As filed with the Securities and Exchange Commission on February 20, 1998.
Registration No. _____________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
COMMODORE HOLDINGS LIMITED
(Exact name of registrant as specified in its charter)
BERMUDA N/A
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
4000 HOLLYWOOD BOULEVARD
SUITE 385-S, SOUTH TOWER
HOLLYWOOD, FLORIDA 33021
(954) 967-2100
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
-------------------
MR. FREDERICK A. MAYER
VICE CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
COMMODORE HOLDINGS LIMITED
4000 HOLLYWOOD BOULEVARD
SUITE 385-S, SOUTH TOWER
HOLLYWOOD, FLORIDA 33021
TELEPHONE NO. (954) 967-2100
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-------------------
COPIES OF COMMUNICATIONS TO:
KATHLEEN L. DEUTSCH, P.A.
BROAD AND CASSEL
201 SOUTH BISCAYNE BOULEVARD, SUITE 3000
MIAMI, FLORIDA 33131
TELEPHONE NO. (305) 373-9400
-------------------------------
Approximate date of commencement of proposed sale to the public:
From time to time after this Registration Statement becomes effective.
---------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
<PAGE>
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SHARES AMOUNT TO OFFERING PRICE AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED BE REGISTERED PER SHARE(1) PRICE(1) FEE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
$.01 par value(2)......... 686,903 $ 4.00 $2,747,612 $ 810.55
- -----------------------------------------------------------------------------------------------------------------
Common Stock,
$.01 par value(3)......... 54,952 $ 3.76 $ 206,620 $ 60.95
- -----------------------------------------------------------------------------------------------------------------
Common Stock
$.01 par value(3)......... 150,000 $ 2.75 $ 412,500 $ 121.69
- -----------------------------------------------------------------------------------------------------------------
Common Stock
$.01 par value(4)......... 1,042,055 $ 3.00 $3,126,165 $ 922.22
- -----------------------------------------------------------------------------------------------------------------
TOTAL:.......................................................................... $1,915.41
=================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee and
pursuant to Rule 457.
(2) Represents shares issuable upon the conversion of convertible debentures,
as more fully set forth on the cover page of the Prospectus included
herein. Also includes such additional shares as may be issuable as a
result of the anti-dilution provisions of the debentures.
(3) Represents shares issuable upon the exercise of certain warrants, as more
fully set forth on the cover page of the Prospectus included herein. Also
includes such additional shares as may be issuable as a result of the
anti-dilution provisions of the warrants.
(4) Represents shares issuable upon the exercise of convertible preferred
stock, as more fully set forth on the cover page of the Prospectus
included herein.
================================================================================
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
SUBJECT TO COMPLETION, DATED FEBRUARY 20, 1998
PROSPECTUS
1,933,910 SHARES
COMMODORE HOLDINGS LIMITED
COMMON STOCK
This Prospectus relates to an aggregate of 1,933,910 shares (the
"Shares") of Common Stock, par value $.01 per share (the "Common Stock"), of
Commodore Holdings Limited, a Bermuda exempted company ("Commodore" or the
"Company"), consisting of the following: (i) 686,903 shares of Common Stock
issuable upon the conversion (the "Conversion Shares") of the Company's 7%
convertible subordinated debentures due December 31, 2002 (the "Debentures"),
issued in a December 1997 private offering (the "Private Offering") of 21.5
units, each unit consisting of $100,000 in face value of Debentures with a
purchase price of $80,000 per unit; (ii) 204,952 shares of Common Stock issuable
upon exercise of warrants (the "Broker Warrants") issued to the placement agent
in connection with the Private Offering and for financial consulting services;
and (iii) 1,042,055 shares of Common Stock issuable upon conversion of the
Company's convertible series A preference shares (the "Series A Preference
Shares"). The Shares will be offered from time to time by the holders thereof
(the "Selling Stockholders"). The Company will not receive any proceeds from the
sale of the Shares by the Selling Stockholders or upon conversion of the
Debentures, but will receive up to an aggregate of approximately $619,000 upon
the exercise of the Broker Warrants.
The Selling Stockholders have advised the Company that they may from
time to time sell all or a portion of the Shares offered hereby in one or more
transactions on The Nasdaq National Market, or on any exchange on which the
Common Stock may then be listed, in privately negotiated transactions or
otherwise, or a combination of such methods of sale, at market prices prevailing
at the time of sale or prices related to such prevailing market prices or at
negotiated prices. The Selling Stockholders may effect such transactions by
selling the Shares to or through broker-dealers, and such broker-dealers may
receive compensation in the form of underwriting discounts, concessions or
commissions from the Selling Stockholders and/or purchasers of the Shares for
whom they may act as agent (which compensation may be in excess of customary
commissions). The Selling Stockholders and any participating broker-dealers may
be deemed to be "underwriters" as defined in the Securities Act of 1933, as
amended (the "Securities Act"). Neither the Company nor the Selling Stockholders
can estimate at the present time the amount of commissions or discounts, if any,
that will be paid by the Selling Stockholders on account of their sales of the
Shares from time to time. The Company has agreed to indemnify the Selling
Stockholders against certain liabilities, including certain liabilities under
the Securities Act. See "Plan of Distribution."
The Common Stock is quoted on The Nasdaq National Market under the
symbol "CCLNF". On February 18, 1998, the last reported sales price of the
Common Stock on The Nasdaq National Market was $3.00 per share.
---------------------
<PAGE>
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN RISKS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
--------------------
THE DATE OF THIS PROSPECTUS IS __________, 1998
-2-
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company may be inspected and
copied (at prescribed rates) at the public reference facilities maintained by
the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and
at the following regional offices located at Seven World Trade Center, Suite
1300, New York, New York 10048, and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and may also be obtained from the Commission's website
located at http://www.sec.gov. Quotations relating to the Company's Common Stock
appear on The Nasdaq National Market, and reports, proxy statements and other
information concerning the Company can also be inspected at the offices of the
National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on
Form S-3 (the "Registration Statement") under the Securities Act with respect to
the Shares. This Prospectus, which is a part of the Registration Statement, does
not contain all the information set forth in, or annexed as exhibits to, such
Registration Statement, certain portions of which have been omitted pursuant to
rules and regulations of the Commission. For further information with respect to
the Company and the Shares, reference is hereby made to such Registration
Statement, including the exhibits thereto. Copies of the Registration Statement,
including exhibits, may be obtained from the aforementioned public reference
facilities of the Commission upon payment of the fees prescribed by the
Commission, or may be examined without charge at such facilities. Statements
contained herein concerning any document filed as an exhibit are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement. Each such statement is
qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission under
the Exchange Act are incorporated in and made a part of this Prospectus by
reference:
(a) the Company's Annual Report on Form 10-K for the year ended
September 30, 1997;
(b) the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended December 31, 1997; and
(c) the Company's definitive 1998 Proxy Statement distributed in
connection with its Annual Meeting of Stockholders held on
February 11, 1998.
-3-
<PAGE>
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date hereof and prior to the
termination of the sale of all of the Shares shall be deemed to be incorporated
by reference herein and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein,
or in any other subsequently filed documents, which also are incorporated or
deemed to be incorporated by reference herein, modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed to
constitute a part of this Prospectus except as so modified or superseded.
This Prospectus incorporates documents by reference that are not
presented herein or delivered herewith. The Company hereby undertakes to
provide, without charge, to each person, including any beneficial owner, to whom
a copy of this Prospectus is delivered, on the written or oral request of such
person, a copy of any or all of the information incorporated herein by
reference. Exhibits to any of such documents, however, will not be provided
unless such exhibits are specifically incorporated by reference into such
documents. The requests should be addressed to: Investor Relations, Commodore
Holdings Limited, 4000 Hollywood Boulevard, Suite 385-S, South Tower, Hollywood,
Florida 33021, telephone number (954) 967-2100.
THE COMPANY
GENERAL
Commodore Holdings Limited, a Bermuda exempted company (the "Company"),
owns two cruise ships, the S/S Enchanted Isle (the "Enchanted Isle") and the S/S
Universe Explorer (formerly the S/S Enchanted Seas) (the "Universe Explorer" or
the "Enchanted Seas"). The Enchanted Isle offers Caribbean cruises from New
Orleans and the Universe Explorer is chartered to Sea-Comm, Ltd., a Liberian
corporation ("Sea-Comm"), a joint venture between the Company and Seawise
Foundation, Inc. ("Seawise"), which in turn has space-chartered the vessel to
Seawise, which operates the educational "Semester at Sea" program during a
portion of the year. Sea-Comm operates cruises to Alaska and the Caribbean
aboard the Universe Explorer during the balance of the year. The Company
acquired the Enchanted Isle and the Enchanted Seas in July 1995 from Commodore
Cruise Line Limited, a Cayman Islands Company and certain of its subsidiaries
("Old Commodore").
Since April 1995, the Enchanted Isle has offered seven day cruises from
New Orleans to the Western Caribbean with ports-of-call at Cancun, Cozumel,
Grand Cayman and Montego Bay (alternately, Key West). It is a 23,395 gross
registered ton cruise vessel, has nine passenger decks, a capacity of
approximately 729 passengers in 366 cabins (on a double occupancy basis), is of
Panamanian registry and was built in 1958. The Enchanted Isle is designed to be
a seagoing resort containing a casino, nightclub, movie theater, swimming pool,
restaurants, workout room, sundeck and deck activities.
-4-
<PAGE>
Revenues from the Enchanted Isle are derived from ticket sales and from
certain on-board activities and services operated by the Company including
casino gambling, liquor sales in a variety of bars, restaurants, lounges, and a
discotheque. Additional revenue is earned from the sale of pre- and post-cruise
packages in the vessel's city of embarkation. The Company earns concession
revenue from duty-free shops, gift shops, the sale of photographs to passengers,
shore excursions and from the beauty salon.
The Universe Explorer is a 23,900 gross registered ton cruise vessel,
has nine passenger decks, a capacity of approximately 739 passengers in 363
cabins (on a double occupancy basis), is of Panamanian registry and was built in
1958. The Universe Explorer was designed to be a seagoing resort containing a
casino, discotheque, movie theater, library, reading room, restaurants, full
service communication facilities, two pools, jogging course, aerobic classes,
workout room, sun deck areas and deck activities. After the Company acquired the
Enchanted Seas in July 1995, the Enchanted Seas was laid up and placed in
drydock for maintenance and refurbishing until January 1996. During this time,
the Company renovated portions of it to prepare it for use both as a cruise
vessel and for use in the Semester at Sea program. The Company removed the
vessel's casino to install a library, and installed various partitions so that
certain lounges and dining areas could be easily converted to classrooms when
needed for the Semester at Sea program and returned to their prior state when
used for cruises. The Company also renamed the vessel the "Universe Explorer."
Revenues from the Universe Explorer are derived from charter revenue.
Sea-Comm derives revenues from different sources depending on whether the vessel
is being used as a cruise vessel or for the Semester at Sea program. Cruise
revenues include those from ticket sales and certain on-board activities and
services such as beverage sales, shore excursions, and concession revenue.
Revenues from the Semester at Sea program are derived from space charter fees
and ticket sales to adult (non-student) passengers, who may represent up to 24%
of the passengers on each voyage. Seawise will also pay Sea-Comm $1,500,000 in
1997 for all of the non-student passenger cabins. Additional revenue is earned
from beverage and snack bar sales and from other miscellaneous on-board
services.
Cruises in general are differentiated primarily by cruise cost, length
and itinerary. Segments within the cruise industry include the standard, premium
and luxury cruises, each of which, the Company believes, appeals to different
population segments and attracts varying demographic groups. The standard
market, in which the Company competes, is the largest of the three segments,
comprising approximately 55% of industry-wide capacity.
The Company believes that the Semester at Sea program is unique, and to
its knowledge, the Universe Explorer is the only such floating university in the
world. The program competes indirectly, however, with land-based semester or
year abroad programs offered to college students.
The Company was incorporated in Bermuda on April 13, 1995. The
executive offices of the Company are located at 4000 Hollywood Boulevard, Suite
385-S, South Tower, Hollywood, Florida 33021, and its telephone number is (954)
967-2100.
-5-
<PAGE>
THE COMMODORE ACQUISITION
The Company and its wholly-owned subsidiaries were established for the
purpose of acquiring certain assets (the "Commodore Acquisition") of an existing
cruise line operation from Old Commodore. The Commodore Acquisition included the
trade names "Commodore" and "Commodore Cruise Line" ("Commodore"), as well as
certain related trade names and trademarks (collectively, the "Trademarks"), the
Enchanted Isle and the Enchanted Seas, and all of Old Commodore's existing
operations with regard to the Enchanted Isle and the Enchanted Seas (together
the "Cruise Ships"), including certain advance ticket sales, marketing and sales
information, and certain shoreside assets (collectively, the "Commodore
Assets").
The Company closed the Commodore Acquisition on July 14, 1995 (the
"Commodore Closing"). The purchase price for the Commodore Assets was
$33,500,000. The Company paid $5,000,000 to Old Commodore, which represented the
cash portion of the purchase price. In addition, the Company issued 1,000,000
Series A Preference Shares at an agreed value of $4.00 per share to EffJohn
International B.V. ("EffJohn"), the parent company of Old Commodore, as partial
payment of the purchase price. EffJohn International Cruise Holdings, Inc. (the
"Lender"), an affiliate of EffJohn, loaned the balance of the purchase price,
$24,500,000, to the Company (the "Loan"), which is secured by substantially all
of the assets of the Company's wholly-owned subsidiary New Commodore Cruise
Lines Limited, a Bermuda exempted company ("New Commodore"), including first
preferred ships' mortgages on the Cruise Ships. References herein to the
operations of the Company are to the historical operations of Old Commodore
prior to the Commodore Closing and to those of the Company subsequent thereto.
-6-
<PAGE>
FORWARD-LOOKING STATEMENTS
The Company cautions readers that certain important factors may affect
the Company's actual results and could cause such results to differ materially
from any forward-looking statements that may be deemed to have been made in this
Prospectus or that are otherwise made by or on behalf of the Company. For this
purpose, any statements contained in this Prospectus that are not statements of
historical fact may be deemed to be forward-looking statements which involve
risks and uncertainties. Without limiting the generality of the foregoing, words
such as "may," "will," "expect," "believe," "anticipate," "intend," "could,"
"estimate" or "continue" or the negative variations thereof or comparable
terminology are intended to identify forward-looking statements. These risks and
uncertainties include competing in a saturated industry against modern and
larger fleets; the ability of the Company to obtain additional financing for the
acquisition of additional ships; a high percentage of debt on assets owned by
the Company; the potential for additional governmental regulations; the need for
expensive upgrades and/or maintenance to aging vessels; general economic factors
in markets where the Company operates; those factors discussed in the section
captioned "Risk Factors" below as well as those discussed elsewhere in this
Prospectus and from time to time in the Company's filings with the Commission.
-7-
<PAGE>
RISK FACTORS
THE SHARES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK. BEFORE INVESTING IN THE COMMON STOCK, PROSPECTIVE PURCHASERS SHOULD
CAREFULLY CONSIDER THE MATTERS SET FORTH BELOW AS WELL AS THE OTHER INFORMATION
SET FORTH IN THIS PROSPECTUS.
1. HIGH LEVERAGE; EXISTENCE OF LIENS ON ALL ASSETS
Upon the Commodore Closing, the Company became indebted to the Lender
in the amount of U.S. $24,500,000 (the "Acquisition Indebtedness"), which
indebtedness is secured by a lien on substantially all of New Commodore's assets
and mortgages on the Cruise Ships. While the Acquisition Indebtedness (which has
since been reduced to approximately U.S. $20,000,000) may increase the potential
return on invested capital, it also presents additional elements of risk,
including the following: (i) the Company's ability to obtain additional
financing in the future for working capital, capital expenditures, ship and
other acquisitions, general corporate purposes or other purposes may be
impaired; (ii) pursuant to the Loan, New Commodore must maintain a minimum cash
balance in its operating accounts of $1 million after deducting the substantial
portion of the Company's cash flow from operations which must be dedicated to
the payment of the principal and interest on its indebtedness, and if such funds
are insufficient, the Company will be forced to raise additional funds or
curtail activities such as marketing; (iii) the Company's degree of leverage may
make it more vulnerable to economic downturns and may limit its ability to
withstand competitive pressures; and (iv) the Company's borrowing at variable
rates of interest will subject the Company to fluctuations in interest rates.
Moreover, to the extent that the Company's assets continue to be pledged to
secure the Acquisition Indebtedness, such assets will be unavailable to secure
additional debt financing, which may adversely affect the Company's ability to
borrow in the future. A substantial portion of the Company's cash flow is used
for debt service. There can be no assurance that the Company will be able to
meet its debt service obligations. If the Company fails to satisfy obligations
with respect to the Acquisition Indebtedness, including without limitation
making required payments of principal and interest, the Acquisition Indebtedness
could be declared in default and the Company's assets foreclosed upon.
2. POSSIBLE EXEMPTION FROM CERTAIN U.S. INCOME TAXES
The Company is a foreign corporation which is engaged in a trade or
business in the United States. The Internal Revenue Code of 1986, as amended
(the "Code") provides a complex set of tax rules concerning the taxation of
foreign corporations engaged in business in the United States. Under these
rules, such a foreign corporation may be subject to various U.S. taxes,
including the regular U.S. corporation income tax (or alternative minimum tax);
an additional branch profits tax; a gross basis tax on certain gross rentals
derived from bareboat charters of ships to affiliated or unaffiliated companies;
and branch taxes on certain interest paid or accrued. Unless and except to the
extent that the Company qualifies for the tax exemption provided by Code section
883(a), it is subject to these U.S. income taxes.
-8-
<PAGE>
The Company currently qualifies for this exemption because Code section
883(c) generally makes eligible for the Code section 883(a) exemption
wholly-owned foreign subsidiaries of a foreign corporation, provided that both
the country of incorporation of the foreign subsidiary, and the country of
incorporation of the foreign parent, reciprocally exempt the international
shipping income of U.S. shipping corporations, and the foreign parent's stock is
primarily and regularly traded on an established securities market in the United
States or in certain foreign countries. Based on advice of Bermudian and
Panamanian counsel and counsel familiar with Liberian law, the countries of
incorporation of the Company, its subsidiaries, and Sea-Comm, are viewed as
providing a reciprocal exemption. In addition, such exemption requires, among
other things, that 80% of the value of the Company's capital stock be traded on
certain securities exchanges or markets. At present, the Company believes that
it meets the requirements of such exemption because its Common Stock is traded
on The Nasdaq National Market. Accordingly, the Company believes that the
Company meets the requirements of the Section 883(a) exemption.
In addition, even if the Company meets the requirements of the Section
883(a) exemption, there are certain events, such as a decline in the market
value of the Company's Common Stock relative to the value of its Series A
Preference Shares, a de-listing from Nasdaq, a change in the Bermuda or Panama
tax laws governing shipping income, or a change in Code section 883(a) or
regulations issued thereunder, which could cause the Company to not qualify for
the reciprocal exemption provided by that section. Whether the Company meets the
80% requirement depends on the value of the Common Stock compared to the value
of the Series A Preference Shares, which are not traded on The Nasdaq National
Market and cannot be included in the 80% determination. In the event the value
of the Common Stock should decline, the Company could become ineligible for the
international shipping exemption, which would cause its income to be subject to
United States income taxes. Such an event would have a material adverse effect
on the Company. There can be no assurance that the corporate tax exemption
provided by Code section 883(a) will continue to be available.
3. COMPETITION
The cruise line industry is extremely competitive. The Company operates
in the Gulf of Mexico, the Caribbean and in Alaska, and competition for
passengers in such geographic areas is intense. The Company competes with other
cruise ship lines in the standard segment that offer the same type of products
in several markets, and land-based resorts, many of which have significantly
greater financial resources and experience, and are more well known than the
Company. The Company competes with its competitors principally on the basis of
quality of service, type and variety of itineraries and price. In particular,
since the Company presently has only two vessels, with limited itineraries, it
may be disadvantaged in attracting passengers. Fixed costs represent the major
portion of a cruise line's operating expenses and cannot be reduced when
competition causes a reduction in load factors or ticket prices. In addition,
cruise demand declined slightly during 1995 and 1996 for the first time in
several years. Although demand rebounded slightly in 1997, there can be no
assurance that satisfactory occupancy percentages will be reached and maintained
or that the Company will be able to sustain or enhance any penetration and
competitive position.
-9-
<PAGE>
Recent statistics indicate that the larger cruise lines are increasing
existing capacity by acquiring new ships, making it very difficult for smaller
operators, such as the Company, to compete with the glamorous new ships for
passengers. Industry sources predict that the increase in capacity will not be
matched by a sufficient increase in passenger volume and that the older ships
will not operate at full capacity. Various articles concerning the cruise line
industry note that this trend is expected to continue in the foreseeable future.
If this trend continues, the Company's ability to compete with these larger
operators may be substantially impaired.
Although the Company believes that the Universe Explorer offers the
only ocean-going accredited educational program, such as the Semester at Sea
program, this program competes for student passengers with operators of
land-based university programs, such as semesters abroad. Many of these
universities have substantially greater experience and resources than the
operators of the Semester at Sea program. In addition, the Semester at Sea
program competes for adult passengers with extended cruise providers, such as
freighters which offer passenger quarters. In the event such programs are not
successful, the operator could, in certain circumstances, cancel the charter of
the Universe Explorer, and the Company would have to seek another use of this
vessel. There can be no assurance that the Company could successfully identify a
profitable alternative for such vessel.
4. AGE OF THE CRUISE SHIPS
The Enchanted Isle underwent an overhaul and refitting from August 1994
until December 1994. The Company completed a substantial overhaul on the
Universe Explorer in 1996 to prepare it for the Semester at Sea program. There
can be no assurance, however, that required drydock maintenance will be
completed in the future on a timely basis. Delays in completing future
maintenance may be caused by technical matters, strikes, acts of God, or
negligence. The Cruise Ships were built in 1958. Their age makes them
particularly susceptible to this risk. In the event of any such delay, the
Company would likely lose substantial revenue while such vessel was out of
service. Although the Company has obtained insurance to recover lost revenues
when either of the Cruise Ships is out of service due to a "covered event" for
more than 15 days, there can be no assurance that insurance proceeds will be
adequate to cover the Company's losses. "Covered events" are those events which
trigger coverage under the Company's hull and machinery insurance policy, such
as losses due to collision, crew negligence or mechanical breakdowns, other than
those due to ordinary wear and tear.
5. GOVERNMENT REGULATION
The Cruise Ships are registered in Panama, and are subject to
regulations issued by Panama, including regulations issued pursuant to
international treaties governing the safety of the ships and its passengers. The
country of registry will conduct periodic inspections to verify compliance with
these regulations. The United States Coast Guard periodically carries out Port
State control verification of the condition of the Cruise Ships and their
compliance with international and Panama regulations, as permitted under
international treaties. The Company believes that the Cruise Ships are in
substantial compliance with all applicable regulations and
-10-
<PAGE>
that they have the licenses necessary to conduct their business; however, there
can be no assurance that the Cruise Ships comply with all such regulations.
The Company is also subject to international treaties prohibiting ocean
dumping and to various U.S. laws and regulations relating to environmental
protection. Under such laws and regulations, the Company will be prohibited
from, among other things, discharging materials, such as petrochemicals and
plastics, into the waterways. The Company has obtained insurance against the
costs of environmental damage due to oil pollution occasioned at, or in transit
to, sea. However, the civil and criminal fines that may be imposed for
environmental damage or for illegal ocean dumping are not and cannot be insured
against and the Company remains exposed to this risk although the Company does
have and expects to continue regular training and to maintain established
procedures to prohibit and prevent the discharge or dumping of prohibited
substances. Although the financial costs relating to U.S. environmental laws and
regulations are not expected to have a material adverse impact on the Company's
results of operations, financial condition or liquidity, there can be no
assurance that an uninsured loss will not occur.
The Company believes that it is in substantial compliance with all
regulations applicable to the operation of the Cruise Ships and has the licenses
necessary to conduct its business, however, there can be no assurance thereof.
From time to time, legislation has been introduced and new regulations proposed
which could have an impact upon the Company's operations. During recent years,
the International Convention on Safety of Life at Sea ("SOLAS") has been amended
and required, among other things, most passenger vessels not fitted with
sprinkler systems to install such systems and other safety arrangements,
including smoke detection systems, low-location lighting and enclosed escape
stairwells, by October 1997. In the event a vessel met certain requirements
under SOLAS as amended through 1974, but without reference to any subsequent
amendments thereto ("SOLAS 1974"), as do the Cruise Ships, it was not required
to be fitted with a sprinkler system or to make other required safety
modifications until on or before October 1, 2005. The Cruise Ships are currently
in compliance with the October 1997 SOLAS requirements but are not fitted with
sprinkler systems. The cost of such installation is presently estimated to be
approximately $3,000,000 per vessel.
There have been efforts in prior Congresses to adopt bills that would
apply United States labor laws to nonresident alien crews of foreign registered
ships sailing from U.S. ports and to exclude certain foreign-built ships from
U.S. ports if they received construction subsidies of a particular type. With
respect to the ship construction subsidies, the Cruise Ships are U.S. built and
thus would be at risk to such legislation only if it were to apply to conversion
and maintenance work performed on the vessels in foreign countries. The
application of U.S. labor laws to foreign registered passenger ships would have
a very substantial impact on the cruise industry as a whole and the Company
cannot predict the implications on its operations. Such proposed legislation is
not presently under consideration by the 104th Congress, but there can be no
assurance that it will not be re-introduced.
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6. INTERNATIONAL FACTORS
The Company's itineraries typically include ports outside the U.S.
Thus, the Company and its business may be affected by the risks of doing
business abroad, including changes in foreign governments, foreign laws and
regulations, economic and political conditions, restrictions on currency
transfer, exchange fluctuations, currency devaluations, customs duties, tariffs,
import quotas and other possible adverse regulations, which could result in
increased costs, delayed or reduced revenues from foreign operations, adverse
effects on the Company's ability to generate revenue and other adverse
consequences.
7. NO DIVIDENDS
To date, the Company has not paid any dividends on its Common Stock and
does not expect to declare or pay dividends on the Common Stock in the
foreseeable future. The Loan documents and the terms of the Series A Preference
Shares contain additional restrictions on the Company's ability to pay a
dividend on the Common Stock.
8. JOINT VENTURE RISKS
Pursuant to the agreement governing the joint venture between the
Company and Seawise (the "Agreement"), Seawise has the right to terminate the
Agreement, and thus the Company's charter of the Universe Explorer for use in
the Semester at Sea and Alaska cruise programs, on 15 months' notice at any time
after January 14, 1999. In the event Seawise terminates the Agreement, there can
be no assurance that the Company will find an acceptable alternate use for the
Universe Explorer.
9. DAMAGE TO OR DESTRUCTION OF THE CRUISE SHIPS
The Company's profitability is dependent on the operation of the Cruise
Ships. If either of the Cruise Ships were to be damaged due to a hurricane,
storm, or other natural disaster or for some other reason, the Company's
operations could be terminated until such Cruise Ship was repaired or replaced.
Furthermore, such repairs or replacement could be delayed if funds are not
available to pay for such repairs or replacement. The Company maintains hull and
machinery insurance as well as increased value insurance on both the Universe
Explorer and the Enchanted Isle, as required by the terms of the Loan, as well
as loss of hire insurance to cover loss of revenues in certain situations.
Despite such insurance coverage, there can be no assurance that the insurance
proceeds will be sufficient to fully compensate the Company for its losses.
10. CERTAIN BUSINESS RISKS
The Company's operations may be adversely affected by numerous other
factors, including, among others, labor disturbances or strikes, either by
shipboard employees or land based personnel, government regulatory orders or
rules, or the failure of its reservations system. The Company's activities will
also be subject to risks generally associated with the operation of
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a business, including changes in general and local economic conditions, fiscal
policies affecting the business and related industries, acts of God and other
factors which are beyond the control of the Company. Finally, the Company's
business will be faced with risks generally found in the cruise business, such
as fluctuations in the cost of fuel, claims for property damage or personal
injury to passengers or crew. The Company has obtained insurance to protect it
against these types of claims, but there can be no assurance that such insurance
will provide coverage for all types of claims or that the amount of coverage
will be sufficient in all cases.
11. TRADEMARK PROTECTION
The Company owns the Trademarks, which include Commodore Cruise Line
and the distinctive Commodore logo. The Company believes that the Trademarks are
widely recognized and have considerable value, of which no assurance can be
given. The Company has not yet recorded the transfer of certain of its foreign
Trademarks to it due to the substantial cost involved and the potentially
limited value of certain of such Trademarks. The Company is not aware of any
actions against its Trademarks and, to the Company's knowledge, no notice or
claim of infringement in respect of its Trademarks exists. There can be no
assurance that the Company's Trademarks do not violate the proprietary rights of
others, that they would be upheld if challenged, that the Company would not, in
such an event, be prevented from using the Trademarks or that its failure to
record the transfer of certain of its foreign Trademarks will not have an
adverse effect on the Company.
12. RELIANCE ON CURRENT MANAGEMENT
The Company's operations and future success are greatly dependent upon
certain members of its senior management, particularly the services of its
Vice-Chairman, Frederick A. Mayer, New Commodore's President, James R. Sullivan,
and New Commodore's Vice-President, Finance and Chief Financial Officer, Alan
Pritzker. Mr. Mayer has executed an employment agreement with New Commodore;
however, Mr. Sullivan and Mr. Pritzker are employed on a month-to-month basis.
The Company does not maintain key-man life insurance on any of their lives. The
termination of any of their employment or loss of any of their services for any
reason could have a significant adverse effect upon the Company's operations.
The Company's success is also dependent upon the ability of the Company
to hire and retain additional financial and marketing personnel. Competition for
qualified employees among cruise line companies is intense, and the inability to
attract, retain and motivate additional highly skilled employees, could
adversely affect the Company's business and prospects. There can be no assurance
that the Company will be able to retain its existing personnel or attract
additional qualified employees.
13. CONTROL BY MANAGEMENT AND PRINCIPAL STOCKHOLDERS
At the time of this Prospectus, the Company's officers and directors
own, in the aggregate, approximately 32.9% of the issued and outstanding shares
of Common Stock of the Company, excluding any Common Stock which may be issued
upon the conversion of the Series
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A Preference Shares, the exercise of the outstanding stock options and warrants
or the conversion of the Debentures. Upon the sale of all of the Shares offered
hereby, Mr. Binder, the Chairman of the Company, and Mr. Mayer, the
Vice-Chairman of the Company, will beneficially own approximately 14.6% and 9.0%
of the outstanding Common Stock of the Company, respectively, excluding any
shares of Common Stock which may be issued upon the conversion of the Series A
Preference Shares or the exercise of certain outstanding stock options and
warrants to purchase Common Stock.
14. RIGHTS OF SECURITY HOLDERS UNDER BERMUDA LAW MAY BE LESS THAN
UNDER U.S. JURISDICTIONS
The Company's corporate affairs are governed by its Memorandum of
Association, Bye-laws, and the corporate law of Bermuda. Principles of law
relating to such matters as the validity of company procedures, the fiduciary
duties of management and the rights of the Company's security holders may differ
from those that would apply if the Company were incorporated in a jurisdiction
within the United States. The rights of security holders under Bermuda law are
not as extensive as are the rights of security holders under the law or judicial
precedent in many United States jurisdictions. Thus, the holders of securities
of the Company may have more difficulty in protecting their interests from
actions by the Company's Board of Directors than they might have as security
holders of a company incorporated in many United States jurisdictions. In
addition, there is uncertainty whether the courts of Bermuda would enforce
judgments of the courts of the United States and of other foreign jurisdictions.
There is also uncertainty whether the courts of Bermuda would entertain actions
brought in Bermuda which are predicated upon the securities laws of the United
States.
15. AUTHORIZATION OF PREFERENCE SHARES
The Company's Bye-Laws authorize the issuance of 10,000,000 preference
shares, including 8,957,945 "blank check" preference shares with such
designations, rights and preferences as may be determined from time to time by
the Company's Board of Directors. Accordingly, the Board of Directors is
empowered, without stockholder approval, to issue additional preference shares
with dividend, liquidation, conversion, voting, or other rights which could
adversely affect the voting power or other rights of the holders of the Common
Stock. In the event of issuance, the preference shares could be utilized, under
certain circumstances, as a method of discouraging, delaying, or preventing a
change in control of the Company. The Company issued 1,000,000 Series A
Preference Shares to EffJohn in connection with the Commodore Acquisition and
42,055 Series A Preference Shares to EffJohn in partial payment of dividends.
The Series A Preference Shares are convertible into Common Stock and have other
rights which could discourage a takeover of the Company and which could dilute
the Common Stock.
16. CERTAIN RIGHTS OF SERIES A PREFERENCE SHARES
The Series A Preference Shares are entitled to a preference with
respect to liquidation or the distribution of assets of the Company over any
other shares of capital stock of the Company. In the event of any such
liquidation or distribution of assets, the holders of the Series
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A Preference Shares will receive any accrued but unpaid dividends and USD$4.00
per Series A Preference Share before the holders of other series of preferred
stock or the Common Stock receive any distribution of the Company's assets. In
addition, the holders of the Series A Preference Shares are entitled to receive
a dividend equal to seven percent of the issuance price of the Series A
Preference Shares per annum before the Company may pay any dividends on the
Common Stock.
17. TRADING MARKET FOR COMMON STOCK
The Company's Common Stock is quoted on The Nasdaq National Market.
There currently are a relatively limited number of shares of Common Stock in the
hands of the public and a relatively limited trading market for the Common
Stock. Consequently, purchasers of Shares may have a limited ability to dispose
of their Shares in the public market. Furthermore, there can be no assurance
that a more active trading market for the Common Stock will develop or, if
developed, that it would be sustained.
18. EFFECT OF OUTSTANDING STOCK OPTIONS, WARRANTS AND CONVERTIBLE
SECURITIES
As of the date of this Prospectus, there are 500,000 shares of Common
Stock reserved for issuance upon the exercise of stock options under the Plan,
of which 386,000 options have been granted to date, 2,004,952 shares of Common
Stock reserved for issuance upon the exercise of outstanding warrants (including
the Public Warrants), and 1,042,055 shares of Common Stock reserved for issuance
upon conversion of the Series A Preference Shares and 686,903 shares of Common
Stock reserved for issuance upon conversion of the Debentures. In addition, the
Company may issue the Broker Warrants to any broker-dealers participating in the
Offering. Exercise of any such options or warrants or conversion of such Series
A Preference Shares could have an adverse effect on the terms upon which the
Company may be able to obtain additional equity, since the holders of the
options, warrants, and Series A Preference Shares can be expected to exercise or
convert them, as the case may be, at a time when the Company would, in all
likelihood, be able to obtain any needed capital on terms more favorable to the
Company than those provided in the options, warrants or Series A Preference
Shares.
19. SHARES ELIGIBLE FOR FUTURE SALE
As of the date of this Prospectus, approximately 1,265,000 shares of
Common Stock held by existing stockholders constitute "restricted securities,"
as that term is defined in Rule 144, promulgated under the Securities Act ("Rule
144"), and may only be sold if such shares are registered under the Securities
Act or sold in accordance with Rule 144 or another exemption from registration
under the Securities Act. Of the approximately 1,265,000 shares, 1,240,000
shares are owned by affiliates of the Company, as that term is defined under the
Securities Act. In general, under Rule 144, subject to satisfaction of certain
other conditions, a person, including an affiliate of the Company, who has
beneficially owned restricted shares of Common Stock for at least one year, is
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of 1% of the total number of outstanding shares of the
same class, or if the Common Stock is quoted on Nasdaq, the average weekly
trading volume during the four calendar weeks preceding the sale. A person who
has not been an affiliate of the
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<PAGE>
Company for at least three months immediately preceding the sale and who has
beneficially owned the shares of Common Stock for at least two years is entitled
to sell such shares under Rule 144 without regard to any of the volume
limitations described above. Substantially all of the Company's restricted
shares of Common Stock are either eligible for sale pursuant to Rule 144 or have
been registered under the Securities Act for resale by the holders thereof,
which will permit the sale of such registered shares of Common Stock in the open
market or in privately negotiated transactions without compliance with the
requirements of Rule 144. No prediction can be made as to the effect, if any,
that sales of shares or the availability of such shares for sale will have on
the market prices prevailing from time to time. Nevertheless, the possibility
that substantial amounts of Common Stock may be sold in the public market may
adversely affect prevailing market prices for the Common Stock and could impair
the Company's ability to raise capital in the future through the sale of equity
securities.
20. NASDAQ MAINTENANCE REQUIREMENTS; POSSIBLE DE-LISTING OF
SECURITIES FROM NASDAQ SYSTEM; RISKS OF LOW-PRICED STOCKS
The Securities and Exchange Commission (the "Commission") has approved
rules imposing stringent criteria for the listing of securities on Nasdaq,
including standards for maintenance of such listing. The Common Stock is quoted
on The Nasdaq National Market; however, the Company still must meet certain
maintenance criteria. If the Company is unable to satisfy Nasdaq's maintenance
criteria in the future, its securities will be subject to being de-listed and
trading, if any, would thereafter be conducted in the over-the-counter market in
the so-called "pink sheets," or the "electronic bulletin board" of the National
Association of Securities Dealers, Inc. ("NASD"). As a consequence of such
de-listing, an investor could find it more difficult to dispose of, or to obtain
accurate quotations as to the price of, the Company's securities.
The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure, relating to the market for penny stocks, in connection
with trades in any stock defined as a penny stock. The Commission recently
adopted regulations that generally define a penny stock to be any equity
security that has a market value of less than $5.00 per share, subject to
certain exceptions. Such exceptions include any equity security listed on
Nasdaq, and any equity security issued by an issuer that has: (i) net tangible
assets of at least $2 million, if such issuer has been in continuous operation
for three (3) years; (ii) net tangible assets of at least $5 million, if such
issuer has been in continuous operation for less than three (3) years; or (iii)
average annual revenue of at least $6 million, for the last three (3) years.
Unless an exception is available, the regulations require delivery, prior to any
transaction involving a penny stock, of a disclosure schedule explaining the
penny stock market and the risks associated therewith.
In addition, if the Company's securities are not quoted on Nasdaq, or
the Company does not have $2 million in net tangible assets, trading in the
Common Stock would be covered by Rule 15g-9, promulgated under the Securities
Exchange Act of 1934 (the "Exchange Act"), for non-Nasdaq and
non-Exchange-listed securities. Under such Rule, broker-dealers who recommend
such securities to persons other than established customers and accredited
investors must make a special written suitability determination for the
customer, and receive the
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<PAGE>
purchaser's written agreement to a transaction prior to sale. Securities are
also exempt from this Rule if the market price is at least $5.00 per share.
Although the Company's Common Stock is, as of the date of this
Prospectus, outside the definitional scope of the penny stock rules, as it is
quoted on Nasdaq, in the event the Common Stock was subsequently to become
characterized as a penny stock, the market liquidity for the Company's
securities could be severely affected. In such an event, the regulations on
penny stocks could limit the ability of broker-dealers to sell the Company's
securities, and thus the ability of purchasers of the Company's securities to
sell their securities in the secondary market.
USE OF PROCEEDS
The Company will receive no proceeds from the sale of any of or all of
the Shares of Common Stock being offered by the Selling Stockholders hereunder
or upon conversion of the Debentures, but may receive an aggregate of
approximately $619,000 upon the exercise of the Broker Warrants. Such proceeds,
if any, will be used for working capital and other corporate purposes.
Expenses to be incurred by the Company in connection with the
registration of the Shares are estimated at approximately $57,000.
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SELLING STOCKHOLDERS
The Company has been advised by the Selling Stockholders that none of
the Selling Stockholders has or had a position, office or other material
relationship with the Company or any of its affiliates within the past three
years. Unless otherwise indicated, the following table sets forth certain
information with respect to the ownership of the Company's Common Stock by each
Selling Stockholder as of the date of this Prospectus.
<TABLE>
<CAPTION>
OWNERSHIP OF SHARES NUMBER OF OWNERSHIP OF SHARES
NAME OF SELLING OF COMMON STOCK SHARES OF COMMON STOCK
STOCKHOLDER PRIOR TO OFFERING OFFERED HEREBY AFTER OFFERING(1)
- ------------------------------------- ------------------------ -------------- ---------------------
SHARES PERCENTAGE SHARES PERCENTAGE
------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C>
Windy City, Inc...................... 23,962(2) * 23,962(2) 0 *
Alliance Capital Investment Co....... 63,898(2) * 63,898(2) 0 *
Joseph Ende.......................... 23,962(2) * 23,962(2) 0 *
Allied International Fund, Inc....... 31,949(2) * 31,949(2) 0 *
Manhattan Group Funding.............. 23,962(2) * 23,962(2) 0 *
Stretego Invest A.S.................. 63,898(2) * 63,898(2) 0 *
Dr. Gary Prescott.................... 15,974(2) * 15,974(2) 0 *
Kenneth Koock........................ 23,962(2) * 23,962(2) 0 *
Laurence Kaplan...................... 23,962(2) * 23,962(2) 0 *
Craig H. Gross....................... 42,492(2)(3) * 42,492(2)(3) 0 *
Stanley A. Kaplan.................... 23,962(2) * 23,962(2) 0 *
Dennis and Marie Casagrande.......... 31,949(2) * 31,949(2) 0 *
Frank J. Skelly...................... 42,492(2)(3) * 42,492(2)(3) 0 *
Baystate Development Trust........... 31,948(2) * 31,948(2) 0 *
Frank Huang.......................... 31,949(2) * 31,949(2) 0 *
Calvin S. Caldwell................... 79,872(2) * 79,872(2) 0 *
Jay Raubvogel........................ 127,796(2) * 127,796(2) 0 *
The J.B. Sutton Group, LLC........... 176,837(3) * 176,837(3) 0 *
Theodore J. Burns.................... 7,029(3) * 7,029(3) 0 *
Eff-Shipping, Ltd.................... 1,042,055(4) 15.73% 1,042,055(4) 0 *
</TABLE>
- -------------------------
* Less than 1%.
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(1) Assumes that all Shares are sold pursuant to this offering and that no
other shares of Common Stock are acquired or disposed of by the Selling
Stockholders prior to the termination of this offering. Because the
Selling Stockholders may sell all, some or none of their Shares or may
acquire or dispose of other shares of Common Stock, no reliable estimate
can be made of the aggregate number of Shares that will be sold pursuant
to this offering or the number or percentage of shares of Common Stock
that each Selling Stockholder will own upon completion of this offering.
(2) Shares of Common Stock issuable upon conversion of the Debentures.
Additional shares were registered in the Registration Statement of which
this Prospectus forms a part with respect to additional shares of Common
Stock that may be issued upon conversion of the Debentures pursuant to
the terms thereof.
(3) Includes the Shares of Common Stock issuable upon exercise of the Broker
Warrants. Additional Shares were registered in the Registration Statement
of which this Prospectus forms a part with respect to additional shares
of Common Stock that may be issued upon conversion of the Broker
Warrants pursuant to the terms thereof.
(4) Includes the Shares of Common Stock issuable upon conversion of the
Series A Preference Shares. Additional Shares were registered in the
Registration Statement of which this Prospectus forms a part with respect
to additional shares of Common Stock that may be issuable upon conversion
of the Series A Preference Shares pursuant to the terms thereof. The
Company purchased the Commodore Assets from EffJohn, an affiliate of
Eff-Shipping, Ltd.
PLAN OF DISTRIBUTION
The Selling Stockholders have advised the Company that they may from
time to time sell all or a portion of the Shares offered hereby in one or more
transactions on The Nasdaq National Market or on any other exchange on which the
Common Stock may then be listed, in privately negotiated transactions or
otherwise, or a combination of such methods of sale, at market prices prevailing
at the time of sale or prices related to such prevailing market prices or at
negotiated prices. The Selling Stockholders may effect such transactions by
selling the Shares to or through broker-dealers, and such broker-dealers may
receive compensation in the form of underwriting discounts, concessions or
commissions from the Selling Stockholders and/or purchasers of the Shares for
whom they may act as agent (which compensation may be in excess of customary
commissions). The Selling Stockholders and any participating broker-dealers may
be deemed to be "underwriters" as defined in the Securities Act. Neither the
Company nor the Selling Stockholders can estimate at the present time the amount
of commissions or discounts, if any, that will be paid by the Selling
Stockholders on account of their sales of the Shares from time to time. The
Company has agreed to indemnify the Selling Stockholders against certain
liabilities, including certain liabilities under the Securities Act.
Under the securities laws of certain states, the Shares may be sold in
such states only through registered or licensed broker-dealers or pursuant to
available exemptions from such requirements. In addition, in certain states the
Shares may not be sold therein unless the Shares have been registered or
qualified for sale in such state or an exemption from such requirement is
available and is complied with.
The Company shall bear all fees and expenses incurred in connection
with the preparation and filing of this Registration Statement, estimated to be
approximately $57,000, including the Company's legal and accounting fees,
printing, and blue sky fees and expenses in up to five (5) states. The Company
will not, however, be liable for any commissions or discounts (including
non-accountable expense allowances) to any underwriter or broker in connection
with the sale of Shares, if any, or the fees or expenses of any counsel,
accountants or other professionals separately retained by the Selling
Stockholders. The Company has agreed to indemnify the Selling Stockholders,
their directors, officers, agents and representatives, and any underwriters,
against certain liabilities, including certain liabilities under the Securities
Act.
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In connection with this Registration Statement, holders of Debentures
will be limited as to the maximum number of Shares they may sell during four
90-day periods following the effective date of this Registration Statement. With
respect to the Shares, a holder may not sell more than 25% of the maximum number
of shares of Common Stock which it could receive upon conversion of the
Debentures, during the 90-day period beginning on the day after the Registration
Statement is declared effective. This number of shares increases by 25% each 90
days thereafter. All Shares will be eligible for sale not later than December
15, 1999.
The Selling Stockholders and other persons participating in the
distribution of the Shares offered hereby are subject to the applicable
requirements of Regulation M promulgated under the Exchange Act in connection
with sales of the Shares.
DESCRIPTION OF SECURITIES
GENERAL
The Company is a Bermuda "exempted company," which means that it is
exempt from the requirement of the Companies Act that "local" companies be at
least 60% owned and controlled by Bermudians. The following summary is a
description of certain provisions of the Company's Memorandum of Association
("Memorandum of Association") and Bye-laws. Such summary does not purport to be
complete and is subject to, and is qualified in its entirety by, all of the
provisions of the Memorandum of Association and Bye-laws, including the
definitions therein of certain terms.
The Company's authorized capital stock consists of 100,000,000 shares
of Common Stock, par value $.01 per share, and 10,000,000 shares of Series A
Preference Shares, par value $.01 per share (the "Preference Shares"). As of the
date of this Prospectus, 5,581,933 shares of Common Stock and 1,042,055 shares
of Preference Shares were outstanding. The transfer agent and registrar for the
Common Stock is Stock Trans, Inc., 7 East Lancaster Avenue, Ardmore,
Pennsylvania 19003.
COMMON STOCK
The Company is authorized to issue 100 million shares of Common Stock.
Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders. There is no cumulative voting with
respect to the election of directors, with the result that the holders of more
than 50 percent of the shares who vote in the election of directors can elect
all of the directors except the director that may be elected by EffJohn during
the time it owns at least 125,000 Series A Preference Shares. Holders of Common
Stock are entitled to receive ratably such dividends, if any, as may be declared
by the Board of Directors of the Company out of funds legally available therefor
and after payments to holders of the Series A Preference Shares and any other
series of preferred stock outstanding. Upon the liquidation, dissolution or
winding up of the Company, the holders of Common Stock are entitled to receive
ratably the net assets of the Company after payment of all debts and liabilities
and payments to holders of the Company's Series A Preference Shares and any
other series of preferred stock outstanding. Holders of Common Stock have no
preemptive, subscription, redemption or conversion rights.
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The Company's Bye-laws provide that the quorum required for a meeting
of stockholders is stockholders representing more than 50% of the total votes
able to be cast. An amalgamation of the Company, which includes a merger or
consolidation, requires the approval of stockholders representing more than 50%
of the total votes cast at a meeting at which a quorum is established. The
Company's Bye-laws further provide that the approval of stockholders
representing more than 50% of the total votes able to be cast is required to
amend the Memorandum of Association and Bye-laws with respect to certain
matters, including, without limitation, the voting provisions and other matters
set forth above.
The outstanding shares of Common Stock are, and the Shares, when issued
and paid for, will be, fully paid and non-assessable. Prior to the Offering,
there were 5,581,933 shares of Common Stock outstanding held by 94 stockholders
of record.
PUBLIC WARRANTS
As part of the Company's initial public offering of its securities in
July 1996, the Company issued an aggregate of 1,150,000 warrants (the "Public
Warrants") to purchase up to an aggregate of 575,000 shares of Common Stock. The
Public Warrants are exercisable only in pairs, with each two Public Warrants
entitling the registered holder to purchase one share of Common Stock. The
Public Warrants were issued pursuant to an agreement (the "Public Warrant
Agreement") between the Company and Stock Trans, Inc., as warrant agent (the
"Public Warrant Agent"). The following discussion of certain terms and
provisions of the Public Warrants is qualified in its entirety by reference to
the detailed provisions of the Public Warrant Agreement and the Public Warrant
certificates, the forms of which were filed as an exhibit to the Company's
registration statement on Form S-1 (No. 333-01270) (the "Registration
Statement").
Each two Public Warrants entitle the holder to purchase one share of
Common Stock at an exercise price of $6.00 per share. The Public Warrants may be
exercised at any time until they expire on July 15, 2001 . The Public Warrants
may be redeemed by the Company at any time, commencing one year after the date
of this Prospectus, at a redemption price of $.05 per Public Warrant upon 25
days prior written notice, provided the average closing bid price of the Common
Stock for 20 consecutive trading days ending not more than 15 days prior to the
date of any redemption notice is in excess of $9.00 per share. Public Warrant
holders shall have exercise rights until the close of the business day preceding
the date fixed for redemption.
In order for a holder to exercise a Public Warrant, and as required in
the Public Warrant Agreement, there must be a current registration statement on
file with the Commission pertaining to the shares of Common Stock underlying the
Public Warrants, and such shares must be registered or qualified for sale under
the securities laws of the state in which such Public Warrant holder resides or
such exercise must be exempt from registration in such state. At present, the
Registration Statement covering the shares underlying the Public Warrants is not
current because the Public Warrants are "out of the money." Until such time as
the Company files a post-effective amendment to the Registration Statement,
which is declared effective by the Commission, the Public Warrants will not be
exercisable.
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Holders of the Public Warrants are protected against dilution upon the
occurrence of certain events, including, but not limited to the issuance of any
Common Stock or other securities convertible or exercisable for Common Stock at
a price per share less than the exercise price or the market price of the Common
Stock, or in the event of any stock dividend, stock split, reclassification,
recapitalization, stock combination or similar transaction. However, holders of
the Public Warrants do not have voting rights and are not entitled to dividends.
In the event of liquidation, dissolution or winding up of the Company, holders
of Public Warrants are not entitled to participate in any distribution of the
Company's assets.
The purchase price payable upon exercise of the Public Warrants is to
be paid in lawful money of the United States. The Company is not required to
issue certificates representing fractions of shares of Common Stock upon the
exercise of Public Warrants, but with respect to any fraction of a share, it
will make payment in cash based upon the market price of the Common Stock as
determined by the Public Warrant Agent.
PREFERRED STOCK
The Company is authorized to issue 10 million shares of preferred
stock. The Bye-laws authorize the Board of Directors (without stockholder
approval), among other things, to issue such preferred stock, with such rights
and limitations as the Board of Directors may subsequently determine. Among
other designations, the Board of Directors may determine (i) the dividend rate
and conditions and the dividend preferences, if any; (ii) whether dividends
would be cumulative and, if so, the date from which dividends on such series
would accumulate; (iii) whether, and to what extent, the holders of such series
would enjoy voting rights, if any, in addition to those prescribed by law; (iv)
whether, and upon what terms, such series would be convertible into or
exchangeable for shares of any other class of capital stock or other series of
preferred shares; (v) whether, and upon what terms, such series would be
redeemable; (vi) whether or not a sinking fund would be provided for the
redemption of such series and if so, the terms and conditions thereof, and (vii)
the preference, if any, to which such series would be entitled in the event of
voluntary or involuntary liquidation, dissolution or winding up of the Company.
Any particular series of preferred shares may rank junior to, on a parity with
or senior to any other class of the Company's capital stock, including any other
series of preferred shares, except that no such series of preferred stock may
rank senior to or on a parity with the Series A Preference Shares, without the
approval of the holders of the Series A Preference Shares. Thus, the Board of
Directors, without the approval of the holders of Common Stock, could authorize
the issuance of a series of preferred shares with voting, conversion and other
rights that could affect the voting power and other rights of the holders of
Common Shares or that could have the effect of delaying, deferring or preventing
a change in control of the Company.
SERIES A PREFERENCE SHARES
In July 1995, the Company issued 1,000,000 Series A Preference Shares
to EffJohn at the Commodore Closing in partial payment for the Commodore Assets.
In April 1996, February 1997 and February 1998, respectively, the Company issued
an additional 6,979, 20,251 and 14,825 Series A Preference Shares to EffJohn in
partial satisfaction of dividend obligations. The following is a
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summary of the principal features of the Series A Preference Shares. This
summary does not address all of the rights and preferences of the Series A
Preference Shares.
The Series A Preference Shares are entitled to a preference with
respect to dividends, liquidation or a distribution of assets of the Company
over any other shares of capital stock of the Company. In the event of any such
liquidation or distribution of assets, the holders of the Series A Preference
Shares will receive any accrued but unpaid dividends and USD$4.00 per Series A
Preference Share before the holders of other series of preferred stock or the
Common Stock receive any distribution of the Company's assets.
The holders of the Series A Preference Shares are entitled to receive a
dividend equal to seven (7) percent of the issuance price of the Series A
Preference Shares prior to the payment of dividends on the Common Stock. Unpaid
dividends will accumulate from year to year, and the maximum amount which may be
paid to the holders of the Series A Preference Shares in any year is 10 percent
of the net profits of the Company for such year. Dividends in excess of this
amount may be paid in additional Series A Preference Shares or Common Stock.
The Series A Preference Shares are not entitled to vote except on the
following matters: (i) matters relating to the winding up of the Company, (ii)
matters relating to the alteration of the terms of the Series A Preference
Shares, or (iii) in the event that the Company has not paid any part of the
dividend on the Series A Preference Shares for two consecutive years, on all
matters on which holders of Common Stock would be entitled to vote. When voting,
each Series A Preference Share receives one vote.
The holders of the Series A Preference Shares shall have the option, at
any time, to convert any or all of their Series A Preference Shares into Common
Stock of the Company at a conversion rate equal to the greater of USD$4.00 per
share or a price per share equal to eight times the Company's earnings per share
for its prior fiscal year.
The Company has the option to redeem all or any part of the Series A
Preference Shares at USD$4.00 per share at any time commencing three years after
their issuance subject to the right of EffJohn to convert its Series A
Preference Shares upon receipt of the notice. As long as EffJohn holds at least
125,000 Series A Preference Shares, it has the nontransferable right to appoint
one person to the Company's Board of Directors.
CONVERTIBLE SUBORDINATED DEBENTURES
In December 1997, the Company issued 21.5 units, with each unit
consisting of $100,000 in face value of subordinated debentures, as part of the
sale of units in the Private Offering.
The Debentures mature on December 31, 2002 (the "Maturity Date").
Interest accrues at 7% per annum from the date of issuance of the Debentures
until the earlier of conversion into Common Stock or the Maturity Date, payable
quarterly in arrears, on December 31, March 31, June 30 and September 30 of each
year, to holders on record at the close of business on December 15, March 15,
June 15 and September 15, respectively, preceding the next interest payment
date, commencing on March 31, 1998. The Debentures are subordinated in right of
payment to all existing and future debt of the Company.
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The Debenture(s) are convertible by the holder(s) thereof into the
Company's Common Stock at any time prior to the close of business on the
Maturity Date, but in no event later than one year after December 15, 1997. The
conversion price is equal to the average closing sale price for the common stock
as reported on Nasdaq for the five trading days (the "Average Closing Sale
Price") immediately preceding the date the holder of such Debentures gives the
Company notice of conversion, but in no event less than USD$3.13, and in no
event more than USD$4.00. The Company is obligated to reserve a sufficient
number of shares of Common Stock for issuance upon conversion of the Debentures.
DIFFERENCES IN CORPORATE LAW
The Companies Act 1981, as amended (the "Companies Act") of Bermuda
differs in certain respects from laws generally applicable to U.S. corporations
and their stockholders. Set forth below is a summary of certain significant
provisions of the Companies Act (including any modifications adopted pursuant to
the Company's Bye-laws) applicable to the Company, which differ in certain
respects from provisions of Delaware corporate law. The comparison of the
Companies Act to Delaware law provides only a basis of comparison and in no way
means that the corporate law of Delaware is the same as that of other U.S.
states. The following statements are summaries of some of the provisions of the
Companies Act, and do not purport to deal with all aspects of Bermuda law that
may be relevant to the Company and its stockholders. See "Risk Factors - Bermuda
Corporate Law."
INTERESTED DIRECTORS. The Bye-laws provide that any transaction entered
into by the Company in which a director has an interest is not voidable by the
Company nor can such director be liable to the Company for any profit realized
pursuant to such transaction provided the nature of the interest is disclosed at
the first opportunity: (i) at a meeting of directors or in writing to the
directors, and (ii) to the Company's auditors, upon their request. Under
Delaware law no such transaction would be voidable if (i) the material facts as
to such interested director's relationship or interests are disclosed or are
known to the board of directors and the board in good faith authorizes the
transaction by the affirmative vote of a majority of the disinterested
directors, (ii) such material facts are disclosed or are known to the
stockholders entitled to vote on such transaction and the transaction is
specifically approved in good faith by vote of the stockholders or (iii) the
transaction is fair as to the corporation as of the time it is authorized,
approved or ratified.
LOANS TO DIRECTORS. The Companies Act generally forbids loans to
directors without the prior approval of stockholders who hold 90% of the Common
Stock of the Company at a general meeting of stockholders. Delaware law does not
contain a similar provision.
MERGERS AND SIMILAR ARRANGEMENTS. The Company may acquire the business
of another Bermuda company similarly exempt from Bermuda taxes or a company
incorporated outside Bermuda and carrying on such business when it is within the
objects of its Memorandum. The Company may "amalgamate" (merge or consolidate)
with another Bermuda company or a foreign corporation if such amalgamation is
approved by the board of directors and the holders of a majority of the Common
Stock at a meeting at which a quorum is established. While a dissenting
stockholder may have the right to express to a Bermuda court his view that the
transaction sought to be approved would not provide the stockholders with the
fair value of their
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shares, the court ordinarily would not disapprove the transaction on such ground
absent evidence of fraud or bad faith. The Bermuda court would, however, assess
the fair value of such dissenting stockholder's Common Stock, and the dissenting
stockholder would be entitled to receive this amount, in cash, in lieu of the
consideration such dissenting stockholder would otherwise receive in the
transaction. Under Delaware law, with certain exceptions, any merger,
consolidation or sale of all or substantially all the assets of a corporation
must be approved by the board of directors and a majority of the outstanding
shares entitled to vote. Under Delaware law, a stockholder of a corporation
participating in certain major corporate transactions may, under varying
circumstances, be entitled to appraisal rights pursuant to which such
stockholder may receive cash in the amount of the fair market value of the
shares held by such stockholder (as determined by a court or by agreement of the
corporation and the stockholder) in lieu of the consideration such stockholder
would otherwise receive in the transaction. Delaware law does not provide
stockholders of a corporation with voting or appraisal rights when the
corporation acquires another business through the issuance of its stock or other
consideration (i) in exchange for the assets of the business to be acquired,
(ii) in exchange for the outstanding stock of the corporation to be acquired or
(iii) in a merger of the corporation to be acquired with a subsidiary of the
acquiring corporation.
TAKEOVERS. Bermuda law provides that where an offer is made for shares
of another company and, within four months of the offer the holders of not less
than 90% of the shares which are the subject of the offer accept, the offeror
may by notice require the nontendering stockholders to transfer their shares on
the terms of the offer. Dissenting stockholders may apply to the court within
one month of the notice objecting to the transfer. The burden is on the
dissenting stockholders to show that the court should exercise its discretion to
enjoin the required transfer, which the court will be unlikely to do unless
there is evidence of fraud or bad faith or collusion as between the offeror and
the holders of the shares who have accepted the offer as a means of unfairly
forcing out a minority stockholder. Delaware law provides that a parent
corporation, by resolution of its board of directors and without any stockholder
vote, may merge with any 90% or more owned subsidiary. Upon any such merger,
dissenting stockholders of the subsidiary would have appraisal rights.
ACQUISITION OF MINORITY SHARES. The holders of at least 95% of the
Common Stock (the "Majority Stockholders") may force the holders of 5% or less
of the Common Stock (the "Remaining Stockholders") to sell their Common Stock to
the Majority Stockholders under Bermuda law. If the Remaining Stockholders are
dissatisfied with the price offered by the Majority Stockholders, they may apply
to a Bermuda court for an appraisal of their shares. The appraisal is binding on
the Remaining Stockholders.
STOCKHOLDER'S SUIT. Class action and derivative actions are generally
not available to stockholders under the laws of Bermuda. However, the Bermuda
courts ordinarily would be expected to follow English case law precedent, which
would permit a stockholder to commence an action in the name of the Company to
remedy a wrong done to the Company where the act complained of is alleged to be
beyond the corporate power of the Company or is illegal or would result in the
violation of the Memorandum and Bye-laws. Furthermore, consideration would be
given by the court to acts that are alleged to constitute a fraud against the
minority stockholders or where an act requires the approval of a greater
percentage of the Company's stockholders than actually approved it. The winning
party in such an action generally would be able to
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recover a portion of its attorney fees incurred in connection with such action.
Class actions and derivative actions generally are available to stockholders
under Delaware law for, among other things, breach of fiduciary duty, corporate
waste and actions not taken in accordance with applicable law. In such actions,
the court has discretion to permit the winning party to recover attorney fees
incurred in connection with such action.
INDEMNIFICATION OF DIRECTORS. The Company has agreed to indemnify its
directors or officers in their capacity as such in respect of any loss arising
or liability attaching to them by virtue of any rule of law in respect of any
negligence, default, breach of duty or breach of trust of which a director or
officer may be guilty in relation to the Company other than in respect of his
own wilful default, wilful neglect, fraud or dishonesty. Under Delaware law, a
corporation may adopt a provision eliminating or limiting the personal liability
of a director to the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for breaches of the director's
duty of loyalty, for acts or omissions not in good faith or which involve
intentional misconduct or knowing violations of law, for improper payment of
dividends or for any transaction from which the director derived an improper
personal benefit. Delaware law has provisions and limitations similar to Bermuda
regarding indemnification by a corporation of its directors or officers, except
that under Delaware law the statutory rights to indemnification may not be as
limited. Both Bermuda and Delaware law allow a company to obtain directors and
officers liability insurance. The Company has not yet decided whether it will
purchase such insurance.
INSPECTION OF CORPORATE RECORDS. Members of the general public have the
right to inspect the public documents of the Company available at the office of
the Registrar of Companies in Bermuda which will include the Memorandum
(including its objects and powers) and any alteration to the Memorandum and
documents relating to an increase or reduction of authorized capital. The
stockholders have the additional right to inspect the Bye-laws, minutes of
general meetings and audited financial statements of the Company, which must be
presented to the annual meeting of stockholders. The register of stockholders of
the Company is also open to inspection by stockholders without charge, and to
members of the public for a fee. The Company is required to maintain its share
register in Bermuda but may establish a branch register outside of Bermuda. The
Company is required to keep at its registered office a register of its directors
and officers which is open for inspection by members of the public without
charge.
LOCAL DIRECTORS. The Companies Act requires that a quorum of a
company's directors be residents of Bermuda unless a company's common shares are
listed on an appointed stock exchange (including Nasdaq), in which case a
company may have a resident representative in Bermuda instead of resident
directors. Accordingly, at this time, two of the Company's directors, Messrs.
Francis and Hill, are Bermuda residents and the Company's Bye-Laws establish a
quorum for meetings of directors at two members.
WARRANTS. Under the provisions of the Companies Act, it is unlawful for
any company to issue "bearer" shares of stock, which are defined as shares that
may be transferred by delivery of the warrant or certificate relating thereto.
The term "warrant" is used in Bermuda law only in this bearer stock context.
Accordingly, under Bermuda law, any reference to "warrant" must be construed as
an option, which is an instrument entitling the holder to subscribe to the
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Common Stock in accordance with the terms of the instrument. References herein
to either the Binder Warrant or the Broker Warrants should not be construed as
enabling the underlying Common Stock to be transferred upon delivery of such
certificate alone.
"ANTI-TAKEOVER" PROVISIONS
Although the Board of Directors is not presently aware of any takeover
attempts, the Bye-laws of the Company contain certain provisions which may be
deemed to be "anti-takeover" in nature in that such provisions may deter,
discourage or make more difficult the assumption of control of the Company by
another corporation or person through a tender offer, merger, proxy contest or
similar transaction or series of transactions. These provisions were adopted
unanimously by the Board of Directors and approved by the stockholders of the
Company.
AUTHORIZED BUT UNISSUED SHARES. The Company has authorized 100 million
shares of Common Stock and ten million shares of preferred stock. These shares
of Common Stock were authorized for the purpose of providing the Board of
Directors of the Company with as much flexibility as possible to issue
additional shares for proper corporate purposes including equity financing
(including the proposed public offering of which no assurance can be made that
it will be completed), acquisitions (including the Commodore Acquisition), stock
dividends, stock splits, the Plan, stock options (including the Binder Option
and the Broker Warrants), and other purposes. The Company has no agreements,
commitments or plans at this time for the sale or use of the additional shares
of Common Stock or preferred stock except for the sale of the Series A
Preference Shares in connection with the Commodore Acquisition and the potential
conversion of such Series A Preference Shares into Common Stock. The issuance of
shares of preferred stock may have an adverse effect on the Company's
stockholders. See "Preferred Stock." Stockholders of the Company do not have
preemptive rights with respect to the purchase of these shares. Therefore such
issuance could result in a dilution of voting rights and book value per share as
to Common Stock of the Company. See "Business - Commodore Acquisition" and
"Description of Securities - Series A Preference Shares."
NO CUMULATIVE VOTING. The Company's Bye-laws do not contain any
provisions for cumulative voting. Cumulative voting entitles stockholders to as
many votes as equal the number of shares owned by such holder multiplied by the
number of directors to be elected. A stockholder may cast all these votes for
one candidate or distribute them among any two or more candidates. Thus,
cumulative voting for the election of directors allows a stockholder or group of
stockholders who hold less than 50 percent of the outstanding shares voting to
elect one or more members of a Board of Directors. Without cumulative voting for
the election of directors, the vote of holders of a plurality of the shares
voting is required to elect any member of a Board of Directors and would be
sufficient to elect all the members of the board being elected.
CLASSIFIED BOARD OF DIRECTORS. The Board of Directors is divided into
three classes. One class holds office initially for a term expiring at the
annual meeting of stockholders to be held in 1999, a second class holds office
for a term expiring at the annual meeting of stockholders to be held in 2000 and
a third class holds office for a term expiring at the annual meeting of
stockholders to be held in 2001. Approximately one-third of the total number
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of directors will serve as members of each such class. As a result, it would
take a person who wanted to gain control of the Company a minimum of two annual
meetings of stockholders before he could gain control of the Company's Board of
Directors.
STOCKHOLDER RIGHTS PLAN. In addition to the foregoing, the Company's
Board of Directors recently approved a stockholder rights plan, subject to the
advice of an investment banker with respect to certain aspects of such plan.
Such plans, commonly referred to as "poison pills," are designed to encourage
potential acquirors of a company to proceed on a friendly basis by negotiating
with management rather than on a hostile basis. Rights plans are intended to
impede certain transactions which the board determines are unfair to
stockholders. Although there are several types of stockholder rights plans, the
most common type involves the issuance to stockholders of a right to purchase
securities, which when exercised by stockholders other than the acquiror,
results in substantial dilution to the acquiror. Such a stockholder rights plan
may be adopted by the Board of Directors of the Company without stockholder
approval. Such plans typically require the issuance of rights to all investors
who purchase common stock of a company during the term of the plan.
GENERAL EFFECT OF ANTI-TAKEOVER PROVISIONS. The overall effect of these
provisions may be to deter a future tender offer or other takeover attempt that
some stockholders might view to be in their best interest as the offer might
include a premium over the market price of the Company's Common Stock at that
time. In addition, these provisions may have the effect of assisting the
Company's current management in retaining its position and place it in a better
position to resist changes which some stockholders may want to make if
dissatisfied with the conduct of the Company's business.
LEGAL MATTERS
Certain legal matters with respect to the issuance of the securities
offered hereby will be passed upon for the Company by Richards, Francis &
Francis, Cedarpark Centre, 48 Cedar Avenue, Hamilton HM11, Bermuda.
EXPERTS
The financial statements of the Company from April 13, 1995 (date of
inception) through September 30, 1997, which are incorporated by reference in
this Prospectus from the Company's Annual Report on Form 10-K for the year ended
September 30, 1997, have been audited by Grant Thornton LLP, independent
certified public accountants, as indicated in its report with respect thereto,
and are incorporated herein in reliance upon the authority of said firm as
experts in accounting and auditing. The combined financial statements of the S/S
Enchanted Seas and the S/S Enchanted Isle (operating units of EffJohn
International B.V.) for the period from January 1, 1995 through July 14, 1995,
are set forth in the Company's Annual Report on Form 10-K, which is incorporated
by reference in this Prospectus, in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accountants, as indicated in its
report thereto, and incorporated herein in reliance upon the authority of said
firm as experts in accounting and auditing.
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================================================================================
No dealer, salesperson or any other person has been authorized to give any
information or to make any representation not contained or incorporated by
reference in this Prospectus in connection with the offering made hereby, and
any information or representation not contained or incorporated herein must not
be relied upon as having been authorized by the Company. This Prospectus does
not constitute an offer to sell or a solicitation of an offer to buy any
securities other than the Shares described in the cover page hereof, or an offer
to sell or a solicitation of an offer to buy the Shares offered hereby in any
jurisdiction where, or to any person to whom, it is unlawful to make such offer
or solicitation. Neither the delivery of this Prospectus nor any sales made
hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the Company since the date hereof or that the
information contained herein is correct as of any time subsequent to its date.
TABLE OF CONTENTS
PAGE
----
AVAILABLE INFORMATION..............................................3
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE...........................................3
THE COMPANY........................................................4
FORWARD-LOOKING STATEMENTS.........................................7
RISK FACTORS.......................................................8
USE OF PROCEEDS...................................................17
SELLING STOCKHOLDERS..............................................18
PLAN OF DISTRIBUTION..............................................20
DESCRIPTION OF SECURITIES.........................................21
LEGAL MATTERS.....................................................29
EXPERTS...........................................................29
================================================================================
1,933,910 Shares
COMMODORE HOLDINGS
LIMITED
Common Stock
----------
PROSPECTUS
----------
________, 1998
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Company estimates that its expenses in connection with this
registration statement will be as follows:
Securities and Exchange Commission registration fee.......... $ 1,915
Printing Costs*.............................................. $10,000
Legal fees and expenses*..................................... $20,000
Accounting fees and expenses*................................ $10,000
Blue Sky fees and expenses*.................................. $ 5,000
Miscellaneous*............................................... $10,000
-------
Total............................................... $56,915
=======
- ------------------
* Indicates expenses that have been estimated for the purpose of filing.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 98 of The Companies Act provides generally that a Bermuda
company may indemnify its directors, officers and auditors against any
liability, which by virtue of Bermudian law otherwise would be imposed on them,
except in cases where such liability arises from the willful negligence, willful
default, fraud or dishonesty of which such officer, director, or auditor may be
guilty in relation to the company. Section 98 further provides that a Bermudian
company may indemnify its directors, officers and auditors against any liability
incurred by them in defending any proceedings, whether civil or criminal, which
judgment is awarded in their favor or they are acquitted or in which they are
acquitted or granted relief by the Supreme Court of Bermuda in certain
proceedings arising under Section 281 of the Act.
The Company has adopted provisions in its Bye-laws that provide that
the Company shall indemnify its officers and directors to the maximum extent
permitted under the Act. The Company has also entered into indemnification
agreements with certain of its officers and directors. Such agreements provide
that each director shall be indemnified to the maximum extent permitted by law.
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ITEM 16. EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------
5.1 Opinion of Richards, Francis & Francis.
23.1 Consent of Grant Thornton LLP.*
23.2 Consent of KPMG Peat Marwick LLP.*
23.3 Consent of Richards, Francis & Francis
(included in Exhibit 5.2 hereto).
24.1 Power of Attorney (see page II-4 of the Registration Statement).
- ------------------
* to be filed by amendment
ITEM 17. UNDERTAKINGS.
(a) RULE 415 OFFERING. The undersigned Registrant hereby
undertakes to:
(1) File, during any period in which it offers or sells
securities, a post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section
10(a)(3) of the Securities Act.
(ii) Reflect in the prospectus any facts or
events which, individually or together, represent a fundamental change
in the information in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement.
(iii) Include any additional or changed material
information on the plan of distribution.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do
not apply if the registration statement is on Form S-3 (ss. 239.13 of this
chapter) or Form S-8 (ss. 239.16b of this
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chapter), and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by the
registrant pursuant to section 13 or section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the registration statement.
(2) For determining liability under the Securities Act, treat
each post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial BONA
FIDE offering.
(3) File a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.
(b) FILINGS INCORPORATING SUBSEQUENT EXCHANGE ACT DOCUMENTS BY
REFERENCE. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) INCORPORATED ANNUAL AND QUARTERLY REPORTS. The undersigned
registrant hereby undertakes to deliver or cause to be delivered with the
prospectus, to each person to whom the prospectus is sent or given, the latest
annual report to security holders that is incorporated by reference in the
prospectus and furnished pursuant to and meeting the requirements of Rule 14a-3
or Rule 14c-3 under the Securities Exchange Act of 1934; and, where interim
financial information required to be presented by Article 3 of Regulation S-X
are not set forth in the prospectus, to deliver, or cause to be delivered to
each person to whom the prospectus is sent or given, the latest quarterly report
that is specifically incorporated by reference in the prospectus to provide such
interim financial information.
(d) REQUEST FOR ACCELERATION OF EFFECTIVE DATE. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Hollywood, State of Florida, on this 19th day of
February, 1998.
COMMODORE HOLDINGS LIMITED
By: /s/ ALAN PRITZKER
---------------------------
Alan Pritzker
Vice President, Finance and
Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Alan Pritzker and Jeffrey I.
Binder his true and lawful attorneys-in-fact, each acting alone, with full
powers of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any or all amendments, including any
post-effective amendments, to this Registration Statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact or their substitutes, each acting alone, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/S/ FREDERICK A. MAYER Vice Chairman of the Board and February 19, 1998
- ----------------------------------- Chief Executive Officer (principal
FREDERICK A. MAYER executive officer)
/S/ JEFFREY I. BINDER Chairman of the Board February 18, 1998
- -----------------------------------
JEFFREY I. BINDER
/S/ ALAN PRITZKER Vice President, Finance and Chief February 19, 1998
- ----------------------------------- Financial Officer (principal financial
ALAN PRITZKER and accounting officer)
II-4
<PAGE>
SIGNATURE TITLE DATE
- --------- ----- ----
/S/ JAMES R. SULLIVAN President February 19, 1998
- ---------------------------
JAMES R. SULLIVAN
/S/ ARNOLD ADOLPHUS FRANCIS Director February 18, 1998
- ---------------------------
ARNOLD ADOLPHUS FRANCIS
/S/ GORDON LEONARD HILL Director February 18, 1998
- -----------------------------------
GORDON LEONARD HILL
Director February __, 1998
- -----------------------------------
RALPH V. DE MARTINO
/S/ MARK MAGED Director February 19, 1998
- -----------------------------------
MARK MAGED
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------ ------------
5.1 Opinion of Richards, Francis & Francis.
EXHIBIT 5.1
RICHARDS, FRANCIS & FRANCIS
BARRISTERS AND ATTORNEYS
CEDARPARK CENTRE, 48 CEDAR AVENUE
HAMILTON HM 11, BERMUDA
20th February 1998
Commodore Holdings Limited
4000 Hollywood Boulevard
Suite 385-S, South Tower
Hollywood, Florida 33021
U.S.A.
Ladies and Gentlemen:
RE: COMMODORE HOLDINGS LIMITED ("THE COMPANY")
REGISTRATION STATEMENT ON FORM S-3
You have requested our opinion with respect to the shares of the Company's
common stock, par value $.01 per share (the "Common Stock"), included in the
Registration Statement on Form S-3 (the "Form S-3"), which will be filed by the
Company with the U.S. Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended (the "Securities Act") in February 1998
(the "Registration Statement").
Unless otherwise defined, terms defined in this opinion shall have the same
meanings as those set out in the Registration Statement and Exhibits thereto
(the "Documents").
For the purposes of this opinion, we have been supplied with and have
reviewed and relied upon true copies of the Documents.
We have also examined originals or copies certified or otherwise identified
to our satisfaction such corporate records, certificates of officials and other
instruments (the "Public Documents") as we have deemed necessary or advisable
for the purpose of rendering this opinion.
In giving this opinion, we have assumed:
a. that there have been no changes to the Public Documents examined
by us since the date of our examination thereof;
<PAGE>
RICHARDS, FRANCIS & FRANCIS
2
b. the truth, accuracy and completeness of all representations
and warranties of fact made in the Documents;
c. the genuineness of all signatures on the documents which we
have examined;
d. the conformity to original documents of all documents produced
to us as copies and the authenticity and completeness of all
documents which, or copies of which have been submitted to us;
e. that when filed the Documents will be in a form which does not
differ in any material respect from the drafts examined by us
for the purpose of this opinion.
This opinion is limited to Bermuda law and is given on the basis that it
will be governed by and construed in accordance with Bermuda law. We have made
no investigation of the laws of any jurisdiction other than Bermuda and neither
express nor imply any opinion as to any other law, in particular the laws of the
United States of America.
Based upon the foregoing, subject to the qualifications set out below,
to matters not disclosed to us and having regard to such legal consideration as
we deem relevant, we are of the opinion that insofar as the present laws of
Bermuda are concerned:
(1) The Company is a company duly incorporated and validly existing under
and in compliance with Bermuda law.
(2) The shares of Common Stock being registered on behalf of the Selling
Shareholders as described in the Registration Statement that are
issuable due to conversion of the company's debentures or exercise of
the Broker Warrants, shall, upon issuance and payment therefor as
described in the Registration Statement, be duly and validly issued
and fully paid and non-assessable.
Our qualifications are as follows:
A. We express no opinion as to any law other than Bermuda law and none of
the opinions expressed herein relates to compliance with or matters
governed by the laws of any jurisdiction other than Bermuda. Where an
obligation is to be performed in a jurisdiction other than Bermuda, a
Bermuda Court may decline to enforce it to the extent that such
performance would be illegal or contrary to public policy under the
laws of such other jurisdictions.
B. We express no opinion as to the availability of equitable remedies,
such as specific performance or other injunctive relief, or as to any
matters which are within the discretion of the Courts of Bermuda,
such as the awards of costs, or questions relating to jurisdiction.
Further, we express no opinion as to the validity or binding effect in
Bermuda of any waiver of or obligation to waive any provision of law
(whether substantive or procedural) or any right or remedy arising
through circumstances not known at the time of filing the Documents.
<PAGE>
RICHARDS, FRANCIS & FRANCIS
3
C. The obligations of the Company under the Documents will be subject to
any laws from time to time in effect relating to bankruptcy or
liquidation or any other laws or other legal procedures affecting
generally the enforcement or creditors' rights and may also be subject
to statutory limitation of the time within which proceedings may be
brought.
This opinion is issued on the basis that it will be construed in accordance
with the provisions of Bermuda law and will not give rise to any action in any
other jurisdiction. It is addressed to you to be filed with the Documents and is
not to be made available or relied upon by any other person, firm of entity or
used for any other purpose without our prior written consent. We consent to the
filing of this opinion as an exhibit to The Documents and to the reference to
our name in the Prospectus therein.
Richards Francis & Francis
By: /s/ Richards Francis & Francis
- ---------------------------
Richards Francis & Francis
