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
------------
For the Fiscal Year Ended May 31, 1995 Commission file number 33-23430-D
THE TOEN GROUP, INC.
(Exact name of registrant as specified in its charter)
Nevada
(State of other jurisdiction of incorporation or organization)
84-1091271
(I.R.S. Employer Identification No.)
2 Park Plaza, Suite 470, Irvine, California
(Address of Principal Executive Offices)
92614
Zip Code
Registrant's telephone number, including area code: (714) 833-2091
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes No X
At July 31, 1996, 799,372 shares of Registrant's no par value common
stock issued and outstanding. There were also outstanding warrants to purchase
up to 668,000 shares of the Registrant's common stock. There has been no bid or
asked prices of the Registrant's common stock quoted in any market since
September 6, 1990.
Documents Incorporated by Reference:
None
Total Pages including cover: 63
TOEN\10K\TG53195.10K]-9
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TABLE OF CONTENTS
Page
PART I
Item 1. Business ........................................................1
Item 2. Properties.......................................................2
Item 3. Legal Proceedings................................................2
Item 4. Submission of Matters to a Vote of Security Holders..............2
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
matters ........................................................3
Item 6. Management's Discussion and Analysis of Financial Condition
and Results of Operations ......................................4
Item 7. Financial Statements and Supplementary Data......................5
Item 8. Change in and Disagreements With Accountants.....................5
PART III
Item 9. Directors and Executive Officers.................................6
Item 10. Management Remuneration and Transactions.........................8
Item 11. Security Ownership of Certain Beneficial Owners and Management...9
Item 12. Certain Relationships and Related Transactions...................11
PART IV
Item 13. Exhibits, Financial Statement Schedules and Reports on Form 8-K..12
Index to Consolidated Financial Statements and Schedules.........F-1
TOEN\10K\TG53195.10K]-9
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PART I
ITEM 1. BUSINESS
The Toen Group, Inc. (the Registrant" or the "Company") was
incorporated in the State of Colorado on June 10, 1988 for the purpose of
searching for, evaluating and organizing an interest in or more business
opportunities. On December 3, 1989, the Company completed a public offering of
its stock pursuant to a registration statement on Form S-18 filed with the
Denver Regional Office of the Securities and Exchange Commission. The Company,
through an underwriter, sold a total of 50,000,000 shares of the Company's no
par value common stock and 5,000,000 warrants for the purchase of 5,000,000
shares of common stock.
On March 9, 1990, the Company completed an agreement to exchange its
common stock for all of the issued and outstanding capital stock of Sunbelt
Media Group Inc. ("Sunbelt"). Pursuant to the terms of the agreement with the
shareholders of Sunbelt, the Company issued 278,400,000 shares of its common
stock in exchange for all the outstanding shares of common stock of Sunbelt and
Sunbelt became a wholly-owned subsidiary of the Company. From March 1990 to
October 1992 Sunbelt owned and operated low power television stations and
related businesses, and provided programming to those stations. The Company
discontinued the Sunbelt business in October 1992 and sold all the assets
associated with the operation of Sunbelt, including all contracts and lease
agreements necessary for its operations to William J. Kitchen ("Kitchen") in
consideration of 1) Kitchen's forgiveness of notes and other obligations owed to
Kitchen by the Registrant; and 2) Kitchen's assumption of miscellaneous debts of
Sunbelt. Pursuant to the sale, Kitchen also delivered 98,795,000 shares of the
Registrant's common stock to the Registrant for cancellation. Since October 1992
the Company has not had any revenues or operations.
Accordingly, Toen is currently in the process of seeking a merger or
acquisition with a business entity or entities expected to be private companies,
partnerships or sole proprietorships. Management believes the Registrant can
offer owners of potential merger or acquisition candidates the opportunity to
acquire a controlling interest in a public company at substantially less cost
than is required to conduct an initial public offering.
On August 31, 1992 Jeffrey Paul Stroud ("Stroud") acquired 173,995,000
shares of the Registrant's common stock, representing 51% of the then issued and
outstanding shares, from Kitchen. Stroud also acquired from Kitchen 162,000,000
warrants to acquire 162,000,000 shares of the Registrant's common stock. On
March 31, 1993 Stroud entered into a Stock Purchase Agreement with New World
Capital Markets, Ltd. under which he sold 173,995,000 shares of the Registrant's
common stock and 162,000,000 warrants to acquire an additional 162,000,000
shares of common stock.
On June 17, 1993 the Registrant's then existing Board of Directors
resigned and Fred G. Luke and Jon L. Lawver were appointed as replacement
Directors. The outgoing Board also elected Fred G. Luke as President of the
Registrant and Jon L. Lawver as Secretary, Treasurer and Chief Financial
Officer.
In September 1994 the Company's shareholders voted to effect a 1 for
1000 reverse split of the Company's issued and outstanding common stock. The
split was implemented through a merger with a newly formed Nevada corporation.
The accompanying financial statements have been retroactively restated to
reflect the merger including the change from no par value common stock to $.01
par value common stock. In connection with the merger and reverse split, the
Company's authorized number of
TOEN\10K\TG53195.10K]-9
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shares was reduced from 785,000,000 to 50,000,000. There are presently
outstanding warrants to purchase 668,000 shares of common stock. The warrants
are exercisable at $5.00 per share.
The Registrant's day-to-day business affairs are handled by three
directors and two officers. No executive compensation has been paid to them or
to any other officers or directors during the fiscal year ended May 31, 1995. As
of the filing date of this Report the Registrant had no employees and no
operations. Current management is pursuing business opportunities, but no
assurance can be given that the Registrant will be successful in acquiring any
business opportunities, or if acquired, what revenues might be provided from
such operations.
As used herein, the term "Company" or the "Registrant" refers to The
Toen Group Inc. The Registrant currently maintains its executive offices at 2
Park Plaza, Suite 470, Irvine, California 92614.
The telephone number is (714)833-2094.
Effective October 8, 1996, the Board of Directors authorized a change
in the Company's name from The Toen Group, Inc. to Virtual Enterprises, Inc.
ITEM 2. PROPERTIES
The Registrant's principal executive offices are located in leased
premises of approximately 3,000 square feet in Irvine, California. These
premises are occupied by the Registrant under an Advisory and Management
Agreement with NuVen Advisors, Inc. ("NuVen"), an affiliate.
ITEM 3. LEGAL PROCEEDINGS
As of the date of this report there are no legal proceedings to which
the Registrant is a party, or of which any of the Registrant's properties is the
subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On September 28, 1994 the Annual Meeting of the stockholders of the
Registrant was held. Fred G. Luke, Jon L. Lawver and John D. Desbrow were
elected as directors for the 1995 fiscal year.
The matters voted upon and the number of votes cast for, against or
withheld, as well as the number of abstentions were as follows:
<TABLE>
<CAPTION>
Votes
Votes Abstaining/Broker
Votes For Against Non-Votes
----------- --------- -----------------
<S> <C> <C> <C>
I. Election of Fred G. Luke, Jon L.
Lawver and John D. Desbrow 184,930,000 0 0
II. Approval and Adoption of an
Agreement of Merger with a newly
formed Nevada corporation 184,930,000 0 0
III. Approval and Adoption of a 1994
Non-Qualified Stock Compensation Plan 183,330,000 1,600,000 0
</TABLE>
All of the above matters were approved by a majority of the issued and
outstanding shares.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
(a) Market Information
Following the completion of the public offering on November 30, 1989
and until September 6, 1990, the Company's common stock was traded on the
over-the-counter market and reported by the National Quotation Bureau Pink
Sheets. Trading ceased on September 6, 1990. The Registrant's outstanding
securities, consist of no par value common stock and Redeemable Common Stock
Purchase Warrants ("Warrants"). The Registrant's Board of Directors and
shareholders approved a 1:1000 reverse split of its common stock on September
28, 1994 decreasing the number of issued and outstanding common stock from
249,371,667 to 249,372. The Registrant's board of directors, shareholders and
warrantholders approved a 1:250 reverse split of the Warrants decreasing the
number of issued and outstanding Warrants from 167,000,000 to 668,000 and
increasing the exercise price from $.02 per Warrant to $5.00 per Warrant.
Additionally, the expiration date of the Warrants was extended to December 31,
1996. Each Warrant entitles the holder to purchase at a price of $5.00, one
share of the Company's common stock.
There has been no market for the Registrant's Common Stock since
September 6, 1991. Prior to such date the closing bid and ask price for the
Company's common stock, giving effect to the 1:1000 revenue split of the
outstanding common shares which became effective September 28, 1994 reported by
the National Quotation Bureau Inc., is follows:
BID PRICE OF
COMMON STOCK
----------------------
HIGH LOW
------ ------
$10.00 $10.00
(b) Holders
The approximate number of holders of record of each class of equity
securities of the Registrant as of May 31, 1995, was as follows:
NUMBER OF
TITLE OF CLASS RECORD HOLDERS
- ----------------------------------------- --------------
Common Stock No Par Value 40
Redeemable Common Stock Purchase Warrants 30
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(c) Dividends
The Registrant has never declared or paid a cash dividend on its common
stock. The Registrant does not intend to pay a cash dividend in the foreseeable
future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Year Ended May 31, 1995 Compared to Year Ended May 31, 1994
There were no operations during fiscal 1995 and as such, there were no
revenues or cost of revenues recorded during fiscal 1995.
General and administrative expenses increased to $175,065 in fiscal
1995 compared to $170,751 in fiscal 1994 due to a slight increase in
professional services provided for fiscal 1995.
Liquidity and Capital Resources.
As of May 31, 1995 the Registrant had a working capital deficit of
$315,076, an increase of $145,065 from fiscal year 1994 due to the
continued accrual of professional, consulting and advisory fees during
fiscal 1995 that were incurred but not paid.
The Registrant had cash balances of approximately $161 at May 31, 1995.
The limited cash balances are a direct result of the Registrant having
no operations during fiscal year 1995.
The Registrant's plan is to keep searching for additional sources of
capital and new operating opportunities. In the interim, the
Registrant's existence is dependent on continuing financial support
from an affiliate which is estimated to be approximately $425,000 for
the next fiscal year based upon current agreements and obligations the
Company has at May 31, 1995. Furthermore, the Registrant may have to
utilize its common stock for future financial support to finance its
needs. Such conditions raise substantial doubt about the Registrant's
ability to continue as a going concern. As such, the Registrant's
independent accountants have modified their report to include an
explanatory paragraph with respect to the uncertainty.
The Registrant has no commitments for additional equity or debt
financing and no assurances can be made that its working capital needs
can be met.
Additionally, as of May 31, 1995, the Registrant had no employees or
operations.
TOEN\10K\TG53195.10K]-9
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<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements are filed as a part of this Annual
Report on Form 10-KSB and are included immediately following the
signature page.
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Certified Public Accountants ...............F-2
Balance Sheet for May 31, 1995....................................F-3
Statements of Operations for the years ended May 31, 1995
and 1994 .......................................................F-4
Statements of Stockholders' Equity for May 31, 1995 and 1994......F-5
Statements of Cash Flows for May 31, 1995 and 1994................F-6
Notes to Financial Statements.....................................F-7
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Following May 31, 1990, Jerome W. Karsh & Co. resigned as the
Registrant's principal accountants. In April, 1993, the Registrant notified
O'Neal & White of its appointment as the Registrant's principal independent
accountants. On July 19, 1995, C. Williams & Associates replaced O'Neal & White
as the Registrant's principal accountants. On April 24, 1996, Spurgeon, Kang &
Associates replaced C. Williams & Associates as the Registrant's principal
accountants.
Mr. Charles R. Williams, one of the principals of C. Williams, was
advised by the Texas State Board of Public Accountancy in a letter dated January
29, 1996, addressed to the Chief Accountant of the Division of Corporation
Finance of the Securities and Exchange Commission (the "Commission"), that his
certificate as a Certified Public Accountant was revoked effective as of May 18,
1995, which was subsequently revised to provide for a revocation date as of
March 2, 1995. The Chief Accountant of the Division of Corporation Finance
advised Mr. Williams by means of a letter dated February 7, 1996, that the
Commission does not recognize any person as a certified public accountant who is
not duly registered and in good standing as such under the laws of the place of
his residence or principal office as of March 2, 1995. No opinion on the
Registrant's financial statements was ever issued by C. Williams & Associates.
In connection with the audit for the fiscal year ended May 31, 1990,
and for the period from June 10, 1988, to May 31, 1990, there were no
disagreements between the Registrant and Jerome W. Karsh & Co. on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedures, which disagreements, if not resolved to the satisfaction of
Jerome W. Karsh & Co. would have caused it to make reference in connection with
its report.
None of the reports of Jerome W. Karsh & Co. on the Registrant's
financial statements contained an adverse opinion or a disclaimer of opinion or
was qualified as to uncertainty, audit scope, or accounting principles except
that the opinion was qualified by the assumption that the Registrant would
continue as a going concern.
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The decision to change principal independent accountants was made by
the Registrant's Board of Directors.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS
(a) Identification of Directors.
The following table furnishes the information concerning the directors
and those persons nominated and chosen to become directors of the Registrant as
of September 28, 1994. The directors of the Registrant are elected every year
and serve until their successors are elected and qualify.
Period Served as
Name Age Director
- ---------------------- --- -------------------
Fred G. Luke 50 6-17-93 to Present
Jon L. Lawver 58 6-17-93 to Present
John D. Desbrow 41 9-28-94 to Present
(b) Identification of Executive Officers.
The officers of the Registrant are chosen by and serve at the pleasure
of the Board of Directors. The following table furnishes information concerning
executive officers and all persons chosen to become executive officers of the
Registrant. The officers of the Registrant serve at the pleasure of the Board of
Directors.
Positions and Office
Name Age with Company Period Served as Officer
- ------------- --- ----------------------------- ------------------------
Fred G. Luke 50 Chairman and President June, 1993 to Present
Jon L. Lawver 58 Secretary and Chief Financial June, 1993 to April 24,
Officer 1996
The Registrant has no audit, compensation or nominating committees. No
family relationships exist between any of the officers or directors.
In August 1995, the Company entered into an Employment Agreement with
Fred G. Luke, the Company's Chairman and President. The terms of the Employment
Agreement call for Mr. Luke to receive approximately $54,000 per year
retroactive to June 1, 1994, for five (5) years as a base salary; grants him an
option to purchase 750,000 shares of the Company's common stock at an exercise
price of 110% of the book value per share on August 1, 1995; and requires the
Company to purchase life insurance coverage, reimburse him for vehicle expenses,
and provide fringe benefits. The Company expensed $54,000 during fiscal 1995,
and had $54,000 due to Mr. Luke as of May 31, 1995.
TOEN\10K\TG53195.10K]-9
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Effective April 24, 1996, the Company entered into a consulting
agreement with Mr. 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, 1996. Pursuant to the agreement the Company agreed to pay Mr. Dong
$5,000 in cash or in the Company's common stock and granted him an option to
purchase 100,000 shares of the Company's common stock at an exercise price of
$.10 per share. No cash payments were made to Mr. Dong by the Company during
fiscal 1995. The Company expensed $0 during fiscal 1995 and had no amounts due
as of May 31, 1995.
In July 1996, the Company memorialized a prior verbal consulting
agreement entered into in September 1994 with Mr. Desbrow, to hold the office of
Director through December 31, 1996. Pursuant to the agreement the Company agreed
to pay Mr. Desbrow $1,000 per month. No cash payments were made to Mr. Desbrow
by the Company during fiscal 1995. The Company expensed $8,000 during fiscal
1995 and had $8,000 due as of May 31, 1995.
(c) Identification of Certain Significant Employees.
There are no employees other than the executive officers disclosed
above who make or are expected to make, significant contributions to the
business of the Registrant, the disclosure of which would be material.
(d) Family Relationships.
None.
(e) Business Experience.
The following is a brief account of the business experience during the
past five years of each director and executive officer of the Registrant,
including principal occupations and employment during that period and the name
and principal business of any corporation or other organization in which such
occupation and employment were carried on.
Fred G. Luke, has been Chairman and President of the Registrant since
June, 1993. Mr. Luke has over twenty-four (24) years of experience in
domestic and international financing and the management of private and
publicly-held companies. In addition to his position with the Company,
Mr. Luke currently serves as Chairman and Chief Executive Officer of
Nona Morelli's II Inc., Diversified Land & Exploration Co. and New
World Capital Inc. Since 1982 Mr. Luke has provided consulting services
and has served, for brief periods usually lasting not more than six
months, as Chief Executive Officer and/or Chairman Of The Board of
various public and privately-held companies in conjunction with such
financial and corporate restructuring services. Mr. Luke also served
from 1973 through 1985 as President of American Energy Corporation, a
privately held oil and gas company involved in the operation of
domestic oil and gas properties. From 1970 through 1985 Mr. Luke served
as an officer and Director of Eurasia, Inc., a private equipment
leasing company specializing in oil and gas industry equipment.
Jon L. Lawver, has been Secretary and a Director of the Registrant
since June, 1993 and was Chief Financial Officer from June 1993 to
April 24, 1996. Mr. Lawver has twenty-two (22) years of experience in
the area of bank financing where he has assisted medium size companies
($5 million to $15 million) by providing expertise in documentation
preparation and locating
TOEN\10K\TG53195.10K]-9
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<PAGE>
financing for expansion requirements. Mr. Lawver was with Bank of
America from 1961 to 1970, ending his employment as Vice President and
Manager of one of its branches. From 1970 to Present Mr. Lawver has
served as President and a Director of J.L. Lawver Corp., a financial
consulting firm. Since 1988 Mr. Lawver has served as President and a
Director of Eurasia, a private finance equipment leasing company
specializing in oil and gas industry equipment.
John D. Desbrow, has served as a Director of the Registrant since
September 28, 1994. Mr. Desbrow is also a Director of Hart Industries,
Inc. and holds the office of Secretary of Nona Morelli's II, Inc. and
NuOasis Gaming, Inc. Mr. Desbrow is a member in good standing of the
State Bar of California and has been since 1980. Prior to joining the
Company Mr. Desbrow was in the private practice of law. Mr. Desbrow
received his Bachelor of Science degree in Business Administration from
the University of Southern California in 1977, his Juris Doctorate from
the University of Southern California Law Center in 1980, and his
Master of Business Taxation degree from the University of Southern
California Graduate School of Accounting.
Steven H. Dong. Mr. Dong, a Certified Public Accountant, and as an
independent Consultant serves as Chief Financial Officer of the
Registrant. Mr. Dong replaced Jon L. Lawver who resigned as the
Registrants' Chief Financial Officer and as a Director effective April
24, 1996. Prior to joining the Registrant, Mr. Dong worked with the
international accounting firm of Coopers & Lybrand since 1988. As an
Assurance Manager with Coopers & Lybrand, Mr. Dong's experience
consisted of providing financial accounting and consulting services to
privately and publicly held companies. In addition to his position with
the Registrant, Mr. Dong currently serves as Chief Financial Officer of
Nona, NuOasis Gaming and Hart. 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.
ITEM 10. MANAGEMENT REMUNERATION AND TRANSACTIONS
(a) Cash Compensation.
None of the Registrant's executive officers received any cash
compensation during the fiscal year ended May 31, 1994. On March 31, 1995, Fred
G. Luke, Fred Graves Luke, J.L. Lawver Corp., John D. Desbrow and Structure
America, Inc. each were issued 60,000 shares of restricted common stock.
(b) Stock Options
During fiscal year 1995 there were no individual grants of stock options
made to the Company's Chief Executive Officer or to any of the four most highly
compensated executive officers other than the Chief Executive Officer.
(c) Aggregated Option Exercises
During the fiscal year ended May 31, 1995, there were no exercises of
stock options by the Chief Executive Officer or any of the four most highly
compensated executive officers other than the Chief Executive Officer.
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(d) Long-Term Incentive Plans
During the fiscal year ended May 31, 1995, there were no awards under
any Long Term Incentive Plan to the Chief Executive Officer or any of the four
most highly compensated executive officers other than the Chief Executive
Officer.
(e) Compensation of Directors
The Company has no standard arrangement for the compensation of
directors or their committee participation or special assignments.
(f) Employment Contracts and Change of Control
The Luke Family Trust (the "Trust") and J.L. Lawver Corp. (the "JLL
Corp.") owns 93% and 7%, respectively, of the common stock of NuVen. Fred G.
Luke, as the trustee of the Trust, controls the Trust and Jon L. Lawver is the
majority stockholder of JLL Corp. Mr. Luke and Mr. Lawver are also officers and
directors of the Company.
On March 31, 1995 Fred G. Luke, J.L. Lawver Corp. and John D. Desbrow
were each issued 60,000 shares of restricted common stock for services rendered
to the Company as officers and directors or legal counsel through May 31, 1994.
The Company also issued 60,000 shares of restricted common stock each to two
consultants for merger and acquisition services in fiscal 1994, the Company
recorded an expense of $30,000 during fiscal year 1994 related to such share
issuances.
(g) Report on Repricing of Options
During fiscal year 1995, the Registrant has not adjusted or amended the
exercise price of stock options.
(h) Termination of Employment and Change of Control Arrangements.
None
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AS OF MAY 31, 1995
(a) Beneficial owners of five percent (5%) or greater of the Registrant's
Outstanding Voting Securities.
The following sets forth information with respect to ownership by
holders of more than five (5%) of the Registrant's outstanding voting securities
known by the Registrant.
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<PAGE>
<TABLE>
<CAPTION>
Amount and Nature
Name and Address of Beneficial
Title of Class of Beneficial Owner Interest Percent of Class
- ----------------------------- ----------------------------------------- --------------------- -------------------
<S> <C> <C> <C>
No par value Rubec B.V.
Common Stock Keizer KarelWeg 381, 1181 RE 173,995 31.67%
Amstelveen
The Netherlands
John D. Desbrow 60,000 10.92%
2 Park Plaza, Ste. 470
Irvine, Ca 92714
J. L. Lawver Corp 60,000 10.92%
2 Park Plaza, Ste. 470
Irvine, Ca 92714
Fred G. Luke 60,000 10.92%
2 Park Plaza, Ste. 470
Irvine, Ca 92714
Fred Graves Luke 60,000 10.92%
2 Park Plaza, Ste. 470
Irvine, Ca 92714
Structure America, Inc. 60,000 10.92%
3753 Howard Hughes Parkway. Ste. 200
Las Vegas, NV 89109
Redeemable Common Stock Rubec B.V. 97.00%
Purchase Warrants Keizer KarelWeg 381, 1181 RE 648,000
Amstelveen
The Netherlands
Combined no par value Rubec B.V. 67.50%
Common Stock and Keizer KarelWeg 381, 1181 RE 821,995
Redeemable Common Stock Amstelveen
Purchase Warrants The Netherlands
</TABLE>
The following sets forth information with respect to the Registrant's
Common Stock beneficially owned by each Officer and Director, and by all
Officers and Directors as a group. No Officer or Director personally owns any of
the Registrant's Redeemable Common Stock Purchase Warrants.
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<PAGE>
<TABLE>
<CAPTION>
Amount and Nature
Name and Address of Beneficial
Title of Class of Beneficial Owner Interest Percent of Class
- ------------------- ------------------------------------------- ------------------ ----------------
<S> <C> <C> <C>
No par value Fred G. Luke
Common Stock 2 Park Plaza, Suite 470 60,000 10.92%
Irvine, CA 92714
Jon L. Lawver 60,000 10.92%
2 Park Plaza, Suite 470
Irvine, CA 92714
John D. Desbrow 60,000 10.92%
2 Park Plaza, Suite 470
Irvine, CA 92714
Redeemable Common Fred G. Luke 0 0%
Stock Purchase 2 Park Plaza, Suite 470
Warrants Irvine, CA 92714
Jon L. Lawver 0 0%
2 Park Plaza, Suite 470
Irvine, CA 92714
All Officers and Directories as a group 0 0%
</TABLE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Transactions With Management and Others.
During fiscal 1995 there were no transactions with related parties that
exceeded $60,000 other than the following:
The Luke Family Trust (the "Trust") and J.L. Lawver Corp. (the "JLL
Corp.") owns 93% and 7%, respectively, of the common stock of NuVen. Fred G.
Luke, as the trustee of the Trust, controls the Trust and Jon L. Lawver is the
majority stockholder of JLL Corp. Mr. Luke and Mr. Lawver are also officers and
directors of the Company.
Effective April 1, 1993, the Company and NuVen, entered into an
Advisory and Management Agreement for the engagement of NuVen to perform
advisory services on behalf of the Company for a 3 year term. Pursuant to such
agreement the Company is obligated to pay NuVen $120,000 annually in monthly
installments of $10,000. Under the terms of such agreement, the Company has
granted NuVen an option to purchase 100,000 shares of the Company's common stock
exercisable at a price of $1.00 per share. The option vested on the date of the
agreement.
Effective February 1, 1995 the Company amended its Advisory and
Management Agreement with NuVen. The amended terms require the Company to pay
NuVen, for services rendered, $5,000 a month for an annual total of $60,000
through January 31, 1998.
(b) Certain Business Relationships.
There are no employees other than the executive officers disclosed
above who make, or are expected to make, significant contributions to the
business of the Registrant, the disclosure of which would be material.
(c) Indebtedness of Management.
None.
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<PAGE>
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K.
(a) Financial Statements: The Financial Statements are included elsewhere
herein and are indexed on Page F-1, "Index to Financial Statements."
(b) 8-K Reports:
On October 9, 1992 the Registrant filed a Current Report on Form 8-K
dated September 25, 1992 reporting the sale to William J. Kitchen by the
Registrant of all assets owned by the Registrant associated with the operation
of Sunbelt, including all contracts and lease agreements necessary for its
operations (the "Sunbelt Assets"). In return for the Sunbelt Assets, Kitchen
forgave all notes and other obligations of the Registrant to Kitchen and/or all
entities owned or controlled by Kitchen, as well as Kitchen's assumption of
other miscellaneous debts of Sunbelt. Kitchen also returned to the Registrant of
98,795,000 shares of the Registrant's common stock as partial consideration for
the sale by the Registrant of the Sunbelt assets to Kitchen. The consideration
offered and accepted by the Registrant and Kitchen was the result of arms length
negotiations. The amounts were arbitrarily determined by the parties and bore no
relationship to assets, shareholders' equity, or any other recognized criteria
of value.
The sale of the trade name "Sunbelt Media Group" and all of the assets
owned by the Registrant associated with its Sunbelt operation constituted the
sale of substantially all of the Registrant's assets.
In the same Report on Form 8-K the Registrant reported that pursuant to
an Agreement to Purchase Stock dated as of August 31, 1992 (the "Sunbelt
Agreement"), Jeffrey Paul Stroud acquired 173,995,000 shares of the Registrant's
common stock (the "Stroud Shares") representing fifty-one percent (51%) of the
issued and outstanding shares of stock of the Registrant from Kitchen, a
shareholder of the Registrant who, prior to closing the Sunbelt Agreement, owned
272,790,000 shares of common stock of the Registrant (the "Kitchen Shares"),
said shares representing eighty percent (80%) of the issued and outstanding
shares of the Registrant at the time as set forth above. Under the terms of the
Agreement, Stroud also acquired from Kitchen, all other equity rights, options,
warrants and the like in and to the Registrant's shares owned by Kitchen, which
rights included Warrants representing the right to acquire an additional
162,000,000 shares of common stock of the Registrant. As partial consideration
for the sale of the Warrants and the Stroud Shares to Stroud by Kitchen, Stroud
agreed to release Kitchen from any and all claims which Stroud had against
Kitchen as a result of Stroud's investment in the registered securities of the
Registrant prior to closing the Sunbelt Agreement.
At closing of the Agreement, the Registrant's then existing Board of
Directors systematically resigned and were replaced by Jeffrey Paul Stroud,
Gregory Skufca and Patricia Schoenbaum. The newly reconstituted Board of
Directors then elected Stroud to serve as President of the Registrant, and
Gregory Skufca to serve as Secretary/Treasurer.
TOEN\10K\TG53195.10K]-9
11
<PAGE>
(c) Exhibits:
Exhibit
Number Description
----------------------------------------------------------------------
3 Articles of Incorporation and Bylaws [incorporated herein by
reference to Exhibit 3.1 and 3.2 of Registrant's Registration
Statement on Form S-18 (No. 33-23430- D)].
4(a) Warrant Agreement and form of Warrant Certificate [incorporated
herein by reference to Exhibit 4.6 of Registrant's Registration
Statement on Form S-18 (No. 33-23430-D)].
4(b) Specimen Redeemable Common Stock Purchase Warrant [incorporated
herein by reference to Exhibit 4.2 of Registrant's Registration
Statement on Form S-18 (No. 33-23403-D)].
10(a)Underwriting Agreement with Tri-Bradley Investment, Inc.
[incorporated herein by reference as Exhibit 1.1 to Amendment No.
5 to Form S-18 Registration Statement on Form S-18 (No.
33-23430-D)].
10(b)Agreement to Purchase Stock dated August 31, 1992 between The
Toen Group, Inc., Jeffrey Stroud and William J. Kitchen
[incorporated herein by reference to Exhibit "A" to Form 8-K
dated September 25, 1992, and filed October 9, 1992].
10(c)Stock Purchase Agreement dated March 31, 1993 between New World
Capital Markets, Ltd. and Jeffrey Paul Stroud. [Incorporated by
reference to Exhibit 10.c to Form 10-KSB for the fiscal years
ended May 31, 1992 and 1993].
10(d)Advisory and Management Agreement with NuVen Advisors, Inc.
[incorporated herein by reference to Exhibit 10(d) to Form 10-KSB
for fiscal year ended May 31, 1994].
10(e) Employment Agreement with Fred G. Luke.
10(f) Consulting Agreement with John D. Desbrow.
10(g) Consulting Agreement with Steven Dong.
TOEN\10K\TG53195.10K]-9
12
<PAGE>
SIGNATURES
Pursuant to the requirements of 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.
THE TOEN GROUP, INC.
(Registrant)
Date: January 20, 1997 By: /s/ Fred G. Luke
----------------------------------
Fred G. Luke, Chairman
of the Board and President
Date: January 20, 1997 By: /s/ Jon L. Lawver
----------------------------------
Jon L. Lawver,
Secretary and Director
Date: January 20, 1997 By: /s/ John D. Desbrow
----------------------------------
John D. Desbrow, Director
Date: January 20, 1997 By: /s/ Steven H. Dong
----------------------------------
Steven H. Dong,
Chief Financial Officer
TOEN\10K\TG53195.10K]-9
13
<PAGE>
THE TOEN GROUP, INC.
INDEX TO FINANCIAL STATEMENTS
Financial Statements, Fiscal Year 1995 Page
Reports of Independent Public Accountants ........................F-2
Balance Sheet as of May 31, 1995..................................F-3
Statements of Operations for the years
ended May 31, 1995 and 1994......................................F-4
Statements of Stockholders' Deficiency
for the years Ended May 31, 1995 and 1994........................F-5
Statements of Cash Flows for the Years
Ended May 31, 1995 and 1994 .....................................F-6
Notes to Financial Statements.....................................F-7
TOEN\10K\TG53195.10K]-9
16
<PAGE>
Spurgeon, Kang & Associates
Accountancy Corporation
Certified Public Accountants
9831 Belmont Street
Belmont Street, Bellflower, CA. 90706
(310)251-2161
INDEPENDENT AUDITOR'S REPORT FYE 1995
Board of Directors and Stockholders THE TOEN GROUP, INC.
2 Park Plaza, Suite 470
Irvine, CA 92714
We have audited the accompanying balance sheet of The Toen Group, Inc. as of May
31, 1995 and the related statements of income, retained earnings and cash flow
for the years ended May 31, 1995 and 1994. These financial statements are the
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted audited standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Toen Group, Inc. as of May
31, 1995 and the results of its operations and cash flows for the years ended
May 31, 1995 and 1994 in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as going concern. As discussed in Note 1 to the financial
statements, the Company has incurred net losses and possesses limited liquid
resources and negative working capital as of May 31, 1995. Management's plans
regarding those matters are described in Note 2. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Spurgeon, Kang & Associates
Bellflower, CA
November 4, 1996
TOEN\10K\TG53195.10K]-9
<PAGE>
THE TOEN GROUP, INC.
Balance Sheet
As of May 31, 1995
Assets
Cash $ 161
-------------------
Total Assets $ 161
===================
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 6,096
Due to affiliates 309,141
-------------------
Total Current Liabilities 315,237
Commitments and Contingencies -
Stockholders' Deficiency:
Common stock, no par value, 50,000,000 shares
authorized; 549,372 shares issued
and outstanding 411,442
Additional paid-in capital 27,000
Accumulated deficit (728,673)
Treasury stock (98,795 Shares, at Cost) (24,845)
--------------------
Total Stockholders' Deficiency (315,076)
Total Liabilities and Stockholders'
Deficiency $ 161
===================
TOEN\10K\TG53195.10K]-9
The accompanying notes are an integral part of these financial statements
<PAGE>
<TABLE>
<CAPTION>
THE TOEN GROUP, INC.
Statements of Operations
For the Years Ended May 31,
1995 1994
------------------- --------------------
<S> <C> <C>
Revenues $ - $ -
Cost of Revenues - -
---------------------- --------------------
Gross Profit - -
---------------------- --------------------
General and Administrative Expenses:
Employment and Consulting Services 164,726 170,000
Legal and Accounting 5,986 -
Other 4,353 751
---------------------- --------------------
Total 175,065 170,751
---------------------- --------------------
Operating Loss (175,065) (170,751)
Other Income (Expense):
Interest Expense, Net - -
---------------------- --------------------
Net Loss Before Discontinued Operations (175,065) (170,751)
Income From Discontinued
Operations - 14,286
---------------------- --------------------
Net Loss $ (175,065) $ (156,465)
====================== =====================
Net Income (Loss) Per Share:
Loss From Continuing Operations $ (.540) $ (.685)
====================== =====================
Income Loss from Discontinued
Operations - .057
---------------------- --------------------
Net Loss per Share $ (.540) $ (.627)
====================== =====================
Weighted Average Number of Shares
Outstanding 324,372 249,372
</TABLE>
TOEN\10K\TG53195.10K]-9
The accompanying notes are an integral part of these financial statements
<PAGE>
<TABLE>
<CAPTION>
THE TOEN GROUP, INC.
Statements of Stockholders' Deficiency
For The Years Ended May 31, 1995 and 1994
COMMON ADDITIONAL TOTAL
SHARES COMMON TREASURY PAID-IN ACCUMULATED STOCKHOLDERS'
OUTSTANDING STOCK STOCK CAPITAL DEFICIT DEFICIENCY
------------- --------- ---------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balances at June 1, 1993 249,371,667 $ 408,442 $ (24,845) $ - $ (397,143) $ (13,546)
Effect of reverse stock
split (249,122,295) - - - - -
Net Loss - - - - (156,465) (156,465)
------------- ---------- ---------- --------- ------------- ------------
Balances at May 31, 1994 249,372 $ 408,442 $ (24,845) $ - $ (553,608) $ (170,011)
Stock issued for services 300,000 3,000 - 27,000 - 30,000
Net Loss - - - - (175,065) (175,065)
------------- ---------- ---------- --------- ------------- ------------
Balances at May 31, 1995 549,372 $ 411,442 $ (24,845) $ 27,000 $ (728,673) $ (315,076)
============= ========== ========== ========= ============= ============
</TABLE>
TOEN\10K\TG53195.10K]-9
The accompanying notes are an integral part of these financial statements
<PAGE>
<TABLE>
<CAPTION>
THE TOEN GROUP, INC.
Statements of Cash Flows
For the Years Ended May 31,
1995 1994
--------------------- ---------------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income loss $ (175,065) $ (156,465)
Adjustments to Reconcile Net Loss to Net Cash Provided
(Used) by Operating Activities:
Amortization - 739
Stock issued for services 30,000 -
Changes in Assets and Liabilities:
Increase (Decrease) in Liabilities:
Accounts payable 6,096 (14,285)
Due to affiliates 134,141 175,000
--------------------- --------------------
Net cash provided (used) by operating activities (4,828) 4,989
--------------------- --------------------
Increase (decrease) in cash and cash equivalents (4,828) 4,989
Beginning Balance, Cash and Cash Equivalents 4,989 -
--------------------- --------------------
Ending Balance, Cash and Cash Equivalents $ 161 $ 4,989
===================== ====================
Supplemental Disclosure of Cash Flow Information:
Cash payments for income taxes $ - $ -
Cash payments for interest $ - $ -
===================== ====================
Supplemental Disclosure of Non-Cash Investing
and Financing Activities:
Stock issued for services $ 30,000 $ -
===================== ====================
</TABLE>
TOEN\10K\TG53195.10K]-9
The accompanying notes are an integral part of these financial statements
<PAGE>
THE TOEN GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
May 31, 1995
Note 1. Summary of Significant Accounting Policies
Business and Organization
The Company was incorporated in June, 1989 as a Colorado corporation. The
Company was primarily engaged in the acquisition, maintenance and operation of
television stations in various states through 1992.
In August 1992, the Company sold its Sunbelt Media Group ("Sunbelt") division,
operating the television stations, to a majority stockholder of the Company.
Since August 1992 through the date of this report, the Company has had no
operations and management is seeking a merger and/or sale of controlling
interest in its stock.
Principals of Management Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles require 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.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of
three months or less as cash equivalents.
Income Taxes
The Company accounts for income taxes using the liability method. Income taxes
are provided on all revenue and expense items, regardless of the period in which
such items are recognized for tax purposes, except for those items representing
a permanent difference between pre-tax income and taxable income. A valuation
allowance is recorded when it is more likely than not that benefits resulting
from deferred tax assets will not be realized.
Earnings (Loss) Per Common Share
Net income (loss) per common share is calculated by dividing net income (loss)
by the weighted average number of shares outstanding during each year. All per
share amounts are reported as adjusted after the merger and resulting reverse
stock split. Common stock equivalents were not considered in the loss per share
calculations as the effect would have been anti dilutive.
TOEN\10K\TG53195.10K]-9
<PAGE>
THE TOEN GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
May 31, 1995
Issuance of Stock for Services
Shares of the Company's common stock issued for services are recorded in
accordance with APB16 at the fair market value of the stock issued or the fair
market of the services provided, whichever value is the more clearly evident.
The value of the services are typically stipulated by contract.
Reclassification of Prior Year Amounts
To enhance comparability, the fiscal 1994 financial statements have been
reclassified, where appropriate, to conform with the financial statements
presentation used in fiscal 1995.
Note 2. Going Concern
The Company has experienced recurring net losses, has limited liquid resources,
negative working capital and its primary operating subsidiary was liquidated
during fiscal year 1993. Management's intent is to keep searching for additional
sources of capital and new operating opportunities. In the interim, the Company
will keep operating with minimal overhead and key administrative functions will
be provided by NuVen Advisors, Inc., an affiliate ("NuVen"). It is estimated
that NuVen will have to contribute approximately $425,000 for future financial
support for the Company to exist for the next fiscal year. Accordingly, the
accompanying consolidated financial statements have been presented under the
assumption the Company would continue as a going Concern.
Note 3. Discontinued Operations
In August, 1992, the Company executed an agreement with an 80% shareholder of
the Company, whereby the Sunbelt Media Group ("Sunbelt") trade name and all
assets and debt related to Sunbelt, were sold to the majority shareholder. A
note due to the majority stockholder in the amount of $24,500 was outstanding at
the date of the agreement, and was forgiven as part of the payment price. In
exchange, the majority shareholder returned 98,795,000 shares of its common
stock holdings in the Company. No gain or loss was recognized on the
transaction, as the resulting value of assets sold over liabilities assumed was
assigned as the cost of the treasury stock acquired.
Note 4. Capital Stock
In September 1994 the Company's shareholders voted to effect a 1 for 1000
reverse split of the Company's issued and outstanding common stock. The split
was implemented through a merger with a newly formed Nevada corporation. The
accompanying financial statements have been retroactively restated to reflect
the merger including the change from no par value common stock to $.01 par value
common stock. In connection with the merger and reverse split, the Company's
authorized number of shares was reduced from 785,000,000 to 50,000,000. There
are presently outstanding warrants to purchase 668,000 shares of common stock.
The warrants are exercisable at $5.00 per share.
TOEN\10K\TG53195.10K]-9
<PAGE>
THE TOEN GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
May 31, 1995
Note 5. Related Party Transactions
The Luke Family Trust (the "Trust") and J.L. Lawver Corp. (the "JLL Corp.") owns
93% and 7%, respectively, of the common stock of NuVen. Fred G. Luke, as the
trustee of the Trust, controls the Trust and Jon L. Lawver is the majority
stockholder of JLL Corp. Mr. Luke and Mr. Lawver are also officers and directors
of the Company.
Effective April 1, 1993, the Company and NuVen, entered into an Advisory and
Management Agreement for the engagement of NuVen to perform advisory services on
behalf of the Company for a 3 year term. Pursuant to such agreement the Company
is obligated to pay NuVen $120,000 annually in monthly installments of $10,000.
Under the terms of such agreement, the Company has granted NuVen an option to
purchase 100,000 shares of the Company's common stock exercisable at a price of
$1.00 per share. The option vested on the date of the agreement.
Effective February 1, 1995 the Company amended its Advisory and Management
Agreement with NuVen. The amended terms require the Company to pay NuVen, for
services rendered, $ 5,000 a month for an annual total of $60,000 through
January 31, 1998.
NuVen's advisory services include the payment on behalf of the Company, of
monthly office rent, telephone expenses, monthly accounting expenses and the
costs associated with the preparation of annual state and federal regulatory
filings, and franchise and federal tax returns.
On March 31, 1995 Fred G. Luke, J.L. Lawver Corp. and John D. Desbrow were each
issued 60,000 shares of restricted common stock for services rendered to the
Company as officers, directors, or legal counsel through May 31, 1994. The
Company also issued 60,000 shares of restricted common stock each to two
consultants for merger and acquisition services in fiscal 1994. The Company
recorded an expense of $30,000 during fiscal year 1994 related to such share
issuances.
Note 6. Subsequent Events
In August 1995, the Company entered into an Employment Agreement with Fred G.
Luke, the Company's Chairman and President. The terms of the Employment
Agreement which is retroactive to June 1, 1994 call for Mr. Luke to receive
approximately $54,000 per year for five (5) years as a base salary; grants him
an option to purchase 750,000 shares of the Company's common stock at an
exercise price of 110% of the book value per share on August 1, 1995; and
requires the Company to purchase life insurance coverage, reimburse him for
vehicle expenses, and provide fringe benefits. The Company expensed $54,000 and
$0 during fiscal 1995 and 1994, respectively, and had $54,000 and $0 due to Mr.
Luke as of May 31, 1995 and 1994, respectively.
Effective April 24, 1996, the Company entered into a consulting agreement with
Mr. 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, 1996.
Pursuant to the agreement the Company agreed to pay Mr. Dong $5000 in cash or in
the Company's common stock and granted him an option to purchase 10,000 shares
TOEN\10K\TG53195.10K]-9
<PAGE>
THE TOEN GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
May 31, 1995
of the Company's common stock at an exercise price of $.10 per share. No cash
payments were made to Mr. Dong by the Company during fiscal 1995. The Company
expensed $0 during fiscal 1995 and had no amounts due as of May 31, 1995.
In July 1996, the Company memorialized a prior verbal consulting agreement
entered into in September 1994 with Mr. Desbrow, to hold the office of Director
through December 31, 1996. Pursuant to the agreement the Company agreed to pay
Mr. Desbrow $1,000 per month. No cash payments were made to Mr. Desbrow by the
Company during fiscal 1995. The Company expensed $8,000 during fiscal 1995 and
had $8,000 due as of May 31, 1995.
Effective October 8, 1996 the Company's Board of Directors authorized a change
in the name from The Toen Group, Inc. to Virtual Enterpises, Inc.
TOEN\10K\TG53195.10K]-9
25
EXHIBIT 10E
EMPLOYMENT AGREEMENT WITH FRED G. LUKE
<PAGE>
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is made this 1st day of August, 1995, by and
between Fred G. Luke, an individual with offices at 2 Park Plaza, Suite 470,
Irvine, California 92714 ("Employee") and The Toen Group Inc., a Nevada
corporation ("the Company"), with its principal offices at 1 Park Plaza, Suite
600, Irvine, CA 92714.
WHEREAS, Employee has over 25 years of experience in mergers,
acquisitions, and corporate finance and management; and,
WHEREAS, the Company desires to employ Employee to serve the Company on
the Company's Board of Directors and as its President, and to provide advice
concerning mergers and acquisitions, corporate finance, day to day management,
guidance with respect to general business decisions, and other duties commonly
performed by the President of a publicly-held company ("Services").
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Company and
Employee agree as follows:
1. Employment
The Company hereby employs Employee as the Company's President, to
provide the Company with advice and services, on an as-needed basis,
effective the date hereof and continuing through the Employment Period
(as defined below).
2. Scope of Services
The services to be provided by Employee under this Agreement shall be
all those necessary or proper to manage the Company, and to evaluate
and advise the Company's Board of Directors on transactions between the
Company and third parties.
3. Term of Employment
This Agreement shall have an initial term of five (5) years (the
"Employment Period"), retroactive to , the date Employee first began
providing the Services (the "Employment Period"). Thereafter, this
Agreement will automatically be extended on a year-to-year basis unless
Employee or the Company shall serve written notice on the other party
terminating the Agreement; provided, however, that Employee and the
Company shall agree in writing as to Employee's continuing
compensation. Notice to terminate shall be in writing and shall be
delivered at least ten (10) days prior to the end of the Employment
Period, as extended, as provided herein.
[FLJ\AGR:TOENEMPL.AGR]
1
<PAGE>
4. Duties of Employee
Employee shall devote that amount of time, as necessary, on a monthly
basis, to fulfilling his obligations under this Agreement. The
particular amount of time may vary from day to day or week to week. The
Company understands that Employee serves as an officer and/or director
for other companies which require some of Employee's professional time
but which, except as disclosed by Employee in writing and waived by the
Company's Board of Directors, do not conflict with Employee's
obligations hereunder. Employee agrees that he will at all times,
faithfully and to the best of his experience, ability, and talents, but
expressly subject to events, services of others, and all other events
outside of Employee's control, perform all the duties required of him
under this Agreement.
5. Compensation
Compensation to Employee for services provided pursuant to this
Agreement shall consist of the following:
A) Fixed Annual Compensation. In consideration for the Services
provided hereunder, the Company shall pay to Employee an annual
salary ("Fixed Annual Compensation") at the rate of $54,000 per
annum, beginning the Effective Date. Fixed Annual Compensation
payable to Employee by the Company hereunder shall be paid at
such times and in such amounts as the Company may designate in
accordance with the Company's usual practices, but, unless agreed
by Employee, in no event less than once monthly.
B) Business Expense Reimbursement. Employee shall be entitled to an
aggregate of $1,000 per month for employee business expenses in
excess of those for which Employee makes an accounting to the
Company. To the extent that Employee does not utilize all or any
portion of the foregoing expense reimbursement account in any
given month, the unused amount shall be cumulated and carried
forward from month-to-month until used. Employee shall also be
entitled to reimbursement of all reasonable and customary
business travel and entertainment expenses for which Employee
makes an adequate accounting to the Company. The determination of
the adequacy of the accounting and reasonableness of the expenses
shall be within the reasonable discretion of the Company's
independent certified accountants taking into consideration the
substantiation requirements of the Internal Revenue Code of 1986,
as amended (the "Code"). If verification is provided, the
non-deductibility of such expenses for tax purposes shall not
affect Employee's right to reimbursement.
C) Additional Incentive Compensation. In addition to the Fixed
Annual Compensation to be provided to Employee hereunder, the
Company shall also provide Employee with such additional
incentive compensation ("Additional Incentive Compensation") in
the form of reimbursement of expenses, securities of the Company,
stock options or a deferred compensation arrangement customarily
utilized for top management executives in the Company's line of
business, and shall include but not be limited to the following:
[FLJ\AGR:TOENEMPL.AGR]
2
<PAGE>
i) Life Insurance Policy - a split rate life insurance policy
for the benefit of Employee in the amount of not less than
$1,000,000 (the "Life Insurance Policy"). The Company agrees
to make all premium payments under the Life Insurance
Policy. Employee shall be entitled to name the Luke Family
Trust u/t/d May 20, 1990 (the "Trust"), the Alison Noelle
Luke Trust (the "Alison Trust") or the Lindsey Marie Luke
Trust (the "Lindsey Trust"), or in combination of them, as
the beneficiary or beneficiaries of such policy. Upon the
death of Employee during the Initial Employment Period of
this Agreement, and upon the payment of benefits pursuant to
the Life Insurance Policy, such benefits shall be allocated
as follows: (i) the Company shall be entitled to
reimbursement of all premiums actually paid under such
policy plus six percent (6%) per annum interest on such
amounts actually paid, and (ii) the beneficiary or
beneficiaries named under such policy shall be entitled to
receive the remainder of such benefits. Employee agrees that
the Company may secure additional insurance on Employee's
life for the benefit of the Company and that Employee shall
cooperate with the Company in connection with the
application process for such insurance.
ii) Directors and Officers Liability Insurance - insurance
generally maintained for by publicly-held companies for the
benefit of their directors and officers against all costs,
charges and expenses whatsoever incurred or sustained in
connection with any action, suit or proceeding to which such
officers or directors may be made a party by reason of being
or having been a director or officer. Such insurance
coverage shall be provided by the Company and the Company
shall use its best efforts to cause such insurance to be
maintained in effect for not less than six (6) years from
the date of termination of this Agreement, or from the date
of a change in control (as defined herein), whichever is the
longer period, and containing terms and conditions that are
acceptable to Employee.
iii) Fringe Benefits. In addition to the foregoing, upon request
by Employee, Employee shall receive and shall continue to
receive such fringe benefits ("Fringe Benefits") as he now
enjoys and as shall become available in the future to those
with similar executive positions in the leisure and
entertainment industries, including without limitation: (i)
club memberships (including initiation fees, annual dues and
other recurring expenses) in an amount not to exceed $20,000
in each year of the Initial Employment Period; (ii)
first-class air travel and private air travel (if first
class air travel is not practicable in Employee's sole
judgment) for all trips made by Employee outside of the
United States in connection with the Services provided to
the Company; (iii) the lease of an automobile of Employee's
choice for use by Employee, and reimbursement for all
expenses incurred in connection with such automobile, and
(iv) reimbursement of Employee's personal legal and
accounting expenses related to Employee's association with
the Company in an amount not to exceed $50,000 in each year
of the Initial Employment Period.
iv) Stock Option. The Company agrees to execute with Employee a
Stock Option Agreement (the "Option") consistent with the
Company's existing plans or guidelines in which the Company
will grant Employee stock options to purchase
[FLJ\AGR:TOENEMPL.AGR]
3
<PAGE>
Seven Hundred Fifty Thousand (750,000) shares of common
stock of the Company (the "Option Shares") at one hundred
ten percent (110%) of the Market Value (as defined herein)
as of the date of the Option. Such Options shall vest to
Employee immediately upon execution of the Option. In the
event of any change in the common stock of the Company by
reason of stock dividends, stock splits, reverse stock
splits, spin-offs, mergers, recapitalizations, combinations,
conversions, exchanges of shares or the like or the issuance
of shares of common stock or any class of securities
directly or indirectly convertible into or exchangeable for
common stock after the date hereof, the number and kind of
shares subject to the Option shall be appropriately
adjusted.
For the purpose of this Agreement, "Market Price" shall mean the
average bid price on the date of exercise of the Option, or any portion
thereof, or, in case no sale takes place on such day, the closing bid
price for the last executed trade, in each case on the NASD Electronic
Bulletin Board or the securities exchange to which the shares of common
stock of the Company (or its successor, if any) are listed or admitted
to trading or, if not listed or admitted to trading, the average of the
closing bid price as furnished by two members of the National
Association of Securities Dealers Inc. selected by Employee for that
purpose. In the absence of one or more such quotations, the Market
Price shall be based upon the book value per share calculated on the
basis of the Company's most recent financial statements.
6. Registration of the Company Shares
The Company will register the Option Shares with the Securities and
Exchange Commission on a Form S-1 or other applicable registration
statement within one (1) year from the date hereof. Option Shares
issued prior to registration will be done so only in reliance on
exemptions from registration provided by Section 4(2) of the Securities
Act of 1933 (the "Act"), Regulation D of the Act, and applicable state
securities laws. Such issuance shall be in reliance on representations
and warranties of Employee set forth below, to be updated upon
exercise.
7. Opportunities Rejected by the Company
Opportunity Compensation. If, commencing the Effective Date, during the
Employment Period, because of the Company's financial condition, the
Board elects not to proceed to acquire any project or potential
acquisition submitted, identified and/or selected by Employee, then
Employee, upon notification to the Company's Board, shall be entitled
to submit the project elsewhere (a "Opportunity") and Employee shall be
entitled to any and all fees or profits resulting from Employee's
referral or placement of such Opportunity (the "Opportunity
Compensation"); provided, however, that Employee's efforts related to
such Opportunity shall be of an incidental nature and shall not
interfere with Employee's Services to the Company other than in a de
minimis manner; and the Opportunity may not be offered to a third party
on terms more favorable to such third party than the terms proposed to
the Company at the time that the Company's Board elected not to
proceed.
[FLJ\AGR:TOENEMPL.AGR]
4
<PAGE>
8. Place of Services
The Services provided by Employee hereunder will be performed primarily
through the Company's offices in Irvine, California, except as
otherwise mutually agreed by Employee and the Company. It is understood
and expected that Employee may make contacts with persons and entities
and perform services in other locations as deemed appropriate and
directed by the Company.
9. Status
Employee will act as an employee in the performance of duties under
this Agreement. Accordingly, the Company will be responsible for
payment of all federal, state, and local taxes on compensation paid
under this Agreement, including income and social security taxes,
unemployment insurance, and any other taxes as may be required.
10. Termination
(A) Termination for Disability. If, during the Employment Period,
Employee shall be unable to provide the Services for three (3)
consecutive months because of illness, accident, or other
incapacity, the Company shall have the right to terminate this
Agreement upon written notice to Employee within ten (10) days
after the end of any such three (3) month period. Termination
under this Paragraph shall be effective upon receipt by
Employee of the written notice.
(B) Death. In the event of Employee's death, this Agreement and
all rights and obligations hereunder shall immediately be
terminated.
(C) Termination for Cause. The Company may, at its option,
terminate this Agreement by giving written notice of
termination to Employee without prejudice to any other remedy
to which the Company may be entitled either at law, in equity,
or under this Agreement, if Employee:
(i) Willfully breaches or neglects the duties that Employee
is required to perform under the terms of this
Agreement;
(ii) Fails to promptly comply with and carry out all
directives of the Company's Board of Directors; or
(iii)Is convicted of committing any dishonest or unlawful
act.
(D) Termination Other Than For Cause. This Agreement shall terminate
immediately on the occurrence of any one of the following events:
(i) The occurrence of circumstances, in the judgment of the
Company's Board of Directors, that make it
impracticable for the Company to continue its present
line(s) of business;
[FLJ\AGR:TOENEMPL.AGR]
5
<PAGE>
(ii) The decision of and upon notice by Employee to
voluntarily terminate this Agreement;
(iii) The loss by Employee of legal capacity;
(iv) If the Company institutes, or has instituted against it
any bankruptcy proceeding for reorganization for
rearrangement of the party's financial affairs;
(v) If the Company has a receiver of its assets or property
appointed because of insolvency;
(vi) If the Company makes a general assignment for the
benefit of creditors; or
(vii)If the Company otherwise becomes insolvent or unable
to timely satisfy all obligations in the ordinary
course of business.
(E) Effect of Termination on Compensation. In the event of the
Termination Other Than For Cause prior to the completion of
the Employment Period, Employee shall be entitled to a lump
sum payment equal to the balance of all compensation due to
Employee, including but not limited to salary and benefits
under this Agreement, and to the rights to exercise any
remaining, previously unexercised Options. Notwithstanding
anything contained herein to the contrary, Employee's right to
exercise any exercised Options shall continue for two (2)
years following the date of termination.
13. Representations and Warranties of the Company
The Company represents and warrants to Employee that:
(A) Corporate Existence. The Company is a corporation duly
organized, validly existing, and in good standing under the
laws of the State of Nevada, with corporate power to own
property and carry on its business as it is now being
conducted.
(B) Financial Information. The Company has or will cause to be
delivered concurrently with the execution of this Agreement,
copies of the Disclosure Documents (as defined in Paragraph
14(D)(1)) which accurately set forth the financial condition
of the Company as of the respective dates of such documents.
(C) Capitalization. The capitalization of Company is, as of the
date hereof, comprised of Fifty Million (50,000,000) shares of
authorized $.01 par value common stock of which no more than
Eight Hundred Thousand (800,000) shares are issued and
outstanding, and Six Hundred Sixty Eight Thousand (668,000)
warrants to purchase common stock ("Warrants"). All issued and
outstanding shares and the Warrants are legally issued, fully
paid, and nonassessable, and are not issued in violation of
the preemptive or other right of any person.
[FLJ\AGR:TOENEMPL.AGR]
6
<PAGE>
(D) No Conflict. This Agreement has been duly executed by the
Company and the execution and performance of this Agreement
will not violate, or result in a breach of, or constitute a
default in any agreement, instrument, judgment, decree or
order to which the Company is a party or to which the Company
is subject, nor will such execution and performance constitute
a violation or conflict of any fiduciary duty to which the
Company is subject.
(E) Full Disclosure. The information concerning the Company
provided to Employee pursuant to this Agreement is, to the
best of the Company's knowledge and belief, complete and
accurate in all material respects and does not contain any
untrue statement of a material fact or omit to state a
material fact required to make the statements made, in light
of the circumstances under which they were made, not
misleading.
(F) Date of Representations and Warranties. Each of the
representations and warranties of the Company set forth in
this Agreement is true and correct at and as of the date of
execution of this Agreement.
14. Representations and Warranties of Employee
Employee represents and warrants to the Company that he understands and
acknowledges that any Option Shares issued prior to registration will
be so issued in reliance on the exemptions from registration provided
by Section 4(2) of the Act Regulation D, and applicable state
securities laws. Representations and warranties by Employee in this
paragraph will be used and relied upon by the Company to determine
whether any issuance of Option Shares may be made to Employee pursuant
to Section 4(2) of the Act and Regulation D and applicable state
securities laws, and Employee will notify the Company immediately of
any material changes to the representations made herein. In this
regard, Employee represents and warrants that:
(A) Disclosure Documents. Employee has been furnished with a copy of
the Company's most recent Annual Report on Form 10-K and all
reports or documents required to be filed under Sections 13(a),
14(a), and 15(d) of the Securities and Exchange Act of 1934, as
amended, including but not limited to quarterly reports on Form
10-Q, current reports on Form 8-K, and proxy statements (the
"Disclosure Documents"). In addition, Employee has been furnished
with a description of the Company's capital structure and any
material changes in the Company's financial condition that may
not have been disclosed in the Disclosure Documents.
(B) Employee Suitability. By reason of Employee's knowledge and
experience in financial and business matters in general, and
investments in particular, Employee is capable of evaluating the
merits and risks of this transaction and in bearing the economic
risks of an investment in the Option Shares and fully understand
the speculative nature of such securities and the possibility of
such loss. Further, Employee represents to the Company:
(1) Employee is fully aware that any Option Shares issued to
Employee prior to registration will be "Restricted
Securities" as defined by Rule 144 of the Act and that any
resale of such securities by Employee may be governed by
Rule 144. Employee is further aware of the specific
restrictions on resale of such securities contained in Rule
144.
[FLJ\AGR:TOENEMPL.AGR]
7
<PAGE>
(2) Employee will not sell, transfer or otherwise dispose of any
Option Shares issued or reserved for issuance hereunder
prior to registration except in compliance with the Act.
(3) Any and all certificates representing the Option Shares
issued prior to registration of such shares, and any and all
securities issued in replacement thereof or in exchange
therefore, shall bear the following legend:
"The shares represented by this certificate have not
been registered under the Securities Act of 1933 (the
"Act") and are "restricted securities" as that term
is defined in Rule 144 under the Act. The shares may
not be offered for sale, sold, or otherwise
transferred except pursuant to an effective
Registration Statement under the Act or pursuant to
an exemption from registration under the Act, the
availability of which is to be established to the
satisfaction of the Company."
15. Indemnification
The Company and Employee agree to indemnify, defend and hold each other
harmless from and against all demands, claims, actions, losses,
damages, liabilities, costs and expenses, including without limitation,
interest, penalties and attorneys' fees and expenses asserted against
or imposed or incurred by either party by reason of or resulting from a
breach of any representation, warranty, covenant, condition, or
agreement of the other party to this Agreement.
The Company further agrees to indemnify defend and hold Employee
harmless from and against all demands, claims, actions, losses,
damages, liabilities, costs and expenses, including without limitation,
interest, penalties and attorneys' fees and expenses asserted against
or imposed or incurred by Employee arising from Employee's fulfillment
of his duties as an officer and director to the maximum extent
permitted by the Nevada Corporation Code.
In addition to the foregoing indemnity, the Company agrees to indemnify
and hold harmless Employee, and each other person controlling Employee
or any of its affiliates (collectively, the "Indemnified Parties" and
each an "Indemnified Party"), within the meaning of either Section 15
of the Act, or Section 20 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") from and against any losses, claims,
damages and liabilities (or actions in respect thereof), joint or
several, which are related to or arise out of or are based upon any
untrue or alleged untrue statement of material fact or any omission or
alleged omission of material fact required to be stated or necessary to
make other statements, in light of the circumstances in which they are
made, not misleading contained in any document, report or material
provided to an relied upon by Employee to prepare any registration
statement, prospectus, prospectus supplement license application or
other materials or reports filed by the Company with any regulatory
agency.
[FLJ\AGR:TOENEMPL.AGR]
8
<PAGE>
16. Inside Information - Securities Laws Violations
In the course of the performance of his duties, Employee may become
aware of information which may be considered "inside information"
within the meaning of the Federal Securities Laws, Rules and
Regulations. Employee acknowledges that his use of such information to
purchase or sell securities of the Company, or its affiliates, or to
transmit such information to any other party with a view to buy, sell
or otherwise deal in the securities of the Company or its affiliates is
prohibited by law and would constitute a breach of this Agreement and
notwithstanding the provisions of this Agreement will result in the
immediate termination of the Agreement.
17. Miscellaneous
(A) Subsequent Events. Employee and the Company each agree to notify
the other party if, subsequent to the date of this Agreement,
either party incurs obligations which could compromise their
efforts and obligations under this Agreement.
(B) Amendment. This Agreement may be amended or modified at any time
and in any manner only by an instrument in writing executed by
the parties hereto.
(C) Further Actions and Assurances. At any time and from time to
time, each party agrees, at its or their expense, to take actions
and to execute and deliver documents a may be reasonably
necessary to effectuate the purposes of this Agreement.
(D) Waiver. Any failure of any party to this Agreement to comply with
any of its obligations, agreements, or conditions hereunder may
be waived in writing by the party to whom such compliance is
owed. The failure of any party to this Agreement to enforce at
any time any of the provisions of this Agreement shall in no way
be construed to be a waiver of any such provision or a waiver of
the right of such party thereafter to enforce each and every such
provision. No waiver of any breach of or non-compliance with this
Agreement shall be held to be a waiver of any other or subsequent
breach or non- compliance.
(E) Assignment. Neither the Company nor employee shall assign their
rights or obligations under the Agreement without the prior
written consent of the other. However, the Options granted to
Employee shall be assignable by Employee without the consent of
or notice to the Company.
(F) Notices. Any notice or other communication required or permitted
by this Agreement must be in writing and shall be deemed to be
properly given when delivered in person to an officer of the
other party, when deposited in the United States mails for
transmittal by certified or registered mail, postage prepaid, or
when deposited with a public telegraph company for transmittal,
or when sent by facsimile transmission charges prepared, provided
that the communication is addressed:
[FLJ\AGR:TOENEMPL.AGR]
9
<PAGE>
(1) In the case of the Company:
The Toen Group Inc.
1 Park Plaza, Suite 600
Irvine, California 92714
Telephone: (714) 833-5380
Telefax: (714) 833-7854
(2) In the case of Employee:
Fred G. Luke
2 Park Plaza, Suite 470
Irvine, California 92714
Telephone: (714) 833-2094
Telefax: (714) 833-7854
or to such other person or address designated by the Company
or Employee to receive notice.
(G) Headings. The section and subsection headings in this
agreement are inserted for convenience only and shall not
affect in any way the meaning or interpretation of this
Agreement.
(H) Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument.
(I) Governing Law. This Agreement was negotiated and is being
contracted for in the State of California, and shall be
governed by the laws of the State of California, notwith
standing any conflict-of-law provision to the contrary.
(J) Binding Effect. This Agreement shall be binding upon the
parties hereto and inure to the benefit of the parties, their
respective heirs, administrators, executors, successors, and
assigns.
(K) Entire Agreement. This Agreement contains the entire agreement
between the parties hereto and supersedes any and all prior
agreements, arrangements, or understandings between the
parties relating to the subject matter of this Agreement. No
oral understan dings, statements, promises, or inducements
contrary to the terms of this Agreement exist. No
representations, warranties, covenants, or conditions, express
or implied, other than as set forth herein, have been made by
any party.
(L) Severability. If any part of this Agreement is deemed to be
unenforceable the balance of the Agreement shall remain in
full force and effect.
[FLJ\AGR:TOENEMPL.AGR]
10
<PAGE>
(M) Facsimile Counterparts. A facsimile, telecopy, or other
reproduction of this Agreement may be executed by one or more
parties hereto and such executed copy may be delivered by
facsimile of similar instantaneous electronic transmission
device pursuant to which the signature of or on behalf of such
party can be seen, and such execution and delivery shall be
considered valid, binding and effective for all purposes. At
the request of any party hereto, all parties agree to execute
an original of this Agreement as well as any facsimile,
telecopy or other reproduction hereof.
(N) Termination of Any Prior Agreements. Effective the date
hereof, all prior rights of Employee relating to the accrual
or payment of any form of compensation or other benefits from
the Company based upon any agreements other than this
Agreement, whether written or oral, entered into prior to the
date hereof, are hereby terminated.
(O) Consolidation or Merger. Subject to the provisions hereof, in the
event of a sale of the stock, or substantially all of the stock,
of the Company, or consolidation or merger of the Company with or
into another corporation or entity, or the sale of substantially
all of the operating assets of the Company to another
corporation, entity or individual, the Company may assign its
rights and obligations under this Agreement to its successor-in-
interest and such successor-in-interest shall be deemed to have
acquired all rights and assumed all obligations of the Company
hereunder; provided, however, that in no event shall the duties
and services of Employee provided for in Paragraph 2 hereof, or
the responsibilities, authority or powers commensurate therewith,
change in any material respect as a result of such sale of stock,
consolidation, merger or sale of assets.
(P) Time is of the Essence. Time is of the essence of this
Agreement and of each and every provision hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement
effective the date first written above.
"Employee"
/s/ Fred G. Luke
---------------------------------------
Fred G. Luke
"Company"
THE TOEN GROUP INC.
a Nevada corporation
By: /s/ The Toen Group Inc.
----------------------------------
[FLJ\AGR:TOENEMPL.AGR]
11
EXHIBIT 10F
CONSULTING AGREEMENT WITH JOHN D. DESBROW
<PAGE>
CONSULTING AGREEMENT
This Consulting Agreement is made this 23rd day of July, 1996 by and
between John D. Desbrow, Attorney at Law ("Consultant") and The Toen Group,
Inc., a Nevada corporation, with its principal offices at 2 Park Plaza, Suite
470, Irvine, California 92614 ("Client").
WHEREAS, Consultant is an attorney licensed to practice law in the
State of California; and
WHEREAS, Consultant has served a Director of Client since September 28;
and
WHEREAS, Consultant has billed Client $1,000 per month for services
rendered from October 1, 1994 to the present; and
WHEREAS, the parties desire to memorialize the compensation due to
Consultant for past services rendered and to state the terms and conditions for
the rendering of future services through December 31, 1996.
NOW, THEREFORE, in consideration of mutual promises, covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledge, the Company and
Consultant agree as follows:
1. Prior and Future Services
The parties confirm that Consultant has been engaged to serve as a
Director of Client since September 28, 1994. This agreement confirms
Consultant's engagement and confirms the Consultant will be engaged in
his present capacity through December 31, 1996.
2. Scope of Services to be Provided
The services provided shall consist of all corporate duties commonly
performed by the Director of a publicly held company.
3. Term
This Agreement shall have a term expiring on December 31, 1996;
thereafter, this Agreement will automatically be extended on a month to
month basis (the "Extension Period") unless Consultant or Client shall
serve written notice on the other party terminating the Agreement.
Notice to terminate shall be in writing and shall be delivered at least
ten (10) days prior to December 31, 1996 or any subsequent Extension
Period as provided herein. In the event of termination pursuant to this
Paragraph 3, neither party shall have any further rights or obligations
hereunder after the effective date of such termination, except that the
obligation of Client to pay fees earned and to reimburse costs and
expenses of Consultant incurred prior to the effective date of
termination in performance of the Services shall continue until such
fees, costs, and expenses are paid in full by Client.
[JDD\AGR\TOEN.AGR]
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<PAGE>
4. Time and Effort of Consultant
Consultant shall devote that amount of working time, as necessary, on a
weekly basis, to fulfilling his obligations under this Agreement. The
particular amount of time may vary from day to day or week to week;
Client understands that Consultant has other clients which require some
of Consultant's professional time, but which do not conflict with
Consultant's obligations hereunder. Consultant agrees that he will at
all times, faithfully and to the best of his experience, ability, and
talents, perform all the duties required of him under this Agreement.
5. Compensation
Compensation to Consultant for the Services provided under this
Agreement shall consist of the following:
(A) Director's Fee. Commencing September 28, 1994, Consultant
shall be paid a base fee for serving as a member of Client's
Board of Directors, at the monthly rate of $1,000.
6. Costs and Expenses
Unless otherwise agreed and approved in writing between Consultant and
Client, all third party and out-of-pocket expenses, filing fees, copy,
and mailing expenses incurred by Consultant performing Services under
this Agreement are the responsibility of Consultant. Any expenses
incurred with the previous approval of Client in carrying out the
Services set forth under this Agreement shall be reimbursed by Client
within thirty (30) days of written notice by Consultant.
7. Place of Services
The Services provided by Consultant hereunder will be performed
primarily through Client's offices in Irvine, California, except as
otherwise mutually agreed by Consultant and Client. It is understood
and expected that Consultant may make contacts with persons and
entities and perform services in other locations as deemed appropriate
and directed by Client.
8. Independent Contractor
Consultant will act as an independent contractor in the performance of
duties under this Agreement. Accordingly, Consultant will be
responsible for payment of all federal, state, and local taxes on
compensation paid under this Agreement, including income and social
security taxes, unemployment insurance, and any other taxes or business
license fees as may be required.
9. No Agency Express or Implied
This Agreement neither expressly nor impliedly creates a relationship
of principal and agent between Consultant and Client. Consultant is not
authorized to enter into any agreements on behalf of Client. Client
expressly retains the right to approve, in its sole discretion, any and
all transactions introduced by Consultant (if any) and to make all
final decisions with respect to activities undertaken by Consultant
related to this Agreement.
[JDD\AGR\TOEN.AGR]
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<PAGE>
10. Nondisclosure and Nonuse of Confidential Information
Consultant agrees that non-public information concerning the finances,
plans, strategies, and overall business operations of Client is highly
confidential and proprietary to Client ("Confidential Information").
This Confidential Information includes, but is not limited to, the
following:
(A) Non-public information related to the business operations,
including financial and accounting information, plans of
operations, and potential mergers or acquisitions prior to the
public announcement of Client;
(B) Customer lists, call lists, and other non-public customer data of
Client;
(C) Memoranda, notes, records, sketches, plans, drawings, and any
media used to store, communicate, transmit, record, or embody
such Confidential Information of Client;
(D) Information treated, marked, or otherwise identified by Client as
confidential or as trade secrets.
Consultant acknowledges that such Confidential Information represents a
legitimate, valuable, and protectable interest of Client and gives
Client a competitive advantage, which would otherwise be lost if the
Confidential Information was improperly disclosed. Consultant further
acknowledges that unauthorized or improper disclosure or use of
Confidential Information would cause Client irreparable harm and
injury. Consultant therefore agrees that, in perpetuity or for as long
as the Confidential Information remains confidential, he will not
disclose or threaten to disclose the Confidential Information to any
person, partnership, company, corporation, or to any other business or
governmental organization or agency without the express written consent
of Client, as the case may be. Consultant further agrees not to use or
threaten to use the Confidential Information in any way that is not
specifically authorized by, or otherwise contrary to the interests of
Client, as the case may be. Consultant agrees that unauthorized
disclosure or use of Confidential Information constitutes
misappropriation of trade secrets and confidential information.
Consultant further agrees that all ownership rights to the Confidential
Information are held or retained by Client, as the case may be, and
that no right of ownership shall pass to Consultant by virtue of this
Agreement or the services provided hereunder.
11. Termination
(A) Termination for Disability. If prior to December 31, 1996,
Consultant shall be unable to provide the services as set
forth under this Agreement for twenty (20) business days
because of illness, accident, or other incapacity, Client
shall have the right to terminate this Agreement upon written
notice to Consultant within ten (10) days after the end of any
such 20-day period. Termination under this Paragraph 12(A)
shall be effective upon receipt by Consultant of such written
notice.
(B) Death. In the event of Consultant's death, this Agreement and
all rights and obligations hereunder shall immediately be
terminated.
[JDD\AGR\TOEN.AGR]
- 3 -
<PAGE>
(C) Termination for Cause. The Client may, at its option,
terminate this Agreement by giving written notice of
termination to Consultant without prejudice to any other
remedy to which the Client may be entitled either at law, in
equity, or under this Agreement, if Consultant:
(i) Willfully breaches or neglects the duties, or fails to
timely provide the Services as required under the terms
of this Agreement;
(ii) Fails to promptly comply with and carry out the
directives of Client's Board of Directors;
(iii)Commits any dishonest or unlawful act, in the judgment
of Client's Board of Directors.
(D) Termination Other Than For Cause. This Agreement shall terminate
immediately on the occurrence of any one of the following events:
(i) The occurrence of circumstances, in the judgment of
Client's Board of Directors, that make it impracticable
for Client to continue its present line(s) of business;
(ii) The decision of and upon notice by Consultant to
voluntarily terminate this Agreement;
(iii) The loss by Consultant of legal capacity;
(iv) If either party files a petition in a court of
bankruptcy or is adjudicated a bankrupt;
(v) If either party institutes, or has instituted against
it any bankruptcy proceeding for reorganization for
rearrangement of the party's financial affairs;
(vi) If either party has a receiver of the party's assets or
property appointed because of insolvency;
(vii)If either party makes a general assignment for the
benefit of creditors; or
(viii) If either party otherwise becomes insolvent or unable
to timely satisfy all obligations in the ordinary
course of business.
(E) Effect of Termination on Compensation. In the event of the
termination of this Agreement for Other Than Cause prior to
December 31, 1996, Consultant shall be entitled to the
compensation earned, and to the Option Shares accrued prior to
the date of termination as provided for in this Agreement.
Consultant shall be entitled to no further compensation after
the date of termination.
[JDD\AGR\TOEN.AGR]
- 4 -
<PAGE>
12. Representations and Warranties of Client
Client represents and warrants to Consultant that:
(A) Corporate Existence. Client is a corporation duly organized,
validly existing, and in good standing under the laws of the
State of Nevada, with corporate power to own property and
carry on its business as it is now being conducted.
(B) No Conflict. This Agreement has been duly executed by Client
and the execution and performance of this Agreement will not
violate, or result in a breach of, or constitute a default in
any agreement, instrument, judgment, decree or order to which
Client is a party or to which Client is subject, nor will such
execution and performance constitute a violation or conflict
of any fiduciary duty to which Client is subject.
(C) Date of Representations and Warranties. Each of the
representations and warranties of Client set forth in this
Agreement is true and correct at and as of the date of
execution of this Agreement.
13. Representations and Warranties of Consultant
Consultant represents and warrants to Client that:
(A) Prior Experience. Consultant has extensive experience in the
practice of general business and securities law.
(B) No Conflict. This Agreement has been duly executed by Consultant
and the execution and performance of this Agreement will not
violate, or result in a breach of, or constitute a default in any
agreement, instrument, judgment, decree or order to which
Consultant is a party or to which Consultant is subject, nor will
such execution and performance constitute a violation or conflict
of any fiduciary duty to which Consultant is subject.
(C) Date of Representations and Warranties. Each of the
representations and warranties of Consultant set forth in this
Agreement is true and correct at and as of the date of execution
of this Agreement.
14. Indemnification
Client and Consultant agree to indemnify, defend and hold each other
harmless from and against all demands, claims, actions, losses,
damages, liabilities, costs and expenses, including without limitation,
interest, penalties and attorneys' fees and expenses asserted against
or imposed or incurred by either party by reason of or resulting from a
breach of any representation, warranty, covenant, condition, or
agreement of the other party to this Agreement. Client and Consultant
agree to execute a separate Indemnification Agreement.
[JDD\AGR\TOEN.AGR]
- 5 -
<PAGE>
15. Agreement Does not Contemplate Corrupt Practice - Domestic or Foreign
Any and all payments under this Agreement constitute compensation for
services performed and this Agreement and all payments and the use of
the payments by Consultant, do not and shall not constitute an offer,
payment, or promise or authorization of payment of any money or gift to
an official or political party of, or candidate for political office in
any jurisdiction within or outside the United States. These payments
may not be used to influence any act or decision of an official, party
or candidate to use his/her/its influence with a government to assist
Client in obtaining, retaining, or directing business to Client, or any
person or other corporate entity. As used in this paragraph, the term
"official" means any officer or employee of a government, or any person
acting in an official capacity for or on behalf of any government; the
term "government" includes any department, agency, or instrumentality
of a government.
16. Inside Information - Securities Laws Violations
In the course of the performance of his duties, Consultant may become
aware of information which may be considered "inside information"
within the meaning of the Federal Securities Laws, Rules and
Regulations. Consultant acknowledges that his use of such information
to purchase or sell securities of Client, or its affiliates, or to
transmit such information to any other party with a view to buy, sell
or otherwise deal in the securities of Client or its affiliates is
prohibited by law and would constitute a breach of this Agreement and
notwithstanding the provisions of this Agreement, will result in the
immediate termination of the Agreement.
17. Miscellaneous
(A) Subsequent Events. Consultant and Client each agree to notify the
other party if, subsequent to the date of this Agreement, either
party incurs obligations which could compromise their efforts and
obligations under this Agreement.
(B) Amendment. This Agreement may be amended or modified at any time
and in any manner only by an instrument in writing executed by
the parties hereto.
(C) Further Actions and Assurances. At any time and from time to
time, each party agrees, at its or their expense, to take actions
and to execute and deliver documents a may be reasonably
necessary to effectuate the purposes of this Agreement.
(D) Waiver. Any failure of any party to this Agreement to comply with
any of its obligations, agreements, or conditions hereunder may
be waived in writing by the party to whom such compliance is
owed. The failure of any party to this Agreement to enforce at
any time any of the provisions of this Agreement shall in no way
be construed to be a waiver of any such provision or a waiver of
the right of such party thereafter to enforce each and every such
provision. No waiver of any breach of or non-compliance with this
Agreement shall be held to be a waiver of any other or subsequent
breach or non- compliance.
(E) Assignment. Neither this Agreement nor any right created by it
shall be assignable by Consultant without the prior written
consent of Client.
[JDD\AGR\TOEN.AGR]
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<PAGE>
(F) Notices. Any notice or other communication required or
permitted by this Agreement must be in writing and shall be
deemed to be properly given when delivered in person to an
officer of the other party, when deposited in the United
States mails for transmittal by certified or registered mail,
postage prepaid, or when deposited with a public telegraph
company for transmittal, or when sent by facsimile
transmission charges prepared, provided that the communication
is addressed:
(1) In the case of Client:
The Toen Group, Inc.
2 Park Plaza, Suite 470
Irvine, CA 92614
Telephone: (714) 833-2094
Telefax: (714) 833-7854
(2) In the case of Consultant:
John D. Desbrow
1406 Estelle
Newport Beach, CA 92660
(714) 645-9833
or to such other person or address designated by Client or
Consultant to receive notice.
(G) Headings. The paragraph and subparagraph headings in this
agreement are inserted for convenience only and shall not
affect in any way the meaning or interpretation of this
Agreement.
(H) Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument.
(I) Governing Law. This Agreement was negotiated and is being
contracted for in the State of California, and shall be
governed by the laws of the State of California, notwith
standing any conflict-of-law provision to the contrary.
(J) Binding Effect. This Agreement shall be binding upon the
parties hereto and inure to the benefit of the parties, their
respective heirs, administrators, executors, successors, and
assigns.
(K) Entire Agreement. This Agreement contains the entire agreement
between the parties hereto and supersedes any and all prior
agreements, arrangements, or understandings between the
parties relating to the subject matter of this Agreement. No
oral understandings, statements, promises, or inducements
contrary to the terms of this Agreement exist. No
representations, warranties, covenants, or conditions, express
or implied, other than as set forth herein, have been made by
any party.
[JDD\AGR\TOEN.AGR]
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<PAGE>
(L) Severability. If any part of this Agreement is deemed to be
unenforceable the balance of the Agreement shall remain in full
force and effect.
(M) Facsimile Counterparts. A facsimile, telecopy, or other
reproduction of this Agreement may be executed by one or more
parties hereto and such executed copy may be delivered by
facsimile of similar instantaneous electronic transmission device
pursuant to which the signature of or on behalf of such party can
be seen, and such execution and delivery shall be considered
valid, binding and effective for all purposes. At the request of
any party hereto, all parties agree to execute an original of
this Agreement as well as any facsimile, telecopy or other
reproduction hereof.
(N) Termination of Any Prior Agreements. Effective the date hereof,
all prior rights of Consultant relating to the accrual or payment
of any form of compensation or other benefits from Client based
upon any agreements other than this Agreement, whether written or
oral, entered into prior to the date hereof, are hereby
terminated.
(O) Consolidation or Merger. Subject to the provisions of Paragraph
12 hereof, in the event of a sale of the stock, or substantially
all of the stock, of Client, or consolidation or merger of Client
with or into another corporation or entity, or the sale of
substantially all of the operating assets of the Client to
another corporation, entity or individual, Client may assign its
rights and obligations under this Agreement to its
successor-in-interest and such successor-in-interest shall be
deemed to have acquired all rights and assumed all obligations of
Client hereunder; provided, however, that in no event shall the
duties and services of Consultant provided for in Paragraph 2
hereof, or the responsibilities, authority or powers commensurate
therewith, change in any material respect as a result of such
sale of stock, consolidation, merger or sale of assets.
(P) Time is of the Essence. Time is of the essence of this Agreement
and of each and every provision hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement
on the date above written.
"Consultant"
/s/ John D. Desbrow
---------------------------------------
John D. Desbrow
"Client"
THE TOEN GROUP, INC.
a Nevada corporation
By: /s/ Fred G. Luke
----------------------------------
Name: Fred G. Luke
Title: President
[JDD\AGR\TOEN.AGR]
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EXHIBIT 10G
CONSULTING AGREEMENT WITH STEVEN DONG
<PAGE>
CONSULTING AGREEMENT
This Consulting Agreement is made this 24th day of April, 1996 by and
between Steven Dong, an individual at 2 Park Plaza, Suite 470, Irvine,
California 92714 ("Consultant") and The Toen Group Inc., a Nevada corporation,
with its principal offices at 2 Park Plaza, Suite 470, Irvine, California 92714
("Client").
WHEREAS, Consultant is a Certified Public Accountant and has over ten
(7) years of experience in accounting and in the audit of publicly-held
companies; and
WHEREAS, Client desires to retain the services of Consultant to serve
as Client's Chief Financial Officer, and to advise Client's Board of Directors
and its Audit Committee, and Consultant desires to serve Client on the terms and
conditions set forth below:
1. Engagement
Client agrees to engage Consultant as its Chief Financial Officer, and
to provide Client with advice and financial consulting services, on an
as-needed basis, effective the date hereof and continuing through the
Initial Consulting Period (as defined below).
2. Scope of Services to be Provided
Consultant hereby accepts the engagement on the terms and conditions
set forth in the Agreement and agrees to provide the services which
shall consist of establishing internal controls and procedures to
effect accurate and timely preparation of financial statements and
regulatory reports on Form 10-K, Form 10-Q and Form 8-K, and to be the
individual responsible for the preparation, review and filing of such
reports; establishing sales and disbursement systems; establishing
payroll and inventory methods; assisting Client's Board of Directors in
the analysis of business opportunities, and debt and equity financing
proposals; preparing and/or timely reviewing of financial projections
and preparing budget; preparing capital requirement forecasts and
corporate finance requirements, the coordination of Client's audit,
including preparation of audit schedules, confirmations, reports and
responses to auditors; and, the performance of such additional duties
as requested by Client's Board of Directors (collectively referred to
herein as the "Services"). Consultant may not assign his duties
hereunder unless agreed to in writing with Client. Consultant's failure
to perform the Services shall be deemed a voluntary termination of this
Agreement by Consultant pursuant to Paragraph 12 hereof.
3. Term
This Agreement shall have an initial will expire June 30, 1996 (the
"Initial Consulting Period"); thereafter, this Agreement will
automatically be extended on a month to month basis (the "Extension
Period") unless Consultant or Client shall serve written notice on the
other party terminating the Agreement; provided, however, that
Consultant and client shall agree in writing as to Consultant's
continuing compensation. Notice to terminate shall be in writing and
shall be delivered at least ten (10) days prior to the end of the
Initial Consulting Period or any subsequent Extension Period as
provided herein. In the event of termination pursuant to this Paragraph
[TOEN\AGR:DONGCON.AGR]
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<PAGE>
3, neither party shall have any further rights or obligations hereunder
after the effective date of such termination, except that the
obligation of Client to pay fees earned and to reimburse costs and
expenses of Consultant incurred prior to the effective date of
termination in performance of the Services shall continue until such
fees, costs, and expenses are paid in full by Client.
4. Time and Effort of Consultant
Consultant shall devote that amount of working time, as necessary, on a
monthly basis, to fulfilling his obligations under this Agreement. The
particular amount of time may vary from day to day or week to week;
provided however, that Consultant shall allocate and be available to
Client for at least eight (8) hours per calendar month. Consultant
agrees that he will at all times, faithfully and to the best of his
experience, ability, and talents, perform all the duties required of
him under this Agreement.
5. Compensation
Compensation to Consultant for the Services provided under this
Agreement shall consist of the following:
(A) For Services as Chief Financial Officer. During the term of
the Agreement Consultant shall be paid a base fee for serving
as Client's Chief Financial Officer, and providing advice
regarding general financial and corporate affairs and growth
strategy, at the rate of Five Thousand Dollars ($5,000) per
annum, with such fee to be paid bi-monthly in arrears in cash
or in shares of Client's common stock (the "Fee Shares"), at
Client's sole discretion.
(B) Options. As incentive to execute this Agreement, Client grants
to Consultant the option to purchase shares of Client's common
stock (the "Option") consisting of 100,000 shares (the "Option
Shares"), exercisable at a price of $.10 per share (the
"Exercise Price"). Subject to Client's right to terminate, as
defined in Paragraph 12 hereunder, the right of Consultant to
exercise such Option will vest to Consultant monthly in
arrears over the Initial Consulting Term beginning the date
hereof.
6. Registration of Client's Shares
As soon as possible following the date hereof, Client will register the
Option Shares, and the Fee Shares (if any) with the Securities and
Exchange Commission under a Form S-8 registration statement. At
Client's sole discretion, any such shares to be issued to Consultant
may be issued prior to registration in reliance on exemptions from
registration provided by Section 4(2) of the Securities Act of 1933
(the "Act"), Regulation D of the Act, and applicable state securities
laws. Such shares shall be issued in reliance on representations and
warranties of Consultant set forth herein.
[TOEN\AGR:DONGCON.AGR]
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<PAGE>
7. Costs and Expenses
Unless otherwise agreed and approved in writing between Consultant and
Client, all third party and out-of-pocket expenses, filing fees, copy,
and mailing expenses incurred by Consultant performing Services under
this Agreement are the responsibility of Consultant. Any expenses
incurred with the previous approval of Client in carrying out the
Services set forth under this Agreement shall be reimbursed by Client
within thirty (30) days of written notice by Consultant.
8. Place of Services
Except as otherwise mutually agreed by Consultant and Client, the
Services provided by Consultant hereunder will be performed primarily
through Client's offices in Irvine, California, or such other place of
business designated by Client as its principal office.
9. Independent Contractor
Consultant will act as an independent contractor in the performance of
duties under this Agreement. Accordingly, Consultant will be
responsible for payment of all federal, state, and local taxes on
compensation paid under this Agreement, including income and social
security taxes, unemployment insurance, and any other taxes or business
license fees as may be required.
10. No Agency Express or Implied
This Agreement neither expressly nor impliedly creates a relationship
of principal and agent between Consultant and Client. Consultant is not
authorized to enter into any agreements on behalf of Client. Client
expressly retains the right to approve, in its sole discretion, any and
all transactions introduced by Consultant (if any) and to make all
final decisions with respect to activities undertaken by Consultant
related to this Agreement.
11. Nondisclosure and Nonuse of Confidential Information
Consultant acknowledges that non-public information concerning the
finances, plans, strategies, and overall business operations of Client
is highly confidential and proprietary to Client ("Confidential
Information"). This Confidential Information includes, but is not
limited to, the following:
(A) Non-public information related to the business operations,
including financial and accounting information, plans of
operations, and potential mergers or acquisitions prior to the
public announcement of Client;
(B) Customer lists, call lists, and other non-public customer data
of Client;
(C) Memoranda, notes, records, sketches, plans, drawings, and any
media used to store, communicate, transmit, record, or embody
such Confidential Information of Client;
(D) Information treated, marked, or otherwise identified by Client
as confidential or as trade secrets.
[TOEN\AGR:DONGCON.AGR]
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<PAGE>
Consultant acknowledges that such Confidential Information represents a
legitimate, valuable, and protectable interest of Client and gives
Client a competitive advantage, which would otherwise be lost if the
Confidential Information was improperly disclosed. Consultant further
acknowledges that unauthorized or improper disclosure or use of
Confidential Information would cause Client irreparable harm and
injury. Consultant therefore agrees that, in perpetuity or for as long
as the Confidential Information remains confidential, he will not
disclose or threaten to disclose the Confidential Information to any
person, partnership, company, corporation, or to any other business or
governmental organization or agency without the express written consent
of Client, as the case may be. Consultant further agrees not to use or
threaten to use the Confidential Information in any way that is not
specifically authorized by, or otherwise contrary to the interests of
Client, as the case may be. Consultant agrees that unauthorized
disclosure or use of Confidential Information constitutes
misappropriation of trade secrets and confidential information.
Consultant further agrees that all ownership rights to the Confidential
Information are held or retained by Client, as the case may be, and
that no right of ownership shall pass to Consultant by virtue of this
Agreement or the Services provided hereunder.
12. Termination
(A) Termination for Disability. If during the Initial Consulting
Period, Consultant shall be unable to provide the services as
set forth under this Agreement for twenty (20) business days
because of illness, accident, or other incapacity, Client
shall have the right to immediately terminate this Agreement
upon written notice to Consultant after the end of any such
20-day period. Termination under this Paragraph 12(A) shall be
effective upon receipt by Consultant of such written notice.
(B) Death. In the event of Consultant's death, this Agreement and
all rights and obligations hereunder shall immediately be
terminated.
(C) Termination for Cause. Client may, at its option, terminate
this Agreement by giving written notice of termination to
Consultant without prejudice to any other remedy to which the
Client may be entitled either at law, in equity, or under this
Agreement, if Consultant:
(i) Willfully breaches or neglects the duties, or fails to
timely provide the Services as required under the terms
of this Agreement;
(ii) Fails to promptly comply with and carry out the
directives of Client's Board of Directors;
(iii)Commits any dishonest or unlawful act, in the judgment
of Client's Board of Directors;
(iv) Engages in any conduct which disrupts the business of
Client or any entity affiliated with Client;
[TOEN\AGR:DONGCON.AGR]
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<PAGE>
(v) Fails to produce work product which, in the judgment of
Client's Board of Directors, is necessary for Client to
comply with requests from auditors or Consultant's
successor, or to timely file reports required of it.
(vi) Is found to have engaged in conduct, prior to or
subsequent to the date hereof, that may preclude Client
from obtaining any local, state or federal regulatory
approval of Client's intent, or application for a
license, to own an interest in or to operate any
regulated business.
(D) Termination Other Than For Cause. This Agreement shall
terminate immediately on the occurrence of any one of the
following events:
(i) The occurrence of circumstances, in the judgment of
Client's Board of Directors, that make it impracticable
for Client to continue its present line of business;
(ii) The decision of and upon notice by Consultant to
voluntarily terminate this Agreement;
(iii) The loss by Consultant of legal capacity;
(iv) If either party files a petition in a court of
bankruptcy or is adjudicated a bankrupt;
(v) If either party institutes, or has instituted against
it any bankruptcy proceeding for reorganization for
rearrangement of the party's financial affairs;
(vi) If either party has a receiver of the party's assets or
property appointed because of insolvency;
(vii)If either party makes a general assignment for the
benefit of creditors; or
(viii) If either party otherwise becomes insolvent or unable
to timely satisfy all obligations in the ordinary
course of business.
(E) Effect of Termination on Compensation. In the event of the
termination of this Agreement Other Than for Cause prior to
the expiration of the Initial Consulting Period, Consultant
shall be entitled to the compensation earned, and to exercise
by appropriate payment therefore the Option Shares exercisable
prior to the date of termination as provided for in this
Agreement. Consultant shall be entitled to no further
compensation after the date of termination.
[TOEN\AGR:DONGCON.AGR]
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<PAGE>
13. Representations and Warranties of Client
Client represents and warrants to Consultant that:
(A) Corporate Existence. Client is a corporation duly organized,
validly existing, and in good standing under the laws of the
State of Nevada, with corporate power to own property and carry
on its business as it is now being conducted.
(B) Financial Information. Client has or will cause to be delivered
concurrently with the execution of this Agreement, copies of the
Disclosure Documents (as defined in Paragraph 14(D)(1)) which
accurately set forth the financial condition of Client as of the
respective dates of such documents.
(C) Capitalization. The capitalization of Client is, as of the date
hereof, comprised of Thirty Million (30,000,000) shares of
authorized $.01 par value common stock of which no more than
Twenty Eight Million (28,000,000) shares are issued and
outstanding, with Two Hundred Fifty Thousand (250,000) shares of
Series B Convertible Preferred Stock issued and outstanding and
Eighteen Million (18,000,000) Warrants and Options to purchase
common stock which, upon exercise will result in at least
Eighteen Million (18,000,000) additional shares of common stock
being issued. All issued and outstanding shares are legally
issued, fully paid, and nonassessable, and are not issued in
violation of the preemptive or other right of any person.
(D) No Conflict. This Agreement has been duly executed by Client and
the execution and performance of this Agreement will not violate,
or result in a breach of, or constitute a default in any
agreement, instrument, judgment, decree or order to which Client
is a party or to which Client is subject, nor will such execution
and performance constitute a violation or conflict of any
fiduciary duty to which Client is subject.
(E) Full Disclosure. The information concerning Client provided to
Consultant pursuant to this Agreement is, to the best of Client's
knowledge and belief, complete and accurate in all material
respects and does not contain any untrue statement of a material
fact or omit to state a material fact required to make the
statements made, in light of the circumstances under which they
were made, not misleading.
(F) Date of Representations and Warranties. Each of the
representations and warranties of Client set forth in this
Agreement is true and correct at and as of the date of execution
of this Agreement.
14. Representations and Warranties of Consultant
Consultant represents and warrants to Client that:
(A) Prior Experience. Consultant has extensive experience in the
area of auditing publicly-held companies and the preparation
of financial statements, establishment of internal control
procedures, debt and equity financing, budgeting and capital
requirement analysis.
[TOEN\AGR:DONGCON.AGR]
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<PAGE>
(B) No Conflict. This Agreement has been duly executed by Consultant
and the execution and performance of this Agreement will not
violate, or result in a breach of, or constitute a default in any
agreement, instrument, judgment, decree or order to which
Consultant is a party or to which Consultant is subject, nor will
such execution and performance constitute a violation or conflict
of any fiduciary duty to which Consultant is subject.
(C) No Litigation. Consultant is not a defendant, nor plaintiff
against whom a counterclaim has been asserted, in any litigation,
pending or threatened, nor has any material claim been made or
asserted against Consultant, nor are there any proceedings
threatened or pending before any U.S. or other territorial,
federal, state or municipal government, or any department, board,
body or agency thereof, involving as of the date hereof, that may
entitle a successful litigant to a claim against any assets of
Consultant, or interfere in any way with the duties of Consultant
hereunder.
(D) Registration and/or Exemption of Client's Shares. Consultant
understands and acknowledges that the Option Shares issued and
any Fee Shares issued pursuant to this Agreement prior to
registration will be so issued in reliance on the exemptions from
registration provided by Section 4(2) or Regulation D of the Act
and applicable state securities laws. Representations and
warranties by Consultant in this Paragraph will be used and
relied upon by Client to determine whether any issuance of such
shares may be made to Consultant pursuant hereto, and Consultant
will notify Client immediately of any material changes to the
representations made herein. In this regard, Consultant
represents and warrants that:
(1) Consultant has been furnished with a copy of Client's most
recent Annual Report on Form 10-KSB and 10-K and all reports
or documents required to be filed under Sections 13(a),
14(a), and 15(d) of the Securities and Exchange Act of 1934
("Exchange Act"), including but not limited to quarterly
reports on Form 10-QSB or 10-Q, Current Reports on Form 8-K,
and Proxy Statement (the "Disclosure Documents"). In
addition, Consultant has been furnished with a description
of Client's capital structure and any material changes in
Client's financial condition that may not have been
disclosed in the Disclosure Documents.
(2) Consultant has had the opportunity to ask questions and
receive answers concerning the terms and conditions of
Client's shares to be issued pursuant to this Agreement, and
to obtain any additional information which Client possesses
or can acquire without unreasonable effort or expense
necessary to verify the accuracy of information furnished
under this Paragraph.
(3) By reason of Consultant's knowledge and experience in
financial and business matters in general, and investments
in particular, Consultant is capable of evaluating the
merits and risks of this transaction and in bearing the
economic risks of an investment in Client's shares, and
Client in general, and fully understand the speculative
nature of such securities and the possibility of such loss.
[TOEN\AGR:DONGCON.AGR]
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<PAGE>
(4) Consultant is fully aware that any of Client's shares issued
to Consultant pursuant to this Agreement prior to
registration will be "Restricted Securities" as defined by
Rule 144 of the Act, and that any resale of such shares by
Consultant may be governed by Rule 144.
(6) Consultant will not sell, transfer or otherwise dispose of
any of Client's shares issued pursuant to this Agreement
prior to registration except in compliance with the Act.
(7) Any and all certificates representing any of Client's shares
issued pursuant to this Agreement issued prior to
registration of such shares, and any and all securities
issued in replacement thereof or in exchange therefore,
shall bear the following legend:
"The shares represented by this certificate
have not been registered under the
Securities Act of 1933 (the "Act") and are
"restricted securities" as that term is
defined in Rule 144 under the Act. The
shares may not be offered for sale, sold, or
otherwise transferred except pursuant to an
effective Registration Statement under the
Act or pursuant to an exemption from
registration under the Act, the availability
of which is to be established to the
satisfaction of the Company."
(E) Full Disclosure. Consultant's resume, and all other
information concerning Consultant provided to Client pursuant
to this Agreement is, to the best of Consultant's knowledge
and belief, complete and accurate in all material respects and
does not contain any untrue statement of a material fact or
omit to state a material fact required to make the statements
made, in light of the circumstances under which they were
made, not misleading.
(F) Non-Compete and Related Agreements.
Consultant agrees that during the Non-competition Period (as
herein defined), unless otherwise agreed with Client in
writing, he will not:
(i) directly or indirectly own, manage, control,
participate in, lend his name to, act as consultant
or advisor to, or render services to (alone or in
association with any other person, firm, corporation
or other business organization) any person or entity
engaged in any business similar to or related in any
way to the business conducted by Client anywhere
within the continental United States,
(ii) have any interest directly or indirectly in any
business engaged in any business similar to or
related in any way to the business conducted by
Client (provided that nothing herein will prevent
Consultant from owning in the aggregate not more than
five percent (5%) of the outstanding stock of any
class of a corporation engaged in the business which
is publicly traded, so long as
[TOEN\AGR:DONGCON.AGR]
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<PAGE>
Consultant has not participated in the management or
conduct of business of such corporation),
(iii) induce or attempt to induce any other employee of the
Client to leave the employ of the Client or its
affiliates, or in any way interfere with the
relationship between the Client and any other
employee of Client or its affiliates, or
(iv) induce or attempt to induce any customer, supplier,
franchisee, licensee, or other business relation of
Client or any affiliate of Client to cease doing
business with the Client or any affiliate of Client,
or in any way interfere with the relationship between
any customer, franchisee or other business relation
and Client or any affiliate of Client, without the
prior written consent of Client's Board of Directors.
For purposes of this Agreement, "Non-competition Period" shall
mean the period commencing as of the date hereof and ending on
the second anniversary of the date on which Consultant shall
not be engaged by Client; provided that in the event
Consultant's engagement hereunder is terminated by Client for
any reason other than Cause or other than as provided in
Paragraph 12 above, "Non-competition Period" shall mean the
period commencing as of the date hereof and ending on the
second anniversary date of the termination hereof.
(ii) If, at the time of enforcement of any provisions of
Paragraph 12 above, a court of competent jurisdiction
holds that the restrictions stated therein are
unreasonable under circumstances then existing, the
parties hereto agree that the maximum period or scope
reasonable under such circumstances will be
substituted for the stated period or scope.
(iii) Consultant agrees that the covenants made in this
Paragraph shall be construed as an agreement
independent of any other provision of this Agreement,
and shall survive the termination of this Agreement
for a period of two (2) years.
(G) Soliciting Customers After Termination of Agreement.
Consultant shall not for a period two (2) years immediately
following the termination of his engagement with Client,
either directly or indirectly:
(i) make known to any person, firm or corporation the names or
addresses of any of the customers of Client or any other
information pertaining to them; or,
(ii) call on, solicit, or take away, attempt to call on, solicit,
to take away any of the customers of Client on whom the
Consultant called or became acquainted with during its
engagement with Client, either for itself or for any other
person, firm or corporation.
(H) Date of Representations and Warranties. Each of the
representations and warranties of Consultant set forth in this
Agreement is true and correct at and as of the date of
execution of this Agreement.
[TOEN\AGR:DONGCON.AGR]
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<PAGE>
15. Indemnification
Client and Consultant agree to indemnify, defend and hold each other
harmless from and against all demands, claims, actions, losses,
damages, liabilities, costs and expenses, including without limitation,
interest, penalties and attorneys' fees and expenses asserted against
or imposed or incurred by either party by reason of or resulting from a
breach of any representation, warranty, covenant, condition, or
agreement of the other party to this Agreement.
16. Agreement Does not Contemplate Corrupt Practice - Domestic or Foreign
Any and all payments under this Agreement constitute compensation for
services performed and this Agreement and all payments and the use of
the payments by Consultant, do not and shall not constitute an offer,
payment, or promise or authorization of payment of any money or gift to
an official or political party of, or candidate for political office in
any jurisdiction within or outside the United States. These payments
may not be used to influence any act or decision of an official, party
or candidate to use his/her/its influence with a government to assist
Client in obtaining, retaining, or directing business to Client, or any
person or other corporate entity. As used in this paragraph, the term
"official" means any officer or employee of a government, or any person
acting in an official capacity for or on behalf of any government; the
term "government" includes any department, agency, or instrumentality
of a government.
17. Inside Information - Securities Laws Violations
In the course of the performance of his duties, Consultant may become
aware of information which may be considered "inside information"
within the meaning of the Federal Securities Laws, Rules and
Regulations. Consultant acknowledges that his use of such information
to purchase or sell securities of Client, or its affiliates, or to
transmit such information to any other party with a view to buy, sell
or otherwise deal in the securities of Client or its affiliates is
prohibited by law and would constitute a breach of this Agreement and
notwithstanding the provisions of this Agreement, will result in the
immediate termination of the Agreement.
18. Exclusive Services
Consultant agrees that the Services to be provided hereunder are
exclusive and, accordingly, Consultant shall not render services of the
same nature or of a similar nature to any other individual or entity
during the term hereof without the written consent of Client; provided
that, if Consultant wishes to consult to or provide services to any
other party, Consultant may voluntarily terminate this Agreement at any
time pursuant and subject to the provisions of Paragraph 12 hereof. On
the other hand, Consultant understands and agrees that Client shall not
be prevented or barred from retaining other persons or entities to
provide services of the same or similar nature as those provided by
Consultant.
[TOEN\AGR:DONGCON.AGR]
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<PAGE>
19. Specific Performance
Consultant and Client acknowledge that in the event of a breach of this
Agreement by either party, money damages would be inadequate and the
non-breaching party would have no adequate remedy at law. Accordingly,
in the event of any controversy concerning the rights or obligations
under this Agreement, such rights or obligations shall be enforceable
in a court of equity by a decree of specific performance. Such remedy,
however, shall be cumulative and non-exclusive and shall be in addition
to any other remedy to which the parties may be entitled.
20. Miscellaneous
(A) Subsequent Events. Consultant and Client each agree to notify the
other party if, subsequent to the date of this Agreement, either
party incurs obligations which could compromise their efforts and
obligations under this Agreement.
(B) Amendment. This Agreement may be amended or modified at any time
and in any manner only by an instrument in writing executed by
the parties hereto.
(C) Further Actions and Assurances. At any time and from time to
time, each party agrees, at its or their expense, to take actions
and to execute and deliver documents a may be reasonably
necessary to effectuate the purposes of this Agreement.
(D) Waiver. Any failure of any party to this Agreement to comply with
any of its obligations, agreements, or conditions hereunder may
be waived in writing by the party to whom such compliance is
owed. The failure of any party to this Agreement to enforce at
any time any of the provisions of this Agreement shall in no way
be construed to be a waiver of any such provision or a waiver of
the right of such party thereafter to enforce each and every such
provision. No waiver of any breach of or non-compliance with this
Agreement shall be held to be a waiver of any other or subsequent
breach or non- compliance.
(E) Assignment. Neither this Agreement nor any right created by it
shall be assignable by Consultant without the prior written
consent of Client.
(F) Notices. Any notice or other communication required or permitted
by this Agreement must be in writing and shall be deemed to be
properly given when delivered in person to an officer of the
other party, when deposited in the United States mails for
transmittal by certified or registered mail, postage prepaid, or
when deposited with a public telegraph company for transmittal,
or when sent by facsimile transmission charges prepared, provided
that the communication is addressed:
[TOEN\AGR:DONGCON.AGR]
- 11 -
<PAGE>
(1) In the case of Client:
The Toen Group Inc.
2 Park Plaza, Suite 470
Irvine, California 92714
Telephone: (714) 833-2094
Telefax: (714) 833-7854
(2) In the case of Consultant:
Steven Dong
2 Park Plaza, Suite 470
Irvine, California 92714
Telephone: (714) 833-2094
Telefax: (714) 833-7854
or to such other person or address designated by Client or
Consultant to receive notice.
(G) Headings. The paragraph and subparagraph headings in this
agreement are inserted for convenience only and shall not
affect in any way the meaning or interpretation of this
Agreement.
(H) Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument.
(I) Governing Law. This Agreement was negotiated and is being
contracted for in the State of California, and shall be
governed by the laws of the State of California, notwith
standing any conflict-of-law provision to the contrary.
(J) Binding Effect. This Agreement shall be binding upon the
parties hereto and inure to the benefit of the parties, their
respective heirs, administrators, executors, successors, and
assigns.
(K) Entire Agreement. This Agreement contains the entire agreement
between the parties hereto and supersedes any and all prior
agreements, arrangements, or understandings between the
parties relating to the subject matter of this Agreement. No
oral understan dings, statements, promises, or inducements
contrary to the terms of this Agreement exist. No
representations, warranties, covenants, or conditions, express
or implied, other than as set forth herein, have been made by
any party.
(L) Severability. If any part of this Agreement is deemed to be
unenforceable the balance of the Agreement shall remain in
full force and effect.
[TOEN\AGR:DONGCON.AGR]
- 12 -
<PAGE>
(M) Facsimile Counterparts. A facsimile, telecopy, or other
reproduction of this Agreement may be executed by one or more
parties hereto and such executed copy may be delivered by
facsimile of similar instantaneous electronic transmission device
pursuant to which the signature of or on behalf of such party can
be seen, and such execution and delivery shall be considered
valid, binding and effective for all purposes. At the request of
any party hereto, all parties agree to execute an original of
this Agreement as well as any facsimile, telecopy or other
reproduction hereof.
(N) Termination of Any Prior Agreements. Effective the date hereof,
all prior rights of Consultant relating to the accrual or payment
of any form of compensation or other benefits from Client based
upon any agreements other than this Agreement, whether written or
oral, entered into prior to the date hereof, are hereby
terminated.
(O) Consolidation or Merger. Subject to the provisions of Paragraph
12 hereof, in the event of a sale of the stock, or substantially
all of the stock, of Client, or consolidation or merger of Client
with or into another corporation or entity, or the sale of
substantially all of the operating assets of the Client to
another corporation, entity or individual, Client may assign its
rights and obligations under this Agreement to its
successor-in-interest and such successor-in-interest shall be
deemed to have acquired all rights and assumed all obligations of
Client hereunder; provided, however, that in no event shall the
duties and services of Consultant provided for in Paragraph 2
hereof, or the responsibilities, authority or powers commensurate
therewith, change in any material respect as a result of such
sale of stock, consolidation, merger or sale of assets.
(P) Time is of the Essence. Time is of the essence of this Agreement
and of each and every provision hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date above written.
"Consultant"
/s/ Steven Dong
---------------------------------------
Steven Dong
"Client"
THE TOEN GROUP INC.
a Nevada corporation
By: /s/ Fred G. Luke
----------------------------------
Name: Fred G. Luke
Title: President
[TOEN\AGR:DONGCON.AGR]
- 13 -
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<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-END> MAY-31-1995
<CASH> 161
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
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0
0
<COMMON> 411,442
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