U.S. 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 June 30, 1997 Commission file number 0-18224
GROUP V CORPORATION
(formerly, NUOASIS GAMING, INC.)
Delaware 95-4176781
(State of other jurisdiction of I.R.S. Employer Identification No.)
corporation or organization)
550 15th Street, San Francisco CA 94103
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (415) 575-0222
------------
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 X No __
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 revenues for the year ended June 30, 1997.
As of August 31, 1997, the aggregate market value of the voting stock
(based upon the average closing bid and asked prices in the over-the-counter
market as quoted on NASD-OTC Bulletin Board as of August 31, 1997) held by
non-affiliates was approximately $6,172,650.
Class Outstanding at August 31, 1997
Common Stock, $.01 par value 40,059,880 shares
Documents Incorporated by Reference:
None
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TABLE OF CONTENTS
PAGE
PART I
Item 1. Description of Business ........................................ 2
Item 2. Description of Properties ...................................... 9
Item 3. Legal Proceedings................................................10
Item 4. Submission of Matters to a Vote of Security Holders............ 10
PART II
Item 5. Market for the Registrant's Securities and Related Stockholder
Matters ...................................................... 10
Item 6. Management's Discussion and Analysis of
Financial Condition and Results of Operations.................. 11
Item 7. Financial Statements .......................................... 15
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure ...........................................15
PART III
Item 9. Directors and Executive Officers of the Registrant ............. 15
Item 10. Executive Compensation ........................................ 21
Item 11. Security Ownership of Certain Beneficial Owners and
Management .................................................. 25
Item 12. Certain Relationships and Related Transactions ................ 27
Item 13. Exhibits and Reports on Form 8-K ............................... 30
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL
Group V Corporation (formerly, NuOasis Gaming, Inc.) ("Group V", the
"Company", or the "Registrant") was originally incorporated in the State of
Delaware in 1987. As of the date of filing this Report, the Registrant has no
current ongoing business. The Registrant is presently evaluating business
opportunities for possible acquisition within the gaming and telecommunication
industry and during the fiscal year ended June 30, 1997, the Registrant acquired
National Pools Corporation, a developer of a group play system in state
lotteries in the United States and foreign countries.
THE BUSINESS AND HISTORY OF NATIONAL POOLS CORPORATION
National Pools Corporation ("NPC") is a California corporation doing
business at 550 15th Street, San Francisco, California 94103. Since inception
NPC has been developing a system to facilitate participation in group play in
state lotteries in the United States and the lotteries of foreign countries. The
program developed by NPC was named "Hit-LoTTo(TM)". The Hit-LoTTo(TM) program
uses debit cards, telecommunications, and proprietary computer software to
organize and market lottery pools for lottery players who participate in various
state lotteries. This program provides players of the various Lotteries the
opportunity to increase their chances of winning by 100 times by randomly
pooling with 99 other players. Since inception NPC's operations have been
devoted primarily to the formulation and design of the telecommunication and
computer technology to support the Hit-LoTTo(TM) program.
NPC plans to offer its proprietary Hit-LoTTo(TM) service to the public
through the sale of a prepaid card, the "Hit-LoTTo(TM) Value Card." The
Hit-LoTTo(TM) Value Card will be sold at approved outlets and Lottery retailers
for $10 and $20 each. Each card will hold four or eight respective plays.
Through a network of retailers, NPC will distribute the Hit-LoTTo(TM) Value Card
enabling participation in the program. To join a pool, callers will simply call
1-800-Hit-LoTTo(TM), enter their Hit-LoTTo(TM) card number and Personal
Identification Number ("PIN"), and be automatically entered into the open pool.
NPC will administer the pools and purchase 100 Lottery tickets on behalf of the
pool members. Pools will be composed of players present in the state issuing
lottery tickets to be purchased by the pools; for example, players in Idaho
would enter pools by purchasing tickets issued by the Idaho Lottery. Pools of
players will be automatically formed by voice response computers after callers
enter their Hit-LoTTo(TM) Value Card number and password. Pool play is allowed
only after the card number, password and account balance have been validated.
Each pool consists of one hundred $1.00 Lottery tickets, and each pool is
completed after receipt of 100 successful Hit-LoTTo(TM) telephone calls. Each
call equates to one pool position and pools are formed for the next available
Super Lotto jackpot.
NPC will act as an agent of the players (callers) by coordinating the
formation of groups or pools of purchasers of Lottery tickets. NPC charges each
member of the pools formed a fee ($2.50 per play) for NPC's service of
coordinating the pool and purchasing the associated tickets on behalf of the
pool members from an authorized Lottery retailer.
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Once a pool has 100 members it is closed, the computer starts a new
pool, and NPC purchases the 100 lottery tickets on behalf of the just closed
pool. Tickets will be Lottery generated "Quick Picks" and are always purchased
in sequence (to avoid any manipulation of tickets). The pool will then be
associated with the corresponding 100 tickets. The first and last sequence
numbers will be entered into NPC's database to ensure the integrity of the pool.
Further, all tickets will be endorsed and stamped with the company name, the
pool number, date and time. The physical tickets will be bound to a pool draw
card and deposited in a safe until the winning numbers are announced and
verified by the Lottery. The winnings will be automatically announced to the
player the next time he or she plays Hit-LoTTo(TM). Winning pools will also be
announced in daily newspapers and on radio and T.V. When a player has depleted
the value of the Hit-LoTTo(TM) Value Card, it can then be easily "recharged";
the card balance can also be transferred to a new Hit-LoTTo(TM) Value Card.
Hit-LoTTo(TM) players will be able to cash out their winnings at any time.
Pool winnings between $5 and $599 are automatically credited to the
player's Hit-LoTTo(TM) Value Card one business day after the lottery draw. NPC
will process winning tickets and claim prize winnings with the Lottery on behalf
of pool members. When pool winnings are over $600, NPC will provide the names of
the individual winning pool members to the Lottery by filling out the State
Lottery Multiple Ownership Claim form. In general, a State Lottery will pay
winnings in amounts between $600 and $1 million in a one time payment directly
to pool members in accordance with established policies and procedures for that
state's Group Play. Prize amounts of $1 million, or more, will generally be paid
by the State Lottery directly to winners over a 20 year period by the Lottery.
NPC does not participate in any winnings or prizes.
NPC provides its Hit-LoTTo(TM) Value Card with a valuable second
feature, long distance calling service. The Hit-LoTTo(TM) Value Card can be used
to make long distance calls from any touch tone telephone in the United States
to anywhere around the world. At the end of a long distance call, NPC will debit
the Hit-LoTTo(TM) Value Card for the cost of the call.
NPC's objective is to attract 1.5% of the more than $2.5 billion
average monthly lottery tickets purchased in the United States to become members
of an NPC administered Hit-LoTTo(TM) pool through the convenience of the
telephone and the Hit-LoTTo(TM) Value Card.
NPC intends to introduce its Hit-LoTTo(TM) program in selected states
after additional review of the potential markets, the regulatory environment in
those states and similar factors. At the present time, NPC believes that the
Hit-LoTTo(TM) concept should be introduced in one or more smaller markets and
only introduced into larger markets, such as California, where the initial test
of the Hit-LoTTo(TM) took place, after the concept is successfully proven in
smaller markets. Arizona, Illinois, and Missouri are states presently under
consideration. The precise legal and regulatory approvals required depend on the
laws of the state involved. NPC has retained the law firm of Bagatelos & Fadem
and the former chairman of the lottery consulting division of KPMG Peat Marwick
to do legal research and advise NPC concerning the law and regulatory climate in
several states with lotteries. NPC will need to retain counsel to review local
law, determine what, if any, regulatory approval is necessary and obtain it.
Consultations with lottery officials will be undertaken to structure the program
in each particular state to either make obtaining regulatory approval likely as
possible or to eliminate the need for such approval by securing the consent to
the program by regulators in a form not needing formal approval. Preliminary
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research and discussions with regulators in several states suggest that such
informal approval or cooperation is likely, but NPC does not yet know the
precise regulatory and legal approvals that must be obtained before it can begin
operations in the states where it intends to do business.
NPC has obtained three opinions on the legality of its Hit-LoTTo(TM)
program under the California Lottery Law from the law firm of Adkins, Rothman &
Morris, the most recent in 1994. The 1994 opinion of Adkins, Rothman & Morris
concluded that the intended business operations of NPC would not violate any
criminal or statutory prohibition of the State of California, including the
California State Lottery Act of 1984, as amended, or any regulation of any
agency, municipality or subdivision of the State of California. NPC now does not
intend to introduce its Hit-LoTTo(TM) program into California until it has
proven successful in a smaller market and this opinion cannot be relied upon in
other states.
In the fall of 1994, after securing second round private debt
financing, NPC tested the Hit-LoTTo(TM) program in San Diego, California. In
addition to establishing telephone lines in which players could call to enter
pools, a limited publicity and advertising campaign was launched in San Diego,
as an attempt to secure retail outlets for the Hit-LoTTo(TM) cards. NPC was able
to successfully obtain publicity and place advertisements for its program in
local media. Mailing to 1,200 convenience store operators, taverns and other
possible retail outlets yielded a 3% positive response, i.e., the merchant
agreed to become a Hit-LoTTo(TM) retail outlet. Follow-up calls to those
merchants (approximately 30 to 50 per day) resulted in a 50% favorable response
from those called. One hundred pools were formed on the 1-900-Hit-LoTTo(TM)
number which was in operation for only a few days. The 1-800-Hit-LoTTo(TM)
number, which was not advertised or even able to form pools, received 1,000
calls per hour during the few days the line was open. NPC assumes interested
parties called this number rather than the 1-900-Hit-Lotto number to save money.
While calls were answered automatically, callers could not enter pools.
Due to limited funding, the experiment was restricted to several weeks
of publicity and advertising and one week of operation. NPC's management deemed
the results successful in that the Hit-LoTTo(TM) program attracted media
interest, retail vendors of Hit-LoTTo(TM) cards proved receptive and, in the
relatively limited time phone lines were open, customers appeared willing to
play lottery games under the Hit-LoTTo(TM) program in numbers sufficient to
generate the minimum projected revenues in the NPC business plan.
After the premature end of the marketing test of the Hit-LoTTo(TM)
program, NPC ceased publicity efforts and efforts to operate the program on a
retail basis. Limited development of necessary software and other technical
systems continued for several months. Lack of funds required further cut backs
and reductions in operations. By early 1995, NPC had one full time employee,
Joseph Monterosso ("Monterosso") as the President and Chief Executive Officer of
NPC, who concentrated his efforts on raising capital and maintaining contacts
with vendors and other providers of goods and services to NPC. Nominal amounts
of capital were raised from NPC shareholders, both by short term loans, which
have since been converted into equity, and additional stock purchases by NPC
shareholders to allow NPC to operate.
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While the Company's management is confident about the viability of the
Hit-LoTTo(TM) program and believes that acquiring NPC and assisting in the
funding of the launch of its Hit-LoTTo(TM) program represents an excellent
opportunity for the Company, the ultimate market acceptance of the Hit-LoTTo(TM)
program cannot be guaranteed. Likewise, there can be no guarantee that NPC, as a
subsidiary of the Company, will be able to acquire all of the necessary
regulatory approvals, enter into all the necessary service and other contracts
or otherwise accomplish all tasks needed to launch and to operate the
Hit-LoTTo(TM) program.
Although the Hit-LoTTo(TM) program is trademarked and the system is
proprietary, the Registrant expects competition from those who may have more
personnel and greater financial resources than the Registrant. NPC is also
dependent on group play by the general public in states that Hit-LoTTo(TM) is
sold. As of the date of this Report, there have been no sales generated by NPC.
ACQUISITION OF NATIONAL POOLS CORPORATION
On June 13, 1996, Nona Morelli's II, Inc. ("Nona"), the then
controlling parent of Group V, granted an option (the "Option") to Joseph
Monterosso, the current President of the Company, to acquire 250,000 Series B
Preferred Shares of Group V (the "Series B Shares") owned by Nona. The Option is
exercisable at a price of $13.00 per share.
On December 19, 1996, Group V entered into Stock Purchase Agreements
with each of the shareholders of NPC pursuant to which Group V agreed to issue a
series of Secured Promissory Notes (the "Notes") in the aggregate principal
amount of $1,200,000 and 1,000,000 shares of Group V's restricted common stock
to the NPC shareholders in exchange for all of the issued and outstanding shares
of capital stock of NPC. The Notes are convertible into a maximum of 241,900,000
shares of Group V common stock. The conversion of the Notes are contingent upon
NPC's operations achieving certain financial goals over the next several fiscal
years. The terms of the conversion are, for every $250,000 of net annual
operating income achieved by NPC, $7,500 in principal amount of the Notes may be
converted into 1,511,875 shares of restricted Group V common stock. The Notes
are non-recourse to Group V, secured by the assets of NPC, bear interest at 8%
per annum, and are due and payable on May 31, 1999. As part of this acquisition,
Nona and Group V agreed to a debt assumption agreement whereby all Group V debt
in excess of $20,000 on December 24, 1996, except for amounts owed to certain
affiliates, which have been converted into shares of Group V common stock, was
assumed by Nona. The NPC Stock Purchase Agreements closed on December 24, 1996.
On June 13, 1997, Mr. Monterosso exercised the Option to purchase
128,041 Series B Shares, at $13.00 per share, by payment to Nona of
approximately $1,665,000. The 128,041 Series B Shares acquired may be
immediately converted into 9,987,198 shares of restricted Group V common stock.
Additionally, on June 13, 1997, Group V sold its wholly owned subsidiary, CMA,
to Nona for cash of $1,140,000, notes receivable from NPC aggregating $245,836
and a credit against the Nona intercompany account of $95,000.
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On August 22, 1997 and effective June 13, 1996, the Option was amended
(the "Amended Option") to increase the exercise price for 21,959 of the Series B
Shares from $13.00 per share to $72.20 per share, or approximately $1,585,000
for the 21,959 shares of Series B Preferred Stock. The option to purchase the
remaining 100,000 Series B Shares was terminated. Concurrently, Nona granted Mr.
Monterosso a new option to purchase the remaining 100,000 Series B Shares at an
exercise price of $11.70 per share. Additionally, as consideration for granting
the new option, Nona acquired the right to require Mr. Monterosso to purchase
all or any remaining unexercised shares of the 100,000 Series B Shares in its
entirety by September 1, 1998.
Closing on September 2, 1997, but effective June 10, 1997, Mr.
Monterosso exercised the Amended Option to purchase 21,959 Series B Shares, at
$72.20 per share, by payment to Nona of approximately $1,585,000. The 21,959
Series B Shares acquired may be immediately converted into 1,712,802 shares of
restricted Group V common stock.
Concurrent with the exercise of the Amended Option, Group V released
Nona from liability, if any, arising from any events while Nona controlled Group
V, in exchange for approximately $1,585,000 of marketable securities.
On September 2, 1997, Nona sold to Mr. Monterosso 6,000,000 New Class D
Warrants in consideration for a $1,800,000 promissory note secured by the New
Class D Warrants, due in September 1998. Each New Class D Warrant is exercisable
at $1.00 per share and entitles Mr. Monterosso to receive, upon exercise, two
shares of common stock, or a total of 12,000,000 common shares if all New Class
D Warrants are exercised. The New Class D Warrants expire on March 30, 2004, and
to date, none of the New Class D Warrants have been exercised.
On September 2, 1997, Nona granted to Mr. Monterosso an option to
purchase 7,800,000 common shares of the Company exercisable at $0.15 per share
after Nona's election to convert the 100,000 shares of Series B Preferred Stock
into 7,800,000 common shares.
As a result of the acquisition of NPC and the sales and purchases of
the Series B Preferred Stock, as discussed above, a change in control of the
Registrant has occurred and the Registrant is now no longer a controlled
subsidiary of Nona.
In September 1997, the Company agreed to acquire a 50% convertible net
profits interest ("Net Profits Interest") in Universal Network Services, Inc.
("UNSI"). NPC's Chief Operating Officer is a shareholder and officer of UNSI.
The Net Profits Interest will provide the Company with up to 50% of UNSI's net
operating profit and grant the Company the option to convert its Net Profits
Interest into an equity interest of up to 100% of UNSI's issued and outstanding
common stock. No agreements have yet been executed and negotiations are still in
process. UNSI is an interexchange carrier that provides telecommunications
services to both residential and business customers throughout the United States
and certain foreign countries.
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OTHER BUSINESS HISTORY
In September 1992, prior management redirected the Registrant's focus
to the legalized gaming business. In this connection, on December 15, 1992, the
Registrant established a gaming subsidiary in Louisiana named Phillips Gaming
International, Inc., a Louisiana corporation. On December 8, 1993, Phillips
Gaming International, Inc. changed its corporate name to Ba-Mak Gaming
International, Inc. ("Ba-Mak"). On April 8, 1993, Ba-Mak obtained a license to
distribute and conduct route operations of electronic video bingo machines to
licensed charitable gaming locations in the state of Louisiana. Ba-Mak filed for
protection under Chapter 11 of the U.S. Bankruptcy Code in October 1995.
Operations of Ba-Mak continued through April 20, 1995, at which time Ba-Mak
converted its Chapter 11 bankruptcy proceeding into a proceeding under Chapter 7
of the Bankruptcy Code (the Ba-Mak Bankruptcy). As a result, all gaming
operations at Ba-Mak ceased and the Chapter 7 Trustee took possession of
Ba-Mak's assets and liquidated such assets for the benefit of Ba-Mak's
bankruptcy estate. Gaming revenues from Ba-Mak will not recur in future years
due to the bankruptcy and liquidation of Ba-Mak.
Since 1992, substantially all of the Registrant's efforts were directed
toward acquiring or merging with another company (or companies), preserving
remaining capital, raising additional capital and creating a new operating
entity, in addition to settling certain pending lawsuits and other obligations
of the Registrant.
On January 13, 1994, the Registrant entered into a Stock Purchase and
Business Combination Agreement (the "1994 Stock Purchase Agreement") with Nona
and Nona's wholly-owned subsidiary, Casino Management of America, Inc. ("CMA"),
whereby the Registrant agreed to purchase all of the outstanding capital stock
of CMA from Nona in exchange for the Registrant issuing to Nona a) 2,000,000
shares of common stock; b) 250,000 shares of Series B Convertible Preferred
Stock; c) 6,000,000 New Class D common stock purchase warrants; and d) an option
to purchase up to an additional 6,000,000 shares of common stock. The closing
occurred on March 30, 1994 (the "Closing Date"), whereby CMA became a
wholly-owned subsidiary of the Registrant. The former Board of Directors, with
the exception of Gary L. Blum, resigned and elected replacement Directors
nominated by Nona.
At the Closing, the Registrant issued to Nona, 2,000,000 shares of the
Registrant's common stock, 250,000 shares of Series B Preferred Stock, 6,000,000
New Class D Warrants, and an option to purchase up to an additional 6,160,000
shares of the Registrant's common stock, exercisable under certain conditions
(the "Nona Option"). A Certificate of Designations, Preferences and Rights, a
Warrant Certificate and an Option Agreement setting forth the terms and
conditions of the Series B Preferred Stock, the New Class D Warrants and the
Nona Option, respectively, were prepared and approved by the Registrant prior to
the Closing Date and were filed as Exhibits to a Current Report on Form 8-K
dated March 31, 1994 and filed on April 11, 1994.
As a result of the 1994 Stock Purchase Agreement with Nona, a change in
voting control of the Registrant occurred in March 1994 and the Registrant
effected the corporate name change to "NuOasis Gaming, Inc." on September 23,
1994. Based on 30,000,000 shares of common stock outstanding at September 30,
1994, Nona could vote 40.2% of the Registrant's voting securities by virtue of
its ownership of 491,847 shares of common stock and 250,000 shares of Series B
Preferred Stock, and the Registrant became, at that time, a controlled
subsidiary of Nona, a publicly-held company whose shares are traded on NASD-OTC
Bulletin Board.
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While under the control of Nona, the Registrant sought to divide its
business segments, both development stage and operational, into separate
subsidiaries. The restructuring was undertaken to allow the Registrant to
redefine its business segments and focus on specific business opportunities. The
restructuring entailed a change in the Board of Directors, upper and local
management and a segregation of the Registrant's then operational segment from
its developmental stage segments in separate subsidiaries.
Following the Ba-Mak bankruptcy, the Registrant began evaluating
business opportunities for possible acquisition. Since then, the Registrant has
acquired NPC and concurrently sold CMA and its subsidiaries back to Nona (see
above). The Registrant will continue to operate as a holding company and
supervise and provide administrative and other services to NPC and other
businesses which may be acquired.
HISTORICAL OPERATING SUBSIDIARIES
(1) BA-MAK GAMING INTERNATIONAL, INC.
On September 30, 1994, Ba-Mak had agreements with five charitable
gaming establishments in New Orleans at which 140 video bingo machines were
operating. Ba-Mak recognized as gaming revenues the gross funds deposited in
video bingo machines. Ba-Mak realized gross profits, or "net win" as represented
by the difference between gross funds deposited into the machines and payments
to customers. Ba-Mak realized net operating profits by way of the percentage of
the net win after payments to the charitable organizations, the location owners
and the State of Louisiana for gaming taxes. On October 28, 1994, Ba-Mak filed
for protection under Chapter 11 of the U.S. Bankruptcy Code in the Eastern
District of Louisiana. Commencing October 28, 1994, Ba-Mak, as a
Debtor-in-Possession, continued to operate as a charitable bingo route operator
in Louisiana. In April 1995, operations ceased when the bankruptcy proceeding
was converted to a proceeding under Chapter 7. Since April 1995, the Chapter 7
Trustee has liquidated Ba-Mak's assets for the benefit of Ba-Mak's bankruptcy
estate. All but 35 of the video bingo machines were returned to the machine
vendor in satisfaction of its secured claim. The remaining 35 machines and
Ba-Mak's office equipment were sold by the Trustee. The Registrant has filed a
Proof of Claim with the Bankruptcy Court for the intercompany advances made to
Ba-Mak.
As of the date of this Report, the Trustee's administration of the
bankruptcy estate is ongoing. Due to the amount of other creditor claims filed
in Ba-Mak's estate and the amount received by the Trustee, the Registrant does
not anticipate receiving any sums on its Claim. Ba-Mak did not have any
employees during the last three fiscal years.
(2) CASINO MANAGEMENT OF AMERICA, INC.
CMA was formed for the purpose of acquiring gaming investments and
businesses and did not have any operations during the last three fiscal years.
CMA was sold to Nona in June 1997 (See NPC above).
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(3) NUOASIS LAS VEGAS, INC. AND NUOASIS LAUGHLIN, INC.
NuOasis Las Vegas, Inc. and NuOasis Laughlin, Inc., both wholly-
owned subsidiaries of CMA did not have any operations during the last three
fiscal years. NuOasis Las Vegas, Inc. and NuOasis Laughlin, Inc. were formed for
the purpose of acquiring gaming assets in the metropolitan Las Vegas, Nevada and
Laughlin, Nevada areas. NuOasis Las Vegas, Inc. and NuOasis Laughlin, Inc., were
sold, as part of CMA, to Nona in June 1997 (See NPC above).
CHANGE IN FISCAL YEAR
During Fiscal 1996, the Registrant elected to change its fiscal year
end from September 30 to June 30 to facilitate and coincide with Nona's fiscal
year end of June 30. The election of change in fiscal year was reported on a
Current Report on Form 8-K filed on November 10, 1995.
ITEM 2. DESCRIPTION OF PROPERTIES.
(1) NATIONAL POOLS CORPORATION
NPC leases office space in San Francisco, California. The San Francisco
lease expires June 2002.
(2) BA-MAK GAMING INTERNATIONAL, INC.
In April 1993, Ba-Mak entered into a non-cancelable lease agreement
for its office and warehouse in Louisiana. The lease expired May 31, 1996 and
provided for monthly rental payments starting at $1,750 with annual increases of
$125. The lease has been included in Ba-Mak's bankruptcy proceedings under
Chapter 7 of the Bankruptcy Code.
On September 30, 1994, the Registrant, through Ba-Mak, provided video
bingo gaming devices to five (5) charitable bingo halls in southern Louisiana.
Ba-Mak leased approximately 1,000 square feet of industrial/office space in the
New Orleans area from where it supervised the related gaming activities and
where it maintained the gaming devices. As of June 30, 1997, all of Ba-Mak's
property was subject to its Chapter 7 bankruptcy proceedings.
(3) CASINO MANAGEMENT OF AMERICA, INC.
CMA did not have any properties during the last three fiscal years.
CMA was sold to Nona in June 1997 (See NPC above).
(4) NUOASIS LAS VEGAS, INC. AND NUOASIS LAUGHLIN, INC.
NuOasis Las Vegas, Inc. and NuOasis Laughlin, Inc. did not have any
properties during the last three fiscal years. NuOasis Las Vegas, Inc. and
NuOasis Laughlin, Inc., were sold, as part of CMA, to Nona in June 1997 (See NPC
above).
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ITEM 3. LEGAL PROCEEDINGS.
The Company's legal proceedings during Fiscal 1997 were associated with
Nona and CMA and therefore do not involve the Company since CMA was sold to Nona
in June 1997 and Nona is no longer a controlling parent.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S SECURITIES AND RELATED STOCKHOLDER MATTERS.
Following the completion of the Registrant's public offering in July
1988, the Registrant's common shares have been traded in the over-the-counter
market and were quoted in the NASDAQ System under the symbol ENPQ commencing
March 1, 1990. On May 12, 1992, the Registrant was delisted from the NASDAQ
System and, on the same day, was listed on the NASD-OTC Bulletin Board where it
currently trades under the symbol "GRPV". The Registrant's securities are not
publicly traded on any other market. Set forth below are the high and low bid
prices for the Common Stock of the Registrant for each quarterly period
commencing July 1995:
Bid Price of Common Stock
Fiscal 1997 Low High
---------------------------- --- ----
Quarter ended 09/30/96 $.19 $.49
Quarter ended 12/31/96 $.11 $.28
Quarter ended 03/31/97 $.15 $.23
Quarter ended 06/30/97 $.16 $.40
Fiscal 1996 Low High
----------------------------- --- ----
Quarter ended 09/30/95 $.01 $.24
Quarter ended 12/31/95 $.01 $.24
Quarter ended 03/31/96 $.01 $.22
Quarter ended 06/30/96 $.01 $.62
Such quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commissions and may not necessarily represent actual transactions.
As of June 30, 1997, the Registrant had 3,927 shareholders of record
and in excess of 2,000 persons who were beneficial shareholders of its common
stock.
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The Registrant has never paid cash dividends on its common stock. At
the present time, the Registrant's anticipated capital requirements are such
that it intends to follow a policy of retaining earnings, if any, in order to
finance the development of its business. Dividends on common stock may not be
paid unless provision has been made for payment of preferred dividends.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
LIQUIDITY AND CAPITAL RESOURCES
The Registrant has incurred net losses and negative cash flows from
operating activities since its inception in 1988. The Registrant had cash and
cash equivalents of approximately $677,525 and $84 as of June 30, 1997 and 1996,
respectively, and working capital of $1,926,180 and negative working capital of
$769,012 as of June 30, 1997 and 1996, respectively. The increase in working
capital is a direct result of the Registrant acquiring NPC, selling CMA and
providing a release of liability to Nona (see below). As of the date of this
Report, the Registrant has no material commitments for capital expenditures.
Prior to the acquisition of NPC and sale of CMA, the Registrant
received financial support from Nona, and was dependent upon Nona for future
working capital. Nona is no longer a controlling parent and will no longer fund
the Registrant. The Registrant's plan is to continue searching for additional
sources of equity and working capital and new operating opportunities. In the
interim, the Registrant's existence is dependent upon the success of NPC's
Hit-LoTTo(TM) product, which has not yet been sold as of the date of this
Report. The Registrant may need to utilize its working capital of $1,926,180 at
June 30, 1997, and utilize its common stock to support its financial obligations
until the HitLoTTo(TM) product is first sold.
As of the date of filing this Report, Ba-Mak's operations had ceased
following the bankruptcy court's conversion in April 1995 of its Chapter 11
proceeding into a proceeding under Chapter 7 of the Bankruptcy Code. The Chapter
7 Trustee took possession of Ba-Mak's assets and is in the process of
liquidating such assets for the benefit of Ba-Mak's bankruptcy estate.
The Registrant is also pursuing other joint venture, merger or
acquisition opportunities which may provide additional capital resources during
fiscal 1998.
ACQUISITIONS AND DISPOSITIONS
On June 13, 1996, Nona Morelli's II, Inc. ("Nona"), the then
controlling parent of Group V, granted an option (the "Option") to Joseph
Monterosso, the current President of the Company, to acquire 250,000 Series B
Preferred Shares of Group V (the "Series B Shares") owned by Nona. The Option is
exercisable at a price of $13.00 per share.
11
<PAGE>
On December 19, 1996, Group V entered into Stock Purchase Agreements
with each of the shareholders of NPC pursuant to which Group V agreed to issue a
series of Secured Promissory Notes (the "Notes") in the aggregate principal
amount of $1,200,000 and 1,000,000 shares of Group V's restricted common stock
to the NPC shareholders in exchange for all of the issued and outstanding shares
of capital stock of NPC. The Notes are convertible into a maximum of 241,900,000
shares of Group V common stock. The conversion of the Notes are contingent upon
NPC's operations achieving certain financial goals over the next several fiscal
years. The terms of the conversion are, for every $250,000 of net annual
operating income achieved by NPC, $7,500 in principal amount of the Notes may be
converted into 1,511,875 shares of restricted Group V common stock. The Notes
are non-recourse to Group V, secured by the assets of NPC, bear interest at 8%
per annum, and are due and payable on May 31, 1999. As part of this acquisition,
Nona and Group V agreed to a debt assumption agreement whereby all Group V debt
in excess of $20,000 on December 24, 1996, except for amounts owed to certain
affiliates, which have been converted into shares of Group V common stock, was
assumed by Nona. The NPC Stock Purchase Agreements closed on December 24, 1996.
On June 13, 1997, Mr. Monterosso exercised the Option to purchase
128,041 Series B Shares, at $13.00 per share, by payment to Nona of
approximately $1,665,000. The 128,041 Series B Shares acquired may be
immediately converted into 9,987,198 shares of restricted Group V common stock.
Additionally, on June 13, 1997, Group V sold its wholly owned subsidiary, CMA,
to Nona for cash of $1,140,000, notes receivable from NPC aggregating $245,836
and a credit against the Nona intercompany account of $95,000.
On August 22, 1997 and effective June 13, 1996, the Option was amended
(the "Amended Option") to increase the exercise price for 21,959 of the Series B
Shares from $13.00 per share to $72.20 per share, or approximately $1,585,000
for the 21,959 shares of Series B Preferred Stock. The option to purchase the
remaining 100,000 Series B Shares was terminated. Concurrently, Nona granted Mr.
Monterosso a new option to purchase the remaining 100,000 Series B Shares at an
exercise price of $11.70 per share. Additionally, as consideration for granting
the new option, Nona acquired the right to require Mr. Monterosso to purchase
all or any remaining unexercised shares of the 100,000 Series B Shares in its
entirety by September 1, 1998.
Closing on September 2, 1997, but effective June 10, 1997, Mr.
Monterosso exercised the Amended Option to purchase 21,959 Series B Shares, at
$72.20 per share, by payment to Nona of approximately $1,585,000. The 21,959
Series B Shares acquired may be immediately converted into 1,712,802 shares of
restricted Group V common stock.
Concurrent with the exercise of the Amended Option, Group V released
Nona from liability, if any, arising from any events while Nona controlled Group
V, in exchange for approximately $1,585,000 of marketable securities.
On September 2, 1997, Nona sold to Mr. Monterosso 6,000,000 New Class D
Warrants in consideration for a $1,800,000 promissory note secured by the New
Class D Warrants, due in September 1998. Each New Class D Warrant is exercisable
at $1.00 per share and entitles Mr. Monterosso to receive, upon exercise, two
shares of common stock, or a total of 12,000,000 common shares if all New Class
D Warrants are exercised. The New Class D Warrants expire on March 30, 2004, and
to date, none of the New Class D Warrants have been exercised.
12
<PAGE>
On September 2, 1997, Nona granted to Mr. Monterosso an option to
purchase 7,800,000 common shares of the Company exercisable at $0.15 per share
after Nona's election to convert the 100,000 shares of Series B Preferred Stock
into 7,800,000 common shares.
As a result of the acquisition of NPC and the sales and purchases of
the Series B Preferred Stock, as discussed above, a change in control of the
Registrant has occurred and the Registrant is now no longer a controlled
subsidiary of Nona.
In September 1997, the Company agreed to acquire a 50% convertible net
profits interest ("Net Profits Interest") in Universal Network Services, Inc.
("UNSI"). NPC's Chief Operating Officer is a shareholder and officer of UNSI.
The Net Profits Interest will provide the Company with up to 50% of UNSI's net
operating profit and grant the Company the option to convert its Net Profits
Interest into an equity interest of up to 100% of UNSI's issued and outstanding
common stock. No agreements have yet been executed and negotiations are still in
process. UNSI is an interexchange carrier that provides telecommunications
services to both residential and business customers throughout the United States
and certain foreign countries.
CASH FLOWS
<TABLE>
<CAPTION>
Year Ended Nine Months
Ended June 30, 1997 June 30,
1997 1996
-------------------- ------------
<S> <C> <C>
Cash used in operating activities $ (544,547) $ (26,282)
Cash provided by investing activities $ 1,140,000 $ -
Cash provided by financing activities $ 81,988 $ 25,500
Net increase (decrease) in cash $ 677,441 $ (782)
</TABLE>
Cash used in operating activities increased to $544,547 for the year
ended June 30, 1997 from $26,282 for the nine months ended June 30, 1996, which
was primarily attributable to the acquisition of NPC (discussed above).
Cash provided by investing activities increased to $1,140,000 for the
year ended June 30, 1997, from zero last year due to the sale of CMA (discussed
above).
Cash provided by financing activities of $81,988 for the year ended
June 30, 1997 increased from $25,500 for the nine months ended June 30, 1996,
which was attributable to proceeds received from the former President of the
Registrant for the payment of stockholder receivable, options exercised and
proceeds received from loans issued.
During fiscal 1997, 5,433,676 common shares were issued upon exercise
of options by the officers of the Registrant in the aggregate amount of
approximately $652,000 or $.12 per share. The Registrant received note
receivables in the amount of $584,167 and cash payments of approximately $67,900
as consideration for the exercise of options.
13
<PAGE>
RESULTS OF OPERATIONS
YEAR ENDED JUNE 30, 1997 COMPARED TO THE NINE MONTHS ENDED JUNE 30, 1996
There were no gaming revenues during the year ended June 30, 1997 or
the nine months ended June 30, 1996. Revenues are dependent upon the sale of
NPC's HitLoTTo(TM) product, of which there have been no sales as of the date of
this Report.
There were no costs of good sold during fiscal year 1997 and 1996 due
to having no sales during the same periods.
General and administrative expenses totaled $287,329 for the year ended
June 30, 1997, representing an increase of $127,551 from the nine months ended
June 30, 1996. Professional services totaled $490,406 for the year ended June
30, 1997, representing an increase of $182,308 from the nine months ended June
30, 1996. The increase in general and administrative expenses was primarily
attributable to comparing a longer year of twelve months ended June 30, 1997 to
a shorter year of nine months ended June 30, 1996. Additionally, the Registrant
incurred additional expenses since acquiring NPC on December 24, 1996 (see
above).
Interest expense increased by $137,089 during the period which was a
result from issuing and acquiring interest bearing debt associated with the
acquisition of NPC (see above).
As a result of the NPC acquisition (see above), the excess of the
purchase price over the fair market value of the net assets acquired was
approximately $3,318,107 and was allocated to goodwill. Due to the Registrant's
and NPC's historical negative cash flows from operations and working capital
deficit, the goodwill of $3,318,107 was immediately written off due to the
uncertainty of realizing any future benefit from this asset. There was no such
write off during the comparable period last year.
The net losses of CMA are presented in the Company's consolidated
statements of operations as discontinued operations. Such net losses decreased
in fiscal year 1997 to $219,497 representing a $109,767 decrease relative to
fiscal year 1996. However, this decrease is primarily the result of a prior
period, nonrecurring valuation charge of $270,000. Excluding this nonrecurring
charge, the fiscal year 1997 net loss increased by $160,233 primarily as a
result of increased legal expenses and a longer fiscal year.
During fiscal year 1997, the Company recorded debt forgiveness income
in the amount of $1,368,454 as certain obligations were satisfied by the Company
for less than amounts originally recorded. Such amounts are presented in the
Company's consolidated statement of operations as an extraordinary item.
As a result of acquiring NPC (see above) and due to a longer current
fiscal year, the Registrant's net loss from operations increased to $3,118,200
during the year ended June 30, 1997 as compared to $797,140 during last year.
14
<PAGE>
As of June 30, 1997, the Registrant had net operating loss
carryforwards of approximately $9,510,000 available for federal income tax
purposes that expire through 2010. If there would be a greater than 50% change
in the ownership of the Registrant's common stock, Internal Revenue Code Section
382 would place certain restrictions on the amount of the net operating loss
("NOL") that could be utilized in future years. Internal Revenue Code Section
382 limits the use of NOL's to the extent of an amount equal to the fair market
value of the Registrant just prior to the 50% or greater change in ownership
multiplied by the Federal Long Term Discount Rate. A valuation allowance was
recorded in the financial statements to offset the tax benefit resulting from
utilization of the NOL carryforward due to the uncertainty surrounding the
realization of such tax asset.
ITEM 7. FINANCIAL STATEMENTS.
Financial Statements are referred to in Item 13(a) and listed in the
Index to Consolidated Financial Statements filed as part of this Annual Report
on Form 10-KSB.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
A Current Report on Form 8-K dated July 3, 1997 was filed on July 9,
1997, reporting under Item 4. a change of accountants on July 3, 1997 from
Raimondo Pettit & Glassman to Haskell & White LLP.
A Current Report on Form 8-K dated November 8, 1995 was filed on
November 16, 1995, reporting under Item 4 a change of accountants on November 8,
1995 from C. Williams & Associates, P.C. to Raimondo, Pettit & Glassman and a
change in fiscal year end from September 30 to June 30.
The report of Raimondo, Pettit & Glassman with respect to the 1995 and
1996 fiscal year financial statements included an explanatory paragraph with
respect to the substantial doubt existing about the ability of the Registrant to
continue as a going concern due to its recurring net losses, negative cash flows
from operating activities since its inception, limited liquid resources,
negative working capital and its primary operating subsidiary filing for
protection under Chapter 7 of the Bankruptcy Code.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS
The Registrant, pursuant to its bylaws, maintains a Board of Directors
of between one and twenty five directors and officers, composed of President,
Secretary and Chief Financial Officer. Any two or more officer positions may be
held by the same person. The directors and officers during fiscal year 1997 are
as follows:
15
<PAGE>
<TABLE>
<CAPTION>
Position Held
Name with the Registrant Age Dates of Service
- ------------------ ---------------------- ----- --------------------------------
<S> <C> <C> <C>
Fred G. Luke Chairman of the Board 51 Mar. 30, 1994 to Aug. 8, 1997
President Mar. 30, 1994 to Nov. 25, 1996
Chief Financial Officer Mar. 30, 1994 to Oct. 24, 1994
John D. Desbrow Secretary 42 Mar. 30, 1994 to Jul. 20, 1994
and Nov. 8, 1994 to May 9, 1997
Director Mar. 30, 1994 to Jul. 20, 1994
Steven H. Dong Chief Financial Officer 31 Jul. 16, 1995 to Present
Joseph Monterosso Director and President 49 Nov. 25, 1996 to Present
Chairman of the Board Aug. 8, 1997 to Present
Royce Warren Director 56 May 5, 1997 to Aug. 8, 1997
Dennis Houston Director 53 Aug. 8, 1997 to Present
Chief Operating Officer July 1, 1997 to Present
(NPC)
Paula Amanda Director 46 May 5, 1997 to Jun. 30, 1997
Leland Rees Director 47 May 5, 1997 to Present
</TABLE>
All directors of the Registrant hold office until the next annual
meeting of shareholders and until their successors have been elected and
qualified. Vacancies in the Board of Directors are filled by the remaining
members of the Board until the next annual meeting of shareholders. The same
current Directors stand for election at the Registrant's next annual meeting.
The officers of the Registrant are elected by the Board of Directors at its
first meeting after each annual meeting of the Registrant's shareholders and
serve at the discretion of the Board of Directors or until their earlier
resignation or death.
Directors will be elected by a favorable vote of a plurality of the
shares of voting stock present, entitled to vote, and actually voting, in person
or by proxy, at the Annual Meeting. Accordingly, abstentions or broker
non-voters as to the election of Directors will not affect the election of the
candidates receiving the plurality of votes. Properly executed, unrevoked
proxies will be voted FOR election of the above-named nominees unless the
stockholders indicate that the proxy shall not be voted for any one or all of
the nominees.
16
<PAGE>
(b) BUSINESS EXPERIENCE
The following is a brief account of the business experience for at
least the past five years of each director, director nominee 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.
All of the directors are elected at the annual meeting of shareholders
to serve for one year or until their successors are elected and have qualified.
Officers serve at the discretion of the Board of Directors.
NEW DIRECTORS AND OFFICERS
JOSEPH MONTEROSSO: Mr. Monterosso has used his entrepreneurial skills to launch
a variety of companies over the past 25 years, culminating with National Pools
Corporation in 1992. Prior to NPC, Monterosso embarked upon fulfilling his
lifelong dream of producing his own automobile after attending the Geneva Auto
Show in 1986. After raising over $45 million for funding, Monterosso founded
LAFORZA AUTOMOBILES, INC., which produced a four-wheel drive sport utility
vehicle for the luxury market and established a new mark in four-wheel drive
sport vehicles. Monterosso conceived the concept of a new kind of Sports Utility
Four Wheel Drive Vehicle when he discovered a unique Italian Sports Utility
Vehicle at the Geneva Auto Show in 1986. Monterosso negotiated the design,
licensing and purchase of the body stamps and dies from the manufacturer and
contracted Pininfarina in Turin to produce the automobile. Monterosso raised the
capital through U.S. investors and European partners. Monterosso negotiated all
vendor contracts in the U.S. and Italy; including the lengthy and delicate
negotiations with Ford to supply the power train and warranty. Monterosso headed
AutoItalia SpA, of Turin, the company that produced the automobile. Monterosso
supervised the redesign of the automobile to meet U.S. Department of
Transportation specifications and market expectations. Designing the interior
and the wheels himself, Monterosso resided in Turin at this time, commuting
monthly to his home in California, overseeing the production and delivery of the
automobile to the U.S.
Upon production of the finished body, interior and chassis in Turin, the LaForza
was flown to an after market assembler located in Detroit to receive the Ford
engine, drive train and electronics. A final fit and finish was done and the
LaForza was then delivered directly to the U.S. distributor, LaForza Automobiles
Inc., of Hayward, CA. LaForza Automobiles was independent of the Italian
production company, and was operated by a President and CPA. In late 1989
LaForza Automobiles Inc., caught in the market downturn and resulting capital
crunch, could not finance their marketing operation and filed for bankruptcy
protection and ceased doing business, eventually being liquidated. Monterosso
tried to salvage the situation by seeking capital for the U.S. company, but was
unsuccessful as he was given only weeks notice of the impending financial
shortfall. Without a distribution network Monterosso closed down the production
of the automobile, paid AutoItalia's creditors and shelved the designs for the
next generation of the automobile that were in process and returned to
California in Mid-1990.
17
<PAGE>
AutoItalia produced 650 LaForza vehicles for the U.S. market, almost all are
still on the road today and are a highly sought after collector's item,
ironically selling for more today than their original price. In hindsight,
Monterosso believes that the market timing could have been better and
capitalization stronger, while the basic concept was sound. He believes that
this is shown by the fact that the rounded, aerodynamic LaForza body style, four
wheel-on-the-fly technology, elegant, luxurious yet Spartan design, has
subsequently been copied by every sports utility manufacturer currently
producing vehicles worldwide; and that the Sports Utility / Light Truck 4 x 4
market is now the strongest share of the U.S. auto market.
In June 1979, Monterosso was named Sales and Operating Vice President for Tony
Ward, Inc., an importer of forklifts from Japan. Monterosso left Tony Ward, Inc.
to found North American Forklift, Inc. in July 1980. While living in Australia
from 1970 - 1979, Monterosso founded three successful firms including a company
that manufactured custom wheels and imported accessories for off-road sport
vehicles which was subsequently sold to Ford Motor Corporation in 1979.
DENNIS D. HOUSTON: Mr. Houston has served as Chief Operating Officer of NPC
since July 1, 1997, and as a Director of the Registrant since August 8, 1997. In
1996, Mr. Houston joined the Chesapeake and Potomac Telephone Co. (a former Bell
Operating Company) as a telecommunications consultant. He progressed through
various executive management positions in several of the (former) Bell Operating
Companies before moving to AT&T headquarters in New York City. His tenure with
the Bell System provided him with responsibilities and experience in commercial
operations, business office operations, network design, pricing, profitability,
public relations, personnel, Capitol Hill liaison, finance, sales and marketing.
With the advent of divestiture, Mr. Houston formed his own company initially
specializing in acquisitions and importing and exporting of telecommunication
equipment. Subsequently he formed several companies, including an organization
to franchise long distance companies, as well as the acquisition of financially
distressed telecommunications companies. In 1989, he led a group to acquire the
controlling interests in Uni-Net, Inc., a telecommunications holding company,
and subsequently merged its long distance telephone interests with Discount
Communications Services to help form the Universal Network Services
organization.
STEVEN H. DONG: Mr. Dong served as Chief Financial Officer of the Registrant,
since July 16, 1995. Mr. Dong, a Certified Public Accountant, previously worked
with the international accounting firm of Coopers & Lybrand LLP since 1988. As a
Business Assurance Manager with Coopers & Lybrand LLP, Mr. Dong's experience
consisted of providing financial accounting and consulting services to privately
and publicly held companies. Additionally, Mr. Dong served as Chief Financial
Officer of Nona Morelli's II, Inc. from July 16, 1995 through June 30, 1997 and
of Hart Industries, Inc. and The Toen Group, Inc. from April 24, 1996 through
June 30, 1997. Mr. Dong received his Bachelor of Science degree in Accounting
from Babson College in 1988 and is a member in good standing with the California
Society of Certified Public Accountants and American Institute of Certified
Public Accountants.
LELAND E. REES: In his role as Chairman of National Pools Corporation's Advisory
Board, Leland E. Rees brings strong experience in government, public affairs and
finance. He was most recently with Rees and Associates, Inc., a legislative
advocacy and governmental affairs firm in Sacramento representing corporations,
non-profit organizations and several associations. Rees remains an officer and
18
<PAGE>
director of Rees and Associates, Inc. which is wholly owned by he and his wife.
Rees has a strong background in finance and banking, as well as both public and
private accounting. He worked for five years in corporate banking helping to
finance large mergers and was the lead lending officer as well as training
officer for both credit analysis and corporate finance. He was invited by the
government of the Philippine Islands to instruct a two-week seminar on
"Financing Cooperatives" where he spoke to an audience of 100 bankers, attorneys
and accountants. Rees then spent 12 years with a Fortune 200 company negotiating
large, complex, domestic and international, government and commercial contracts
for missile systems and specialty chemicals. Rees joined that firm to start a
specialty chemical company which grew to a $20 million/year firm and was merged
into its parent. Rees is a founder and a major stockholder of Ventura County
National Bank in Oxnard, California. He holds a bachelor's degree in Accounting
from the University of Washington in Seattle, Washington and a master's degree
in Finance from Governor's State University in Park Forest South, Illinois.
FORMER DIRECTORS AND OFFICERS
PAULA AMANDA: Ms. Amanda used her legal and managerial skills to manage and
launch her own successful real estate development company 12 years ago. Most
recently, for the last five years, Ms. Amanda has served as in-house counsel for
Southern Pacific Transportation Company, specializing in environmental matters.
Amanda has extensive experience in all business and environmental matters which
has included critical management skills including: the ability to bring together
diverse interests in a cooperative and effective manner to accomplish often
difficult and complex tasks; experience in managing an $8 million per year
environmental budget for the Southern Pacific law department and developing and
implementing compliance with a myriad of state and federal laws and regulations.
Her strengths lie in the conflict resolutions and communication arenas. Ms.
Amanda graduated from UCLA in 1975 with a degree in South East Asian politics
and is a member of Phi Beta Kappa. She received her law degree from the
University of Santa Clara in 1979.
FRED G. LUKE: Mr. Luke has been Chairman of the Board and President of the
Registrant since March 30, 1994 through August 8, 1997, and November 25, 1996,
respectively. Mr. Luke has over twenty-six (26) years of experience in domestic
and international financing and the management of privately 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 former position with the Registrant, Mr. Luke
currently serves as Chairman and Chief Executive Officer of the Registrant's
former parent company, Nona, as well as Chairman and President of NuVen
Advisors, Inc., ("NuVen Advisors"), President and Director of The Toen Group,
Inc. ("Toen"), President of Hart Industries, Inc. ("Hart"), and Chairman and
President of Diversified Land & Exploration Co. ("DL&E"). Both Hart, DL&E and
Toen are public companies which were formerly traded on NASDAQ or the OTC
Bulletin Board. None have ongoing operations. NuVen Advisors provides
managerial, acquisition and administrative services to public and private
companies including Nona, Hart, Toen and formerly the Registrant. Mr. Luke
received a Bachelor of Arts Degree in Mathematics from California State
University, San Jose in 1969.
19
<PAGE>
JOHN D. DESBROW: Mr. Desbrow served as Secretary of the Registrant from March
30, 1994 to July 20, 1994 and from November 8, 1994 to May 9, 1997. He was also
a director of the Registrant from March 30, 1994 to July 20, 1994. Additionally,
Mr. Desbrow was Secretary of Nona from December 20, 1993 to May 9, 1997. 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 in 1982. Mr. Desbrow also served as a Director and
Secretary of Hart Industries, Inc. and as a director of The Toen Group Inc.
through May 9, 1997.
ROYCE WARREN: Mr. Royce Warren is a consultant to the Cheyenne Casino & Hotel in
Las Vegas, Nevada. Mr. Warren has been a consultant to the Cheyenne Casino &
Hotel since November 1995. Since August 1, 1985, Mr. Warren has served as
President of The Cattle Baron Inc. whose projects include a restaurant and
casino hotel project in Henderson, Nevada. Mr. Warren has more than 25 years
experience in gaming personnel recruitment.
(c) Compliance with Section 16(a) of the Securities Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Registrant's officers and directors, and persons
who own more than ten percent of a registered class of the Registrant's equity
securities, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Officers, directors, and greater than
ten-percent shareholders are required by Securities and Exchange Commission
regulations to furnish the Registrant with copies of all Section 16(a) forms
they file.
Based solely on review of the copies of such forms furnished to the
Registrant, or representations that no Forms 5 were required or filed, the
Registrant believes that during the periods from July 1, 1996 through June 30,
1997, all Section 16(a) filing requirements applicable to its officers,
directors, and greater than ten-percent beneficial owners were complied with.
20
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION.
(a) SUMMARY COMPENSATION TABLE
The following summary compensation table sets forth in summary form the
compensation received during each of the Registrant's last three completed
fiscal years by the Registrant's President. No other executive earned in excess
of $100,000.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------------- ----------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Other Annual Restricted LTIP All Other
Name and Principal Fiscal Salary Bonus Compensation Stock Options Payouts Compensation
Position Year ($) ($) ($) Award(s) (#) ($) ($)
- ---------------------- ------ ------ ------- ----------- ---------- ------- ------- -------------
Joseph Monterosso 1995 $ -- - - - - - -
President and
Director 1996 $ -- - - - - - -
(11-25-96
to Present) 1997 $77,083(1) - - - - - -
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)Amounts accrued for fiscal year 1997 represent salary from
December 24, 1996, through June 30, 1997, as NPC was acquired on
December 24, 1996.
21
<PAGE>
(b) OPTION AND LONG-TERM COMPENSATION
There were no options granted during fiscal year 1997.
The following table sets forth in summary form the aggregate options
exercised during fiscal year 1997, the value of unexercised options, as of June
30, 1997, for the Registrant's President and four most highly compensated
executive officers other than the President.
<TABLE>
<CAPTION>
Number of Value of Unexercised
Unexercised In-the-Money
Option/SAR's at Fiscal Year-End
Fiscal Year End Options/SAR's at Fiscal
(#) Year-End ($)
---------------- -----------------------
Shares
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable (d) Unexercisable
- ------------------------- --------------- ------------ --------------------------------------
<S> <C> <C> <C> <C>
Fred G. Luke, Former
President and Director 1,131,176 $124,479 None N/A
NuVen Advisors, Inc.(1) 2,000,000 $220,000 None N/A
Steven H. Dong, CFO 275,000 $ 30,250 None N/A
John D. Desbrow, Former 275,000 $ 30,250 None N/A
Secretary
</TABLE>
- -----------------------------
(1) The Luke Family Trust (the "Luke Trust") owns 93% of NuVen Advisors,
formerly New World. Fred G. Luke, as Co-Trustee of the Luke Trust
determines the voting of such shares and, as a result, may be deemed to
control the Luke Trust.
There were no awards under long-term incentive plans.
(c) PENSION PLANS AND OTHER BENEFIT OR ACTUARIAL PLANS
The Registrant has no annuity, pension or retirement plans or other
plans for which benefits are based on actuarial computations.
22
<PAGE>
(d) EMPLOYMENT, CONSULTING AND ADVISORY MANAGEMENT CONTRACTS
NEW OFFICERS AND DIRECTORS
Effective July 1, 1997, the Company entered into an employment agreement with
Dennis Houston to serve as NPC's Chief Operating Officer and a Director of the
Company. The agreement compensates Mr. Houston at the rate of $100,000 per annum
through December 31, 1997, and a the rate of $200,000 per annum through June 30,
2000, payable in cash or in common stock. The agreement also granted Mr. Houston
an option to purchase 5,250,000 common shares of the Company at an exercise
price of $0.50 per share and participation in the Company's management bonus
program.
On April 1, 1994, NPC entered into an employment agreement with Joseph
Monterosso to serve as the NPC's Chief Executive Officer. In conjunction with
the acquisition of NPC, Mr. Monterosso became the Company's President and
Director on November 25, 1996, and Chairman on August 8, 1997. Subsequent to
June 30, 1997, the Board ratified the agreement with Mr. Monterosso. The
agreement initially compensates Mr. Monterosso $125,000 per annum and $250,000
per annum upon the first sale of the Company's HitLoTTo(TM) Value Card, payable
in cash or in common stock of the Company.
Effective July 1, 1997, the Company entered into an employment agreement with
Steven Dong to serve as the Company's Chief Financial Officer. The agreement
compensates Mr. Dong $105,000 per annum through June 30, 1998, and $125,000 per
annum through June 30,1999, payable in cash or in common stock of the Company.
The agreement also granted Mr. Dong an option to purchase 800,000 common shares
of the Company at an exercise price of $0.50 per share and participation in the
Company's management bonus program.
FORMER OFFICERS AND DIRECTORS
In August 1995, the Company entered into an employment agreement with Fred G.
Luke, the Company's former Chairman and President. Mr. Luke served as the
Company's Chairman and President since approximately March 31, 1994 through
August 8, 1997, and November 25, 1996, respectively. The terms of the employment
agreement call for Mr. Luke to receive $4,500 per month, retroactive to April 1,
1994, for five (5) years as a base salary; and grant him an option to purchase
3,000,000 shares of the Company's common stock at an exercise price of $.12 per
share. In May 1997, 198,715 common shares were issued in settlement of all
amounts owed to Mr. Luke as of May 5, 1997. The Company expensed $54,000 and
$40,500 during Fiscal 1997 and 1996, respectively, and had no amounts due to Mr.
Luke as of June 30, 1997. Mr. Luke's employment agreement was terminated
effective May 5, 1997.
Effective April 1, 1996, the Company renewed a consulting agreement with John D.
Desbrow, through March 31, 1997, to perform legal services and to hold the
office of Secretary. Under the renewed consulting agreement the Company
contracted to pay Mr. Desbrow $75,000 per annum for the renewal term payable in
the Company's common stock. In May 1997, 102,030 common shares were issued in
settlement of all amounts owed to Mr. Desbrow as of May 5, 1997. Under the terms
of the consulting agreement, Mr. Desbrow invoiced the Company and applied the
net proceeds received from the sale of stock to the invoiced amounts. For
purposes of any "profit" computation under Section 16 (b), Mr. Desbrow and the
Company have agreed the price paid for the shares is deemed to be $75,000. The
23
<PAGE>
Company expensed $62,500 and $43,750, during Fiscal 1997 and 1996, respectively,
and had no amounts due to Mr. Desbrow as of June 30, 1997. Mr. Desbrow's renewed
consulting agreement was terminated on May 5, 1997.
In July 1996, the Company renewed a consulting agreement with Steven H. Dong,
pursuant to which Mr. Dong is to perform accounting services and to hold the
office of Chief Financial Officer through June 30, 1997. Pursuant to the renewed
consulting agreement the Company agreed to pay Mr. Dong $39,000 per annum in
cash or in the Company's common stock, payable monthly in arrears. In May 1997,
237,500 common shares were issued in settlement of all amounts owed to Mr. Dong
as of May 5, 1997. Under the terms of the renewed consulting agreement, Mr. Dong
invoices the Company and applies the net proceeds received from the sale of
stock to the invoiced amounts. For purposes of any "profit" computation under
Section 16 (b), Mr. Dong and the Company have agreed the price paid for the
shares is deemed to be $39,000. The Company expensed $39,000 and $15,000 during
Fiscal 1997 and 1996, respectively, and had no amounts due to Mr. Dong as of
June 30, 1997. Mr. Dong's renewed consulting agreement was terminated effective
May 5,1997. Effective July 1, 1997, NPC entered into a new employment agreement
with Mr. Dong to perform accounting services and to hold the office of Chief
Financial officer (see above).
The Luke Family Trust and Lawver Corp. owns 93% and 7%, respectively, of NuVen
Advisors. Fred G. Luke, as trustee of the Luke Trust, controls the Luke Trust
and Mr. Jon Lawver is the majority shareholder of Lawver Corp. and thereby
controls Lawver Corp. Effective October 1, 1995, Group V and CMA renewed
Advisory and Management Agreements with NuVen Advisors for the engagement of
NuVen Advisors to perform professional services for Fiscal 1997 and 1996.
Pursuant to such renewal, Group V and CMA agreed to pay NuVen Advisors $120,000
annually, payable monthly in arrears. In May 1997, 787,180 common shares were
issued in settlement of all amounts owed to NuVen Advisors as of May 5, 1997.
The Company expensed $240,000 and $225,000, during Fiscal 1997 and 1996,
respectively, and had no amounts due to NuVen Advisors as of June 30, 1997.
NuVen Advisors' agreement was terminated, as it relates to Group V, effective
May 5, 1997.
During fiscal year 1994, the Company entered into an agreement with Structure
America, Inc. ("SAI") to issue 1,000,000 shares for consulting services. Such
services were rendered during fiscal 1995. During fiscal year 1996, the Company
entered into another agreement with SAI to perform consulting services. Pursuant
to such agreement, the Company agreed to issue 1,000,000 common shares of the
Company to SAI and granted SAI an option to purchase 1,000,000 common shares of
the Company, exercisable at $.12 per share. In May 1997, 1,000,000 common shares
were issued in settlement of all amounts owed to SAI as of May 5, 1997. The
Registrant expensed $200,000 and $75,000 during fiscal years 1997 and 1996,
respectively and had no amounts due to SAI as of June 30, 1997. SAI's agreement
was terminated effective May 5,1997.
(e) DIRECTOR COMPENSATION
The Registrant has no standard arrangements by which its directors are
compensated.
(f) INTERLOCKING RELATIONSHIPS OF DIRECTORS
As of the date of this Report, there are no interlocking relationships
of Directors.
24
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth, as of August 31, 1997, the stock
ownership of each person known by the Registrant to be the beneficial owner of
five percent or more of the Registrant's voting securities and each officer,
director, director nominees, and all officer's and directors as a group. Unless
otherwise indicated, each person has beneficial voting and investment power with
respect to the shares owned.
Name and Addresses of Shares of Common Stock
Beneficial Owners Beneficially Owned
- --------------------------- ----------------------------------------------------
Number Percentage
Nona Morelli's II, Inc.(1) .............. 7,800,000(2) 16%
Structure America, Inc. ................. 2,000,000 5%
550 N. Jefferson
Loveland, CO 80537
NuVen Advisors, Inc.(1)(5) .............. 2,000,000 8%(5)
Universal Network Services, Inc.(6) ..... 1,712,802 14%(6)
Suite 200
Two Corporate Plaza Drive
Newport Beach CA 92660
Fred G. Luke(5) ......................... 1,131,176 8%(5)
Steven H. Dong .......................... 1,312,500(4) 3%
Two Corporate Plaza Dr., # 200
Newport Beach CA 92660
Joseph Monterosso ....................... 21,211,644(3) 35%
550 15th Street
San Francisco, CA 94103
John D. Desbrow(1) ...................... 123,750
Dennis D. Houston(6) .................... 5,250,000(4) 17%(6)
Two Corporate Plaza Dr., #200
Newport Beach CA 92660
All directors and executive officers as a 43%
group ................................... 29,736,946
- ----------------------------
(1) The address is 2 Park Plaza, Suite 470, Irvine CA 92611.
(2) 7,800,000 common shares assumes full conversion of 100,000
shares of Series B Preferred Stock held by Nona.
25
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(3) 21,211,644 common shares assumes full conversion of 18,098
shares of Series B Preferred shares (common stock equivalent
of 1,411,644 common shares) and full conversion of 6,000,000
New Class D Warrants (common stock equivalent of 12,000,000
common shares) and complete exercise of an option to purchase
100,000 Series B Preferred Shares common stock equivalent of
7,800,000 shares held by Mr. Monterosso.
(4) With respect to Mr. Dong and Mr. Houston, 800,000 and
5,250,000 shares, respectively are subject to options
granted and unexercised.
(5) The Luke Family Trust (the "Luke Trust") owns 93% of
NuVen Advisors, formerly New World. Fred G. Luke, as
Co-Trustee of the Luke Trust determines the voting of such
shares and, as a result, may be deemed to control the Luke
Trust. The 8% percentage shares of Common Stock beneficially
owned includes both 2,000,000 and 1,312,500 shares held by
NuVen and Fred G. Luke, respectively.
(6) Dennis Houston is the President and majority shareholder of
Universal Network Services, Inc. and as a result may be
deemed the control person of Universal Network Services,
Inc. The 14% percentage shares of common stock beneficially
owned includes both 21,959 Series B Preferred Shares (common
stock equivalent of 1.712,802 common shares) and 5,250,000
common shares beneficially held by Universal Network Services,
Inc. and Dennis Houston, respectively.
The following table sets forth, as of August 31, 1997, the Series B
Preferred Stock and 14% Preferred Stock ownership of all holders of more than
five percent of the Series B Preferred Stock and 14% Preferred Stock of the
Registrant. No officers or directors own any shares of the 14% Preferred Stock.
26
<PAGE>
Shares of Series
Name and Address of B Preferred Stock
Beneficial Owner Beneficially Owned
------------------------------------ ------------------------------
Number Percentage
------------------------------------ ---------------- -------------
Joseph Monterosso
550 15th Street
San Francisco, CA 94103 100,000(1) 100%
Name and Address of 14% Preferred Stock
Beneficial Owner Beneficially Owned
------------------------------------ ------------------------------
Number Percentage
------------------------------------ ---------------- -------------
Raymond C. Kitely
20079 Glen Arbor Court
Saratoga, CA 95070 30,000 17.6%
Eli Moshe
110 S. Sweetzer,
No. 301
Los Angeles, CA 90048 10,000 5.9%
Walter K. Theis, M.D.
1200 Corsica Drive
Pacific Palisades, CA 90272 20,000 11.8%
David Seror,
Chapter 7 Trustee for the Estate
of David A. Paletz
221 N. Figueroa St., Room 800
Los Angeles, CA 90012 77,500 45.6%
Neil Miller
2790 Forrester Drive
Los Angeles, CA 90064 15,000 8.8%
David Sheetrit
c/o Moshe Shram
929 East Fourteenth Street
Los Angeles, CA 90021 10,000 5.9%
------------------------------------- ---------------- ----------------
(1) Monterosso holds an option to purchase 100,000 Series B
preferred shares from Nona.
27
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
There were no related transactions during the last two fiscal years for
which the amount of the transaction or series of similar transactions exceeded
$60,000 other than the following:
a) ISSUANCE OF OPTIONS AND WARRANT PURCHASE AGREEMENT
On June 13, 1996, Nona Morelli's II, Inc. ("Nona"), the then
controlling parent of Group V, granted an option (the "Option") to Joseph
Monterosso, the current President of the Company, to acquire 250,000 Series B
Preferred Shares of Group V (the "Series B Shares") owned by Nona. The Option is
exercisable at a price of $13.00 per share.
On December 19, 1996, Group V entered into Stock Purchase Agreements
with each of the shareholders of NPC pursuant to which Group V agreed to issue a
series of Secured Promissory Notes (the "Notes") in the aggregate principal
amount of $1,200,000 and 1,000,000 shares of Group V's restricted common stock
to the NPC shareholders in exchange for all of the issued and outstanding shares
of capital stock of NPC. The Notes are convertible into a maximum of 241,900,000
shares of Group V common stock. The conversion of the Notes are contingent upon
NPC's operations achieving certain financial goals over the next several fiscal
years. The terms of the conversion are, for every $250,000 of net annual
operating income achieved by NPC, $7,500 in principal amount of the Notes may be
converted into 1,511,875 shares of restricted Group V common stock. The Notes
are non-recourse to Group V, secured by the assets of NPC, bear interest at 8%
per annum, and are due and payable on May 31, 1999. As part of this acquisition,
Nona and Group V agreed to a debt assumption agreement whereby all Group V debt
in excess of $20,000 on December 24, 1996, except for amounts owed to certain
affiliates, which have been converted into shares of Group V common stock, was
assumed by Nona. The NPC Stock Purchase Agreements closed on December 24, 1996.
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<PAGE>
On June 13, 1997, Mr. Monterosso exercised the Option to purchase
128,041 Series B Shares, at $13.00 per share, by payment to Nona of
approximately $1,665,000. The 128,041 Series B Shares acquired may be
immediately converted into 9,987,198 shares of restricted Group V common stock.
Additionally, on June 13, 1997, Group V sold its wholly owned subsidiary, CMA,
to Nona for cash of $1,140,000, notes receivable from NPC aggregating $245,836
and a credit against the Nona intercompany account of $95,000.
On August 22, 1997 and effective June 13, 1996, the Option was amended
(the "Amended Option") to increase the exercise price for 21,959 of the Series B
Shares from $13.00 per share to $72.20 per share, or approximately $1,585,000
for the 21,959 shares of Series B Preferred Stock. The option to purchase the
remaining 100,000 Series B Shares was terminated. Concurrently, Nona granted Mr.
Monterosso a new option to purchase the remaining 100,000 Series B Shares at an
exercise price of $11.70 per share. Additionally, as consideration for granting
the new option, Nona acquired the right to require Mr. Monterosso to purchase
all or any remaining unexercised shares of the 100,000 Series B Shares in its
entirety by September 1, 1998.
Closing on September 2, 1997, but effective June 10, 1997, Mr.
Monterosso exercised the Amended Option to purchase 21,959 Series B Shares, at
$72.20 per share, by payment to Nona of approximately $1,585,000. The 21,959
Series B Shares acquired may be immediately converted into 1,712,802 shares of
restricted Group V common stock.
Concurrent with the exercise of the Amended Option, Group V released
Nona from liability, if any, arising from any events while Nona controlled Group
V, in exchange for approximately $1,585,000 of marketable securities.
On September 2, 1997, Nona sold to Mr. Monterosso 6,000,000 New Class D
Warrants in consideration for a $1,800,000 promissory note secured by the New
Class D Warrants, due in September 1998. Each New Class D Warrant is exercisable
at $1.00 per share and entitles Mr. Monterosso to receive, upon exercise, two
shares of common stock, or a total of 12,000,000 common shares if all New Class
D Warrants are exercised. The New Class D Warrants expire on March 30, 2004, and
to date, none of the New Class D Warrants have been exercised.
On September 2, 1997, Nona granted to Mr. Monterosso an option to
purchase 7,800,000 common shares of the Company exercisable at $0.15 per share
after Nona's election to convert the 100,000 shares of Series B Preferred Stock
into 7,800,000 common shares.
As a result of the acquisition of NPC and the sales and purchases of
the Series B Preferred Stock, as discussed above, a change in control of the
Registrant has occurred and the Registrant is now no longer a controlled
subsidiary of Nona.
29
<PAGE>
In September 1997, the Company agreed to acquire a 50% convertible net
profits interest ("Net Profits Interest") in Universal Network Services, Inc.
("UNSI"). NPC's Chief Operating Officer is a shareholder and officer of UNSI.
The Net Profits Interest will provide the Company with up to 50% of UNSI's net
operating profit and grant the Company the option to convert its Net Profits
Interest into an equity interest of up to 100% of UNSI's issued and outstanding
common stock. No agreements have yet been executed and negotiations are still in
process. UNSI is an interexchange carrier that provides telecommunications
services to both residential and business customers throughout the United States
and certain foreign countries.
b) ADVISORY AGREEMENTS WITH AFFILIATES
The Luke Family Trust and Lawyer Corp. owns 93% and 7%, respectively,
of NuVen Advisors. Fred G. Luke, as trustee of the Luke Trust, controls the Luke
Trust and Mr. Lawver is the majority shareholder of Lawver Corp. and thereby
controls Lawver Corp. Effective October 1, 1995, Group V and CMA renewed
Advisory and Management Agreements with NuVen Advisors for the engagement of
NuVen Advisors to perform professional services for Fiscal 1997 and 1996.
Pursuant to such renewal, Group V and CMA agreed to pay NuVen Advisors $120,000
annually, payable monthly in arrears. In May 1997, 787,180 common shares were
issued in settlement of all amounts owed to NuVen Advisors as of May 5, 1997.
The Company expensed $240,000 and $135,000, during Fiscal 1997 and 1996,
respectively, and had no amounts due to NuVen Advisors as of June 30, 1997.
NuVen Advisors' agreement, as it relates to Group V, was terminated effective
May 5, 1997.
During fiscal year 1994, the Company entered into an agreement with
Structure America, Inc. ("SAI") to issue 1,000,000 shares for consulting
services. Such services were rendered during fiscal 1995. During fiscal year
1996, the Company entered into another agreement with SAI to perform consulting
services. Pursuant to such agreement, the Company agreed to issue 1,000,000
common shares of the Company to SAI and granted SAI an option to purchase
1,000,000 common shares of the Company, exercisable at $.12 per share. In May
1997, 1,000,000 common shares were issued in settlement of all amounts owed to
SAI as of May 5, 1997. The Registrant expensed $200,000 and $75,000 during
fiscal years 1997 and 1996, respectively and had no amounts due to SAI as of
June 30, 1997. SAI's agreement was terminated effective May 5,1997.
(c) OPERATING LEASE
The Company sublets office space in San Francisco, California from a
stockholder. The related lease expires in June 2002 and future minimum payments
required under the lease term aggregate $223,268.
30
<PAGE>
(d) SUBSEQUENT EVENT
In September 1997, the Company agreed to acquire a 50%
convertible net profits interest ("Net Profits Interest") in Universal Network
Services, Inc. ("UNSI"). The Company's Chief Operating Officer is a shareholder
and officer of UNSI. The Net Profits Interest will provide the Company with up
to 50% of UNSI's net operating profit and grant the Company the option to
convert its Net Profits Interest into an equity interest of up to 100% of UNSI's
issued and outstanding common stock. No agreements have yet been executed and
negotiations are still in process. UNSI is an interexchange carrier that
provides telecommunications services to both residential and business customers
throughout the United States and certain foreign countries.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements
The financial statements listed in the accompanying index to
consolidated financial statements are filed as part of this Report.
2. Financial Statement Schedules
There were no financial statement schedules required to be filed as
part of this Annual Report.
3. Exhibits
Unless otherwise noted, Exhibits are filed herewith.
Exhibit
Number Description
------ -------------
3.1 Restated Certificate of Incorporation(1)
3.2 By-Laws (filed as Exhibit 3.2 of the Registrant's Registration
Statement on Form S-18, File No. 33-19883-NY, and incorporated
herein by reference thereto).
3.3 Certificate of Amendment of Certificate of Incorporation. (12)
4.5 Certificate of Designations, Preferences and Rights of 14%
Cumulative Convertible $.01 par value Preferred Stock.(1)
4.6 Letter Extending Exercise Period of Class A Warrants and Class
B Warrants.(3)
4.7 Letters Reducing Exercise Price of Class A Warrants, Class B
Warrants and Class C Warrants.(4)
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<PAGE>
Exhibit
Number Description
------ -------------
4.8 Warrant Agreement dated September 13, 1994 with Douglas J.
Phillips.(7)
4.9 Certificate of Designations, Preferences and Rights of Series B
Convertible Preferred Stock of E.N. Phillips Company (10)
4.10 New Class D Warrant Agreement to Purchase Common Stock(10)
4.11 Option Agreement(10)
9.1 Form of Irrevocable Proxy Coupled with Right of First Refusal.
(4)
10.1 Amended 1989 Non-Qualified Stock Option Plan.(1)
10.2 1989 Incentive Stock Option Plan.(1)
10.3 1991 Non-Qualified Stock Option Plan (incorporated by
reference herein from Proxy Statement for February 14, 1992
Annual Meeting filed on February 5, 1992).
10.4 Employment Agreement between Phillips Gaming
International, Inc. and James R. Martin (incorporated by
reference herein from amendment on Form 8 filed February4,
1993 to Form 8-K dated November 23, 1992).
10.5 1993 Incentive Stock Option Plan and 1993 Non-Qualified
Stock Option Plan (incorporated by reference herein from
Proxy Statement for March 4, 1993 Annual Meeting filed on
February 5, 1993).
10.6 Employment Agreement of December 7, 1993 between E.N.
Phillips Company and Douglas J. Phillips (incorporated by
reference from 10-KSB for fiscal year ended September 30,
1993, filed on or about March 28, 1994.)
10.7 Stock Purchase and Business Combination Agreement of
January 13, 1994 between Nona Morelli's II, Inc., Casino
Management of America, Inc. and E.N. Phillips Company
(incorporated by reference from 10-KSB for fiscal year
ended September 30, 1993, filed on or about March 28,
1994.)
10.9 Settlement Agreement dated September 13, 1994 between E.N.
Phillips Company and Douglas J. Phillips.(7)
10.10 Settlement Agreement and Mutual Release between Douglas J.
Phillips, Hal B. Phillips and E.N. Phillips Company and Stephen
A. Weiner.(7)
10.11 Advisory and Management Agreement dated February 1, 1995
between NuOasis Gaming, Inc. and NuVen Advisors, Inc.(11)
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<PAGE>
Exhibit
Number Description
------ -------------
10.12 Advisory and Management Agreement dated July 1, 1994 between
Casino Management of America, Inc. and NuVen Advisors, Inc.(11)
10.13 Employment Agreement dated August 30, 1995 between NuOasis
Gaming, Inc. and Fred G. Luke.(11)
10.14 Consulting Agreement dated July 1995 between NuOasis Gaming,
Inc. and Steven Dong.(11)
10.15 Consulting Agreement dated October 15, 1994 between E.N.
Phillips Company and Kenneth R. O'Neal.(8)
10.16 Engagement Letter and Fee Agreement dated November 29, 1995
between NuOasis Gaming, Inc. and J.L. Lawver Corp.(8)
10.17 Engagement Letter and Fee Agreement dated October 4, 1994
between NuOasis Gaming, Inc. and John Ris.(8)
10.18 Engagement Letter and Fee Agreement dated November 15, 1994
between NuOasis Gaming, Inc. And Geoffrey G. Riggs.(8)
10.19 Engagement Letter and Fee Agreement dated September 13, 1994
between E.N. Phillips Company and Structure America, Inc.(8)
10.20 Engagement Letter and Fee Agreement dated October 18, 1994
between NuOasis Gaming, Inc. and OTC Communications.(8)
10.21 Engagement Letter and Fee Agreement dated November 1, 1994
between NuOasis Gaming, Inc. and Citigate, Inc.(8)
10.22 Consulting Agreement dated April 1, 1994, between NuOasis
Gaming, Inc. and John D. Desbrow.(8)
10.23 Engagement Letter and Fee Agreement dated March 7, 1994 between
NuOasis Gaming, Inc. and John Ris.(9)
10.24 Consulting Agreement dated April 21, 1995 between NuOasis
Gaming, Inc. and Sandra V. Alsina.(9)
10.25 Fee Agreement dated April 12, 1995 between NuOasis Gaming, Inc.
and Richard O. Weed.(9)
10.26 First Addendum to Consulting Agreement dated November 22, 1994
between NuOasis Gaming, Inc. and John D. Desbrow.(9)
10.27 Consulting Agreement dated January 1995 between NuOasis Gaming,
Inc. and Edward S. Luke.(9)
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<PAGE>
Exhibit
Number Description
------ -------------
10.28 Engagement Letter and Fee Agreement for Services with Structure
America, Inc.(13)
10.29 Second Addendum to Consulting Agreement between NuOasis Gaming,
Inc. and John D. Desbrow.(13)
10.30 Second Addendum to Consulting Agreement between NuOasis Gaming,
Inc. and Steven H. Dong.(13)
10.31 Stock Purchase Agreement dated 12/19/96 with Exhibits A through
F between NuOasis and NPC (14)
10.32 Stock Purchase Agreement dated 5/4/97 between NuOasis and Nona
10.33 NPC letter to Fred G. Luke dated 6/4/97
10.34 Letter to/from Richard Skjerven dated 6/2/97 re: escrow
instructions SPA, between Nona and NPC
10.35 Assignment between NuOasis and Nona dated 5/5/97
10.36 Indemnification Agreement dated 5/30/97 between NuOasis and
Nona
10.37 Indemnification Agreement dated 5/30/97 between NuOasis and
Fred Gordon Luke
10.38 Employment Agreement with Dennis Houston
10.39 Employment Agreement with Joseph Monterosso
10.40 Employment Agreement with Steven Dong
24.1 Schedule of Subsidiaries
27. Financial Data Schedule
(1) Previously filed by the Registrant in Post-Effective Amendment No. 2 to the
Registrant's Registration Statement on Form S-18 filed October 23, 1989
File No. 33-19883-NY) and incorporated herein by reference.
(2) Previously filed by the Registrant in Post-Effective Amendment No. 3 to the
Registrant's Registration Statement on Form S-18 filed January 26, 1990
(File No. 33-19883-NY) and incorporated herein by reference.
(3) Previously filed by the Registrant in Post-Effective Amendment No. 5 to the
Registrant's Registration Statement on Form S-18 filed March 28, 1990 (File
No. 33-19883-NY) and incorporated herein by reference.
(4) Previously filed by the Registrant in Post-Effective Amendment No. 6 to the
Registrant's Registration Statement on Form S-18 filed June 25, 1990 (File
No. 33-19883-NY) and incorporated herein by reference.
34
<PAGE>
(5) Previously filed by the Registrant in Pre-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form S-1 filed December 19, 1995 and
incorporated herein by reference.
(6) Previously filed by the Registrant in the Form 10-K filed February 14, 1995
and incorporated herein by reference.
(7) Previously filed by the Registrant in the Form 10-KSB filed June 29, 1995
and incorporated herein by reference.
(8) Previously filed by the Registrant in a Registration Statement on Form S-8
filed December 7, 1994, File No. 33-87102.
(9) Previously filed by the Registrant in a Registration Statement on Form S-8
filed May 3, 1995, File No. 33-91862.
(10) Previously filed by the Registrant in a Current Report on Form 8-K dated
March 31, 1994, filed April 11, 1994.
(11) Previously filed by the Registrant on January 18, 1996 in its Annual Report
on Form 10KSB for the fiscal year ended September 30, 1995.
(12) Previously filed by the Registrant on April 2, 1996 in its amended Annual
Report on Form 10KSB/A for the fiscal year ended September 30, 1995.
(13) Previously filed by the Registrant on November 22, 1996, in its Annual
Report on Form 10KSB for the fiscal year ended June 30, 1996.
(14) Previously filed by the Registrant in a Current Report on Form 8-K dated
December 24, 1996, filed on January 15, 1997.
(b) REPORTS ON FORM 8-K
(1) On November 10, 1995, the Registrant filed a Current Report on
Form 8-K dated November 8, 1995, reporting a change in auditors
from C. Williams & Associates to Raimondo, Pettit & Glassman and
reporting a change in fiscal year end from September 30 to June
30.
(2) On December 19, 1995, the Registrant filed an Amended Current
Report on Form 8-K/A dated March 31, 1994, reporting revised
proforma numbers on the E.N. Phillips-Nona Morelli's Stock
Purchase and Business Combination Agreement.
(3) On December 19, 1995, the Registrant filed an Amended Current
Report on Form 8-K/A dated March 31, 1994, reporting a change in
auditors from J.H. Cohn & Company to C. Williams & Associates.
(4) On January 15, 1997, the Registrant filed a Current Report on
Form 8-K dated December 24, 1996, reporting the acquisition of
National Pools Corporation.
(5) On March 28, 1997, the Registrant filed an Amended Form 8-K/A
dated December 24, 1996, reporting the acquisition of National
Pools Corporation.
(6) On June 30, 1997, the Registrant filed on Form 8-K dated June 13,
1997, reporting the partial exercise of the Monterosso Option.
(7) On July 9, 1997, the Registrant filed on Form 8K, dated July 3,
1997, reporting the change of independent auditors from Raimondo,
Pettit and Glassman to Haskell & White LLP.
35
<PAGE>
SIGNATURES
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.
G GROUP V
CORPORATION
(formerly, NuOasis Gaming, Inc.)
Date: October 9, 1997 By: /s/ Joseph Monterosso
------------------------------
Joseph Monterosso, President & Chairman
Group V Corporation and
National Pools Corporation
Date: October 9, 1997 By: /s/ Dennis D. Houston
------------------------------
Dennis D. Houston, Chief
Operating Officer National Pools
Corporation and Director,
Group V Corporation
Date: October 9, 1997 By: /s/ Steven H. Dong
---------------------------
Steven H. Dong, Chief Financial Officer
and Principal Accounting Officer,
Group V Corporation
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.
Date: October 9, 1997 By: /s/ Joseph Monterosso
---------------------------
Joseph Monterosso, President & Chairman
Group V Corporation and
National Pools Corporation
Date: October 9, 1997 By: /s/ Dennis D. Houston
---------------------------
Dennis D. Houston, Chief Operating Officer
National Pools Corporation and
Director, Group V Corporation
Date: October 9, 1997 By: /s/ Leland Reese
---------------------------
Leland Reese, Director, Group V Corporation
<PAGE>
F1
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
Index to Consolidated Financial Statements
Page
----
CONSOLIDATED FINANCIAL STATEMENTS:
Independent Auditors' Reports........................................F2
Consolidated Balance Sheet as of June 30, 1997.......................F4
Consolidated Statements of Operations for the Year Ended June 30, 1997
and Nine Months Ended June 30,1996..................................F5
Consolidated Statements of Stockholders' Equity
for the Year Ended June 30, 1997
and Nine Months Ended June 30, 1996..................................F6
Consolidated Statements of Cash Flows for the Year Ended June 30, 1997
and Nine Months Ended June 30, 1996..................................F7
Notes to Consolidated Financial Statements...........................F8
<PAGE>
F2
HASKELL & WHITE LLP
Certified Public Accountants
4901 Birch Street
Newport Beach CA 92660
Telephone (714) 833-8312 Fax (714) 833-9421
INDEPENDENT AUDITORS' REPORT
Board of Directors
Group V Corporation
(formerly, NuOasis Gaming, Inc.)
We have audited the accompanying consolidated balance sheet of Group V
Corporation (formerly, NuOasis Gaming, Inc.) and subsidiaries (the "Company") as
of June 30, 1997, and the related consolidated statements of operations,
stockholders' equity and cash flows for the year ended June 30, 1997. 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 auditing 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
June 30, 1997, and the results of its operations and its cash flows for the year
ended June 30, 1997, in conformity with generally accepted accounting
principles.
/s/ HASKELL & WHITE LLP
Newport Beach, California
September 29, 1997
<PAGE>
F3
RAIMONDO, PETTIT & GLASSMAN
A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
CERTIFIED PUBLIC ACCOUNTANTS
UNION BANK TOWER, SUITE 1250
21515 HAWTHORNE BOULEVARD
TORRANCE, CALIFORNIA 90503
TELEPHONE: (310) 540-5990 FAX: (310) 543-3066
INDEPENDENT AUDITORS' REPORT
Board of Directors
Group V Corporation
(formerly, NuOasis Gaming, Inc.)
Irvine, California
We have audited the accompanying consolidated statements of operations,
stockholders' equity and cash flows of Group V Corporation (formerly, NuOasis
Gaming, Inc.) and subsidiaries (the "Company") for the nine months ended June
30, 1996. 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 auditing 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 consolidated financial statements referred to above present
fairly, in all material respects, as of June 30, 1996, the results of operations
and cash flows of the Company for the nine months ended June 30, 1996, in
conformity with generally accepted accounting principles.
/s/ RAIMONDO, PETTIT & GLASSMAN
Torrance, California
October 31, 1996
<PAGE>
F4
GROUP V CORPORATION (formerly,
NuOasis Gaming, Inc.)
Consolidated Balance Sheet
As of June 30, 1997
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current Assets:
Cash and cash equivalents $ 677,525
Due from escrow (Note 2) 1,585,468
Advances 371,990
Prepaid expenses 85,000
-----------
Total Current Assets 2,179,983
-----------
Fixed Assets:
Equipment 45,232
Less accumulated depreciation (6,763)
-----------
Total Fixed Assets, net 38,469
Other Assets: 22,247
-----------
TOTAL ASSETS $ 2,780,699
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 412,246
Loans payable 17,463
Accrued salaries 313,069
Accrued interest 51,025
-----------
Total Current Liability 793,803
-----------
Long Term Debt:
Convertible notes payable (Note 3) 1,200,000
-----------
Total Liabilities 1,993,803
-----------
Commitments and Contingencies (Note 7)
Stockholders' Equity:
Preferred stock - par value $.01; authorized 1,000,000 shares; 14%
cumulative convertible; issued and outstanding 170,000 shares 1,700
(aggregate liquidation of $304,425)
Preferred Stock Series B - par value $2.00; convertible;
authorized, issued and outstanding 250,000 shares
(aggregate liquidation of $500,000) 500,000
Common stock - par value $.01; authorized 333,000,000 shares;
40,059,880 shares issued and outstanding 400,598
Stockholder receivables (584,167)
Additional paid-in capital 16,086,793
Accumulated deficit (15,618,028)
-----------
Total Stockholders' Equity 786,896
-----------
TOTAL LIABILITIES AND STOCKHOLDER $ 2,780,699
EQUITY ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
F5
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
Consolidated Statements of Operations
For the Year Ended June 30, 1997 and Nine Months Ended June 30, 1996
<TABLE>
<CAPTION>
For the Year Ended For the Nine Months
June 30, 1997 Ended June 30, 1996
------------------ ------------------
<S> <C> <C>
Costs and Expenses:
General and administrative .............. $ 287,32 $ 159,778
Depreciation and amortization ........... 34,226 --
Professional services (Note 5) .......... 490,406 308,098
Interest expense, net ................... 137,089 --
Write off of goodwill (Note 2) .......... 3,318,107 --
------------ ----------
Totals ............................... 4,267,157 467,876
------------ ----------
Loss before discontinued
operation and extraordinary item ........ (4,267,157) (467,876)
Discontinued operation (Note 1):
Net loss of discontinued operation ..... (219,497) (329,264)
------------ ----------
Extraordinary item (Note 8):
Debt forgiveness ........................ 1,368,454 --
----------- ----------
Net loss ................................. $(3,118,200) $ (797,140)
============ ==========
Net loss applicable to common stock ...... $ (3,142,000) $ (814,990)
============ ==========
Per share amounts:
Loss before discontinued
operation and extraordinary item ....... $ (.13) $ (.02)
Discontinued operation ............... (.01) (.01)
Extraordinary item ................... .04 --
============ ==========
Net loss per share ....................... $ (.10) $ (.03)
============ ==========
Weighted average common shares outstanding 31,240,255 29,057,660
============ ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
F6
GROUP V CORPORATION
(formerly NuOasis Gaming, Inc.)
Consolidated Statements of Stockholders' Equity
For the Year Ended June 30, 1997 and
Nine Months Ended June 30, 1996
<TABLE>
<CAPTION>
Preferred Preferred Stock Common
Stock Series B Stock
--------- ----------- ---------
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Balances, October 1, 1995 170,000 $1,700 250,000 $500,000 26,131,176 $261,312
Conversion of loan for stock 3,000,000 30,000
stock
Exercise of stock options 868,824 8,688
Collection of stockholder
receivable
Net loss
------- ------ ------- ------- ---------- --------
Balances, June 30, 1996 170,000 1,700 250,000 500,000 30,000,000 300,000
Exercise stock options 5,433,676 54,336
Issuance of stock 3,626,204 36,262
Sale of CMA to stockholder
Issuance of stock in
connection with the 1,000,000 10,000
acquisition of NPC
Issuance of release to
stockholders
Net loss
------- ------ ------- -------- ---------- --------
Balances, June 30, 1997 170,000 $1,700 250,000 $500,000 40,059,880 $400,598
======= ====== ======= ======== ========== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Additional Total
Stockholder Paid In Accumulated Stockholder's
Receivables Capital Deficit Equity
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Balances, October 1, 1995 $(1,473,773) $12,110,626 $(11,702,688) $(302,823)
Conversion of loan for stock 170,000 200,000
Exercise of stock options 95,570 104,258
Collection of stockholder 26,693 26,693
receivable
Net loss (797,140) (797,140)
---------- --------- ------------- ---------
Balances, June 30, 1996 (1,447,080) 12,376,196 (12,499,828) (769,012)
Exercise of stock options (584,167) 597,704 67,873
Issuance of stock 612,947 649,209
Sale of CMA to stockholder 1,447,080 799,478 2,246,558
Issuance of stock in
connection with the
acquisition of NPC 115,000 125,000
Issuance of release to
stockholder 1,585,468 1,585,468
Net loss (3,118,200) (3,118,200)
---------- ----------- ------------- ----------
Balances, June 30, 1997 $ (584,167) $ 16,086,793 $(15,618,028) $ 786,896
========== =========== ============= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
F7
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
Consolidated Statements of Cash Flows
For the Year Ended June 30, 1997 and
Nine Months Ended June 30, 1996
<TABLE>
<CAPTION>
For the Year For the Nine
Ended Months Ended
June 30, 1997 June 30, 1996
------------- -------------
<S> <C> <C>
Operating activities:
Net loss ......................................... $(3,118,200) $(797,140)
Adjustments to reconcile net loss to net
cash used in operating activities:
Write-off of goodwill ........................ 3,318,107 --
Debt forgiveness ............................. (1,368,454) --
Loss from discontinued operations ............ 219,497 329,264
Common stock issued for payment of services .. 170,113 --
Depreciation and amortization ................ 34,226 --
Increase (decrease) from changes in:
Prepaid expenses ............................. (85,000) --
Advances ..................................... (371,992) --
Stockholder receivable ....................... -- 143,962
Other current assets ......................... (4,133) 57,866
Accounts payable ............................. (105,878) 34,505
Due to affiliates ............................ 950,502 416,871
Accrued expenses ............................. 26,032 (113,836)
Net liabilities of discontinued operations ... (209,367) (97,774)
---------- ----------
Net cash used in operating activities .... (544,547) (26,282)
---------- ----------
Investing activities:
Proceeds from sale of CMA ......................... 1,140,000 --
---------- ----------
Net cash provided by investing activities 1,140,000 --
---------- ----------
Financing activities:
Proceeds from loans ............................... 34,881 --
Proceeds from stockholder receivables ............. 121,259 --
Proceeds from issuances of equity securities ...... 67,873 25,500
Repayments of loans ............................... (142,025) --
---------- ----------
Net cash provided by financing activities 81,988 25,500
---------- ---------
Net increase (decrease) in cash and cash equivalents 677,441 (782)
Cash and cash equivalents, beginning of year ....... 84 866
---------- ----------
Cash and cash equivalents, end of year ............. $ 677,525 $ 84
=========== =========
Supplemental cash flow disclosures:
Cash paid during the period for:
Interest ......................................... $ -- $ --
Income taxes ..................................... $ 800 $ 1,600
Non-cash financing activities:
Common stock issued for stockholder receivable ... $ 584,167 $ 78,758
Debt converted to common stock ................... $ 125,000 $ 200,000
Gain on sale of CMA (Note 2) ..................... $ 799,478 $ --
Release of liability to Nona (Note 2) ............ $ 1,585,468 $ --
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
F8
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies and Business Activities
Description of Business
Group V Corporation (formerly, NuOasis Gaming, Inc.) and its subsidiaries (the
"Company"), operate as a holding company for leisure and entertainment related
businesses. Group V Corporation was originally incorporated in the State of
Delaware in 1987. During the year ended June 30, 1997 ("Fiscal 1997") and the
nine months ended June 30, 1996 ("Fiscal 1996"), the Company engaged in gaming
and investment development activities, primarily in the United States.
Principles of Consolidation
The accompanying consolidated financial statements for the year ended June 30,
1997, include the accounts of Group V Corporation ("Group V"), Casino Management
of America, Inc. ("CMA") through its disposal date of June 13, 1997 (Note 2),
and National Pools Corporation ("NPC") from its date of acquisition December 24,
1996 (Note 2).
The accompanying consolidated financial statements for the nine months ended
June 30, 1996, include the accounts of Group V and CMA.
As used herein, the above is collectively referred to as the "Registrant" or the
"Company" unless the context indicates otherwise. All intercompany accounts and
transactions have been eliminated in consolidation.
Discontinued Operation
The sale of CMA in June 1997 has been accounted for as a discontinued operation
and, accordingly, its operating results have been segregated and reported as
discontinued operations in the accompanying consolidated statements of
operations and cash flows for the year ended June 30, 1997 and the nine months
ended June 30, 1996. There are no net assets related to CMA in the accompanying
consolidated balance sheet as of June 30, 1997. The following table summarizes
amounts recorded as the net loss of discontinued operation in the accompanying
consolidated statements of operations:
<PAGE>
F9
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies and Business Activities
(Continued)
<TABLE>
<CAPTION>
For the Year Ended For the Nine Months
June 30, 1997 Ended June 30, 1996
------------- -------------------
<S> <C> <C>
General and administrative expenses $ 100 $ 272,774
Professional services ............. 219,397 95,000
Gain on sale of investment ........ -- (38,510)
------------- -------------------
Net loss of discontinued operation $ 219,497 $ 329,264
============= ==================
</TABLE>
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.
CHANGE IN FISCAL YEAR
During Fiscal 1996, the Company elected to change its fiscal year end from
September 30 to June 30 to coincide with the fiscal year end of Nona Morelli's
II, Inc., the Company's then controlling parent.
CASH EQUIVALENTS
Cash equivalents are highly liquid investments with a maturity of three months
or less when acquired.
CONCENTRATION OF CREDIT RISK
As of June 30, 1997, the Company had cash on deposit with a financial
institution that exceeded the federally insured limit by approximately $545,000.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards ("SFAS") No. 107 requires disclosure
about fair value for all financial instruments whether or not recognized, for
financial statement purposes. Disclosure about fair value of financial
instruments is based on pertinent information available to management as of June
30, 1997. Considerable judgment is necessary to interpret market data and
develop estimated fair value. The Company has determined that the fair value of
all financial instruments approximated their carrying value as of June 30, 1997.
<PAGE>
F10
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies and Business Activities
(Continued)
EQUIPMENT
Equipment is recorded at cost. Depreciation is provided using the straight-line
method over the estimated useful lives of the related assets which is five to
seven years. Maintenance and repairs are charged to operations as incurred.
INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes," which requires the use of the "liability method"
of accounting for income taxes. Accordingly, deferred tax liabilities and assets
are determined based on the difference between the financial statement and tax
bases of assets and liabilities, using enacted tax rates in effect for the year
in which the differences are expected to reverse. Current income taxes are based
on the year's income taxable for federal and state income tax reporting
purposes.
ACCOUNTING FOR EMPLOYEE STOCK OPTIONS
In October 1995, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 123, "Accounting for Stock-Based Compensation." In conformity with the
provisions of SFAS No. 123, the Company has determined that it will not change
to the fair value method presented by SFAS No. 123 and will continue to follow
Accounting Principle Board Opinion No. 25 for measurement and recognition of
employee stock-based transactions. There were no stock options granted to
employees during Fiscal 1997 and 1996.
ISSUANCE OF STOCK FOR SERVICES
Shares of the Company's common stock issued for services are recorded in
accordance with SFAS No. 123 at the fair market value of the stock issued or the
fair market value of the services provided, whichever value is more reliably
measurable. The value of the services are typically stipulated by contractual
agreements.
LOSS PER COMMON SHARE
Loss per common share is computed based on the net loss for each period, as
adjusted for dividends required on preferred stock ($23,800 and $17,850 for
Fiscal 1997 and Fiscal 1996, respectively) and the weighted average number of
common shares outstanding. Common stock equivalents were not considered in the
loss per share calculations, as the effect would have been anti-dilutive.
<PAGE>
F11
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies and Business Activities
(Continued)
RECLASSIFICATION OF PRIOR YEAR AMOUNTS
To enhance comparability, Fiscal 1996 consolidated financial statements have
been reclassified, where appropriate, to conform with the financial statement
presentation used in Fiscal 1997, and to disclose the discontinued operations of
CMA.
RECENT ACCOUNTING DEVELOPMENTS
In February 1997, FASB issued SFAS No. 128, "Earnings Per Share" ("EPS"). SFAS
No. 128 requires all companies to present "basic" EPS and, if they have a
complex capital structure, "diluted" EPS. Under SFAS No. 128, "basic" EPS is
computed by dividing income (adjusted for any preferred stock dividends) by the
weighted average number of common shares outstanding during the period.
"Diluted" EPS is computed by dividing income (adjusted for any preferred stock
or convertible stock dividends and any potential income or loss from convertible
securities) by the weighted average number of common shares outstanding during
the period plus the number of additional common shares that would have been
outstanding if any dilutive potential common stock had been issued. The issuance
of anti-dilutive potential common stock should not be considered in the
calculation. In addition, SFAS No. 128 requires certain additional disclosures
relating to EPS. SFAS No. 128 is effective for financial statements issued for
periods ending after December 15, 1997. Thus, the Company expects to adopt the
provisions of this statement in fiscal year 1998. Management does not expect the
adoption of this pronouncement to have a significant impact on the Company's
financial statements.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income."
This statement establishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains and losses) in an entity's
financial statements. This statement requires an entity to classify items of
other comprehensive income by their nature in a financial statement and display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in-capital in the equity section of a statement of
financial position. This pronouncement is effective for fiscal years beginning
after December 15, 1997 and the Company expects to adopt the provision of this
statement in fiscal year 1998. Management does not expect this statement to
significantly impact the Company's financial statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information." This statement requires public enterprises
to report financial and descriptive information about its reportable operating
segments and establishes standards for related disclosures about product and
services, geographic areas, and major customers. This pronouncement is effective
for fiscal years beginning after December 15, 1997 and the Company expects to
adopt the provisions of this statement in fiscal year 1998. Management does not
expect this statement to significantly impact the Company's financial
statements.
<PAGE>
F12
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2. Acquisition of National Pools Corporation
On June 13, 1996, Nona Morelli's II, Inc. ("Nona"), the then controlling parent
of Group V, granted an option (the "Option") to Joseph Monterosso, the current
President of the Company, to acquire 250,000 Series B Preferred Shares of Group
V (the "Series B Shares") owned by Nona. The Option is exercisable at a price of
$13.00 per share.
On December 19, 1996, Group V entered into Stock Purchase Agreements with each
of the shareholders of NPC pursuant to which Group V agreed to issue a series of
Secured Promissory Notes (the "Notes") in the aggregate principal amount of
$1,200,000 and 1,000,000 shares of Group V's restricted common stock to the NPC
shareholders in exchange for all of the issued and outstanding shares of capital
stock of NPC. The Notes are convertible into a maximum of 241,900,000 shares of
Group V common stock. The conversion of the Notes are contingent upon NPC's
operations achieving certain financial goals over the next several fiscal years.
The terms of the conversion are, for every $250,000 of net annual operating
income achieved by NPC, $7,500 in principal amount of the Notes may be converted
into 1,511,875 shares of restricted Group V common stock. The Notes are
non-recourse to Group V, secured by the assets of NPC, bear interest at 8% per
annum, and are due and payable on May 31, 1999 (Note 3). As part of this
acquisition, Nona and Group V agreed to a debt assumption agreement whereby all
Group V debt in excess of $20,000 on December 24, 1996, except for amounts owed
to certain affiliates, which have been converted into shares of Group V common
stock, was assumed by Nona (Note 8). The NPC Stock Purchase Agreements closed on
December 24, 1996.
On June 13, 1997, Mr. Monterosso exercised the Option to purchase 128,041 Series
B Shares, at $13.00 per share, by payment to Nona of approximately $1,665,000.
The 128,041 Series B Shares acquired may be immediately converted into 9,987,198
shares of restricted Group V common stock. Additionally on June 13, 1997, Group
V sold its wholly owned subsidiary, CMA, to Nona for cash of $1,140,000, notes
receivable from NPC aggregating $245,836, and a credit against the Nona
intercompany account of $95,000. The Fiscal 1997 operations of CMA through the
sale date of June 13, 1997 has been presented as a discontinued operation in the
accompanying consolidated statements of operations (Note 1). The gain on sale of
CMA of $799,478 has been accounted for as a capital contribution in the
accompanying consolidated statements of stockholders' equity.
On August 22, 1997 and effective June 13, 1996, the Option was amended (the
"Amended Option") to increase the exercise price for 21,959 of the Series B
Shares from $13.00 per share to $72.20 per share, or approximately $1,585,000
for the 21,959 shares of Series B Preferred Stock. The option to purchase the
remaining 100,000 shares of Series B Shares was terminated. Concurrently, Nona
granted Mr. Monterosso a new option to purchase the remaining 100,000 Series B
Shares at an exercise price of $11.70 per share. Additionally, as consideration
for granting the new option, Nona acquired the right to require Mr. Monterosso
to purchase all or any remaining unexercised shares of the 100,000 Series B
Shares in its entirety by September 1, 1998.
<PAGE>
F13
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2. Acquisition of National Pools Corporation (Continued)
Closing on September 2, 1997, but effective June 30, 1997, Mr. Monterosso
exercised the Amended Option to purchase 21,959 Series B Shares, at $72.20 per
share, by payment to Nona of approximately $1,585,000. The 21,959 Series B
Shares acquired may be immediately converted into 1,712,802 shares of restricted
Group V common stock. Concurrent with the exercise of the Amended Option, Group
V released Nona from liability, if any, arising from any events while Nona
controlled Group V, in exchange for approximately $1,585,000 of marketable
securities. Such marketable securities have not yet been delivered from escrow
and, accordingly, the consideration to be received by the Company has been
presented in the accompanying consolidated balance sheet as due from escrow.
Additionally, such consideration has been accounted for as a capital
contribution in the accompanying statements of stockholders' equity.
On September 2, 1997, Nona sold to Mr. Monterosso 6,000,000 New Class D Warrants
in consideration for a $1,800,000 promissory note secured by the New Class D
Warrants, due in September 1998. Each New Class D Warrant is exercisable at
$1.00 per share and entitles Mr. Monterosso to receive, upon exercise, two
shares of common stock, or a total of 12,000,000 common shares if all the of the
New Class D Warrants are exercised. The New Class D Warrants expire on March 30,
2004, and to date, none of the New Class D Warrants have been exercised.
On September 2, 1997, Nona granted to Mr. Monterosso an option to purchase
7,800,000 common shares of the Company exercisable at $0.15 per share after
Nona's election to convert its remaining 100,000 shares of Series B Preferred
Stock into 7,800,000 common shares.
As a result of the Company's acquisition of NPC and the sales and purchases of
the Series B Preferred Stock, as discussed above, a change in control of the
Registrant has occurred and the Registrant is now no longer a controlled
subsidiary of Nona.
BASIS OF PRESENTATION OF ACQUISITION
The acquisition of NPC presents Group V as the accounting acquiror. Since
conversion of the Notes (see Note 3) is based upon future earnings of NPC, which
is ultimately based upon the success of the Hit-LoTTo(TM) program, the
probability of the conversion is currently undeterminable and uncertain.
Although control of Group V may be transferred to the NPC shareholders upon
conversion of the Notes due to this uncertainty, the acquisition of NPC has been
accounted for under the purchase method of accounting in accordance with APB No.
16 with Group V deemed the accounting acquiror.
<PAGE>
F14
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2. Acquisition of National Pools Corporation (Continued)
The following table summarizes the assets acquired and liabilities assumed by
the Company in connection with its acquisition of NPC, which closed on December
24, 1996.
Employee advances $ 30,939
Fixed assets, net 45,232
Software, net 38,245
Other assets 5,455
Goodwill 3,318,107 (a)
Liabilities assumed (2,112,978)
-----------------
Total consideration $ 1,325,000 (b)
=================
(a) The excess of the purchase price over the fair market value of
the net assets acquired was approximately $3,318,107 and was
allocated to goodwill. Due to the Registrant's and NPC's
historical negative cash flows from operations and working
capital deficit, the goodwill of $3,318,107 was immediately
written off due to the uncertainty of realizing any future
benefit from this asset.
(b) Total consideration consists of convertible notes payable of
$1,200,000 (Note 3) and common stock aggregating $125,000
based on the fair value of the Company's common stock on the
close date.
NOTE 3. Convertible Notes Payable
In connection with the Stock Purchase Agreements with each of the shareholders
of NPC (Note 2), the Company issued Secured Promissory Notes (the "Notes") in
the aggregate principal amount of $1,200,000. The Notes are convertible into a
maximum of 241,900,000 shares of Group V common stock. The conversion of the
Notes is contingent upon NPC's operations achieving certain financial goals over
the next several fiscal years. The terms of the conversion are, for every
$250,000 of net annual operating income achieved by NPC, $7,500 in principal
amount of the Notes may be converted into 1,511,875 shares of restricted Group V
common stock. The Notes are non-recourse to Group V, secured by the assets of
NPC, bear interest at 8% per annum, and are due and payable on May 31, 1999. As
such, the Notes are included in long-term debt at June 30, 1997 in the
accompanying consolidated balance sheet.
<PAGE>
F15
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Stockholders' Equity
Common Shares Reserved for Issuance
At June 30, 1997, shares of common stock were reserved for the exercise and
conversion of the following:
Preferred stock:
14% Preferred Stock issued and outstanding 170,000
Series B Preferred Stock issued and outstanding 19,500,000
Redeemable common stock purchase warrants:
New Class A (exercisable at $.50 per share) 1,530,000
New Class B (exercisable at $.75 per share) 3,080,000
New Class C (exercisable at $1.00 per share) 1,510,000
New Class D (exercisable at $.50 per share) 12,000,000
1993 Incentive and Non-qualified Stock
Options - available for grant 1,200,000
1991 Non-qualified Stock Options - available for grant 600,000
1989 Incentive Stock Options - available for grant 500,000
1989 Non-qualified Stock Options: available for grant 500,000
Other Stock Options:
Grants outstanding 847,500
NPC Convertible Notes Payable 214,900,000
-----------
Total 256,337,500
===========
None of the common stock purchase warrants have been exercised as of the date of
this report, accordingly no shares have been issued or reflected in the
stockholders' equity section of the accompanying consolidated balance sheet.
PREFERRED STOCK
During 1989, stockholders authorized the issuance of up to 1,000,000 shares of
preferred stock with a par value of $.01 per share.
<PAGE>
F16
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. Stockholders' Equity (Continued)
During 1989, the Company sold 750,000 shares of preferred stock designated as
14% cumulative convertible preferred stock (the "14% Preferred Stock"). The 14%
Preferred Stock is redeemable, in whole or in part, at the option of the Company
at a redemption price of $100 per share plus any unpaid dividends thereon to the
redemption date. The 14% Preferred Stock has a liquidation value of $1.00 per
share, ranks, as to dividends and liquidation, prior to the common stock and is
convertible at the option of the holder upon 30 days notice into one share of
common stock, subject to adjustments in certain events. Each share is entitled
to one vote and an annual dividend of $.14 per share. Dividends are cumulative
and payable quarterly when declared. Dividends on common stock may not be paid
unless provision has been made for payment of preferred dividends.
No 14% Preferred Stock was converted and no dividends were declared or paid on
the 14% Preferred Stock during Fiscal 1997 and 1996. Dividends in arrears
aggregated $158,225 at June 30, 1997.
The 14% Preferred Stock has a liquidation preference of the original purchase
price ($1.00 per share) plus unpaid dividends on each share thereof. The balance
of proceeds of a liquidation, if any, are to be paid to the common stockholders
of the Company. A merger or reorganization or other transaction in which control
is transferred will be treated similar to a liquidation.
Subject to anti-dilution adjustments, each share of 14% Preferred Stock is
convertible at any time into one share of the Company's common stock. Each share
of the 14% Preferred Stock votes on a 1:1 converted-to-common stock basis, and
the holders of 14% Preferred Stock and the holders of common stock shall vote
together as one class on all matters submitted to a vote of the Company's
stockholders. The conversion ratio of the 14% Preferred Stock to common stock
will be proportionally adjusted in the event of dilution, i.e. proportional
adjustments for stock splits and stock dividends will be made.
In March 1994, pursuant to a stock purchase agreement with Nona and CMA, the
Company issued 250,000 shares of Series B Preferred Stock to Nona. The Series B
Preferred Stock has no redemption rights and is not entitled to any dividends.
It has a liquidation value of $2 per share in preference to any payment on
common stock, subject only to rights of the holders of the 14% Preferred Stock.
Each share is entitled to seventy-eight (78) votes and shall be convertible into
seventy-eight (78) fully paid and nonassessable shares of common stock, or a
total of 19,500,000 shares of common stock if all of the shares of Series B
Preferred Stock are converted. As discussed in Note 2, Nona sold 150,000 shares
of Series B Preferred Stock to Mr. Monterosso and converted the remaining
100,000 shares of Series B Preferred Stock into 7,800,000 shares of the
Company's common stock (Note 2).
<PAGE>
F16
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. Stockholders' Equity (Continued)
PRIVATE SALE OF COMMON STOCK AND NEW WARRANTS
During June 1993, the Company undertook a private placement of 25 units for an
aggregate sales price of $250,000 ("Private Placement I"), with each unit
consisting of 40,000 shares of common stock, 40,000 New Class A redeemable
common stock purchase warrants ("New Class A Warrants") and 40,000 New Class B
redeemable common stock purchase warrants ("New Class B Warrants"). Each New
Class A Warrant entitles the holder to purchase one share of common stock at the
price of $.50 per share for the period from August 1, 1993 to the effective date
of a registration statement registering the common stock and the common stock
underlying the New Class A Warrants offered and issuable under the related
private placement memorandum. Each New Class B Warrant entitles the holder to
purchase one share of common stock at the price of $.75 per share for the period
from August 1, 1993 to the effective date of a registration statement
registering the common stock and the common stock underlying the New Class B
Warrants offered and issuable under the related private placement memorandum.
During July 1993, the Company undertook a private placement of an additional 25
units for an aggregate sales price of $250,000 ("Private Placement II"), with
each unit consisting of 40,000 shares of common stock, 40,000 New Class A
Warrants, and 40,000 New Class B Warrants.
During August 1993, the Company undertook a private placement of an additional
20 units for an aggregate sales price of $200,000 ("Private Placement III"),
with each unit consisting of 40,000 shares of common stock, 40,000 New Class A
Warrants, and 40,000 New Class B Warrants.
In connection with Private Placements I, II and III, the Company received
proceeds of $559,000 (net of sales agent and other direct costs which aggregated
$141,000) from the sale of 70 units and issued 2,800,000 shares of common stock,
2,800,000 New Class A Warrants and 2,800,000 New Class B Warrants during fiscal
year 1993.
In September 1993, in an effort to encourage early exercise, the Company offered
one New Class C redeemable common stock purchase warrant ("New Class C
Warrants") for each New Class A Warrant exercised on or before September 30,
1993. In connection with that offer, 1,550,000 New Class A Warrants were
exercised resulting in the issuance of an additional 1,550,000 shares of common
stock for $775,000 and 1,550,000 New Class C Warrants. Each New Class C Warrant
entitles the holder to purchase one share of common stock at the price of $1.00
per share.
The Company received $50,000, $300,000 and $1,090,000 from other private sales
of 300,000, 1,371,500 and 1,090,000 shares of restricted common stock during
1993, 1992 and 1991, respectively. The 1993 private sales included 100,000 New
Class A Warrants and 100,000 New Class B Warrants. No amounts were recorded on
the balance sheet for the issuance or valuation of the warrants as all proceeds
were recorded in common stock and additional paid-in-capital accounts. All New
Class A, B and C Warrants are exercisable up to one year after the effective
date of the registration of the underlying stock. As of the date of this report,
the registration of the underlying stock has not been finalized and therefore is
not yet effective. Note 4. Stockholders' Equity (Continued)
<PAGE>
F18
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. Stockholders' Equity (Continued)
In March 1994, pursuant to a stock purchase agreement with Nona and CMA, the
Company issued 6,000,000 New Class D Warrants to Nona. Each New Class D Warrant
is exercisable at $1.00 per share and will entitle the holder to receive upon
exercise two (2) shares of common stock, or a total of 12,000,000 shares if all
of the New Class D Warrants are exercised. The New Class D Warrants expire on
March 30, 2004, and to date, none of the New Class D Warrants have been
exercised. In September 1997, Nona sold the New Class D Warrants to Mr.
Monterosso for a $1,800,000 promissory note secured by the New Class D Warrants
(Note 2).
1993 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLANS
Under stock option plans adopted on January 22, 1993, the Company's Board of
Directors may grant "incentive stock options" and "non-qualified stock options"
whereby option holders may purchase up to 1,200,000 shares of common stock prior
to the termination of the plan on January 22, 2003. Incentive stock options may
only be granted to officers and other employees; non-qualified stock options may
be granted to employees, advisors, consultants and members of the Board of
Directors of the Company. Incentive stock options may not be granted at a price
less than 100% of fair market value as of the date of grant to officers and
employees who own less than 10% of the Company's common stock and 110% of fair
market value to those officers and employees who own more than 10%.
Non-qualified stock options may be granted at a price to be determined by the
compensation committee of the Board of Directors on the date such non-qualified
stock options are granted. Options are exercisable from the date of grant and
expire no later than ten years from the date of grant or such earlier date as
determined by the compensation committee at the date of grant. However, the term
of an incentive stock option granted to an officer or other employee who at the
time of grant owns at least 10% of the Company's common stock, shall not exceed
five years. No options have been granted under the 1993 incentive and
non-qualified stock options plans.
1991 NON-QUALIFIED STOCK OPTIONS
Under a stock option plan adopted on February 1, 1991, the Company's Board of
Directors may grant "non-qualified stock options" whereby employees may purchase
up to 600,000 shares of common stock prior to the termination of the plan on
February 1, 2001. Options must be granted at no less than 85% of fair market
value as of the date of grant. Options are exercisable from the date of grant
and expire no later than five years from the date of grant. No options were
issued or exercised during fiscal years 1997 or 1996. During Fiscal 1997,
150,000 options expired and were canceled. 600,000 options remain available for
grant as of June 30, 1997.
<PAGE>
F19
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. Stockholders' Equity (Continued)
1989 INCENTIVE STOCK OPTIONS
Under a stock option plan adopted on July 30, 1989, the Company's Board of
Directors may grant "incentive stock options" whereby employees may purchase up
to 500,000 shares of common stock prior to the termination of the plan on July
30, 1999. Options may not be granted at a price less than 100% of fair market
value as of the date of grant to officers and employees who own less than 10% of
the Company's common stock and 110% of fair market value to those officers and
employees who own more than 10%. Options are exercisable from the date of grant,
and expire no later than five years from the date of grant. No options were
issued or exercised during fiscal years 1997 or 1996. During Fiscal 1997, 50,000
options expired and were canceled. 500,000 options remain available for grant as
of June 30, 1997.
1989 NON-QUALIFIED STOCK OPTIONS
Under a stock option plan adopted on July 30, 1989, the Company's Board of
Directors may grant "non-qualified stock options" whereby employees may purchase
up to 500,000 shares of common stock prior to the termination of the plan on
July 30, 1999. Options must be granted at no less than 85% of fair market value
as of the date of grant. Options are exercisable from the date of grant and
expire no later than five years from the date of grant. No options were issued
or exercised during fiscal years 1997 or 1996. During Fiscal 1997, 200,000
options expired and were canceled. 500,000 options remain available for grant as
of June 30, 1997.
THE NONA OPTION
In March 1994, pursuant to a stock purchase agreement with Nona and CMA, the
Company granted to Nona a nontransferable option for the purchase of up to
6,160,000 shares of the Company's common stock. The exercise price and total
number of shares that can be purchased upon exercise of the option is equal to
the exercise price and number of shares of common stock subject to New Class A,
New Class B and New Class C Warrants outstanding at the Closing Date that
eventually expired unexercised. The Warrant Agreements extend the expiration
dates of the respective warrants to one year after the effective date of a
registration statement, at which time Nona may exercise its option provided all
the New Class A, B and C Warrants have not been exercised. Nona does not hold
any of the New Class A, B or C Warrants, nor is it currently entitled to
exercise its Option. In conjunction with the sale of the New Class D Warrants
(Note 2), Nona also sold its rights to exercise any remaining unexercised New
Class A, New Class B and New Class C Warrants.
<PAGE>
F20
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Stockholders' Equity (Continued)
Other Stock Options
A summary of other stock option transactions for Fiscal 1997 and 1996 is as
follows:
<TABLE>
<CAPTION>
Year Nine Months
Ended Ended
June 30, 1997 June 30, 1996
-------------- ---------------
<S> <C> <C>
Outstanding at beginning of year 6,281,176 5,875,000
Granted - 1,275,000
Exercised (5,433,676) (868,824)
Canceled - -
Issued - -
------------ ------------
Outstanding at end of year 847,500 6,281,176
Range of option exercise prices granted - $.12 - $1.00
</TABLE>
STOCK OPTIONS GRANTED
There were no stock options granted in Fiscal 1997 and the stock options granted
in Fiscal 1996 are described in Note 5.
STOCK OPTIONS EXERcised
During Fiscal 1997, 5,433,676 common shares were issued upon exercise of options
by affiliates of the Company in the aggregate amount of $652,041 or $.12 per
share. The Company received notes in the aggregate amount of $584,167 and
aggregate cash payments of $67,874 as consideration for the exercise of these
options. The notes are due May 1998 and earn interest at 10% per annum.
During Fiscal 1996, 868,824 common shares were issued upon exercise of options
by the President of the Company in the amount of $104,258, or $.12 per share.
The Company received a note receivable in the amount of $78,758 and a cash
payment of $25,500 as consideration for the exercise of these options. The note
receivable was fully paid during Fiscal 1997.
SHARES ISSUED TO ADVISORS
During Fiscal 1997, 3,626,040 common shares were issued primarily to advisors
and consultants for services rendered during Fiscal 1997 and 1996. In accordance
with SFAS No. 123, the Company recorded related expenses based on the fair value
of the services received which was more reliably measurable.
<PAGE>
F21
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. Related Party Employment And Consulting Agreements
FORMER OFFICERS AND DIRECTORS
In August 1995, the Company entered into an Employment Agreement with Fred G.
Luke, the Company's former Chairman and President. Mr. Luke served as the
Company's Chairman and President since approximately March 31, 1994 through
August 8, 1997, and November 25, 1996, respectively. The terms of the Employment
Agreement call for Mr. Luke to receive $4,500 per month, retroactive to April 1,
1994, for five (5) years as a base salary; and, grant him an option to purchase
3,000,000 shares of the Company's common stock at an exercise price of $.12 per
share. In May 1997, 198,715 common shares were issued in settlement of all
amounts owed to Mr. Luke as of May 5, 1997. The Company expensed $54,000 and
$40,500 during Fiscal 1997 and 1996, respectively, and had no amounts due to Mr.
Luke as of June 30, 1997. Mr. Luke's Employment Agreement was terminated
effective May 5, 1997.
Effective April 1, 1996, the Company renewed a consulting agreement with John D.
Desbrow through March 31, 1997 to perform legal services and to hold the office
of Secretary. Under the renewed consulting agreement the Company contracted to
pay Mr. Desbrow $75,000 per annum for the renewal term payable in the Company's
common stock. In May 1997, 102,030 common shares were issued in settlement of
all amounts owed to Mr. Desbrow as of May 5, 1997. Under the terms of the
consulting agreement, Mr. Desbrow invoices the Company and applies the net
proceeds received from the sale of stock to the invoiced amounts. For purposes
of any "profit" computation under Section 16 (b), Mr. Desbrow and the Company
have agreed the price paid for the shares is deemed to be $75,000. The Company
expensed $62,500 and $43,750, during Fiscal 1997 and 1996, respectively, and had
no amounts due to Mr. Desbrow as of June 30, 1997. Mr. Desbrow's renewed
consulting agreement was terminated on May 5, 1997.
In July 1996, the Company renewed a consulting agreement with Steven H. Dong,
pursuant to which Mr. Dong is to perform accounting services and to hold the
office of Chief Financial Officer through June 30, 1997. Pursuant to the renewed
consulting agreement the Company agreed to pay Mr. Dong $39,000 per annum in
cash or in the Company's common stock, payable monthly in arrears. In May 1997,
237,500 common shares were issued in settlement of all amounts owed to Mr. Dong
as of May 5, 1997. Under the terms of the renewed consulting agreement, Mr. Dong
invoices the Company and applies the net proceeds received from the sale of
stock to the invoiced amounts. For purposes of any "profit" computation under
Section 16 (b), Mr. Dong and the Company have agreed the price paid for the
shares is deemed to be $39,000. The Company expensed $39,000 and $15,000 during
Fiscal 1997 and 1996, respectively, and had no amounts due to Mr. Dong as of
June 30, 1997. Mr. Dong's renewed consulting agreement was terminated effective
May 5,1997. Effective July 1, 1997, NPC entered into a new employment agreement
with Mr. Dong to perform accounting services and to hold the office of Chief
Financial Officer (see below.)
<PAGE>
F22
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. Related Party Employment And Consulting Agreements (Continued)
The Luke Family Trust and Lawver Corp. owns 93% and 7%, respectively, of NuVen
Advisors. Fred G. Luke, as trustee of the Luke Trust, controls the Luke Trust
and Mr. Jon Lawver is the majority shareholder of Lawver Corp. and thereby
controls Lawver Corp. Effective October 1, 1995, Group V and CMA renewed
Advisory and Management Agreements with NuVen Advisors for the engagement of
NuVen Advisors to perform professional services for Fiscal 1997 and 1996.
Pursuant to such renewal, Group V and CMA agreed to pay NuVen Advisors $120,000
annually, payable monthly in arrears. In May 1997, 787,180 common shares were
issued in settlement of all amounts owed to NuVen Advisors as of May 5, 1997.
The Company expensed $240,000 and $225,000, during Fiscal 1997 and 1996,
respectively, and had no amounts due to NuVen Advisors as of June 30, 1997.
NuVen Advisors' agreements were terminated effective May 5, 1997.
During fiscal year 1994, the Company entered into an agreement with Structure
America, Inc. ("SAI") to issue 1,000,000 shares for consulting services. Such
services were rendered during fiscal year 1995. During fiscal year 1996, the
Company entered into another agreement with SAI to perform consulting services.
Pursuant to such agreement, the Company agreed to issue 1,000,000 common shares
of the Company to SAI and granted SAI an option to purchase 1,000,000 common
shares of the Company, exercisable at $.12 per share. In May 1997, 1,000,000
common shares were issued in settlement of all amounts owed to SAI as of May 5,
1997. The Registrant expensed $200,000 and $75,000 during fiscal years 1997 and
1996, respectively, and had no amounts due to SAI as of June 30, 1997. SAI's
agreement was terminated effective May 5, 1997.
NEW OFFICERS AND DIRECTORS
Effective July 1, 1997, the Company entered into an employment agreement with
Dennis Houston to serve as the NPC's Chief Operating Officer and a Director of
the Company. The agreement compensates Mr. Houston $100,000 per annum through
December 31, 1997, and $200,000 per annum through June 30, 2000, payable in cash
or in common stock. The agreement also granted Mr. Houston an option to purchase
5,250,000 common shares of the Company at an exercise price of $0.50 per share
and participation in the Company's management bonus program.
On April 1, 1994, NPC entered into an employment agreement with Joseph
Monterosso to serve as NPC's Chief Executive Officer. In conjunction with the
acquisition of NPC, Mr. Monterosso became the Company's President and Director
on November 25, 1996, and Chairman on August 8, 1997. The agreement compensates
Mr. Monterosso $125,000 per annum and $250,000 per annum upon the first sale of
the Company's HitLoTTo(TM) Value Card, payable in cash or in common stock of the
Company.
<PAGE>
F23
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. RELATED PARTY EMPLOYMENT AND CONSULTING AGREEMENTS (CONTINUED)
Effective July 1, 1997, the Company entered into an employment agreement with
Steven H. Dong to serve as the Company's Chief Financial Officer. The agreement
compensates Mr. Dong $105,000 per annum through June 30, 1998, and $125,000 per
annum through June 30, 1999, payable in cash or in common stock of the Company.
The agreement also granted Mr. Dong an option to purchase 800,000 common shares
of the Company at an exercise price of $0.50 per share and participation in the
Company's management bonus program.
NOTE 6. Income Taxes
The income tax effects of significant items comprising the Company's net
deferred income tax assets and liabilities as of June 30, 1997 and 1996 are as
follows:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Accrued expenses ............................ $ 185,000 $ --
Valuation allowance ......................... (185,000) --
------------ ------------
Current portion of deferred tax liabilities $ -- $ --
============ ============
Depreciation and amortization ............... $ (3,000) $ 154,000
Net operating loss carryforwards ............ 3,470,000 2,796,000
Valuation allowance ......................... (3,467,000) (2,950,000)
------------ -----------
Long-term portion of deferred tax liabilities $ -- $ --
============ ============
</TABLE>
The reconciliation of income taxes computed at the federal statutory tax rate to
income tax expense at the effective income rate is as follows:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Federal statutory income tax (benefit) rate (34.0)% (34.0)%
Increases (decreases) resulting from:
Goodwill ............................. 36.1 --
Net change in valuation allowance .... (2.1) 34.0
------------ ------------
Effective income benefit rate ............. -- % -- %
============ ============
</TABLE>
The Company has federal and state net operating losses ("NOL's") approximating
$9,510,000 and $4,150,000, respectively. A significant portion of the NOL's
resulted from the acquisition of NPC and may be subject to ownership change
limitations. The federal NOL's carryforwards begin to expire in fiscal year
2005. The state NOL's carryforwards begin to expire in fiscal year 1998. In
addition, utilization of the NOL's may be limited under Section 382 of the
Internal Revenue Code due to additional ownership changes.
<PAGE>
F24
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. Income Taxes (Continued)
At June 30, 1997 and 1996, a 100% valuation allowance has been provided to
reduce the Company's net deferred tax assets for the amount by which the
deferred tax asset exceeded the net deferred tax liability resulting from all
temporary differences. The Company has provided the allowance since management
could not determine that is was "more likely than not" that the benefits of the
deferred tax assets would be realized.
NOTE 7. Commitments And Contingencies
OPERATING LEASE
The Company sublets office space in San Francisco, California from a
stockholder. The related lease expires June 2002. Future minimum annual rental
payments required under the terms of the lease are as follows for the years
ending June 30,:
1998 $ 41,221
1999 42,870
2000 44,585
2001 46,369
2002 48,223
---- --------------
Total $ 223,268
==============
Rent expense aggregated $22,811 and $540 in Fiscal 1997 and 1996, respectively.
LEGAL PROCEEDINGS
The Company's legal proceedings during Fiscal 1997 were associated with Nona and
CMA and therefore do not involve the Company since CMA was sold to Nona and
since Nona is no longer a controlling parent (Note 2).
NOTE 8. Extraordinary Item
During Fiscal 1997, NPC extinguished a note payable, related accrued interest
and certain trade obligations aggregating $1,475,503 by making aggregate cash
payments of $153,033. In addition, as discussed in Note 2, Nona assumed
liabilities of the Company aggregating $45,984. Such debt forgiveness has been
recorded as an extraordinary gain in the accompanying consolidated statements of
operations. The extraordinary item has not been presented net of tax due to the
Company's current year net loss and existing net operating loss carryforwards.
<PAGE>
F25
GROUP V CORPORATION
(formerly, NuOasis Gaming, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. Subsequent Event
In September 1997, the Company agreed in principle to acquire a 50% convertible
net profits interest ("Net Profits Interest") in Universal Network Services,
Inc. ("UNSI"). NPD's Chief Operating Officer is a shareholder and officer of
UNSI. The Net Profits Interest will provide the Company with up to 50% of UNSI's
net operating profit and grant the Company the option to convert its Net Profits
Interest into an equity interest of up to 100% of UNSI's issued and outstanding
common stock. No agreements have yet been executed and negotiations are still in
process. UNSI is an interexchange carrier that provides telecommunications
services to both residential and business customers throughout the United States
and certain foreign countries.
<PAGE>
EXHIBIT 10.32
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement"), is entered into this 4th
day of May, 1997, by and between NuOASIS GAMING INC., a Delaware corporation
("NGI"), and NONA MORELLI'S II, INC., a Colorado corporation ("NONA"), on the
basis of the following recitals.
WHEREAS, Casino Management of America, Inc., a Utah corporation ("CMA") is
a wholly owned subsidiary of NGI.
WHEREAS, NGI desires to sell, assign and transfer to NONA all of the
outstanding shares of stock of CMA ("CMA Shares") consisting of 7,500,000 shares
of common stock, and NONA desires to purchase the CMA Shares for One Million Two
Hundred Thirty Five Thousand Dollars ($1,235,000) upon and subject to the terms
and conditions of this Agreement.
NOW, THEREFORE, for and in consideration of the mutual promises herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, NGI and CMA agree as follows:
SALE OF CMA SHARES.
Upon and subject to all the terms and conditions of this Agreement, at the
Closing NGI shall assign and transfer the CMA Shares to NONA, and as full
consideration therefor NONA shall pay NGI One Million Two Hundred Thirty Five
Thousand Dollars ($1,235,000).
EFFECTIVE DATE AND CLOSING; DELIVERY OF CMA SHARES.
DATE AND PLACE. The closing of this Agreement and transfer of the CMA
Shares (the "Closing") shall occur at the offices of Skjerven, Morrill,
MacPherson, Franklin and Friel LLP as escrow agent, at such time or date as the
parties hereafter may mutually agree. The time and date of the Closing are
herein called the "Closing Date".
PAYMENT. At the Closing, NONA shall deliver to NGI through escrow the
sum of $1,140,000 in certified funds and a credit of $95,000 against the
payments due on the intercompany account between NONA and NGI.
DELIVERY OF CMA SHARES. NGI shall deliver to NONA through escrow a stock
certificate or certificates registered in the name of NONA the CMA Shares, and
NONA shall deliver to CMA and NGI written confirmation, in form reasonably
satisfactory to CMA and NGI, of its investment intent with regard to such
shares, and such other or further documentation as CMA or NGI then may
reasonably require in order to comply with then-applicable federal and state
securities laws or applicable stock exchange requirements. The number, type and
kind of the CMA Shares delivered to NONA, in each case, shall be adjusted to
reflect all stock splits, stock dividends, reverse stock splits,
reclassifications, mergers and similar capital changes that shall
<PAGE>
have occurred in the outstanding common stock of CMA prior to the Closing;
provided, however, that neither the foregoing provision, nor any other provision
of this Agreement, shall be construed to confer on NONA any of the rights,
powers or benefits of ownership of shares of CMA (including without limitation
cash dividends, voting rights, or stock purchase rights) as to any CMA Shares
that shall not actually have been issued and delivered to NONA pursuant to this
Section 2C.
DELIVERY OF OTHER DOCUMENTS. At the Closing, each party hereto shall
deliver to the other party through escrow such other and further documents,
instruments and information as are herein required to be delivered at the
Closing by such party or as are customarily delivered at the closing of a
transaction of the type provided for in this Agreement.
FURTHER DOCUMENTS. From time to time after the Closing, upon the reasonable
request of either party, the other party will deliver such other and further
instruments and documents as may be necessary to more fully vest in the
requesting party the consideration provided for in this Agreement or to enable
the requesting party to obtain the rights and benefits contemplated by this
Agreement.
A. REPRESENTATIONS AND WARRANTIES OF NGI.
NGI hereby covenants with and represents and warrants to NONA that:
1. THE CMA SHARES. The CMA Shares are and will be as of the Closing Date,
owned, of record and beneficially, by NONA, free and clear of all
liens, claims and encumbrances, and NGI has all necessary right and
power to enter into and perform this Agreement and to assign and sell
the CMA Shares to NONA as provided herein. Any necessary shareholder
approval of NGI's shareholders will be obtained prior to Closing.
2. AUTHORITY. NGI has the full corporate power and authority to enter
into this Agreement and to carry out the transactions contemplated by
this Agreement. The Board of Directors of NGI have duly authorized the
execution, delivery, and performance of this Agreement. Upon
execution, this Agreement constitutes the valid, binding and
enforceable obligation of NGI.
3. STATUS OF CMA. CMA is duly organized, validly existing, and in good
standing under the laws of Utah.
4. NO CONFLICT WITH OTHER INSTRUMENT. Except as disclosed herein, the
execution of this Agreement will not violate or breach any document,
instrument, agreement, contract, or commitment to which NGI or CMA is
a party or by which it or CMA is bound.
5. FULL DISCLOSURE. The information concerning CMA set forth herein and
in the CMA Financials, as defined below, is complete and accurate in
all material respects and does not contain any untrue statement of a
material fact or omit to
<PAGE>
state a material fact require to make the statements made, in light of
the circumstances under which they were made, not misleading.
6. FINANCIAL STATEMENTS. Financial statements of CMA for the quarter
ending March 31, 1997 ("CMA Financials"), have been or will be
delivered to NONA prior to the Closing Date. To the best knowledge of
NGI, except as set forth in the CMA Financials, there are no
liabilities, either fixed or contingent, not reflected in such
financial statements other than contracts or obligations in the
ordinary and usual course of business, which would constitute liens or
other liabilities which, if disclosed, would alter substantially the
financial condition of CMA as reflected in such financial statements.
Since March 31, 1997, there have been no material changes in CMA's
financial condition.
7. CAPITALIZATION OF CMA. The capitalization of CMA is, as of the date
hereof, comprised of 25,000,000 shares of authorized common stock,
$.01 par value, of which approximately 7,500,000 shares are issued and
outstanding.
8. COMPLIANCE WITH LAWS. Rules and Regulations. NGI represents and
warrants that it is in compliance with all applicable federal laws,
rules and regulations; and all applicable state laws, rules and
regulations relating to its ownership of CMA except to the extent that
non-compliance would not materially and adversely affect the business,
operations, properties, assets, or condition of NGI and its
subsidiaries or except to the extent that non-compliance would not
result in the incurring of any material liability for NGI.
9. CONDUCT OF BUSINESS. Since March 31, 1997, except as disclosed on
Exhibit "B", CMA has not (1) discharged or satisfied any liens other
than those securing, or paid any obligation or liability other than,
current liabilities shown on the CMA Financials and current
liabilities incurred since the date of the CMA Financials, in each
case in the usual or ordinary course of business, (ii) mortgaged,
pledged or subjected to lien any of their tangible or intangible
assets (other than purchase money liens incurred in the ordinary
course of business for such assets not yet paid for), (iii) sold,
transferred or leased any of their assets except in the usual and
ordinary course of business, (iv) canceled or compromised any material
debt or claim, or waived or released any right of material value, (v)
suffered any physical damage, destruction or loss (whether or not
covered by insurance) materially adversely affecting its properties,
business or prospects, (vi) entered into any transaction other than in
the usual and ordinary course of business, except as contemplated by
this Agreement, (vii) encountered any labor difficulties or labor
union organizing activities, (viii) made or agreed to any wage or
salary increase or entered into any employment agreement, (ix) issued
or sold any securities or granted any options with respect thereto,
except as disclosed pursuant to this Agreement, (x)amended its
Articles of Incorporation, (xi) agreed to declare or pay any
distributions with respect to their outstanding capital stock, or
(xii) suffered or experienced any change in, or condition affecting,
the condition (financial or otherwise) of their properties, assets,
liabilities, business, operations
<PAGE>
or prospects, other than changes, events or conditions in the ordinary
course of their business none of which has (individually or in the
aggregate) been materially adverse, except as disclosed ill the CMA
Financials.
10. LITIGATION. To the best knowledge and belief of CMA, except as
disclosed in the CMA Financials or in NGI's Form 10-KSB for the year
ended June 30, 1996, there is neither pending nor threatened, any
action, suit or arbitration to which CMA's property, assets or
business is or is likely to be subject and in which an unfavorable
outcome, ruling or finding will or is likely to have a material
adverse effect on the condition, financial or otherwise, or
properties, assets, business or operations of CMA, or create any
material liability on the part of CMA or conflict with this Agreement
or any action taken or to be taken in connection herewith.
11. CONTRACTS. Except as disclosed in the CMA Disclosure Documents, there
are no contracts, actual or contingent obligations, agreements,
franchises, license agreements, or other commitments to which CMA is a
party or by which it or any of its properties or assets are bound
which are material to the business, financial condition, or its
results of operation. For purposes of the preceding sentence, the term
"material" refers to any obligation or liability which by their terms
calls for aggregate payments of more than $10,000.
12. MATERIAL CONTRACT BREACHES, DEFAULTS. To the best of their knowledge
and belief, CMA has not materially breached, nor have they any
knowledge of any pending or threatened claims or any legal basis for a
claim that CMA has materially breached, any of the terms or conditions
of any agreements, contracts, or commitments to which they are a party
or is bound and which are material to the business, financial
condition, or results of operations of CMA, taken as a whole. To the
best of their knowledge and belief, CMA is not in default in any
material respect under the terms of any outstanding contract,
agreement, lease, or other commitment which is material to the
business, operations, properties, assets, or condition of CMA, a,]d
there is no event of default or other event which, with notice or
lapse of time or both, would constitute a default in any material
respect under any such contract, agreement, lease, or other commitment
in respect of which CMA has not taken adequate steps to prevent such a
default from occurring.
13. INVESTMENTS. CMA has provided, or will provide to the Company, prior
to Closing, a complete and accurate description of the CMA assets,
including but not limited to a list of all investments of CMA, which
accurately sets forth the nature of CMA's interest or ownership in
each investment and, if applicable, the jurisdictions in which the
respective investments have been incorporated, organized, and
currently doing business. Except for the entities identified on the
list to be provided to NONA, there is no corporation, limited
partnership, limited partnership, joint venture, association, trust,
or other entity or organization which CMA directly or indirectly
controls or in which CMA directly or indirectly owns any equity
interest or any other interest.
<PAGE>
14. CORPORATE RECORDS. Copies of all corporate books and records,
including but not limited to stock transfer ledgers, and any other
documents and records of CMA will be provided to the Company at
Closing. All such records and documents are complete, true, and
correct.
15. BROKERS. NGI has not agreed to pay any brokerage fees, finder's fees,
or other fees or commissions with respect to the transactions
contemplated in tiffs Agreement. To the best of NGI's knowledge, no
person or entity is entitled, or intends to claim that they are
entitled, to receive any such fees or commissions in connection with
such transactions. NGI further agrees to indemnify and hold harmless
NONA against liability to any broker claiming to act on behalf of NGI.
16. DATE OF REPRESENTATIONS AND WARRANTIES. Each of the representations
and warranties of NONA and NGI set forth in this Agreement are true
and correct at and as of the Closing Date, with the same force and
effect as though made at and as of the Closing Date, except for
changes permitted or contemplated by this Agreement.
B. REPRESENTATIONS AND WARRANTIES OF NONA.
1. NONA hereby represents and warrants that, effective this date and the
Closing Date, the representations and warranties listed below are true
and correct.
2. ORGANIZATION AND AUTHORITY. NONA is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of
Colorado with the corporate power and authority to carry on its
business as now being conducted. NONA has the full corporate power and
authority to enter into this Agreement and to carry out the
transactions contemplated by this Agreement. The Board of Directors of
NONA have duly authorized the execution, delivery, and performance of
this Agreement. Upon execution this Agreement constitutes the valid,
binding and enforceable obligation of NONA. 3. QUALIFICATION. As of
the Closing Date, NONA will be in good standing in the State of
Colorado, and will be duly qualified to do business in each state and
jurisdiction where the failure to qualify would have a material
adverse effect on its business.
4. NO CONFLICT. The execution of this Agreement will not violate or
breach any document, instrument, agreement, contract, or commitment
material to the business of NONA or to which NONA is a party, and has
been duly authorized by all appropriate and necessary action.
5. FULL DISCLOSURE. The information concerning NONA set forth in this
Agreement is 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.
<PAGE>
6. ABILITY TO CARRY OUT AGREEMENT. To the best of NONA's knowledge and
belief, the execution and performance of this Agreement will not
violate, or result in a breach of, or constitute a default in, any
provisions of applicable law, any agreement, instrument, judgment,
order or decree to which NONA is a party or to which NONA is subject
so as to give rise to a claim by anyone against NONA. Other than such
violations, breaches, or defaults which, individually or in the
aggregate, will not have a material adverse effect on the
enforceability or validity of this Agreement or on the transactions
contemplated under this Agreement. No consents of any persons under
any contract or agreement required to be disclosed or disclosed
pursuant to this Agreement are required for the execution, delivery,
and performance by NONA of this Agreement.
7. SECURITIES LAWS. NONA is a public company and is required to file
periodic reports under Section 12(g) of the '34 Act. NONA represents
that all reports required to be filed pursuant to the '34 Act and any
applicable U.S. state "Blue Sky" laws have been filed.
8. BROKERS. NONA has not agreed to pay any brokerage fees, finder's fees,
or other fees or commissions with respect to the transactions
contemplated in this Agreement which could give rise to a claim
against the CMA Shares or any portion thereof. To the best of NONA's
knowledge, no person or entity is entitled, or intends to claim that
it is entitled, to receive any such fees or commissions in connection
with such transactions. NONA further agrees to indemnify and hold
harmless NGI against liability to any broker claiming to act on behalf
of NONA.
9. APPROVALS. Except as otherwise provided in this Agreement, to NONA's
best knowledge and belief no authorization, consent, or approval of,
or registration or filing with, any governmental authority or any
other person is required to be obtained or made by NONA in connection
with the execution, delivery, or performance of this Agreement, except
for the filing of Form 8-K following the Closing.
10. DATE OF REPRESENTATIONS AND WARRANTIES. Each of the representations
and warranties of NONA set forth in this Agreement is true and correct
at and as of the Closing Date, with the same force and effect as
though made at and as of the Closing Date, except for changes
permitted or contemplated by this Agreement.
C. DAMAGES AND LIMIT OF LIABILITY OF NGI.
1. NGI shall be liable to NONA for any material breach of the
representations, warranties, and covenants contained herein which
results in a failure to perform any obligations under this Agreement,
but only to the extent of the expenses actually incurred by NONA in
connection with such breach or failure to perform Agreement.
<PAGE>
D. TERMINATION.
This Agreement may be terminated at any time prior to the Closing Date:
BY NONA OR NGI:
1. If there shall be any actual or threatened action or proceeding by or
before any court or any other governmental body which shall seek to
restrain, prohibit, or invalidate the transactions contemplated by
this Agreement and which, in the judgment of such Board of Directors
made in good faith and based upon the advice of legal counsel, makes
it inadvisable to proceed with the transactions contemplated by this
Agreement; or
2. If the Closing shall not have occurred prior to May 15, 1997 or such
later date as shall have been approved by parties hereto, other than
for reasons set forth herein.
BY NONA.
1. If NGI shall fail to comply in any material respect with any of its
covenants or agreements contained in this Agreement, or if any of the
representations or warranties of NGI contained herein shall be
inaccurate in any material respect.
2. BY NGI. If NONA shall fail to comply in any material respect with any
of its covenants or agreements contained in this Agreement, or if any
of the representations or warranties of NONA contained herein shall be
inaccurate in any material respect.
EFFECT OF TERMINATION. In the event this Agreement is terminated pursuant
to this Section 6, this Agreement shall be of no further force or effect,
and no obligation, right, or liability shall arise hereunder and each party
shall bear its own costs in connection with the negotiation, preparation,
and execution of this Agreement and any due diligence conducted pursuant to
this Agreement.
D. PRIVATE TRANSACTION.
NONA understands that the CMA Shares have not been registered under the Act
and the transfer of such shares hereunder is made pursuant to an exemption
from registration pursuant to Regulation D and Section 4(2) of the Act, and
NGI's reliance on such exemption is predicted in part on the
representations set forth herein and in the Investment Letter attached
hereto as Exhibit "C" ("Investment Letter"). E. ACCESS TO INFORMATION.
NONA and NGI represent that, by virtue of their respective economic
bargaining power or otherwise, they have had access to or has been
furnished with, prior to or concurrently with the execution hereof, the
same kind of information that would be available in a registration
statement under the Act should registration of the CMA Shares had been
necessary, and that they have had the opportunity to ask questions of and
receive answers from the other party, or any party acting on their behalf,
concerning the business of CMA
<PAGE>
and that they have bad the opportunity to obtain any additional
information, to the extent that CMA and NGI possesses such information or
can acquire it without unreasonable expense or effort, necessary to verify
the accuracy of information obtained or furnished by CMA or NGI.
G. INDEMNIFICATION BY NGI.
As provided herein, NGI shall indemnify and hold harmless NONA for two (2)
years following the date of Closing under this Agreement against and in
respect of any liability, damage, or deficiency, all actions, suits,
proceedings, demands, assessments, judgments, costs and expenses resulting
from any misrepresentations, breach of covenant or warranty, or from any
misrepresentation contained in any certificate furnished by NGI to NONA
hereunder.
H. INDEMNIFICATION BY NONA.
As provided herein, NONA shall indemnify and hold harmless NGI for two (2)
years following the date of Closing under this Agreement against and in
respect of any liability, damage, or deficiency, all actions, suits,
proceedings, demands, assessments, judgments, costs and expenses resulting
from any misrepresentations, breach of covenant or warranty, or from any
misrepresentation contained in any certificate furnished by NONA to NGI
hereunder.
I. ADDITIONAL COVENANTS.
Between the date hereof and the Closing Date, except with the prior written
consent of NONA, NGI shall cause CMA to:
1. CONDUCT BUSINESS AS USUAL: CMA shall conduct its business only in the
usual and ordinary course and the character of such business shall not
be changed nor any different business be undertaken without the
written consent of NONA. 2. NGI TO MAINTAIN CURRENT CAPITAL STRUCTURE:
No change shall be made in the authorized or issued capital stock of
CMA without the written consent of NONA. 3. AVOID SPECIAL SETTLEMENTS:
CMA shall not discharge or satisfy any lien or encumbrance or
obligation or liability, other than current liabilities shown on the
financial statements contained in the CMA Disclosure Documents, and
current liabilities incurred since that date in the ordinary course of
business. 4. AVOID DISTRIBUTIONS: CMA shall not make any payment or
distribution to its stockholders or purchase for cash or redeem any of
its shares of capital stock. 5. AVOID ENCUMBRANCE OR CANCELLATION OF
DEBT: CMA shall not mortgage, pledge, or subject to lien or
encumbrance any of its assets, tangible or intangible not in the
ordinary course of business. CMA shall not cancel any debts or claims
or waive any rights not in the ordinary course of business. 6. PROVIDE
ADDITIONAL INFORMATION: CMA and the officers of CMA will agree that
after the Closing, they will continue to furnish NONA with such
additional documentation and information regarding CMA as is
reasonably requested.
<PAGE>
J. DOCUMENTS AT CLOSING.
At the Closing the following transactions shall occur, all of such shall
transactions being deemed to occur simultaneously:
1. ACTION BY NGI. NGI will deliver, or cause the following to be
delivered to NONA through escrow:
2. Stock certificate(s) for the CMA Shares to be issued to NONA pursuant
to this Agreement together with such good and sufficient stock powers,
and other good and sufficient instruments of sale, conveyance,
transfer, and assignment, in form and substance satisfactory to NONA's
counsel, as shall be required or as may be appropriate in order to
effectively vest in NONA good, indefeasible, and marketable title to
the CMA shares free and clear of all liens and encumbrances of every
nature; 3. A certificate executed by the NGI to the effect that all
representations and warranties made by NGI under this Agreement are
true and correct as of the Closing, the same as though originally
given to NONA on said date; 4. A certificate dated at or about the
date of the Closing to the effect that CMA is in good standing under
the laws of Utah; 5. Such other instruments, documents, and
certificates, if any, as are required to be delivered pursuant to the
provisions of this Agreement, or which may be reasonably requested by
NONA in furtherance of the intent of this Agreement.
ACTION BY NONA.
NONA will deliver or cause to be delivered to NGI through escrow:
1. A check in the sum of $1,140,000 made payable to NGI;
2. An acknowledgment that $95,000 of the intercompany debt owed to NONA
by NGI has been paid.
3. A certificate of NONA to the effect that all representations and
warranties of NONA made under this Agreement are reaffirmed on the
Closing Date, the same as though originally given to NGI on said date;
4. Such oilier instruments and documents as are required to be delivered
pursuant to the provisions of this Agreement, or otherwise reasonably
requested by NGI.
K. MISCELLANEOUS.
FURTHER ASSURANCES. At any time and from time to time, after the effective
date, each party will execute such additional instruments and take such
action as may be reasonably requested by the other party to confirm or
perfect title to the CMA Shares transferred hereunder or otherwise to carry
out the intent and purposes of this Agreement.
1. WAIVER. Any failure on the part of any party hereto 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.
<PAGE>
2. COSTS AND EXPENSES. Except as otherwise provided herein, all fees,
costs and expenses incurred by either party relating to this Agreement
shall be paid by the party incurring the same. 3. NOTICES. All notices
and other communications hereunder shall be in writing and shall be
deemed to have been given if delivered in person or sent by prepaid
first class registered or certified mail, return receipt requested to
the parties hereto, or their designees, as follows:
To NGI: NuOasis Gaming Inc.
Park Plaza, Suite 470
Irvine, California 92714
Telephone: (714) 833-5382
Telefax: (714) 833-7854
To NONA: Nona Morelli's II, Inc.
Park Plaza, Suite 470
Irvine, California 92714
Telephone: (714) 833-538 I
Telefax: (714) 833-7854
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.
a. 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.
b. 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.
c. BINDING EFFECT. This Agreement shall be binding upon the parties
hereto and inure to the benefit of the parties, their respective
belts, administrators, executors, successors, and assigns.
d. 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 hereof. 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.
e. SEVERABILITY. If any part of this Agreement is deemed to be
unenforceable the balance of the Agreement shall remain in full force
and effect.
f. 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.
<PAGE>
g. TITTLE 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 the day and
year first above written.
"NONA"
NONA MORELLI'S II, INC.
By: /S/ FRED G. LUKE
Name: Fred G. Luke
Title: President
"NGI"
NuOASIS GAMING INC.
By: /S/ JOSEPH MONTEROSSO
Name: Joseph Monterosso
Title: President
<PAGE>
EXHIBIT 10.33
-------------
JOSEPH J. MONTEROSSO
NATIONAL POOLS CORPORATION
550 15TH STREET
SAN FRANCISCO, CA 94103
June 4, 1997
Mr. Fred G. Luke, Jr.
Nona Morelli's II, Inc.
2 Park Plaza, Suite 470
Irvine, CA 92714
Re: Exchange Agreement Transaction
Dear Fred:
Reference is made to that certain Exchange Agreement entered into by and among
me, Nona Morelli's II, Inc. and Universal Network Services, Inc. ("UNS")
concerning the proposed purchase by UNS of 50,000 shares of Series B Preferred
Stock issued by NuOasis Gaming, Inc. ("NuOasis"). As we have discussed, most of
the terms and conditions of that sale will be set forth in a separate agreement
to be entered into by and between me and UNS and the escrow instructions to be
signed by me, UNS and other purchasers of Series B Preferred Stock, Nona
Morelli's II, Inc. and NuOasis.
In order to expedite the closing of the transaction envisioned by the Exchange
Agreement, as well as all related transactions and to accurately reflect our
ultimate economic interest in these transactions, this letter will confirm that
I, in my sole discretion, will, on behalf of both me and Nona Morelli's II,
Inc., have the discretion to decide whether the representations and warranties
made by UNS in the Exchange Agreement are accurate and whether the conditions to
closing specified in that Agreement have been fulfilled. I may not, however,
authorize a closing of the transaction envisioned by the Exchange Agreement or
deem such representations and warranties accurate or such closing conditions
fulfilled, unless I have been informed by Richard H. Skjerven, Esq., of
Skjerven, Morrill, MacPherson, Franklin & Friel LLP, acting as escrow holder for
the various transactions identified above, that he is in a position to make
distributions to Nona Morelli's II, Inc., such that it will receive from the
proposed distribution of cash and all past cash distributions out of such escrow
to Nona Morelli's II, Inc. a total of $250,000.
Please indicate your acceptance of the agreement of these terms and conditions
by signing this letter in the blank below and returning it to me.
Very truly yours,
/S/ JOSEPH J. MONTEROSSO
<PAGE>
The foregoing terms and conditions are accepted and agreed to.
NONA MORELLI'S II, INC.
By: /S/ FRED G. LUKE
Fred G. Luke, CEO
<PAGE>
EXHIBIT 10.34
-------------
June 2, 1997
Richard H. Skjerven, Esq.
Skjerven, Morrill, MacPherson, Franklin & Friel LLP
25 Metro Drive, Suite 700
San Jose, CA 95110
Re: Escrow Instructions for Joseph Monterosso/National Pools Corporation/Nona
Morelli's II, Inc./NuOasis Gaming, Inc. Transactions
Dear Mr. Skjerven:
This letter shall serve as joint escrow instructions by the undersigned to
you in connection with the Stock Purchase Agreement between Nona Morelli's II
Inc. ("Nona") and Joseph J. Monterosso and/or his assignees, dated May 1, 1997
(the "Nona Agreement"), the Stock Purchase Agreement between NuOasis Gaming,
Inc. ("NuOasis") and the Stockholders of National Pools Corporation (the
"Selling NPC Stockholders"), dated December 19, 1996 (the "NPC Agreement"), and
the Stock Purchase Agreement between Nona and NuOasis, dated May 1, 1997 (the
"CMA Agreement")
1. APPOINTMENT AS ESCROW HOLDER. Pursuant to the Nona Agreement, a copy of
which is attached hereto as Exhibit "A", the NPC Agreement, a copy of which
is attached hereto as Exhibit "B", and the CMA Agreement, a copy of which
is attached hereto as Exhibit "C", the parties are each required to deposit
with a mutually acceptable third party, as Escrow Holder, funds and other
documents and securities required to be delivered to the other parties to
each such agreement pursuant to the terms and conditions of such agreement.
In consideration for the covenants contained herein, the adequacy and
sufficiency of which are expressly acknowledged, Nona, NuOasis, Mr.
Monterosso (on behalf of himself and his assignees) and the Selling NPC
Stockholders (all as evidenced by their signatures hereto) mutually agree
with you to engage you as Escrow Holder to effect a Closing and to carry
out the intent and purposes of the Nona Agreement, the NPC Agreement and
the CMA Agreement.
In this regard, subject to your acceptance of these instructions and
agreement, Nona, NuOasis, Mr. Monterosso and/or his assignees and the
Selling NPC Stockholders agree with you as follows:
<PAGE>
2. HOLDING OF DOCUMENTS, ETC. You are hereby irrevocably authorized and
instructed to receive, together with the instant instructions:
A. For the Nona Agreement:
(i) A counterpart original of Exhibit "A" hereto, (the Nona
Agreement), executed by Mr. Monterosso and/or his assignees and
by Nona;
(ii) The sum of at least US$1,235,000 in certified or verified funds
and, at the option of Mr. Monterosso and/or his assignees, up to
an additional US$2,015,000; and
(iii)The stock certificate, together with a properly executed
assignment or stock power, representing Two Hundred Fifty
Thousand (250,000) shares of Series B Preferred Stock of NuOasis
(the "NuOasis Shares").
(iv) Various other agreements entered into by the parties, including
an Exchange Agreement or another document entered into by the
parties that specifies that certain securities and obligations
may be accepted in lieu of cash as payment for certain of the
NuOasis shares, the securities and obligations to be so accepted,
provided nothing in such instrument which would adversely affect
your ability to make the distribution authorized by Paragraph
E.
(v) below, a letter agreement pertaining to certain intercompany
debt, and two Indemnity Agreements, one in favor of Mr. Fred G.
Luke and one in favor of NuOasis and release receipt letters by
various consultants of NuOasis of fees to be paid by NuOasis to
them (the "Ancillary Documents").
B. For the NPC Agreement:
(i) Counterpart originals of Exhibit "B" hereto, (the NPC Agreement),
executed by NuOasis and by the Selling NPC Stockholders;
(ii) A series of Convertible Promissory Notes ("Notes") in favor of
the individual NPC Selling Stockholders in the aggregate
principal amount of One Million, Two Hundred Thousand Dollars
($1,200,000) representing the Purchase Price (as defined in the
NPC Agreement) in such individual denominations as the NPC
Shareholders have instructed;
(iii)Stock certificates representing up to One Million (1,000,000)
shares of Common Stock of NuOasis in such individual
denominations as the NPC Shareholders have instructed; and
(iv) The stock certificates, together with properly executed
assignments or stock powers, representing all the issued and
outstanding shares of common stock of NPC.
C. For the CMA Agreement:
<PAGE>
(i) A counterpart original of Exhibit "C" hereto, (the CMA
Agreement), executed by Nona and by NuOasis; and
(ii) The stock certificate, together with a properly executed
assignment or stock power, representing Seven Million Five
Hundred Thousand shares (7,500,000) of common stock of Casino
Management of America, Inc., a Utah corporation; and
(iii)A release in favor of Nona executed by NuOasis which is one of
the Ancillary Documents, specifically the letter agreement
pertaining to intercompany debt.
You shall hold all such documents and instruments deposited in
escrow as you deem best. All funds deposited in escrow shall be
held in a trust account you establish with interest payable to
those persons depositing the same.
3. DELIVERY OF DOCUMENTS. When you have received all of the foregoing (except
that neither all or any part of the additional U.S.$2,015,000 referred to
above shall be required for you to take action under paragraphs A, B, C or
D below) and you have determined, in your reasonable discretion, or have
otherwise been informed in writing by the parties that all conditions
precedent to the close of the transaction envisioned by the Nona Agreement,
the NPC agreement and the CMA Agreement have been satisfied, you are
authorized to proceed with an initial Closing and you are hereby
irrevocably authorized and instructed to perform the following actions:
A. For the Nona Agreement:
(i) On behalf of Mr. Monterosso and/or his assignees, deliver the
$1,235,000 or such other greater sum as may be specified by Mr.
Monterosso and/or his assignees and deposited in escrow, to Nona,
$1,140,000 of which shall be immediately and simultaneously
distributed per the instruction set forth in C.(i) below; and
(ii) On behalf of Nona, deliver certificates to Mr. Monterosso and/or
his assignees evidencing the number of the NuOasis Shares that
Mr. Monterosso and/or his assignees are entitled to receive under
the Nona Agreement.
B. For the NPC Agreement:
(i) On behalf of NuOasis, deliver to the NPC shareholders the series
of Notes (aggregating $1,200,000, or such lesser amount,
withholding the corresponding number of Notes attributable to
those Selling NPC Stockholders who have not executed the NPC
Agreement) and certificates evidencing shares of common stock of
NuOasis (aggregating 1,000,000 or such lesser number, withholding
the corresponding number of such shares attributable to those
selling NPC Stockholders who have not executed the NPC
Agreement). You shall hold any shares or one of the Notes
attributable to any option held by Ronald McGee pursuant to a
previously executed agreement applicable to such shares and Note.
<PAGE>
(ii) On behalf of the Selling NPC Stockholders, deliver the
certificate(s) evidencing the NPC Shares to NuOasis.
(iii)On behalf of Nona deliver the Indemnification Agreement in favor
of NuOasis (one of the Ancillary Documents) to NuOasis.
C. For the CMA Agreement:
(i) On behalf of Nona, deliver the $1,140,000 or such greater sum as
is received from Mr. Monterosso and/or his assignees to NuOasis
for immediate and simultaneous distribution per the instruction
set forth in (iii) below; provided, however, you shall retain the
difference obtained by subtracting the amount distributed
pursuant to (iii) below from $250,000.
(ii) On behalf of NuOasis, deliver the stock certificate evidencing
the CMA Shares to Nona; and
(iii)On behalf of Mr. Monterosso and/or his assignees and NuOasis,
deliver at least $1,140,000 of the $1,235,000 or such greater sum
as is received from Nona via Mr. Monterosso and/or his assignees
to NPC as additional paid in capital from NuOasis to NPC and for
distribution pursuant to D below.
(iv) On behalf of NuOasis, deliver $95,000 or more (at the rate of
$1.00 for each share of Series B Preferred Stock purchased by Mr.
Monterosso or his assigns in addition to the first 95,000 shares
purchased) to Nona.
(v) On behalf of NuOasis, deliver the Indemnification Agreement in
favor of Mr. Luke (one of the Ancillary Documents) to Mr. Luke.
D. Additional Disbursements at Closing Approved by NuOasis:
Out of funds received by NPC at Closing and on behalf of NPC, or
deposited in escrow from the sale of securities of NuOasis by NuOasis
for such purpose or purposes, NuOasis approves and ratifies the
payment of up to $180,000 as follows:
(a) approximately $15,000 to the Internal Revenue Service in
satisfaction of a tax lien;
(b) up to $250,000 to persons:
[1] who after December 31, 1995 had made bridge loans to NPC; or
[2] who performed legal services on NPC's behalf; or
[3] who performed audit services on NPC's behalf; or
[4] have provided administrative services to NPC.
<PAGE>
Said parties are to provide written evidence, approved by NPC, of such
bridge loans, legal services, audit services and administrative
services prior to Closing.
If you fail to receive any notice to close from the parties within 30
days of your receipt of all the funds, documents and securities set
forth in Paragraph 2, or otherwise are unable to determine that all of
the conditions precedent to the transactions envisioned by the Nona
Agreement, the NPC Agreement or the CMA Agreement have been satisfied,
you shall return to each respective depositing party the funds,
securities or documents deposited by such party into escrow promptly
upon the expiration of said 30 day period; provided, however, this 30
day period shall not expire until 120 days after the date on which
NuOasis is first scheduled to hold a meeting of its shareholders
pursuant to a proxy solicitation approved by the SEC.
E. Disbursements at Second Closing:
If after the deliveries referred to above, Mr. Monterosso and Nona
shall deliver to you notice of their agreement on a new option
exercise price for the NuOasis Shares, or, in any case, for at least
the 120 day period referred to above, you shall hold the certificates
evidencing the NuOasis Shares remaining in escrow, the Release
referred to in Paragraph 1.C.(iii) above and any funds deposited by
Mr. Monterosso and/or his assignees not released in the initial
closing. Upon either (i) the expiration of the 120 day period referred
to above, (ii) the earlier receipt and notice from Mr. Monterosso
and/or his assignees and Nona or (iii) the deposit of the sum of
$2,015,000, you shall make the following disbursements:
(i) On behalf of Mr. Monterosso and/or his assignees, deliver all or
any part of the $2,015,000 in cash and/or securities and
obligations previously deposited to Nona, $1,860,000 of which
shall be immediately and simultaneously distributed as set forth
in (iv) below;
(ii) On behalf of Nona, deliver certificates to Mr. Monterosso and/or
his assignees evidencing the number of the NuOasis Shares that
Mr. Monterosso and/or his assignees are entitled to receive under
the Nona Agreement.
(iii)On behalf of Nona, deliver the $1,860,000 or such lesser sum of
cash and/or securities and obligations received from Mr.
Monterosso and/or his assignees to NuOasis for immediate and
simultaneous distribution per the instructions set forth in (iv)
below;
(iv) On behalf of NuOasis, deliver the $1,860,000 of cash and/or
securities and obligations (less any amount to be distributed
pursuant to (v) below) received from Nona via Mr. Monterosso
and/or his assignees to NPC as additional paid in capital from
NuOasis to NPC and make the distributions envisioned by (v)
below;
(v) On behalf of Mr. Monterosso and/or his assignees and NuOasis,
deliver cash in the amount of the difference obtained by
subtracting from $250,000 the amount distributed pursuant to
Paragraph C.(iv) above.
<PAGE>
(vi) On behalf of each signing party, deliver an original of the
Ancillary Documents not previously released from escrow to the
other party or parties thereto.
Without limiting the generality of the foregoing, you shall
release to Mr. Monterosso and/or his assignees any additional
funds they deposit in escrow solely on their instructions if such
instructions are given prior to the deposit of all items
specified in Paragraph 2A above.
F. Early NPC Close:
Anything contained elsewhere in these instructions to the contrary
notwithstanding, upon written notice from Mr. Monterosso, you are
authorized to treat the sale of the capital stock of NPC to NuOasis by
the Selling NPC Stockholders as though it were closed in accordance
with these instructions and proceed with the closing of the other
transactions envisioned by these instructions in accordance with these
instructions, all without investigation as to the actual closing of
such sale.
4. RELATIONSHIP. The parties mutually agree and acknowledge that as far as
your rights and liabilities are concerned, this transaction is an escrow
and not any other legal relationship, and you are simply acting as an
escrow agent under the terms expressed herein.
5. TIME OF ESSENCE. Time is of the essence of this Agreement and if, for any
reason, this escrow cannot be closed as hereinabove provided or as mutually
extended by the parties hereto, this escrow shall automatically terminate
without further instruction from any party; provided, however, this 30 day
period shall not expire until 120 days after the date on which NuOasis is
first scheduled to hold a meeting of its shareholders pursuant to a proxy
solicitation approved by the SEC.
6. INDEMNIFICATION AND DEFENSE. All of the parties to this escrow hereby
jointly and severally promise to pay promptly on demand, as well as to
indemnify you and to hold you harmless from and against all litigation and
interpleader costs, damages, judgments, attorney's fees, expenses,
obligations and liabilities of every kind which, in good faith, you may
incur or suffer in connection without arising out of this escrow, whether
said litigation, interpleader obligation, liabilities or expenses arise
during the performance of this escrow or subsequent thereto, directly or
indirectly. You are hereby given a lien upon all the right, title and
interest of every party hereto in all escrow papers, securities and other
property and monies deposited into this escrow, to protect your rights and
to indemnify and reimburse you.
7. LIMIT OF RESPONSIBILITY. You are not to be held liable for the sufficiency
or correctness as to form, manner of execution, or validity of any
instruments deposited in this escrow, nor as to identity, authority or
rights of any person executing the same, nor the genuineness of any
signature, nor for failure to comply with any of the provisions of any
agreement, contract or other instrument filed herein or referred to herein,
and your duties hereunder shall be limited to the safekeeping of such
monies, instruments, securities or other documents received by you as
escrow agent, and for the disposition of same in
<PAGE>
accordance with the foregoing instructions and other instructions provided
by all affected parties and accepted by you in this escrow.
8. FEES. Your fees for services rendered pursuant to this Agreement shall be
borne by all parties jointly and severally. It is anticipated by the
parties you will be paid out of the proceeds of this escrow. In addition,
you shall have a lien upon all property deposited with hereunder to secure
payment of your compensation and expenses.
9. RELEASE. It is mutually agreed that you shall not be liable for any action
taken or omitted by you in good faith and believed by you to be within the
discretion and power conferred upon you by this Agreement, nor for any
action taken or omitted by you when acting upon any instrument believed by
you to be genuine.
10. NOTICE. It is mutually agreed by all parties hereto that you shall not be
deemed to have notice or knowledge of any fact hereunder unless written
notice thereof is delivered to you.
11. EFFECT OF SIGNATURE. The signatures of any party on any document and/or
instruction shall be construed as that party's approval of the form,
contents, terms and conditions of such document, instrument and/or
instruction.
12. DELIVERY OF DOCUMENTS. All disbursements of funds, documents and/or
instruments of this escrow shall be delivered by commercial overnight
delivery service to the respective parties as their addresses as they
appear below.
13. COUNTERPARTS. These instructions may be executed in counterparts, each of
which so executed shall irrespective of the date of its execution and
delivery be deemed an original, and said counterparts together shall
constitute one and the same instrument.
14. DISPUTES. It is mutually agreed that if any dispute arises among or between
the parties, or between either party and you before Closing, as to any
action to be taken by you or as to your rights and duties hereunder, you
may upon written request terminate this Escrow and immediately return all
documents, funds or certificates deposited herewith to the respective
depositing party. In such event, you shall thereupon be discharged from all
obligation to account to any party.
15. GOVERNING LAW. These instructions shall be governed by and construed in
accordance with the laws of the United States, State of California. In the
event that an action shall be brought to determine or enforce the
respective rights and liabilities of the parties, venue shall be deemed to
be in Santa Clara County, California.
16. ASSIGNMENT. This Agreement and these escrow instructions shall be binding
on and inure to the benefit of the heirs, executors, administrators,
successors and assigns of the parties hereto.
<PAGE>
17. AMENDMENT. It is mutually agreed that you are to disregard any future or
further instructions from either party severally hereto. Once these
instructions have been received by you, the respective instructions of the
parties may only be amended, supplemented or modified by means of a written
amendment that has been signed in writing by all parties hereto. Any
purported oral amendment, supplement or modification of these instructions
shall be ineffective and invalid.
"NuOasis"
NuOASIS GAMING INC. "Escrowholder"
a Delaware corporation
By: /S/ FRED G. LUKE
Name: FRED G. LUKE /S/ RICHARD J. SKJERVEN
Title: CHAIRMAN Richard J. Skjerven
"Nona"
NONA MORELLI'S II INC.
a Colorado corporation
By: /S/ FRED G. LUKE
Name: FRED G. LUKE
Title: CEO
/S/ JOSEPH J. MONTEROSSO
Joseph J. Monterosso
Series B Preferred Stock Purchasers
Listed on Schedule I
By /S/ JOSEPH J. MONTEROSSO
Joseph J. Monterosso,
their Attorney-in-Fact
<PAGE>
EXHIBIT 10.35
-------------
ASSIGNMENT
----------
KNOW ALL THESE MEN BY THESE PRESENTS:
THIS ASSIGNMENT is made and entered into by and between NuOasis Gaming,
Inc., a Delaware corporation ("Assignor"), and Nona Morelli's II, Inc., a
Colorado corporation ("Assignee").
WITNESSETH: That for and in Consideration of Ten Dollars ($10) and other
good and valuable consideration, the receipt of which is hereby acknowledged,
Assignor hereby bargains, sells, grants and conveys unto Assignee, all of
Assignor's right, title and interest in the Seven Million five Hundred Thousand
(7,500,000) shares of common stock of Casino Management of America Inc., a Utah
corporation (the "CMA shares"), to have and to hold forever. Assignor warrants
that it has the power and authority, and does hereby sell and transfer the CMA
Shares to Assignee.
IN WITNESS WHEREOF, I have caused this instrument to be executed effective
the 5th day of May 1997.
"Assignor"
NuOasis Gaming, Inc.,
a Delaware corporation
By: /S/ JOSEPH MONTEROSSO
Name: Joseph Monterosso
Title: President
<PAGE>
EXHIBIT 10.36
-------------
INDEMNIFICATION AGREEMENT
-------------------------
THIS INDEMNITY AGREEMENT ("Agreement") is made as of the 30th day of May
1997 between NuOasis Gaming Inc., a Delaware corporation, with its principal
office located in Irvine, California (referred to herein as "Indemnitee") and
Nona Morelli's II, Inc., a Delaware corporation with an office in Irvine,
California (referred to herein as "Indemnitor").
IN CONSIDERATION of the sum of Ten Dollars ($10), and other good and
valuable consideration, the receipt and sufficiency of which is acknowledged, it
is hereby agreed:
1. INDEMNIFICATION FOR CLAIMS. Indemnitor shall indemnify and hold Indemnitee
harmless from any and all liability, cost, loss or damage Indemnitee may
suffer or incur as a result of any claim, demand or judgment against
Indemnitee arising out of a claim by a third party that constitutes a
breach of any representation or warranty by NuOasis Gaming, Inc. under that
certain Stock Purchase Agreement by and between NuOasis Gaming, Inc. and
the shareholders of National Pools Corporation or that is due to the
assertion of a claim by any third party or the attempt to collect debt by
any third party purportedly due from NuOasis Gaming, Inc. and not
specifically set forth in Exhibit G to such Stock Purchase Agreement or
otherwise or that is due to the acquisition or disposition or management of
Casino Management of America, Inc. by NuOasis Gaming, Inc. prior to May 30,
1997; provided, however, Indemnitor shall have no liability under this
indemnity to the extent such loss, cost, or damage is the direct result of
the actions or omissions of management of Indemnitee on and after May 5,
1997.
2. DEFENSE OF CLAIMS. Indemnitor also agrees to defend or reimburse Indemnitee
for its reasonable costs in defending any claims brought or actions filed
against Indemnitee with respect to the subject of the indemnity contained
herein, including those which may not result in a payment of indemnity due
to Indemnitor's action or inaction after Indemnitor ceased to control
Indemnitee's affairs, whether such claims or actions are rightfully or
wrongfully brought or filed, provided, in any case, Indemnitor controls the
defense of such claim or suit and Indemnitee complies with Paragraph 4
below. Control of defense shall mean the right to select defense counsel,
which shall be reasonably acceptable to Indemnitee, and, after
consultations with Indemnitee, to determine the defense strategy, to
authorize any settlement offer made to plaintiff(s) and to accept or to
reject any settlement offer made by plaintiff(s).
3. TERM OF INDEMNITY. The indemnity under this Agreement shall commence on the
date hereof, and shall continue in full force and effect until June 30,
2002, and beyond that date for any claim or action brought before that
date.
4. NOTICE OF CLAIMS BY INDEMNITEE. Indemnitee agrees to notify Indemnitor in
writing within ten (10) days by registered mail, return receipt requested,
at Indemnitor's address, of any claim made against Indemnitee in respect to
obligations for which Indemnitee is hereby indemnified by Indemnitor
against or for which Indemnitor is obligated to provide a defense.
<PAGE>
5. MISCELLANEOUS.
A. FURTHER ASSURANCES. At any time and from time to time, after the
effective date, each party will execute such additional instruments
and take such action as may be reasonably requested by the other party
to confirm or otherwise to carry out the intent and purposes of this
Agreement.
B. WAIVER. Any failure on the part of any party hereto 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.
C. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given if delivered in person
or sent by prepaid first class registered or certified mail, return
receipt requested to the parties hereto, or their designees, as
follows, or at such other address as either party may subsequently
provide to the other pursuant to this paragraph:
To Indemnitee: NuOasis Gaming, Inc.
550 15th Street
San Francisco, CA 94103
Telephone: (415) 575-0222
Telefax: (415) 861-4177
To Indemnitor: Nona Morelli's II, Inc.
2 Park Plaza, Suite 470
Irvine, CA 92714
Telephone: (714) 833-5381
Telefax: (714) 833-7854
D. 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.
E. 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.
F. 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.
G. 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 hereof. 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.
<PAGE>
H. SEVERABILITY. If any party of this Agreement is deemed to be
unenforceable, the balance of this Agreement shall remain in full
force and effect.
I. 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 and may
be delivered in original or by facsimile or similar instantaneous
electronic transmission device pursuant to which the signature of or
on behalf of such party can be seen, and in such case the facsimile
execution and delivery shall be considered valid, binding and
effective for all purposes. At the request of any party hereto, all
parties agree to deliver an original of this Agreement as well as any
facsimile, telecopy or other reproduction hereof subsequent to the
effective date.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
"Indemnitor"
NONA MORELLI'S II, INC.
/S/ FRED G. LUKE
Fred G. Luke
"Indemnitee"
NuOASIS GAMING, INC.
By: /S/ JOSEPH MONTEROSSO
Name: Joseph Monterosso
Title: President
<PAGE>
EXHIBIT 10.37
-------------
INDEMNIFICATION AGREEMENT
-------------------------
THIS INDEMNITY AGREEMENT ("Agreement") is made as of the 30th day of May
1997 between NuOasis Gaming Inc., a Delaware corporation, with its principal
office located in Irvine, California (referred to herein as "Indemnitor") and
Fred Gordon Luke, an individual residing in Irvine, California and former
President of the Board of NuOasis Gaming, Inc. (referred to herein as
"Indemnitee").
IN CONSIDERATION of the sum of Ten Dollars ($10), and other good and
valuable consideration, including Indemnitee's termination of that certain
Employment Agreement dated August ___, 1995, such termination to be effective
upon the closing of the sale of all 250,000 shares of Series B Preferred Stock
issued by NuOasis Gaming, Inc. to Joseph Monterosso and/or his assignees by Nona
Morelli's II, Inc., (the "Resignation Date"), the receipt and sufficiency of
which is acknowledged, it is hereby agreed:
1. INDEMNIFICATION FOR PAST SERVICES. Indemnitor shall indemnify Indemnitee
from any and all liability, cost, loss or damage Indemnitee may suffer or
incur as a result of claims, demands or judgments against Indemnitee
arising from Indemnitee's past services in any capacity to Indemnitor
brought by any third party, except to the extent the same are due to any
intentionally wrongful or bad faith act of Indemnitee, but not excluding
liability, loss or damage to Indemnitee attributable to the action or
inaction by Indemnitee's successors in the management of Indemnitor for
which Indemnitor shall be responsible.
2. DEFENSE OF CLAIMS. Indemnitor also agrees to defend or reimburse Indemnitee
for his reasonable costs in defending any claims brought or actions filed
against Indemnitee with respect to the subject of the indemnity contained
herein, including those which may not result in a payment of indemnity due
to Indemnitor's bad faith or intentionally wrongful act or omissions,
whether such claims or actions are rightfully or wrongfully brought or
filed, provided, in any case, Indemnitor controls the defense of such claim
or suit and Indemnitee complies with Paragraph 4 below.
3. TERM OF INDEMNITY. The indemnity under this Agreement shall commence on the
date hereof, and shall continue in full force and effect until June 30,
2002 and beyond that date for any claim or action brought before that date.
4. NOTICE OF CLAIMS BY INDEMNITEE. Indemnitee agrees to notify Indemnitor in
writing within ten (10) business days by registered mail, return receipt
requested, at Indemnitor's address, of any claim made against Indemnitee in
respect to obligations for which Indemnitee is hereby indemnified by
Indemnitor against or for which Indemnitor is obligated to provide a
defense.
<PAGE>
5. RELEASE OF CLAIMS BY INDEMNITOR. Indemnitor hereby releases Indemnitee from
any and all claims or causes of action, of any sort whatsoever, excepting
only claims based on bad faith, intentional misappropriation of funds for
personal use, which Indemnitor may now or may hereafter have against
Indemnitee from arising out of any action or omission of Indemnitee in his
capacity as a direction or officer of Indemnitor from the beginning of time
through the Resignation Date.
6. RELEASE OF CLAIMS BY INDEMNITEE. Indemnitee hereby releases Indemnitor from
any and all claims and causes of action of any sort whatsoever, excepting
only compensation due under any agreement entered into by the parties or
agreed to be assumed by Indemnitor or Joseph Monterosso as part of the
purchase by Joseph Monterosso and assigns of Series B Preferred Stock of
Indemnitor.
7. UNKNOWN CLAIMS. This release extends to claims which the parties may not
know or suspect to exist at the time of executing this Agreement and the
parties hereby waive the benefit of Section 1542 of the California Civil
Code (and all other statutes and court decisions of similar import) which
is set forth below:
"A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the
debtor."
8. ASSISTANCE WITH CLAIMS. In addition to the indemnification and release
obligations of Indemnitor hereunder, Indemnitor will provide Indemnitee
with access to any information and documents in its possession or control
which would assist Indemnitee in the defense of any claim whatsoever,
provided such information or document is not subject to a contractual or
legal restriction or disclosure.
9. MISCELLANEOUS.
A. FURTHER ASSURANCES. At any time and from time to time, after the
effective date, each party will execute such additional instruments
and take such action as may be reasonably requested by the other party
to confirm or otherwise to carry out the intent and purposes of this
Agreement.
B. WAIVER. Any failure on the part of any party hereto 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.
C. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given if delivered in person
or sent by prepaid first class registered or certified mail, return
receipt requested tot he parties hereto, or their designees, as
follows:
<PAGE>
To Indemnitor: Joseph Monterosso
NuOasis Gaming, Inc.
550 15th Street
San Francisco, CA 94103
Telephone: (415) 575-0222
Telefax: (415) 861-4177
To Indemnitee: Fred G. Luke
2 Park Plaza, Suite 470
Irvine, CA 92714
Telephone: (714) 833-5381
Telefax: (714) 833-7854
D. 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.
E. 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.
F. 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.
G. 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 hereof. 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.
H. SEVERABILITY. If any party of this Agreement is deemed to be
unenforceable, the balance of this Agreement shall remain in full
force and effect.
I. 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 and may
be delivered in original or by facsimile or similar instantaneous
electronic transmission device pursuant to which the signature of or
on behalf of such party can be seen, and in such case the facsimile
execution and delivery shall be considered valid, binding and
effective for all purposes. At the request of any party hereto, all
parties agree to deliver an original of this Agreement as well as any
facsimile, telecopy or other reproduction hereof subsequent to the
effective date.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
<PAGE>
"Indemnitee"
/S/ FRED GORDON LUKE
Fred Gordon Luke
"Indemnitor"
NuOASIS GAMING, INC.
By: /S/ JOSEPH MONTEROSSO
Name: Joseph Monterosso
Title: President
<PAGE>
EXHIBIT 10.38
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EXECUTIVE EMPLOYMENT AGREEMENT
------------------------------
This Executive Employment Agreement is made and entered into by and between
National Pools Corporation (hereinafter NPC), a California corporation, a
subsidiary of NuOasis Gaming, Inc., a Delaware corporation (hereinafter "NUOG"),
and Dennis D. Houston (hereinafter the "Executive") who NPC has engaged as its
Chief Operating Officer.
WHEREAS, the parties desire that the Executive will be available to perform
services for NPC on a full-time basis beginning July 1, 1997, and
WHEREAS, the Executive will work closely with and under the direct
supervision of the Chief Executive Officer of NPC to ensure the successful
implementation of NPC business plan and the attainment of NPC goals as set forth
by the NPC Board of Directors.
NOW, THEREFORE, for and in consideration of the premises and promises
contained herein, and other good and valuable consideration, the adequacy of
which is hereby acknowledged, the parties hereto hereby agree as follows, to
wit:
I. TERM OF AGREEMENT
This agreement shall have a term of three years beginning on July 1, 1997, and
ending on July 1, 2000. Upon the expiration of its initial term, this Agreement
may be extended for such period under the same terms and conditions as set forth
herein as the parties shall specify by mutual consent. If the Agreement is not
terminated on July 1, 2000, but no extension is agreed to in writing by the
parties, the terms and conditions of this Agreement shall continue to govern the
parties' employment relationship, except that either party may terminate the
agreement without penalty or additional payment on 60 days' prior written notice
and NPC shall have the right to alter executive's terms and conditions of
employment on 60 days' written notice.
II. RESPONSIBILITIES
The Executive's duties and responsibilities will be the overall supervision and
management of the operations of NPC and as requested by the Chef Executive
Officer and the Board of Directors.
III. COMPENSATION
During the term of this Agreement, Executive's compensation from NPC will be as
follows:
A. During the first six months of this Agreement, the Executive will receive a
salary at the rate of $100,000 per year.
B. During the remainder of the term of this Agreement, the Executive will
receive a salary of $200,000 per year.
<PAGE>
C. NPC will make its best efforts to implement employee incentive stock option
plan within the first twelve months of the Executive's employment. If and
when the plan is adopted, the Executive will receive an option for 250,000
shares of NUOG Common Stock registered under SEC Form S-8. If the incentive
option plan is not adopted by the NUOG shareholders, the Executive will
receive 250,000 shares of NUOG Common stock registered under SEC Form S-8
before the end of the first twelve months of the Executives employment
under this Agreement.
D. Participation in any NPC Medical, Dental, Disability and Life Insurance
programs.
E. All normal federal holidays and four (4) weeks paid vacation for each year
of this Agreement with one week of vacation being earned after each three
(3) months of this Agreement. Vacation scheduling must be cleared in
advance with the CEO or the Board of NPC.
F. One day of sick leave per month.
G. Reimbursement for all pre-approved expenses incurred while in the
performance of any NPC related responsibilities, as per the NPC's
operations manual or reimbursement policies.
H. Car allowance in the amount of $500 per month.
I. Participation in the NPC Management Bonus Program (Attachment A).
J. Participation in the NPC Management Stock Option Program. Specifically, it
is anticipated that NUOG will amend or adopt an incentive stock option plan
or other stock option plan in which Executive and other management
employees of NPC will be eligible to participate. It is now anticipated
that Executive will be granted an option or options to purchase up to
5,250,000 share of Common Stock of NUOG under such stock option plan during
the first three (3) years of Executive's employment by NPC.
The Executive's salary and expense reimbursement will be paid in accordance
with NPC's standard established payroll policies. NPC shall be responsible
for withholding and paying all appropriate federal, state and local taxes.
The Executive's participation in any benefit plan or program listed above,
including plans and programs to provide securities of NPC or NUOG to
Executive, shall be subject to Executive's continued employment by NPC, the
attainment of such company, group and individual goals as may be
established by such plan or program or any person or entity administering
such plan or program, compliance with all legal and procedural requirements
of such plan or program and NPC's (and NUOG's) legal ability to adopt and
maintain such plan or program. Executive acknowledges that neither the
fulfillment of any of these conditions nor the actual benefits to be
derived from any such plan or program can be guaranteed.
<PAGE>
IV. NOTICES
All notices, demands, or requests which may be given by either party to the
other party shall be in writing and shall be deemed to have been duly given
on the date delivered by personal delivery or deposited in the US Mail, and
addressed as follows:
If to NPC: If to Employee:
Attn: Board of Directors Dennis Houston
National Pools Corporation 315 20th Street
550 15th Street, 3rd Floor Huntington Beach CA 92648
San Francisco CA 94401
The address to which such notices, demands, requests, elections or other
communications may be given by either party may be changed by written
notice given by such party to the other party pursuant to this section.
V. TERMINATION
A. The Executive may resign without breach of this Agreement for any
reason by giving NPC no less than 60 days' prior written notice. The
Executive shall serve any portion of the 60 day notice period at the
discretion of NPC's CEO. NPC shall have no severance obligation to the
Executive for any termination by the Executive.
B. NPC may terminate this Agreement for cause, as defined below, without
any notice in addition to any notice required below for any of the
following actions by the Executive.
1. Any breach of this Agreement by Executive which is not cured
within five business days after receiving notice of such breach.
2. Inducing any NPC customer to discontinue using NPC services or
products, diverting customers or vendors away from NPC,
soliciting customers, vendors or employees for competitors of NPC
or aiding others to take such actions.
3. Executive's gross misconduct or criminal behavior.
4. Executive's substantial misconduct, including insubordination or
any other deliberate act or omission, that is significantly
detrimental to NPC or which materially damages NPC's relationship
with its customers, suppliers or employees.
C. If this Agreement is terminated for cause, as set forth above, the
Executive shall not be entitled to any compensation after the date of
such termination.
D. NPC shall have the right to terminate this Agreement and the
Executive's employment at any time for convenience. Upon any such
termination, the Executive shall be paid 60 days of the Executive's
then current salary and shall be entitled to exercise any stock
options otherwise exercisable. Executive shall serve any portion of
the 60 day notice period after the notice of termination at the
discretion of NPC's CEO.
<PAGE>
VI. NON-DISCLOSURE/NON-COMPETE
The Executive shall enter into NPC's standard Employment, Confidential
Information and Invention Assignment Agreement and it is specifically
understood that:
A. The Executive will be receiving certain proprietary information
relating to NPC and to its clients, products and services. The
Executive agrees to hold all such information written or verbal,
strictly confidential during and after the term of this Agreement.
B. It is also agreed that if this Agreement is terminated by the
Executive, the Executive will in no manner involve himself/herself in
or with another entity which may in any way be involved in providing
the same type of services and/or products as NPC for at least three
(3) years form the date of termination.
C. It is understood that a violation of either paragraph 1 or 2 above
would constitute substantial damage to NPC.
VII. INDEMNIFICATION
NPC and the Executive 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 and to the extent
of any breach of any representation, warranty, covenant, condition or
agreement of the other party to this Agreement.
NPC further agrees to indemnify, defend and hold the Executive 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 or imposed or incurred
by the Executive arising from the Executive's fulfillment of his or her
duties as an officer and director to the maximum extent permitted by the
California Corporations Code except to the extent such demand, etc. is due
to the Executive's grossly negligent or intentionally wrongful acts or
omissions.
VIII. ENTIRE AGREEMENT
This written Agreement represents the entire contract between NPC and the
Executive. There are no other agreements, oral or written, nor are they any
conditions precedent thereto which have not been fully complied with at the
time of execution of this contract, nor are there any other documents of
any nature or kind which are part of this contract.
IX. GENERAL
A. This Agreement may be reviewed and changed periodically by mutual
consent and signature of both parties.
<PAGE>
B. This Agreement may be executed in two or more counterparts, each of
which shall be deemed as an original, but all of which together shall
constitute one and the same instrument.
C. This Agreement supersedes any prior agreement(s) between the parties
related to the subject matter hereof. It is agreed that a waiver by
either party of a breach of any provision to this Agreement shall not
operate or be construed as a waiver of any subsequent breach by the
same party. Executive shall serve any portion of the 90 day period at
the CEO's discretion.
D. In case one or more of the provisions contained in this Agreement
shall for any reason be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceable shall not
affect any other provision(s) of this Agreement, but such provision
shall be deemed deleted and such deletion shall not affect the
validity of other provisions of the Agreement.
X. ARBITRATION AND GOVERNING LAW
A. This agreement is to be governed by the laws of the State of
California.
B. Any controversy or claim arising out of or relating to this Agreement
or the Breach thereof shall be settled by binding arbitration in
accordance with the rules and under the auspices of the American
Arbitration Association and judgment upon the award rendered may be
entered in any court having jurisdiction thereof with each party
bearing their own costs.
This Executive Employment Agreement is effective when signed by both parties.
National Pools Corporation Dennis D. Houston
/S/ JOSEPH MONTEROSSO /S/ DENNIS D. HOUSTON
Date: JULY 10, 1997 Date: JULY 10, 1997
<PAGE>
NATIONAL POOLS CORPORATION
MANAGEMENT BONUS PROGRAM
(ATTACHMENT "A)
A Performance Bonus shall be earned by the participating members of
Management of National Pools Corporation (the "Corporation") when certain
quantifiable goals are achieved by the Corporation.
The Performance Bonus shall be divided into shares, with each participating
member of Management of the Corporation receiving the following number of
shares:
CEO total number of shares assigned below
President four shares
COO four shares
CFO four shares
Executive Vice Presidents four shares
Vice Presidents three shares
Directors two shares
Regional Directors two shares
Comptroller one share
State Directors/Managers one share
When the following goals are reached by the Corporation, on a cumulative
basis from 1997 funding of the Corporation by its parent, the corresponding
Performance Bonus, consisting of share of or options for shares of Common Stock
of NuOasis Gaming, Inc. (NUOG) Common Stock will be delivered to participating
members of Management of the Corporation.
GOAL PERFORMANCE BONUS
---- -----------------
At Break-even Point 750,000 shares/options
$1.0 million in Cumulative Net Income before taxes 1,000,000 shares/options
$5.0 million in Cumulative Net Income before taxes 1,500,000 shares/options
$10 million in Cumulative Net Income before taxes 1,750,000 shares/options
$20 million in Cumulative Net Income before taxes 2,000,000 shares/options
$30 million in Cumulative Net Income before taxes 2,250,000 shares/options
$40 million in Cumulative Net Income before taxes 2,250,000 shares/options
After the Corporation has attained the $40 million in Net Income before
taxes level, all subsequent bonuses will be based on and come from a bonus pool
of shares or options for shares of NUOG Common Stock equal to 5% of the
corporation's Net Income before taxes at the market price of such shares.
The Performance Bonuses shall be paid to the participating members of
Management of the Corporation within thirty (30) days after a determination that
the Corporation has achieved the specified goal. The corporation's Yearly
Audited Financial Statement shall determine when and if the targeted Net Income
before taxes goals have been reached. The number of shares comprising any
particular Performance Bonus shall be adjusted for stock splits, reverse stock
splits and similar transactions. This program will terminate ten years after
product (HIT LOTTO(TM)) launch.
<PAGE>
EXHIBIT 10.39
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EMPLOYMENT AGREEMENT WITH JOSEPH MONTEROSSO
This Agreement is executed effective as of the lst day of April, 1994, by
and between National Pools Corporation, a California corporation (the "Company")
and Joseph James Monterosso (the "Executive").
1. POSITION AND DUTIES.
(a) The Company hereby hires the Executive and the Executive hereby
accepts employment as Chairman/Chief Executive Officer of the Company.
The Executive will, to the best of the Executive's ability during this
employment, devote Executive's full time and best efforts to the
performance of the duties and functions of this position, and in the
performance of those duties, will comply with the policies of the
Company and the directions of the Board of Directors of the Company.
(b) The executive's responsibilities and duties will be, but not limited
to, establish, build and manage the Company with all powers granted to
and responsibilities imposed upon chairmen of the board and chief
executive officers by the Bylaws of the Company or the California
Corporations Code, as modified by the Board of the Directors of the
Company, and to consult with the Board of Directors of the Company on
all major issues facing the Company.
2. COMPENSATION.
(a) The Company agrees to pay the Executive and the Executive agrees to
accept as compensation for all of the Executive's services to the
Company, a monthly base salary of $12,300 gross ($150,000 annually),
payable in accordance with the Company's standard payroll policies.
The Company agrees to increase the pay to the Executive to $20,833.34
gross per month ($250,000 annually) commencing at the start of the
Company's business, that is, when the first call is received and
charged on the Company's 800-HIT-LOTTO phone system after the
effective date of this Agreement. The first and last payment of salary
by the Company to the Executive shall be prorated, if necessary, to
reflect a commencement or termination date other than the first or
last working day of a pay period.
(b) The Company agrees to provide the Executive an allowance in the amount
of $450 per month for automobile expenses incurred by the executive
for employment related activities. The Company shall provide the
Executive with a. parking facility arrangement or provide an amount to
be agreed for said parking.
(c) The Company will pay the Executive a bonus equal to two percent (2%)
of the net profits of the Company, as determined by the profit and
loss statement of the Company prepared or reviewed by the Company's
outside accountants using generally accepted accounting principles,
consistently applied; provided, however, that no such bonus shall be
due in any year when the Company's net profits do not equal or EXCEED
one million dollars ($1,000,000); and
<PAGE>
provided further, that the Executive shall be paid an additional bonus
of $25,000 the first year the Company earns net profits or income of
one million dollars ($1,000,000) or more, shall be paid an additional
bonus of $25,000 the first year the Company earns net income or
profits of two million dollars ($2,000,000) or more, shall be paid an
additional bonus of $20,000 the first year the Company earns net
profits or income of three million dollars ($3,000,000) or more and
shall be paid an additional bonus of $20,000 the first year the
Company earns net profits or income of four million dollars
($4,000,000) or more. Any such bonus shall be paid within 45 days
after the Company's accountant's determination or verification of the
net income or PROFITS of the Company for its preceding fiscal year.
(d) The Company will reimburse the reasonable mid necessary travel
expenses of the Executive, subject to compliance with the Company's
travel and expense approval procedures.
(e) The Company will provide medical, dental, disability and life
insurance to the Executive equivalent to that provided by other
members of the Company's senior management staff.
3. SALE OF STOCK. The Company will grant the Executive the fight to purchase
up to 500,000 shares of the Company's Common Stock, without par value, at a
price of $0.0464597 per share. The Executive may pay for these shares
either in cash or under a Promissory Note due December 31, 1995 bearing
interest at the rate of six and one-half percent (6.5%) per year. The Note
may be prepaid at any time and any shares purchased by the Executive,
either for cash or upon prepayment of the Note, prior to the termination of
his employment with the Company shall be retained by him free and clear of
any claim by the Company. The Note will be canceled upon termination of the
Executive's employment with the Company and any shares not previously paid
for will be canceled, but the Executive will have 30 days after such
termination to purchase 25,000 shares for each month since April 1, 1994,
the Executive has been employed by the Company. If the Executive's
employment is terminated because of his death or disability, the Executive
or his personal representative, if any, shall have 90 days after such
termination to purchase all 500,000 shares for the cash price specified
above.
4. PROPRIETARY INFORMATION AGREEMENT. The Executive shall enter into the
Company's standard Employment, Confidential Information and Invention
Assignment Agreement.
5. INDEMNIFICATION AGREEMENT. The Executive shall enter into the Company's
standard Indemnification Agreement.
6. TERMS AND TERMINATION.
(a) The term of this Agreement shall commence on April 1, 1994, and shall
terminate on April 1, 1999.
(b) This Agreement may be terminated by the Company at any time for
justifiable cause (as defined below) without any severance obligation
on the part of the Company. For the purpose of this Agreement, the
term justifiable cause is defined as (i)Executive's gross misconduct.
OR criminal behavior, (ii) Executive's material failure, in the
reasonable opinion of the Company, to perform the Executive's duties
and responsibilities faithfully and diligently, (iii) Executive's
material failure, in the reasonable opinion of the Company, to adhere
to clear and lawful directions of the Company's board of directors,
(iv) Executive's substantial misconduct or dishonesty or
insubordination or other deliberate act or omission that is
detrimental in a significant way to the goodwill of the Company or
materially damaging to the Company's relationships with its customers,
suppliers or employees.
<PAGE>
(c) The Company has the right to terminate the Executive's employment at
any time other than pursuant to Section 6(b) during the five year
period ending April, 1999. Upon any such termination, Executive shall
be paid one year of Executive's then current salary and will be
entitled to exercise any options otherwise exercisable.
(d) This Agreement may be terminated by the Executive at any time upon 90
days written notice.
7. MISCELLANEOUS.
(a) This Agreement shall be binding upon the legal representatives,
distributes, successors and assigns of the parties hereto.
(b) This Agreement contains the entire agreement of the parties, and may
not be changed orally, but only be a writing signed by the party
against whom enforcement or such change is sought.
(c) This Agreement supersedes any prior agreements between the parties
related to the subject matter hereof It is agreed that a waiver by
either party of a breach of any provision to this Agreement shall not
operate or be construed as a waiver of any subsequent breach by the
same party.
(d) In case one or more of the provisions contained in this Agreement
shall for any reason be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall
not affect any other provisions of this Agreement, but such provisions
shall be deemed deleted and such deletion shall not affect the
validity of other provisions of this Agreement.
(e) This Agreement shall be governed by and construed according to the
laws of the State of California. The federal and state courts of the
State of California shall have exclusive jurisdiction to adjudicate
any dispute rising out of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
NATIONAL POOLS CORPORATION, EXECUTIVE
A CALIFORNIA CORPORATION
By: /S/ RON MCGEE /S/ JOSEPH J. MONTEROSSO
OFFICER OF THE CORPORATION JOSEPH J. MONTEROSSO
Date: DECEMBER 6, 1994
<PAGE>
EXHIBIT 10.40
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EMPLOYMENT AGREEMENT WITH STEVEN DONG
This Executive Employment Agreement is made and entered into by and between
National Pools Corporation. (hereinafter NPC), a California corporation, a
subsidiary of Group V Corporation, formerly NuOasis Gaming, Inc., a Delaware
corporation (hereinafter "Group V"), and Steven Dong (hereinafter the
"Executive") who NPC has engaged as its Chief Financial Officer and Treasurer.
WHEREAS, the parties desire that the Executive will be available to perform
services for NPC on a full-time basis beginning July 1, 1997, and
WHEREAS, the Executive will work closely with and under the direct supervision
of the Chief Executive Officer of NPC to ensure the successful implementation of
NPC business plan and the attainment of NPC goals as set forth by the NPC Board
of Directors.
NOW, THEREFORE, for and in consideration of the premises and promises contained
herein, and other good and valuable consideration, the adequacy of which is
hereby acknowledged, the parties hereto hereby agree as follows, to wit:
I. Term of Agreement
This Agreement shall have a term of two years beginning on July 1, 1997, and
ending on June 30, 1999. Upon the expiration of its initial term, this Agreement
may be extended for such period under the same terms and conditions as set forth
herein as the parties shall specify by mutual consent. If the Agreement is not
terminated on June 30, 1999, but no extension is agreed to in writing by the
parties, the terms and conditions of this Agreement shall continue to govern the
parties' employment relationship, except that either party may terminate the
agreement without penalty or additional payment on 60 days' prior written notice
and NPC shall have the right to alter executive's terms and conditions of
employment on 60 days' prior written notice.
II. Responsibilities
A. The Executive's duties and responsibilities will be as directed and
requested by the Chief Executive Officer and will include, but will
not be limited to the supervision and management of NPC's financial
and financial reporting operations.
III. Compensation
A. During the term of this Agreement Executive's compensation from NPC
will be as follows:
1. During the term of this Agreement, the Executive will receive a
salary of $105,000 per year for the first year and $120,000 per
year for the second year.
2. Participation in any NPC Medical, Dental, Disability and Life
insurance programs.
3. All normal federal holidays and four (4) weeks paid vacation for
each year of this Agreement with one week of vacation being
earned after each three (3) months of this Agreement. Vacation
scheduling must be cleared in advance with the CEO or the Board
of NPC.
4. One day of sick leave per month.
5. Reimbursement for all pre-approved expenses incurred while in the
performance of NPC related responsibilities, as per the NPC's
operations manual or reimbursement policies.
6. Car allowance in the amount of $300 per month.
7. Participation in the NPC Management Bonus Program. (Attachment
A).
8. Participation in the NPC Management Stock Option Program.
Specifically, it is anticipated that Group V will amend or adopt
an incentive stock option plan or other stock option plan in
which Executive and other management employees of NPC will be
eligible to participate. It is now anticipated that Executive
will be granted an option or options to purchase up to 800,000
shares of Common Stock of Group V under such stock option during
the first two (2) years of Executive's employment by NPC at an
exercise price of $0.50 per share, such option to vest evenly
over such period. NPC agrees to amend or adopt such an incentive
stock option plan as soon as practicable, but no later than six
months after the first day of the Initial Term of this Agreement.
9. Reimbursement for all Continuing Professional Education ("CPE")
expenses and professional membership fees reasonably incurred for
the purpose of keeping the Executive's Certified Public
Accountant license current and in good standing with the
California State Board of Accountancy, California Society of
Certified Public Accountants and American Institute of Certified
Public Accountants.
10. Computer allowance in the amount of $150 per month.
The Executive's salary and expense reimbursement will be paid in
accordance with NPC's standard established payroll policies. NPC shall
be responsible for withholding and paying all appropriate federal,
state and local taxes. The Executive's participation in any benefit
plan or program listed above, including plans and programs to provide
securities of NPC or Group V to Executive, shall be subject to
Executive's continued employment by NPC, the attainment of such
company, group and individual goals as may be established by such plan
or program or any person or entity administering such plan or program,
compliance with all legal and procedural requirements of such plan or
program and NPC's (and Group V's) legal ability to adopt and maintain
such a plan or program. Executive acknowledges that neither the
fulfillment of any of these conditions nor the actual benefits to be
derived from any such plan or program can be guaranteed.
IV. Notices
All notices, demands, or requests which may be given by either party to the
other party shall be in writing and shall be deemed to have been duly given
on the date delivered by personal delivery or deposited in the US Mail, and
addressed as follows:
If to NPC: If to Employee:
National Pools Corporation. Steven Dong
550 15th Street, 3rd Floor 1048 Irvine Avenue, #306
San Francisco, California 94401 Newport Beach, CA 92660
Attention: CEO
The address to which such notices, demands, requests, elections or other
communications may be given by either party may be changed by written
notice given by such party to the other party pursuant to this section.
V. Termination
A. The Executive may resign without breach of this Agreement for any
reason by giving NPC no less than 60 days' prior written notice. The
Executive shall serve any portion of the 60 day notice period at the
discretion of NPC's CEO. NPC shall have no severance obligation to the
Executive for any termination by the Executive.
B. NPC may terminate this Agreement for cause, as defined below, without
any notice in addition to any notice required below for any of the
following actions by the Executive.
1. Any breach of this Agreement by Executive which is not cured
within five business days after receiving notice of such breach.
2. Inducing any NPC customer to discontinue using NPC services or
products, diverting customers or vendors away from NPC,
soliciting customers, vendors or employees for competitors of NPC
or aiding others to take such actions.
3. Executive's gross misconduct or criminal behavior.
4. Executive's substantial misconduct, including insubordination or
any other deliberate act or omission, that is significantly
detrimental to NPC or which materially damages NPC's relationship
with its customers, suppliers or employees.
C. If this Agreement is terminated for cause, as set forth above, the
Executive shall not be entitled to any compensation after the date of
such termination.
D. NPC shall have the right to terminate this Agreement and the
Executive's employment at any time for convenience. In the event of
any such termination prior to the completion of the Initial Term,
Executive shall be entitled to a lump sum payment equal to the balance
of all compensation due to Executive, including, but not limited to,
salary and benefits under this Agreement, and to the rights to
exercise any remaining, previously unexercised Option Shares.
Notwithstanding anything contained herein to the contrary, Executive's
right to exercise any unexercised Option Shares shall continue for ten
years following the date of any termination. Executive shall serve any
portion of the 60 day notice period after the notice of termination at
the discretion of NPC's CEO.
VI. Non-Disclosure / Non-Compete
A. The Executive shall enter into NPC's standard Employment, Confidential
Information and Invention Assignment Agreement and it is specifically
understood that:
1. The Executive will be receiving certain proprietary information
relating to NPC and to its clients, products and services. The
Executive agrees to hold all such information, written or verbal,
strictly confidential during and after the term of this
Agreement.
2. It is also agreed that if this Agreement is terminated by the
Executive, the Executive will in no manner involve
himself/herself in or with another entity which may in any way be
involved in providing the same type of services and/or products
as NPC for at least three (3) years from the date of the
termination.
3. It is understood that a violation of either paragraph 1 or 2
above would constitute substantial damage to NPC.
VII. Indemnification
NPC and the Executive 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 and to the extent
of any breach of any representation, warranty, covenant, condition or
agreement of the other party to this Agreement.
NPC further agrees to indemnify, defend and hold the Executive 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 the Executive arising from the Executive's fulfillment of his
or her duties as an officer and director to the maximum extent permitted by
the California Corporations Code except to the extent such demand, etc. is
due to the Executive's grossly negligent or intentionally wrongful acts or
omissions.
VIII. Entire Agreement
This written Agreement represents the entire contract between NPC and the
Executive. There are no other agreements, oral or written, nor are there
any conditions precedent thereto which have not been fully complied with at
the time of execution of this contract, nor are there any other documents
of any nature or kind which are part of this contract.
IX. General
A. This Agreement may be reviewed and changed periodically by mutual
consent and signature of both parties.
B. This Agreement may be executed in two or more counterparts, each of
which shall be deemed as an original, but all of which together shall
constitute one and the same instrument.
C. This Agreement supersedes any prior agreement(s) between the parties
related to the subject matter hereof. It is agreed that a waiver by
either party of a breach of any provision to this Agreement shall not
operate or be construed as a waiver of any subsequent breach by the
same party. Executive shall serve any portion of the 90 day period at
the CEO's discretion.
D. In case one or more of the provisions contained in this Agreement
shall for any reason be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall
not affect any other provision(s) of this Agreement, but such
provisions shall be deemed deleted and such deletion shall not affect
the validity of other provisions of this Agreement.
X. Arbitration and Governing Law
A This agreement is to be governed by the laws of the State of
California.
B. Any controversy or claim arising out of or relating to this Agreement
or the Breach thereof shall be settled by binding arbitration in
accordance with the rules and under the auspices of the American
Arbitration Association and judgment upon the award rendered may be
entered in any court having jurisdiction thereof with each party
bearing their own costs.
This Executive Employment Agreement is effective when signed by both
parties.
National Pools Corporation Steven Dong
By: /s/ Joseph Monterosso /s/ Steven Dong
Date: July 1, 1997 July 1, 1997
<PAGE>
EXHIBIT 24.1
SCHEDULE OF SUBSIDIARIES
NAME OF SUBSIDIARY PARENT
National Pool Corporation Group V Corporation
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 677,525
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,042,458
<PP&E> 45,232
<DEPRECIATION> (6,763)
<TOTAL-ASSETS> 2,780,699
<CURRENT-LIABILITIES> 793,803
<BONDS> 0
0
501,700
<COMMON> 40,598
<OTHER-SE> (115,402)
<TOTAL-LIABILITY-AND-EQUITY> 2,780,699
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,130,068
<LOSS-PROVISION> 137,089
<INCOME-PRETAX> 0
<INTEREST-EXPENSE> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> (219,497)
<EXTRAORDINARY> 1,368,454
<CHANGES> 0
<NET-INCOME> (3,188,200)
<EPS-PRIMARY> (0.10)
<EPS-DILUTED> 0
</TABLE>
