SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 (Fee Required)
For the Fiscal Year Ended December 31, 1995 Commission file number 0-12746
---------
HART INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Nevada
(State of other jurisdiction of incorporation or organization)
33-0661675
(I.R.S. Employer Identification Number)
2 Park Plaza, Suite 470, Irvine, California 92714
(Address of Principal Executive Offices) Zip Code
Registrant's telephone number, including area code: (714) 833-5380
------------
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes No X
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K, is not contained herein and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB
The Registrant had no operating revenues for its most recent fiscal
year.
The aggregate market value of the voting stock held by non-affiliates
is not determinable as no average bid or asked prices of such stock have been
available since the Registrant's stock was de-listed from the National
Association of Securities Dealers Small Cap MarketSM in June, 1993.
Class Number of Shares Outstanding at December 31, 1995
- ----------------------------- -------------------------------------------------
Common Stock , $.01 par value 1,730,960 shares
Documents Incorporated by Reference:
None
Total Number of Pages Including Cover
[HART\10K:123195.KSB]-12
<PAGE>
TABLE OF CONTENTS
Page
PART I
Item 1. Business .............................................1
Item 2. Properties ...........................................3
Item 3. Legal proceedings ....................................3
Item 4. Submission of matters to a vote of
security holders ................................3
PART II
Item 5. Market for common equity and related
stockholder matters. ...........................3
Item 6. Selected financial data ..............................4
Item 7. Management's discussion and analysis of financial
condition and results of operations ............5
Item 8. Financial statements .................................7
Item 9. Changes in and disagreements with accountants on
accounting and financial disclosure .............7
PART III
Item 10. Directors, executive officers, promoters and
control persons of the Registrant; compliance with
section 16(a) of the Exchange Act ...............8
Item 11. Executive compensation ..............................11
Item 12. Security ownership of certain beneficial owners and
management .....................................15
Item 13. Certain relationships and related transactions ......16
PART IV
Item 14. Exhibits, financial statement schedules and reports
on Form 8-K ....................................17
[HART\10K:123195.KSB]-12
<PAGE>
PART I
ITEM 1. BUSINESS
The Registrant was incorporated in the State of Utah in October, 1982.
Its developmental activities through September 30, 1990 principally consisted of
organizing the Registrant, issuing common stock for cash, services, and
equipment, negotiation of license agreements and incurring research and
development costs. All costs, except those associated with the license
agreements, patents, trademarks and equipment costs, were expended as incurred
during the development stage.
From 1983 to 1986 the Registrant developed a non-electric,
water-powered dishwasher (the "Dishwasher Assets"). The Registrant's Dishwasher
Assets did not develop beyond the prototype stage. In December 1990 the
Registrant sold its Dishwasher Assets to an unrelated third party for an 8%
$3,000,000 promissory note payable out of future production royalties. In 1991
and 1992 the Registrant negotiated a rescission of the sale due to the failure
of the purchaser to commence production. In May 1993, the Registrant again sold
its Dishwasher Assets to a second unrelated third party for a $2,500,000 note
receivable payable out of future production royalties. In August, 1994, the note
was canceled and the Dishwasher Assets were returned to the Registrant. At that
time the Registrant had plans to liquidate the Dishwasher Assets in order to
raise working capital. As of December 31, 1994 the Registrant was unable to sell
the Dishwasher Assets and has written off the Dishwasher Assets from its balance
sheet but is continuing to attempt to liquidate the Dishwasher Assets for cash.
In addition, the Registrant wrote-off a $125,000 investment in securities due to
uncertainties in the value and marketability of these securities.
Commencing in 1988 through 1992, the Registrant pursued its Underground
Storage Tank Program through its Environmental Services Division. This program
was designed to meet the stringent regulations covering Underground Storage
Tanks promulgated by the Environmental Protection Agency in early 1989. Under
the program, the Registrant offered a complete tank package to service station
owners, small town municipalities and others who were not in compliance with the
EPA's requirements. The Registrant explored arrangements for the manufacture,
sale, installation and insurance of its tanks, rather than acquiring the
facilities, equipment and personnel necessary to perform such functions itself.
The Underground Storage Tank Program was discontinued in 1992.
In 1989 the Registrant acquired sixty percent (60%) of Occidental Fire
& Casualty Ltd, a European reinsurer in 1989. Effective September 12, 1989 it
sold that interest to Stevenson, Abercrombie & Claythorne ("SAC"), in exchange
for debt and SAC's assumption of a note payable.
In October, 1989, the stockholders approved a decrease in the
authorized number of shares of common stock from 100,000,000 to 10,000,000 and a
one-for-ten (1:10) reverse stock split. The split date was April 13, 1991.
In May, 1990, the Registrant purchased a Transportable
Sludge-Dewatering Treatment Unit ("TTU") to actively engage in pollution cleanup
through its Environmental Services Division. The payment for this unit was made
in cash and stock. After the Registrant took possession of same, the seller and
two of its officers disputed the title to the unit. A lawsuit was filed in 1990
and settled in 1992. Revenues for the fiscal year ended December 31, 1990 were
all realized from the Environmental Services Division. There was no revenue
generated in 1991 from the TTU. The TTU was stolen in 1992. 1992 revenue was
generated through the Underground Storage Tank program of the Environmental
Services Division, which ceased operations at the end of 1992.
[HART\10K:123195.KSB]-12
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<PAGE>
In June, 1992, the Registrant executed an Acquisition Agreement with
the stockholders of MediLife Holdings Limited ("MediLife"), a British
corporation pursuant to which the Registrant issued two million shares of its
common stock in exchange for all the outstanding stock of MediLife. At the
Closing the shareholders of MediLife represented that MediLife owned five
nursing homes in the U.K. Subsequent to the Closing the Registrant learned that
MediLife's title to the nursing homes had not been perfected due to defects and
ownership disputes (the "MediLife Claims"). Litigation ensued to rescind the
transaction. In July 1993 the Registrant assigned its contractual rights to the
shares of MediLife and the underlying assets and certain causes of action
against the MediLife shareholders to an unrelated third party in exchange for
investment securities. Also in July 1993 the purchaser effected a settlement of
all outstanding litigation involving the MediLife transaction whereby the
agreement with the MediLife shareholders was canceled, the Registrant's common
stock issued to the MediLife shareholders was transferred to the purchaser of
the MediLife Claims and the purchaser caused all litigation in the United States
and United Kingdom against the Registrant to be dismissed with prejudice.
In July, 1993 the Registrant acquired certain manufacturing assets,
in conjunction with its equipment leasing activities, for 3,000,000 (150,000
shares after adjustment for the merger and the resulting reverse split) shares
of its common stock. The manufacturing assets acquired as part of this
transaction and initially recorded at $313,474, the cost basis of the seller,
were leased to Signpac Incorporated ("Signpac"), a sign fabrication firm in
Costa Mesa, California, for use in its business. The lease was secured by the
assets and was personally guaranteed by the principal shareholder of the lessee.
In the fiscal year ended December 31, 1994 the Registrant did not receive any
lease revenues from Signpac due to financial difficulties experienced by
Signpac. The Registrant terminated the lease due to Signpac's default and in
May, 1995 the assets were sold at a public auction for $72,710 of net proceeds.
Effective March 8, 1994 the Registrant reincorporated in the State of
Nevada pursuant to a merger with a wholly-owned Nevada corporation following
shareholder approval. Every twenty (20) shares of the Registrant issued and
outstanding prior to the reincorporation were automatically converted into one
share of the Nevada corporation, the name of which remained "Hart Industries,
Inc." As a result, the Registrant on the effective date of the merger had
480,962 shares of common stock issued and outstanding and 50,000,000 shares
authorized giving effect to the re-incorporation in Nevada. All share and per
share amounts have been restated, where noted, to give effect to the merger.
In August, 1994 the Registrant entered into an Agreement to purchase a
net profits interest in two casinos in Macau. In May, 1995 the Registrant and
the other party to the Agreement agreed to terminate the Agreement due to the
Registrant's inability to satisfy a condition precedent in the Agreement which
required a resumption of public trading in the Registrant's common stock. The
Registrant intends to evaluate other proposed acquisitions, and will continue
efforts to relist its shares for trading.
The Registrant's day-to-day business affairs are handled by three
directors and three officers. All three officers were parties to employment or
consulting agreements with the Registrant for fiscal year 1995. As of the date
of this report, the Registrant had no employees and no operations. Current
management is pursuing additional business opportunities in the equipment
leasing industry and other industries, but no assurance can be given that the
Registrant will be successful in acquiring any business opportunities, or if
acquired what revenues might be provided from such operations.
[HART\10K:123195.KSB]-12
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<PAGE>
ITEM 2. PROPERTIES
The Registrant's principal executive offices are located in leased
premises of approximately 3,000 square feet in Irvine, California. These
premises are occupied by the Registrant under an agreement with an affiliate.
ITEM 3. LEGAL PROCEEDINGS
As of the date of this report the Registrant is not a party to any
litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Market Information
The Registrant's common stock was traded on NASDAQ until June 7, 1993
when it was delisted. The following table sets forth the range of high and low
bid prices of the Registrant's common stock as reported on NASDAQ for each
quarter in the last three years.
<TABLE>
<CAPTION>
Bid Price of Common Stock
------------------------------
Fiscal 1995 High Low
---------------------- ---- ---
<S> <C> <C>
Quarter ended 03/31/95 $ NA $ NA
Quarter ended 06/30/95 $ NA $ NA
Quarter ended 09/30/95 $ NA $ NA
Quarter ended 12/31/95 $ NA $ NA
Fiscal 1994
----------------------
Quarter ended 03/31/94 $ NA $ NA
Quarter ended 06/30/94 $ NA $ NA
Quarter ended 09/30/94 $ NA $ NA
Quarter ended 12/31/94 $ NA $ NA
Fiscal 1993
----------------------
Quarter ended 03/31/93 $ .1875 $.1875
Quarter ended 06/30/93 $ NA $ NA
Quarter ended 09/30/93 $ NA $ NA
Quarter ended 12/31/93 $ NA $ NA
</TABLE>
[HART\10K:123195.KSB]-12
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<PAGE>
Since the Registrants common stock was delisted on June 7, 1993, bid
prices of the Registrant's common stock are not available for fiscal 1995 and
1994 and partially for fiscal 1993.
Stockholders of Record
The approximate number of holders of record of the Registrant's common
stock as of the close of business on May 31, 1996 was approximately 840.
Dividends
The Registrant has never declared or paid any dividends on any class of
its securities. The Registrant's anticipated capital requirements are such that
it intends to follow a policy of retaining earnings, if any, to finance the
conduct of its business.
ITEM 6. SELECTED FINANCIAL DATA
The Registrant's financial data presented below has been derived from
the Financial Statements of the Registrant, including the Notes thereto
appearing elsewhere herein, and should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------------------------------------------------------
Summary of Operations 1995 1994 1993 1992 1991 1990
--------------------- ------------- ------------- ------------ --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ -- $ -- $ -- $ 73,034 $ 496,158 $ 402,953
Net Income (Loss) $ (227,255) $ (2,979,860) $ 11,950 $(946,373) $ 269,176 $ 543,116
Net Income (Loss)
Per Share $ (.13) $ (2.98) $ .025 $ (3.26) $ .06 $ .14
Weighted Average
Shares Outstanding 1,730,960 1,001,794 480,962* 289,962* 230,963* 203,804*
</TABLE>
*Number of shares adjusted to take into account one-for-twenty [1:20] reverse
stock split effective March 8, 1994.
[HART\10K:123195.KSB]-12
4
<PAGE>
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------------------------------------------
Summary of Balance Sheet 1995 1994 1993 1992 1991 1990
------------------------ -------------- -------------- -------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Data
Working capital (deficit) $ (226,634) $ (61,289) $ (138,120) $ (164,036) $ 3,286 $ 2,976,414
Total assets $ 41 $ 62,095 $ 2,974,005 $ 3,256,672 $ 3,847,268 $ 3,586,478
Total liabilities $ 226,675 $ 61,474 $ 173,651 $ 185,708 $ 69,151 $ 119,275
Stockholders'
equity(deficiency) $ (226,634) $ 621 $ 2,800,354 $ 3,070,964 $ 3,736,379 $ 3,467,203
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
There were no operations during fiscal 1995. As a result there were no
revenues or cost of revenues recorded during fiscal 1995.
Total operating expenses (comprised mostly of general and
administrative expenses relating to professional, consulting and advisory fees)
increased from $159,546 in fiscal 1994 to 238,055 in fiscal 1995.
Year Ended December 31, 1994 Compared to Year Ended December 31, 1993
The Registrant had no operating revenue during 1994 or 1993. In 1994
the Registrant accrued $56,250 of interest income on the promissory note issued
by New World for the Dishwasher Assets (the "New Note"). In 1993 the Registrant
obtained net income of $11,950 primarily due to the interest accrued and
partially paid during 1993 on the New Note received for the Dishwasher Assets.
Total general and administrative expenses in 1994 were $146,733 compared to
$28,550 in 1993.
During fiscal 1994 the Registrant charged $2,876,564 against income to
write-off the Dishwasher Assets and marketable securities; and to write down the
Signpac Assets to their salvage value due to impairments in the assets and
uncertainties regarding their recoverability and marketability.
As a result of the write-offs and write down of assets, Operating
losses increased to $159,546 in 1994 compared to an operating loss of $28,550 in
1993. The net loss for 1994 was $2,979,860 compared to $11,950 income for 1993.
Liquidity and Capital Resources
The Registrant has continued to incur net losses and negative cash
flows from operating activities during the fiscal 1995.
[HART\10K:123195.KSB]-12
5
<PAGE>
As of December 31, 1995, the Registrant had a working capital deficit
of $226,634 an increase of $165,345 from 1994 due to the continued accrual of
professional, consulting and advisory fees during fiscal 1995 that were incurred
but not paid.
The Registrant had cash balances of approximately $41 and $185 at
December 31, 1995 and 1994 respectively. The limited cash balances are a direct
result of the Registrant having no operations during 1995 and 1994.
In May 1995 certain manufacturing assets previously leased to a third
party were repossessed upon the lessee's default and sold at auction for
$72,710.
The Registrant's plan is to keep searching for additional sources of
capital and new operating opportunities. In the interim, the Registrant's
existence is dependent on continuing financial support from an affiliate which
is estimated to be approximately $265,000 for the next fiscal year based upon
current agreements and obligations the Company has at December 31, 1995. Such
conditions raise substantial doubt about the Registrant's ability to continue as
a going concern. As such, the Registrant's independent accountants have modified
their report to include an explanatory paragraph with respect to the
uncertainty.
As of December 31, 1994, the Registrant had a working capital deficit
of $61,289, a decrease of $76,831 from 1993 due to the conversion of $171,670 of
current liabilities into shares of common stock. As of December 31, 1993, the
Registrant had a working capital deficit of $138,120, a decrease of
approximately $25,916 from 1992. This decrease was due primarily to the decrease
in funds borrowed from SAC.
From inception through June 30, 1993, the Registrant's principal
source of working capital was advances received from SAC. Through December 31,
1993, SAC had made advances to the Registrant aggregating $2,328,568 (including
accrued interest). However, all of such advances except $171,670 were forgiven
in exchange for shares of the Registrant's common stock. In July 1993, SAC
assigned the remaining indebtedness in the principal amount of $171,670 plus
interest accrued to NuVen Advisors, Inc., formerly New World Capital, Inc., a
Utah corporation ("NuVen"). Effective August 31, 1994, NuVen and the Registrant
agreed to convert the indebtedness, plus accrued interest, into 750,000 shares
of the Registrant's common stock.
The Registrant currently has no commitments for additional
equity or debt financing, and no assurances can be made that its working capital
needs can be met out of operations or borrowing.
Additionally, as of December 31, 1995 the Registrant had no employees
or operations.
[HART\10K:123195.KSB]-12
6
<PAGE>
ITEM 8. FINANCIAL STATEMENTS
The following financial statements are filed as a part of this Annual
Report on Form 10-KSB and are included immediately following the signature page.
INDEX TO FINANCIAL STATEMENTS
Page
Reports of Independent Certified Public Accountants .......................F-2
Balance Sheets as of December 31, 1995 and 1994 ...........................F-3
Statements of Operations for the Years
Ended December 31, 1995 and 1994 .....................................F-4
Statements of Stockholders' Equity for the Years Ended
December 31, 1995 and 1994 ...........................................F-5
Statements of Cash Flows for the Years Ended
December 31, 1995 and 1994 ...........................................F-6
Notes to Financial Statements ......................................F-7 - F-11
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
A Current Report on Form 8-K dated August 12, 1994 was filed on August
22, 1994, reporting under Item 4 the resignation of O'Neal and White ("O&W") as
the Registrant's certifying accountants. The accounting firm of C. Williams &
Associates, P.C. was appointed the successor to O&W on February 7, 1995 for the
purpose of examining the Registrant's financial statements included in this
Annual Report on Form 10-KSB and for rendering the Independent Auditor's Report.
During the fiscal years ended December 31, 1992 and 1993, and during the
subsequent interim period from the date of the December 31, 1993 audited
financial statements to August 12, 1994, there were no disagreements between the
Registrant and its former auditors. The reports of the former principal auditors
on the financial statements of the Registrant for either of the 1992 and 1993
fiscal years did not contain any adverse opinion or disclaimer of opinion, nor
was any opinion qualified or modified as to uncertainty, audit scope, or
accounting principles.
The firm of O'Neal & White performed an audit of the Registrant's
financial statements for the year ended December 31, 1993 and issued its report
on that audit on May 25, 1994. O'Neal & White voluntary dissolved on April 15,
1995.
The shareholders of the Registrant continue to retain legal rights to
sue and recover damages from O'Neal & White, and its directors, officers and
shareholders for material misstatements or omissions, if any, in the fiscal 1993
financial statements, in accordance with the laws of the State of Texas
governing the dissolution of Texas professional corporations.
The firm of C. Williams & Associates, P.C. performed an audit of the
Registrant's December financial statements for the year ended December 31, 1994,
and issued its report on that audit on June 12, 1995 which is after the
revocation of Mr. Williams' license on March 2, 1995, and therefore is not in
accordance with the applicable rules and regulations of the Securities and
Exchange Commission. Accordingly, a Current Report on Form 8-K dated February
19, 1995 was filed on April 24, 1996, reporting under Item 4 the resignation of
C. Williams and Associates P.C. ("C. Williams") as the Registrant's certifying
accountants. The accounting firm Spurgeon, Kang & Associates was appointed the
successor to C. Williams on April 24, 1996 for the purpose of examining the
Registrant's financial statements included in the Annual Report on Form 10-KSB/A
for fiscal 1994, and for rendering an Independent Auditor's Report. During
fiscal year ended December 31, 1994, there were no disagreements between the
Registrant and its former auditors. The reports of the former principal auditors
on the financial statements of the Registrant for either of the past two fiscal
years did not contain any adverse opinion or disclaimer of opinion, nor was any
opinion qualified or modified as to uncertainty, audit scope or accounting
principles, except for the 1994 report which included an explanatory paragraph
with respect to the substantial doubt existing about the ability of the
Registrant to continue as a going concern.
[HART\10K:123195.KSB]-12
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<PAGE>
The Report of Spurgeon, Kang & Associates with respect to the 1994
fiscal year financial statements includes an explanatory paragraph with respect
to the substantial doubt existing about the ability of the Company to continue
as a going concern due to its recurring net losses, negative cash flows from
operating activities since its inception, limited liquid resources and negative
working capital.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF
THE REGISTRANT; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
(a) Identification of Directors and Executive Officers.
The following table sets forth certain information concerning the
Registrant's directors and executive officers:
<TABLE>
<CAPTION>
Position Held with Date First
Name Age the Registrant Elected or Appointed
- ---------------- --- ----------------------- -------------------------------
<S> <C> <C> <C>
Fred G. Luke 49 President July 24, 1993
Director July 24, 1993
Fred Graves Luke 73 Chief Financial Officer July 31, 1993 to April 21, 1996
Director July 31, 1993
John D. Desbrow 40 Secretary July 31, 1993
Director July 31, 1993
Steven H. Dong 30 Chief Financial Officer April 21, 1996
</TABLE>
All directors serve until the Registrant's next Annual Meeting of
Shareholders and until their successors are elected and qualified. The
Registrant's officers serve at the pleasure of the Board of Directors. The Board
generally considers the status of the officers at the meeting of the Board
following each Annual Meeting of Shareholders.
[HART\10K:123195.KSB]-12
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<PAGE>
Fred G. Luke is the son of Fred Graves Luke. Other than this father-son
relationship, there are no family relationships between any director or officer
of the Registrant and any other director or officer of the Registrant.
(b) Business Experience
The following is a brief account of the business experience during the
past five years of each director and executive officer of the Registrant,
including principal occupations and employment during that period and the name
and principal business of any corporation or other organization in which such
occupation and employment were carried on.
Fred G. Luke. Mr. Fred Luke has been a Director, Chairman and
President of the Registrant since July 24, 1994. Mr. Luke has over twenty-five
(25) years of experience in domestic and international financing and the
management of private and publicly held companies. Since 1982, Mr. Luke has
provided consulting services and has served, for brief periods lasting usually
not more than six months, as Chief Executive Officer and/or Chairman of the
Board of various publicly held and privately held companies in conjunction with
such financial and corporate restructuring services. In addition to his position
with the Registrant, Mr. Luke currently serves as Chairman and Chief Executive
Officer of Nona Morelli's II, Inc.(Nona) as well as Chairman and President of
NuVen Advisors, Inc., ("NuVen Advisors") formerly New World Capital, Inc. ("New
World"), President and Director of The Toen Group, Inc. ("Toen"), Chairman and
President of Diversified Land & Exploration Co. ("DL&E"). DL&E is a former
publicly traded independent natural resource development company engaged in
domestic oil and gas exploration, development and production. Prior to 1995,
DL&E was a 90% owned subsidiary of Basic Natural Resources, Inc. ("BNR"). From
1991 through 1994 Mr. Luke served as the President and a Director of BNR. BNR is
presently inactive. DL&E formerly in the environmental services and natural gas
processing business. Toen is a public company which was formerly traded on
NASDAQ or the OTC Bulletin Board. Toen does not have ongoing operations. Nona is
a publicly held company whose shares are traded on the Electronic Bulletin
Board. It is a diversified holding company with overseas gaming and domestic
pasta production subsidiaries, in addition to NuOasis Gaming. NuVen Advisors
provides managerial, acquisition and administrative services to public and
private companies including Nona, NuOasis Gaming, and Toen. NuVen Advisors,
which is controlled by Fred G. Luke, as Trustee of the Luke Family Trust, is an
affiliate of the Registrant. NuVen Advisors is a stockholder of NuOasis Gaming,
DL&E and Nona, and provides management, general and administrative services, and
merger and acquisition services to NuOasis Gaming , DL&E and Nona pursuant to
independent Advisory and Management Agreements. Mr. Luke also served from 1973
through 1985 as President of American Energy Corporation, a privately held oil
and gas company involved in the operation of domestic oil and gas properties.
From 1970 through 1985 Mr. Luke served as an officer and Director of Eurasia,
Inc., a private equipment leasing company specializing in oil and gas industry
equipment. Mr. Luke received a Bachelor of Arts Degree in Mathematics from
California State University, San Jose in 1969.
Fred Graves Luke. Mr. Fred Graves Luke has served as a Director and
Chief Financial Officer of the Registrant since July 31, 1993. Mr. Luke also
currently serves as Chairman of the Advisory Board of Nona Morelli's II, Inc.
Prior to his association with the Registrant, Mr. Luke served as Chief Executive
Officer of three private firms operating oil and gas properties from 1954 until
his retirement in 1985. He received his B.A. and LLB Degrees from the University
of Arizona and was admitted to the bar in the State of Arizona in 1950. Mr. Luke
served in the U.S. Army Air Corp. in World War II as a pilot and served in the
U.S. Air Force as a legal officer during the Korean War. Mr. Luke resigned in
April, 1996.
[HART\10K:123195.KSB]-12
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<PAGE>
John D. Desbrow. Mr. John D. Desbrow has served as a Director and
Secretary of the Registrant since July 31, 1993. Mr. Desbrow also currently
serves as Secretary of Nona Morelli's II, Inc., Secretary of NuOasis Gaming,
Inc. and Director of Toen. Mr. Desbrow is a member in good standing of the State
Bar of California and has been since 1980. Prior to joining the Registrant Mr.
Desbrow was in the private practice of law. Mr. Desbrow received his Bachelor of
Science degree in Business Administration from the University of Southern
California in 1977, his Juris Doctorate from the University of Southern
California Law Center in 1980, and his Master of Business Taxation degree from
the University of Southern California Graduate School of Accounting.
Steven H. Dong. Mr. Dong is Chief Financial Officer of the Registrant.
Mr. Dong replaced Fred Graves Luke who resigned as the Registrants' Chief
Financial Officer effective April 21, 1996. Prior to joining the Registrant, Mr.
Dong worked as a Certified Public Accountant with the international accounting
firm of Coopers & Lybrand since 1988. Mr. Dong's experience consisted of
providing financial accounting and consulting services to privately and publicly
held companies. In addition to his position with the Registrant, Mr. Dong
currently serves as Chief Financial Officer of Nona, NuOasis Gaming and Toen.
Mr. Dong received his Bachelor of Science degree in Accounting from Babson
College.
(c) Identification of Certain Significant Employees.
None.
(d) Family relationships
Fred G. Luke is the son of Fred Graves Luke. Other than this father-son
relationship, there are no family relationships between any director or officer
of the Registrant and any other director or officer of the Registrant.
(e) Involvement in Certain Legal Proceedings.
During the past five years, no director or officer of the Registrant
has:
1. Filed or has had filed against him a petition under the federal
bankruptcy laws or any state insolvency law, nor has a receiver,
fiscal agent or similar officer been appointed by a court for the
business or property of such person, or any partnership in which he
was a general partner, or any corporation or business association of
which he was an executive officer at or within two years before such
filings; except, however, that Fred G. Luke was Secretary of
Diversified Production Services, Inc., an Oklahoma corporation
("DPS") which filed a Voluntary Petition under Chapter 11 of the U.S.
Bankruptcy Code on 1991. DPS was discharged from its bankruptcy
proceedings in May 10, 1994 following the affirmative vote on its Plan
of Reorganization.
2. Been convicted in a criminal proceeding.
3. Been the subject of any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining such person from,
or otherwise limiting his involvement in any type of business,
securities or banking activities.
[HART\10K:123195.KSB]-12
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<PAGE>
4. Been found by a court of competent jurisdiction in a civil action, the
Securities and Exchange Commission or the Commodity Futures Trading
Commission to have violated any federal or state securities or
commodities law, which judgment has not been reversed, suspended, or
vacated.
(f) Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the Registrant's directors and officers and persons who own more
than ten percent of the Registrant's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "SEC"). Directors, officers and greater than ten-percent shareholders are
required by SEC regulations to furnish the Registrant with copies of all Section
16(a) reports filed.
Based solely on its review of the copies of the reports it received
from persons required to file, the Registrant believes that during the period
from January 1, 1995 through December 31, 1995 all filing re quirements
applicable to its officers, directors and greater than ten-percent shareholders
were complied with.
ITEM 11. EXECUTIVE COMPENSATION
(a) Summary Compensation Table.
The following table sets forth in summary form the compensation
received during each of the Registrant's last three completed fiscal years by
the named executive officers:
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
--------------------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
- --------------------- ---------------------------------------------------- ----------------------------- -----------
Other Annual LTIP All Other
Name and Principal Fiscal Year Salary ($) Bonus Compensation Restricted Stock Options Payouts ($) Compensation
Position (1) ($) (2) ($) (3) Award(s) ($) (4) (#) (5) (6) ($) (7)
- --------------------- ------------ ----------- --------- --------------- ------------------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fred G. Luke 1995 54,000 N/A N/A N/A N/A N/A N/A
President (1993)
1994 N/A 1,666 N/A 1,666 166,666 N/A N/A
1993 N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
John D. Desbrow 1995 24,000 N/A N/A N/A N/A 0 0
Secretary (1993)
1994 10,000 1,666 N/A 1,666 166,666 0 0
1993 N/A N/A N/A 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Patrick J. Elliott 1995 N/A N/A N/A 0 0 0 0
Secretary (1992)
1994 N/A N/A N/A 0 0 0 0
1993 27,000 N/A N/A 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Fred Graves Luke 1995 N/A N/A N/A N/A N/A 0 0
Chief Financial
Officer (1993-1996) 1994 N/A 1,666 N/A 1,666 166,666 0 0
1993 N/A N/A N/A N/A 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Steven H. Dong 1995 1,000 N/A N/A 0 0 0 0
CFO (1996)
1994 N/A N/A N/A 0 0 0 0
1993 N/A N/A N/A 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[HART\10K:123195.KSB]-12
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<PAGE>
(1) The dollar value of base salary (cash and non-cash) received.
(2) The dollar value of bonus (stock) received (valued at $.01 per
share). Also reported in footnote 4.
(3) During the period covered by the Table, the Registrant did not pay any
other annual compensation not properly categorized as salary or bonus,
including perquisites and other personal benefits, securities or
property.
4) During the period covered by the Table, the Registrant awarded 166,666
shares (valued at $.01 per share) restricted stock, to its officers
and granted options to purchase 166,666 shares to each officer.
(5) The sum of the number of shares of common stock to be received upon
the exercise of all stock options granted.
(6) Except for stock option plans, the Registrant does not have in effect
any plan that is intended to serve as incentive for performance to
occur over a period longer than one fiscal year.
(7) All other compensation received that the Registrant could not properly
report in any other column of the Table including annual Registrant
contributions or other allocations to vested and unvested defined
contribution plans, and the dollar value of any insurance premiums paid
by, or on behalf of, the Registrant with respect to term life insurance
for the benefit of the named executive officer, and, the full dollar
value of the remainder of the premiums paid by, or on behalf of, the
Registrant.
(b) Option/Stock Appreciation Rights ("SAR") Grants Table
Option/SAR Grants Table. The following table sets forth information
concerning individual grants of stock options and freestanding
SAR's made during the fiscal year ended December 31, 1995 to the
named executive officers:
<TABLE>
<CAPTION>
Individual Grants Potential
Realizable Value
at Assumed
Annual Rates of
Stock Price
Appreciation for
Option Term
% of Total
Options
Fiscal Granted to Exercise
Year Options Employees or Base Expiration
Name Granted in Fiscal Price Date 5% ($) 10% ($) (2)
(#) Year ($/Share) (1)
- ---------------- ------ ---------- --------- --------- ----------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Fred G. Luke 1995 -- -- -- -- -- --
President 1994 166,666 33% $.01 8/31/99 0 0
1993 -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
John D. Desbrow 1995 -- -- -- -- -- --
Secretary 1994 166,666 33% $.01 8/31/99 0 0
1993 -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Fred Graves Luke 1995 -- -- -- -- -- --
Chief Financial 1994 166,666 33% $.01 8/31/99 0 0
Officer 1993 -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Steven H. Dong 1995 -- -- -- -- -- --
1994 -- -- -- -- -- --
1993 -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) As of the date of this Report the Registrant could not calculate the
potential realizable value of each grant of options, due to a lack of a
market price for the shares of common stock underlying the options.
(2) As of the date of this Report the Registrant could not calculate the
potential realizable value of each grant of options, due to a lack of a
market price for the shares of common stock underlying the options.
(c) Aggregated Option Exercises and Fiscal Year-End Option Value Table
The following table sets forth information concerning each exercise of
options during the fiscal year ended December 31, 1995 and 1994 by
the Registrant's named executive officers:
Aggregated Option/SAR Exercises
for Fiscal Year Ended December 31, 1995
and Year-End Option/SAR Values
<TABLE>
<CAPTION>
Value of
Unexercised In-
Number of the-Money
Unexercised Options at
Options at Fiscal Fiscal Year-end
Year-End (#)(3) ($)(4)
------------------ ---------------
Shares Acquired on Exercisable/ Exercisable
Name Exercise (#) (1) Value Realized ($) (2) Unexercisable /Unexercisable
- ------------------ ---- ------------------ ---------------------- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
Fred G. Luke 1995 0 0 0 0
President 1994 0 0 0 0
1993 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
John D. Desbrow 1995 0 0 0 0
Secretary 1994 0 0 0 0
1993 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Fred Graves Luke 1995 0 0 0 0
Chief Financial 1994 0 0 0 0
Officer 1993 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Steven H. Dong 1995 0 0 0 0
Chief Financial 1994 0 0 0 0
Officer 1993 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The number of shares received upon exercise of options during the
fiscal year ended December 31, 1995.
(2) With respect to options exercised during the Registrant's fiscal year
ended December 31, 1995, the dollar value of the difference between the
option exercise price and the market value of the option shares
purchased on the date of the exercise of the options.
(3) The total number of unexercised options held as of December 31, 1995,
separated between those options that were exercisable and those options
that were not exercisable.
[HART\10K:123195.KSB]-12
12
<PAGE>
(4) For all unexercised options held as of December 31, 1995, the aggregate
dollar value of the excess of the market value of the stock underlying
those options over the exercise price of those unexercised options.
(d) Long-Term Incentive Plans Table
The following table sets forth each award under any long-term incentive
plan made during the fiscal year ended December 31, 1995 and 1994 to the
Registrant's named executive officers:
<TABLE>
<CAPTION>
Estimated Future Payouts Under
(b) Non-Stock Price-Based Plans
Number -------------------------------------------
of shares (c)
Units Performance or Other (d) (e) (f)
or other Period Until Maturation Threshold Target Maximum
Name Rights (#) or Payout ($ or #) ($ or #) ($ or #)
- ------------------------------ ---------- ----------------------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Fred G. Luke 1995 0 0 0 0 0
President 1994 0 0 0 0 0
1993 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
John D. Desbrow 1995 0 0 0 0 0
Secretary 1994 0 0 0 0 0
1993 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Fred Graves Luke 1995 0 0 0 0 0
Chief Financial 1994 0 0 0 0 0
Officer 1993 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Patrick J. Elliott 1995 0 0 0 0 0
Former Secretary 1994 0 0 0 0 0
1993 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Steven H. Dong 1995 0 0 0 0 0
Chief Financial 1994 0 0 0 0 0
Officer 1993 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[HART\10K:123195.KSB]-12
13
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) and (b) Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information regarding ownership
of the Registrant's common stock as of December 31, 1995. The table includes (a)
each person known by the Registrant to be the beneficial owner of more than 5%
of the Registrant's common stock, (b) each director, (b) each director
individually, (c) the name executive officer, and (d) the directors and officers
of the Registrant as a group. Unless otherwise indicated, the persons named in
the table possess sole voting and investment power with respect to the shares
listed (except to the extent such authority is shared with spouses under
applicable law).
<TABLE>
<CAPTION>
Amount and
Nature of
Name and Address Beneficial
Title of Class of Beneficial Owner Interest(1) Percent of Class(3)
- -------------- ------------------------------ ----------- -------------------
<C> <C> <C> <C>
$.01 par value New World Capital Markets Ltd. 150,000 (2) 8.7%
Common Stock Companies House, Tower Street
Ramsey, Isle of Man
United Kingdom
Overseas Equity (UK) Limited 150,000 8.7%
700-595 Howe Street
Vancouver, British Columbia
V6C 2T5
NuVen Advisors, Inc. (formerly 750,000 43.33%
New World Capital, Inc.)
2 Park Plaza, Suite 470
Irvine, CA 92714
</TABLE>
(1) All shares have been adjusted to take into account the
reincorporation of the Registrant and the resulting
one-for-twenty share reverse stock split effective March 8,
1994.
(2) 50,000 shares of the 150,000 shares are issued in the name of
John D. Desbrow, Trustee, pursuant to an escrow for the
purchase of such 50,000 shares by New World Capital Markets,
Ltd. ("NWCM") and Canadian Overseas Investment Trust ("COIT")
from the seller. The seller has granted NWCM a proxy to vote
the 50,000 shares held in escrow.
(3) Based on 1,730,960 shares outstanding.
The following sets forth information with respect to the Registrant's
common stock beneficially owned by each officer and director, and by all
officers and directors as a group:
[HART\10K:123195.KSB]-12
14
<PAGE>
<TABLE>
<CAPTION>
Amount and
Nature of
Name and Address Beneficial
Title of Class of Officers and Directors Interest Percent of Class
- -------------------- --------------------------- ---------- ----------------
<C> <C> <C> <C>
$.01 par value Fred G. Luke 166,666 9.6%
Common Stock 2 Park Plaza, Suite 470
Irvine, CA 92714
Fred Graves Luke 166,666 9.6%
2 Park Plaza, Suite 470
Irvine, CA 92714
John D. Desbrow (1) 166,666 9.6%
2 Park Plaza, Suite 470
Irvine, CA 92714
Steven H. Dong
2 Park Plaza, Suite 470 -- --
Irvine, CA. 92714
All Officers and Directors
as a group 0 28.8%
</TABLE>
(1) Excludes shares held as a trustee under escrow instructions.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In January, 1994, the Registrant entered into several consulting and
advisory agreements with its then officers and directors in an effort to locate
and acquire new assets and business opportunities, and to manage its day-to-day
general and administrative affairs. Such agreements require the Registrant to
compensate the respective consultants with shares and options to purchase shares
of the Registrant's common stock. As of July 31, 1994 the three officers and
directors of the Registrant had accrued rights to receive an aggregate 500,000
shares in consideration for services rendered, and rights to options to purchase
500,000 shares, from July 31, 1993 to July 31, 1994. The rights to the shares
and options accrued on a monthly basis from July 31, 1993. In lieu of salaries
to the officers during this same twelve month period, the Registrant issued
500,000 shares of its common stock to the three officers and directors and in
August, 1994 granted to each officer and director an option to purchase 166,666
shares of common stock at an exercise price of $.01 per share which options
expire August 1, 1999.
Effective January 27, 1995, the Registrant entered into an Advisory and
Management Agreement with NuVen Advisors for the engagement of NuVen Advisors to
perform administrative, human resource and merger/acquisition services
consisting of (a) management of the use, purchase and disposition of the
Registrant's assets including, by way of illustration, the evaluation of
economic, statistical, financial and other data, and formulation and/or
implementation of the Registrant's business plan; and (b) management of the
Registrant's operations including, by way of illustration, the furnishing of
routine supervisory, and administrative services and the supervision of
administrative personnel including, by way of illustration, consultant
recruiting and screening; and (c) preparation of the usual and customary reports
required of a publicly-held company subject to the reporting requirements of the
Securities Exchange Act of 1934; and (d) furnishing of office space, facilities
and equipment for the Registrant's
[HART\10K:123195.KSB]-12
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<PAGE>
non-exclusive use. The Registrant has significantly reduced or eliminated
completely its human resource and payroll obligations and requirements, but the
Registrant continues to require the administrative, audit and consultant
screening, and merger/acquisition services. The Registrant anticipates continued
reliance on the services provided under the Advisory and Management Agreements
until such time it has, or its subsidiaries, have the need and sufficient cash
flow to justify to perform such services in-house. Pursuant to such Agreement,
the Registrant agreed to pay NuVen Advisors $120,000 annually, payable monthly
in $10,000 increments in arrears, and granted NuVen Advisors an option to
purchase 150,000 shares of the Registrant's common stock exercisable at a price
of $.20 per share. The Registrant expensed $120,000, and $120,000 during fiscal
1995 and 1994, respectively, and had $131,300 and $46,000 due to NuVen Advisors
as of December 31, 1995 and 1994, respectively.
In January 1995, the Registrant entered into an Employment Agreement
with Mr. Luke, pursuant to which Mr. Luke is to hold the office of President
through December 2000. Pursuant to the agreement the Registrant agreed to pay
Mr. Luke $54,000 per annum in cash or in the Registrant's common stock payable
monthly in arrears, and granted him an option to purchase 1,000,000 shares of
the Registrant's common stock at an exercise price per share of 110% of market
value at date of grant. Cash payments of $6,982 were made to Mr. Luke by the
Registrant during fiscal 1995 for reimbursement of travel expenses only. The
Registrant expensed $54,000 during fiscal 1995 and owed $54,000 as of December
31, 1995.
In July 1996, the Registrant entered into a Consulting Agreement with
John Desbrow, pursuant to which Mr. Desbrow is to perform legal services and to
hold the office of Secretary and Director. Pursuant to the agreement the
Registrant agreed to pay Mr. Desbrow $2,000 per month commencing August 1, 1994.
No cash payments have been made to Mr. Desbrow by the Registrant during fiscal
1995 for services provided. The Registrant expensed $24,000 and $12,000 fiscal
1995 and 1994 respectively, and had $34,000 and $12,000 amount due as of
December 31, 1995 and 1994 respectively.
Effective April 1996, the Registrant entered into a Consulting
Agreement with Mr. Steven Dong, pursuant to which Mr. Dong is to perform
accounting services and to hold the office of Chief Financial Officer through
June 30, 1996. Pursuant to the agreement the Registrant agreed to pay Mr. Dong
$10,000 in cash or in the Registrant's common stock payable in arrears, and
granted him an option to purchase 166,666 shares of the Registrant's common
stock at an exercise price of $.01 per share. Cash payments of $1,000 made to
Mr. Dong by the Registrant during fiscal 1995 for services provided by Mr. Dong
prior to his Consulting Agreement. The Registrant expensed $1,000 fiscal 1995
and had no amounts due as of December 31, 1995.
During fiscal 1995, the Company expensed $24,000 for services incurred
by John D. Desbrow for legal services provided in fiscal 1995. No amounts were
paid to Mr. Desbrow during fiscal 1995 and $34,000 was owed to him at December
31, 1995.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Financial Statements
The Financial Statements included in this Item are indexed on Page 8,
Item 8, "Index to Financial Statements."
[HART\10K:123195.KSB]-12
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<PAGE>
(b) Financial Statement Schedules
None.
(c) Exhibits
Exhibit
Number Description
3.1 Articles of Incorporation1
3.2 Certificate of Amendment of Articles of Incorporational
3.3 Bylaws, as amended1
3.4 Articles of Merger - Utah1
3.5 Articles of Merger - Delaware1
3.6 Articles of Merger - Nevada5
10.1 Agreement dated March 20, 1989 between Hart Industries and
Occidental Fire & Casualty Ltd.2
10.2 Mutual Release Agreement dated December 19, 1989 between
Hart Industries, Inc., and North American Polymer2
10.3 Letter and Agreement dated May 31, 1990 between Hart
Industries, Inc., and Stevenson, Abercrombie & Claythorne
Co. with regard to the purchase of a transportable treatment
unit from Magnolia Energy and Refining Corporation2
10.4 Sale and Exclusive Patent License Agreement between Hart
Industries, Inc., and GNE Enterprises, Inc., dated December
21, 19902
10.5 Settlement of Magnolia Lawsuit and Cancellation of Shares2
10.6 Russian Lease Agreement and Subsequent Recision3
10.7 MediLife Agreement3
10.8 Assets Sales Agreement4
10.9 Assignment and Transfer of Contractual Rights and Causes of
Action4
10.10 Equipment Lease Agreement4
[HART\10K:123195.KSB]-12
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<PAGE>
Exhibit
Number Description
10.11 Assignment and Bill of Sale4
10.12 Agreement with Overseas Equity (UK) Limited4
10.13 Merger Agreement with Casino Management of America, Inc., a
Nevada corporation4
10.14 Non-Qualified Stock Option Agreement with Fred G. Luke5
10.15 Non-Qualified Stock Option Agreement with Fred Graves Luke5
10.16 Non-Qualified Stock Option Agreement with John D. Desbrow5
10.17 Employment Agreement with Fred G. Luke6
10.18 Consulting Agreement with Steven H. Dong6
10.19 Consulting Agreement with John D. Desbrow6
10.20 Advisory and Management Agreement with NuVen Advisors, Inc.,
a Nevada Corporation6
(d) Reports on Form 8-K
On April 24, 1996, the Registrant filed a current report on Form 8-K
dated February 19, 1996, reporting a change in auditors from C.
Williams & Associates, P.C. to Spurgeon, Kang & Associates.
1 Each of the foregoing exhibits is incorporated herein by
reference to the Registrant's Form 10.
2 Each of the foregoing exhibits is incorporated herein by
reference to the Registrant's 1990 Form 10K.
3 Each of the foregoing exhibits is incorporated herein by
reference to the Registrant's 1992 Form 10K.
4 Each of the foregoing exhibits is incorporated herein by
reference to the Registrant's 1993 Form 10K.
5 Each of the foregoing exhibits is incorporated herein by
reference to the Registrant's 1994 Form 10KSB filed on August 14,
1995.
6 Each of the foregoing exhibits is included with this Form 10-KSB.
[HART\10K:123195.KSB]-12
18
<PAGE>
In accordance with Section 13 or 15 (d) of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
HART INDUSTRIES, INC.
Date: August , 1996 By:/s/ Fred G. Luke
----- ---------------------------------------
Fred G.Luke, President and Director
Date: August , 1996 By:/s/ Steven H. Dong
----- ---------------------------------------
John D. Desbrow, Secretary and Director
Date: August , 1996 By:/s/ John D. Desbrow
----- ---------------------------------------
Steven H. Dong, Chief Financial Officer
In accordance with the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
HART INDUSTRIES, INC.
Date: August 23, 1996 By:/s/ Fred G. Luke
--------------------------------------
Fred G. Luke, President and Director
Date: August 23, 1996 By:/s/ Steven H. Dong
--------------------------------------
John D. Desbrow, Secretary and Director
Date: August 23, 1996 By:/s/ John D. Desbrow
---------------------------------------
Steven H. Dong, Chief Financial Officer
[HART\10K:123195.KSB]-12
20
EXHIBIT 10.17
EMPLOYMENT AGREEMENT WITH FRED G. LUKE
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is made this 1st day of January, 1995 by
and between Fred G. Luke, an individual with offices at 2 Park Plaza, Suite 470,
Irvine, California 92714 ("Employee") and Hart Industries Inc., a Utah
corporation ("the Company"), with its principal offices at 1 Park Plaza, Suite
600, Irvine, CA 92714
WHEREAS, Employee has over 25 years of experience in mergers,
acquisitions, and corporate finance and management; and,
WHEREAS, the Company desires to employ Employee to serve the Company on
the Company's Board of Directors and as its Chief Executive Officer, and to
provide advice concerning mergers and acquisitions, corporate finance, day to
day management, guidance with respect to general business decisions, and other
duties commonly performed by the Chief Executive Officer of a publicly-held
company.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Company and
Employee agree as follows:
1. Employment
The Company hereby employs Employee as the Company's Chief Executive
Officer, to provide the Company with advice and services, on an
as-needed basis, effective the date hereof and continuing through the
Employment Period (as defined below).
2. Scope of Services
The services to be provided by Employee under this Agreement shall be
all those necessary or proper to evaluate and advise on transactions
between the Company and third parties.
3. Term of Employment
This Agreement shall have an initial term of five (5) years (the
"Employment Period"). Thereafter, this Agreement will automatically be
extended on a year-to-year basis unless Employee or the Company shall
serve written notice on the other party terminating the Agreement;
provided, however, that Employee and the Company shall agree in writing
as to Employee's continuing compensation. Notice to terminate shall be
in writing and shall be delivered at least ten (10) days prior to the
end of the Employment Period, as extended, as provided herein.
4. Duties of Employee
Employee shall devote that amount of time, as necessary, on a monthly
basis, to fulfilling his obligations under this Agreement. The
particular amount of time may vary from day to day or week to week. The
Company understands that Employee serves as an officer and/or director
for other companies which require some of Employee's professional time
but which do not conflict
[FLJ\AGR:HARTEMPL.AGR]
1
<PAGE>
with Employee's obligations hereunder. Employee agrees that he will at
all times, faithfully and to the best of his experience, ability, and
talents, perform all the duties required of him under this Agreement.
5. Compensation
Compensation to Employee for services provided pursuant to this
Agreement shall consist of the following:
A) Fixed Annual Compensation. In consideration for the Services
provided hereunder, the Company shall pay to Employee an annual
salary ("Fixed Annual Compensation") at the rate of $54,000 per
annum. Fixed Annual Compensation payable to Employee by the
Company hereunder shall be paid at such times and in such amounts
as the Company may designate in accordance with the Company's
usual practices, but in no event less than once monthly.
B) Compensation Pool. In addition to the Fixed Annual Compensation,
Employee shall be entitled to participate in the profits of the
Company by way of a Compensation Pool Agreement, a copy of which
is attached hereto as Exhibit "A" (the "Compensation Pool").
The Company shall account to Employee no less frequently than
quarterly with respect to the Compensation Pool beginning with
the Effective Date and continuing for a period of five (5) years
thereafter. Statements, which shall be accompanied by payments of
any amounts shown to be due Employee, shall be delivered to
Employee within forty-five (45) days following the close of the
applicable accounting period (60 days with respect to annual
accountings). Employee shall have the right, exercisable not more
frequently than once annually, to audit the Company's books and
records, which audits shall be performed by a reputable firm of
certified public accountants and which shall not unreasonably
interfere with the operation of the Company's business.
C) Business Expense Reimbursement. Employee shall be entitled to an
aggregate of $1,000 ------------------------------ per month for
employee business expenses in excess of those for which Employee
makes an accounting to the Company. To the extent that Employee
does not utilize all or any portion of the foregoing expense
reimbursement account in any given month, the unused amount shall
be cumulated and carried forward from month-to-month until used.
Employee shall also be entitled to reimbursement of all
reasonable and customary business travel and entertainment
expenses for which Employee makes an adequate accounting to the
Company. The determination of the adequacy of the accounting and
reasonableness of the expenses shall be within the reasonable
discretion of the Company's independent certified accountants
taking into consideration the substantiation requirements of the
Internal Revenue Code of 1986, as amended (the "Code"). If
verification is provided, the non-deductibility of such expenses
for tax purposes shall not affect Employee's right to
reimbursement.
D) Additional Incentive Compensation. In addition to the Fixed
Annual Compensation and the Compensation Pool (if any) to be
provided hereunder to Employee by the Company, the Company shall
provide Employee with such additional incentive compensation
[FLJ\AGR:HARTEMPL.AGR]
2
<PAGE>
("Additional Incentive Compensation") in the form of cash, securities
of the Company, stock options or a deferred compensation arrangement
customarily utilized for top management executives in the leisure and
entertainment industries, and shall include but not be limited to the
following:
i) Life Insurance Policy - a split rate life insurance policy for
the benefit of --------------------- Employee in the amount of
not less than $1,000,000 (the "Life Insurance Policy"). The
Company agrees to make all premium payments under the Life
Insurance Policy. Employee shall be entitled to name the Luke
Family Trust u/t/d May 20, 1990 (the "Trust"), the Alison Noelle
Luke Trust (the "Alison Trust") or the Lindsey Marie Luke Trust
(the "Lindsey Trust"), or in combination of them, as the
beneficiary or beneficiaries of such policy. Upon the death of
Employee during the Initial Employment Period of this Agreement,
and upon the payment of benefits pursuant to the Life Insurance
Policy, such benefits shall be allocated as follows: (i) the
Company shall be entitled to reimbursement of all premiums
actually paid under such policy plus six percent (6%) per annum
interest on such amounts actually paid, and (ii) the beneficiary
or beneficiaries named under such policy shall be entitled to
receive the remainder of such benefits. Employee agrees that the
Company may secure additional insurance on Employee's life for
the benefit of the Company and that Employee shall cooperate with
the Company in connection with the application process for such
insurance.
ii) Directors and Officers Liability Insurance - insurance generally
maintained for by ------------------------------------------
publicly-held companies for the benefit of their directors and
officers against all costs, charges and expenses whatsoever
incurred or sustained in connection with any action, suit or
proceeding to which such officers or directors may be made a
party by reason of being or having been a director or officer.
Such insurance coverage shall be provided by the Company and the
Company shall use its best efforts to cause such insurance to be
maintained in effect for not less than six (6) years from the
date of termination of this Agreement, or from the date of a
change in control (as defined herein), whichever is the longer
period, and containing terms and conditions that are acceptable
to Employee.
iii) Fringe Benefits. In addition to the foregoing, upon request by
Employee, --------------- Employee shall receive and shall
continue to receive such fringe benefits ("Fringe Benefits") as
he now enjoys and as shall become available in the future to
those with similar executive positions in the leisure and
entertainment industries, including without limitation: (i) club
memberships (including initiation fees, annual dues and other
recurring expenses) in an amount not to exceed $20,000 in each
year of the Initial Employment Period; (ii) first-class air
travel and private air travel (if first class air travel is not
practicable in Employee's sole judgment) for all trips made by
Employee outside of the United States in connection with the
Services provided to the Company; (iii) the lease of an
automobile of Employee's choice for use by Employee, and
reimbursement for all expenses incurred in connection with such
automobile, and (iv) reimbursement of Employee's personal legal
and accounting expenses related to Employee's association with
the
[FLJ\AGR:HARTEMPL.AGR]
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<PAGE>
Company in an amount not to exceed $50,000 in each year of the
Initial Employment Period.
iv) Stock Option. The Company agrees to execute with Employee a Stock
Option ------------ Agreement (the "Option") in which the Company
will grant Employee stock options to purchase One Million
(1,000,000) shares of common stock of the Company (the "Option
Shares") at one hundred ten percent (110%) of the Market Value
(as defined herein) as of the date of the Option. Such Options
shall vest to Employee immediately upon execution of the Option.
In the event of any change in the common stock of the Company by
reason of stock dividends, stock splits, reverse stock splits,
spin-offs, mergers, recapitalizations, combinations, conversions,
exchanges of shares or the like or the issuance of shares of
common stock or any class of securities directly or indirectly
convertible into or exchangeable for common stock after the date
hereof, the number and kind of shares subject to the Option shall
be appropriately adjusted.
For the purpose of this Agreement, "Market Price" shall mean the
average bid price on the date of exercise of the Option, or any
portion thereof, or, in case no sale takes place on such day, the
closing bid price for the last executed trade, in each case on
NASDAQ or the securities exchange to which the shares of common
stock of the Company (or its successor, if any) are listed or
admitted to trading or, if not listed or admitted to trading, the
average of the closing bid price as furnished by two members of
the National Association of Securities Dealers Inc. selected by
Employee for that purpose. In the absence of one or more such
quotations, the Market Price shall be based upon the book value
per share calculated on the basis of the Company's most recent
financial statements.
6. Registration of the Company Shares
The Company will register the Option Shares with the Securities and
Exchange Commission on a Form S-1 or other applicable registration
statement within one (1) year from the date hereof. Option Shares
issued prior to registration will be done so only in reliance on
exemptions from registration provided by Section 4(2) of the Securities
Act of 1933 (the "Act"), Regulation D of the Act, and applicable state
securities laws. Such issuance shall be in reliance on representations
and warranties of Employee set forth below, to be updated upon
exercise.
7. Opportunities Rejected by the Company
Opportunity Compensation. If, commencing July 1, 1993, during the
Initial Employment Period, because of the Company's financial
condition, the Board elects not to proceed to acquire any project or
potential acquisition submitted, identified and/or selected by
Employee, then Employee, upon notification to the Company's Board,
shall be entitled to submit the project elsewhere (a "Opportunity") and
Employee shall be entitled to any and all fees or profits resulting
from Employee's referral or placement of such Opportunity (the
"Opportunity Compensation"); provided, however, that (i) Opportunity
Compensation shall be limited to four (4) Opportunities in each
calendar year during the Initial Employment Period; (ii) Employee's
efforts related to such Opportunity shall be of an incidental nature
and shall not interfere with Employee's Services
[FLJ\AGR:HARTEMPL.AGR]
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<PAGE>
to the Company other than in a de minimis manner; (iii) the Opportunity
may not be offered to a third party on terms more favorable to such
third party than the terms proposed to the Company at the time that the
Company's Board elected not to proceed.
8. Place of Services
The Services provided by Employee hereunder will be performed primarily
through the Company's offices in Irvine, California, except as
otherwise mutually agreed by Employee and the Company. It is understood
and expected that Employee may make contacts with persons and entities
and perform services in other locations as deemed appropriate and
directed by the Company.
9. Status
Employee will act as an employee in the performance of duties under
this Agreement. Accordingly, the Company will be responsible for
payment of all federal, state, and local taxes on compensation paid
under this Agreement, including income and social security taxes,
unemployment insurance, and any other taxes as may be required.
10. Termination
(A) Termination for Disability. If, during the Employment Period,
Employee shall be unable to provide the Services for three (3)
consecutive months because of illness, accident, or other
incapacity, the Company shall have the right to terminate this
Agreement upon written notice to Employee within ten (10) days
after the end of any such three (3) month period. Termination
under this Paragraph shall be effective upon receipt by
Employee of the written notice.
(B) Death. In the event of Employee's death, this Agreement and
all rights and obligations hereunder shall immediately be
terminated.
(C) Termination for Cause. The Company may, at its option,
terminate this Agreement by giving written notice of
termination to Employee without prejudice to any other remedy
to which the Company may be entitled either at law, in equity,
or under this Agreement, if Employee:
(i) Willfully breaches or neglects the duties that Employee
is required to perform under the terms of this
Agreement;
(ii) Fails to promptly comply with and carry out all
directives of the Company's Board of Directors; or
(iii) Is convicted of committing any dishonest or unlawful
act.
[FLJ\AGR:HARTEMPL.AGR]
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(D) Termination Other Than For Cause. This Agreement shall terminate
immediately on the occurrence of any one of the following events:
(i) The occurrence of circumstances, in the judgment of the
Company's Board of Directors, that make it impracticable for
the Company to continue its present line(s) of business;
(ii) The decision of and upon notice by Employee to voluntarily
terminate this Agreement;
(iii) The loss by Employee of legal capacity;
(iv) If the Company institutes, or has instituted against it any
bankruptcy proceeding for reorganization for rearrangement
of the party's financial affairs;
(v) If the Company has a receiver of its assets or property
appointed because of insolvency;
(vi) If the Company makes a general assignment for the benefit of
creditors; or
(vii)If the Company otherwise becomes insolvent or unable to
timely satisfy all obligations in the ordinary course of
business.
(E) Effect of Termination on Compensation. In the event of the
Termination Other Than For Cause prior to the completion of the
Employment Period, Employee shall be entitled to a lump sum
payment equal to the balance of all compensation due to Employee,
including but not limited to salary and benefits under this
Agreement, and to the rights to exercise any remaining,
previously unexercised Options. Notwithstanding anything
contained herein to the contrary, Employee's right to exercise
any exercised Options shall continue for two (2) years following
the date of termination.
13. Representations and Warranties of the Company
The Company represents and warrants to Employee that:
(A) Corporate Existence. The Company is a corporation duly organized,
validly existing, and in good standing under the laws of the
State of Utah, with corporate power to own property and carry on
its business as it is now being conducted.
(B) Financial Information. The Company has or will cause to be
delivered concurrently with the execution of this Agreement,
copies of the Disclosure Documents (as defined in Paragraph
14(D)(1)) which accurately set forth the financial condition of
the Company as of the respective dates of such documents.
(C) Capitalization. The capitalization of Company is, as of the date
hereof, comprised of Thirty Million (30,000,000) shares of
authorized $.01 par value common stock of which no more than
Twenty Eight Million (28,000,000) shares are issued and
outstanding, with
[FLJ\AGR:HARTEMPL.AGR]
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<PAGE>
Two Hundred Fifty Thousand (250,000) shares of Series B
Convertible Preferred Stock issued and outstanding and Eighteen
Million (18,000,000) Warrants and Options to purchase common
stock which, upon exercise will result in at least Eighteen
Million (18,000,000) additional shares of common stock being
issued. All issued and outstanding shares are legally issued,
fully paid, and nonassessable, and are not issued in violation of
the preemptive or other right of any person.
(D) No Conflict. This Agreement has been duly executed by the Company
and the execution and performance of this Agreement will not
violate, or result in a breach of, or constitute a default in any
agreement, instrument, judgment, decree or order to which the
Company is a party or to which the Company is subject, nor will
such execution and performance constitute a violation or conflict
of any fiduciary duty to which the Company is subject.
(E) Full Disclosure. The information concerning the Company provided
to Employee pursuant to this Agreement is, to the best of the
Company's knowledge and belief, complete and accurate in all
material respects and does not contain any untrue statement of a
material fact or omit to state a material fact required to make
the statements made, in light of the circumstances under which
they were made, not misleading.
(F) Date of Representations and Warranties. Each of the
representations and warranties of the Company set forth in this
Agreement is true and correct at and as of the date of execution
of this Agreement.
14. Representations and Warranties of Employee
Employee represents and warrants to the Company that he understands and
acknowledges that any Option Shares issued prior to registration will
be so issued in reliance on the exemptions from registration provided
by Section 4(2) of the Act Regulation D, and applicable state
securities laws. Representations and warranties by Employee in this
paragraph will be used and relied upon by the Company to determine
whether any issuance of Option Shares may be made to Employee pursuant
to Section 4(2) of the Act and Regulation D and applicable state
securities laws, and Employee will notify the Company immediately of
any material changes to the representations made herein. In this
regard, Employee represents and warrants that:
(A) Disclosure Documents. Employee has been furnished with a copy of
the Company's most -------------------- recent Annual Report on
Form 10-K and all reports or documents required to be filed under
Sections 13(a), 14(a), and 15(d) of the Securities and Exchange
Act of 1934, as amended, including but not limited to quarterly
reports on Form 10-Q, current reports on Form 8-K, and proxy
statements (the "Disclosure Documents"). In addition, Employee
has been furnished with a description of the Company's capital
structure and any material changes in the Company's financial
condition that may not have been disclosed in the Disclosure
Documents.
(B) Employee Suitability. By reason of Employee's knowledge and
experience in financial and business matters in general, and
investments in particular, Employee is capable of evaluating the
merits and risks of this transaction and in bearing the economic
risks of an
[FLJ\AGR:HARTEMPL.AGR]
7
<PAGE>
investment in the Option Shares and fully understand the speculative
nature of such securities and the possibility of such loss. Further,
Employee represents to the Company:
(1) Employee is fully aware that any Option Shares issued to Employee
prior to registration will be "Restricted Securities" as defined
by Rule 144 of the Act and that any resale of such securities by
Employee may be governed by Rule 144. Employee is further aware
of the specific restrictions on resale of such securities
contained in Rule 144.
(2) Employee will not sell, transfer or otherwise dispose of any
Option Shares issued or reserved for issuance hereunder prior to
registration except in compliance with the Act.
(3) Any and all certificates representing the Option Shares issued
prior to registration of such shares, and any and all securities
issued in replacement thereof or in exchange therefore, shall
bear the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 (the "Act") and are
"restricted securities" as that term is defined in Rule 144 under
the Act. The shares may not be offered for sale, sold, or
otherwise transferred except pursuant to an effective
Registration Statement under the Act or pursuant to an exemption
from registration under the Act, the availability of which is to
be established to the satisfaction of the Company."
15. Indemnification
the Company and Employee agree to indemnify, defend and hold each other
harmless from and against all demands, claims, actions, losses,
damages, liabilities, costs and expenses, including without limitation,
interest, penalties and attorneys' fees and expenses asserted against
or imposed or incurred by either party by reason of or resulting from a
breach of any representation, warranty, covenant, condition, or
agreement of the other party to this Agreement.
the Company further agrees to indemnify defend and hold Employee
harmless from and against all demands, claims, actions, losses,
damages, liabilities, costs and expenses, including without limitation,
interest, penalties and attorneys' fees and expenses asserted against
or imposed or incurred by Employee arising from Employee's fulfillment
of his duties as an officer and director to the maximum extent
permitted by the Utah Corporation Code.
In addition to the foregoing indemnity, the Company agrees to indemnify
and hold harmless Employee, and each other person controlling Employee
or any of its affiliates (collectively, the "Indemnified Parties" and
each an "Indemnified Party"), within the meaning of either Section 15
of the Act, or Section 20 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") from and against any losses, claims,
damages and liabilities (or actions in respect thereof), joint or
several, which are related to or arise out of or are based upon any
untrue or alleged untrue statement of material fact or any omission or
alleged omission of material fact required to be stated or necessary to
make other statements, in light of the circumstances in which they are
made, not
[FLJ\AGR:HARTEMPL.AGR]
8
<PAGE>
misleading contained in any document, report or material provided to an
relied upon by Employee to prepare any registration statement,
prospectus, prospectus supplement license application or other
materials or reports filed by the Company with any regulatory agency.
16. Inside Information - Securities Laws Violations
In the course of the performance of his duties, Employee may become
aware of information which may be considered "inside information"
within the meaning of the Federal Securities Laws, Rules and
Regulations. Employee acknowledges that his use of such information to
purchase or sell securities of the Company, or its affiliates, or to
transmit such information to any other party with a view to buy, sell
or otherwise deal in the securities of the Company or its affiliates is
prohibited by law and would constitute a breach of this Agreement and
notwithstanding the provisions of this Agreement will result in the
immediate termination of the Agreement.
17. Miscellaneous
(A) Subsequent Events. Employee and the Company each agree to
notify the other party if, subsequent to the date of this
Agreement, either party incurs obligations which could
compromise their efforts and obligations under this
Agreement.
(B) Amendment. This Agreement may be amended or modified at any
time and in any manner only by an instrument in writing
executed by the parties hereto.
(C) Further Actions and Assurances. At any time and from time to
time, each party agrees, at its or their expense, to take
actions and to execute and deliver documents a may be
reasonably necessary to effectuate the purposes of this
Agreement.
(D) Waiver. Any failure of any party to this Agreement to comply
with any of its obligations, agreements, or conditions
hereunder may be waived in writing by the party to whom such
compliance is owed. The failure of any party to this
Agreement to enforce at any time any of the provisions of
this Agreement shall in no way be construed to be a waiver
of any such provision or a waiver of the right of such party
thereafter to enforce each and every such provision. No
waiver of any breach of or non-compliance with this
Agreement shall be held to be a waiver of any other or
subsequent breach or non-compliance.
(E) Assignment. Neither the Company nor employee shall assign
their rights or obligations under the Agreement without the
prior written consent of the other. However, the Options
granted to Employee shall be assignable by Employee without
the consent of or notice to the Company.
(F) Notices. Any notice or other communication required or
permitted by this Agreement must be in writing and shall be
deemed to be properly given when delivered in person to an
officer of the other party, when deposited in the United
States mails for transmittal by certified or registered
mail, postage prepaid, or when deposited with a public
telegraph company for transmittal, or when sent by facsimile
transmission charges prepared, provided that the
communication is addressed:
[FLJ\AGR:HARTEMPL.AGR]
9
<PAGE>
(1) In the case of the Company:
Hart Industries Inc.
1 Park Plaza, Suite 600
Irvine, California 92714
Telephone: (714) 833-5380
Telefax: (714) 833-7854
(2) In the case of Employee:
Fred G. Luke
2 Park Plaza, Suite 470
Irvine, California 92714
Telephone: (714) 833-2094
Telefax: (714) 833-7854
or to such other person or address designated by the Company or
Employee to receive notice.
(G) Headings. The section and subsection headings in this
agreement are inserted for convenience only and shall not
affect in any way the meaning or interpretation of this
Agreement.
(H) Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed
an original, but all of which together shall constitute one
and the same instrument.
(I) Governing Law. This Agreement was negotiated and is being
contracted for in the State of California, and shall be
governed by the laws of the State of California,
notwithstanding any conflict-of-law provision to the
contrary.
(J) Binding Effect. This Agreement shall be binding upon the
parties hereto and inure to the benefit of the parties,
their respective heirs, administrators, executors,
successors, and assigns.
(K) Entire Agreement. This Agreement contains the entire
agreement between the parties hereto and supersedes any and
all prior agreements, arrangements, or understandings
between the parties relating to the subject matter of this
Agreement. No oral understan dings, statements, promises, or
inducements contrary to the terms of this Agreement exist.
No representations, warranties, covenants, or conditions,
express or implied, other than as set forth herein, have
been made by any party.
(L) Severability. If any part of this Agreement is deemed to be
unenforceable the balance of the Agreement shall remain in
full force and effect.
[FLJ\AGR:HARTEMPL.AGR]
10
<PAGE>
(M) Facsimile Counterparts. A facsimile, telecopy, or other
reproduction of this Agreement may be executed by one or
more parties hereto and such executed copy may be delivered
by facsimile of similar instantaneous electronic
transmission device pursuant to which the signature of or on
behalf of such party can be seen, and such execution and
delivery shall be considered valid, binding and effective
for all purposes. At the request of any party hereto, all
parties agree to execute an original of this Agreement as
well as any facsimile, telecopy or other reproduction
hereof.
(N) Termination of Any Prior Agreements. Effective the date
hereof, all prior rights of Employee relating to the accrual
or payment of any form of compensation or other benefits
from the Company based upon any agreements other than this
Agreement, whether written or oral, entered into prior to
the date hereof, are hereby terminated.
(O) Consolidation or Merger. Subject to the provisions hereof,
in the event of a sale of the Company or consolidatiion or
merger of the Company with or into another corporation or
entity, or stock, or the sale of substantially all of the
stock, of the Company, or consolidation or merger of the
Company with or into another corporation or entity, or the
sale of substantially all of the operating assets of the
Company to another corporation, entity or individual, the
Company may assign its rights and obligations under this
Agreement to its successor-in-interest and such
successor-in-interest shall be deemed to have acquired all
rights and assumed all obligations of the Company hereunder;
provided, however, that in no event shall the duties and
services of Employee provided for in Paragraph 2 hereof, or
the responsibilities, authority or powers commensurate
therewith, change in any material respect as a result of
such sale of stock, consolidation, merger or sale of assets.
(P) Time is of the Essence. Time is of the essence of this Agreement
and of each and every provision hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement
effective the date first written above.
"Employee"
/s/ Fred G. Luke
--------------------------------------------
Fred G. Luke
"Company"
HART INDUSTRIES INC.
a Utah corporation
By:--------------------------------------
Name:
Title:
[FLJ\AGR:HARTEMPL.AGR]
11
EXHIBIT 10.18
CONSULTING AGREEMENT WITH STEVEN H. DONG
CONSULTING AGREEMENT
This Consulting Agreement is made this 21st day of April, 1996 by and
between Steven Dong, an individual at 1048 Irvine Ave., Ste. #306, Newport
Beach, CA 92660 ("Consultant") and Hart Industries Inc., a Nevada corporation,
with its principal offices at 2 Park Plaza, Suite 470, Irvine, California 92714
("Client").
WHEREAS, Consultant is a Certified Public Accountant and has over ten
(7) years of experience in accounting and in the audit of publicly-held
companies; and
WHEREAS, Client desires to retain the services of Consultant to serve
as Client's Chief Financial Officer, and to advise Client's Board of Directors
and its Audit Committee, and Consultant desires to serve Client on the terms and
conditions set forth below:
1. Engagement
Client agrees to engage Consultant as its Chief Financial Officer, and
to provide Client with advice and financial consulting services, on an
as-needed basis, effective the date hereof and continuing through the
Initial Consulting Period (as defined below).
2. Scope of Services to be Provided
Consultant hereby accepts the engagement on the terms and conditions
set forth in the Agreement and agrees to provide the services which
shall consist of establishing internal controls and procedures to
effect accurate and timely preparation of financial statements and
regulatory reports on Form 10-K, Form 10-Q and Form 8-K, and to be the
individual responsible for the preparation, review and filing of such
reports; establishing sales and disbursement systems; establishing
payroll and inventory methods; assisting Client's Board of Directors in
the analysis of business opportunities, and debt and equity financing
proposals; preparing and/or timely reviewing of financial projections
and preparing budget; preparing capital requirement forecasts and
corporate finance requirements, the coordination of Client's audit,
including preparation of audit schedules, confirmations, reports and
responses to auditors; and, the performance of such additional duties
as requested by Client's Board of Directors (collectively referred to
herein as the "Services"). Consultant may not assign his duties
hereunder unless agreed to in writing with Client. Consultant's failure
to perform the Services shall be deemed a voluntary termination of this
Agreement by Consultant pursuant to Paragraph 12 hereof.
3. Term
This Agreement shall have an initial term ending on June 30, 1996 (the
"Initial Consulting Period"); thereafter, this Agreement will
automatically be extended on a month to month basis (the "Extension
Period") unless Consultant or Client shall serve written notice on the
other party terminating the Agreement; provided, however, that
Consultant and client shall agree in writing as to Consultant's
continuing compensation. Notice to terminate shall be in writing and
shall be delivered at least ten (10) days prior to the end of the
Initial Consulting Period or any subsequent Extension Period as
provided herein. In the event of termination pursuant to this Paragraph
3,
[HART\AGR:DONGCON.AGR]
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neither party shall have any further rights or obligations hereunder
after the effective date of such termination, except that the
obligation of Client to pay fees earned and to reimburse costs and
expenses of Consultant incurred prior to the effective date of
termination in performance of the Services shall continue until such
fees, costs, and expenses are paid in full by Client.
4. Time and Effort of Consultant
Consultant shall devote that amount of working time, as necessary, on a
monthly basis, to fulfilling his obligations under this Agreement. The
particular amount of time may vary from day to day or week to week;
provided however, that Consultant shall allocate and be available to
Client for at least eight (8) hours per calendar month. Consultant
agrees that he will at all times, faithfully and to the best of his
experience, ability, and talents, perform all the duties required of
him under this Agreement.
5. Compensation
Compensation to Consultant for the Services provided under this
Agreement shall consist of the following:
(A) For Services as Chief Financial Officer. During the term of
the Agreement Consultant shall be paid a base fee for serving
as Client's Chief Financial Officer, and providing advice
regarding general financial and corporate affairs and growth
strategy, at the rate of Ten Thousand Dollars ($10,000) per
annum, with such fee to be paid bi-monthly in arrears in cash
or in shares of Client's common stock (the "Fee Shares"), at
Client's sole discretion.
(B) Options. As incentive to execute this Agreement, Client grants
to Consultant the option to purchase shares of Client's common
stock (the "Option") consisting of 166,000 shares (the "Option
Shares"), exercisable at a price of $.01 per share (the
"Exercise Price"). Subject to Client's right to terminate, as
defined in Paragraph 12 hereunder, the right of Consultant to
exercise such Option will vest to Consultant monthly in
arrears over the Initial Consulting Term beginning the date
hereof.
6. Registration of Client's Shares
As soon as possible following the date hereof, Client will register the
Option Shares, and the Fee Shares (if any) with the Securities and
Exchange Commission under a Form S-8 registration statement. At
Client's sole discretion, any such shares to be issued to Consultant
may be issued prior to registration in reliance on exemptions from
registration provided by Section 4(2) of the Securities Act of 1933
(the "Act"), Regulation D of the Act, and applicable state securities
laws. Such shares shall be issued in reliance on representations and
warranties of Consultant set forth herein.
7. Costs and Expenses
Unless otherwise agreed and approved in writing between Consultant and
Client, all third party and out-of-pocket expenses, filing fees, copy,
and mailing expenses incurred by Consultant
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<PAGE>
performing Services under this Agreement are the responsibility of
Consultant. Any expenses incurred with the previous approval of Client
in carrying out the Services set forth under this Agreement shall be
reimbursed by Client within thirty (30) days of written notice by
Consultant.
8. Place of Services
Except as otherwise mutually agreed by Consultant and Client, the
Services provided by Consultant hereunder will be performed primarily
through Client's offices in Irvine, California, or such other place of
business designated by Client as its principal office.
9. Independent Contractor
Consultant will act as an independent contractor in the performance of
duties under this Agreement. Accordingly, Consultant will be
responsible for payment of all federal, state, and local taxes on
compensation paid under this Agreement, including income and social
security taxes, unemployment insurance, and any other taxes or business
license fees as may be required.
10. No Agency Express or Implied
This Agreement neither expressly nor impliedly creates a relationship
of principal and agent between Consultant and Client. Consultant is not
authorized to enter into any agreements on behalf of Client. Client
expressly retains the right to approve, in its sole discretion, any and
all transactions introduced by Consultant (if any) and to make all
final decisions with respect to activities undertaken by Consultant
related to this Agreement.
11. Nondisclosure and Nonuse of Confidential Information
Consultant acknowledges that non-public information concerning the
finances, plans, strategies, and overall business operations of Client
is highly confidential and proprietary to Client ("Confidential
Information"). This Confidential Information includes, but is not
limited to, the following:
(A) Non-public information related to the business operations,
including financial and accounting information, plans of
operations, and potential mergers or acquisitions prior to the
public announcement of Client;
(B) Customer lists, call lists, and other non-public customer data
of Client;
(C) Memoranda, notes, records, sketches, plans, drawings, and any
media used to store, communicate, transmit, record, or embody
such Confidential Information of Client;
(D) Information treated, marked, or otherwise identified by Client
as confidential or as trade secrets.
Consultant acknowledges that such Confidential Information represents a
legitimate, valuable, and protectable interest of Client and gives
Client a competitive advantage, which would otherwise be lost if the
Confidential Information was improperly disclosed. Consultant further
acknowledges that unauthorized or improper disclosure or use of
Confidential Information would cause Client
[HART\AGR:DONGCON.AGR]
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<PAGE>
irreparable harm and injury. Consultant therefore agrees that, in
perpetuity or for as long as the Confidential Information remains
confidential, he will not disclose or threaten to disclose the
Confidential Information to any person, partnership, company,
corporation, or to any other business or governmental organization or
agency without the express written consent of Client, as the case may
be. Consultant further agrees not to use or threaten to use the
Confidential Information in any way that is not specifically authorized
by, or otherwise contrary to the interests of Client, as the case may
be. Consultant agrees that unauthorized disclosure or use of
Confidential Information constitutes misappropriation of trade secrets
and confidential information. Consultant further agrees that all
ownership rights to the Confidential Information are held or retained
by Client, as the case may be, and that no right of ownership shall
pass to Consultant by virtue of this Agreement or the Services provided
hereunder.
12. Termination
(A) Termination for Disability. If during the Initial Consulting
Period, Consultant shall be unable to provide the services as
set forth under this Agreement for twenty (20) business days
because of illness, accident, or other incapacity, Client
shall have the right to immediately terminate this Agreement
upon written notice to Consultant after the end of any such
20-day period. Termination under this Paragraph 12(A) shall be
effective upon receipt by Consultant of such written notice.
(B) Death. In the event of Consultant's death, this Agreement and
all rights and obligations hereunder shall immediately be
terminated.
(C) Termination for Cause. Client may, at its option, terminate
this Agreement by giving written notice of termination to
Consultant without prejudice to any other remedy to which the
Client may be entitled either at law, in equity, or under this
Agreement, if Consultant:
(i) Willfully breaches or neglects the duties, or fails to
timely provide the Services as required under the
terms of this Agreement;
(ii) Fails to promptly comply with and carry out the
directives of Client's Board of Directors;
(iii) Commits any dishonest or unlawful act, in the
judgment of Client's Board of Directors;
(iv) Engages in any conduct which disrupts the business of
Client or any entity affiliated with Client;
(v) Fails to produce work product which, in the judgment
of Client's Board of Directors, is necessary for
Client to comply with requests from auditors or
Consultant's successor, or to timely file reports
required of it.
(vi) Is found to have engaged in conduct, prior to or
subsequent to the date hereof, that may preclude
Client from obtaining any local, state or federal
regulatory approval
[HART\AGR:DONGCON.AGR]
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<PAGE>
of Client's intent, or application for a license, to
own an interest in or to operate any regulated
business.
(D) Termination Other Than For Cause. This Agreement shall
terminate immediately on the occurrence of any one of
the following events:
(i) The occurrence of circumstances, in the judgment of
Client's Board of Directors, that make it
impracticable for Client to continue its present line
of business;
(ii) The decision of and upon notice by Consultant to
voluntarily terminate this Agreement;
(iii) The loss by Consultant of legal capacity;
(iv) If either party files a petition in a court of
bankruptcy or is adjudicated a bankrupt;
(v) If either party institutes, or has instituted against
it any bankruptcy proceeding for reorganization for
rearrangement of the party's financial affairs;
(vi) If either party has a receiver of the party's assets
or property appointed because of insolvency;
(vii) If either party makes a general assignment for the
benefit of creditors; or
(viii) If either party otherwise becomes insolvent or unable
to timely satisfy all obligations in the ordinary
course of business.
(E) Effect of Termination on Compensation. In the event of the
termination of this Agreement Other Than for Cause prior to
the expiration of the Initial Consulting Period, Consultant
shall be entitled to the compensation earned, and to exercise
by appropriate payment therefore the Option Shares exercisable
prior to the date of termination as provided for in this
Agreement. Consultant shall be entitled to no further
compensation after the date of termination.
13. Representations and Warranties of Client
Client represents and warrants to Consultant that:
(A) Corporate Existence. Client is a corporation duly organized,
validly existing, and in good standing under the laws of the
State of Nevada, with corporate power to own property and
carry on its business as it is now being conducted.
(B) Financial Information. Client has or will cause to be
delivered concurrently with the execution of this Agreement,
copies of the Disclosure Documents (as defined in Paragraph
14(D)(1)) which accurately set forth the financial condition
of Client as of the respective dates of such documents.
[HART\AGR:DONGCON.AGR]
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<PAGE>
(C) Capitalization. The capitalization of Client is, as of the
date hereof, comprised of Thirty -------------- Million
(30,000,000) shares of authorized $.01 par value common
stock of which no more than Twenty Eight Million
(28,000,000) shares are issued and outstanding, with Two
Hundred Fifty Thousand (250,000) shares of Series B
Convertible Preferred Stock issued and outstanding and
Eighteen Million (18,000,000) Warrants and Options to
purchase common stock which, upon exercise will result in at
least Eighteen Million (18,000,000) additional shares of
common stock being issued. All issued and outstanding shares
are legally issued, fully paid, and nonassessable, and are
not issued in violation of the preemptive or other right of
any person.
(D) No Conflict. This Agreement has been duly executed by Client
and the execution and performance of this Agreement will not
violate, or result in a breach of, or constitute a default
in any agreement, instrument, judgment, decree or order to
which Client is a party or to which Client is subject, nor
will such execution and performance constitute a violation
or conflict of any fiduciary duty to which Client is
subject.
(E) Full Disclosure. The information concerning Client provided
to Consultant pursuant to this Agreement is, to the best of
Client's knowledge and belief, complete and accurate in all
material respects and does not contain any untrue statement
of a material fact or omit to state a material fact required
to make the statements made, in light of the circumstances
under which they were made, not misleading.
(F) Date of Representations and Warranties. Each of the
representations and warranties of Client set forth in this
Agreement is true and correct at and as of the date of
execution of this Agreement.
14. Representations and Warranties of Consultant
Consultant represents and warrants to Client that:
(A) Prior Experience. Consultant has extensive experience in the
area of auditing publicly-held companies and the preparation
of financial statements, establishment of internal control
procedures, tax planning, debt and equity financing, budgeting
and capital requirement analysis.
(B) No Conflict. This Agreement has been duly executed by
Consultant and the execution and performance of this Agreement
will not violate, or result in a breach of, or constitute a
default in any agreement, instrument, judgment, decree or
order to which Consultant is a party or to which Consultant is
subject, nor will such execution and performance constitute a
violation or conflict of any fiduciary duty to which
Consultant is subject.
(C) No Litigation. Consultant is not a defendant, nor plaintiff
against whom a counterclaim has been asserted, in any
litigation, pending or threatened, nor has any material claim
been made or asserted against Consultant, nor are there any
proceedings threatened or pending before any U.S. or other
territorial, federal, state or municipal government, or any
department, board, body or agency thereof, involving as of the
date hereof, that may
[HART\AGR:DONGCON.AGR]
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<PAGE>
entitle a successful litigant to a claim against any
assets of Consultant, or interfere in any way with the
duties of Consultant hereunder.
(D) Registration and/or Exemption of Client's Shares. Consultant
understands and acknowledges that the Option Shares issued
and any Fee Shares issued pursuant to this Agreement prior
to registration will be so issued in reliance on the
exemptions from registration provided by Section 4(2) or
Regulation D of the Act and applicable state securities
laws. Representations and warranties by Consultant in this
Paragraph will be used and relied upon by Client to
determine whether any issuance of such shares may be made to
Consultant pursuant hereto, and Consultant will notify
Client immediately of any material changes to the
representations made herein. In this regard, Consultant
represents and warrants that:
(1) Consultant has been furnished with a copy of Client's
most recent Annual Report on Form 10-KSB and 10-K and
all reports or documents required to be filed under
Sections 13(a), 14(a), and 15(d) of the Securities and
Exchange Act of 1934 ("Exchange Act"), including but
not limited to quarterly reports on Form 10-QSB or
10-Q, Current Reports on Form 8-K, and Proxy Statement
(the "Disclosure Documents"). In addition, Consultant
has been furnished with a description of Client's
capital structure and any material changes in Client's
financial condition that may not have been disclosed in
the Disclosure Documents.
(2) Consultant has had the opportunity to ask questions and
receive answers concerning the terms and conditions of
Client's shares to be issued pursuant to this
Agreement, and to obtain any additional information
which Client possesses or can acquire without
unreasonable effort or expense necessary to verify the
accuracy of information furnished under this Paragraph.
(3) By reason of Consultant's knowledge and experience in
financial and business matters in general, and
investments in particular, Consultant is capable of
evaluating the merits and risks of this transaction and
in bearing the economic risks of an investment in
Client's shares, and Client in general, and fully
understand the speculative nature of such securities
and the possibility of such loss.
(4) Consultant is fully aware that any of Client's shares
issued to Consultant pursuant to this Agreement prior
to registration will be "Restricted Securities" as
defined by Rule 144 of the Act, and that any resale of
such shares by Consultant may be governed by Rule 144.
(6) Consultant will not sell, transfer or otherwise dispose
of any of Client's shares issued pursuant to this
Agreement prior to registration except in compliance
with the Act.
(7) Any and all certificates representing any of Client's
shares issued pursuant to this Agreement issued prior
to registration of such shares, and any and all
securities
[HART\AGR:DONGCON.AGR]
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<PAGE>
issued in replacement thereof or in exchange therefore,
shall bear the following legend:
"The shares represented by this certificate
have not been registered under the
Securities Act of 1933 (the "Act") and are
"restricted securities" as that term is
defined in Rule 144 under the Act. The
shares may not be offered for sale, sold, or
otherwise transferred except pursuant to an
effective Registration Statement under the
Act or pursuant to an exemption from
registration under the Act, the availability
of which is to be established to the
satisfaction of the Company."
(E) Full Disclosure. Consultant's resume, and all other
information concerning Consultant provided to Client pursuant
to this Agreement is, to the best of Consultant's knowledge
and belief, complete and accurate in all material respects and
does not contain any untrue statement of a material fact or
omit to state a material fact required to make the statements
made, in light of the circumstances under which they were
made, not misleading.
(F) Non-Compete and Related Agreements.
Consultant agrees that during the Non-competition Period (as
herein defined), unless otherwise agreed with Client in
writing, he will not:
(i) directly or indirectly own, manage, control,
participate in, lend his name to, act as consultant
or advisor to, or render services to (alone or in
association with any other person, firm, corporation
or other business organization) any person or entity
engaged in any business similar to or related in any
way to the business conducted by Client anywhere
within the continental United States,
(ii) have any interest directly or indirectly in any
business engaged in any business similar to or
related in any way to the business conducted by
Client (provided that nothing herein will prevent
Consultant from owning in the aggregate not more than
five percent (5%) of the outstanding stock of any
class of a corporation engaged in the business which
is publicly traded, so long as Consultant has not
participated in the management or conduct of business
of such corporation),
(iii) induce or attempt to induce any other employee of the
Client to leave the employ of the Client or its
affiliates, or in any way interfere with the
relationship between the Client and any other
employee of Client or its affiliates, or
(iv) induce or attempt to induce any customer, supplier,
franchisee, licensee, or other business relation of
Client or any affiliate of Client to cease doing
business with the Client or any affiliate of Client,
or in any way interfere with the relationship between
any customer, franchisee or other business relation
and Client or any affiliate of Client, without the
prior written consent of Client's Board of Directors.
[HART\AGR:DONGCON.AGR]
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<PAGE>
For purposes of this Agreement, "Non-competition Period" shall
mean the period commencing as of the date hereof and ending on
the second anniversary of the date on which Consultant shall
not be engaged by Client; provided that in the event
Consultant's engagement hereunder is terminated by Client for
any reason other than Cause or other than as provided in
Paragraph 12 above, "Non-competition Period" shall mean the
period commencing as of the date hereof and ending on the
second anniversary date of the termination hereof.
(ii) If, at the time of enforcement of any provisions of
Paragraph 12 above, a court of competent jurisdiction
holds that the restrictions stated therein are
unreasonable under circumstances then existing, the
parties hereto agree that the maximum period or scope
reasonable under such circumstances will be
substituted for the stated period or scope.
(iii) Consultant agrees that the covenants made in this
Paragraph shall be construed as an agreement
independent of any other provision of this Agreement,
and shall survive the termination of this Agreement
for a period of two (2) years.
(G) Soliciting Customers After Termination of Agreement.
Consultant shall not for a period two (2) years immediately
following the termination of his engagement with Client,
either directly or indirectly:
(i) make known to any person, firm or corporation the
names or addresses of any of the customers of Client
or any other information pertaining to them; or,
(ii) call on, solicit, or take away, attempt to call on,
solicit, to take away any of the customers of Client
on whom the Consultant called or became acquainted
with during its engagement with Client, either for
itself or for any other person, firm or corporation.
(H) Date of Representations and Warranties. Each of the
representations and warranties of Consultant set forth in this
Agreement is true and correct at and as of the date of
execution of this Agreement.
15. Indemnification
Client and Consultant agree to indemnify, defend and hold each other
harmless from and against all demands, claims, actions, losses,
damages, liabilities, costs and expenses, including without limitation,
interest, penalties and attorneys' fees and expenses asserted against
or imposed or incurred by either party by reason of or resulting from a
breach of any representation, warranty, covenant, condition, or
agreement of the other party to this Agreement.
16. Agreement Does not Contemplate Corrupt Practice - Domestic or Foreign
Any and all payments under this Agreement constitute compensation for
services performed and this Agreement and all payments and the use of
the payments by Consultant, do not and shall not constitute an offer,
payment, or promise or authorization of payment of any money or gift to
an
[HART\AGR:DONGCON.AGR]
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<PAGE>
official or political party of, or candidate for political office in
any jurisdiction within or outside the United States. These payments
may not be used to influence any act or decision of an official, party
or candidate to use his/her/its influence with a government to assist
Client in obtaining, retaining, or directing business to Client, or any
person or other corporate entity. As used in this paragraph, the term
"official" means any officer or employee of a government, or any person
acting in an official capacity for or on behalf of any government; the
term "government" includes any department, agency, or instrumentality
of a government.
17. Inside Information - Securities Laws Violations
In the course of the performance of his duties, Consultant may become
aware of information which may be considered "inside information"
within the meaning of the Federal Securities Laws, Rules and
Regulations. Consultant acknowledges that his use of such information
to purchase or sell securities of Client, or its affiliates, or to
transmit such information to any other party with a view to buy, sell
or otherwise deal in the securities of Client or its affiliates is
prohibited by law and would constitute a breach of this Agreement and
notwithstanding the provisions of this Agreement, will result in the
immediate termination of the Agreement.
18. Exclusive Services
Consultant agrees that the Services to be provided hereunder are
exclusive and, accordingly, Consultant shall not render services of the
same nature or of a similar nature to any other individual or entity
during the term hereof without the written consent of Client; provided
that, if Consultant wishes to consult to or provide services to any
other party, Consultant may voluntarily terminate this Agreement at any
time pursuant and subject to the provisions of Paragraph 12 hereof. On
the other hand, Consultant understands and agrees that Client shall not
be prevented or barred from retaining other persons or entities to
provide services of the same or similar nature as those provided by
Consultant.
19. Specific Performance
Consultant and Client acknowledge that in the event of a breach of this
Agreement by either party, money damages would be inadequate and the
non-breaching party would have no adequate remedy at law. Accordingly,
in the event of any controversy concerning the rights or obligations
under this Agreement, such rights or obligations shall be enforceable
in a court of equity by a decree of specific performance. Such remedy,
however, shall be cumulative and non-exclusive and shall be in addition
to any other remedy to which the parties may be entitled.
20. Miscellaneous
(A) Subsequent Events. Consultant and Client each agree to notify
the other party if, subsequent to the date of this Agreement,
either party incurs obligations which could compromise their
efforts and obligations under this Agreement.
(B) Amendment. This Agreement may be amended or modified at any
time and in any manner only by an instrument in writing
executed by the parties hereto.
[HART\AGR:DONGCON.AGR]
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<PAGE>
(C) Further Actions and Assurances. At any time and from time to
time, each party agrees, at its or their expense, to take
actions and to execute and deliver documents a may be
reasonably necessary to effectuate the purposes of this
Agreement.
(D) Waiver. Any failure of any party to this Agreement to comply
with any of its obligations, agreements, or conditions
hereunder may be waived in writing by the party to whom such
compliance is owed. The failure of any party to this Agreement
to enforce at any time any of the provisions of this Agreement
shall in no way be construed to be a waiver of any such
provision or a waiver of the right of such party thereafter to
enforce each and every such provision. No waiver of any breach
of or non-compliance with this Agreement shall be held to be a
waiver of any other or subsequent breach or non-compliance.
(E) Assignment. Neither this Agreement nor any right created by it
shall be assignable by Consultant without the prior written
consent of Client.
(F) Notices. Any notice or other communication required or
permitted by this Agreement must be in writing and shall be
deemed to be properly given when delivered in person to an
officer of the other party, when deposited in the United
States mails for transmittal by certified or registered mail,
postage prepaid, or when deposited with a public telegraph
company for transmittal, or when sent by facsimile
transmission charges prepared, provided that the communication
is addressed:
(1) In the case of Client:
Hart Industries Inc.
2 Park Plaza, Suite 470
Irvine, California 92714
Telephone: (714) 833-2094
Telefax: (714) 833-7854
(2) In the case of Consultant:
Steven Dong
1048 Irvine Ave., Ste. 306
Newport Beach, California 92660
Telephone: (714) 287-0194
Telefax: (714) 645-7610
or to such other person or address designated by Client or
Consultant to receive notice.
(G) Headings. The paragraph and subparagraph headings in this
agreement are inserted for convenience only and shall not
affect in any way the meaning or interpretation of this
Agreement.
(H) Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument.
[HART\AGR:DONGCON.AGR]
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<PAGE>
(I) Governing Law. This Agreement was negotiated and is being
contracted for in the State of California, and shall be
governed by the laws of the State of California,
notwithstanding any conflict-of-law provision to the contrary.
(J) Binding Effect. This Agreement shall be binding upon the
parties hereto and inure to the benefit of the parties, their
respective heirs, administrators, executors, successors, and
assigns.
(K) Entire Agreement. This Agreement contains the entire agreement
between the parties hereto and supersedes any and all prior
agreements, arrangements, or understandings between the
parties relating to the subject matter of this Agreement. No
oral understan dings, statements, promises, or inducements
contrary to the terms of this Agreement exist. No
representations, warranties, covenants, or conditions, express
or implied, other than as set forth herein, have been made by
any party.
(L) Severability. If any part of this Agreement is deemed to be
unenforceable the balance of the Agreement shall remain in
full force and effect.
(M) Facsimile Counterparts. A facsimile, telecopy, or other
reproduction of this Agreement may be executed by one or more
parties hereto and such executed copy may be delivered by
facsimile of similar instantaneous electronic transmission
device pursuant to which the signature of or on behalf of such
party can be seen, and such execution and delivery shall be
considered valid, binding and effective for all purposes. At
the request of any party hereto, all parties agree to execute
an original of this Agreement as well as any facsimile,
telecopy or other reproduction hereof.
(N) Termination of Any Prior Agreements. Effective the date
hereof, all prior rights of Consultant relating to the accrual
or payment of any form of compensation or other benefits from
Client based upon any agreements other than this Agreement,
whether written or oral, entered into prior to the date
hereof, are hereby terminated.
(O) Consolidation or Merger. Subject to the provisions of
Paragraph 12 hereof, in the event of a sale of the stock, or
substantially all of the stock, of Client, or consolidation or
merger of Client with or into another corporation or entity,
or the sale of substantially all of the operating assets of
the Client to another corporation, entity or individual,
Client may assign its rights and obligations under this
Agreement to its successor-in-interest and such
successor-in-interest shall be deemed to have acquired all
rights and assumed all obligations of Client hereunder;
provided, however, that in no event shall the duties and
services of Consultant provided for in Paragraph 2 hereof, or
the responsibilities, authority or powers commensurate
therewith, change in any material respect as a result of such
sale of stock, consolidation, merger or sale of assets.
(P) Time is of the Essence. Time is of the essence of this
Agreement and of each and every provision hereof.
[HART\AGR:DONGCON.AGR]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
above written.
"Consultant"
August----, 1996 /s/ Steven H. Dong
---------------------------------------
Steven H. Dong
"Client"
HART INDUSTRIES INC.
a Nevada corporation
By:------------------------------------
Name: Fred G. Luke
Title: President
[HART\AGR:DONGCON.AGR]
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EXHIBIT 10.19
CONSULTING AGREEMENT WITH JOHN D. DESBROW
CONSULTING AGREEMENT
This Consulting Agreement is made this 1st day of July, 1996 by and
between John D. Desbrow, Attorney at Law ("Consultant") and Hart Industries,
Inc., a Nevada corporation, with its principal offices at 2 Park Plaza, Suite
470, Irvine, California 92714 ("Client").
WHEREAS,Consultant is an attorney licensed to practice law in the
State of California; and
WHEREAS,Consultant has served as an Officer and Director of Client
since July 31, 1993; and
WHEREAS, Consultant received shares and an option to purchase shares of
Client as compensation for services rendered to July 31, 1994; and
WHEREAS, Consultant has billed Client $2,000 per month for services
rendered from August 1, 1994 to the present; and
WHEREAS, the parties desire to memorialize the compensation due to
Consultant for past services rendered and to state the terms and conditions for
the rendering of future services through December 31, 1996.
NOW, THEREFORE, in consideration of mutual promises, covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledge, the Company and
Consultant agree as follows:
1. Prior and Future Services
The parties confirm that Consultant has been engaged to serve as
Secretary and Director of Client since July 31, 1993. The parties agree
that Consultant has been compensated with 166,666 shares of Client's
common stock for services rendered from July 31, 1993 to July 31, 1994.
This agreement confirms Consultant's engagement and confirms the
Consultant will be engaged in his present capacities through December
31, 1996.
2. Scope of Services to be Provided
The services provided shall consist of all corporate duties commonly
performed by the General Counsel and Secretary of a publicly held
company.
3. Term
This Agreement shall have a term expiring on December 31, 1996;
thereafter, this Agreement will automatically be extended on a month to
month basis (the "Extension Period") unless Consultant or Client shall
serve written notice on the other party terminating the Agreement.
Notice to terminate shall be in writing and shall be delivered at least
ten (10) days prior to December 31, 1996 or any subsequent Extension
Period as provided herein. In the event of termination pursuant to this
Paragraph 3, neither party shall have any further rights or obligations
hereunder after the effective date of such termination, except that the
obligation of Client to pay fees earned and to
[JDD\AGR\HART.AGR]
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<PAGE>
reimburse costs and expenses of Consultant incurred prior to the effective date
of termination in performance of the Services shall continue until such fees,
costs, and expenses are paid in full by Client.
4. Time and Effort of Consultant
Consultant shall devote that amount of working time, as necessary, on a
weekly basis, to fulfilling his obligations under this Agreement. The
particular amount of time may vary from day to day or week to week;
Client understands that Consultant has other clients which require some
of Consultant's professional time, but which do not conflict with
Consultant's obligations hereunder. Consultant agrees that he will at
all times, faithfully and to the best of his experience, ability, and
talents, perform all the duties required of him under this Agreement.
5. Compensation
Compensation to Consultant for the Services provided under this
Agreement shall consist of the following:
(A) Secretary's Fee. Commencing August 1, 1994, Consultant shall
be paid a base fee of $1,000 --------------- per month.
(B) Director's Fee. Commencing August 1, 1994, Consultant shall be
paid a base fee for serving as a member of Client's Board of
Directors, at the monthly rate of $1,000.
(C) Options. As incentive to execute this Agreement, and in
consideration of past services rendered, Client grants to
Consultant the option to purchase Client's common stock (the
"Option") consisting of 166,666 shares of Client's common
stock per each twelve month period commencing August 1, 1994
(the "Option Shares") exercisable at a price of $.01 per share
(the "Exercise Price"). Subject to Client's right to
terminate, as defined in Paragraph 12 hereunder, the right of
Consultant to exercise such Option will vest to Consultant
monthly in advance over each twelve month period beginning
August 1, 1994.
6. Registration of Option Shares
As soon as possible following the date hereof, Client will register the
Option Shares with the Securities and Exchange Commission under a Form
S-8 registration statement. At Client's sole discretion, Fee Shares may
be issued or reserved for issuance prior to registration in reliance on
exemptions from registration provided by Section 4(2) of the Securities
Act of 1933 (the "Act"), Regulation D of the Act, and applicable state
securities laws.
7. Costs and Expenses
Unless otherwise agreed and approved in writing between Consultant and
Client, all third party and out-of-pocket expenses, filing fees, copy,
and mailing expenses incurred by Consultant performing Services under
this Agreement are the responsibility of Consultant. Any expenses
incurred with the previous approval of Client in carrying out the
Services set forth under this Agreement shall be reimbursed by Client
within thirty (30) days of written notice by Consultant.
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<PAGE>
8. Place of Services
The Services provided by Consultant hereunder will be performed
primarily through Client's offices in Irvine, California, except as
otherwise mutually agreed by Consultant and Client. It is understood
and expected that Consultant may make contacts with persons and
entities and perform services in other locations as deemed appropriate
and directed by Client.
9. Independent Contractor
Consultant will act as an independent contractor in the performance of
duties under this Agreement. Accordingly, Consultant will be
responsible for payment of all federal, state, and local taxes on
compensation paid under this Agreement, including income and social
security taxes, unemployment insurance, and any other taxes or business
license fees as may be required.
10. No Agency Express or Implied
This Agreement neither expressly nor impliedly creates a relationship
of principal and agent between Consultant and Client. Consultant is not
authorized to enter into any agreements on behalf of Client. Client
expressly retains the right to approve, in its sole discretion, any and
all transactions introduced by Consultant (if any) and to make all
final decisions with respect to activities undertaken by Consultant
related to this Agreement.
11. Nondisclosure and Nonuse of Confidential Information
Consultant agrees that non-public information concerning the finances,
plans, strategies, and overall business operations of Client is highly
confidential and proprietary to Client ("Confidential Information").
This Confidential Information includes, but is not limited to, the
following:
(A) Non-public information related to the business operations,
including financial and accounting information, plans of
operations, and potential mergers or acquisitions prior to the
public announcement of Client;
(B) Customer lists, call lists, and other non-public customer data
of Client;
(C) Memoranda, notes, records, sketches, plans, drawings, and any
media used to store, communicate, transmit, record, or embody
such Confidential Information of Client;
(D) Information treated, marked, or otherwise identified by Client
as confidential or as trade secrets.
Consultant acknowledges that such Confidential Information represents a
legitimate, valuable, and protectable interest of Client and gives
Client a competitive advantage, which would otherwise be lost if the
Confidential Information was improperly disclosed. Consultant further
acknowledges that unauthorized or improper disclosure or use of
Confidential Information would cause Client irreparable harm and
injury. Consultant therefore agrees that, in perpetuity or for as long
as the Confidential Information remains confidential, he will not
disclose or threaten to disclose the Confidential Information to any
person, partnership, company, corporation, or to any other business
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<PAGE>
or governmental organization or agency without the express written
consent of Client, as the case may be. Consultant further agrees not to
use or threaten to use the Confidential Information in any way that is
not specifically authorized by, or otherwise contrary to the interests
of Client, as the case may be. Consultant agrees that unauthorized
disclosure or use of Confidential Information constitutes
misappropriation of trade secrets and confidential information.
Consultant further agrees that all ownership rights to the Confidential
Information are held or retained by Client, as the case may be, and
that no right of ownership shall pass to Consultant by virtue of this
Agreement or the services provided hereunder.
12. Termination
(A) Termination for Disability. If prior to December 31, 1996,
Consultant shall be unable to provide the services as set
forth under this Agreement for twenty (20) business days
because of illness, accident, or other incapacity, Client
shall have the right to terminate this Agreement upon written
notice to Consultant within ten (10) days after the end of any
such 20-day period. Termination under this Paragraph 12(A)
shall be effective upon receipt by Consultant of such written
notice.
(B) Death. In the event of Consultant's death, this Agreement and
all rights and obligations hereunder shall immediately be
terminated.
(C) Termination for Cause. The Client may, at its option,
terminate this Agreement by giving written notice of
termination to Consultant without prejudice to any other
remedy to which the Client may be entitled either at law, in
equity, or under this Agreement, if Consultant:
(i) Willfully breaches or neglects the duties, or fails to
timely provide the Services as required under the terms
of this Agreement;
(ii) Fails to promptly comply with and carry out the
directives of Client's Board of Directors;
(iii)Commits any dishonest or unlawful act, in the judgment
of Client's Board of Directors.
(D) Termination Other Than For Cause. This Agreement shall
terminate immediately on the occurrence of any one of the
following events:
(i) The occurrence of circumstances, in the judgment of
Client's Board of Directors, that make it impracticable
for Client to continue its present line(s) of business;
(ii) The decision of and upon notice by Consultant to
voluntarily terminate this Agreement;
(iii) The loss by Consultant of legal capacity;
(iv) If either party files a petition in a court of
bankruptcy or is adjudicated a bankrupt;
[JDD\AGR\HART.AGR]
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<PAGE>
(v) If either party institutes, or has instituted against
it any bankruptcy proceeding for reorganization for
rearrangement of the party's financial affairs;
(vi) If either party has a receiver of the party's assets or
property appointed because of insolvency;
(vii)If either party makes a general assignment for the
benefit of creditors; or
(viii) If either party otherwise becomes insolvent or unable
to timely satisfy all obligations in the ordinary
course of business.
(E) Effect of Termination on Compensation. In the event of the
termination of this Agreement for Other Than Cause prior to
December 31, 1996, Consultant shall be entitled to the
compensation earned, and to the Option Shares accrued prior to
the date of termination as provided for in this Agreement.
Consultant shall be entitled to no further compensation after
the date of termination.
13. Representations and Warranties of Client
Client represents and warrants to Consultant that:
(A) Corporate Existence. Client is a corporation duly organized,
validly existing, and in good standing under the laws of the
State of Nevada, with corporate power to own property and
carry on its business as it is now being conducted.
(B) No Conflict. This Agreement has been duly executed by Client
and the execution and performance of this Agreement will not
violate, or result in a breach of, or constitute a default in
any agreement, instrument, judgment, decree or order to which
Client is a party or to which Client is subject, nor will such
execution and performance constitute a violation or conflict
of any fiduciary duty to which Client is subject.
(C) Date of Representations and Warranties. Each of the
representations and warranties of Client set forth in this
Agreement is true and correct at and as of the date of
execution of this Agreement.
14. Representations and Warranties of Consultant
Consultant represents and warrants to Client that:
(A) Prior Experience. Consultant has extensive experience in the
practice of general business and securities law.
(B) No Conflict. This Agreement has been duly executed by
Consultant and the execution and performance of this Agreement
will not violate, or result in a breach of, or constitute a
default in any agreement, instrument, judgment, decree or
order to which Consultant is a party or to which Consultant is
subject, nor will such execution and performance constitute a
violation or conflict of any fiduciary duty to which
Consultant is subject.
[JDD\AGR\HART.AGR]
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<PAGE>
(C) Date of Representations and Warranties. Each of the
representations and warranties of Consultant set forth in this
Agreement is true and correct at and as of the date of
execution of this Agreement.
15. Indemnification
Client and Consultant agree to indemnify, defend and hold each other
harmless from and against all demands, claims, actions, losses,
damages, liabilities, costs and expenses, including without limitation,
interest, penalties and attorneys' fees and expenses asserted against
or imposed or incurred by either party by reason of or resulting from a
breach of any representation, warranty, covenant, condition, or
agreement of the other party to this Agreement. Client and Consultant
agree to execute a separate Indemnification Agreement.
16. Agreement Does not Contemplate Corrupt Practice - Domestic or Foreign
Any and all payments under this Agreement constitute compensation for
services performed and this Agreement and all payments and the use of
the payments by Consultant, do not and shall not constitute an offer,
payment, or promise or authorization of payment of any money or gift to
an official or political party of, or candidate for political office in
any jurisdiction within or outside the United States. These payments
may not be used to influence any act or decision of an official, party
or candidate to use his/her/its influence with a government to assist
Client in obtaining, retaining, or directing business to Client, or any
person or other corporate entity. As used in this paragraph, the term
"official" means any officer or employee of a government, or any person
acting in an official capacity for or on behalf of any government; the
term "government" includes any department, agency, or instrumentality
of a government.
17. Inside Information - Securities Laws Violations
In the course of the performance of his duties, Consultant may become
aware of information which may be considered "inside information"
within the meaning of the Federal Securities Laws, Rules and
Regulations. Consultant acknowledges that his use of such information
to purchase or sell securities of Client, or its affiliates, or to
transmit such information to any other party with a view to buy, sell
or otherwise deal in the securities of Client or its affiliates is
prohibited by law and would constitute a breach of this Agreement and
notwithstanding the provisions of this Agreement, will result in the
immediate termination of the Agreement.
18. Miscellaneous
(A) Subsequent Events. Consultant and Client each agree to notify
the other party if, subsequent to the date of this Agreement,
either party incurs obligations which could compromise their
efforts and obligations under this Agreement.
(B) Amendment. This Agreement may be amended or modified at any
time and in any manner only by an instrument in writing
executed by the parties hereto.
[JDD\AGR\HART.AGR]
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<PAGE>
(C) Further Actions and Assurances. At any time and from time to
time, each party agrees, at its or their expense, to take
actions and to execute and deliver documents a may be
reasonably necessary to effectuate the purposes of this
Agreement.
(D) Waiver. Any failure of any party to this Agreement to comply
with any of its obligations, agreements, or conditions
hereunder may be waived in writing by the party to whom such
compliance is owed. The failure of any party to this Agreement
to enforce at any time any of the provisions of this Agreement
shall in no way be construed to be a waiver of any such
provision or a waiver of the right of such party thereafter to
enforce each and every such provision. No waiver of any breach
of or non-compliance with this Agreement shall be held to be a
waiver of any other or subsequent breach or non-compliance.
(E) Assignment. Neither this Agreement nor any right created by it
shall be assignable by Consultant without the prior written
consent of Client.
(F) Notices. Any notice or other communication required or
permitted by this Agreement must be in writing and shall be
deemed to be properly given when delivered in person to an
officer of the other party, when deposited in the United
States mails for transmittal by certified or registered mail,
postage prepaid, or when deposited with a public telegraph
company for transmittal, or when sent by facsimile
transmission charges prepared, provided that the communication
is addressed:
(1) In the case of Client:
Hart Industries, Inc.
2 Park Plaza, Suite 470
Irvine, CA 92714
Telephone: (714) 553-3279
Telefax: (714) 833-7854
(2) In the case of Consultant:
John D. Desbrow
1406 Estelle
Newport Beach, CA 92660
(714) 645-9833
or to such other person or address designated by Client or Consultant
to receive notice.
(G) Headings. The paragraph and subparagraph headings in this
agreement are inserted for convenience only and shall not
affect in any way the meaning or interpretation of this
Agreement.
(H) Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument.
[JDD\AGR\HART.AGR]
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<PAGE>
(I) Governing Law. This Agreement was negotiated and is being
contracted for in the State of California, and shall be
governed by the laws of the State of California,
notwithstanding any conflict-of-law provision to the contrary.
(J) Binding Effect. This Agreement shall be binding upon the
parties hereto and inure to the benefit of the parties, their
respective heirs, administrators, executors, successors, and
assigns.
(K) Entire Agreement. This Agreement contains the entire agreement
between the parties hereto and supersedes any and all prior
agreements, arrangements, or understandings between the
parties relating to the subject matter of this Agreement. No
oral understandings, statements, promises, or inducements
contrary to the terms of this Agreement exist. No
representations, warranties, covenants, or conditions, express
or implied, other than as set forth herein, have been made by
any party.
(L) Severability. If any part of this Agreement is deemed to be
unenforceable the balance of the Agreement shall remain in
full force and effect.
(M) Facsimile Counterparts. A facsimile, telecopy, or other
reproduction of this Agreement may be executed by one or more
parties hereto and such executed copy may be delivered by
facsimile of similar instantaneous electronic transmission
device pursuant to which the signature of or on behalf of such
party can be seen, and such execution and delivery shall be
considered valid, binding and effective for all purposes. At
the request of any party hereto, all parties agree to execute
an original of this Agreement as well as any facsimile,
telecopy or other reproduction hereof.
(N) Termination of Any Prior Agreements. Effective the date
hereof, all prior rights of Consultant relating to the accrual
or payment of any form of compensation or other benefits from
Client based upon any agreements other than this Agreement,
whether written or oral, entered into prior to the date
hereof, are hereby terminated.
(O)Consolidation or Merger. Subject to the provisions of Paragraph 12
hereof, in the event of a sale of the stock, or substantially all
of the stock, of Client, or consolidation or merger of Client
with or into another corporation or entity, or the sale of
substantially all of the operating assets of the Client to
another corporation, entity or individual, Client may assign its
rights and obligations under this Agreement to its
successor-in-interest and such successor-in-interest shall be
deemed to have acquired all rights and assumed all obligations of
Client hereunder; provided, however, that in no event shall the
duties and services of Consultant provided for in Paragraph 2
hereof, or the responsibilities, authority or powers commensurate
therewith, change in any material respect as a result of such
sale of stock, consolidation, merger or sale of assets.
(P) Time is of the Essence. Time is of the essence of this
Agreement and of each and every provision hereof.
[JDD\AGR\HART.AGR]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
on the date above written.
"Consultant"
/s/ John D. Desbrow
--------------------------------------------
John D. Desbrow
"Client"
HART INDUSTRIES, INC.
a Nevada corporation
By:----------------------------------------
Name: Fred G. Luke
Title: President
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EXHIBIT 10.20
ADVISORY AND MANAGEMENT AGREEMENT WITH
NUVEN ADVISORS, INC., A NEVADA CORPORATION
ADVISORY AND MANAGEMENT AGREEMENT
THIS ADVISORY AND MANAGEMENT AGREEMENT ("Agreement") is made this 27th
day of January, 1995 effective the first day the Services (as defined below)
were first rendered by and between NuVen Advisors, Inc. a Nevada corporation
("Advisor") with offices at 2 Park Plaza, Suite 470, Irvine, California 92714
and Hart Industries, Inc., a Nevada corporation with its principal offices at
3753 Howard Hughes Parkway, Suite 200, Las Vegas, Nevada 89109 ("Client").
WHEREAS, Advisor and Advisor's personnel have numerous years of
experience in managing and in performing administrative duties for
privately-held companies and development stage investment opportunities; and
WHEREAS, Client desires to retain the Services of Advisor, and Advisor
desires to provide the Services (as defined below) for Client on the terms and
conditions set forth below.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, Client and Advisor
agree as follows:
1. Engagement
Client hereby engages Advisor to provide Client with merger and
acquisition advice, and management and general administrative services
("Advisor's personnel"), and Advisor accepts such engagement.
2. Scope of Services to be Provided
Advisor, subject to the control, direction and supervision of Client's
Board of Directors, and in conformity with applicable laws, Client's
Articles of Incorporation, By-laws, registration statements, business
plan objectives, policies and restrictions, shall provide the following
Services, excluding the compensation to Advisor's employees or agents
covered under separate agreements, if any, and their related expenses,
as provided below:
(A) Management of Assets. Advisor will manage the Client's assets
including, by way of illustration, the evaluation of pertinent
economic, statistical, financial and other data, and
formulation and/or implementation of a corporate business
plan; and
(B) Management of Operations. Advisor will conduct and manage the
day-to-day operations of the Client including, by way of
illustration, the furnishing of routine legal, supervisory,
accounting and administrative services, and the supervision of
the Client's administrative personnel, except for services
provided by outside counsel selected by Client; and
(C) Administrative Facilities. Advisor will furnish to Client
office space, facilities, equipment and personnel adequate to
provide the Services.
[NUVEN/AGR:HART94.AGR]-4
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<PAGE>
3. Term
This Agreement shall have an initial term of three (3) years (the
"Initial Advisory Period"), with an effective date retroactive to the
date the Services were first performed by Advisor, which was on or
about January 1, 1994. At the conclusion of the Initial Advisory
Period, this Agreement will automatically be extended on a month to
month basis (the "Extension Period") unless Advisor or Client shall
serve written notice on the other party terminating the Agreement;
provided, however, that Advisor and Client shall agree in writing as to
Advisor's continuing compensation during any Extension Period. Any
notice to terminate given hereunder shall be in writing and shall be
delivered at least ten (10) days prior to the end of the Initial
Advisory Period or any subsequent Extension Period.
4. Time and Effort of Advisor
Advisor shall cause Advisor's personnel to devote that amount of time,
as necessary, on a weekly basis, to fulfilling Advisor's obligations
under this Agreement. The particular amount of time may vary from day
to day or week to week. Advisor unconditionally agrees that Advisor's
personnel, or his replacement, will at all times, faithfully and to the
best of his experience, ability, and talents, perform all the duties
required of Advisor under this Agreement.
5. Compensation
Client agrees to pay Advisor the following (collectively, the
"Consideration") for the Services rendered hereunder:
(A) The Services. The Client shall pay to the Advisor, as
compensation for the Services rendered, facilities furnished
and expenses paid by the Advisor, a monthly fee equal to Ten
Thousand Dollars ($10,000). Such fee shall be payable for each
calendar month as soon as practicable after the end of that
month.
(B) Options. As incentive to execute this Agreement, Client grants
to Advisor the option to purchase Client's common stock (the
"Option") consisting of One Hundred Fifty Thousand (150,000)
shares (the "Option Shares"), exercisable at a price of $.20
per share (the "Exercise Price"). The right of Advisor to
exercise such Option will vest to Advisor upon execution
hereof.
The parties acknowledge that the consideration for Client's
shares to be delivered to Advisor shall consist of the
Services rendered to Client, and that Advisor is accepting
payment in shares as an accommodation to Client. Client and
Advisor acknowledge that Advisor may be considered an
affiliate subject to Section 16(b) of the Securities Exchange
Act of 1934 and, in this regard, Client and Advisor agree that
for purposes of any "profit" computation under Section 16(b)
the price paid for the Fee Shares is equal to the Base Fee.
[NUVEN/AGR:HART94.AGR]-4
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<PAGE>
6. Role of Advisor
The Advisor, and any person controlled by or under common control with
the Advisor, shall be free to render similar services to others and
engage in other activities, so long as the Services rendered to the
Client are not impaired.
Except as otherwise required by the Investment Company Act of 1940 (
the "1940 Act"), any of the shareholders, directors, officers and
employees of the Client may be a shareholder, trustee, director,
officer or employee of, or be otherwise interested in, the Advisor, and
in any person controlled by or under common control with the Advisor,
and the Advisor and any person controlled by or under common control
with the Advisor, may have an interest in the Client.
Except as otherwise agreed, in the absence of willful misfeasance, bad
faith, negligence or reckless or reckless disregard or obligations or
duties hereunder on the part of the Advisor or Advisor's personnel,
Advisor shall not be subject to liability to the Client, or to any
shareholder of the Client, for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may
be sustained in the purchase, management, holding or sale of any asset
of or security issued by Client.
7. Other Services
If, as a result of providing the Services or otherwise, Advisor is
successful in effecting a merger or reverse acquisition between a
Business Opportunity and Client (a "Business Combination"), in addition
to the Advisory Fee set forth in Paragraph 5A, above, Advisor shall be
entitled to a Finder's Fee. Such Finder's Fee shall be equal to ten
percent (10%) of the value of each transaction and shall be payable at
the close of each and every transaction in cash, notes, or capital
stock of Client, or other consideration as the parties shall mutually
agree. Such agreement as to the make-up of such consideration shall be
reduced to writing prior to the execution and a definitive agreement
between Client, and the prospective purchaser/seller. Failing to reach
an agreement as to the make-up of such Finder's Fee, Client agrees that
such fee shall consist solely of cash. In the event that the Finder's
Fee contains capital stock ("Finders Fee Shares"), unless otherwise
mutually agreed between the parties in writing, such stock to be issued
to Advisor shall be valued at the average bid price of such stock
during the ten (10) days preceding the execution of the definitive
agreement relative to such Business Combination, or any public
announcement related to such transaction, whichever is the earlier
date.
In the event that the Finder's Fee Arrangement calls for capital stock,
unless otherwise mutually agreed to by the parties, such stock to be
issued to Consultant shall be valued at fifty percent (50%) of the
average bid price, or if no bid price then the book value, of such
stock during the thirty days' preceding execution of the definitive
agreement relating to such Business Combination or any public
announcement related to such Business Combination, whichever first
occurs.
8. Registration of Client's Shares
No later than ten (10) days following the date of an event giving use
to the obligation by Client to issue Fee Shares, Option Shares or
Finder Fee Shares, Client will register such shares with the Securities
and Exchange Commission under a Form S-8 or other applicable
registration statement.
At Client's sole discretion, such shares may be issued prior to
registration in reliance on exemptions from registration provided by
Section 4(2) of the Securities Act of 1933 (the "Act"), Regulation D of
the Act, and applicable state securities laws. Such issuance or
reservation shall be in reliance on representations and warranties of
Advisor set forth herein.
9. Costs and Expenses
All third party and out-of-pocket expenses, filing fees, copy, and
mailing expenses incurred by Advisor in the performance of the Services
under this Agreement are the responsibility of Client, and shall be
paid by Client, or reimbursed to Advisor, within ten (10) days, of
receipt of written notice by Advisor.
10. Place of Services
The Services provided by Advisor hereunder will be performed primarily
at Advisor's offices except as otherwise mutually agreed by Advisor and
Client. It is understood and expected that Advisor may make contacts
with persons and entities and perform the Services in other locations
as deemed appropriate by Advisor.
11. Independent Contractor
Advisor and Advisor's personnel will act as an independent contractor
in the performance of its duties under this Agreement. Accordingly,
Advisor will be responsible for payment of all federal, state, and
local taxes on compensation paid under this Agreement, including income
and social security taxes, unemployment insurance, and any other taxes
due relative to Advisor's personnel, and any and all business license
fees as may be required.
12. No Agency Express or Implied
This Agreement neither expressly nor impliedly creates a relationship
of principal and agent between Client and Advisor, or Employee and
Employer as between Advisor's personnel and Client. Neither Advisor's
personnel or Advisor are authorized to enter into any agreements on
behalf of Client. Advisor expressly retains the right to approve, in
its sole discretion, each and every transaction introduced to Client,
and to make all final decisions with respect to activities undertaken
by Advisor or Advisor's personnel related to this Agreement.
13. Termination
(A) Termination for Disability. If during the Initial Consulting
Period, Advisor or Advisor's personnel shall be unable to
provide the Services as set forth under this Agreement for 120
consecutive business days because of illness, accident, or
other incapacity, Client shall have the right to terminate
this Agreement upon written notice to Advisor not less than 30
business days after the end of any such 120-day period.
Termination under this Paragraph 13(A) shall be effective upon
receipt by Advisor of the written notice.
(B) Death. In the event of the death of Advisor's personnel with
replacement, this Agreement and all obligations hereunder
shall immediately be terminated.
(C) Termination for Cause. The Client may, at its option,
terminate this Agreement by giving written notice of
termination to Advisor without prejudice to any other remedy
to which the Client may be entitled either at law, in equity,
or under this Agreement, if Advisor:
(i) Willfully breaches or neglects the duties that Advisor
is required to perform under the terms of this
Agreement;
(ii) Fails to promptly comply with and carry out all
directives of Client's Board of Directors;
(iii)Commits any dishonest or unlawful act, in the judgment
of Client's Board of Directors;
(iv) Engages in any conduct which disrupts the business of
Client or any entity affiliated with Client; or
(D) Termination Other Than For Cause. This Agreement shall
terminate immediately on the occurrence of any one of the
following events:
(i) The occurrence of circumstances, in the judgment of
Client's Board of Directors, that make it impracticable
for Client to continue its present line(s) of business;
(ii) The decision of and upon notice by Advisor to
voluntarily terminate this Agreement;
(iii)If Client files a petition in a court of bankruptcy or
is adjudicated a bankrupt;
(iv) If Client institutes, or has instituted against it any
bankruptcy proceeding for reorganization for
rearrangement of its financial affairs;
(v) If Client has a receiver of its assets or property
appointed because of insolvency;
(vi) If Client makes a general assignment for the benefit of
creditors; or
(vii)If either party otherwise becomes insolvent or unable
to timely satisfy its obligations in the ordinary
course of business.
(E) Effect of Termination on Compensation. In the event of the
Termination Other Than For Cause prior to the completion of
the Initial Consulting Period, Advisor shall be entitled to
the full Compensation, the rights under the Options, and any
outstanding unpaid portion of the Consideration and expenses.
[NUVEN/AGR:HART94.AGR]-4
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<PAGE>
14. Representations and Warranties of Client
Client represents and warrants to Advisor that:
(A) Corporate Existence. Client is a corporation duly organized,
validly existing, and in good standing under the laws of the
State of Nevada with the corporate power to own property and
carry on its business as it is now being conducted.
(B) Financial Information. Client has or will cause to be
delivered concurrently with the execution of this Agreement,
copies of the Disclosure Documents (as defined in Paragraph
15(D)(1)) which accurately set forth the financial condition
of Client as of the respective dates of such documents.
(C) No Conflict. This Agreement has been duly executed by Client
and the execution and performance of this Agreement will not
violate, or result in a breach of, or constitute a default in
any agreement, instrument, judgment, decree or order to which
Client is a party or to which Client is subject, nor will such
execution and performance constitute a violation or conflict
of any fiduciary duty to which Client is subject.
(D) Full Disclosure. The information concerning Client provided to
Advisor pursuant to this Agreement is, to the best of Client's
knowledge and belief, complete and accurate in all material
respects and does not contain any untrue statement of a
material fact or omit to state a material fact required to
make the statements made, in light of the circumstances under
which they were made, not misleading.
(E) Date of Representations and Warranties. Each of the
representations and warranties of Client set forth in this
Agreement is true and correct at and as of the date of
execution of this Agreement.
15. Representations and Warranties of Advisor
Advisor represents and warrants to Client that:
(A) No Conflict. This Agreement has been duly executed by Advisor
and the execution and performance of this Agreement will not
violate, or result in a breach of, or constitute a default in
any agreement, instrument, judgment, decree or order to which
Advisor is a party or to which Advisor is subject, nor will
such execution and performance constitute a violation or
conflict of any fiduciary duty to which Advisor is subject.
(B) No Litigation. Advisor is not a defendant, nor plaintiffs
against whom a counterclaim has been asserted, in any
litigation, pending or threatened, nor has any material claim
been made or asserted against Advisor, nor are there any
proceedings threatened or pending before any U.S. or other
territorial, federal, state or municipal government, or any
department, board, body or agency thereof, involving as of the
date hereof, that may entitle a successful litigant to a claim
against any assets of Advisor, or interfere in any way with
the duties of Advisor hereunder.
(C) Registration and/or Exemption of Client's Shares. Option
Shares or Finder's Fee Shares may be issued prior to
registration in reliance on the exemptions from registration
provided by Section 4(2) of the Securities Act of 1933 (the
"Act"), Regulation D, and applicable state securities laws.
Representations and warranties by Advisor in this Paragraph
15(C) will be used and relied upon by Client to determine
whether any issuance of Option Shares may be made to Advisor
pursuant to Section 4(2) of the Act and Regulation D and
applicable state securities laws, and Advisor will notify
Client immediately of any material changes. With these
specific understandings, Advisor represents and warrants that:
(1) Advisor has been furnished with a copy of Client's most
recent Annual Report on Form 10-K and all reports or
documents required to be filed under Sections 13(a),
14(a), and 15(d) of the Securities and Exchange Act of
1934, as amended, including but not limited to
quarterly reports on Form 10-Q, current reports on Form
8-K, and proxy statements (the "Disclosure Documents").
In addition, Advisor has been furnished with a
description of Client's capital structure and any
material changes in Client's affairs that may not have
been disclosed in the Disclosure Documents.
(2) Advisor has had the opportunity to ask questions and
receive answers concerning the terms and conditions of
the Option Shares and/or Finder's Fee Shares to be
issued and/or reserved for issuance and to obtain any
additional information which Client possesses or can
acquire without unreasonable effort or expense that is
necessary to verify the accuracy of information
furnished under Paragraph 15(D)(1) of this Agreement.
(3) By reason of Advisor's knowledge and experience in
financial and business matters in general, and
investments in particular, Advisor is capable of
evaluating the merits and risks of this transaction and
in bearing the economic risks of an investment in the
Option Shares and the Introduction Shares, if any, and
the company in general, and fully understand the
speculative nature of such securities and the
possibility of such loss.
(4) The present financial condition of Advisor is such that
Advisor is not under any present or contemplated future
need to dispose of any portion of the Option Shares or
the Finder's Fee Shares, if any, to satisfy an existing
or contemplated undertaking, need, or indebtedness.
(5) Advisor is fully aware that any Option Shares and
Finder's Fee Shares issued to Advisor prior to
registration are "Restricted Securities" as defined by
Rule 144 of the Act and that any resale of such
securities by Advisor may be governed by Rule 144.
Advisor is further aware of the specific restrictions
on resale of such securities contained in Rule 144.
(6) Advisor will not sell, transfer or otherwise dispose of
any Option Shares or Finder's Fee Shares issued or
reserved for issuance prior to registration except in
compliance with the Act.
(7) Any and all certificates representing Clients share
issued upon exercise of options or otherwise prior to
registration of such shares and any and all securities
issued in replacement thereof or in exchange therefore,
shall bear the following legend:
"The shares represented by this certificate
have not been registered under the
Securities Act of 1933 (the "Act") and are
"restricted securities" as that term is
defined in Rule 144 under the Act. The
shares may not be offered for sale, sold, or
otherwise transferred except pursuant to an
effective Registration Statement under the
Act or pursuant to an exemption from
registration under the Act, the availability
of which is to be established to the
satisfaction of the Company."
(D) Full Disclosure. The information concerning Advisor provided
to Client pursuant to this Agreement is, to the best of
Advisor's knowledge and belief, complete and accurate in all
material respects and does not contain any untrue statement of
a material fact or omit to state a material fact required to
make the statements made, in light of the circumstances under
which they were made, not misleading.
(E) Date of Representations and Warranties. Each of the
representations and warranties of Advisor set forth in this
Agreement is true and correct at and as of the date of
execution of this Agreement.
16. Indemnification
Client and Advisor agree to indemnify, defend and hold each other
harmless from and against all demands, claims, actions, losses,
damages, liabilities, costs and expenses, including without limitation,
interest, penalties and attorneys' fees and expenses asserted against
or imposed or incurred by either party by reason of or resulting from a
breach of any representation, warranty, covenant, condition, or
agreement of the other party to this Agreement.
17. Agreement Does not Contemplate Corrupt Practice - Domestic or Foreign
All payments under this Agreement constitute compensation for services
performed and this Agreement and all payments and the use of the
payments by Advisor, do not and shall not constitute an offer, payment,
or promise or authorization of payment of any money or gift to an
official or political party of, or candidate for political office in
any jurisdiction within or outside the United States. These payments
may not be used to influence any act or decision of an official, party
or candidate to use his/her/its influence with a government to assist
Client in obtaining, retaining, or directing business to Client or any
person or other corporate entity. As used in this paragraph, the term
"official" means any officer or employee of a government, or any person
acting in an official capacity for or on behalf of any government; the
term "government" includes any department, agency, or instrumentality
of a government.
[NUVEN/AGR:HART94.AGR]-4
- 4 -
<PAGE>
18. Inside Information - Securities Laws Violations
In the course of the performance of his duties, Advisor may become
aware of information which may be considered "inside information"
within the meaning of the Federal Securities Laws, Rules and
Regulations. Advisor acknowledges that his use of such information to
purchase or sell securities of Client, or its affiliates, or to
transmit such information to any other party with a view to buy, sell
or otherwise deal in Client's securities is prohibited by law and would
constitute a breach of this Agreement and notwithstanding the
provisions of this Agreement, will result in the immediate termination
of the Agreement.
19. Specific Performance
Advisor and Client acknowledge that in the event of a breach of this
Agreement by either party, money damages would be inadequate and the
non-breaching party would have no adequate remedy at law. Accordingly,
in the event of any controversy concerning the rights or obligations
under this Agreement, such rights or obligations shall be enforceable
in a court of equity by a decree of specific performance. Such remedy,
however, shall be cumulative and non-exclusive and shall be in addition
to any other remedy to which the parties may be entitled.
20. Miscellaneous
(A) Subsequent Events. Advisor and Client each agree to notify the
other party if, subsequent to the date of this Agreement,
either party incurs obligations which could compromise its
efforts and obligations under this Agreement.
(B) Amendment. This Agreement may be amended or modified at any
time and in any manner only by an instrument in writing
executed by the parties hereto.
(C) Further Actions and Assurances. At any time and from time to
time, each party agrees, at its or their expense, to take
actions and to execute and deliver documents a may be
reasonably necessary to effectuate the purposes of this
Agreement.
(D) Waiver. Any failure of any party to this Agreement to comply
with any of its obligations, agreements, or conditions
hereunder may be waived in writing by the party to whom such
compliance is owed. The failure of any party to this Agreement
to enforce at any time any of the provisions of this Agreement
shall in no way be construed to be a waiver of any such
provision or a waiver of the right of such party thereafter to
enforce each and every such provision. No waiver of any breach
of or non-compliance with this Agreement shall be held to be a
waiver of any other or subsequent breach or non- compliance.
(E) Assignment. Neither this entire Agreement nor any right
created by it shall be assignable by either party without the
prior written consent of the other.
(F) Notices. Any notice or other communication required or
permitted by this Agreement must be in writing and shall be
deemed to be properly given when delivered in person to an
officer of the other party, when deposited in the United
States mails for transmittal by
certified or registered mail, postage prepaid, or when
deposited with a public telegraph company for transmittal, or
when sent by facsimile transmission charges prepared, provided
that the communication is addressed:
(i) In the case of Client:
Hart Industries, Inc.
3753 Howard Hughes Parkway, Suite 200
Las Vegas, Nevada 89109
Telephone: (702) 892-3745
Telefax: (714) 833-7854
(ii) In the case of Advisor and Advisor's personnel, to:
NuVen Advisors, Inc.
2 Park Plaza, Suite 470
Irvine, CA 92714
Telephone: (714) 833-2094
Telefax: (714) 833-7854
or to such other person or address designated by Client or
Advisor to receive notice.
(G) Headings. The section and subsection headings in this
agreement are inserted for convenience only and shall not
affect in any way the meaning or interpretation of this
Agreement.
(H) Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument.
(I) Governing Law. This Agreement was negotiated and is being
contracted for in the State of Nevada, and shall be governed
by the laws of the State of Nevada, notwithstanding any
conflict-of-law provision to the contrary.
(J) Binding Effect. This Agreement shall be binding upon the
parties hereto and inure to the benefit of the parties, their
respective heirs, administrators, executors, successors, and
assigns.
(K) Entire Agreement. This Agreement contains the entire agreement
between the parties hereto and supersedes any and all prior
agreements, arrangements, or understandings between the
parties relating to the subject matter of this Agreement. No
oral understan dings, statements, promises, or inducements
contrary to the terms of this Agreement exist. No
representations, warranties, covenants, or conditions, express
or implied, other than as set forth herein, have been made by
any party.
(L) Severability. If any part of this Agreement is deemed to be
unenforceable the balance of the Agreement shall remain in
full force and effect.
[NUVEN/AGR:HART94.AGR]-4
- 5 -
<PAGE>
(M) Facsimile Counterparts. A facsimile, telecopy, or other
reproduction of this Agreement may be executed by one or more
parties hereto and such executed copy may be delivered by
facsimile of similar instantaneous electronic transmission
device pursuant to which the signature of or on behalf of such
party can be seen, and such execution and delivery shall be
considered valid, binding and effective for all purposes. At
the request of any party hereto, all parties agree to execute
an original of this Agreement as well as any facsimile,
telecopy or other reproduction hereof.
(N) Termination of Any Prior Agreements. Effective the date
hereof, all prior rights of Advisor relating to the accrual or
payment of any form of compensation or other benefits from
Client based upon any agreements other than this Agreement,
whether written or oral, entered into prior to the date
hereof, are hereby terminated.
(O) Consolidation or Merger. Subject to the provisions of
Paragraph 7 hereof, in the event of a sale of the stock, or
substantially all of the stock, of Client, or consolidation or
merger of Client with or into another corporation or entity,
or the sale of substantially all of the operating assets of
the Client to another corporation, entity or individual,
Client may assign its rights and obligations under this
Agreement to its successor-in-interest and such
successor-in-interest shall be deemed to have acquired all
rights and assumed all obligations of Client hereunder;
provided, however, that in no event shall the duties and
Services of Advisor provided for in Paragraph 2 hereof, or the
responsibilities, authority or powers commensurate therewith,
change in any material respect as a result of such sale of
stock, consolidation, merger or sale of assets.
(P) Time is of the Essence. Time is of the essence of this
Agreement and of each and every provision hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement
on the date above written.
"Advisor"
NUVEN ADVISORS, INC.
a Nevada corporation
/s/ Jon L. Lawver
By:----------------------------------------
Name: Jon L. Lawver
Title: Vice President
"Client"
HART INDUSTRIES, INC.
a Nevada corporation
/s/ Fred G. Luke
By:----------------------------------------
Name: Fred G. Luke
Title: President
[NUVEN/AGR:HART94.AGR]-4
- 6 -
HART INDUSTRIES, INC.
INDEX TO FINANCIAL STATEMENTS
Page
(1) FINANCIAL STATEMENTS:
REPORT OF INDEPENDENT PUBLIC ACCOUNTANT ............................F-2
BALANCE SHEETS AS OF DECEMBER 31, 1995 AND 1994 ....................F-3
STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
DECEMBER 31, 1995 AND 1994 ........................................F-4
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
DECEMBER 31, 1995 AND 1994 ........................................F-5
STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED
DECEMBER 31, 1995 AND 1994 ........................................F-6
NOTES TO FINANCIAL STATEMENTS .................................F-7/F-11
[HART\10K:123195.KSB]-12
F-1
<PAGE>
Spurgeon, Kang & Associates Steven Y.C. Kang, CPA
Accountancy Corporation John H. Spurgeon, CPA
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
Hart Industries, Inc.
2 Park Plaza, Suite 470
Irvine, CA 92714
We have audited the accompanying balance sheets of Hart Industries, Inc. as of
December 31, 1995 and 1994, and the related statements of income, retained
earnings, and cash flows for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted audited standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1995 financial statements referred to above present fairly,
in all material respects, the financial position of Hart Industries, Inc. as of
December 31, 1995 and 1994, and the results of its operations and cash flows for
the years then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as going concern. As discussed in Note 1 to the financial
statements, the Company has incurred recurring net losses and negative cash
flows from operating activities since its inception, has limited liquid
resources and had negative working capital as of December 31, 1995. Management's
plans regarding those matters are described in Note 1. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
/s/ Spurgeon, Kang & Associates
Bellflower, CA 90706
August 7, 1996
Telephone: 310-867-2715 o Facsimile: 310-866-7046
9831 Belmont Street, Bellflower, CA 90706
Mailing Address: PO Box 1399, Bellflower, CA 90706
[HART\10K:123195.KSB]-12
F-2
<PAGE>
HART INDUSTRIES, INC.
Balance Sheets
As of December 31,
<TABLE>
<CAPTION>
ASSETS
- ----------------------------------------------------------- 1995 1994
----- ------
<S> <C> <C>
Current Assets: Cash $ 41 $ 185
------- -------
Total current assets 41 185
Property and Equipment (Note 7) - 61,910
TOTAL ASSETS $ 41 $62,095
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 7,375 $ 5,474
Due to affiliates 219,300 56,000
-------- ------
Total current liabilities $226,675 $61,474
-------- ------
Commitments and contingencies (Note 5) - -
Stockholders' Equity (Deficiency):
Common stock: $.01 Par Value, 50,000,000 shares
authorized; issued and outstanding: 1,730,960 shares as
of December 31, 1995, and 1994 17,310 17,310
Additional paid-in capital 5,252,948 5,252,948
Accumulated deficit (5,496,892) (5,269,637)
----------- -----------
Total stockholders' equity(deficiency) (226,634) 621
--------- ---
TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY (DEFICIENCY) $ 41 $ 62,095
===== =========
</TABLE>
The accompanying notes are an integral part of these financial statements
[HART\10K:123195.KSB]-12
F-3
<PAGE>
HART INDUSTRIES, INC.
Statements of Operations
For the Years Ended December 31,
<TABLE>
<CAPTION>
1995 1994
---------- -----------
<S> <C> <C>
Revenues $ -- $ --
Costs of Revenues -- --
-- --
Gross Profit -- --
Costs and Expenses:
General and Administrative Expenses 238,055 159,546
----------- ------------
Total Costs and Expenses 238,055 159,546
----------- ------------
Operating income (loss) (238,055) (159,546)
Other Income (Expense):
Gain on sale of assets 10,800 --
Write-off of investment -- (125,000)
Interest income -- 56,250
Write-off of dishwasher assets -- (2,500,000)
Write-down of property and
equipment -- (251,564)
Net Income (Loss) $ (227,255) $(2,979,860)
============ ============
Earnings (Loss) Per Common Share $ (.13) $ (2.98)
============ ============
Weighted Average Common Shares
Outstanding 1,730,960 1,001,794
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
[HART\10K:123195.KSB]-12
F-4
<PAGE>
HART INDUSTRIES, INC.
Statement of Cash Flows
For the Years Ended December 31,
<TABLE>
<CAPTION>
1995 1994
-------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (227,255) $ (2,979,860)
Adjustments to Reconcile Net Income to Net Cash Provided (Used)
by Operating Activities:
Gain on Sale of Assets (10,800) --
Write-off of dishwasher assets -- 2,500,000
Write-down of property and equipment -- 251,564
Write-off of investment securities -- 125,000
(Increase) decrease in:
Interest Receivable -- 28,000
Accounts Payable 1,901 11,950
Due to affiliate 163,300 56,000
-------------- ---------------
Net Cash Provided (Used) by Operating Activities (72,854) (7,346)
-------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Disposal of assets 72,710 --
-------------- ---------------
Net Cash Provided by Investing Activities 72,710 --
-------------- ---------------
Net Cash Provided (Used) by Financing
Activities -- --
-------------- ---------------
Net Increase (Decrease) in Cash and Cash Equivalents (144) (7,346)
Cash and Cash Equivalents - Beginning of Period 185 7,531
-------------- ---------------
Cash and Cash Equivalents - End of Period $ 41 $ 185
============== ===============
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Common Stock Issued for Payment of Notes Payable $ -- $ 175,127
Common Stock Issued for Assets/Investments $ -- $ --
Common Stock Issued for Services $ -- $ 5,000
</TABLE>
The accompanying notes are an integral part of these financial statements
[HART\10K:123195.KSB]-12
F-5
<PAGE>
HART INDUSTRIES, INC.
Statements of Stockholders' Equity
For the Years Ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
Common Common Additional Retained
Stock Stock Paid-In Earnings
Shares Amount Capital (Deficit) Total
--------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balances at January 1, 1994 480,962 $ 4,810 $5,085,321 $(2,289,777) $ ,800,354
Issuance of Stock for
Conversion of Debt 750,000 7,500 167,627 -- 175,127
Issuance of Stock for
Services 499,998 5,000 -- -- 5,000
Net Income (Loss) -- -- -- (2,979,860) (2,979,860)
--------- ------- ---------- ----------- -----------
Balances at December 31, 1994 1,730,960 17,310 5,252,948 (5,269,637) 621
---------- ------- ---------- ----------- ------------
Net income (loss) (227,255) (227,255)
Balances at December 31, 1995 1,730,960 $17,310 $5,252,948 $(5,496,892) $ (226,634)
========== ======= ========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
[HART\10K:123195.KSB]-12
F-6
<PAGE>
HART INDUSTRIES, INC.
Notes to Financial Statements
December 31, 1994
Note 1. Summary of Significant Accounting Policies and Business Activities
Organization
The Company was in the development stage from incorporation in October,
1982 to September 30, 1990. Activities through September 30, 1990
principally consisted of organizing the Company, issuing common stock
for cash, services, and equipment, negotiation of license agreements
and incurring research and development costs. All costs, except those
associated with the license agreements, patents, trademarks and
equipment costs, were expensed as incurred during the development
stage. In December, 1990, the Company sold its assets and all rights to
the nonelectric dishwasher for a note receivable and future royalties.
During 1990, the Company began performing sludge dewatering operations
through its Transportable Treatment Unit (TTU) and was taken out of the
development stage for accounting purposes. The revenue generated in
1990 was from the Environmental Services Division and the TTU. There
was no revenue generated in 1991 from the TTU. 1992 revenue was
generated through the Environmental Services Division. There were no
operating revenues during fiscal years 1993, 1994 or 1995.
Principles of Management Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Reorganization
Effective March 8, 1994 the Company reorganized via a merger with a
newly formed Nevada corporation whose name became Hart Industries, Inc.
at the effective date. The Merger Agreement was approved by the
Company's stockholders at the Annual Meeting held on January 18, 1994.
Under the Merger Agreement each shareholder received one share in the
Nevada corporation for every twenty shares held in the Company. Any
fractional shares resulting from the merger were rounded up to the
nearest whole share. As a result of the merger, the number of
authorized shares of common stock increased from 10,000,000 to
50,000,000 while retaining the same $.01 par value. All share and per
share amounts have been restated to give effect to the merger.
Going Concern
The Company has experienced recurring net losses, has limited liquid
resources, negative working capital and has no current operations.
Management's intent is to keep searching for additional sources of
capital and new operating opportunities. In the interim , the Company
will keep
[HART\10K:123195.KSB]-12
F-7
<PAGE>
Note 1. Summary of Significant Accounting Policies (Continued)
operating with minimal overhead and key administrative functions will
be provided by an affiliate. Accordingly, the accompanying consolidated
financial statements have been presented under the assumption the
Company would continue as a going concern.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less as cash equivalents.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed
using accelerated methods over the estimated useful lives of the assets
ranging from 3-15 years. The Company provides tax depreciation in
conformity with the provisions of applicable tax law. Cost and
accumulated depre ciation of assets sold or retired are removed from
the accounts and the net gain or loss is recorded in operations in the
year of the transaction.
Income Taxes
The Company accounts for income taxes using the liability method.
Income taxes are provided on all revenue and expense items, regardless
of the period in which such items are recognized for tax purposes,
except for those items representing a permanent difference between
pre-tax accounting income and taxable income. A valuation allowance is
recorded when it is more likely than not that benefits resulting from
deferred tax assets will not be realized.
Earnings (Loss) Per Common Share
Net income (loss) per common share is calculated by dividing net income
(loss) by the weighted average number of shares outstanding during each
year. All per share amounts are reported as adjusted after the merger
and resulting reverse stock split. Common stock equivalents were not
considered in the loss per share calculations as the effect would have
been anti-dilutive.
Issuance of Stock for Services
Shares of the Company's common stock issued for services are recorded
in accordance with APB16 at the fair market value of the stock issued
or the fair market of the services provided, whichever value is the
more clearly evident. The values of the services are typically
stipulated by contract.
Reclassification of Prior Year Amounts
To enhance comparability, the fiscal 1994 consolidated financial
statements have been reclassified, where appropriate, to conform with
the financial statement presentation used in fiscal 1995.
[HART\10K:123195.KSB]-12
F-8
<PAGE>
Note 2. Debt Conversion and Cancellation of Note Receivable
Stevenson, Abercrombie and Claythorne, Inc. ("SAC"), an affiliate of
the Company, funded the Company's operations through advances and loans
from March, 1983 through the end of 1992. In December, 1993 the
obligation resulting from advances made to the Company by SAC, totaling
$171,670, was acquired by NuVen Advisors, Inc., formerly New World
Capital, Inc. ("NuVen"). Effective August 31, 1996, NuVen and the
Company agreed to the conversion of the $171,670 note payable, plus
accrued interest, into 750,000 shares of the Company's common stock
which resulted in an increase to additional paid-in-capital of
$167,627.
On May 21, 1993 the Company sold all of the tools, dies and technology
for the non-electric dishwasher ("Dishwasher Assets") for $2,500,000
evidenced by a promissory note issued by NuVen. The Luke Family Trust
(the "Luke Trust") owns 90% of NuVen. Fred G. Luke is a Trustee of the
Luke Trust and a recently elected officer and director of the Company.
Effective August 31, 1994 NuVen and the Company mutually agreed to a
cancellation of the promissory note in exchange for the return of the
Dishwasher Assets to the Company. Additionally, NuVen agreed to pay all
accrued interest due under the note, which totaled $56,250 in 1994 and
$40,500 in 1993.
Note 3. Write-Off of Dishwasher Assets and Investment
In 1994, the Company decided to abandon its attempts to sell the
Dishwasher Assets and write them off. In addition, the Company
wrote-off a $125,000 investment in securities due to uncertainties in
the value and marketability of these securities.
Note 4. Federal Income Taxes
For financial statement and income tax reporting purposes, the Company
has net operating loss carry forwards as of December 31, 1995 of
approximately $5,300,000, which expire at various times from 1999
through 2009, and are available to reduce future Federal taxable
income, if any.
The Company accounts for income taxes using the liability method. The
deferred tax benefit applicable to the net operating loss carry forward
has been offset by a 100% valuation reserve since it is unlikely that
the Company will recognize any benefit from the carry forward.
Note 5. Commitments and Contingencies
Prior to September, 1992, the Company had rented facilities for
executive offices under a month-to-month sublease agreement from SAC.
From September 1992 to July 1993 the Company rented office space in
Newport Beach, California on a month-to-month basis. In August 1993,
the Company moved its executive offices into facilities provided by
Nuven.
[HART\10K:123195.KSB]-12
F-9
<PAGE>
Note 6. Sale of Manufacturing Assets
In July 1993, the Company acquired certain manufacturing assets and in
conjunction with its equipment leasing activities leased the assets to
a third party. The Company terminated the lease due to the lessee's
default, and in May 1995, sold the assets at auction for $72,710.
The Company has experienced negative cash outflows from operating
activities through 1992 and ceased operations in March 1992, prior to
capital restructuring and change in management. Cash contributions from
SAC provided the financial support necessary for the Company to satisfy
its obligtions through 1992. Since January, 1993, Nuven has provided
financial and administrative support for the Company's operations. The
Company expects to receive continued financial and administrative
support from Nuven until a new business opportunity is acquired or
developed.
Note 7. Business Condition
The Company has experienced negative cash outflows from operating
activities through 1992 and ceased operations in March 1992, prior to
capital restructuring and change in management. Cash contributions
from Stevenson Abercrombie & Claythorne Co. ("SAC") had provided the
financial support necessary for the Company to satisfy its obligations
through 1992. Since January 1993, Nuven has provided financial support
to fund the Company's cash requirements. The Company expects to
receive continued financial support from Nuven until a new corporate
shareholder is attained.
Note 8. Other/Related Party Transactions
In January 1994, the Company entered into several consulting and
advisory agreements with its then officers and directors in an effort
to locate and acquire new assets and business opportunities, and to
manage its day-to-day general and administrative affairs. Such
agreements require the Company to compensate the respective
consultants with shares and options to purchase shares of the
Company's common stock. As of July 31, 1994 the three officers and
directors of the Company had accrued rights to receive an aggregate
500,000 shares in consideration for services rendered, and rights to
options to purchase 500,000 shares from July 31, 1993 to July 31,
1994. The rights to the shares and options accrued on a monthly basis
from July 31, 1993. In lieu of salaries to the officers during this
same twelve month period, the Company issued 500,000 shares of its
common stock to the three officers and directors and in August, 1994
granted to each officer and director an option to purchase 166,666
shares of common stock at an exercise price of $.01 per share, which
options expire August 1, 1999.
Effective January 1, 1994, the Company entered into an Advisory and
Management Agreement with NuVen for the engagement of NuVen to perform
professional services for calendar year 1994. Pursuant to such
Agreement, the Company agreed to pay NuVen $120,000 annually, payable
monthly in $10,000 increments in arrears, and granted NuVen an option
to purchase 150,000 shares of the Company's common stock exercisable
at a price of $.20 per share. The Company expensed $120,000, and
$120,000 during fiscal 1995 and 1994, respectively, and had $131,300
and $46,000 due to NuVen as of December 31, 1995 and 1994,
respectively.
The Company has significantly reduced or eliminated completely its
human resource and payroll obligations and requirements, but continues
to require administrative, audit and consultant screening, and
merger/acquisition services. The Company anticipates continued
reliance on the services provided under the Advisory and Management
Agreement until such time it has, or its subsidiaries, have the need
and sufficient cash flow to justify to perform such services in-house.
In January 1995, the Company entered into an Employee Agreement with
Mr. Luke, pursuant to which Mr. Luke is to hold the office of
President through December 1996. Pursuant to the agreement the Company
agreed to pay Mr. Luke $54,000 per annum in cash or in the Company's
[HART\10K:123195.KSB]-12
F-10
<PAGE>
common stock payable monthly in arrears, and granted him an option to
purchase 1,000 shares of the Company's common stock at an exercise
price per share of 110% of market value at date of grant. Cash
payments of $6,982 were made to Mr. Luke by the Company during fiscal
1995 for reimbursement of travel expenses only. The Company expensed
$54,000 during fiscal 1995 and owed $54,000 as of December 31, 1995.
Effective April 1996, the Company entered into a Consulting Agreement
with Mr. Steven Dong, pursuant to which Mr. Dong is to perform
accounting services and to hold the office of Chief Financial Officer
through June 30, 1996. Pursuant to the agreement the Company agreed to
pay Mr. Dong $10,000 in cash or in the Company's common stock payable
in arrears, and granted him an option to purchase 166,666 shares of
the Company's common stock at an exercise price of $.01 per share.
Cash payments of $1,000 made to Mr. Dong by the Company during fiscal
1995 for services provided by Mr. Dong prior to his Consulting
Agreement. The Company expensed $1,000 during fiscal 1995 and had no
amounts due as of December 31, 1995.
In July 1996, the Company entered into a Consulting Agreement with
John Desbrow, pursuant to which Mr. Desbrow is to perform legal
services and to hold the office of Secretary and Director. Pursuant to
the agreement the Company agreed to pay Mr. Desbrow $2,000 per month
commencing August 1, 1994. No cash payments have been made to Mr.
Desbrow by the Company during fiscal 1995 for services provided. The
Company expensed $24,000 and $12,000 during fiscal 1995 and 1994
respectively, and had $34,000 and $12,000 amount due as of December
31, 1995 and 1994 respectively.
[HART\10K:123195.KSB]-12
F-11
