<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 May 31, 1999
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission file number: 000-24452
RMS TITANIC, INC.
(Exact name of registrant as specified in its charter)
Florida 59-2753162
(State or other jurisdiction of (IRS Employer Identification No.
incorporation or organization)
17 Battery Place, Suite 203, New York, NY 10004
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 558-6300
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
The number of shares outstanding of the registrant's common stock on
July 15, 1999 was 16,187,119.
<PAGE> 2
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 14
PART II
OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Changes in Securities 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 21
2
<PAGE> 3
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 as included in the Company's Form 10-K for the year
ended February 28, 1999.
3
<PAGE> 4
<TABLE>
<CAPTION>
RMS TITANIC, INC.
BALANCE SHEET
=========================================================================================================
MAY 31, FEBRUARY 28,
1999 1999
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 1,333,248 $ 719,929
Accounts receivable 1,248,950 1,645,373
Refundable withholding tax -- 429,022
Prepaid expenses and other current assets 256,301 179,024
------------ ------------
TOTAL CURRENT ASSETS 2,838,499 2,973,348
Artifacts Recovered, at cost 9,180,376 9,181,340
Deferred Income Tax Asset, net 509,000 509,000
Property and Equipment, net of accumulated depreciation
of $401,706 and $319,013, respectively 1,154,553 1,207,331
Other Assets 417,694 38,694
------------ ------------
TOTAL ASSETS $ 14,100,122 $ 13,909,713
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 1,902,226 $ 1,909,926
Income taxes payable 121,000 --
Deferred revenue 150,000 500,000
------------ ------------
TOTAL CURRENT LIABILITIES 2,173,226 2,409,926
============ ============
Commitments and Contingencies
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 (1,990,471) (2,417,580)
------------ ------------
STOCKHOLDERS' EQUITY 11,926,896 11,499,787
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 14,100,122 $ 13,909,713
============ ============
</TABLE>
See Notes to Financial Statements
4
<PAGE> 5
<TABLE>
<CAPTION>
RMS TITANIC, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
==========================================================================================
<S> <C> <C>
THREE-MONTH PERIOD ENDED MAY 31, 1999 1998
----------- -----------
Revenue:
Exhibitions and related merchandise sales $ 1,128,078 $ 2,097,019
Licensing fees 11,361 115,941
Merchandise and other 163,447 272,020
Sale of coal 9,639 77,339
----------- -----------
Total revenue 1,312,525 2,562,319
----------- -----------
Expenses:
Cost of coal sold 964 2,630
Cost of merchandise sold 1,526 --
General and administrative 560,946 387,395
Depreciation and amortization 82,693 30,225
----------- -----------
Total expenses 646,129 420,250
----------- -----------
Income from operations 666,396 2,142,069
Interest income 13,910 10,440
----------- -----------
Income before provision for income taxes 680,306 2,152,509
Provision for income taxes 253,197 811,264
----------- -----------
Net income $ 427,109 $ 1,341,245
=========== ===========
Basic income per common share $ .03 $ .08
=========== ===========
Weighted-average number of common shares outstanding 16,187,128 16,187,128
========== ==========
</TABLE>
See Notes to Financial Statements
5
<PAGE> 6
<TABLE>
<CAPTION>
RMS TITANIC, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
==================================================================================================================
<S> <C> <C>
THREE-MONTH PERIOD ENDED MAY 31, 1999 1998
----------- -----------
Cash flows from operating activities:
Net income $ 427,109 $ 1,341,245
----------- -----------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 82,693 30,225
Other -- (76,500)
Reduction in artifacts recovered 964 2,630
Noncash exhibition revenue (225,000) --
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 396,423 (874,831)
Decrease (increase) in refundable withholding tax 429,022 (130,570)
Increase in prepaid expenses and other current assets (77,277) --
Increase in other assets (4,000) (52,630)
Decrease in accounts payable and accrued liabilities (7,700) (197,348)
Increase in income taxes payable 121,000 (682,384)
Decrease in deferred revenue (500,000) (14,943)
----------- -----------
TOTAL ADJUSTMENTS 216,125 (631,583)
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 643,234 709,662
----------- -----------
Cash flows used in investing activity - purchases of property and equipment (29,915) (66,070)
----------- -----------
Net increase in cash 613,319 643,592
Cash and cash equivalents at beginning of period 719,929 1,000,269
----------- -----------
Cash and cash equivalents at end of period $ 1,333,248 $ 1,643,861
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the three-month period for income taxes $ 349,103 $ 128,880
=========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITY:
Noncash purchases of property and equipment $ -- $ 76,500
=========== ===========
</TABLE>
See Notes to Financial Statements
6
<PAGE> 7
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 May 31, 1999 and its results of
operations and its cash flows for the three months ended May
31, 1999 and 1998. Results of operations for the three
month period ended May 31, 1999 are not necessarily
indicative of the results that may be expected for the year
ending February 29, 2000.
Note 2 - In February 1997, the FASB issued SFAS No. 128, Earnings
per Share. 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. Diluted EPS is not presented
for the three months ended May 31, 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 May 10, 1998 and further 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 from March 1, 1998 to May 1,
1998, and two-thirds of the net profits, after recoupment of
certain project expenses, from May 2, 1998 through September
30,1 9998, as defined. In addition, the Company received a
percentage of merchandise revenue, as defined, for the period
from March 1, 1998 to September 30, 1998. Additionally, the
Company received guaranteed exhibition fees attributable to
the initial term of the exhibition of $460,000 as a
non-refundable advance against the Company's share of net
profits, as defined.
7
<PAGE> 8
RMS TITANIC, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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 ("Attendance Fee"), as
defined. In addition, the Company received 10% of gross
revenue, as defined, from the sale of merchandise at the
exhibition ("Gift Shop Fee"). The minimum combined Attendance
Fee and Gift Shop Fee payable to the Company under the terms
of the agreement was $300,000.
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"). The exhibition was
thereafter extended through March 21, 1999. Pursuant to the
Queen Mary exhibition agreement, the Company received, 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 received fifty (50%) percent
of net profits, as defined, from the sale of merchandise at
the Queen Mary exhibition.
In April 1998, the Company entered into an agreement with
Resource Plus and Event Management International ("EMI"), a
division of the World Trade Center Boston, for an exhibition
of Titanic artifacts in Boston, Massachusetts from July 1,
1998 through on or about November 15, 1998. Pursuant to the
exhibition agreement, the Company was to receive two-thirds
(2/3) 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
8
<PAGE> 9
RMS TITANIC, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
the Company. This exhibition closed on November 29, 1998. The
Company earned no exhibition fees in excess of the minimum.
In May 1998, the Company entered into an agreement with
Titanic Exhibition Japan Inc. ("TEJI") for the exhibition of
approximately 200 Titanic artifacts in seven (7) venues in
Japan commencing on or about July 20, 1998 and ending on or
about July 31, 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, and that the Company has the right to select and
obtain legal title to 50% of the exhibitry utilized in the
exhibition at no additional cost to the Company. Revenue for
the quarter ended May 31, 1999 includes $225,000, representing
60% of the value of the Company's share of the exhibitry
utilized in the Japanese exhibition, with the balance of
$150,000 related to such exhibitry having been recognized as
deferred revenue.
In August 1998, the Company entered into an agreement with
CRE-CO and Freddy Burger Management Group for the exhibition
of Titanic artifacts in Zurich, Switzerland from November 11,
1998 through May 9, 1999. Pursuant to the agreement, the
Company was to be paid a minimum of $600,000, in equal monthly
installments of $100,000 commencing November 30, 1998, with
such payments to be credited against the Company's rights to
receive two-thirds of the profits, if any, as defined, from
ticket, merchandise and sponsorship revenue in excess of a
budget of approximately $3,000,000.
In September 1998, the Company entered into an agreement with
Media Rare, Inc. for the presentation in St. Paul, Minnesota,
of the objects and exhibitry contained in the Company's Boston
exhibition for a period of four months commencing on January
1, 1999 and ending on April 30, 1999. Pursuant to this
agreement, the Company received, subsequent to February 28,
1999, the minimum fee of $1,000,000. This minimum payment
represents a credit against the Company's share of two-thirds
of the net profits, as defined, derived from ticket,
merchandise and sponsorship revenue in excess of certain
project expenses of approximately $2,000,000, as defined.
Included in the project expenses is a $300,000 payment to the
Company for the lease of its exhibitry for the
9
<PAGE> 10
RMS TITANIC, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
St. Paul exhibition. Pursuant to an amendment to this
agreement, Media Rare agreed to pay the Company a minimum of
$3.00 per visitor to the exhibition during the extension
thereof from May 1, 1999 to May 9, 1999 (the "Extension"),
with two-thirds of any revenues in excess of a budget of
approximately $113,000 for the extension period to be paid to
the Company, after crediting the $3.00 per visitor fee paid to
the Company against such profit distribution. The Company's
revenue for the quarter ended May 31, 1999 includes $680,358
from this exhibition, representing 50% of the minimum
guaranteed fee ($500,000), 50% of the exhibitry lease fee
($150,000), and $30,358 for the Extension.
In March 1999, the Company entered into an agreement with
Magicworks Entertainment, Inc., a direct subsidiary of PACE
Entertainment, Inc. and an indirect subsidiary of SFX
Entertainment, Inc. (collectively "SFX"), pursuant to which
RMST granted SFX an exclusive worldwide license to exhibit the
Company's Titanic artifacts in consideration of the payment to
the Company of a minimum of $8,500,000 annually. The license
agreement has an initial term of one year, commencing
September 14, 1999, with SFX having the option to extend the
term for up to four additional one-year periods. Such
$8,500,000 payment is payable as follows: $500,000 upon the
effective date of the license agreement, and payments of
$2,000,000 each on a quarterly basis commencing September 15,
1999. The license agreement became effective in May 1999. All
obligations of SFX under the license agreement have been
guaranteed by SFX Entertainment, Inc.
Pursuant to the license agreement, the Company will receive
sixty-five (65%) percent and SFX will receive thirty-five
(35%) percent of net ticket, merchandise and sponsorship
revenues, after deduction of mutually agreed upon project
expenses. The $8,500,000 annual guaranteed minimum payment
to be made to the Company will be credited against its share
of net revenues in excess of project expenses. The Company has
the right to terminate the license agreement effective as of
September 14, 2001, or annually thereafter, upon the
occurrence of certain conditions, including the merger or sale
of majority control of the Company or substantially all of its
assets. If the Company terminates the license agreement, SFX
will have the right to continue one major exhibition,
containing no more than 200 of the Company's Titanic artifacts
and involving an investment by SFX in excess of $2,000,000,
until no later than September 14, 2004 in consideration of the
payment to the Company
10
<PAGE> 11
RMS TITANIC, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
of a minimum of $2,250,000 annually. Upon recoupment of the
project expenses, the Company has the right to select and
obtain legal title to, without the payment of additional
consideration, sixty-five (65%) of the exhibitry built for the
exhibitions presented during the term of the agreement.
In addition, the license agreement provides that the Company
shall receive twenty (20%) percent of the profits, if any,
from a current Titanic themed exhibition in Orlando, Florida
presented by SFX and third parties. Under the license
agreement, SFX does not have the right to include any of the
Company's Titanic artifacts in the Orlando exhibition. A
member of the board of directors of the Company is a related
party to this exhibition.
The Company commenced an exhibition on May 29, 1999 of
approximately 200 of its Titanic artifacts in Atlantic City at
the Tropicana Hotel. This exhibition, which includes a section
of Titanic's hull recovered during the 1998 Titanic
expedition, is scheduled to conclude on September 7, 1999.
Pursuant to the exhibition agreement entered into in April
1999, Tropicana is responsible for payment of all costs and
expenses related to the presentation, operation and marketing
of the exhibition, with the exception of the Company's
contribution of approximately $100,000 of the installation
costs of the exhibition. The exhibition agreement provides
that the Company will receive all ticket and merchandising
revenue from the exhibition, without recoupment by Tropicana
of any of its costs for presenting, operating and marketing
the exhibition. It was further agreed that sponsorship
revenues, less commissions, will be divided equally between
the Company and Tropicana.
Merchandising operations at the Atlantic City exhibition are
conducted through an unaffiliated third party, Titanic
Merchandising, Inc. ("TMI"). Pursuant to the Company's
agreement with TMI, the Company receives thirty (30%) percent
of the gross revenues derived from the sale of merchandise at
the retail shop established within the exhibition premises.
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-
11
<PAGE> 12
RMS TITANIC, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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. In March 1999 the U.S. Court of
Appeals for the Fourth Circuit issued an opinion affirming the
Company's status as salvor-in-possession of the wreck of the
Titanic, and reversing that portion of the District Court's
ruling that the Company could exclude others from viewing and
photographing the wreck and wreck site. The Company has filed
an appeal with the United States Supreme Court from the
decision of the U.S. Court of Appeals for the Fourth Circuit
rendered in April 1999.
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 of 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
12
<PAGE> 13
RMS TITANIC, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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, copyright infringement, fraudulent
misrepresentation, money lent, quantum meruit and conversion.
Management of the Company has filed an answer denying the
essential allegations of the complaint, and has asserted
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 and has infringed upon the
Company's copyright to the images obtained with the light
towers. 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, and
otherwise denied the Company's motion to dismiss and/or
transfer the action. This action is now in the stage of
discovery proceedings, with a motion instituted by the Company
to dismiss plaintiff's claim for copyright infringement, as
alleged in an amended complaint, presently pending before the
Court. The Company intends to defend itself vigorously against
the plaintiff's claims and to pursue its counterclaims
The Company is a named defendant in a lawsuit commenced in the
Arizona Superior Court, Maricopa County (North American
Capital Consultants, Inc. v. RMS Titanic, Inc. et al.) On
March 3, 1999, the Company removed the action to the United
States District Court for the District of Arizona (No. CIV
99-0401-PHX-SMM). The complaint alleges that the Company
breached a contractual obligation to deliver to the plaintiff
- a financial public relations firm - 250,000 warrants
exercisable, at various prices per share, into freely-trading
common stock of the Company, and further claims that the
actions of the Company, in allegedly promising to deliver such
warrants, constituted negligent misrepresentation, fraud, and
breach of fiduciary duty, and that the plaintiff is entitled
to recover damages on a quantum meruit basis. The complaint
seeks an order requiring the Company to deliver the warrants,
damages in the amount of $250,000 and unspecified punitive
damages, attorneys' fees and costs. The Company has filed an
answer denying the essential allegations of the complaint, and
has asserted a counterclaim alleging the plaintiff's
13
<PAGE> 14
RMS TITANIC, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
breach of its contractual obligations to the Company and is
seeking damages of approximately $36,000 plus attorneys' fees
and costs. A proposed settlement of this action is presently
under consideration, the terms of which would not have a
material financial affect upon the Company. If this action is
not resolved through settlement, the Company intends to defend
vigorously against the plaintiff's claims and to pursue its
counterclaim. This action is now in the discovery stage of
proceedings.
Note 5 - The Company has approved the grant to the Company's
President of five-year options expiring on May 26, 2004 to
purchase 500,000 shares of the Company's Common Stock at a
price of $1.98 per share.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion provides information to assist in the
understanding of the Company's financial condition and results of operations,
and should be read in conjunction with the financial statements and related
notes appearing elsewhere herein.
RESULTS OF OPERATIONS
FOR THE QUARTER ENDED MAY 31, 1999 VERSUS
THE QUARTER ENDED MAY 31, 1998
During the first quarter of its 2000 fiscal year (the "2000
fiscal year"), the Company's revenues decreased approximately 49%, as compared
to the first quarter of its 1999 fiscal year (the "1999 fiscal year"). This
decrease was principally attributable to a 46% decrease in revenue from
exhibitions and related merchandise sales during the first quarter of the 2000
fiscal year as compared to the first quarter of the 1999 fiscal year. This
decrease was primarily attributable to the timing of the receipt of revenue from
the Company's exhibition in St. Petersburg, Florida during the first quarter of
the 1999 fiscal year as compared to the timing of receipt of revenue from the
Company's exhibition in St. Paul, Minnesota during the first quarter of the 2000
fiscal year; exhibitions of the Company's Titanic artifacts having been
presented in St. Petersburg, Florida, Hamburg, Germany and Long Beach,
California throughout the first quarter of the 1999 fiscal year, while
exhibitions were presented for portions of the first quarter of the 2000 fiscal
year in each of St. Paul, Minnesota, Zurich, Switzerland, Long Beach,
California, and two cities in Japan. In addition, the Company's revenue from
the exhibition in Zurich, Switzerland during the first quarter of the 2000
fiscal year was substantially less than its revenue from its Hamburg, Germany
exhibition during the first quarter of the 1999 fiscal year. In view of the
logistical and operational
14
<PAGE> 15
difficulties in establishing short-term exhibitions on satisfactory terms, and
the of the Company's license to a subsidiary of SFX Entertainment, Inc. of
worldwide rights to exhibit the Company's Titanic artifacts for a minimum of
one (1) year, commencing September 14, 1999, in consideration of the payment to
the Company of a minimum of $8,500,000, the Company, apart from commitments for
the completion of the touring exhibition in Japan, has entered into only an
agreement for the exhibition of its artifacts in Atlantic City, New Jersey
during the period from May 29, 1999 to September 7, 1999. Revenue from
licensing fees decreased approximately 90% during the first quarter of the 2000
fiscal year as compared to the first quarter of the 1999 fiscal year, and
merchandise and other revenue decreased approximately 40% during the first
quarter of the 2000 fiscal year as compared to the first quarter of the 1999
fiscal year. These decreases were principally attributable to the heightened
interest in Titanic products during the first quarter of the 1999 fiscal year
during the release of the feature film "Titanic," as well as the Company's
receipt of revenues during the 1999 quarter from a book published in
conjunction with unrelated third parties. Additionally, the Company recognized,
as other revenue during the first quarter of its 2000 fiscal year, $150,000
from the rental of exhibitry for use in the St. Paul, Minnesota exhibition, as
compared to having recognized, during the first quarter of the 1999 fiscal
year, $76,500 from the rental of exhibitry for use in the St. Petersburg,
Florida exhibition. The Company's revenue from the sale of coal decreased
approximately 88% during the first quarter of the 2000 fiscal year as compared
to the first quarter of the 1999 fiscal year, principally as a result of
decrease in sales of coal made through the Company's web site, retail efforts
undertaken by third parties while the "Titanic" movie was in theatrical
release, and in merchandise shops of the Company's United States exhibitions.
The Company's cost of coal sold decreased approximately 63% during the
first quarter of the 2000 fiscal year as compared to the first quarter of the
1998 fiscal year, with such decrease relating to the volume of sales in the
respective periods. General and administrative expenses of the Company
increased approximately 45% during the first quarter of the 2000 fiscal year as
compared to the first quarter of the 1999 fiscal year, primarily as a result of
the Company incurring the expense for the deinstallation and transportation of
the exhibition from St. Paul, Minnesota to Atlantic City, New Jersey, an
increase in professional fees, and an increase in executive compensation. The
Company's depreciation expense increased approximately 174% during the first
quarter of its 2000 fiscal year as compared to the first quarter of its 1999
fiscal year as a result of depreciation related to exhibitry equipment acquired
during the 1999 fiscal year.
The Company's income before provision for income taxes decreased
approximately 68% during the first quarter of the 2000 fiscal year as compared
to the first quarter of the 1999 fiscal year. The Company's provision for income
taxes decreased approximately 69% during the first quarter to the 2000 fiscal
year as compared to the first quarter of the 1999 fiscal year, and net income
decreased approximately 68% during the first quarter of the 2000 fiscal year as
compared to the first quarter of the 1999 fiscal year.
15
<PAGE> 16
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 $180,600 from the sale of coal during the 1999,
1998, 1997 and 1996 fiscal years, resulting in an unpaid balance of $99,400 as
of February 28, 1999. Such unpaid balance, which was not further reduced during
the first quarter of the 2000 fiscal year, does not bear interest. There were
no profits from sale of cruise ship cabins for the 1996 expedition.
The Company's capital commitments during its 2000 fiscal year include
lease payments for its principal offices, and compensation to its executive
officer and to its general counsel.
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, and in addition thereto, the sum of approximately $175,000 in
connection with claimed cost overruns incurred in connection with the Boston
exhibition. The Company has rejected such demands.
The Company's near term operating needs will be financed principally
from the distribution of revenues to the Company under its agreements for
exhibition in Atlantic City, New Jersey; its touring exhibition in Japan; and
its exhibition tour agreement with a subsidiary of SFX Entertainment, Inc,
pursuant to which the Company will be paid a minimum of $8.5 million annually
for the grant of exhibition rights for an initial one-year period commencing
September 14, 1999, subject to options granted to the licensee to extend the
term for up to four (4) additional one year periods in consideration of
additional minimum annual payments to the Company of $8.5 million.
Substantially all of the Company's cash flow derives from the Company's
operating activities.
16
<PAGE> 17
None of the Company's cash flow during the first quarter of the 2000 fiscal year
derived from financing activities, with approximately $30,000 used in
investing activities.
In view of the Company's recent purchase of new computers and the
limited impact that Year 2000 issue 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 Annual Report
on Form 10-K 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.
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 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. 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
18
<PAGE> 18
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 125,000 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.
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 organizers 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.
19
<PAGE> 19
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There has been no material change in the 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) subsequent
to the filing of the report on Form 10-K for the year ended February 28, 1999,
except that the Company has filed an appeal with the United States Supreme Court
from the decision of the U. S. Court of Appeals for the Fourth Circuit rendered
in April 1999.
There has been no material change in the status of the 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)
subsequent to the filing of the report on Form 10-K for the year ended February
28, 1999.
There has been no material change in the status of the lawsuit
commenced in the Arizona Superior Court, Maricopa County (North American Capital
Consultants, Inc. v. RMS Titanic, Inc. et al.), which has been removed to the
United States District Court for the District of Arizona (No. CIV
99-0401-PHX-SMM) subsequent to the filing of the report on Form 10-K for the
year ended February 28, 1999.
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.
19
<PAGE> 20
(a) EXHIBITS
10.1 Exhibition Tour Agreement between the registrant and Magicworks
Entertainment, Inc. dated March 31, 1999.
10.2 Exhibition Agreement between the registrant and Adamar New Jersey, Inc.
D/B/A Tropicana Casino and Resort dated April 5, 1999.
(b) REPORTS ON FORM 8-K
None.
20
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
RMS TITANIC, INC.
(Registrant)
Dated: July 20, 1999
By: /s/ George Tulloch
-------------------------------------------
George Tulloch, Principal Executive Officer
and Acting Principal Accounting Officer
21
<PAGE> 1
EXHIBITION TOUR AGREEMENT
THIS EXHIBITION TOUR AGREEMENT is entered into this 31st day of March,
1999 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 MAGICWORKS ENTERTAINMENT, INC., a
corporation organized under the laws of the State of Delaware, having its
principal place of business at 199 East Garfield Road, Aurora, Ohio 44202
("Magicworks"). Magicworks is a direct subsidiary of PACE Entertainment
Corporation ("PACE") and an indirect subsidiary of SFX Entertainment, Inc.
("SFXE").
WHEREAS, Magicworks wishes to acquire from RMST, and RMST wishes to
grant to Magicworks, the exclusive worldwide rights to present one or more tours
(collectively the "Tour") of exhibitions of artifacts recovered by RMST from the
wreck site of the Titanic (the "Exhibition(s)"), 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:
1.1 "Artifacts" shall mean all of the objects recovered from the wreck
site of the Titanic by RMST except as set forth below, and as may be recovered
during any such future expedition conducted by RMST during the Term hereof, all
in an "as is" condition as specified on the respective Exhibits, and subject to
Conservation Procedures; provided, however, Artifacts, as defined herein, shall
not include: (a) coal that has been, or may be, recovered from the Titanic wreck
site (provided, however, that RMST shall negotiate in good faith with Magicworks
to sell Magicworks certain amounts of coal to be sold by Magicworks during the
Tour); (b) samples recovered or to be recovered by RMST from the Titanic wreck
site which have been, or may be, delivered to scientists and other experts for
research and examination (the current list of such samples is on Exhibit
1.1.A.); or (c) twenty-seven (27) objects that have been delivered to
third-parties for limited display purposes in England and France within events
that cannot be promoted as a Titanic exhibit; or four (4) other objects that
have been, or additional future objects that may be, deposited with officers of
the United States District Court for the Eastern District of Virginia for
purposes of permitting such court to exercise its jurisdiction over a matter
involving RMST's interests in the Titanic (all such objects in this phrase (c)
are identified on Exhibit 1.1.B.). So long as RMST is salvor-in-possession, all
Artifacts will be made available to Magicworks subject to Conservation
Procedures. A current and complete list of each Artifact owned by RMST is set
forth on Exhibit 1.1.C. All outstanding contracts and agreements relating to the
exhibition of Artifacts, and to the above-referenced objects which are not
included as Artifacts are listed on
<PAGE> 2
Exhibit 1.1.D. and copies of such contracts and agreements are attached to
Exhibit 1.1.D. as Exhibit 1.1.D. - 1 through 1.1.D. - 2. RMST agrees not to
amend or modify (either in writing or orally) any of the contracts and
agreements set forth on Exhibits 1.1.D. When any such contracts or agreements
relating to objects excluded from the definition of Artifacts expire or
terminate, such objects shall immediately be included in the definition of
Artifacts and be made available to Magicworks. Exhibit 1.1.E. is a list of
Artifacts which are currently undergoing Conservation Procedures and estimates
of the date they will be available to Magicworks. Exhibit 1.1.F. is a list of
all Artifacts not currently on exhibit by RMST and which need Conservation
Procedures, but their precise state of conservation and their date(s) of
availability for exhibition are not currently known. (Exhibit 1.1.F. shall be
supplemented by the parties in accordance with Section 4.10 of this Agreement).
Exhibit 1.1G. is a list of all Artifacts which are currently on exhibit by RMST
and which currently need Conservation Procedures, along with a brief description
of what Conservation Procedures need to be performed.
1.2 "Condition Reports" shall mean reports to be delivered by RMST to
Magicworks at the time of the delivery of the Artifacts by RMST to Magicworks,
which reports shall show the current condition of the Artifacts and the need for
any further Conservation Procedures.
1.3 "Conservation Procedures" shall mean all procedures which are
reasonably necessary to maintain the integrity and condition of the Artifacts in
connection with the Exhibition of the Artifacts during the Term, as more fully
described in the Condition Reports.
1.4 "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 Exhibitions, together with all drawings, plans, specifications and other
documentation relating thereto. Notwithstanding the foregoing, the term
"Exhibitry" does not include any RMST Display Items, as defined below.
1.5 "Exhibits" shall mean all Exhibits referenced in this Agreement,
which Exhibits have been delivered in connection herewith and are incorporated
herein by reference as if more fully set forth herein.
1.6 "Orlando Exhibition" shall mean the "Titanic - Ship of Dreams"
exhibition at the Mercado, located at 8445 International Drive, Orlando, Florida
32819, which exhibition is scheduled to open on or about April 10, 1999.
1.7 "Profits" shall mean the excess of Revenues (as defined in Section
1.9 hereof) over Project Expenses (as defined in Section 1.8).
1.8 "Project Expenses" shall include all costs and expenses of every
kind and description incurred in identifying, selecting, designing,
constructing, establishing, presenting, operating and marketing the Tour.
Project Expenses will be projected in a budget to be prepared by Magicworks,
subject to the review and approval by RMST, which approval shall not be
unreasonably withheld or delayed (the "Budget"); provided, however, the Budget
shall not
2
<PAGE> 3
include any provision for the payment of a management or other fee to either
party representing an allocation of such party's general operating expenses; and
provided, further, however, the Budget shall include provision for the itemized
categories of expenditures reflected in Exhibit 1.8, as may hereafter be amended
in writing from time-to-time by further agreement of the parties. The facility
rental charge included in settlement may be traded by the facility in exchange
for a co-promotion interest and therefore not actually be invoiced to and paid
by Magicworks. Supplies and services owned or provided by Magicworks will be
provided at a cost to be pre-negotiated by and between Magicworks and RMST, and
such cost shall be charged at the agreed upon amount as a Project Expense.
Supplies and services owned or provided by SFXE or an affiliate of SFXE
(excluding Magicworks) shall be provided at a cost charged at arm's length and
consistent with industry standards. Advertising at gross will be charged as a
Project Expense. Insurance expenses will include premiums, administration and
deductibles.
1.9 "Revenue" shall mean and include the aggregate of:
1.9.1 "Ticket Revenue," which shall include all sums generated
by ticket sales at the Exhibition and through authorized ticket sale
outlets, minus sales tax, third party service charges, credit card
fees, and check verification fees.
1.9.2 "Merchandising Revenue," which shall include all
revenues derived from the sale of merchandise pursuant to Sections 8.1
through 8.4 hereof and from the sale of food and beverages at the
Exhibition (including revenue derived from catering special events, as
described in Section 1.9.4 below), minus cost of goods (if applicable),
sales tax, credit card fees and check verification fees.
1.9.3 "Sponsorship Revenue," which shall include all revenues
except non-cash or in-kind sponsorships, derived from the granting of
sponsorship or promotion rights to third parties for the Exhibition,
less commissions paid in connection with the generation of the
Sponsorship Revenue.
1.9.4 "Ancillary Revenues," which shall include all revenues
(net of costs paid to third parties and except as set forth in this
subsection) related to or derived from the Exhibition not otherwise
included within the provisions of Sections 1.9.1 through 1.9.3 hereof,
such as, for example and not by means of limitation, vehicle parking
fees; fees derived from the rental of an audio tour to Exhibition
visitors; or revenues derived from special events that allow groups to
attend the Exhibition while the general public is excluded. Ancillary
Revenues shall not include any "Ticket Rebate Payments" made by
Ticketmaster or any other third party. "Ticket Rebate Payments" shall
be all payments made to Magicworks, SFXE or any of their affiliates in
connection with any ticket sales related to the Tour or the
Exhibitions.
1.9.5 "Ancillary Rights" It is specifically recognized and
acknowledged that Magicworks or its affiliates due to a larger overall
relationship with a vendor, such as an agreement to provide a certain
number of shows to a facility or a
3
<PAGE> 4
contractor, may be entitled to receive certain payments, volume rebates
or other discounts which will not be included in Revenue.
1.10 "RMST Display Items" shall mean display cases, models and other
theatrical or audio visual components owned by RMST which are presently
incorporated within exhibitions of RMST's Titanic Artifacts in touring
exhibitions in Japan, St. Paul, Minnesota and Zurich, Switzerland, or which may
hereafter be acquired by RMST. Copies of all contracts and agreements relating
to the touring exhibition in Japan are included on Exhibit 1.10.A. Copies of all
contracts and agreements relating to the St. Paul, Minnesota exhibition are
included on Exhibit 1.10.B. Copies of all contracts and agreements relating to
the Zurich, Switzerland exhibition are included on Exhibit 1.10.C.
1.11 "Supporting Material" shall mean material relating specifically to
the recovery of the Artifacts recovered by RMST from the wreck site of the
Titanic, including but not limited to photographs and video footage supplied by
RMST. Supporting Material does not include digital images or computer data
constituting a photomosaic of Titanic's wreck and surrounding wreck site
collected during RMST's 1998 expedition to the Titanic.
1.12 "Term" shall mean the period commencing on September 15, 1999 and
expiring on September 14, 2000, whereupon this Agreement shall automatically
terminate without further notice by either party to the other unless this
Agreement has been extended pursuant to the provisions of Section 12 hereof.
1.13 "Venue(s)" shall mean the location of each Exhibition on the Tour.
2. SCOPE OF TOUR; RMST'S CONSULTATION RIGHTS.
2.1 The parties agree that Magicworks shall have the exclusive
worldwide rights to exhibit the Artifacts and to present exhibitions of the
Artifacts during the Term hereof, subject to: an Exhibition in a venue in Myrtle
Beach, South Carolina (the "Myrtle Beach Exhibition") until on or about December
31, 1999 of approximately seventy-five (75) to one hundred (100) Artifacts,
including Artifacts formerly on display in an exhibition at the Queen Mary in
Long Beach, California (except for those Artifacts that may be removed from the
exhibition for conservation purposes). It is expressly understood and agreed
that RMST's share of revenues from the Myrtle Beach Exhibition from and after
September 15, 1999 shall be deemed Revenues under the terms of this Agreement
and shall be credited against the guarantee payments due RMST pursuant to
Section 5.1 of this Agreement; provided, however, in computing RMST's share of
revenues under the Myrtle Beach Exhibition Agreement, costs related to site
preparation and exhibition construction shall be amortized on a straight-line
basis during the term of such exhibition. The copy of the Myrtle Beach
Exhibition Agreement will be provided to Magicworks as soon as it is finalized
and executed, and will be identified as Exhibit 2.1. Notwithstanding the
foregoing, RMST shall have the right to use some of the Artifacts for
promotional or educational purposes, with the prior written consent of
Magicworks, which shall not be unreasonably withheld or delayed.
4
<PAGE> 5
2.2 The parties acknowledge that Magicworks presently contemplates that
the Artifacts will be incorporated into approximately five (5) Exhibitions
during the first year of the Term. The categories of Artifacts that are
considered the "Most Significant Artifacts" are listed on Exhibit 2.2. The Most
Significant Artifacts are subdivided on Exhibit 2.2 into the categories "Major
Artifacts" and "Star Artifacts." Magicworks agrees that each Exhibition shall
have approximately twenty percent (20%) of each category of the Most Significant
Artifacts on display at each such Exhibition and each Exhibition shall have a
minimum of one hundred (100) Artifacts unless Magicworks receives RMST's prior
written approval, which approval shall not be unreasonably withheld or delayed.
For purposes of this Section 2.2, the 52 playing cards shall be collectively one
Artifact, any number of coins shall be collectively one Artifact, and any number
of paper currency shall be collectively one Artifact. Notwithstanding anything
else to the contrary contained herein, Magicworks shall not have the right to
incorporate or utilize any Artifacts in any manner other than Exhibitions
produced and presented in accordance with the terms of this Agreement.
Accordingly, during the Term hereof, Magicworks shall not have the right to
display Artifacts for promotional purposes without the prior written consent of
RMST, which consent shall not be unreasonably withheld or delayed. For the
purposes of the foregoing, "promotional purposes" shall mean the display of an
Artifact in an area where it can be viewed without the purchase of an admission
ticket. The term "promotional purposes" does not, however, include press
conferences that are conducted to publicize an Exhibition. Consistent with this
Section, all Artifacts presented at a press conference will be presented in a
dignified manner and handled properly. RMST will be consulted and shall approve
the Artifacts for each press conference, which approval shall not be
unreasonably withheld or delayed.
2.3 The name of each Exhibition shall be "Titanic - The Exhibition" or
such other name or names mutually agreed upon by the parties and the consent to
use other names shall not be unreasonably withheld or delayed by RMST. RMST
authorizes Magicworks to use the name "Titanic - The Exhibition" and all similar
names used in connection with the merchandise only to the extent that RMST owns
such names. Equal credit for the production of the Exhibitions shall be given to
Magicworks and RMST, and the Exhibitions will be advertised and promoted in such
manner as will reasonably give recognition to Magicworks' and RMST's
co-production of the Exhibitions, both parties to be given equal credit in
priority, character size, lettering and print type. For purposes of this
Section, Magicworks shall include any of its affiliates, including SFXE and
PACE.
2.4 Subject to the provisions of Section 2.4.1 hereof, Magicworks shall
locate and select the Venues and design the Exhibitions. Magicworks 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. Magicworks accordingly agrees
that the Exhibitions 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, Magicworks agrees that:
2.4.1 The general design and appearance of the Exhibitions
shall all be subject to review and written approval in advance by RMST,
which approval shall not be unreasonably withheld or delayed.
5
<PAGE> 6
2.4.2 Upon reasonable request from RMST, Magicworks 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(s).
2.4.3 Upon reasonable request of RMST, Magicworks will provide
reasonable access for RMST representatives to observe the preparation
of the Venue for presentation of the Exhibition(s).
2.4.4 Upon reasonable request of RMST, Magicworks shall
deliver to RMST copies of all drawings, specifications and plans for
the Exhibitions, including but not limited to Exhibition design and
layout and lighting system design and layout.
2.5 If there is a dispute or a disagreement ("Dispute") between RMST
and Magicworks in connection with this Agreement, a senior officer of both RMST
and Magicworks shall, within two (2) days of such Dispute, meet in good faith to
resolve such Dispute and, if such Dispute cannot be resolved by such senior
officers within five (5) days of such dispute, the parties will immediately use
the American Arbitration Association to select one arbitrator in New York City,
New York, who will arbitrate the Dispute on the most expedited basis within a
time frame of not greater than fifteen (15) days from the date of the selection
of the arbitrator. The award rendered by the arbitrator shall be final, and
judgment may be entered upon the award in accordance with applicable law in any
court having competent jurisdiction thereof.
3. THE OBLIGATIONS OF MAGICWORKS.
Magicworks 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, Magicworks will use its commercially reasonable efforts
best to ensure 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 each Venue and improvements or
additions to the RMST Display Items, including, but not limited to:
3.2.1 All display cases, including alarm systems,
environmental control systems and any integrated lighting systems.
3.2.2 All theatrical displays or devices that may be
incorporated into the Exhibition.
3.2.3 All didactic panels, Artifact mountings and Artifact
labels.
6
<PAGE> 7
3.2.4 All lighting systems and equipment for illumination of
the galleries and ancillary exhibition areas.
3.2.5 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, secure, store, handle and display the Artifacts and
present them in a manner that will allow the public to safely view
them. It is agreed that all display cases and mountings shall be of
"Exhibition Quality" and will consist of safety-glass vitrines.
"Exhibition Quality" shall mean the usual and customary quality of a
display case and mountings utilized in similar Artifact exhibitions.
3.3 Develop and implement a comprehensive marketing, advertising,
promotion and public relations plan for the Exhibition in consultation with
RMST. Subject to the terms and conditions of Section 6.6, Magicworks owns any
such items it pays for and/or develops. Magicworks agrees that no photographs,
videotape or other audio-visual materials constituting Supporting Materials
hereunder shall be utilized by Magicworks in any promotional or marketing
materials, or be otherwise distributed or disseminated by Magicworks, without
credit of the sole copyright ownership thereof to RMST (if RMST is the sole
copyright owner).
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 Exhibitions.
3.5 Be responsible for the care and storage of the Artifacts, RMST
Display Items (subject to reasonable wear and tear) and Supporting Material so
as to protect the Artifacts from the elements, including extreme lighting,
extreme temperature, extreme 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 consistent with
valuations previously used by RMST, as set forth on Exhibit 3.6, from the time
the Artifacts are delivered by RMST to Magicworks until thirty (30) days after
the end of the Term, or the return of the Artifacts to RMST, whichever occurs
first, and full insurance coverage for the RMST Display Items in an amount
consistent with valuations previously used by RMST as set forth on Exhibit 3.6.
3.7 Be responsible for all staffing, security and the daily operations
of the Exhibition(s).
3.8 Upon completion of the current exhibition of Artifacts in Zurich,
Switzerland, a touring exhibition in Japan (which is scheduled to conclude in
July 1999) and the Atlantic City, New Jersey exhibition (which is scheduled to
conclude on September 7, 1999), Magicworks shall arrange and pay for the pick-up
and transportation of the items constituting the RMST Display Items and
Artifacts to, at Magicworks' sole discretion, one or more locations for
7
<PAGE> 8
either storage or for incorporation into an Exhibition; provided, however, RMST
shall have the right to approve any such storage locations, which approval shall
not be unreasonably withheld or delayed. The Artifacts and RMST Display Items
shall be made available to Magicworks in ready for delivery condition and crated
or packed by RMST.
3.9 Except as provided in Section 3.8, be responsible for all Artifact
prepacking, packing, handling, security, insurance, export and import customs
charges and duties, and the transportation thereof from the place(s) where they
are held by RMST to the Exhibitions of Magicworks.
3.10 Be responsible for the installation and de-installation of the
Exhibitions, including the Artifacts. Installation and de-installation of the
Artifacts for an Exhibition will be handled in a manner in which it was
previously handled by RMST's conservators or such other means as RMST may
approve, which approval shall not be unreasonably withheld or delayed (with the
further understanding that RMST has experienced a maximum cost of $15,000.00 for
installation and $15,000.00 for de-installation of past exhibitions involving
200 Artifacts).
3.11 Subject to the prior written consent of RMST, which shall not be
unreasonably withheld or delayed, Magicworks shall have the right to refurbish,
alter or otherwise modify elements of the RMST Display Items for use within an
Exhibition.
3.12 Be responsible for the safety and security of the Artifacts,
Exhibitry and RMST Display Items from the time the Artifacts, Exhibitry and RMST
Display Items are delivered by RMST to Magicworks and pick-up by RMST within
thirty (30) days of the end of this Agreement.
3.13 Be responsible for all Artifact conservation and mounting work
that is reasonably necessary for the display of the Artifacts in an Exhibition,
including, but not limited to, the costs of packing, shipping, handling,
security, insurance, export and import customs charges and duties, and the
transportation thereof to the Magicworks' Exhibitions. RMST shall pay for the
cost of all conservation inspections. Magicworks shall not be responsible for
the cost of any Conservation Procedures for Artifacts which are not included in
a Magicworks' Exhibition. The remaining Conservation Procedures to be performed
on the Artifacts listed on Exhibit 1.1.G. during the Term shall be paid and
accounted for as a Project Expense. If an item in a Magicworks' Exhibition is
not identified in Section 1.1 and on Exhibit 1.1.G. as needing conservation, and
during the Tour such item is identified as needing Conservation Procedures,
either (i) Magicworks shall remove such item from the Magicworks' Exhibition and
deliver it to RMST for conservation at RMST's expense or (ii) Magicworks shall
maintain such item in the Magicworks' Exhibition, enable such item to undergo
the Conservation Procedures at RMST's expense, and RMST shall provide Magicworks
with a substantially similar item while such item is undergoing Conservation
Procedures, to the extent such substitute item is available. Notwithstanding any
other term or condition of this Agreement, RMST shall not require Magicworks to
include any specific Artifact in an Exhibition.
3.14 Subject to Magicworks' obligations under Section 10, produce an
audio-visual presentation for use solely in an orientation theater in the
Exhibitions. RMST shall have
8
<PAGE> 9
the right to review and approve the script for any audio tour, which approval
shall not be unreasonably withheld or delayed.
3.15 Make arrangements for two (2) of RMST's officers to attend the
opening events for each Exhibition, which arrangements shall include coach air
transportation, lodging and meals related thereto for a period of two (2) days.
3.16 Except as specifically allocated to RMST or Magicworks, as the
case may be, in Sections 3.1 through 3.15, the costs and expenses of all of the
items and actions set forth in Sections 3.1 through and including 3.15 shall be
Project Expenses.
3.17 In partial consideration for this Agreement, Magicworks shall pay
RMST twenty percent (20%) of the net amount to be distributed to the joint
venture members (the "J.V. Distribution") from the operation of the Orlando
Exhibit during the Term of this Agreement (the "RMST Orlando Payments"). The
RMST Orlando Payments shall be based on the J.V. Distribution under Section
5.5.1(b)(ii) of the Joint Venture Agreement and First Amendment to Joint Venture
Agreement set forth in Exhibit 3.17. The RMST Orlando Payments shall be credited
against the guaranty payments due RMST pursuant to Section 5.1 of this
Agreement. Within thirty (30) days after the date of this Agreement, Magicworks
will pay to RMST $50,000 towards the legal fees incurred by RMST in connection
with the Application for Contempt and Injunctive Relief filed in the United
States District Court for the District of Connecticut, Civil Action Nos.
5:91CV007 (WWE) and 3:96 CV01768 (WWE) in January, 1999. It is further agreed
that none of RMST's Artifacts will be used in the Orlando Exhibition, and no
reference to RMST shall be made in connection with the Orlando Exhibition.
3.18 Magicworks shall give RMST and its authorized representative
reasonable access to each Exhibition.
4. RMST'S OBLIGATIONS.
RMST agrees to:
4.1 Subject to the provisions of Section 2.1 hereof, make the Artifacts
and RMST Display Items available to Magicworks pursuant to Section 3.8, but in
no event less than seven (7) days prior to the start of the Term.
4.2 Make available, on a non-exclusive basis, such Supporting Material
as Magicworks shall reasonably require following consultation with RMST and
subject to any licenses or other agreements which may restrict RMST's ability to
utilize certain Supporting Material in conjunction with an Exhibition. Copies of
all such licenses or other agreements are included in Exhibit 4.2.
4.3 At Magicworks' reasonable request, make its corporate officers
available for press interviews and public relations events related to the
Exhibitions or Tour, the costs of which shall be a Project Expense.
9
<PAGE> 10
4.4 Provide Magicworks with advance notice of a minimum of thirty (30)
days of the place and date designated for delivery of Artifacts to Magicworks in
accordance with Section 3.8 hereof.
4.5 Provide all drawings or written descriptions of the RMST Display
Items that are available to RMST as reflected on Exhibit 4.5.
4.6 Be responsible for the Artifacts after de-installation (per Section
3.10) of the Artifacts at the Exhibitions at the end of the Term.
4.7 Make available to Magicworks for its review, all financial
information and books and records in the possession of RMST which Magicworks
shall deem reasonably necessary for the purpose of reviewing Show Costs. For the
purpose hereof, Show Costs shall mean those costs incurred or paid in connection
with the presentation, production, or promotion of the exhibitions in Japan, St.
Paul, Minnesota and Zurich, Switzerland. RMST shall also provide to Magicworks
verifiable attendance records for each of such exhibitions and any other RMST
related exhibition within the past five (5) years to the extent such records are
available to RMST. Such attendance records shall be delivered to Magicworks
contemporaneously with the execution of this Agreement, but no later than the
date when such attendance records first become available to RMST.
4.8 RMST shall stabilize each object and Artifact so that it is ready
for Conservation Procedures.
4.9 RMST shall not require Magicworks to include any specific Artifact
in an Exhibition.
4.10 Except as specifically set forth in Section 3.13 and in this
Section 4.10, RMST shall pay all costs of Conservation Procedures for objects or
Artifacts (including the costs of all Conservation Procedures for Artifacts
which are incurred or accrue prior to Magicworks' acceptance of an "Additional
Objects Exhibition Tender," as defined in Section 12.6(b) hereof); provided,
however, that the undertaking and timing of such conservation work is at the
discretion of RMST. Within thirty (30) days following the date of this
Agreement, a representative designated by Magicworks shall accompany (an) RMST
representative(s) to the LP3 Conservation lab in Semur, France. With respect to
each Artifact listed on Exhibit 1.1.F., the parties shall jointly determine, in
good faith and with as much specificity as possible, (i) the nature and current
status of Conservation Procedures for each Artifact; (ii) a good faith estimate
of the length of time remaining to complete Conservation Procedures for each
Artifact; (iii) the cost of the Conservation Procedures completed to-date for
each Artifact; and (iv) the cost of the Conservation Procedures remaining to be
performed for each Artifact (the "Remaining Conservation Cost"). The parties
shall thereupon supplement Exhibit 1.1.F. with a revised Exhibit 1.1.F.
containing all of the foregoing information, and the revised Exhibit 1.1.F.
shall be signed by authorized representatives of Magicworks and RMST. From and
after the date of the fully executed revision of Exhibit 1.1.F., if Magicworks
desires to incorporate any Artifacts from Exhibit 1.1.F. into an Exhibition,
RMST will make such Artifacts available for exhibition, and
10
<PAGE> 11
the Remaining Conservation Cost for such Artifacts will be paid for by
Magicworks and shall be accounted for as a Project Expense for purposes of this
Agreement.
4.11. RMST warrants and represents that it intends to continue to dive
and explore the Titanic wreck and to maintain its status as salvor in possession
of the Titanic.
5. FINANCIAL GUARANTEE TO RMST
5.1 Magicworks unconditionally guarantees to RMST the payment of Eight
Million Five Hundred Thousand ($8,500,000) Dollars for each year of the Term, as
follows: (a) $500,000 upon execution of this Agreement; and (b) quarterly
installments of $2,000,000 each on September 15, 1999; December 15, 1999; March
15, 2000; and June 15, 2000. The RMST Orlando Payments (defined in Section 3.17)
paid or to be paid to RMST shall be credited against payments made or to be made
to RMST pursuant to this subsection.
5.2 In the event that Magicworks fails to make timely payment of any of
the installments due under subdivision (b) of Section 5.1, and fails to cure
such default within fifteen (15) days of receipt of written notice thereof,
Magicworks shall be deemed to have assigned to RMST all rights, title and
interest in Revenues until the sum due under such installments is paid in full,
and to effectuate such assignment, Magicworks hereby grants RMST an irrevocable
limited power of attorney solely for the collection of such Revenue. 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
Magicworks obligations hereunder.
5.3 All payments due to RMST under this Section 5 shall be paid on or
before the dates specified in Section 5.1 hereof by the wire transfer of funds
into a bank account designated in writing by RMST, or by the delivery to RMST of
a certified or official bank check to RMST at 17 Battery Place, Suite 203, New
York, New York 10004. All payments shall be made in United States dollars.
6. DIVISION AND PAYMENT OF REVENUES.
6.1. All Revenues shall be collected by Magicworks and be deposited
into an interest-bearing bank account to be utilized for the receipt and
disbursement of Revenues (the "Bank Account"). Unless Revenues have been
assigned to RMST pursuant to the provisions of Section 5.2 hereof, Revenues
shall be disbursed for the following purposes and in the following priority: (a)
to Magicworks, 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 6.2 hereof.
6.2 Profits (as defined in Section 1.7 hereof) shall be divided between
RMST and Magicworks as follows: sixty-five (65%) percent thereof shall be paid
to RMST and thirty-five (35%) percent thereof shall be paid to Magicworks. The
payment of $8,500,000 to RMST in accordance with Section 5 hereof shall first be
credited against RMST's share of Profits.
11
<PAGE> 12
6.3 Profits shall be determined on a fiscal year basis as of September
14, 2000, and each anniversary thereof, if any, during the Term, and shall be
distributed by Magicworks to the parties simultaneously within sixty (60) days
thereafter.
6.4 Magicworks shall maintain all books of accounts and all documents
necessary to audit, review and verify Revenue and Project Expenses, and agrees
to allow authorized representatives of RMST to have reasonable access to such
books and records, and to make such copies thereof as such representatives shall
reasonably require. 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 reasonably request, including all information pertaining to deposits
and withdrawals or disbursements into and from the Bank Account.
6.5 Magicworks shall furnish to RMST electronic statements of ticket
sales and Exhibition attendance on a daily basis and monthly accountings of
Ticket Revenue, Sponsorship Revenues, Merchandise Revenue, Ancillary Revenues
and Project Expenses within one week of the close of each monthly period, with
the first such monthly report to be issued within one week of October 31, 1999
(the "Monthly Report"). Within sixty (60) days of September 30, 2000, Magicworks
shall furnish RMST with an accounting of each of the aforesaid categories of
Revenues and Project Expenses (the "Annual Accounting"). The Monthly Reports and
Annual Accounting shall itemize the Project Expenses in the manner set forth in
Exhibit 1.8 hereof, or in such other manner as the parties may mutually agree
upon in writing. In the event that an audit reflects a five (5%) percent or
greater discrepancy from the accounting furnished by Magicworks to RMST, then
Magicworks shall be responsible for payment of the costs of such audit.
6.6 Upon recoupment of the Project Expenses: (a) RMST shall have the
right to select and obtain legal title to, without the payment of any additional
consideration, sixty-five (65%) of the Exhibitry, with such rights to be
exercised on or before the last day of the Term and with Magicworks to furnish
to RMST an itemized list of the Exhibitry, including the cost thereof, within
thirty (30) days of the delivery of such items of Exhibitry to Magicworks; and
(b) RMST shall have the right to acquire from Magicworks all or a portion of the
thirty-five (35%) percent balance of the Exhibitry, at the purchase price
defined below, with RMST to give notice of its election to purchase such items
on or before the last day of the Term. The purchase price for such Exhibitry
shall equal the fair market value thereof as of the date of purchase, and shall
be paid by wire transfer to a bank account designated in writing by Magicworks
or by the delivery of a certified or official bank check to Magicworks within
thirty (30) days of the end of the Term. RMST shall be responsible for
picking-up and shipping any items of Exhibitry it acquires pursuant to the terms
hereof within thirty (30) days of the end of the Term, subject to RMST's payment
of the purchase price. In the event that Magicworks has not recouped the Project
Expenses hereunder, and the Agreement is terminated by RMST, RMST shall have the
right to purchase all such Exhibitry at the unrecouped cost of the Exhibitry.
6.7 RMST shall not bear any responsibility for any financial losses
that may be incurred in connection with the presentation of the Exhibition(s) or
the Tours.
12
<PAGE> 13
7. MARKETING, ADVERTISING AND PUBLICITY.
7.1 RMST shall be reasonably consulted about advertising and publicity
materials relating to the Exhibitions. RMST shall cooperate and not unreasonably
withhold or delay its consent to these matters.
7.2 Magicworks shall make available to RMST the advertising and
promotional materials in advance for the written approval of RMST, which
approval shall not be unreasonably withheld or delayed. Magicworks may then use
all of its advertising and promotional materials without further approval from
RMST so long as there is no material change to the format of the materials which
have been incorporated into Magicworks' advertising and promotional materials
with RMST's prior approval, which shall not be unreasonably withheld or delayed.
8. MERCHANDISING.
8.1 Each Exhibition shall be designed to have adequate space for a
merchandise shop.
8.2 As indicated in the document identified as Exhibit 8.2, RMST has
entered into an agreement with Titanic Merchandise, Inc. ("TMI"), pursuant to
which TMI is obligated to build-out, operate, staff and acquire the inventory
("Merchandise") for the merchandise shop at Exhibitions in the United States
(the "Merchandise Shop") until June 30, 2000 (the "Exhibition Retail
Agreement"). Under the Exhibition Retail Agreement, 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
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. RMST is not receiving any
payments or other consideration from TMI for the Merchandise Shop except as set
forth in the Exhibition Retail Agreement and except for royalties earned from
the utilization of RMST's proprietary rights, and supplies or goods sold by RMST
to the Merchandise Shop. Magicworks acknowledges that the foregoing terms of
such agreement are acceptable. RMST shall assign to Magicworks the Exhibition
Retail Agreement and all rights to receive revenues and reports from TMI under
the Exhibition Retail Agreement with respect to Exhibitions during the Term ,
which revenues shall be included in Merchandising Revenue as defined by Section
1.9.2 hereof.
8.3 With respect to Exhibitions in the United States after the
expiration of the Exhibition Retail Agreement on June 30, 2000, and with respect
to Exhibitions outside the United States, Magicworks shall have the right, in
its sole discretion, to market and sell the Merchandise during the term of this
Agreement on terms and conditions which are substantially similar to the
Exhibition Retail Agreement whereby Magicworks receives seventy percent (70%) of
gross sales and thirty percent (30%) of gross sales is included in Revenue.
8.4 It is agreed that an 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
13
<PAGE> 14
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.
Other Exhibition Catalogues may be developed by Magicworks, subject to the
consent of RMST, which consent shall not be unreasonably withheld or delayed.
9. SPONSORSHIP.
Magicworks shall seek corporate sponsors for the Exhibition(s) 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(s), which approval shall not be
unreasonably withheld or delayed. No sponsor shall be granted any rights, other
than sponsorship rights with respect to the Exhibition(s), without the prior
written consent of RMST, which shall not be unreasonably withheld or delayed.
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(s). Any and all payments received from sponsors of the Exhibition(s),
less commissions paid in connection therewith, provided such commissions are
negotiated on an arm's length industry standard basis and are a maximum of
fifteen percent (15%), shall be considered Revenue for purposes of this
Agreement. The parties acknowledge that RMST has entered into an agreement with
Discovery Communications, Inc. ("Discovery"), identified as Exhibit 9, 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. Any money or other
consideration received by RMST from Discovery in connection with the Exhibitions
shall be included in Revenues and be a credit against the payments due RMST
under this Agreement. In the event that Discovery is a sponsor of the
Exhibition(s), its logo shall appear in all promotional materials related to the
Exhibition(s). Magicworks hereby acknowledges that the above arrangements with
Discovery are acceptable and binding upon Magicworks for purposes of this
Agreement.
10. AUDIO VISUAL RIGHTS.
10.1 Except for the production of an orientation theatre presentation
to be made pursuant to Section 3.14 hereof exclusively for presentation within
an Exhibition (the "Orientation Film") and except for the production of a B-Roll
videotape of no more than four (4) minutes duration for the sole purpose of
promoting the Exhibition(s) 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 Magicworks. The parties further agree that the subject of
the Orientation Film and the Promotional Work shall be limited to the
Exhibition(s), and that subject to RMST's prior written consent, which consent
shall not be unreasonably withheld or delayed, a reasonable portion of RMST's
Supporting Material shall be made available for utilization in the Orientation
Film and Promotional Work. All rights and title to photographs of the Artifacts
and RMST's Supporting Material shall be owned exclusively by RMST, and no rights
or interests therein are hereby conferred upon Magicworks except as expressly
set forth in this Agreement. RMST shall have the right to approve the content
and form of the Orientation Film and Promotional Work prior to the release
thereof to the media, which approval shall not be unreasonably withheld. Any
14
<PAGE> 15
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 Orientation Film, in the event that RMST intends to engage an
outside producer to produce the same and such agreement is identified as Exhibit
9. 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. Magicworks hereby
acknowledges that the above agreements with Discovery are acceptable and binding
upon Magicworks for purposes of this Agreement.
10.2 Any Internet site established by Magicworks to promote or
advertise the Exhibitions shall state that the Exhibition(s) is/are produced by
Magicworks and RMST, and shall include, on the initial screen thereof, a
hypertext link to RMST's Internet site at the first reference to RMST, and a
brief mission statement by RMST. Any Internet site used by RMST shall include a
reference, on the initial screen thereof, to the Exhibitions and shall include a
hypertext link to the Internet site used by Magicworks to promote or advertise
the Exhibition(s).
10.3 Except as set forth in Section 10.1 hereof, Magicworks will use
its best reasonable efforts including, but not limited to, posting signs at the
entrance of the Exhibition(s),and making an announcement to the patrons, to
prohibit photography, videotaping, filming or other recording of the
Exhibition(s) and will take reasonable measures to inform visitors to the
Exhibition(s) of this prohibition. Magicworks shall eject any visitor to the
Exhibition(s) who refuses to comply with such prohibition, and shall use its
best reasonable efforts to confiscate and photographic film or other recording
of the Exhibition(s) obtained by such visitor.
11. TICKET SALES.
11.1 All ticket prices for the Exhibition(s) shall be subject to the
written consent of RMST, which consent shall not be unreasonably withheld or
delayed. Ticket prices shall be established for each of the following
categories: adults; seniors; youth (5-11 years); school and camp groups (20 or
more) and adult groups (20 or more). Any discounts from ticket prices, whether
through coupons or otherwise, shall be subject to the written consent of RMST,
which consent shall not be unreasonably withheld or delayed.
11.2 Magicworks shall have the right to distribute to Exhibition
sponsors, on a complimentary, no-charge basis, tickets for the Exhibitions;
provided, however, that Magicworks can distribute in excess of 2% of the total
tickets sold if Magicworks provides evidence to RMST that such excess tickets
were exchanged for value added services.
15
<PAGE> 16
11.3 Magicworks shall have the right to grant individuals with valid
press credentials admission to an Exhibition free of any ticket admission
charges.
11.4 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.
11.5 RMST shall be entitled to a copy of all of the data collected or
received by Magicworks in connection with the sale of tickets hereunder, and
Magicworks 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.
11.6 To the extent that Magicworks obtains the names and/or addresses
of the purchasers of tickets for the Exhibition(s), a list of such names and
address shall be furnished to RMST in a data format compatible with a database
program, such as Excel or FileMaker Pro, if available, or in printed form. Such
list shall be furnished to RMST on a monthly basis. Any expense associated with
obtaining any list shall be paid by RMST. Both parties shall have the right to
use the list of such purchasers as they may respectively determine thereafter,
independent of, and without claims or rights, of the other party hereto.
12. OPTIONS TO EXTEND.
RMST grants to Magicworks the following options:
12.1 Magicworks is hereby granted four (4) options (the "Annual
Option(s)") to extend the term of this Agreement for an additional period of one
(1) year each (the "Extension Period") on the same terms and conditions as those
contained herein, except as follows: in lieu of the payment of Five Hundred
Thousand ($500,000) Dollars upon execution of this Agreement pursuant to Section
5.1(a) hereof, Magicworks shall instead pay to RMST such sum of $500,000 (the
"Annual Advance") simultaneously with delivery to RMST of notice of its exercise
of an Annual Option. In all other respects, the terms and conditions of this
Agreement, including, but not limited to, the provisions for payments due to
RMST under Section 5.1(b) hereof, shall be in full force and effect during each
Extension Period.
12.2 Each Annual Option shall be exercisable by Magicworks no earlier
than April 30 and no later than May 15 of each year by sending written notice
thereof to RMST and by payment of the Annual Advance for the Extension Period.
Each year, Magicworks shall have the right to exercise only one Annual Option so
as to extend this Agreement for one Extension Period.
12.3 No Annual Option shall be exercisable unless all preceding Annual
Options have been exercised.
12.4 No Annual Option shall be exercisable unless Magicworks has
theretofore duly performed its material obligations hereunder.
16
<PAGE> 17
12.5 Whenever reference is made to the Term in this Agreement, such
word shall mean and include all Extension Periods if the Annual Options with
respect thereto have been exercised.
12.6 (a) Notwithstanding anything else to the contrary
contained herein, in the event of a Change of Control of RMST, RMST
shall have the right to cancel all subsequent Annual Options of
Magicworks by delivery of written notice to Magicworks on or before
February 28 of each Extension Period stating that a Change of Control
of RMST has occurred, and in that event the Term of this Agreement
shall end on September 14 of the then current Extension Period. A
Change of Control or RMST shall occur upon (i) the sale to, or
acquisition by, a person or entity who is not an affiliate of RMST in a
transaction or series of related transactions of a majority of the
outstanding capital stock of RMST or substantially all of the assets of
RMST, or (ii) the merger of RMST with another entity such that after
the consummation of such merger the shareholders of RMST immediately
prior to such merger do not own a majority of the outstanding capital
stock of the surviving entity immediately following such merger.
(b) In the event RMST conducts one or more diving expeditions
to recover additional objects ("Additional Objects") from the wreck
site of the Titanic and such Additional Objects are of such a quantity
and variety that they can reasonably support an additional Exhibition,
RMST may give Magicworks written notice of (i) a complete listing and
description of the Additional Objects and (ii) RMST's intent to place
such Additional Objects into an Exhibition (the "Additional Objects
Exhibit Tender"). Magicworks shall have thirty (30) days from the
receipt of the Additional Objects Exhibit Tender to accept or reject
the Additional Objects Exhibit Tender. Failure to send written
acceptance of the Additional Objects Exhibit Tender to RMST within
thirty (30) days of its receipt by Magicworks shall constitute a
rejection of the Additional Objects Exhibit Tender. In the event that
Magicworks rejects the Additional Objects Exhibit Tender, then RMST, by
giving written notice to Magicworks on or before February 28th of each
Extension Period, shall have the right to terminate Magicworks'
exercise of Annual Options hereunder. In the event that such notice of
termination is given by RMST, then the Term of this Agreement shall end
on September 14th of the then current Extension Period.
(c) In the event this Agreement is terminated pursuant to
either Sections 12.6(a) or 12.6(b), Magicworks shall have the right, at
its sole discretion, to continue one major Exhibition which involves a
substantial investment by Magicworks, SFXE or any of their affiliates
in excess of $2 million (the "Major Exhibition") after this Agreement
is so terminated as set forth below:
(i) Upon termination, Magicworks must de-install all
Artifacts for pick-up by RMST except for 200 Artifacts which
shall include twenty percent (20%) of each category of the
Most Significant Artifacts listed in Exhibit 2.2;
17
<PAGE> 18
(ii) Magicworks is hereby granted three (3) options
(the "Major Exhibition Annual Option(s)") to extend the term
of this Agreement for one Major Exhibition at only one
permanent venue for an additional period of one (1) year each
until no later than September 14, 2004 (the "Major Exhibition
Extension Period") on the same terms and conditions as those
contained herein, except as follows: (a) in lieu of the
payment of Five Hundred Thousand Dollars ($500,000) upon
execution of this Agreement pursuant to Section 5.1(a) hereof,
Magicworks shall instead pay to RMST such sum of Five Hundred
Thousand Dollars ($500,000) (the "Major Exhibition Annual
Advance") simultaneously with delivery to RMST of notice of
its exercise of a Major Exhibition Annual Option; and (b) the
quarterly payments due RMST pursuant to Section 5.1(b) shall
be reduced from Two Million Dollars ($2,000,000.00) to Four
Hundred Thirty-Seven Thousand Five Hundred Dollars
($437,500.00). In all other respects, (except for the
exclusive right to display Artifacts other than those in the
Major Exhibition) the terms and conditions of this Agreement
shall be in full force and effect during each Extension
Period.
(iii) Each Major Exhibition Annual Option shall be
exercisable by Magicworks no earlier than April 30 and no
later than May 15 of each year by sending written notice
thereof to RMST and by payment of the Major Exhibition Annual
Advance for the Major Exhibition Extension Period. Each year,
Magicworks shall have the right to exercise only one Major
Exhibition Annual Option so as to extend this Agreement for
one Major Exhibition Extension Period.
(iv) No Major Exhibition Annual Option shall be
exercisable unless all preceding Major Exhibition Annual
Options have been exercised.
(v) No Major Exhibition Annual Option shall be
exercisable unless Magicworks has theretofore duly performed
its material obligations hereunder.
(vi) The terms and conditions of this Agreement shall
apply to all Major Exhibition Extension Periods if the Major
Exhibition Annual Options with respect thereto have been
exercised.
12.7 At the expiration of the Term of this Agreement or any
extension thereof, Magicworks shall have the option to continue any or all
Exhibitions under the following terms and conditions:
(a) Magicworks shall give RMST written notice of such option
to continue an Exhibition which is already open at least two (2) months
prior to the expiration of the Term, said written notice to be given at
least three (3) months prior to the expiration of the Term;
18
<PAGE> 19
(b) The option to continue shall extend the Term for such
Exhibition for a period of three (3) months;
(c) At the end of the Term, Magicworks must de-install all
Artifacts for pick-up by RMST except for 200 Artifacts which shall
include twenty percent (20%) of each category of the Most Significant
Artifacts listed in Exhibit 2.2; provided, however, that the Artifacts
in the Exhibition to be extended shall be in addition to the 200
Artifacts referenced above and shall remain in the Exhibition until the
end of such extended term, and
(d) The profits would continue to be split 65% to RMST and 35%
to Magicworks; provided, however, that any site preparation or buildout
expenses incurred after the expiration of the Term shall not be
deducted as an expense from Revenue.
Notwithstanding this provision, Magicworks may not extend the Major Exhibition
beyond the time period provided in Section 12.6.
12.8 For purposes of Sections 12.6(c) and 12.7, Magicworks shall have
the right to include two of the following Artifacts in any extended Exhibition:
the Cherub, the Bell, the Big Piece and the D-Deck Door; provided, however, that
Magicworks may not select both the Cherub and the Bell for the same Exhibition
and may not select both the Big Piece and the D-Deck Door for the same
Exhibition.
13. MAGICWORKS' REPRESENTATIONS AND WARRANTIES.
Magicworks hereby represents and warrants that:
13.1 It is a Delaware corporation, a direct subsidiary of PACE and an
indirect subsidiary of SFXE, and it has the right and the complete authority to
enter into this Agreement and to undertake the obligations set forth herein on
behalf of SFXE.
13.2 PACE is a valid and existing corporation in good standing in the
state of Delaware. SFXE is a valid and existing corporation in good standing in
the state of Delaware.
13.3 Except as it may relate to the Orlando Exhibition and except as
set forth in Section 13.4, SFXE, through Magicworks or any subsidiary or other
division of SFXE, has not entered into any agreement or granted any rights or
undertaken any obligations, and will not do so during the Term, that will or
might violate its agreements, or conflict with its obligations, hereunder.
13.4 Except as it may relate to the Orlando Exhibition and except as
set forth below, SFXE through Magicworks or any subsidiary or other division of
SFXE, shall not engage or otherwise obtain the services of Arnie Geller, G.
Michael Harris, D. Michael Harris, John Joslyn, Jon Thompson, Charles Sachs or
Ralph White, directly or through any business entity with which any or all of
the aforesaid individuals may be affiliated, in any capacity whatsoever,
including, without limitation, employee, agent, advisor, consultant, independent
contractor,
19
<PAGE> 20
director or officer, in connection with any of the activities contemplated in
this Agreement, without the prior written consent of RMST, which consent shall
not be unreasonably withheld or delayed. Notwithstanding the previous sentence,
Magicworks shall be permitted to confer with such individuals on an infrequent
and occasional basis in connection with any of the activities contemplated by
this Agreement; provided, however, that such individuals shall not be permitted
by Magicworks to contact or communicate with RMST or its officers, directors or
representatives in connection with this Agreement (except as permitted by law or
other corporate arrangements). RMST agrees to indemnify, defend and hold
harmless Magicworks, PACE , SFXE, and their respective officers, employees,
directors, shareholders, attorneys, agents and representatives, for any and all
loss, damage, claim, demand, cause of action, cost and expense (including
attorneys' fees and court costs) arising out of the matters set forth in this
subsection.
14. RMST'S REPRESENTATIONS AND WARRANTIES.
14.1 RMST has the right and complete authority to enter into this
Agreement and to undertake the obligations set forth herein, including, but not
limited to, any necessary shareholder and board of directors approvals.
14.2 RMST is a valid and existing corporation in good standing in its
state of incorporation, as specified in the preamble to this Agreement.
14.3 Except as otherwise expressly disclosed in or expressly permitted
under this Agreement, RMST has not assigned, licensed or otherwise conveyed any
interest in the Artifacts and shall not, during the Term of this Agreement,
assign, license or otherwise convey any interest in the Artifacts to any person
other than Magicworks. RMST has not entered into any agreement or granted any
rights or undertaken any obligations, and will not do so during the Term, that
will or might violate its agreements, or conflict with its obligations,
hereunder.
14.4 RMST has the right and authority to use and/or to assign the right
and authority to Magicworks to use all of the Artifacts, trademarks, copyrights
and other materials relating to the Exhibitions and the Tour. Prior to the
effective date of this Agreement, and except as otherwise expressly disclosed in
or expressly permitted under this Agreement, RMST has not assigned, licensed or
otherwise conveyed RMST's right to use all of the Artifacts, trademarks,
copyrights or other materials relating to the Exhibitions and the Tour.
14.5 RMST is the sole legal owner of the Artifacts.
14.6 Pursuant to orders of court, RMST is the sole legal owner of the
salvage rights to recover objects from the wreck site of the Titanic and for so
long as RMST maintains its status as salvor-in-possession, such rights shall not
be assigned, licensed or otherwise conveyed to any other person during the Term.
15. INDEMNITIES.
15.1 RMST agrees to indemnify, defend and hold harmless Magicworks, its
subsidiaries, parent companies, affiliates, agents, and assigns and their
respective agents, officers,
20
<PAGE> 21
employees, and directors, from and against any and all losses, damages,
liabilities, claims, demands, suits and expenses that Magicworks may incur or be
liable for as a result of any claim, suit or proceeding made or brought against
Magicworks based upon, arising out of, or in connection with RMST's breach of
any of its representations, duties or obligations hereunder.
15.2 Magicworks 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 Magicworks based upon, arising out of, or in connection with
Magicworks' breach of any of its representations, duties or obligations
hereunder.
15.3 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.
16. 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 (i) if Magicworks has recouped all of its costs and expenses related
to this Agreement, RMST shall be the sole and exclusive owner of all trademarks
utilized for the Exhibition and of all Exhibition logos and (ii) if Magicworks
has not recouped all of its costs and expenses related to this Agreement, RMST
may purchase all of the trademarks utilized in the Exhibition and all of the
Exhibition logos from Magicworks at their aggregate cost and expense.
17. TERMINATION.
17.1 This Agreement shall terminate in the event that (a) both
Magicworks and SFXE fail to perform any material term, covenant or agreement to
be observed or performed by them under this Agreement, and such failure shall
continue for twenty (20) days following written notice from RMST; (b) both
Magicworks and SFXE shall become insolvent or admit their inability to pay their
debts as they mature or shall both make an assignment for the benefit of their
creditors; (c) a proceeding in bankruptcy or for the reorganization of both
Magicworks and SFXE or the readjustment of any of their debts under the
Bankruptcy Code or any other laws, whether state or federal, for the relief of
debtors shall be commenced by both Magicworks and SFXE, or shall be commenced
against both Magicworks and SFXE, and not discharged within sixty (60) days
after the commencement thereof; or (d) a receiver or trustee shall be appointed
for both Magicworks and SFXE for any substantial part of their assets, or any
proceeding shall be instituted for dissolution or the full or partial
liquidation of both Magicworks and SFXE.
21
<PAGE> 22
17.2 Within thirty (30) days of termination of the Agreement Term,
Magicworks at the request of RMST shall forthwith return to RMST or otherwise
dispose of as RMST may direct all pamphlets, literature, contractual
documentation, photographs, catalogues, advertising material, specifications,
cost estimates and other materials, documents and papers whatsoever belonging to
RMST and sent to RMST relating to the Exhibition (other than correspondence
between the Magicworks and RMST) which Magicworks 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.
17.3 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.
18. NON-COMPETITION.
18.1 Except for the Orlando Exhibition, Magicworks, for Magicworks and
its affiliates, agrees that, during the Term hereof, it will not, either
directly or indirectly, engage in any other business relating to the
presentation of an exhibition concerning the Titanic, including but not limited
to, the construction, operation or life on board the Titanic prior to its
sinking, the passengers or crew of the Titanic, the sinking of the Titanic,
efforts to discover the Titanic, the discovery of the Titanic, expeditions to
and exploration of the Titanic following its discovery, and artifacts and other
objects recovered from the Titanic, either as a proprietor, partner, investor,
shareholder, director, officer, employee, principal, agent, advisor, or
consultant. It is the intention of this provision to preclude not only direct
competition but also all forms of indirect competition, such as consultation for
competitive businesses, or any assistance or transmittal of information of any
kind or nature whatsoever which would be of any material assistance to a
competitor. In the event RMST terminates this Agreement, Magicworks may engage
in any and all competitive exhibitions, tours and other activities during the
Term of the Agreement and thereafter. In the event the Term of this Agreement
expires without RMST terminating this Agreement, Magicworks and its affiliates
shall thereafter be bound by the non-competition provisions of this Section.
18.2 If all or any portion of the covenants set forth in this Section
18 are held unreasonable, void, vague or illegal by any court having competent
jurisdiction over the parties and subject matter, the court shall be empowered
to revise and/or construe said covenants so as to fall within permissible legal
limits and shall not by necessity invalidate the entire covenants. Magicworks
expressly agrees to be bound by any lesser covenant subsumed within the terms of
this Section 18 as if the resulting covenants were separately stated in and made
a part hereof.
18.3 Each party acknowledges that Magicworks' violation of the
covenants contained in this Section 18 would result in immediate and irreparable
injury to RMST for which no adequate remedy at law will be available.
Accordingly, Magicworks, in the event of its violation of this Agreement,
consents to the entry of an injunction prohibiting any conduct of the terms of
the covenants set forth in this Section 18. Magicworks further agrees to pay all
costs and expenses (including reasonable attorneys' and experts' fees) incurred
by RMST in connection
22
<PAGE> 23
with the enforcement of those covenants not to compete set forth in this
Agreement only if RMST shall prevail in any such litigation.
19. MISCELLANEOUS.
19.1 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.
19.2 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.
19.3 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 Southern
District of New York, or if such courts lack jurisdiction, in the County of New
York in the State of New York, and by execution and delivery of this Agreement,
Magicworks and RMST hereby accepts for itself and in respect of its property,
generally and unconditionally, the jurisdiction of the aforesaid court.
Magicworks 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.
19.4 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 a nationally recognized overnight delivery service or certified or
registered air mail, return receipt requested, as follows:
If to RMST, addressed to:
RMS Titanic, Inc.
17 Battery Place, Suite 203
New York, New York 10004
Attention: George Tulloch, President
Fax No.: (212) 482-1912
23
<PAGE> 24
with a copy to:
Allan H. Carlin, Esquire
RMS Titanic, Inc.
17 Battery Place, Suite 203
New York, NY 10004
Fax No.: (212) 482-1912
If to Magicworks, addressed to:
Magicworks Entertainment, Inc.
199 East Garfield Road
Aurora, Ohio 44202
Attention: Lee Marshall, President
Fax No.: (330) 995-0872
with copies to:
H. Yale Gutnick, Esquire Jeffrey B. Lewis, Esquire
Strassburger McKenna Gutnick & Potter SFX Entertainment, Inc.
322 Blvd. of the Allies, Suite 700 2000 West Loop South, Suite 1300
Pittsburgh, PA 15222 Houston, TX 77027
Fax No.: (412) 281-8264 Fax No.: (713) 693-8672
All such notices shall be effective upon the delivery thereof to the addressee
in person or via telegraph, telex, nationally recognized overnight delivery
service or facsimile with documentary evidence of delivery. Any party may change
their respective addresses and fax numbers by giving notice as herein provided.
19.5 Entire Agreement. This Agreement contains the entire agreement
relating to the Tour 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.
19.6 Assignability. This agreement shall not be assignable by
Magicworks without the written consent of RMST, which consent shall not be
unreasonably withheld or delayed; provided, however, that Magicworks may assign
this Agreement to PACE, SFXE or their affiliates. RMST shall have the right to
assign this Agreement to a third-party, with the prior written consent of
Magicworks, which consent shall not be unreasonably withheld. Notwithstanding
the foregoing, Magicworks' consent shall not be required for (i) the sale to, or
24
<PAGE> 25
acquisition by, a person or entity who is not an affiliate of RMST in a
transaction, or series of related transactions, of a majority of the outstanding
capital stock of RMST or (ii) the merger of RMST with another entity such that
after the consummation of such merger the shareholders of RMST immediately prior
to such merger do not own a majority of the outstanding capital stock of the
surviving entity immediately following such merger.
19.7 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.
19.8 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.
19.9 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.
19.10 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.
19.11 Confidentiality. RMST and Magicworks agree, as may be permitted
by law, to use their reasonable efforts 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,
RMST and Magicworks shall use reasonable efforts not to 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.
19.12 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 Magicworks 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.
25
<PAGE> 26
19.13 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.
19.14 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 Agreement Term for a
period of four (4) years.
19.15 Headings. The captions and headings used herein are for
convenience only and shall not be construed as a part of this agreement.
19.16 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.
19.17 As used herein the term "not unreasonably withheld or delayed"
shall mean the event shall have occurred within five (5) New York business days.
19.18 Guaranty by SFXE. Although SFXE is not a party to this Agreement,
it is agreed that SFXE, by its signature below, has guaranteed the obligations
hereunder of Magicworks.
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. MAGICWORKS ENTERTAINMENT, INC.,
a Delaware corporation
By:/s/ George Tulloch By:/s/ Lee Marshall
--------------------------- -----------------------------
George Tulloch, President Lee Marshall, President
SFX ENTERTAINMENT, INC.,
a Delaware corporation
By:/s/
-----------------------------
26
<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 5th day of April,
1999, 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 Adamar New Jersey, Inc. D/B/A
Tropicana Casino and Resort a corporation organized under the laws of the State
of New Jersey and having its principal place of business at Brighton and the
Boardwalk, Atlantic City, New Jersey 08401-6390 (the "Tropicana").
WHEREAS, RMST and Tropicana wish to work in association with
one another to present an exhibition 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 May 29,
1999 and expiring on September 7, 1999.
1.3 Except as provided in Section 3.2 and 3.11 hereof,
"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 Exhibition" currently presented on display at
the Union Depot in St. Paul, Minnesota (the "St. Paul Exhibition"); provided,
however, the following items are not included in the Exhibitry: (a) none of the
dresses of survivors of the Titanic, or accompanying display cases; (b) none of
the didactic or other panels relating to the connection of Minnesota residents
to the Titanic; and (c) the wall of showering water upon which the footage of
icebergs is displayed.
1.4 "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.
1.5 "Venue" shall mean an area consisting of approximately
20,000 square feet known as the Grand Exhibition Center in the Tropicana.
2. THEMES AND DURATION OF THE EXHIBITION, AND RMST'S
CONSULTATION
<PAGE> 2
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 St. Paul
Exhibition, subject to design of the Exhibition for presentation within the
dimensions of the Venue. In this regard, the parties acknowledge that the size
and scope of the Exhibition may have to be reduced in view of the smaller size
of the venue as compared to the St. Paul Exhibition.
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, and will be
advertised and promoted in such manner as will reasonably give recognition to
RMST's production of the Exhibition.
2.4 Tropicana 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 Tropicana to have the
responsibility of supervising the preparation of the Venue and any modifications
to the St. Paul Exhibition as are mutually agreed upon. In connection with these
matters, Tropicana 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.
Tropicana 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, Tropicana 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 of RMST, Tropicana will
provide reasonable access for RMST representatives to observe
the preparation of the Venue for presentation of the
Exhibition.
3. THE OBLIGATIONS OF TROPICANA.
Tropicana agrees to undertake the following obligations and to
be solely responsible for payment of the costs thereof :
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, Tropicana
2
<PAGE> 3
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, construction and
installation work relating to the presentation of the Exhibition in the Venue,
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.
3.2.3 A display shall be designed and constructed 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 display of the Big Piece in the St. Paul
Exhibition will not be utilized in the Venue and does not
constitute part of the Exhibitry as defined by Section 1.3
hereof.
3.3 Develop and implement, in consultation with RMST, a
comprehensive marketing, advertising, promotion and public relations plan for
the Exhibition in a manner consistent with the Marketing Plan annexed hereto and
Schedule 3.3.
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 Tropicana 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. Notwithstanding the foregoing, RMST
understands and agrees that Tropicana will not insure the Artifacts in transit.
3.7 Be responsible for all staffing and the daily operations
of the Exhibition.
3
<PAGE> 4
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 Tropicana and until returned to RMST.
3.9 Provide secure, pest-free storage for shipping crates.
3.10 Deinstall and remove the Exhibitry and Artifacts from the
Venue within fifteen (15) days of the expiration of the Exhibition Term.
3.11 Construct and operate a ticket booth with an adequate
number of attendants in an area adjacent to the Venue, it being acknowledged by
the Tropicana that the ticket booth is not part of the Exhibitry.
4. RMST'S OBLIGATIONS.
RMST agrees to:
4.1 Commission and supervise de-installation of the Exhibitry
and Artifacts from the St. Paul Exhibition and for the delivery thereof to the
Venue no later than May 21, 1999.
4.2 Make available such Supporting Material as Tropicana shall
reasonably require following consultation with RMST.
5. PAYMENT OF TICKET REVENUES
5.1 RMST shall be entitled to all ticket revenues derived from
the Exhibition, less credit card fees. All ticket revenues shall be deposited by
Tropicana on a daily basis into a segregated bank account to be established for
RMST (the "Bank Account").
5.2 Tropicana shall maintain all books of accounts and all
documents necessary to audit, review and verify ticket revenues, 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.
6. MARKETING, ADVERTISING AND PUBLICITY.
6.1 RMST shall be fully consulted about and shall participate
in the scheduling and details of all marketing, advertising and publicity
activities relating to the Exhibition. RMST shall cooperate and not unreasonably
withhold its consent to, or unreasonably refuse to participate in, promotional
activities.
6.2 Tropicana shall make available to RMST any advertising or
promotional material in advance of the utilization thereof by the Tropicana for
the marketing or promoting the Exhibition. RMST shall make available to
Tropicana any advertising or promotional material in
4
<PAGE> 5
advance of the utilization thereof by RMST for marketing or promoting the
Exhibition.
6.3 No advertising, promotional or other marketing materials
may be used by Tropicana without RMST's prior written consent, which consent
shall not be unreasonably withheld.
7. MERCHANDISING.
7.1 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 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"). Tropicana acknowledges that it has
no right to receive any portion of the revenues derived from the Merchandise
Shop.
7.2 It is acknowledged that in addition to space of no less
that 2,500 square feet within the Venue for the construction and establishment
of a Merchandise Shop, Tropicana shall arrange for TMI to establish a satellite
merchandise shop in the "concourse" area of the Tropicana as well as a kiosk on
the boardwalk abutting the Tropicana.
7.3 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.
8. SPONSORSHIP.
Tropicana and RMST shall seek corporate sponsors for the
Exhibition that are not in conflict with the image of promoting science and
education. 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 divided equally between the Parties. The party which
collects sponsorship revenue shall provide an accounting thereof to the other
party within thirty (30) days of the receipt thereof, together with payment of
such party's share of the sponsorship revenue, as reflected by the accounting.
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
5
<PAGE> 6
promotional materials related to the Exhibition. Tropicana hereby acknowledges
that the above arrangements with Discovery are acceptable.
9. AUDIO VISUAL RIGHTS.
9.1 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 Tropicana. The parties further agree that the subject of
the Promotional Work shall be limited to the Exhibition, and that subject to
RMST's prior written consent, a reasonable portion of RMST's Supporting Material
shall be made available for utilization in the Promotional Work. All rights and
title to photographs of the Artifacts and RMST's Supporting Material shall be
owned exclusively by RMST, and no rights or interests therein are hereby
conferred upon Tropicana 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. Tropicana hereby acknowledges that the above
agreements with Discovery are acceptable.
9.2 Any Internet site established by Tropicana to promote or
advertise the Exhibition shall state that the Exhibition is presented by RMST in
association with Tropicana 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 Tropicana to promote or advertise
the Exhibition.
9.3 Except as set forth in Section 10.1 hereof, Tropicana 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. Tropicana 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.
10. TICKET SALES.
6
<PAGE> 7
10.1 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.
10.2 Tickets shall be made available for sale in advance on a
time-reserved basis, with a service charge of an outside ticket outlet to be
mutually agreed upon (the "Service Charge") to be added to each ticket purchased
in advance.
10.3 Tropicana shall be entitled to distribute thirty thousand
(30,000) tickets to the Exhibition on a complimentary basis, free of any
charges, for distribution to qualified recipients on Tropicana's existing
mailing list (the "Qualified Recipients") and shall be entitled to purchase
additional tickets to the Exhibition at a price of $8.50 (plus applicable taxes,
if any) for distribution to Qualified Recipients.*
10.4 RMST shall be entitled to a copy of all of the data
collected by Tropicana in connection with the sale of tickets hereunder, and
Tropicana 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.
11. INDEMNITIES.
11.1 RMST agrees to indemnify, defend and hold harmless
Tropicana, 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 Tropicana may incur or be liable for as a result of any claim,
suit or proceeding made or brought against Tropicana based upon, arising out of,
or in connection with RMST's breach of any of its duties or obligations
hereunder.
11.2 Tropicana 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 Tropicana based upon, arising out of, or in
connection with Tropicana's breach of any of its duties or obligations
hereunder.
11.3 Each party shall give the other party prompt notice of
any claim or suit coming within the purview of these indemnities. Upon the
written request of any indemnitee, the indemnitor shall assume the defense of
any claim, demand or action against such indemnitee, and shall upon the request
of the indemnitee, allow the indemnitee to participate in the defense thereof,
such participation to be at the expense of the indemnitee. Settlement by the
indemnitee without the indemnitor's prior written consent shall release the
indemnitor from the indemnity as to the claim, demand or action so settled.
*Tropicana agrees to run a television advertisement for the exhibit, pay for one
half of the list of load in and load out of the exhibit to be located in the
Grand Exhibition Center, and set up of the "Big Piece" described in the attached
Exhibit A.
7
<PAGE> 8
12. TRADEMARK RIGHTS.
Neither party, by virtue of this Agreement, shall obtain or
claim any right, title or interest in or to the other's name, trademark or logo,
except the right to use as specified herein and hereby acknowledges and agrees
that all such use shall inure to the benefit of the respective owner. 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.
13. OBLIGATIONS UPON TERMINATION.
13.1 Within thirty (30) days of termination of the Exhibition
Term, RMST at the request of Tropicana shall forthwith return to Tropicana or
otherwise dispose of as Tropicana may direct all pamphlets, literature,
photographs, catalogues, advertising material, specifications, cost estimates
and other materials, documents and papers whatsoever belonging to Tropicana and
sent to RMST relating to the Exhibition (other than correspondence between the
Tropicana and RMST) which RMST may have in its possession or under its control,
except that RMST shall have the right to retain one (1) copy of each of the
foregoing for archival purposes.
13.2 Within thirty (30) days of termination of the Exhibition
Term, Tropicana at the request of RMST shall forthwith return to RMST or
otherwise dispose of as RMST may direct all pamphlets, literature, contractual
documentation, photographs, catalogues, advertising material, specifications,
cost estimates and other materials, documents and papers whatsoever belonging to
RMST and sent to RMST relating to the Exhibition (other than correspondence
between the Tropicana and RMST) which Tropicana may have in its possession or
under its control, except that RMST shall have the right to retain one (1) copy
of each of the foregoing for archival purposes.
13.3 If either party brings an action against the other to
enforce any condition or covenant of this Agreement or for breach of its
obligations under this Agreement, the prevailing party shall be entitled to
recover from the other party its court costs and reasonable attorney's fees
incurred in such action.
14. MISCELLANEOUS.
14.1 Other Documents. Each of the parties hereto shall execute
and deliver such other and further documents and instruments, and take such
other and further actions, as may be reasonably requested of them for the
implementation and consummation of this Agreement and the transactions herein
contemplated.
14.2 Parties in Interest. This agreement shall be binding upon
and inure to the benefit of the parties hereto, and the successors and assigns
of all of them, but shall not confer, expressly or by implication, any rights or
remedies upon any other party.
14.3 Governing Law. This agreement is made and shall be
governed in all respects, including validity, interpretation and effect, by the
laws of the State of New York, USA,
8
<PAGE> 9
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, Tropicana and RMST hereby accepts for itself and in respect of its
property, generally and unconditionally, the jurisdiction of the aforesaid
courts. Tropicana and RMST hereby irrevocably waive, in connection with any such
action or proceeding, (i) trial by jury, (ii) any objection, including, without
limitation, any objection to the laying of venue or based on the grounds of
forum non conveniens, which it may now or hereafter have to the bringing of any
such action or proceeding in such respective jurisdictions.
14.4 Notices. All notices required to be given under the terms
of this Agreement shall be in writing (including telegraphic, telex, and
facsimile transmissions, provided that a copy thereof is also sent by certified
or registered air mail on the same day as such telegraphic, telex or facsimile
transmission) and shall be deemed to have been duly given if delivered to the
addressee in person (and receipted on a copy of such notice), or transmitted, or
mailed by certified or registered air mail, return receipt requested, as
follows:
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 Tropicana, addressed to:
Tropicana Casino and Resort
Brighton and the Boardwalk
Atlantic City, NJ 08401-6390
Attention: Corporate Counselor / Executive Offices
Fax No.: (609) 340-4346
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.
14.5 Entire Agreement. This Agreement contains the entire
agreement between the parties and supersedes all prior agreements,
understandings and writings between the parties with respect to the subject
matter hereof and thereof. Each party hereto acknowledges that no
representations, inducement, promises, or agreements, oral or otherwise, have
been made by any party, which are not embodied herein or in an exhibit hereto,
and that no other agreement,
9
<PAGE> 10
statement or promise may be relied upon or shall be valid or binding. Neither
this agreement nor any term hereof may be changed, waived, discharged or
terminated orally. This agreement may be amended or supplemented or any term
hereof may be changed, waived, discharged or terminated by an agreement in
writing signed by all parties hereto.
14.6 Assignability. This agreement shall not be assignable by
either party hereto without the written consent of the other party hereto.
14.7 Severability. If any provision of the Agreement shall be
held invalid or unenforceable, the remainder of this Agreement which can be
given effect without such invalid or unenforceable provision shall remain in
full force and effect. If any provision is held invalid or unenforceable with
respect to particular circumstances, it shall remain in full force and effect in
all other circumstances.
14.8 No Waiver. The waiver by any party hereto of any breach
or violation of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach.
14.9 Force Majeure. If due to acts of God, insurrection, fire,
elements, national emergency, or any other similar cause outside of the
reasonable control of either party to this Agreement ("Force Majeure") the
Exhibition is canceled, delayed or the performance of either party under the
terms of this Agreement is made impossible, the parties agree that such
cancellation, postponement or failure to perform shall not be considered a
breach of this agreement. In such event, however, the parties agree to use their
best efforts to reschedule the Exhibition.
14.10 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.
14.11 Confidentiality. RMST and Tropicana 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
Tropicana shall disclose to anyone for any reason, without the prior written
consent of the other, any marketing plans, strategies, results or other
confidential information divulged to or learned by either party about the other
from any source whatsoever, unless and until such information has generally
become available to the public from sources other than the other party.
14.12 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 Tropicana except as expressly set forth herein, and both
parties understand that, except as expressly agreed to herein, each shall be
10
<PAGE> 11
responsible for its own separate debts, obligations and other liabilities.
14.13 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.
14.14 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.
14.15 Headings. The captions and headings used herein are for
convenience only and shall not be construed as a part of this agreement.
14.16 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.
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. TROPICANA INC.
By: /s/ George Tulloch By: /s/ Pamela J. Popielarski
----------------------------- ---------------------------------
George Tulloch, President Pamela J. Popielarski
President and General Manager
11
<PAGE> 12
ADDENDUM TO THE AGREEMENT BY AND BETWEEN ADAMAR OF NEW JERSEY, INC. D/B/A
TROPICANA CASINO AND RESORT ("TROPICANA") AND RMS TITANIC, INC. ("RMST") DATED
APRIL 5, 1999 ("THE AGREEMENT").
The following terms and conditions are hereby added to the above referenced
Agreement:
1. CASINO CONTROL COMMISSION APPROVAL
The Agreement is subject to the provisions of the New Jersey Casino
Control Act ("the Act") and the regulations promulgated by the New
Jersey Casino Control Commission ("the Commission"). RMST agrees to
provide such information as is necessary for the filing of a vendor
registration form on its behalf, if RMST is not already vendor
registered and further, agrees to apply for a casino service industry
license if it is required to do so by the Commission. In the event
Tropicana is prohibited from doing business with RMST by order of the
Commission, this Agreement shall be terminated without any liability on
the part of Tropicana.
2. SUPERSEDING EFFECT
The terms of this Addendum supersede the corresponding terms in the
principal Agreement to the extent that a conflict exists. Except as
expressly modified and amended herein, the terms, covenants, conditions
and provisions of the Agreement shall remain in full force and effect.
In Witness Whereof, the parties have executed this Addendum this 5th day of
April, 1999.
Adamar of New Jersey, Inc. d/b/a
Tropicana Casino and Resort
By: _____________________________
PAMELA J. POPIELARSKI
President and General Manager
RMS Titanic, Inc.
By: ______________________________
Name: ____________________________
Title: ___________________________
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-2000
<PERIOD-START> MAR-01-1999
<PERIOD-END> MAY-31-1999
<CASH> 1,333,248
<SECURITIES> 0
<RECEIVABLES> 1,248,950
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,838,499
<PP&E> 1,556,259
<DEPRECIATION> 401,706
<TOTAL-ASSETS> 14,100,122
<CURRENT-LIABILITIES> 2,173,226
<BONDS> 0
1,619
0
<COMMON> 0
<OTHER-SE> 11,925,277
<TOTAL-LIABILITY-AND-EQUITY> 14,100,122
<SALES> 163,447
<TOTAL-REVENUES> 1,312,525
<CGS> 2,490
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 680,306
<INCOME-TAX> 253,197
<INCOME-CONTINUING> 666,396
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 427,109
<EPS-BASIC> .03
<EPS-DILUTED> .03
</TABLE>
