximately 55% during the first nine months
of the 1999 fiscal year as compared to the first nine months of the 1998 fiscal
year. These changes were primarily the result of an increase in professional
fees and expenses of $150,000 incurred during the third quarter of the 1999
fiscal year related to deinstallation and transportation of the exhibition from
Hamburg, Germany to Zurich, Switzerland. The Company's depreciation and
amortization expenses increased approximately 3,724% and 2,516% during the third
quarter and first nine months of the 1999 fiscal year, respectively, as compared
to the corresponding periods of the 1998 fiscal year. During the third quarter
of the 1999 fiscal year, the Company incurred $1,845,000 of costs related to
vessel and equipment chartering related to the Company's audio-visual licensee's
requirements for the Summer of 1998 Expedition, as compated to zero costs
attributable to license fees during the nine months ended November 30, 1997.
During the second quarter of its 1999 fiscal year, the Company recorded an
impairment loss of $150,000 attributable to exhibitry equipment related to the
Company's exhibition of Titanic artifacts in Hamburg, Germany based upon the
determination that certain items of exhibitry would not be utilized in the
planned re-location and presentation of the Hamburg exhibition in Zurich,
Switzerland commencing in November 1998.
The Company's income before provision for income taxes decreased
approximately 52% during the third quarter of the 1999 fiscal year as compared
to the third quarter of the 1998 fiscal year, and increased approximately 133%
during the first nine months of the 1999 fiscal year as compared to the first
nine months of the 1998 fiscal year. The Company's net income decreased
approximately 70% during the third quarter of the 1999 fiscal year as compared
to the third quarter of the 1998 fiscal year, and increased approximately 41%
during the first nine months of the 1999 fiscal year as compared to the first
nine months of the 1998 fiscal year.
13
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LIQUIDITY AND CAPITAL RESOURCES
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 from an unaffiliated 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 $127,000 from the sale of coal during the 1998,
1997 and 1996 fiscal years, resulting in an unpaid balance of $153,168 as of
February 28, 1998. Such unpaid balance, which was not further reduced during the
third quarter of the 1999 fiscal year, does not bear interest. 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. 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. The Company has satisfied its obligations to pay
$500,000 of its exhibition revenue to IFREMER, as described above, and has not
received any income from the sale of products involving the 1996 expedition.
Accordingly, as of June 1, 1998, the unpaid balance owed to IFREMER under the
1996 charter agreement is $480,000, with the sum of $200,000 paid to IFREMER
during the first quarter of the 1999 fiscal year having been applied as a
deposit for the chartering of IFREMER's vessel and crews for the Summer of 1998
Expedition.
In connection with the Summer of 1998 Expedition, the Company entered
into an agreement with IFREMER to charter equipment and crew necessary for this
expedition, which commenced on
14
<PAGE> 15
August 3, 1998 and concluded on August 31, 1998. Pursuant to the terms of such
charter agreement, the Company agreed to pay IFREMER, in addition to the deposit
of $200,000, the sum of $1,460,000 for this expedition, inclusive of all amounts
that were due and owing to IFREMER for the Summer of 1996 Expedition ($480,000).
The Company agreed to pay $1,260,000 of such charter costs prior to the
commencement of the Summer of 1998 Expedition, with the $200,000 balance to be
paid upon the conclusion of the expedition. Pursuant to the agreement between
the Company and its audio-visual licensee for the Summer of 1998 Expedition, the
Company's audio-visual licensee paid $1,150,000 of such charter costs on the
Company's behalf. In July 1998, the Company paid the sum of $80,000 to IFREMER
pursuant to the charter agreement. The balance of $200,000 payable by the
Company to IFREMER under the charter agreement was paid subsequent to November
30, 1998.
In addition to the charter agreement with IFREMER, the Company also
entered into agreements with unrelated third parties for the chartering of
equipment and crews in connection with the Summer of 1998 Expedition in an
aggregate amount of $2,195,000. The Company's audio-visual licensee for the
Summer of 1998 Expedition, in addition to the $1,150,000 payment to IFREMER
discussed above, also agreed to pay all of such other charter costs on the
Company's behalf.
The Company's capital commitments during its 1999 fiscal year includes
compensation to the Company's principal executive officer and lease payments for
its principal offices, with respect to which the Company is presently
negotiating an extension of its lease for the period commencing October 1, 1998.
Pursuant to its agreement with Resource Plus and Event International
("EMI") for the exhibition of the Company's artifacts in Boston, Massachusetts,
the Company agreed to pay EMI the sum of $300,000 to provide certain services,
including de-installation, shipping and installation of the exhibition in its
next venue (St. Paul, Minnesota). As a result of EMI's alleged breach of the
agreement, the Company terminated EMI's obligations and corresponding rights
with respect to the de-installation, shipping and installation of the
exhibition. EMI has demanded that the Company pay $100,000 to EMI with respect
to these matters. The Company has rejected such demand.
The Company's near term operating needs will be financed principally
from the distribution of revenues to the Company under its agreements for
exhibitions in Zurich, Switzerland; St. Paul, Minnesota; its touring exhibition
in Japan; and at the Queen Mary in Long Beach, California. The Company has moved
its exhibition presented in Boston, Massachusetts to St. Paul, Minnesota for a
four (4) month period commencing January 1, 1999 (the "St. Paul Exhibition").
Pursuant to its agreement for the St. Paul Exhibition, the Company will be paid
a minimum of $1,000,000 no later than February 28, 1999 (subject to the
withholding for a maximum period of one month an amount of up to approximately
$200,000 for agreed upon operating expenses for the month of March 1999 in the
event that cash flow needs so require). The Company will receive two-thirds of
the net profits, as defined (the "Net Profits"), derived from ticket,
merchandise and sponsorship revenues in excess of a maximum budget of $2,000,000
(the "Budget"). The Budget includes a $300,000 payment to be made to the Company
for the lease of its exhibitry for the St. Paul Exhibition. The $1,000,000
minimum to be paid to the Company will be credited against its share of the Net
Profits.
15
<PAGE> 16
The Company has also re-located its exhibition from Hamburg, Germany,
which closed on September 30, 1998, to Zurich, Switzerland for a six-month
presentation commencing in November 1998 (the "Zurich Exhibition"). Pursuant to
the terms of its agreement for the Zurich exhibition, the Company will be paid a
minimum of $100,000 per month, commencing November 30, 1998, during the term of
the Zurich Exhibition. After the total of net ticket and sponsorship revenue
combined with 20% of gross merchandise sales (less sales tax) exceed 4,600,000
Swiss Francs (the "Threshold"), the Company will receive two-thirds of the net
profits, as defined, derived from ticket and sponsorship revenues in excess of
the Threshold and 20% of all merchandise revenues from inception of the Zurich
Exhibition. The $100,000 per month payments to the Company will be credited
against its share of the net profits from the Zurich Exhibition after the
Threshold has been attained.
The Company is also actively negotiating for the presentation of an
exhibition of its Titanic artifacts in venues after its present and planned
exhibitions are completed. In the event that cash flows are not adequate to
satisfy the Company's future operating needs (inclusive of payment of
outstanding liabilities), no assurances of which can be given, additional debt
and/or equity financing may be required.
Substantially all of the Company's cash flow derives from the Company's
operating activities. None of the Company's cash flow during the first quarter
of the 1999 fiscal year derived from financing activities, with approximately
$1,599,000 used in investing activities.
In view of the Company's recent purchase of new computers and the
limited impact that Year 2000 issues has upon the Company's business activities
or competitive conditions, management of the Company does not believe that Year
2000 issues will have a material adverse affect upon the Company.
Except for historical information contained herein, this Quarterly
Report on Form 10-Q contains forward-looking statements within the meaning of
the Private Securities Reform Act of 1995 which involve certain risks and
uncertainties including, without limitation, the Company's needs, as discussed
above, to obtain additional financing in order to achieve its objectives and
plans. The Company's actual results or outcomes may differ materially from those
anticipated. Important facts that the Company believes might cause such
differences are discussed in the cautionary statements accompanying the
forward-looking statements as well as in the risk factors discussed below.
Although the Company believes that the assumptions underlying the
forward-looking statements contained herein are reasonable, any of the
assumptions could be inaccurate, and therefore, there can be no assurance that
the forward-looking statements contained in this Report will prove to be
accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation of the Company or any other such
person that the objectives and plans of the Company will be achieved. In
addition to uncertainties of ordinary business operations and the factors
discussed in the Company's Form 8-K dated June 15, 1998, the forward-looking
statements of the Company contained in this report are also subject to the
following risks and uncertainties:
In order for the Company to design, construct and embark on the
Waterborne Exhibition,
16
<PAGE> 17
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 St. Petersburg, St. Paul, Zurich and Japan, 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 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.
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. 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.
17
<PAGE> 18
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 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 1998
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.
The Company's sales of coal recovered from the Titanic wreck site and
other merchandise through its web site increased significantly during the period
of the initial theatre release of the motion picture "Titanic" in December 1997
without the Company incurring any significant marketing expenses. This coal is
the only object recovered from the Titanic that the Company is offering or will
offer for sale to the general public. Through the date of this report,
approximately 110,000 units of the Company's Titanic coal have been sold since
the commencement of such sales in the fall 1996, which represents approximately
one-half of the total units of coal available for sale. A substantial portion of
the remaining Titanic coal supply is different in size than that which the
Company has marketed to date, and the Company's pricing and commercial
presentation of the coal is likely to change. No assurances can be given that
different price points or different presentations of the coal will be attractive
to consumers. Additionally, in the event that the Company does not recover any
additional Titanic coal, and the existing supply of coal is exhausted in the
future, the volume of the Company's merchandise sales may be materially
adversely affected in the absence of the introduction and marketing of
additional products, such as replicas of artifacts.
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 and Japan.
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<PAGE> 19
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 third quarter of the 1999 fiscal
year, there were no significant fluctuations in the exchange rates with respect
to foreign currencies in which the Company transacts business. Although the
Company's financial arrangements with IFREMER and its exhibition organizer in
Germany, Zurich and Japan 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.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is a named defendant in a lawsuit commenced in the United
States District Court for the Eastern District of Virginia) on or about May 4,
1998 (Haver v. RMS Titanic, Inc., Civil Action No.: 2:98cv507). The plaintiff
therein seeks a declaratory judgment permitting him to participate in a
photographic expedition to the wreck of the Titanic known as Operation Titanic.
This action does not challenge the Company's salvor-in-possession status. On or
about May 4, 1998, the Company instituted a motion for a preliminary injunction
in the United States District Court for the Eastern District of Virginia against
Deep Ocean Expeditions, Mike McDowell, Bakers World Travel, Quark Expedition,
Ralph White, Don Walsh, Alfred S. McLaren, WildWings, and Mr. Haver, all of whom
are involved in Operation Titanic, seeking an order enjoining such parties from
conducting their proposed photographic expedition. (R.M.S. Titanic, Inc. v. The
Wrecked and Abandoned Vessel, etc. believed to be the RMS Titanic, in rem, Civil
Action No. 2:93cv902). The United States District Court for the Eastern District
of Virginia has previously held, in August 1996, that RMS Titanic, Inc. had the
right to exclude others from taking photographs of the wreck and to control
entry in to the wreck site. The Court's ruling to that effect also states that
the Company has the right to exclude others from the wreck site regardless of
whether the Company is at the wreck site while other groups attempt to visit the
site. Pursuant to stipulation, the action commenced by Mr. Haver and the
Company's motion for a preliminary injunction have been consolidated. By Order
dated June 23, 1998, the Court granted the Company's motion for a preliminary
injunction enjoining certain parties from visiting the wreck site to view and
photograph the wreck. Certain of the enjoined parties have appealed the Order to
the U.S. Court of Appeals for the Fourth Circuit. By order entered on July 17,
1998, a motion to stay the Order pending determination of the appeal was denied
by the U.S. Court of Appeals. Such appeal is pending determination following
oral argument in October 1998.
The Company is a named defendant in a lawsuit commenced in the
United States District Court for the Southern District of New York on or about
December 16, 1997 (Lindsay v. The
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<PAGE> 20
Wrecked and Abandoned Vessel RMS Titanic, et al., in rem, and RMS Titanic, Inc.
et al., No. 97Civ9248), as disclosed in the Company's report on Form 8-K dated
June 15, 1998. The plaintiff alleges therein, inter alia, that he rendered
certain services to the Company in connection with its 1996 expedition to the
Titanic wreck site and in particular connection with the alleged production
film, video and still images of the Titanic illuminated by certain light towers.
The relief sought includes an accounting and a judgment declaring the plaintiff
a co-salvor of the 1996 expedition and awarding him, in specie, the underwater,
film, video and still photographs allegedly obtained by plaintiff from the use
of the light towers. The plaintiff also seeks an award of compensatory damages
of up to approximately $500,000 and punitive damages in excess of $2,000,000
based upon claims of breach of contract, fraudulent misrepresentation, money
lent, quantum meruit and conversion. Management of the Company has filed an
answer denying the essential allegations of the complaint, intends to defend
itself vigorously, and to assert counterclaims seeking compensatory and punitive
damages against the plaintiff based upon, among other things, claims that the
plaintiff has wrongfully removed and retained property owned by the Company, has
wrongfully interfered with contractual relations with third parties, and has
violated the Company's copyright to the images obtained with the light towers.
In connection with this action, the parties agreed, without further order of the
court, coins and currency recovered from the Titanic located within the Southern
District of New York (the "District") as of December 18, 1997 would not be
removed from the District, and would not be sold, liened or otherwise
encumbered. The Company filed a motion to dismiss the complaint and/or transfer
it to the Eastern District of Virginia. By order dated September 1, 1998, the
Court granted the Company's motion to dismiss the plaintiff's claim for an
accounting, vacated the above agreement between the parties with respect to
disposition of the coins and currency without order of the court, and otherwise
denied the Company's motion to dismiss and/or transfer this action. This action
is now in the stage of discovery proceedings.
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.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
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<PAGE> 21
10.1 Agreement dated September 25, 1998 between the Company and Media Rare,
Inc.
(b) Reports on Form 8-K
None
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 19, 1999 By: /s/George Tulloch
George Tulloch, Principal Executive Officer
and Acting Principal Accounting Officer
21
<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 25th day of
September, 1998, 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 Media Rare Inc, a
corporation organized under the laws of the State of Minnesota and having its
principal place of business at 400 Silbey Street, Suite 270, St. Paul, Minnesota
55101 ("Media Rare").
WHEREAS, RMST and Media Rare wish to work in association with
one another to present an exhibition in the city of Saint Paul, Minnesota of
artifacts recovered by RMST from the wreck site of the Titanic (the
"Exhibition"), together with supporting material, subject to the terms and
conditions of 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:
1.2 "Exhibition Term" shall mean the period commencing
December 31, 1998 and expiring on April 30, 1999.
1.3 "Exhibitry" shall include, display cases, mountings,
props, theatrical pieces, didactic and other panels, artwork, models,
transportable walls and wall covering, electronic, audiovisual and computer
equipment and software programs, and any and all other display items or elements
contained in the Exhibition that can be removed from "Titanic: The Artifacts
Exhibition" currently presented in a temporary structure near the World Trade
Center Boston (the "Boston Exhibition") for re-installation at the Venue,
together with all drawings, plans, specifications and other documentation
relating thereto.
1.4 "Profits" shall mean the excess of Revenues over the
lesser of: (a) the costs of operations, as defined by the Budget referenced in
Section 1.5 hereof (the "Budget"); or (b) the actual costs of operations. For
purposes of the foregoing, costs of operations shall consist of all expenses set
forth in the Budget.
1.5 "Project Expenses" shall include, all costs and expenses
of every kind and description incurred in establishing and presenting the
Exhibition, including, without limitation, design and fabrication of the
Exhibition, operating the Exhibition and marketing the Exhibition, all as set
forth in a certain memo dated September 16, 1998 from Media Rare to RMST, a copy
of
<PAGE> 2
which is attached hereto as Exhibit A and incorporated by reference herein (the
"Memo"); plus (a) payments to be made in accordance with Section 5 hereof for
the deinstallation of the Boston Exhibition, transportation and installation of
the Exhibitry and Artifacts in the Venue, and for related services; (b) payment
of $300,000 to RMST for the lease of the Exhibitry for the Exhibition Term (the
"Lease Fee"); (c) out-of-pocket expenses (including travel to and from New York
City to Saint Paul and lodging in St. Paul) incurred for the attendance of
George Tulloch and/or Allan Carlin (or other mutually agreed upon
representatives of RMST) in connection with the design, marketing and promotion
of the Exhibition (including the opening night reception) upon the request of
Media Rare; and (d) such other expenses as the parties may mutually agree upon.
The expenses identified in the Memo and subparagraphs (a) through (d) above are
hereinafter collectively referred to as the "Budget."It is further agreed that
the Lease Fee shall be paid to RMST after other Project Expenses are recouped or
a reserve from Revenue is available for the future payment of the Project
Expenses contained in the Budget.
1.6 "Revenue" shall mean and include the aggregate of:
1.6.1 "Ancillary Revenues," which shall include all
revenues derived from television broadcast, film and music
rights that may be granted pursuant to and in accordance with
the terms of this Agreement, and, except as set forth in
Sections 1.6.2 through 1.6.4 hereof, other revenues related to
or derived from the presentation of the Exhibition.
1.6.2 "Merchandising Revenue," which shall include
all revenues derived from the sale of merchandise pursuant to
Section 8.1 hereof and from the sale of food and beverages at
the Exhibition (including revenue derived from catering
special events, as described in Section 1.6.3 below, minus
cost of goods (if applicable), sales tax, credit card fees and
check verification fees.
1.6.3 "Sponsorship Revenue," which shall include all
revenues except non-cash or in-kind sponsorships, derived from
the granting of sponsorship or promotion rights (including,
but not limited to, special events, such as for example,
permitting groups to attend the exhibition while the general
public is excluded from the exhibition) to third parties for
the Exhibition, less commissions paid to third-parties in
connection with the generation of the Sponsorship Revenue.
1.6.4 "Ticket Revenue," which shall include all sums
generated by ticket sales at the Exhibition and through
authorized ticket sale outlets, minus sales tax, credit card
fees, and check verification fees, potential outside ticketing
services and couponing programs, plus the Service Charge, as
defined by Section 11.2 hereof.
1.7 "Supporting Material" shall mean material relating
specifically to the recovery of the Artifacts and other objects recovered by
RMST from the wreck site of the Titanic, including but not limited to
photographs and video footage, supplied by RMST.
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<PAGE> 3
1.8 "Venue" shall mean a structure consisting of approximately
35,000 square feet known as the Union Depot in the Lowertown section of St.
Paul, Minnesota.
2. THEMES AND DURATION OF THE EXHIBITION, AND RMST'S
CONSULTATION RIGHTS.
2.1 The parties agree that the Exhibition will be presented in
the Venue and will be substantially the same as the content of the Boston
Exhibition, subject to design of the Exhibition for presentation within the
dimensions of the Venue.
2.2 The name of the Exhibition shall be "Titanic - The
Exhibition" or such other name mutually agreed upon by the parties.
2.3 The Exhibition is to be produced by RMST in association
with Media Rare, and will be advertised and promoted in such manner as will
reasonably give recognition to RMST's and Media Rare's association with the
Exhibition.
2.4 Media Rare and RMST acknowledge that work on the design
and construction of the Exhibition for presentation in the Venue will commence
following the execution of this Agreement, and that the parties shall jointly be
responsible for the design of the Exhibition, with Media Rare to have the
responsibility of supervising the preparation of the Venue and any improvements
or additions to the Boston Exhibition as are mutually agreed upon. In connection
with these matters, Media Rare 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. Media Rare accordingly agrees that the Exhibition will be designed
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,
Media Rare agrees:
2.4.1 (a) The design of the Exhibition; (b)
the content of all marketing, advertising and public relations
materials; (c) the plan for and personnel in charge of
handling and installation of the Artifacts; and (d) the
content of a pre-recorded audio tour of the Exhibition, as
provided elsewhere herein, shall all be subject to review and
written approval in advance by RMST, which approval shall not
be unreasonably withheld.
2.4.2 Upon reasonable request from RMST,
Media Rare will arrange for 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, Media
Rare will provide reasonable access for RMST representatives
to observe the preparation of the Venue for presentation of
the Exhibition.
3
<PAGE> 4
3. THE OBLIGATIONS OF MEDIA RARE.
Media Rare agrees to pay all Project Expenses in the amounts
set forth in the Budget and to:
3.1 Make all arrangements, and obtain all rights, permits and
licenses as may be required, for presentation of the Exhibition in the Venue,
and in connection therewith, Media Rare 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;
3.2 Commission and supervise all design and construction work
relating to the presentation of the Exhibition in the Venue and improvements or
additions to the Boston Exhibition, including, but not limited to:
3.2.1 All lighting systems and equipment for
illumination of the galleries and ancillary exhibition areas.
3.2.2 All necessary galleries and ancillary
areas, including furniture and equipment for an Artifact
retention area, box office, security, coat check, cash
control, orientation theater, queuing area, concessions, and
all other areas or improvements that may be required to
properly display the Artifacts and present them in a manner
that will allow the public to safely view them.
3.3.3 A display shall be designed for the
Big Piece to be fully immersed in water with appropriate
chemical treatments and equipment so as to permit its proper
conservation during the Exhibition Term. It is understood and
agreed that the frame supports and "shower system" utilized
for the display of the Big Piece in the Boston Exhibition will
not be utilized in the Venue.
3.3 Develop and implement a comprehensive marketing,
advertising, promotion and public relations plan for the Exhibition in
consultation with RMST.
3.4 Develop and implement a comprehensive 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.
3.5 Be responsible for the care and storage of the Artifacts
and Supporting Material, including 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.
3.6 Provide full insurance coverage for the Artifacts of Ten
Million ($10,000,000) Dollars in assessed valuation from the time the Artifacts
are delivered by RMST to
4
<PAGE> 5
Media Rare until thirty (30) days after the conclusion of the Exhibition or the
return of the Artifacts to RMST, whichever occurs first, and full insurance
coverage for the Exhibitry in an amount equal to no less than the actual costs
of the Exhibitry.
3.7 Be responsible for all staffing and the daily operations
of the Exhibition.
3.8 Be responsible for the safety and security of the
Artifacts and Exhibitry from the time the Artifacts and Exhibitry are delivered
by RMST to Media Rare and until returned to RMST.
3.9 Provide secure, pest-free storage for shipping crates.
3.10 Produce an audio-visual presentation of approximately 8
minutes duration for use solely in an orientation theater in the Exhibition, the
content of which shall be subject to RMST's consent, which consent shall not be
unreasonably withheld.
4. RMST'S OBLIGATIONS.
RMST agrees to:
4.1 Make the Exhibitry and Artifacts available to Media Rare
for the Exhibition Term and available to be packed at the Boston Exhibition no
later than December 1, 1998. The Exhibitry and Artifacts shall be delivered to
the Venue no later than December 15, 1998. In the event that the Exhibitry and
Artifacts are not delivered on or before December 15, 1998, Media Rare shall
have the option to cancel this Agreement on or before December 18, 1998, without
any claims by or against RMST.
4.2 Make available such Supporting Material as Media Rare
shall reasonably require following consultation with RMST.
4.3 Deinstall and remove the Exhibitry and Artifacts from the
Venue within thirty (30) days of the expiration of the Exhibition Term.
5. DELIVERY OF THE BOSTON EXHIBITION
The parties acknowledge that RMST has engaged Resource Plus
and Event Management International ("EMI"), in consideration of the payment to
EMI of the sum of Three Hundred Thousand Dollars ($300,000), payable in six (6)
equal installments of $50,000 each commencing on December 1, 1998, to prepack,
pack, handle, provide security for, transport, insure, and install the
Exhibition (including the Artifacts) in the next venue for the Exhibition in the
United States after its presentation in Boston, Massachusetts (the "Next
Venue"), to consult with RMST as may be reasonably necessary in connection with
needs and expectations for preparation of the site for the installation and
operation of the Exhibition at the Next Venue, and to provide onsite training
services at the Next Venue for a period of one week prior to the opening and
ending one
5
<PAGE> 6
week after the opening of the Exhibition in consideration of the payment to EMI;
provided, however, in the event that the actual out-of-pocket expenses incurred
by EMI in connection with the prepacking, packing, handling, providing security
for, transporting, insuring and installing the Exhibition exceed $200,000, RMST
has agreed to re-negotiate in good faith the sum payable to EMI pursuant hereto.
Accordingly, the Budget contains provision for the payment of $300,000 for the
deinstallation of the Boston Exhibition and the transportation and installation
thereof in the Venue, together with the provisioning of related services. In the
event that EMI actually incurs out-of-pocket costs in excess of $200,000 for the
prepacking, packing, handling, providing security for, transporting, insuring
and installing the Exhibition, RMST agrees to be solely responsible for the
payment of any such overage.
6. DIVISION AND PAYMENT OF REVENUES.
6.1. All Revenues shall be collected by Media Rare and be
deposited into an interest-bearing bank account to be utilized for the receipt
and disbursement of Revenues (the "Bank Account"). Revenues shall be disbursed
for the following purposes and in the following priority: (a) subject tot he
provisions set forth in Section 6.2 below, to pay RMST the sum of $1,000,000 no
later than February 28, 1999; provided, however, in the event the payment of
such $1,000,0000 to RMST would not leave an adequate cash reserve for the
payment of projected March operating expenses, exclusive of Lease Payments,
projected from the Budget (the "March Expenses"), then payment of a portion of
such $1,000,000 payment may be deferred in order to establish a satisfactory
reserve for the payment of the March expenses; (b) to Media Rare, in recoupment
of the Project Expenses; and (b) to the respective parties, in proportion to
their respective rights to Profits as set forth in Section 6.3 hereof.
6.2 Notwithstanding the provisions of Section 6.2(a) hereof,
Media Rare shall have the right to use Revenues for the payment of Project
Expenses prior to the payment of such $1,000,000 payment to RMST; provided,
however, the use of Revenues to pay such Project Expenses shall in no respect
diminish or qualify Media Rare's obligations to pay $1,000,000 (less a reserve
for payment of the March Expenses) on or before February 28, 1999 in accordance
with Section 6.1(a) hereof, or to pay any deferred balance thereof on or before
March 31, 1999. Media Rare hereby acknowledges that if Revenues are insufficient
to pay both the sum due to RMST under Section 6.1(a) hereof and Project
Expenses, Media Rare nonetheless unconditionally guarantees to RMST the payment
of all sum due under Section 6.1(a) hereof on a timely basis. In the event that
Media Rare fails to make the payments due to RMST on or before February 28, 1999
in accordance with the foregoing, or fails to make the payment of any deferred
balance thereof on or before March 31, 1999, Media Rare hereby assigns to RMST
all rights, title and interest in Revenues until such $1,000,000 is paid in
full. The foregoing assignment of Revenues is without prejudice to, or
limitation or waiver of, all of RMST's legal and equitable rights and remedies
to enforce Media Rare's obligations hereunder.
6.3 Profits (as defined in Section 1.4 hereof) shall be
divided between RMST and Media Rare as follows: two-thirds (2/3) thereof shall
be paid to RMST and one-third (1/3) thereof shall be paid to Media Rare. The
payment of $1,000,000 to RMST in accordance with
6
<PAGE> 7
Section 6.1(a) hereof shall be credited against RMST's share of Profits.
6.4 Media Rare shall maintain all books of accounts and all
documents necessary to audit, review and verify Revenue and Project Expenses,
and will agree 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. Without limiting the foregoing, RMST
shall be provided with access to the records of the Bank Account at such times
and with such frequency as RMST may be reasonably request, including all
information pertaining to deposits and withdrawals or disbursements into and
from the Bank Account.
6.5 Media Rare shall furnish to RMST, to the extent
practicable, daily accountings of ticket sales and Exhibition attendance and
weekly accountings of Ticket Revenue, Sponsorship Revenues, Merchandise Revenue,
Ancillary Revenues and Project Expenses within one week of the close of each
weekly period, with the first such weekly report to be issued within one week of
February 28, 1999. To the extent that Profits are payable, each such weekly
report shall be accompanied by proof of transfer to RMST's designated bank
account of RMST's share of Profits. Profits shall be disbursed to the parties
upon Revenues exceeding Project Expenses. In the event that an audit reflects a
five (5%) percent or greater discrepancy from the accounting furnished by Media
Rare to RMST, then Media Rare shall be responsible for payment of the costs of
such audit.
6.6 RMST shall not bear any responsibility for any financial
losses that may be incurred in connection with the presentation of the
Exhibition.
7. MARKETING, ADVERTISING AND PUBLICITY.
7.1 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.
7.2 Media Rare shall make available to RMST any advertising or
promotional material in advance of the utilization thereof by the Media Rare for
the marketing or promoting the Exhibition. RMST shall make available to Media
Rare any advertising or promotional material in advance of the utilization
thereof by RMST for marketing or promoting the Exhibition.
7.3 No advertising, promotional or other marketing materials
may be used by Media Rare without RMST's prior written consent, which consent
shall not be unreasonably withheld.
8. MERCHANDISING.
8.1 The parties acknowledge that RMST has entered into an
agreement with Titanic Merchandise, Inc. ("TMI"), pursuant to which TMI is
obligated to build-out, operate, staff
7
<PAGE> 8
and acquire the inventory for the merchandise shop at the Exhibition (the
"Merchandise Shop"). It is further acknowledged that TMI has agreed to pay to
RMST thirty (30%) of gross sales of the Merchandise Shop, less sales tax, credit
card charges, check verification fees and returns (the "Merchandise Sales"), and
that TMI shall furnish a weekly report of merchandise sales, on an itemized
basis, together with remittance of the Merchandise Sales on Friday of each week
for the period covering the preceding Monday through Sunday during the
Exhibition Term. Media Rare acknowledges that the foregoing terms of such
agreement are acceptable. RMST shall use its best efforts to arrange for TMI to
have merchandise available for sale on terms and at a place in the St. Paul
metropolitan area as may be mutually agreed upon.
8.2 It is agreed that the Exhibition Catalogue will be a
customized version of the book "Titanic - Legacy of the World's Greatest Ocean
Liner" by Susan Wels, with a new cover and approximately sixteen pages of
material to be combined with the existing book contents so as to customize such
book as an Exhibition catalogue.
9. SPONSORSHIP.
Media Rare shall seek corporate sponsors for the Exhibition
that are not in conflict with the image of promoting science and education, and
RMST shall provide its assistance and support for such efforts. RMST shall have
the right to approve all sponsors for the Exhibition, which approval shall not
be unreasonably withheld. No sponsor shall be granted any rights, other than
sponsorship rights with respect to the Exhibition, without the prior written
consent of RMST. Nothing in this Agreement shall be construed as authorizing the
right to grant sponsorship arrangements for any activity or undertaking of RMST
other than the Exhibition. Any and all payments received from sponsors of the
Exhibition, less commissions paid in connection therewith, shall be considered
Sponsorship Revenue for purposes of this Agreement. The parties acknowledge that
RMST has entered into an agreement with Discovery Communications, Inc.
("Discovery"), pursuant to which it has been agreed that Discovery has the right
to be a sponsor of the exhibitions of its Titanic artifacts, and that if
Discovery desires to be a sponsor, such sponsorship shall be at no cost to
Discovery. In the event that Discovery is a sponsor of the Exhibition, its logo
shall appear in all promotional materials related to the Exhibition. Media Rare
hereby acknowledges that the above arrangements with Discovery are acceptable.
10. AUDIO VISUAL RIGHTS.
10.1 Except for the sole purpose of the orientation theatre
presentation to be made pursuant to Section 3.12 hereof and except for the sole
purpose of promoting the Exhibition through the media (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 Media Rare. 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
8
<PAGE> 9
hereby conferred upon Media Rare 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 media, which consent shall
not be unreasonably withheld. Any licensing fees that may be derived from the
distribution of the Promotional Work shall be included in Ancillary Revenues
under this Agreement. It is hereby acknowledged that RMST has granted Discovery
a right of first negotiation to produce the Promotional Work, in the event that
RMST intends to engage an outside producer to produce the same. Such right of
first negotiation is for a period of not less than 30 days, commencing on the
date that RMST first notifies Discovery that it intends to cause the production
of the Promotional Work, and during such period RMST shall negotiate exclusively
and in good faith with Discovery. If Discovery and RMST shall agree on terms in
respect of such reel, and if RMST shall thereafter fail to enter into an
agreement with Discovery with respect thereto, but shall instead reach agreement
with a different media company on the same or less favorable terms (for RMST) as
those agreed to with Discovery, RMST has agreed it shall permit Discovery the
right to once again negotiate (for a period of 10 days) to produce the
Promotional Work on such terms. Media Rare hereby acknowledges that the above
agreements with Discovery are acceptable.
10.2 Any Internet site established by Media Rare to promote or
advertise the Exhibition shall state that the Exhibition is presented by RMST in
association with Media Rare and shall include, on the initial screen thereof, 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 the Venue and shall include a
hypertext link to the Internet site used by Media Rare to promote or advertise
the Exhibition.
10.3 Except as set forth in Section 10.1 hereof, Media Rare
will prohibit photography, videotaping, filming or other recording of the
Exhibition and will take reasonable measures to inform visitors to the
Exhibition of this prohibition. Media Rare shall eject any visitor to the
Exhibition who refuses to comply with such prohibition, and shall use its best
efforts to confiscate and photographic film or other recording of the Exhibition
obtained by such visitor.
11. TICKET SALES.
11.1 All ticket prices for the Exhibition shall be as follows,
unless the parties mutually agree otherwise: Adults - $13.95; Seniors (60+) -
$12.95; Youth (5-11 yrs.) - $6.95; School and camp groups (20 or more) - $5.50;
and $11.95 adult groups of 20 or more.
11.2 Tickets shall be made available for sale in advance on a
time-reserved basis, with a service charge to be mutually agreed upon (the
"Service Charge") to be added to each ticket purchased in advance.
11.3 RMST shall be entitled to a copy of all of the data
collected by Media Rare in connection with the sale of tickets hereunder, and
Media Rare shall provide RMST with a weekly report of the number of tickets sold
within each of the categories enumerated in this Section 11, and such other
ticket price categories that may hereafter be established.
9
<PAGE> 10
12. INDEMNITIES.
12.1 RMST agrees to indemnify, defend and hold harmless Media
Rare, 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 Media Rare may incur or be liable for as a result of any claim, suit or
proceeding made or brought against Media Rare based upon, arising out of, or in
connection with RMST's breach of any of its duties or obligations hereunder.
12.2 Media Rare 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 Media Rare based upon, arising out of, or in
connection with Media Rare's breach of any of its duties or obligations
hereunder.
12.3 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.
13. 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. It is
expressly agreed that RMST shall be the sole and exclusive owner of all
trademarks utilized for the Exhibition and of all Exhibition logos.
14. OBLIGATIONS UPON TERMINATION.
14.1 Within thirty (30) days of termination of the Exhibition
Term, RMST at the request of Media Rare shall forthwith return to Media Rare or
otherwise dispose of as Media Rare may direct all pamphlets, literature,
photographs, catalogues, advertising material, specifications, cost estimates
and other materials, documents and papers whatsoever belonging to Media Rare and
sent to RMST relating to the Exhibition (other than correspondence between the
Media Rare 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.
14.2 Within thirty (30) days of termination of the Exhibition
Term, Media Rare at the request of RMST shall forthwith return to RMST or
otherwise dispose of as RMST may
10
<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 the Media Rare and
RMST) which Media Rare 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.
14.3 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.
15. MISCELLANEOUS.
15.1 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.
15.2 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.
15.3 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 shall
be brought exclusively in the courts of the United States of America for the
District where the defendant maintains its principal place of business, and by
execution and delivery of this Agreement, Media Rare and RMST hereby accepts for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. Media Rare 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.
15.4 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:
11
<PAGE> 12
If to RMST, addressed to:
RMS Titanic, Inc.
17 Battery Place
Suite 203
New York, New York 10004
Attention: George Tulloch, President
Fax No.: (212) 482-1912
If to Media Rare, addressed to:
Media Rare Inc.
400 Silbey Street
St. Paul, MN 55101
Attention: Eriche Mische
Fax No.: (612) 292-0256
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 and fax numbers by giving notice as herein provided.
15.5 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.
15.6 Assignability. This agreement shall not be assignable by
either party hereto without the written consent of the other party hereto.
15.7 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.
15.8 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
15.9 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.
15.10 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.
15.11 Confidentiality. RMST and Media Rare 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 the
Media Rare 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.
15.12 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 Media Rare 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.
15.13 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.
15.14 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.
15.15 Headings. The captions and headings used herein are for
convenience only and shall not be construed as a part of this agreement.
15.16 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. MEDIA RARE INC.
By: /s/ George Tulloch By: /s/ Kenneth Rowe
------------------------------- -------------------------------------
George Tulloch, President Kenneth Rowe, CFO
14
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