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 June 30, 1996 Commission file number 0-18377
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NONA MORELLI'S II, INC.
(Exact name of registrant as specified in its charter)
Colorado
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(State of other jurisdiction of incorporation or organization)
84-1126818
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(I.R.S. Employer Identification No.)
2 Park Plaza, Suite 470, Irvine, California 92614
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(Address of Principal Executive Offices) Zip Code)
Registrant's telephone number, including area code: (714) 833-5381
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Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes No X
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K, is not contained herein and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.
o
The Registrant's revenues for its most recent fiscal year were
$12,658,491.
The aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of October 15, 1996 was approximately
$6,329,500.
Class
Common Stock , $.01 par value
Outstanding at October 15, 1996
45,048,500 shares
Documents Incorporated by Reference:
None
Total Number of Pages Including Cover
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TABLE OF CONTENTS
Page
PART I
Item 1. Description of Business .........................................1
Item 2. Description of Property .........................................13
Item 3. Legal Proceedings ...............................................14
Item 4. Submission of Matters to a Vote of Security-Holders .............18
PART II
Item 5. Market for Common Equity and Related Stockholder Matters ........19
Item 6. Management's Discussion and Analysis of Financial Condition
and Results of Operations ......................................20
Item 7. Financial Statements ............................................26
Item 8. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure .......................................26
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act ..............27
Item 10. Executive Compensation ..........................................32
Item 11. Security Ownership of Certain Beneficial Owners and Management ..37
Item 12. Certain Relationships and Related Transactions ..................38
PART IV
Item 13. Exhibits and Reports on Form 8-K ................................40
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
(a) Business Development
Nona Morelli's II, Inc. (the "Company" or the "Registrant") was
incorporated in Colorado on February 6, 1989 and became public in 1990. The
Registrant was originally organized to succeed the business of the Nona Morelli
Limited Partnership which operated a restaurant from 1986 through 1989 and
manufactured and marketed fresh-pack pasta and pasta sauces. Prior to December
1992, the business of the Registrant consisted solely of the manufacturing,
marketing and sale of Italian food products, primarily pasta and sauces.
During its fiscal year ended June 30, 1993 ("fiscal 1993"), as a result
of a number of acquisitions and investments in the areas of food, legalized
gaming and real estate, the Registrant evolved from a pasta manufacturer into a
food manufacturing, distributing and investment company. Following some
extensive corporate re-engineering in fiscal 1993 and the first six months of
its fiscal year ended June 30, 1994 ("fiscal 1994"), the Registrant was
restructured to operate as a holding company. Since July 1, 1993, the
Registrant's food, legalized gaming and real estate acquisition, development and
production activities have been owned and operated by wholly-owned subsidiaries
or subsidiaries where the Registrant owned and exercised voting control. The
restructuring was undertaken to allow the Registrant to redefine its business
segments, concentrate its financial and human resources in each of its present
areas of operation, and focus performance incentives based upon separate
segment, or industry-specific businesses.
The Registrant believes that maintaining an entrepreneurial atmosphere
is essential to continuing its growth and development. In order to create this
environment, in fiscal 1993 the Registrant adopted the strategy to ultimately
result in its separate subsidiaries becoming publicly-held companies, which the
Registrant believes will permit the establishment of more focused management
objectives and performance incentives, and allow each subsidiary to raise new
equity capital, as needed, while minimizing the Registrant's financial
commitment to support the subsidiaries' growth. Since the beginning of fiscal
1994, the Registrant's operating philosophy is to supervise its subsidiaries by
providing financial support, centralized strategic planning, corporate
development, administrative, and other services that would not otherwise be
available to independent companies of similar size. As of the close of the
fiscal year ended June 30, 1996 ("fiscal 1996"), the Registrant had four
subsidiaries, one of which is publicly traded.
The Registrant's historical domestic gaming related assets and
operations have been conducted by its subsidiary, NuOasis Gaming, Inc., a
Delaware corporation ("NuOasis Gaming"), formerly E.N. Phillips Company,
("ENP"), which is a publicly-held company whose shares are traded on the OTC
Bulletin Board. The Registrant has voting control of NuOasis Gaming and has the
right to acquire a majority interest in NuOasis Gaming by virtue of its
ownership of common and preferred stock, and warrants and options to purchase
additional common stock. During the year ended June 30, 1996, the Registrant
entered into an option agreement to sell the Registrant's controlling interest
in NuOasis Gaming (see Item 6, Management's Discussion and Analysis).
The Registrant's international gaming activities which, at the close of
fiscal 1996, are still in the development stage and include its Asian and
Tunisian activities, are conducted by its wholly-owned subsidiary, NuOasis
International, Inc. ("NuOasis International"), a Bahamas corporation, successor
to NuOasis International Inc., a California Corporation (formerly International
Casino Management, Inc.), and by Cleopatra Palace Limited, an Irish corporation
("Cleopatra") in which the Registrant owns a 28% equity interest.
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The Registrant's domestic food operations are conducted by its
wholly-owned subsidiary, Fantastic Foods International, Inc., a California
corporation ("Fantastic Foods") doing business as the Pasta Fresca Company
("Pasta Fresca").
The Registrant's domestic real estate operations, which at the close of
fiscal 1996 are still in the development stage, are conducted by NuOasis
Properties, Inc., a Colorado corporation ("NuOasis Properties"), formerly
Morelli Capital, Inc. ("MCI"), a wholly-owned subsidiary.
As used herein, the term "Company" or the "Registrant" refers to Nona
Morelli's II, Inc., and its subsidiaries: NuOasis Gaming and its wholly-owned
subsidiaries; NuOasis Properties; NuOasis International; and Fantastic Foods.
The wholly-owned subsidiaries of NuOasis Gaming are: Casino Management of
America, Inc., a Utah corporation ("CMA"); NuOasis Laughlin, Inc., a Colorado
corporation ("NuOasis Laughlin"); and NuOasis Las Vegas, Inc., a Colorado
corporation ("NuOasis Las Vegas"). The Registrant currently maintains its
executive offices in Irvine, California.
The following chart illustrates the relationship between the Registrant
and the various subsidiaries:
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|NONA MORELLI'S II INC |
| |
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|
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| | | |
- ---------------- -------------------- ----------------- ----------------
| NuOasis | | NuOasis | | Fantastic | | NuOasis |
| Gaming Inc. | | International | | Foods | | Properties |
| (Voting | | Inc. | | International | | Inc. |
| Control) | | (100%) | | Inc. (100%) | | (100%) |
- ---------------- -------------------- ----------------- -----------------
(b) Description of Business
The Registrant's business interests are comprised of food manufacturing
and distribution, legalized gaming, and real estate acquisition and development.
The activities in the past have been financed by working capital, equity
financing or through joint ventures between one of the Registrant's subsidiaries
and unrelated parties.
(1) Food Manufacturing and Distribution
The Registrant is a manufacturer and marketer of fresh and
frozen packed pasta and Italian sauces. The Registrant utilizes its own
recipes and those acquired in the purchase of the assets and business
of Italfin, Inc. ("Italfin") and The Pasta Fresca Co. ("Pasta Fresca
Company") in fiscal 1993. The Registrant's pasta products are fresh or
frozen, not dried, to maintain 60% of the nutritional value, to cook
quickly and to retain aroma and taste. Its pasta is high in complex
carbohydrates making it a high energy food. The Registrant's pasta is
manufactured under the brand names "Nona Morelli" and "Pasta Fresca,"
and contains all natural ingredients without any preservatives. The
"Nona Morelli" and "Pasta Fresca" brand name pasta products are sold
primarily to the retail trade in supermarkets, club stores and
independent grocers in California and other states and, to an
increasingly greater extent, through contract packaging ("co-packing")
for other national/regional organizations, which distribute the
Registrant's products under their private labels. Fresh and frozen
pasta is also sold in bulk for the food service industry, hotels and
restaurants. The Registrant has lines of no cholesterol and low
cholesterol pasta and packages and markets pasta with accompanying
sauces. The Registrant is also a producer and marketer of a private
label and "Nona Morelli" and "Pasta Fresca" brand sauces.
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During the year ended June 30, 1996, the Registrant continued
to pursue a program that focused on increasing operations on both a
national and international level. The Registrant continues its direct
manufacturing and marketing activities for the "Nona Morelli" and
"Pasta Fresca" brand names on a regional basis through various brokers
in the Southeast and Southwest. In co-packing, the Registrant packages
its pasta and sauce products for other companies which market the
products under their own labels and brand names. Co-packing represented
approximately 24% and 55% of food sales revenue for each of the years
ended June 30, 1996 and 1995, respectively.
Since September 1993, the Registrant's food products
operations have been conducted by Fantastic Foods. In fiscal 1994 the
Registrant's historical food manufacturing and distribution activities,
which include pasta and sauce products, were transferred from Colorado
to California and are now operated in two (2) manufacturing facilities
based in Irwindale and Arcadia, California. The USDA certified Arcadia
facility produces the Registrant's meat and other filled pasta
products, and speciality items for hotels and restaurants.
Products
The Registrant's primary food products include a variety of
pastas and sauces. The Registrant's pasta sales accounted for ninety
five percent of food sales revenues for both the years ended June 30,
1996 and 1995. The Registrant's pasta line consists of 35 different
pasta products separately packaged under the Registrant's and
private-label names.
The Registrant also manufactures and markets eight different
sauce products separately packaged in five sizes under the Registrant's
brand name and private-label.
Fresh pasta is manufactured from high quality durum or
semolina flour, and whole eggs or egg whites, in a process which takes
it from dough mix through various machines which shape and cut the
pasta to the required shape, thickness, and size. The product is then
pasteurized and packaged in a way in which oxygen is flushed from the
package and replaced with an inert gas to inhibit spoilage and increase
shelf life. The fresh pasta industry has flourished with the advent of
effective, cost-efficient, packaging equipment. Spinach, cheese,
tomatoes, and other ingredients may be added to the mix to create a
variety of gourmet pasta products. Cholesterol free pasta is
manufactured from semolina flour, egg whites, and water.
The major markets for fresh pasta are chain-supermarkets, club
stores, food service, independent groceries, delicatessens, and
military commissaries. Fresh pasta, sold in retail supermarkets,
generally may be found in the "deli" section, refrigerated grocery, or
possibly the nutrition section. According to a compilation of the U.S.
Commerce Department and the National Pasta Association, annual sales of
pasta in the United States for 1990 were estimated at approximately 4.6
billion pounds or a mean annual per capita consumption rate of 18.4
pounds, up from 13 pounds per person in 1980. Domestic sales of fresh
pasta were not separately categorized by the publication. The National
Pasta Association estimated that the mean annual per capita consumption
of pasta will be 30.6 pounds by the year 2000.
While consumption of pasta generally has been occurring for
hundreds of years in Europe and the United States, over-the-counter
sale of off-premises manufactured and packaged fresh pasta is made
possible by pasteurization and oxygen flushing. Domestic fresh pasta
sales began to accelerate in 1985. Sales of low cholesterol, and no
cholesterol, fresh pasta began to capture a small market share in 1988
as U.S. consumers with health concerns, or dietary requirements, became
more aware of pasta products with these features. These same fresh
pasta products can also be quick frozen for longer shelf life in the
retail markets. Management expects the demand for fresh and frozen
pasta will continue to increase during the coming years.
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Marketing
There are approximately 40,000 major supermarkets in the
United States and between 4,000 and 6,000 in market areas presently
served by the Registrant's products. The Registrant cannot estimate its
market share of fresh pasta sales.
The Registrant is currently packaging pasta products and
sauces separately and in combination for three marketers. Under
co-packing agreements, the Registrant contracts with distributors to
market its pasta products who are typically responsible for
transporting, warehousing, advertising, distributing, promoting and
brokering Fantastic Foods produced pastas and sauces. The Registrant's
expenses related to managing co-packing accounts have been relatively
nominal. Thus, the primary costs are limited to production, packaging,
and returns, which are subject to more accurate budgeting and control.
Sales of the Registrant's products are made through direct
marketing by food brokers and Registrant's personnel with a focus on
supermarket chains and other retailers. Typically, the Registrant's
products are delivered to distribution centers of such supermarket
chains for subse quent re-delivery through the supermarket subsystem as
demand dictates. The Registrant also markets its products through
distributors under short term "spot sale" arrangements terminable on
short notice. Food brokers utilized by the Registrant usually receive
commissions based on net sales, while distributors purchase the
Registrant's products for their own account. The Registrant has not
granted exclusive area distribution rights with respect to any of its
products.
Production
The Registrant purchases durum and semolina flour from mills
in California and Minnesota in truck load quantities. The Registrant
purchases whole eggs and egg white mixtures from local egg producers.
The Registrant has not experienced any shortages or limited
availability for ingredients for its products; however, prices for
flour and eggs fluctuate based on weather, market variations, and other
factors beyond the Registrant's control. The California and Minnesota
mills currently supply 90% of flour purchases for the Registrant's
products. Spices, cheese and various other raw materials are purchased
locally in Southern California.
The Registrant mixes flour and eggs (whole or whites only)
into a moist dough mix which is then processed into specific
thicknesses in sheets. The sheets are then placed in machines which
form different pasta products, i.e., spaghetti, ravioli, linguine,
tortellini and fettuccine. Spinach, tomato paste, and other herb
ingredients are added to the basic pasta mix at different stages to
create flavored products. The Registrant cuts, pasteurizes, and
packages through an oxygen flushing process for its fresh or frozen
pasta.
Packaging
In its fresh or frozen pasta manufacturing process, the
Registrant uses a series of equipment, including dough mixers, pasta
sheeters, tortellini and ravioli machines, cutters, and pasteurizing
and packaging equipment. Sauces, which are marketed in separate
containers and combination packages, are precooked in large batches
pursuant to proprietary recipes. The Registrant packages its sauces in
7 oz., 8 oz., 15 oz., 21 oz., and bulk containers for sale, usually
with clear-wrap to reveal its freshness. Colorful logos are included on
the package, along with identifying and ingredient labels meeting all
USDA and Government standards along with cooking instructions. Low fat
and no cholesterol notations are clearly indicated on the Registrant's
products with those features. Since the Registrant's products are
usually maintained for retail sale in "deli" areas of supermarkets, the
Registrant seeks distinctive packaging for its products,
notwithstanding the slightly higher costs.
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Current Sales Activity
The Registrant's strategy is to continue to develop the market
for its Nona Morelli and Pasta Fresca brand name products on a
nationwide and regional basis, as well as to pursue additional
co-packing agreements and relationships. The Registrant's brand sales
represented 40% and 35% of food sales revenues for the years ended June
30, 1996 and 1995, respectively. The Registrant expects that its
co-packing agreements with other customers will continue to represent a
significant portion of its food business as the Registrant enters into
additional co-packing agreements, and that direct sales of its products
to stores will increase as a percentage of total sales.
(2) Domestic Gaming Activities
Until April 1995, Ba-Mak Gaming International Inc. ("BGI"), a
wholly-owned subsidiary of NuOasis Gaming was active and involved in
charitable gaming in Louisiana. BGI operated five charitable gaming
establishments in New Orleans at which 140 video bingo machines were
operating. BGI recognized as gaming revenues the gross funds deposited
in video bingo machines. BGI realized a gross profit, or "net win", as
represented by the difference between gross funds deposited into the
machines and payments to customers. BGI realized net operating profits
by way of the percentage of the net win after payments to the
charitable organizations, the location owner and the State of Louisiana
for gaming taxes. However, from inception through October 1994, BGI was
unable to generate any operating profits. Additionally, the Registrant
has suffered from negative cash flows since assuming control of BGI in
April 1994. On October 28, 1994, BGI filed for protection under Chapter
11 of the U.S. Bankruptcy Code in the Eastern District of Louisiana.
While under the protection of Chapter 11, BGI continued to operate as a
charitable bingo route operator in Louisiana as Debtor-in-Possession.
On April 20, 1995, upon motion from the United States Trustee,
an order converting the case to Chapter 7 was issued. The Chapter 7
trustee took possession of BGI's assets and is in the process of
liquidating such assets for the benefit of BGI's bankruptcy estate. As
such, all gaming operations at BGI ceased and, accordingly, BGI was
accounted for as a disposition of investment during fiscal 1995 which
resulted in (a) the write-off of $1,056,978 and $1,415,050 of total
assets and liabilities, respectively, and (b) a net loss on disposal of
investment in the amount of approximately $140,949. As of the date of
this Report, the Trustee's administration of the bankruptcy estate is
ongoing.
NuOasis Gaming currently has no gaming or other ongoing
business, and is presently evaluating business opportunities for
possible acquisition within the gaming industry. In particular, NuOasis
Gaming is currently evaluating the potential acquisition of a
development stage California company formed in 1992 to facilitate
public participation in group play in the California State Lottery and
the lotteries of other states, through the sale of a prepaid debit card
called the HIT- LOTTO value card (see Item 6, Managements Discussion
and Analysis - National Pools Corporation).
(3) International Gaming Activities
In September 1993, as part of the Registrant's new business
plan, it formed NuOasis International through which it hoped to extend
its proposed gaming operations internationally. The Registrant believes
that international leisure and entertainment opportunities offer much
greater potential, and have far less competition than domestic U.S.
gaming because of the "emerging market" status of many of the host
countries. The Registrant's goal is to capitalize on the expected
growth in tourism trade and the surge of entertainment spending
worldwide, and to take advantage of certain investment opportunities in
emerging markets which appear to be the greatest beneficiaries of this
expected growth. As a result of the Registrant's research into these
expected emerging leisure and entertainment markets during fiscal 1996,
it has been soliciting and evaluating prospects in certain markets in
North Africa, Asia, the Caribbean and the South Pacific where it
intends to focus the majority of its resources.
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North Africa
In October 1993, the Registrant acquired a 70% equity interest
in Cleopatra. In December 1995, the Registrant transferred a 42% equity
interest in Cleopatra along with other corporate assets, to acquire a
gaming interest in Macau (the "Gaming Interest") (as discussed below).
In December 1995, the remaining 28% interest in Cleopatra was
transferred to the Registrant's wholly-owned subsidiary, NuOasis
International.
Cleopatra is the lessee of a 200,000 square foot casino and
Las Vegas-style showroom facility (the "Cap Gammarth Casino") pursuant
to a Casino Lease Agreement and Operating Management Contract dated
October 8, 1993, with Societe Touristique Tunisie-Golfe ("Tunisie-
Golfe"). The Cap Gammarth Casino is presently under construction. In
conjunction with such casino, Tunisie-Golfe is also building a
five-star hotel, a health and sports center, a beach club, a 54-unit
shopping mall and 250 apartments, all located within walking distance
to the Cap Gammarth Casino. The location of the Cap Gammarth Casino is
approximately 10 miles northwest of Tunis, the capital of Tunisia.
In October 1994, Cleopatra entered into an agreement with
Societe Loisirs Club Hammamet ("Club Hammamet") to lease and operate
the sixty thousand (60,000) square foot casino and French-style cabaret
in Hammamet, Tunisia (the "Hammamet Casino"). The Hammamet Casino is
presently under construction on a build-to-suit basis for Cleopatra as
part of a new five-star hotel and villa resort (the "Hammamet Hotel").
Club Hammamet is a subsidiary of Occidental Hotels which, in turn, is a
subsidiary of General Mediterranean Holdings, Ltd. The Hammamet Hotel
is one of forty-five (45) hotels planned or currently under
construction in south Hammamet as part of a Tunisian
government-sponsored expansion of the Hammamet resort area. If
completed, these additional hotels will provide up to thirty-eight
thousand (38,000) additional beds for the Hammamet area. The Hammamet
Hotel facilities were completed and opened in September 1996. Both the
Hammamet Casino and Hotel facilities are situated within walking
distance of three operating hotels, two of which were also recently
completed, with approximately eighteen hundred (1,800) beds.
Subsequent to the close of fiscal 1996, NuOasis International
executed letters of intent and is negotiating definitive agreements
related to its international gaming and hospitalities activities. The
transactions represented by these agreements involve (a) the purchase
of a controlling interest in the corporate entity which owns the Cap
Gammarth Casino real property and improvements (b) the purchase of a
50% interest in the entity which is currently the lessor of the Le
Palace Hotel and surrounding commercial center and residential complex
(the "Cap Gammarth Resort"), (c) the formation of a new joint venture
with a publicly-held European hotel and food service company, (d) the
purchase of the Cap Gammarth Resort including the real estate and
improvements, and (e) the purchase of additional equity in Cleopatra.
The Registrant has an agreement in principle with the European hotel
operation pursuant to which the parties plan to form a joint venture.
In exchange for a 50% interest in the new joint venture, the European
hotel operator will provide the new joint venture with up to $13.5
million in working capital and NuOasis International will contribute or
cause to be transferred its interest in the entities which hold the
rights to manage the Le Palace Hotel, the Cap Gammarth Casino, the
Hammamet Casino and the Monastir Casino.
Closings have not occurred on any of the proposed transactions
and there is no guarantee that all or any of the proposed transactions
will be consummated. Additionally, failing to consummate the proposed
new joint venture with the European hotel operator, the new
acquisitions contemplated by NuOasis International, along with the
continued development and completion of the Cap Gammath Casino and the
Hammamet Casino, may require aggregate financing in excess of $20
million to complete, to which neither the Registrant nor any of its
subsidiaries currently have access.
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At the close of fiscal 1996, the Registrant held a 28% equity
interest in Cleopatra, Mr. Ng Man Sun ("Mr. Ng"), doing business as
Dragon Sight International Amusement (Macau) Company ("Dragon") held
42% of the equity interest in Cleopatra, and the remaining 30% is owned
by one unrelated party and two related parties: 10% by Fred Graves
Luke, Fred G.Luke's father, and a member of the Registrant's Advisory
Board, a Director of Cleopatra, and an Officer and Director of
Fantastic Foods International, Inc.; 10% by Gabriel Tabarani, President
and Director of Cleopatra; and 10% subscribed but not paid for by an
individual unrelated to the Registrant. Neither Cap Gammarth Casino nor
Hammamet Casino are operating as of the date of this Report.
Asia
On May 25, 1995, the Registrant purchased from Dragon, a 40%
net profits interest in the gaming operations conducted by Dragon at
two hotels in Macau (the "Gaming Interest"). The two casinos, the
Diamond Casino (Holiday Inn), Macau, and the Harbor Island Diamond
Casino (Hyatt Regency), Macau are operated by Dragon and have been in
operation since March 1991 and February 1994, respectively.
The two casinos exist pursuant to a sub-license to Dragon
under a master gaming permit granted by the government of Portugal to
Sociedade DeTurismo Diversocs De Macau ("STDM"). STDM is owned, in
part, by Mr. Stanley Ho. Dragon acquired its rights and interest in the
two casinos pursuant to an "arrangement" with STDM, pursuant to which,
Dragon equips and manages the casinos for which it is allowed to retain
a percentage of the "net win" equal to 12.5% of Macau and Hong Kong
resident customers and 37.5% of "foreign passport" customers. The
balance of the "net win" in both categories is paid to STDM. The 40%
net profits interest that Dragon sold and transferred to the Registrant
is based on Dragon's portion of the "net win." STDM is the lessee of
the leasehold interest in which each casino is situated and the annual
leasehold costs are paid by STDM out of its share of net winnings.
Dragon's costs are limited to the marketing, promotion and operation of
the casinos. The total floor area of the casinos is approximately
10,000 square feet. Gaming activities consist primarily of card games;
there are no slot machines in the two casinos.
The arrangement between Dragon and STDM is oral: there is no
written contract and, therefore, Dragon essentially conducts its
business at the will of STDM. Mr. Ng, the sole proprietor of Dragon,
reportedly has a good working relationship with STDM. Historically,
STDM has not terminated any arrangement with any of its sub-licensees.
STDM reportedly has no plans to open additional casinos in Macau prior
to the year 2001, when STDM's license expires.
On August 5, 1996, NuOasis International, holder of the Gaming
Interest, entered into an agreement with Mr. Ng to sell the Gaming
Interest for twenty million (20,000,000) shares of the Registrant's
common stock issued by the Registrant in the original purchase of the
Gaming Interest. On or about September 30, 1996, the subject shares
were tendered by Mr. Ng to a third party escrow agent pending the
closing of the purchase of replacement properties which NuOasis
International is currently negotiating to purchase ("the Replacement
Property").
At June 30, 1996, the Registrant recognized a write down of
the book value of the Gaming Interest to bring the value of the shares
held in escrow for the purchase of the Replacement Property to the
basis of the stock originally issued to Mr. Ng, which was $.50 a share
or $10 million in aggregate. Since the intended purchase of the
Replacement Property will be effective later in fiscal 1997, the book
value of the escrowed shares has been presented in a position similar
to treasury stock as of June 30, 1996.
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The Registrant earned $2,111,228 and $11,407,317 as gaming
revenue generated from the Gaming Interest for the 5-week period from
inception on May 25, 1995 to June 30,1995 and fiscal year ended June
30, 1996, respectively. Due to the sale of the Gaming Interest, these
revenues are not expected to recur in future years.
(4) Real Estate Activities
Effective December 31, 1995, the Registrant acquired from
Silver Faith Development Limited ("SFDL"), an affiliate of the
Registrant and Mr. Ng, an interest in three buildings currently under
construction located in a large master planned commercial and
residential real estate development located in Beijing, Peoples
Republic of China ("PRC") known as The Peony Garden project ("Peony
Garden"). The purchase price of the Registrant's interest in Peony
Garden was $21 million for which the Registrant issued an 8% Promissory
Note in the principal amount of $21 million (the "Peony Garden Note").
The Peony Garden Note was non recourse and fully collateralized by the
interest acquired, with the outstanding principal balance convertible
into the shares of the Registrant's common stock. In January 1996, the
Registrant made a prepayment of principal on the Peony Garden Note in
the amount of $9.6 million.
In April 1996, the Registrant requested a title opinion on
Peony Garden in conjunction with NuOasis International's efforts to
receive financing on the property. Upon receipt of the title opinion in
October 1996, the Registrant learned that under PRC law, real property
cannot be transferred until completion of the project. Since the
project was not completed at June 30, 1996, and the Peony Garden Note
was non recourse other than against the Registrant's interest in Peony
Garden, the Registrant has presented its investment in Peony Garden as
a beneficial ownership interest in the real estate development.
On August 8, 1996, the Registrant entered into an agreement
with The Hartcourt Companies, Inc. ("Hartcourt") to sell the
Registrant's entire interest in Peony Garden for $22 million,
consisting of $10 million of Hartcourt common stock and a $12 million
Convertible Promissory Note secured by the Peony Garden interest being
sold (the "Hartcourt Note"). The sale closed on October 8, 1996 and,
according to unaudited information received from Hartcourt, the
Registrant's investment in the Hartcourt stock represents an equity
interest of approximately 43%. Concurrent with the closing of the sale
of the Registrant's interest in Peony Garden, the Hartcourt Note was
assigned to SFDL in exchange for the Peony Garden Note (the "Note
Swap"). No profit was recognized on the Note Swap or the transaction
since the difference between the sales price and the Registrant's basis
in Peony Garden represents approximately the amount of interest on the
Note that would otherwise have been capitalized during the construction
of the Peony Garden project. At June 30, 1996, the beneficial ownership
interest in Peony Garden was valued at the lower of the Registrant's
equity in Hartcourt on or about the closing date or its net investment
in the Peony Garden interest. The Registrant's ultimate realization of
value from the investment in Hartcourt is dependent upon many factors,
such as changes in the equity value in Hartcourt, which itself is
dependent upon uncertainties surrounding Peony Garden, and upon the
Registrant's ability to dispose of its investment at its current basis.
The Registrant intends to exchange the Hartcourt equity investment for
other equity investments.
[NM\10-KSB:63096KSB]-45
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<PAGE>
(c) Raw Materials
The Registrant's domestic food manufacturing and distribution segment
requires raw materials which are readily available such as flour, tomatoes and
domestically-grown spices. The Registrant has not experienced any difficulty
obtaining any raw materials for its domestic food operations in the past and
does not anticipate any supply problems in the future.
The Registrant's international gaming and proposed real estate
acquisition and development activities are not manufacturing-based businesses
and therefore do not rely on raw materials.
(d) Patents, Trademarks and Licenses
Although the Registrant's formulas and recipes are not subject to
patent protection, the Registrant considers these proprietary and uses
confidentiality agreements as appropriate in an attempt to protect such formulas
and recipes. The Registrant has received a trademark for "Nona Morelli" from the
United States Patent and Trademark Office, which it uses on some of its
products.
The Registrant's proposed international gaming activities do not
require patents or trademarks, and the Registrant does not intend to rely on
patents or trademarks. The operations of the proposed gaming casinos will depend
on and be subject to gaming licenses and permits from their respective
jurisdictions. With respect to the proposed gaming operations of Cleopatra in
North Africa, the respective gaming licenses are to be issued jointly to
Cleopatra and the owner/operators of the hotel complexes, of which the proposed
casinos are a part. With respect to the Registrant's Gaming Interest in Macau,
which was sold subsequent to the close of fiscal 1996, neither Dragon nor the
Registrant relied on patents or trademarks. However, Dragon operated as a
sub-licensee under a master gaming permit granted by the government of Portugal
to STDM.
(e) Seasonality
None of the Registrant's industry segment activities is seasonal in
nature.
(f) Customer Dependence
For the year ended June 30, 1996, the Registrant had three major
customers, all distributors, each of which accounted for more than 10% of the
Registrant's sales with respect to its food manufacturing and distribution
segment. The Registrant's Tunisian gaming segment remains under development, and
its domestic gaming is nonoperational since BGI's liquidation in April 1995. The
Registrant's Macau Gaming Interest was dependent on gaming by the general public
in Macau.
(g) Backlog of Orders
The Registrant's food manufacturing and distribution subsidiary, at
June 30, 1996, had a backlog for orders of $31,733 as compared to $22,651 at
June 30, 1995. This reflects production on an as-ordered basis.
The Registrant's domestic gaming, international gaming and real estate
subsidiaries were not subject to the type of business activities which would
give rise to "orders."
(h) Government Contracts
None of the Registrant's industry segment activities were involved with
material government contracts in fiscal 1996 or 1995.
[NM\10-KSB:63096KSB]-45
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<PAGE>
(i) Competition
(1) Food Manufacturing and Distribution
Although the Registrant has no market data compiled on the
fresh pasta industry, management believes that Contadina, a division of
Carnation Foods, is the fresh pasta industry leader accounting for in
excess of 50%, nationally, of fresh pasta sales. However, in certain
states in which the Registrant operates, management believes Contadina
controls less than 50% of this market in the aggregate. Other major
retail competitors are Davis Lay under the trade name Mallard's, Pasta
Pasta, Trios, Pasta Perfecta, DiGiorno, Romance and Monterey Pasta
Company.
Competitive factors in the industry include product quality
and taste, freshness, healthfulness, brand name awareness among
consumers, advertising and promotion, supermarket shelf space, product
shelf life, package design, price and reputation among consumers.
Competition is severe in each area, and industry leaders, such as
Contadina, are extremely strong in most competitive areas.
Management believes the Registrant may be in a position to
establish a niche in the food manufacturing industry with its
co-packing agreements which are becoming a significant portion of its
business. The Registrant expects Contadina to continue to be a major
force due to its vast resources, name recognition, and good reputation.
Although management believes the Registrant can compete on the basis of
quality, price, and reliability of delivery, the marketing of food
products is subject to changeable consumer tastes and habits and thus,
there is no assurance the Registrant can maintain or improve its market
position.
(2) Domestic Gaming Activities
The Registrant, through NuOasis Gaming, competes with other
gaming companies for opportunities to acquire legal gaming sites in
emerging gaming jurisdictions, and opportunities to manage gaming
facilities. NuOasis expects many competitors to enter new jurisdictions
that authorize gaming, some of whom may have more personnel, and
greater financial and other resources than NuOasis Gaming or the
Registrant. Further expansion of legalized gaming could also
significantly and adversely affect the proposed gaming activities of
NuOasis Gaming. In particular, the expansion of casino gaming in or
near any geographic area that NuOasis Gaming attracts, or expects to
attract a significant number of customers, would have a material effect
on their business.
(3) International Gaming Activities
The Registrant, directly and through NuOasis International and
Cleopatra, competes with other gaming companies for opportunities to
manage casino gaming activities in emerging international gaming
jurisdictions. The Registrant expects many competitors to enter new
international jurisdictions that authorize gaming, some of whom may
have more personnel and greater financial and other resources than
NuOasis International and Cleopatra, or the Registrant. Further
expansion of international legalized gaming could also significantly
and adversely affect the proposed gaming activities of NuOasis
International and the Registrant. In particular, the expansion of
casino gaming in or near any geographic area where the Registrant,
NuOasis International, Cleopatra or any future international gaming
subsidiary of the Registrant is active, or in pursuit of a gaming
license or rights to manage casino gaming activities, may diminish or
otherwise detract from the activities of the Registrant or its
subsidiaries.
[NM\10-KSB:63096KSB]-45
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<PAGE>
(4) Real Estate Activities
The Registrant has no operating activities with respect to
real estate investments, acquisitions and development. As of the date
of this Report, NuOasis Properties does not hold any domestic real
estate assets; therefore, competition is insignificant. International
real estate related investments to date consist of a beneficial
ownership interest in Peony Garden, which was sold subsequent to the
close of fiscal 1996 and, therefore, competition as it relates to Peony
Garden is not applicable.
(j) Research and Development
As part of the Registrant's domestic food manufacturing
process, the Registrant enhances existing products and develops new products on
a continuous basis. The Registrant did not have any direct costs associated with
customer-sponsored research and development activities.
(k) Government Regulation
(1) Food Manufacturing and Distribution
The Registrant is regulated by the Los Angeles County Health
Department and the United States Food and Drug Administration. The
Registrant is subject to various regulations with respect to
cleanliness, maintenance of food production equipment, storage cooling
and cooking temperatures, food handling and storage, and is subject to
on-site inspections. The finding of a failure to comply with one or
more regulatory requirements could result in a variety of sanctions,
including fines and the withdrawal of the Registrant's products from
store shelves.
(2) Domestic Gaming Activities
At the present time, neither the Registrant nor NuOasis Gaming
has any domestic gaming activities. However, NuOasis Gaming is
currently evaluating proposals from third parties to reenter the
domestic gaming market. With respect to the Registrant's domestic
gaming activities, casino gaming in the United States is highly
regulated. Owners and operators of casinos must be licensed by the
various state gaming commissions and must provide detailed financial
and other reports. Additionally, some of the states which have just
recently legalized gaming, have experienced unexpected internal changes
and modification of the rules and regulations, all of which has served
to delay and impede gaming applications filed by prospective gaming
operators. Changes in laws and regulations may limit or otherwise
materially affect types of gaming that may be conducted in these new
jurisdictions. Any such changes might have an adverse effect on the
activities and proposed activities of NuOasis Gaming. To the extent
that the Registrant or NuOasis Gaming utilizes certain of their assets
to make investments in or otherwise re-enter the domestic gaming
industry, one or all companies may be required to submit applications
for gaming licenses, as most jurisdictions require any holder of more
than ten percent (10%) of the common stock of the operating entity to
be suitable.
(3) International Gaming Activities
Tunisia
Under Tunisian law, casino gaming is closely supervised and
monitored through the use of on-site government representatives and
strict published operating procedures. The process through which a
company obtains a license to conduct casino gaming in Tunisia is
similar to that of many of the various states in the U.S. which have
recently adopted legalized gaming statutes, involving background
checks, personal interviews and the discretionary right of the
government body overseeing gaming activities to deny or withdraw a
license to any applicant.
[NM\10-KSB:63096KSB]-45
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<PAGE>
The Tunisian government has approved Cleopatra and its
management for casino gaming licenses at the Cap Gammarth Casino and
Hammamet Casino.
Macau
The Gaming Interest in Macau is operated by Dragon, who is a
sub-licensee under a 40- year master gaming permit granted in 1961 by
the government of Portugal to STDM. Pursuant to this arrangement with
STDM, Dragon owns interests in seven casinos, two of which it operates.
The arrangement between STDM and Dragon is an oral agreement and the
master gaming permit granted to STDM will expire in the year 2001 if
not renewed or terminated in 1999 upon the return of Macau to the
Peoples Republic of China. Since the Gaming Interest was sold in August
1996, the Registrant is no longer affected by Portuguese government
regulations.
(4) Real Estate Activities
Since Peony Garden was sold in October 1996, the Registrant
believes that PRC government regulations will have little if any direct
effect on the Registrant in future fiscal years.
(l) Compliance With Environmental Laws
Compliance with federal, state and local provisions regulating the
discharge of materials into the environment or otherwise relating to the
protection of the environment has no material effect on the capital
expenditures, earnings and competitive position and operators of the Registrant.
(m) Employees
(1) Corporate Officers and Significant Subsidiaries Officers
Corporate officers of Nona and significant subsidiaries who
rendered services during fiscal 1996 pursuant to employment or
consulting agreements are as follows:
Name Office
---------------------------- ---------------------------------------
Fred G. Luke (Employee) Chief Executive Officer (Nona);
and President (NuOasis Gaming)
Steven H. Dong (Consultant) Chief Financial Officer
(Nona & NuOasis Gaming)
John D. Desbrow (Consultant) Corporate Secretary
(Nona & NuOasis Gaming)
Jon L. Lawver (Consultant) President (Fantastic Foods)
Albert Rapuano (Consultant) President (NuOasis International)
(2) Food Manufacturing and Distribution
Fantastic Foods, the food manufacturing and distribution
subsidiary, currently has 10 employees engaged in administrative
activities, 27 employees engaged in production and 2 employees engaged
in sales. The number of production employees varies depending upon
demand for product and the Registrant's production procedures. The
range for the two years ending June 30, 1996 was a low of 15 employees
and a high of 35 employees. Production employees are generally paid an
average of $7.93 per hour and the Registrant has not experienced
difficulty in obtaining sufficient labor. None of Fantastic Foods
employees are covered by a collective bargaining agreement, and it
believes it has very good employee relations.
[NM\10-KSB:63096KSB]-45
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<PAGE>
(3) Domestic Gaming Activities
The Registrant's subsidiary, NuOasis Gaming and BGI (through
April 20, 1995, the date BGI was converted into Chapter 7 liquidation)
employed 4 full-time employees and 10 part-time employees during fiscal
1995. All employees were located in Louisiana. Since BGI's bankruptcy
case was converted to a Chapter 7 proceeding, NuOasis Gaming ceased
employing personnel at BGI.
(4) International Gaming Activities
Tunisia
The Registrant's international gaming subsidiary, NuOasis
International, has no employees; Cleopatra had 2 employees as of June
30, 1996, as its proposed activities are still under development until
the opening of its proposed casinos in North Africa.
Macau
The Gaming Interest acquired by the Registrant consisted of a
40% net profits interest in two Macau casinos; the Registrant did not
acquire any rights to manage or otherwise participate in the daily
operations of such casinos and, accordingly, the Registrant has no
employees engaged in the operations of the two Macau casinos. The
Gaming Interest was sold in August 1996.
(5) Real Estate Activities
The Registrant's real estate acquisition and development
subsidiary, NuOasis Properties, has no employees, as there are no real
estate operations as of June 30, 1996.
ITEM 2. DESCRIPTION OF PROPERTY.
(a) Food Manufacturing and Distribution Facilities and Corporate
Headquarters
The Registrant owns a 26,000 square foot plant in Pueblo, Colorado. The
Registrant's Pueblo, Colorado facility was purchased in 1990 and includes 3.2
acres of land. The building was formerly used by a beverage distributor and
contains 11,000 square feet of refrigerated space and 5,000 square feet of
office space.
In fiscal 1993, the Registrant relocated its pasta manufacturing
activities to Southern California as part of the Pasta Fresca Company and
Italfin acquisitions. The Registrant currently leases its Pueblo facilities to
an ethnic food manufacturer under a month-to-month lease agreement calling for
the lessee to pay $4,000 per month in advance and satisfy certain maintenance
and other operating costs associated with the building. The Lessee has an option
to buy the building at an amount of $660,000.
Fantastic Foods leases approximately 7,000 and 10,000 square feet of
food manufacturing space in Arcadia and Irwindale, California, respectively. It
also owns two trucks for transportation of its products, various equipment for
the manufacture of pasta and sauces, five large refrigeration units, and four
large freezers for certain raw materials and finished products. Fantastic Foods
completed a remodeling of its Irwindale plant in late 1995, increasing its
production and storage capacity.
The Registrant currently subleases its principal offices at 2 Park
Plaza, Suite 470, Irvine, California, 92614, from an affiliate, NuVen Advisors,
Inc. ("NuVen Advisors," formerly New World Capital), on a month-to-month basis
as part of an Advisory and Management Agreement with NuVen Advisors. The
Registrant believes that these facilities and its southern California
manufacturing facilities are suitable and adequate for its needs.
[NM\10-KSB:63096KSB]-45
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<PAGE>
(b) Domestic Gaming Facilities
Prior to April 1995, the Registrant, through BGI, provided video bingo
gaming devices to five (5) charitable bingo halls in southern Louisiana. During
this time, BGI leased approximately 1,000 square feet of industrial/office space
in the New Orleans area from where it supervised the related gaming activities
and where it maintained the gaming devices. All of BGI's property, however, was
subject to its Chapter 7 bankruptcy proceedings and, as a result, BGI maintained
no facilities at June 30, 1996 (discussed in Item 6). At June 30, 1996, the
Registrant did not own any domestic gaming real property interests or personal
property, nor was its domestic gaming entity subject to lease obligations.
(c) International Gaming Facilities
Tunisia
At June 30, 1996, Cleopatra was a lessee under two casino lease and
management operating contracts related to the proposed Cap Gammarth Casino and
Hammamet Casino under construction in Tunisia. As of the date of this Report,
Cleopatra's activities are still in the development stage and, because
construction of the proposed casinos has not yet been completed, the Registrant
did not own any real or personal property nor was it subject to any leasehold or
other contingent obligations with respect to its investment in Cleopatra, other
than being the guarantor on the Cap Gammarth Casino lease and operating
agreement.
Macau
The Registrant acquired the Gaming Interest, representing a 40% net
profits interest in two Macau casinos; the Registrant did not acquire the
operations of the casinos or any fixed assets, and accordingly the Registrant
does not have any facilities or fixed assets recorded with respect to the two
Macau casinos.
The Gaming Interest was sold in August 1996.
(d) Real Estate Activities
The Registrant held no real estate operations at June 30, 1996, or as
of the date of this Report.
ITEM 3. LEGAL PROCEEDINGS.
The Registrant knows of no material pending legal proceedings, other
than ordinary routine litigation incidental to the Registrant's business except
as follows:
(a) Casino Management of America, Inc. vs. Mark Bachik, Bachik
Enterprises, Inc. and Bruce West; District Court, Dallas County,
Texas; Case No. 94-4479
In April 1993, FTF Management Company, Inc., a Colorado corporation
owned by Frank J. Morelli, II and Frank J. Morelli, III ("FTF") entered into an
agreement with Bachik Enterprises, Inc., a Texas corporation ("Bachik") to
purchase a 50% interest in the Star Casino, a gaming facility located in Cripple
Creek, Colorado. At the time of the Agreement, Mr. Morelli, II and Mr. Morelli,
III were current and former officers and directors of the Registrant. Under the
agreement, FTF and Bachik orally agreed to form a joint venture to own and
operate the Star Casino with each party acquiring a 50% interest in the venture.
Subsequent to the agreement, a $400,000 receivable due to the Registrant was
allegedly diverted by Mr. Morelli, II and Mr. Morelli, III to agents of Bachik
for the purpose of applying the funds to the acquisition of the Star Casino.
Concurrently with the diversion of the Registrant's funds, Mr. Morelli, II was
identified by local newspaper articles as the owner of the Registrant's interest
in the star Casino. Subsequently, based on documentation received by the
Registrant, the interest in the Star Casino attributable to the Registrant's
funds was held in the name of FTF. The Registrant subsequently assigned its
rights to the $400,000 receivable to Casino Management of America, Inc., ("CMA")
which is now a subsidiary of NuOasis Gaming but which at the time of the
assignment was a subsidiary of the Registrant. On May 9, 1994, Texas counsel for
CMA filed suit in Texas against Bachik and other defendants to recover the funds
improperly diverted to Bachik. Counsel for Mark Bachik, Bachik Enterprises,
Inc., and East Bennett Limited Liability Company has withdrawn from their
representation. Texas Counsel for CMA has negotiated a settlement with Bachik.
Counsel for CMA and the Registrant and Counsel for Defendant Bruce West have
entered into a letter agreement for settlement with Bruce West calling for the
deposit of $25,000 into an attorney's escrow until certain conditions are
satisfied. A jury trial which was set to commence in October 1996 has been taken
off calendar pending receipt of documentation to effect a dismissal of the
action.
[NM\10-KSB:63096KSB]-45
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<PAGE>
(b) Nona Morelli's II, Inc. and Casino Management of America, Inc. vs.
Star Casinos International, Inc., and Cripple Creek Properties, Inc.;
Teller County, Colorado District Court; Case No. 94-CV-144
In a further effort to recover the $400,000 receivable related to the
Star Casino, the Registrant and CMA in November 1994 filed a suit in the
District Court of Teller County, Colorado against Star Casinos International,
Inc. ("Star International") and Cripple Creek Properties, Inc. ("Cripple Creek")
seeking imposition of a resulting trust, constructive seal, constructive trust,
and an accounting of all money received and expended in connection with a gaming
facility known as the Star Casino. The Defendants answered and counterclaimed
for slander of title given that the Registrant filed a lis pendens against the
real property on which the Star Casino is located in Cripple Creek, Colorado.
The Registrant has asserted that the counterclaim for slander of title is
substantially frivolous and groundless due to existing Colorado case law. Star
International and Cripple Creek have filed a counterclaim naming Richard M.
Greene ("Greene") as a third party defendant alleging breach of contract,
promissory estoppel and fraud causes of action asserting that Greene received
$100,000 from them under an agreement between Greene, FTF and Star
International, that the funds would be paid to the Registrant. The funds were
never paid to the Registrant, resulting in the Registrant filing suit. After
taking the depositions of all of the principal players, everyone has
acknowledged that the original $400,000 used to purchase the Star Casino in 1993
came from the Registrant. On May 3, 1996 Star Casinos International, Inc., (the
"debtor") filed a bankruptcy petition under chapter 11 of the Bankruptcy Code.
The schedules filed with the bankruptcy court do not list the Casino real
property as an asset of the bankruptcy estate. Prior to October 9, 1996, the
casino real property was held by Cripple Creek, one of the defendants and a
subsidiary of the debtor, the stock of which is listed as one of the debtor's
assets. In July 1996, the first trust deed holder on the subject real property
instituted a quasi-judicial foreclosure proceeding in Teller County, Colorado
District Court. A foreclosure sale occurred on October 9, 1996. The bid price by
the foreclosing party was $782,320. Since the first trust deed holder
foreclosed, the ability of the defendants to establish any damages as a result
of the filing of the lis pendens has been substantially impaired. Additionally,
under Colorado law subject to redemption rights, the foreclosure sale
effectively eliminates all junior liens including the Registrant's lis pendens.
A trial date which was set for the week of November 4, 1996 has been vacated and
the suit has been indefinitely stayed pending resolution of the bankruptcy case.
Another creditor of the debtor unrelated to the Registrant has filed a motion to
dismiss the Chapter 11 bankruptcy and that motion is currently pending. The
Registrant has filed a Proof of Claim in the Bankruptcy proceeding for the
$400,000 plus accrued interest.
(c) Chuck Arnold vs. Nona Morelli's II, Inc., Casino Management of America
and MDM Gaming Partners, L.P.; Denver, Colorado District Court; Case
No. 95-CV-104
In January 1995, Charles Arnold ("Arnold"), a consultant to the
Registrant's prior management, initiated a lawsuit against the Registrant, CMA
and MDM Gaming Partners, L.P. ("MDM"), alleging that the defendants have denied
him a 1% equitable interest in MDM, which was allegedly verbally promised to
Arnold by Frank J. Morelli, II and Frank J. Morelli, III for alleged
professional services rendered to MDM. Arnold is alleging damages in an amount
of $90,000 in connection with this claim. The Registrant and the other
defendants have filed a third-party complaint against FTF, Theodore E. DeTello,
Frank J. Morelli, II and Frank J. Morelli, III, seeking full indemnification
from them for any damages to which Arnold may be entitled in accordance with a
certain Termination Agreement dated December 17, 1993 between the parties.
Counsel for the Morelli's has recently indicated that the Morelli's would be
taking the Fifth Amendment against testifying in connection with this lawsuit.
Since Arnold may not have witnesses to prove the alleged existence of an oral
promise, the likelihood of any recovery against the Registrant, CMA or MDM
appears to be remote. Counsel for the parties have stipulated to binding
arbitration to be held sometime in 1997.
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(d) Ruben Kitay et al. vs. Nona Morelli's II, Inc. et al.; United States
District Court for the Central District of California; Case No.
95-4375 RMT (SHx)
On October 10, 1995, a Second Amended Complaint was filed in the U.S.
District Court for the Central District of California which named NuOasis
Gaming, Fred G. Luke, John D. Desbrow, Kenneth R. O'Neal, O'Neal & White, P.C.,
a Texas professional corporation, New World Capital, Inc., Rocci Howe,
Euro-Belge (NA) N.V., Structure America, Inc., International Banking Corporation
Caribbean (IBCC), and the Luke Family Trust as defendants in an alleged
shareholder derivative action (the "Derivative Action") filed on behalf of
certain shareholders of NuOasis Gaming. The Derivative Action arose from a
certain Stock Purchase and Business Combination Agreement, pursuant to which
Nona Morelli's II, Inc. acquired voting control of E.N. Phillips Company, Inc.
(now NuOasis Gaming, Inc.) and the events surrounding the bankruptcy of Ba-Mak
Gaming International, Inc. The Plaintiffs sought damages according to proof,
interest, rescission, attorneys' fees and exemplary damages. Outside counsel for
NuOasis Gaming in the Derivative Action, and the management of both NuOasis
Gaming and Nona believe, among other things, that the Plaintiffs do not have
standing to file such litigation, have failed to state a proper claim, and do
not qualify as representatives in a shareholder action. In response to NuOasis
Gaming's filing a Motion to Dismiss the Derivative Action, the Action was
dismissed without prejudice pursuant to stipulation.
(e) Gustavo Farias vs. Nona Morelli's Inc. et al; United States District
Court for the Central District of California; Case No. CV-96-2617 RMT
(SHx)
A Second Amended Complaint entitled Ruben Kitay et al vs. Nona
Morelli's II, Inc., et al; United States District Court for the Central District
of California: Case No. 95-4375 RMT(SHx), filed on October 10, 1995, in the U.S.
District Court for the Central District of California and subsequently dismissed
pursuant to stipulation, was refiled by the Plaintiffs on April 12, 1996, in a
complaint entitled Gustavo Farias, et al v. Nona Morelli's II Inc., et al. The
new complaint named the Registrant, its officers, the Registrant's accounting
firm and other third parties as defendants in an alleged shareholder derivative
action (the "Refiled Action") refiled on behalf of certain shareholders of
NuOasis Gaming. The Refiled Action alleged securities fraud and RICO violations
in connection with a certain Stock Purchase and Business Combination Agreement
pursuant to which the Registrant acquired voting control of ENP (now NuOasis
Gaming), and the events surrounding the bankruptcy of BGI. The plaintiffs seek
damages in an amount not yet ascertained according to proof, interest,
rescission, imposition of a constructive trust, diminution of share value for
the individual plaintiffs, attorneys' fees and exemplary damages. Outside
counsel for the Registrant in the Refiled Action, and the management of both
NuOasis Gaming and the Registrant believe among other things, that the action
was initiated by Mike Savage, a former consultant of NuOasis Gaming, and persons
affiliated with him, as a part of an attempt to take control of NuOasis Gaming;
that the Plaintiffs do not have standing to file such litigation; that the
Plaintiffs have no competent and credible evidence to support their allegations;
that they have failed to state a proper claim; and that they do not qualify as
proper representatives in a shareholder action. After the filing of the
Registrant's Motion to Dismiss in the original action, the original action was
voluntarily dismissed by the Plaintiffs. The Registrant has filed a Motion to
Dismiss the Refiled Action. As of the date of this Report, all but three of the
Plaintiffs have dropped out of the litigation. In response to the Registrant's
Motion to Dismiss, the remaining Plaintiffs have voluntarily dismissed most of
the other Defendants and have dismissed the RICO claims. The Registrant's
accounting firm and chief financial officer have been dismissed as Defendants.
The Motion to Dismiss the remaining claims is currently pending.
[NM\10-KSB:63096KSB]-45
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(f) Louis Siegel vs. Nona Morelli's II, Inc.; Case No. 703222, Superior
Court of California for the County of San Diego.
In June 1993, prior management of the Registrant issued 450,000
pre-reverse split shares of its common stock to Louis Siegel ("Siegel"),
allegedly in consideration for food conveyor equipment. However, new management
found the apparatus stored in the parking lot at the Pueblo, Colorado plant and
discovered that the equipment was nothing more than scrap metal. In September
1994, when Mr. Siegel failed to provide an appraisal for the apparatus after a
demand for the same from the Registrant's Chief Executive Officer, the
Registrant's Board of Directors canceled the shares, finding that no
consideration had been received for the issuance of the shares. In July 1995,
Siegel requested reinstatement of the shares. The Registrant refused. No further
developments occurred during fiscal year 1996. However, on September 6, 1996,
the Registrant was served with a Complaint filed by Siegel against the
Registrant in San Diego Superior Court entitled Louis Siegel vs. Nona Morelli's
II, Inc. Case No. 703222 seeking compensatory damages in excess of $150,000,
interest, punitive damages, costs of suit and attorney's fees. Counsel for the
Registrant and Siegel have stipulated to a transfer of the action to the
Superior Court for the County of Orange and the Superior Court of Orange County
assigned Case No. 772045 to the complaint. The Registrant intends to vigorously
defend the Complaint and is in the process of filing a Demurrer and Motion to
Strike the Complaint.
(g) Ba-Mak Gaming International Inc., Chapter 11 Bankruptcy, Eastern
District of Louisiana, Case No. 94-1366
On October 28, 1994, Ba-Mak Gaming International, Inc. ("BGI") filed a
Chapter 11 Petition with the United States District Court (Bankruptcy Division)
for the Eastern District of Louisiana, Bankruptcy Case #94-13661. On April 20,
1995, the Bankruptcy Court granted the motion of the United States Trustee to
convert the case to a proceeding under Chapter 7. A Trustee was appointed to
liquidate the bankruptcy estate of BGI, and the liquidation of its assets has
been occurring since July 1995. The Registrant's remaining obligation in
connection with BGI is a claim, in the approximate amount of $47,000, against
NuOasis Gaming for legal fees incurred during the bankruptcy if the bankruptcy
estate does not pay such legal fees in full. The Trustee in the bankruptcy
estate has been ordered to pay such fees. As of the date of this Report, the
Trustee has not yet closed the bankruptcy estate; however, due to the claims of
other creditors, the Registrant does not expect to recover any amount on the
Proof of Claim it has filed for funds lent or advanced to BGI.
(h) Investigation
The Securities and Exchange Commission ("SEC") has been conducting an
investigation into certain transactions in the Registrant's shares which appear
to have occurred under the stewardship of former management. Outside counsel for
the Registrant has been informed by the SEC's staff that they do not have any
intention of recommending an enforcement action against any of the present
management of the Registrant. It is not known whether the Registrant will ever
be named in an enforcement action for misconduct engaged in by prior management.
The investigation appears to focus on the issuance of shares to consultants in
1992 and 1993 by prior management and the validity of certain Consulting
Agreements executed by the Registrant's former President. Present management and
the SEC have reviewed the transactions in question and both agree that the
Registrant appears to be entitled to the cancellation or return of shares issued
by the Registrant to consultants in situations in which the Registrant could not
obtain evidence of these consultants rendering consideration to the Registrant.
The Registrant has cooperated fully with the SEC in this investigation. After
consultation with counsel, present management believes that, ultimately, any
action brought by the SEC will not have any material adverse effect on the
Registrant's accompanying consolidated financial statements. In the opinion of
outside counsel, it is unlikely that any enforcement action would seek monetary
consideration from the Registrant, either in the form of disgorgement or
penalties.
[NM\10-KSB:63096KSB]-45
17
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
None.
[NM\10-KSB:63096KSB]-45
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<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
(a) Market Information
Through August 16, 1995, the Registrant's common stock was traded on
the NASDAQ Small CapSM System under the symbol "NONA." Subsequent to August 16,
1995, the Registrant's shares have been traded on the Electronic Bulletin Board
under the Symbol "NONA". The range of high and low "bid" quotations for the
Registrant's common stock for the last two fiscal years as reported by NASDAQ or
OTC Bulletin Board are provided below. These over-the-counter market quotations
reflect inter-dealer prices without retail markup, markdown or commissions and
may not necessarily represent actual transactions.
Bid Price of Common Stock
------------------------------
Fiscal 1996 High Low
---------------------- ----- -----
Quarter ended 06/30/96 $2.28 $1.03
Quarter ended 03/31/96 $1.81 $ .78
Quarter ended 12/31/95 $2.25 $ .75
Quarter ended 09/30/95 $2.78 $1.46
Fiscal 1995 High Low
---------------------- ----- -----
Quarter ended 06/30/95 $2.78 $ .41
Quarter ended 03/31/95 $ .81
Quarter ended 12/31/94 $1.25 $ .31
Quarter ended 09/30/94 $3.00 $ .94
The total number of shares authorized is 50,000,000. There were no
stock splits during fiscal 1995 or 1996.
(b) Holders
The approximate number of holders of record of each class of equity
securities of the Registrant as of June 30, 1996, was as follows:
Title of Class Number of Record Holders
- ---------------------------- ------------------------
Common Stock, $.01 par value 2,015
Series D Preferred Stock,
$.01 par value 1
This does not include an unknown number of beneficial holders of the
Registrant's common stock whose shares are registered in "street name."
[NM\10-KSB:63096KSB]-45
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<PAGE>
(c) Dividends
The Registrant has paid no cash dividends with respect to its common
stock since its inception. However, during fiscal 1995, the Registrant declared
and paid a property dividend of approximately 1.5 million shares of common stock
of NuOasis Gaming. No cash or property dividends were paid or declared during
fiscal 1996. As of the date of this Report, the Board of Directors of the
Registrant have not approved a dividend distribution policy. There are no
contractual restrictions on the Registrant's present or future ability to pay
dividends.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(a) Significant Events During the Year Ended June 30, 1996.
Purchase and Subsequent Sale of Peony Garden
Effective December 31, 1995, the Registrant acquired from Silver Faith
Development Limited ("SFDL"), an affiliate of the Registrant and Mr. Ng, an
interest in three buildings currently under construction located in a large
master planned commercial and residential real estate development located in
Beijing, Peoples Republic of China ("PRC") known as The Peony Garden project
("Peony Garden"). The purchase price of the Registrant's interest in Peony
Garden was $21 million for which the Registrant issued an 8% Promissory Note in
the principal amount of $21 million (the "Peony Garden Note"). The Peony Garden
Note was non recourse and fully collateralized by the interest acquired, with
the outstanding principal balance convertible into the shares of the
Registrant's common stock. In January 1996, the Registrant made a prepayment of
principal on the Peony Garden Note in the amount of $9.6 million.
In April 1996, the Registrant requested a title opinion on Peony
Garden in conjunction with NuOasis International's efforts to receive financing
on the property. Upon receipt of the title opinion in October 1996, the
Registrant learned that under PRC law, real property cannot be transferred until
completion of the project. Since the project was not completed at June 30, 1996,
and the Peony Garden Note was non recourse other than against the Registrant's
interest in Peony Garden, the Registrant has presented its investment in Peony
Garden as a beneficial ownership interest in the real estate development.
Following the close of fiscal 1996, on August 8, 1996, the Registrant
entered into an agreement with The Hartcourt Companies, Inc. ("Hartcourt") to
sell the Registrant's entire interest in Peony Garden for $22 million,
consisting of $10 million of Hartcourt common stock and a $12 million
Convertible Promissory Note secured by the Peony Garden interest being sold (the
"Hartcourt Note"). The sale closed on October 8, 1996 and, according to
unaudited information received from Hartcourt, the Registrant's investment in
the Hartcourt stock represents an equity interest of approximately 43%.
Concurrent with the closing of the sale of the Registrant's interest in Peony
Garden, the Hartcourt Note was assigned to SFDL in exchange for the Peony Garden
Note (the "Note Swap"). No profit was recognized on the Note Swap or the
transaction since the difference between the sales price and the Registrant's
basis in Peony Garden represents approximately the amount of interest on the
Peony Garden Note that would otherwise have been capitalized during the
construction of the Peony Garden project. At June 30, 1996, the beneficial
ownership interest in Peony Garden of $9.6 million was reduced to the value of
the Registrant's equity in Hartcourt on or about the closing date of
approximately $7 million resulting in a $2.6 million write down. The
Registrant's ultimate realization of value from the investment in Hartcourt is
dependent upon many factors, such as changes in the equity value in Hartcourt,
which itself is dependent upon uncertainties surrounding Peony Garden, and upon
the Registrant's ability to dispose of its investment at its current basis. The
Registrant intends to exchange the Hartcourt equity investment for other equity
investments.
[NM\10-KSB:63096KSB]-45
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<PAGE>
(b) Significant Subsequent Events
Gaming Interest
On August 5, 1996, NuOasis International, holder of the Gaming
Interest, entered into an agreement with Mr. Ng to sell the Gaming Interest for
twenty million (20,000,000) shares of the Registrant's common stock issued by
the Registrant in the original purchase of the Gaming Interest. On or about
September 30, 1996, the subject shares were tendered by Mr. Ng to a third party
escrow agent pending the closing of the purchase of replacement properties which
NuOasis International is currently negotiating to purchase ("the Replacement
Property").
At June 30, 1996, the Registrant recognized a $6.6 million write down
of the book value of the Gaming Interest to bring the value of the shares held
in escrow for the purchase of the Replacement Property to the basis of the stock
originally issued to Mr. Ng, which was $.50 a share or $10 million in aggregate.
Since the intended purchase of the Replacement Property will be effective later
in fiscal 1997, the book value of the escrowed shares has been presented in a
position similar to treasury stock as of June 30, 1996 .
The Registrant earned $2,111,228 and $11,407,317 as gaming revenue
generated from the Gaming Interest for the 5-week period from inception on May
25, 1995 to June 30,1995 and fiscal year ended June 30, 1996, respectively. Due
to the sale of the Gaming Interest subsequent to the closing of fiscal 1996,
these revenues are not expected to recur in future years.
The gaming revenues for the six months ended June 30, 1996 were
classified as Due From Affiliate as of June 30, 1996 in the amount of
approximately $3.9 million and were subsequently collected. $3.2 million of the
$3.9 million generated from the Gaming Interest was used by the Registrant as
full payment of the principal and accrued interest on the $3 million promissory
note issued as part of the original purchase of the Gaming Interest on May 25,
1995.
Peony Garden
As discussed above, the sale of the Peony Garden interest occurred on
August 8, 1996 and closed on October 8, 1996.
Cleopatra
Subsequent to the close of fiscal 1996, NuOasis International executed
letters of intent and was negotiating definitive agreements to acquire
Replacement Properties related to its international gaming and hospitality
activities.
In July 1996, Cleopatra signed two letters of intent with a company
owning a hotel and casino project in Monastir, Tunisia, pursuant to which
Cleopatra (or its designee, Cleopatra World), would lease the casino and through
NuOasis International manage the hotel (to be re-named "Cleopatra Palace Resort
- - Monastir"), and provide Las Vegas casino gaming management for the casino (the
"Monastir Casino").
Also in July 1996, the Registrant entered into negotiations with the
owners of a newly built hotel and casino facility in the southern Caribbean
area, to form a joint venture between NuOasis International and the owners for
the purpose of completing the construction and managing the operations of the
subject complex (to be re-named "NuOasis Resort & Casino"). Negotiations are
still continuing, but there have been no definitive agreements executed. If
present negotiations result in the acquisition of that facility, capital
expenditures for remodeling and construction of that facility are estimated to
be in excess of $15 million, which neither the Registrant nor any of its
subsidiaries have received a commitment for financing at this time.
[NM\10-KSB:63096KSB]-45
21
<PAGE>
In September 1996, the Registrant entered into an agreement in
principle with a European hotel management company pursuant to which the parties
plan to form a joint venture. In exchange for a 50% interest in the new joint
venture, the European hotel operator will provide the new joint venture with up
to $13.5 million in working capital, and the Registrant, through NuOasis
International, will contribute or cause to be transferred its interest in the
entities which hold the rights to manage the Le Palace Hotel, the Cap Gammarth
Casino, the Hammamet Casino and the Monastir Casino.
In October 1996, the Registrant and Cleopatra entered into a
reorganization agreement with Cleopatra which will result in NuOasis
International issuing $13.5 million in secured promissory notes in consideration
for 70% of the outstanding stock of three Cleopatra subsidiaries, including
Cleopatra Cap Gammarth Casino, Cleopatra Hammamet Casino and Cleopatra Monastir.
Additionally, the Registrant and Cleopatra agreed to increase NuOasis
International's equity interest in Cleopatra from 28% to 33%.
Also, in October 1996, NuOasis International entered into negotiations
to purchase a controlling interest in the corporate entity which owns the Cap
Gammarth Casino real property and improvements. Additionally, following the
restructuring agreement with Cleopatra, NuOasis International executed an
agreement to purchase a 50% interest in Cleopatra World, Inc., a British Virgin
Island corporation ("Cleopatra World"), the lessor of the Le Palace Hotel and
the commercial center, residential complex, real estate and improvements
surrounding the Cap Gammarth Casino (the "Cap Gammarth Resort").
National Pools Corporation
On June 13, 1996, Nona entered into an Option Agreement with Joseph
Monterosso, President of National Pools Corporation ("NPC"), an individual
previously unrelated to NuOasis Gaming or Nona, and granted such individual an
option to purchase the 250,000 Series B Preferred Shares of NuOasis Gaming owned
by Nona at a purchase price of $13.00 per share, or a total of $3,250,000, with
a minimum purchase of 110,000 shares.
The exercise of the option is conditioned upon shareholder approval of
a proposal to increase the authorized number of shares of common stock of
NuOasis Gaming by at least twenty million (20,000,000) shares. The option is
assignable and shall expire 90 days after the next Annual Meeting of
Shareholders of NuOasis Gaming.
On November 21, 1996, NuOasis Gaming's board of directors approved the
acquisition of NPC. The acquisition is expected to be financed by the issuance
of securities of NuOasis Gaming, however, a definitive agreement has not been
signed. Moreover, the acquisition is contingent upon the occurrence of certain
events including but not limited to: (a) NPC shareholder approval; (b) exercise
of that certain option agreement between Monterosso and Nona; (c) Monterosso
securing financing that would allow the exercise of the option by Monterosso
and/or one or more qualified private investors; (d) reaching an agreement to
sell CMA; and (e) shareholder approval of a proposal to increase the number of
authorized shares of common stock of NuOasis Gaming by at least 20,000,000
shares. There are no assurances that such transaction will occur and, because of
on-going negotiations and uncertainties surrounding the realization of such
transaction, NuOasis Gaming cannot determine the ultimate effect on NuOasis
Gaming's financial position at this time.
(c) Going Concern
The Registrant has experienced recurring net losses, has limited
liquid resources, negative working capital and one of its operating subsidiaries
was liquidated during fiscal year 1995. Management's intent is to continue
searching for additional sources of capital and, in the case of NuOasis Gaming,
new operating opportunities. In the interim, the Registrant intends to continue
operating with minimal overhead and key administrative functions provided by
consultants who are compensated in the form of the Registrant's common stock. It
is estimated, based upon its historical operating expenses and current
obligations, that the Registrant may need to utilize its common stock for future
financial support to finance its needs during fiscal year 1997. Accordingly, the
accompanying consolidated financial statements have been presented under the
assumption the Registrant will continue as a going concern.
[NM\10-KSB:63096KSB]-45
22
<PAGE>
(d) Liquidity and Capital Resources
A comparison of working capital, cash and cash equivalents and current
ratios for the past two fiscal years are reflected in the following table:
June 30,
--------------------------------------------
1996 1995
------------------ -------------------
Working Capital (Deficit) $ (1,923,964) $ (830,069)
Cash and Cash Equivalents $ 50,436 $ 628,870
Current Ratio .68 .8
The most significant effects on working capital and its components
during fiscal 1996 were (i) earned revenue of approximately $11.4 million from
the Gaming Interest; (ii) the pre-payment of $9.6 million in principal on the
Registrant's note issued to acquire the interest in Peony Garden; (iii) an
increase in current liabilities of approximately $2 million; and; (iv) a
decrease in cash of $578,434.
The Registrant's current plan for growth is to increase its working
capital by converting the shares of Hartcourt received from the sale of Peony
Garden into additional equity investments and, in turn, use these additional
equity investments along with external debt and equity financing, if any can be
arranged, to finance the activities of its subsidiaries, and for future
acquisitions in its three business segments. Additionally, the Registrant
anticipates receiving a distribution of net operating revenues from the
Cleopatra casinos, which at the present time, subject to obtaining financing,
are scheduled to be completed during the next calendar year. However, there are
no assurances that the subject casinos will open during the next calendar year
since the financing required by Cleopatra to complete and open its properties
has not yet been committed. As of the date of this Report, the Registrant's sole
operations are derived from its food manufacturing subsidiary and, therefore,
there is considerable risk that the Registrant will not have adequate working
capital to sustain its current status, and that the Registrant or its
subsidiaries may not be able to secure the required debt or equity financing to
complete their proposed projects during the next calendar year, in which case
the Registrant or its subsidiaries may be forced to sell the projects or
contribute them to a third party on terms which would preclude the Registrant
from realizing significant future benefit, or any benefit at all from the
projects. The Registrant may need to issue additional shares of its common stock
to pay for services incurred, to finance the operations of its subsidiaries, and
to continue to sustain itself.
(e) Capital Expenditures
General
The Registrant has no commitments for material capital expenditures,
however, to date neither the Registrant nor its subsidiaries have been able to
secure adequate third party financing commitments to complete its various
projects.
Capital Requirements of Cleopatra
At June 30, 1996, Cleopatra has approximately $3,500,000 deposited
with the builders of the Cap Gammarth Casino and the Hammamet Casino. Cleopatra
has approximately $2,000,000 remaining to be paid, as security deposits and
advance rent, before it can take possession of the two casinos (see Note 12 of
the footnotes to the accompanying financial statements included herein at Item
7). Construction on the Cap Gammarth Casino and Hammamet Casino is near
completion. In addition, Cleopatra estimates remaining expenditures and working
capital requirements, including security deposits and advance rental payments,
related to equipping and opening the two casinos to be approximately $15 million
in aggregate.
[NM\10-KSB:63096KSB]-45
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<PAGE>
To finance the expected $15 million in remaining expenditures on the
Cap Gammarth Casino and the Hammamet Casino, the Registrant is negotiating a
joint venture between NuOasis International and a European hotel management
company whereby the European hotel management company will contribute up to
$13.5 million in exchange for a 50% interest in the joint venture (see Note 13
of the footnotes to the accompanying financial statements included herein at
Item 7). Alternatively, subject to providing satisfactory collateral, the
Registrant has arranged for a credit facility with Banque Francaise de L'Orient
(the "Bank") which Cleopatra may utilize to borrow up to $25 million.
Through June 30, 1996 the Registrant and its subsidiaries have, with
few exceptions, financed all operations with internally generated funds and the
Registrant's common stock. Third party debt and equity financing has been
pursued, both domestically and internationally, without success. And, while the
Registrant and its subsidiaries have been able to meet their financial
commitments through the close of fiscal 1996, if for any reason, the proposed
joint venture is not formed, or if Cleopatra is unable to borrow from the Bank,
or if Cleopatra or NuOasis International are unable to otherwise meet their
commitments under the various agreements to provide the furniture, fixtures,
equipment and working capital for the proposed casinos once construction is
completed, the Registrant may be required to intercede and provide the requisite
financing and working capital, or be forced to sell all or a portion of their
respective interest, or lose their respective rights to the projects and
properties entirely.
(f) Cash Flows
Cash provided by operating activities was $8,861,699 for the year ended
June 30, 1996 as compared to $560,435 in cash used by operating activities for
the comparable period last year. The increase is primarily attributable to the
receipt of $9.6 million generated from the Gaming Interest. Although revenues
were accrued, there was no receipt of cash flow from the Gaming Interest during
the same period last year.
Cash used in investing activities was $9,666,393 as compared to
$114,791 in cash provided by investing activities for the comparable period last
year. The increase is primarily attributable to the $9.6 million principal
payment made to acquire the Registrant's beneficial ownership interest in Peony
Garden as discussed above.
Cash provided by financing activities was $226,260 for the year ended
June 30, 1996 as compared to $122,177 in cash used by financing activities for
the comparable period last year. The increase is primarily attributable to a
$350,000 loan obtained by Fantastic Foods for the repayment of existing debt,
improvement of plant and equipment and for general working capital purposes.
(g) Results of Operations
Year Ended June 30, 1996 Compared to Year Ended June 30, 1995
The Registrant's total food sales for the year ended June 30, 1996 were
$1,251,174 as compared to $1,555,119, for the year ended June 30, 1995,
resulting in a decrease of $303,945 or 20%. The decrease is primarily
attributable to a combination of a $633,026 decrease in co-packing sales and a
$345,217 increase in fresh pasta sales.
The Registrant's total cost of food sales for the year ended June 30,
1996 were $838,453 as compared to $938,848 for the year ended June 30, 1995,
resulting in a decrease of $100,395 or 11%, which is primarily attributable to
the lower food sales discussed above. Additionally, continued efforts to
increase operating efficiencies have not compensated for the higher absorption
of overhead on lower sales, and the Registrant's continued change in emphasis
from the sale of its own brand label products to sales through private labeling
arrangements has not yet had a positive effect on gross profit margin resulting
in a decrease in gross profit margin to 33% for the year ended June 30, 1996
from 40% for the year ended June 30, 1995.
[NM\10-KSB:63096KSB]-45
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<PAGE>
The Registrant's total gaming revenues for the year ended June 30, 1996
were $11,407,317 as compared to $3,292,273 for the year ended June 30, 1995,
resulting in an increase of $8,115,044 or 247%. The increase is primarily
attributable to the timing of the acquisition of the Gaming Interest, which
contributed a full year of revenue as compared to last fiscal year which
included revenues from inception on May 25, 1995, through June 30, 1995. Since
the Gaming Interest was sold after year end, these revenues will not exist in
the future.
Since March 31, 1994, the Registrant has reported, on a consolidated
basis, the revenues and net assets of NuOasis Gaming. The Registrant's cost of
gaming revenue was $887,472 for the year ended June 30, 1995, as compared to $0
for the year ended June 30, 1996. Since cost of gaming revenue of $887,472 was
solely from the operations of BGI, the decrease is attributable to the cessation
of BGI's operations in April 1995 due to BGI's Chapter 7 bankruptcy proceedings.
The Gaming Interest acquired in May 1995 was an acquisition of a forty
percent (40%) net operating profits interest in the operations of two Macau
casinos and, accordingly, had no effect on the total cost of gaming revenue.
Amortization expense of $4,268,544 contributed to the increase in the total
depreciation and amortization expense of $4,989,064 during fiscal 1996.
The Registrant's total legal and professional fees and general and
administrative expenses were $3,475,422 for fiscal 1996, as compared to
$3,432,530 for fiscal 1995, resulting in an increase of $42,892 or 1%. The
increase is primarily attributable to the combination of a $380,000 increase in
the Registrant's legal and professional fees and a $337,000 decrease in the
Registrant's general and administrative expenses during fiscal 1996 from fiscal
1995.
The Registrant incurred a one time expense in connection with the sale
of the Gaming Interest on August 8, 1996. As discussed above, because the sale
of the Gaming Interest was structured to be effective on July 1, 1996, the
Registrant recognized a write down of approximately $6.6 million to bring down
the book value of the Gaming Interest to the basis of the stock originally
issued to Mr. Ng Man Sun which was $.50 per share or $10 million in aggregate.
The Registrant incurred a one time valuation expense in connection with
the sale of Peony Garden discussed above. Since the value of the Registrant's
equity in Hartcourt on or about the closing date was approximately $7 million,
which is lower than the Registrant's net investment in the Peony Garden interest
of $9.6 million, the Registrant recognized a write down for the difference in
the amount of approximately $2.6 million.
During fiscal 1996, the Registrant remodeled and improved its food
processing equipment in its California locations and leased its Colorado
facility held for sale. In connection therewith, the Company re-evaluated the
use and value of its older equipment and wrote off certain impaired equipment
with a net book value of approximately $1 million which is included in Other
Valuation Expense.
During fiscal year 1996, the Registrant incurred expenses on behalf of
Cleopatra amounting to $955,439 which is included as a stockholders' receivable
at June 30, 1996, net of an allowance for possible loss of $766,180 which is
included in Other Valuation Expense.
The Registrant's total operating loss for fiscal 1996 was $7,475,285
as compared to an operating loss of $872,733 for fiscal 1995, resulting in an
operating loss increase of $6,602,552. The increase is attributable to the one
time valuation expenses of approximately $ 6.6 million,$2.6 million, $1 million,
and $766,180 as discussed above. Comparatively, there were no such valuation
expenses in fiscal 1995.
[NM\10-KSB:63096KSB]-45
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<PAGE>
The Registrant recorded an income tax provision of $997,932 for fiscal
year 1996 and an income tax benefit of $615,436 for fiscal year 1995. For the
year ended June 30, 1996 and 1995, the Company's effective federal and state
income tax rate applied to book taxable income (loss) differs from the statutory
rate primarily from the effect of foreign controlled corporation losses for
which no deferred tax was recognized, the change in valuation allowance to
offset deferred tax benefits, utilization of net operating loss carry forwards
and impact of state taxes net of federal effect. The Company utilized $989,356
and $192,353 in net operating losses to offset federal and state taxable income
for the years ended June 30, 1996 and 1995, respectively.
The deferred taxes result from temporary differences relating to the
difference in the basis of assets and liabilities for financial and tax
reporting purposes. The temporary differences relate mainly to the difference in
basis of the Gaming Interest, accounts receivable and the recognition of the
benefit of prior year losses carried forward.
As a result of changes in stock ownership which occurred in 1993 and
1995, the Registrant's use of its net operating loss carry forwards may be
limited by Section 382 of the Internal Revenue Code until such net operating
loss carry forwards expire. The Registrant intends to obtain independent third
party valuation of its stock for purposes of the calculation required by Section
382 in order to determine whether such net operating loss carry forwards may be
limited. As of the date of this Report, the Registrant has not received such
independent valuation and accordingly has accrued its income tax provision in
consideration of Section 382.
Deferred tax assets have been computed using the maximum expiration
terms of 13 and 5 years (or total net operating losses available of
approximately $11.9 million and $7.8 million) for federal and state tax
purposes, respectively. Net operating losses expire from the years 2004 through
2009.
A valuation allowance was recorded at June 30, 1996 to offset benefits
of net operating losses in excess of any potential federal loss carry back. The
change in the valuation allowance in fiscal 1996 is due to the sale of cash flow
producing assets.
No provision was made or benefits recognized in 1996 for U.S. income
taxes on the undistributed earnings/losses of the foreign subsidiary as it is
the Registrant's intention to utilize those earnings in the foreign operations
for an indefinite period of time or repatriate earnings only when tax effective
to do so. The foreign subsidiary had an accumulated deficit at June 30, 1996
which would have resulted in an unrecognized temporary difference for an NOL
carryforward of approximately $9.6 million with a related unrecognized deferred
tax benefit of approximately $3.3 million.
(h) Recent Accounting Developments
In March 1995, the Financial Accounting Standards Board ("FASB")
adopted Statement No. 121 "Accounting for the Impairment of Long Lived Assets
and for Long Lived Assets to be Disposed Of" which requires entities to review
long lived assets impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable and
provides guidance as to measurement of the carrying value of assets to be
disposed of. The statement is effective for fiscal years beginning after
December 15, 1995. The Registrant has not determined the effect the adoption of
the statement will have, but does not believe its implementation will have a
material effect on its financial position.
In October 1995, the FASB adopted Statement No.123, "Accounting for
Stock-Based Compensation." This Statement encourages entities to adopt a fair
value method of accounting for stock- based compensation plans including stock
options and warrants issued to employees. For entities which do not adopt this
method, the Statement requires disclosure of the effect that the fair-value
method would have on net income and earnings per share. The Statement is
effective for transactions entered into in fiscal years that begin after
December 15, 1995. The Registrant has not determined the effect of this
Statement nor has it decided when it will adopt the provisions of this
Statement.
ITEM 7. FINANCIAL STATEMENTS.
The required financial statements are filed as a part of this Annual
Report on Form 10-KSB commencing on page F-1 attached hereto.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
A Current Report on Form 8-K dated August 18, 1995 was filed on August
24, 1995, reporting under Item 4 a change of accountants on August 18, 1995 from
BDO Seidman, LLP to Raimondo, Pettit & Glassman. There were no disagreements
between the Registrant and its former auditors regarding accounting and
financial disclosure.
[NM\10-KSB:63096KSB]-45
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<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
(a) Identification of Directors and Executive Officers.
The Registrant, pursuant to its bylaws is authorized to maintain a five
(5) member Board of Directors, and executive officers as needed. The directors
and officers for fiscal 1996 were as follows:
<TABLE>
<CAPTION>
Position
Name Held with the Registrant Age Dates of Service
- ------------------- ---------------------------------- --- ----------------------------------
<S> <C> <C> <C>
Fred G. Luke Chairman of the Board and Chief 49 June 14, 1993 to Present
Executive Officer
John D. Desbrow Director 41 December 20, 1993 to May 29, 1996
Secretary December 20, 1993 to Present
Jonathan L. Small Director 44 March 17, 1994 to January 22, 1996
Kenneth R. O'Neal Director, Chief Financial Officer 51 August 24, 1994 to July 15, 1995
Carol Chen Director 43 January 22, 1996 to October 29,
1996
Liu Mei Huan Chen Director 32 October 9, 1995 to Present
Cheng Tai Chee Director 62 October 9, 1995 to Present
Steven H. Dong Chief Financial Officer 30 July 16, 1995 to Present
</TABLE>
All directors of the Registrant hold office until the next annual
meeting of shareholders and until their successors have been elected and
qualified. Vacancies in the Board of Directors are filled by the remaining
members of the Board until the next annual meeting of shareholders. The officers
of the Registrant are elected by the Board of Directors at its first meeting
after each annual meeting of the Registrant's shareholders and serve at the
discretion of the Board of Directors or until their earlier resignation or
death.
The Registrant, pursuant to resolutions adopted by its Board of
Directors on December 15, 1993, maintains a five-member Advisory Board. At June
30, 1996, the following individuals served on the Advisory Board:
Position
Name Held with the Registrant Age Dates of Service
- ----------------- ------------------------ --- -----------------------
Fred Graves Luke Member of Advisory Board 74 October 1993 to Present
Clifford A. Jones Member of Advisory Board 84 October 1993 to Present
Kenneth Scholl Member of Advisory Board 52 October 1993 to Present
Louis Weiner Member of Advisory Board 81 October 1993 to Present
Royce Warren Member of Advisory Board 57 October 1993 to Present
[NM\10-KSB:63096KSB]-45
27
<PAGE>
(b) Business Experience
The following is a brief account of the business experience during the
past five years of each director, director nominee and executive officer of the
Registrant, and the members of its Advisory Board, including principal
occupations and employment during that period and the name and principal
business of any corporation or other organization in which such occupation and
employment were carried on.
Fred G. Luke. Mr. Fred G. Luke has been a Director of the Registrant
since June 1993, and Chairman and Chief Executive Officer since July 22, 1993.
Mr. Luke has more than twenty-six years of experience in domestic and
international financing and the management of private and publicly held
companies. Since 1982, Mr. Luke has provided consulting services and has served,
for brief periods lasting usually not more than six months, as Chief Executive
Officer and/or Chairman of the Board of various publicly held and privately held
companies in conjunction with such financial and corporate restructuring
services. In addition to his position with the Registrant, Mr. Luke currently
serves as Chairman and President of NuOasis Gaming, as well as Chairman and
President of NuVen Advisors, Inc., ("NuVen Advisors") formerly New World
Capital, Inc. ("New World"), President and Director of The Toen Group, Inc.
("Toen"), President and Director of Hart Industries, Inc. ("Hart"), Chairman and
President of Diversified Land & Exploration Company ("DL&E"). DL&E is a former
publicly traded independent natural resource development company engaged in
domestic oil and gas exploration, development and production. Prior to 1995,
DL&E was a 90% owned subsidiary of Basic Natural Resources, Inc. ("BNR"). From
1991 through 1994 Mr. Luke served as the President and Director of BNR. BNR is
presently inactive. Hart and DL&E were formerly in the environmental services
and natural gas processing business, respectively. Both Hart and Toen are public
companies which were formerly traded on NASDAQ or the OTC Bulletin Board.
Neither Hart nor Toen has ongoing operations. NuVen Advisors provides
managerial, acquisition, and administrative services to public and private
companies including Nona, NuOasis Gaming, Hart, Toen, and DL&E. NuVen Advisors,
which is controlled by Fred G. Luke, as Trustee of the Luke Family Trust, is an
affiliate of both Nona and NuOasis Gaming. NuVen Advisors is a stockholder of
Hart, DL&E and Nona, and provides management, general and administrative
services, and merger and acquisition services to Hart, DL&E, NuOasis Gaming and
Nona pursuant to independent Advisory and Management Agreements. Mr. Luke also
served from 1973 through 1985 as President of American Energy Corporation, a
privately held oil and gas company involved in the operation of domestic oil and
gas properties. From 1970 through 1985 Mr. Luke served as an officer and
Director of Eurasia, Inc., a private equipment leasing company specializing in
oil and gas industry equipment. Mr. Luke received a Bachelor of Arts Degree in
Mathematics from California State University, San Jose in 1969.
John D. Desbrow. Mr. John D. Desbrow, as an independent consultant,
has been a Director and Secretary of the Registrant since December 20, 1993. Mr.
Desbrow is a member in good standing of the State Bar of California and has been
since 1980. Prior to joining the Registrant Mr. Desbrow was in the private
practice of law. Mr. Desbrow received his Bachelor of Science degree in Business
Administration from the University of Southern California in 1977, his Juris
Doctorate from the University of Southern California Law Center in 1980, and his
Master of Business Taxation degree from the University of Southern California
Graduate School of Accounting in 1982. Mr. Desbrow has served as a Director and
Secretary of Hart Industries, Inc. since July 1993, as the Secretary of NuOasis
Gaming since April 1994 and as a Director of Toen since Septmeber 1994. Mr.
Desbrow resigned as a Director of the Registrant in May 1996.
Carol Chen. Ms. Carol Chen has served as a Director of the Registrant
since January 22, 1996. From 1991 to the present, Ms. Chen has been active as a
real estate agent for Park Georgia Realty Limited where she specialized in
industrial warehouses and commercial land projects. From 1990 to 1991, Ms. Chen
served as a licensed real estate agent for Century 21 Prudential Estates where
her focus was the residential real estate market in British Columbia, Canada.
Ms. Chen resigned as a Director of the Registrant on October 29, 1996.
[NM\10-KSB:63096KSB]-45
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<PAGE>
Liu Mei Huan Chen. Ms. Chen has served as a Director of the Registrant
since October 9th, 1995. From 1992 to the present, Ms. Chen has been serving as
an Executive Director of Silver Faith Holding (Macau) Ltd. and certain of its
subsidiaries, where she acts as corporate liaison to the central and certain
provincial governments of The Peoples Republic of China. Ms. Chen also serves as
a Director of Silver Faith (Hong Kong) Holdings Limited. Both companies are
subsidiaries of Silver Faith Holdings Limited, and both are involved in the
manufacturing and distribution of cigarettes in China, Hong Kong and Macau. From
1988 to 1992, Ms. Chen operated a Mitsubishi car dealership in Canton Province
and was an authorized fuel oil broker for Mainland China. From 1981 to 1988, Ms.
Chen lived in New York where she operated an import/export clothing business and
served as an advisor to Mainland Chinese companies regarding international hotel
projects.
Cheng Tai Chee. Mr. Chee has served as a Director of the Registrant
since October 9, 1995. From 1970 through 1984, Mr. Chee was a champion horse
jockey and trainer for the Royal Hong Kong Jockey Club. After he retired from
the Royal Hong Kong Jockey Club in 1984, he joined Dragon Sight International
Amusement (Macau) Company as Marketing Coordinator for the promotion of the
junket group from Southeast Asia. In 1992, he joined the Silver Faith Holdings
group of companies of Silver Faith Holdings Ltd., where he presently serves as
Project Coordinator for the Peony Gardens real estate development in Beijing,
Mainland China.
Jonathan L. Small. Mr. Jonathan L. Small, as an independent
consultant, has been a Director of the Registrant from March 17, 1994, through
January 22, 1996, at which date he resigned. Mr. Small is currently a member in
good standing of the State Bar of California and has been since 1980. Mr. Small
is in the private practice of law. Mr. Small's law practice consists of the
regulation, due diligence, planning tax opinions for private placement offerings
in oil and gas, real estate, banking, alternative energy, investment and venture
capital programs; financial business and individual planning; civil litigation
and general business matters. Prior to forming his private law practice, Mr.
Small was a tax accountant with Arthur Young & Company in 1981 and 1982. Mr.
Small served as Director, General Counsel and Assistant Secretary of Basic
Natural Resources, Inc. from June 1992 to September 1994. Mr. Small has served
as Secretary and General Counsel for Diversified Land and Exploration since
March 1988.
Steven H. Dong. Mr. Dong, a Certified Public Accountant, and as an
independent consultant, has served as Chief Financial Officer of the Registrant
since July 16, 1995. Mr. Dong replaced Kenneth R. O'Neal, who resigned as the
Registrant's Chief Financial Officer and as a Director effective July 15, 1995.
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 NuOasis Gaming, Toen and Hart. Mr. Dong received his
Bachelor of Science degree in Accounting from Babson College in 1988. Mr. Dong
is currently a member in good standing with the California Society of Certified
Public Accountants and American Institute of Certified Public Accountants.
Fred Graves Luke. Mr. Fred Graves Luke, served as a Director and
Secretary of the Registrant from June 14, 1993 to November 30, 1993. Prior to
his association with the Registrant, Mr. Luke served as Chief Executive Officer
of three private firms operating oil and gas properties from 1954 until his
retirement in 1985. Mr. Luke also serves as Vice President of International
Sales and as a Director of Fantastic Foods. He received his B.A. and LLB Degrees
from the University of Arizona and was admitted to the bar in the State of
Arizona in 1950. Mr. Luke served in the U.S. Army Air Corp. in World War II as a
pilot and served in the U.S. Air Force as a legal officer during the Korean War.
Clifford A. Jones. Mr. Clifford A. Jones has been involved in the
gaming and resort hotel industry since 1941. Mr. Jones established the first
American-style casino in several foreign countries and is known as a global
pioneer of the gaming industry. Mr. Jones served as Lieutenant Governor of the
state of Nevada for two terms and founded the law firm of Jones, Jones, Close &
Brown in Las Vegas in 1938. Mr. Jones owns 10% of Cleopatra, one of the
Registrant's equity investments.
[NM\10-KSB:63096KSB]-45
29
<PAGE>
Kenneth Scholl. Mr. Kenneth Scholl is a consultant to the gaming,
hotel and distribution business. Mr. Scholl has developed, owned and operated a
hotel management company.
Louis Weiner. Mr. Louis Weiner is a nationally recognized attorney
emphasizing in gaming operations.
Royce Warren. Mr. Royce Warren is Director of Operations of the Indian
Springs Casino in Indian Springs, Nevada. Mr. Warren has more than 25 years
experience in gaming personnel recruitment.
(c) Identification of Certain Significant Employees and Consultants.
In connection with the acquisition of Italfin and Pasta Fresca in
fiscal 1993, Fantastic Foods entered into an Employment Agreement with Giancarlo
Pino for his services as a Vice President of Fantastic Foods which was renewed
during fiscal 1996. He is responsible for the day to day operations of the two
food product manufacturing plants in Southern California.
During fiscal 1996, Jon L. Lawver, through J. L. Lawver Corp. ("Lawver
Corp."), renewed his Consulting Agreement with the Registrant to serve as
President of Fantastic Foods. Mr. Lawver has been President of Fantastic Foods
since June, 1993. Mr. Lawver has twenty-two (22) years of experience in the area
of bank financing where he has assisted companies by locating financing for
expansion requirements and was employed with Bank of America from 1961 to 1970,
ending his employment as Vice President. Since 1970, Mr. Lawver has served as
President and a Director of J.L. Lawver Corp., a financial consulting firm.
Since 1988, Mr. Lawver has also served as President and a Director of Eurasia, a
private finance equipment leasing company specializing in oil and gas industry
equipment. Mr. Lawver has also served as an officer of both Toen and Hart.
Albert Rapuano entered into a Consulting Agreement with the Registrant
to serve as President of NuOasis International. Mr. Rapuano has over 30 years
experience in all aspects of hotel and casino management. Since, 1993, Mr
Rapuano has been a partner and principle at EOR Weller Advertising and
Marketing, a full-service advertising and marketing company specializing in the
gaming industry. Prior to his work with EOR Weller, Mr. Rapuano served as
President and Chief Operating Officer of the 2,174 room Riviera Hotel and Casino
in Las Vegas. Mr. Rapuano successfully guided the Riviera through and out of
bankruptcy within fifteen months. From 1982 to 1987, Mr. Rapuano served as
Executive Vice President of the MGM Grand Hotel in Las Vegas, which was acquired
by Bally Manufacturing Company in April 1986 and became Bally's Casino Resort.
This 2,832 room casino hotel facility employed over 4,000 people and achieved
gross annual revenues of $276 million with an annual operating income of $56
million.
(d) Family Relationships
Fred Graves Luke is the father of Fred G. Luke, Chief Executive Officer
of the Registrant. At June 30, 1996, Fred Graves Luke served as the chairperson
of the Registrant's Advisory Board; and Vice President of International Sales
and a Director of Fantastic Foods. Fred Graves Luke holds 10% of the equity
interest in Cleopatra. Giancarlo Pino, who serves as Vice President of
Manufacturing and a Director of Fantastic Foods is the husband of Daniela
Grechi, who serves as Corporate Secretary of Fantastic Foods.
(e) Involvement in Certain Legal Proceedings.
During the past five years, no director or officer of the Registrant has:
(1) Filed or has filed against him a petition under the federal bankruptcy laws
or any state insolvency law, nor has a receiver, fiscal agent or similar officer
been appointed by a court for the business or property of such person, or any
partnership in which he was a general partner, or any corporation or business
association of which he was an executive officer at or within two years before
such filings; except, however, that Fred G. Luke was Secretary of Diversified
Production Services, Inc., an Oklahoma corporation ("DPS") which filed a
Voluntary Petition under Chapter 11 of the U.S. Bankruptcy Code in 1991. DPS
was discharged from its bankruptcy proceedings in May 10, 1994 following
the affirmative vote on its Plan of Reorganization.
[NM\10-KSB:63096KSB]-45
30
<PAGE>
(2) Been convicted in a criminal proceeding; except however, during fiscal year
1995, Kenneth R. O'Neal, formerly a Director and Chief Financial Officer of the
Registrant, was the subject of a lawsuit filed in United States District Court,
Middle District of Florida, Orlando Division, Case No. 95-73-C-Orl-22, wherein
the United States Attorney charged Mr. O'Neal with securities fraud in violation
of Rule 10b- 5(17C.F.R._240.10b-5) in connection with an audit of a company
unrelated to the Registrant performed by O'Neal & White, P.C. in 1991 while Mr.
O'Neal was a partner of O'Neal & White, P.C. In April 1995, Mr. O'Neal pleaded
guilty. In July 1995, Mr. O'Neal resigned as an Officer and Director of the
Registrant.
(3) Been the subject of any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining such person from, or otherwise limiting his
involvement in any type of business, securities or banking activities.
(4) Been found by a court of competent jurisdiction in a civil action, the SEC
or the Commodity Futures Trading Commission ("FTC") to have violated any federal
or state securities or commodities law, which judgment has not been reversed,
suspended, or vacated.
(f) Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the Registrant's directors and officers and persons who own more
than 10 percent of the Registrant's equity securities, to file reports of
ownership and changes in ownership with the SEC. Directors, officers and greater
than ten-percent shareholders are required by SEC regulation to furnish the
Registrant with copies of all Section 16(a) reports filed.
Based solely on its review of the copies of the reports it received
from persons required to file, the Registrant believes that during the period
from June 30, 1995 through June 30, 1996, all filing re quirements applicable to
its officers, directors and greater than ten-percent shareholders were complied
with except the following instances:
Kenneth R. O'Neal failed to file Form 3 to report his acceptance of
the office of Chief Financial Officer and as a director in August 1994. Mr.
O'Neal further failed to file Form 4 reporting his acquisition and subsequent
sale of 170,000 shares of the Registrant's common stock. Mr. O'Neal resigned in
July 1995 as an officer and director of the Registrant.
Kenneth R. O'Neal failed to furnish the Registrant with any Form 4
filings reporting the termination of reporting requirements due to his
resignation in July 1995 as an Officer and Director of the Registrant.
In January 1996, Mr. Ng Man Sun, the beneficial owner of 13,000,000
shares owned of record by Dragon Star Securities Ltd., Sharp Profit Investment
Limited, Sunning Star Enterprises Ltd., and Up- field Investment Ltd., filed a
late Form 3 for the month of July 1995 reporting the acquisition of 29.13% of
the Registrant's common stock.
In March 1996, Jonathan L. Small filed a late Form 4 for the months of
December 1995 and January 1996. In September 1995 Mr. Small filed a late Form 4
for the month of June 1995.
In May 1996, J. L. Lawver Corp., which is owned by Jon L. Lawver,
President of Fantastic Foods, filed a late Form 4 for the months of July through
October 1995, December 1995, February 1996 and March 1996. In May 1996, J. L.
Lawver Corp. filed two Form 5s for the fiscal years ended June 30, 1994 and June
30, 1995, respectively.
In April 1996, Fred G. Luke filed a late Form 5 reporting his
acquisition in September 1995 of an option to purchase 1,000,000 shares of the
Registrant's common stock.
[NM\10-KSB:63096KSB]-45
31
<PAGE>
In February 1996, Liu Mei Huan Chen filed a late Form 3 for the month
of October 1995 related to becoming a director of the Registrant.
In February 1996, Cheng Tai Chee filed a late Form 3 for the month of
October 1995 related to becoming a director of the Registrant.
ITEM 10. EXECUTIVE COMPENSATION.
(a) Summary Compensation Table
The following summary compensation table sets forth in summary form the
compensation received during each of the Registrant's last three completed
fiscal years by the Registrant's Chief Executive Officer and four most highly
compensated executive officers other than the Chief Executive Officer.
Name and Principal Fiscal Salary Other Annual Options
Position Year ($) Compensation($) Granted (#) (3)
- ------------------ ---- ------- --------------- ---------------
Fred G. Luke (1) (2) 1996 174,000 130,000 N/A
Chief Executive 1995 192,000 N/A 1,000,000
Officer (7-93 to 1994 22,500 N/A N/A
Present)
John D. Desbrow (1) 1996 206,250 N/A 50,000
Secretary (12-93 to 1995 189,500 N/A 50,000
Present) 1994 84,000 N/A N/A
Steven H. Dong (1) 1996 165,000 N/A 100,000
Chief Financial Officer 1995 N/A N/A N/A
(7-95 to Present) 1994 N/A N/A N/A
Jon L. Lawver 1996 100,000 N/A 50,000
President of 1995 100,000 N/A 50,000
Fantastic Foods 1994 100,000 N/A N/A
Albert Rapuano 1996 115,000 N/A 500,000
President of 1995 N/A N/A N/A
NuOasis International 1994 N/A N/A N/A
(1) Salary dollar values include both Nona and NuOasis Gaming combined base
salary (cash and non-cash) earned.
(2) Other Annual Compensation of $130,000 includes $84,000 of value
realized on the exercise of 400,000 Nona options, and $21,000 and
$25,000 amounting to the excess of reimbursable expenses pursuant to
Mr. Luke's employment agreements with Nona and NuOasis Gaming,
respectively.
(3) During the period covered by the Table, the Registrant did not make any
award of restricted stock, including share units. The number of options
granted are the sum of the number of shares of Common Stock to be
received upon the exercise of all stock options granted. Except for
stock option plans, the Registrant does not have in effect any plan
that is intended to serve as incentive for performance to occur over a
period longer than one fiscal year.
[NM\10-KSB:63096KSB]-45
32
<PAGE>
b) Stock Options - Nona Morelli's II, Inc.
The following table sets forth in summary form the aggregate options
granted during fiscal year 1996 to Nona's Chief Executive Officer and four most
highly compensated executive officers other than the Chief Executive Officer.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
Percent of
Total Exercise
Options/SAR's or Base
Options/SAR's Granted to Price Expiration
Name Granted (#) Employees ($/Sh) Date
- -------------------------- ------------- ------------- ------- ----------
Steven H. Dong, CFO 100,000 14% $ 1.53 12/31/99
John D. Desbrow, Secretary 50,000 7% $ 1.53 12/31/99
Jon L. Lawver, President 50,000 7% $ 1.53 12/31/99
(Fantastic Foods)
Albert Rapuano, President 500,000 72% $ .91 12/31/99
(NuOasis Intl.)
The following table sets forth in summary form the aggregate options
exercised during fiscal year 1996, and the June 30, 1996 value of unexercised
options for The Registrant's Chief Executive Officer and four most highly
compensated executive officers other than the Chief Executive Officer.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money
Option/SAR's at Fiscal Options/SAR's at Fiscal
Year-End (#) Year-End ($)
Shares
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
- ---------------------------- ------------------ ------------ ---------------------- ----------------------
<S> <C> <C> <C> <C>
Fred G. Luke, Chief
Executive Officer and 400,000 $524,000 600,000 Exercisable - Exercisable
Director
NuVen Advisors, Inc. (1) _ _ 100,000 Exercisable - Exercisable
Steven H. Dong, CFO _ _ 100,000 Exercisable - Exercisable
John D. Desbrow, _ _ 100,000 Exercisable - Exercisable
Secretary
Jon L. Lawver,
President of Fantastic _ _ 100,000 Exercisable - Exercisable
Foods
Albert Rapuano,
President of NuOasis
International _ _ 500,000 Exercisable $140,000 Exercisable
</TABLE>
(1) The Luke Family Trust (the "Luke Trust") owns 93% of NuVen Advisors,
formerly New World. Fred G. Luke, as Co-Trustee of the Luke Trust
determines the voting of such shares and, as a result, may be deemed
to control the Luke Trust.
[NM\10-KSB:63096KSB]-45
33
<PAGE>
(c) Stock Options - NuOasis Gaming, Inc.
The following table sets forth in summary form the aggregate options
granted during fiscal year 1996 to NuOasis Gaming's President and four most
highly compensated executive officers other than the President.
<TABLE>
<CAPTION>
Number of Percent of Total
Shares Options/
Under SAR's Granted Exercise or
Options/SAR's to employees Base Price Expiration
Name Granted in Fiscal Years ($/Sh) Date
- ----------------------- ------------- --------------- ----------- ----------
<S> <C> <C> <C> <C>
Fred G. Luke, President
and Director 3,000,000(1) 84% $.12 7/00
Steven H. Dong, CFO 275,000 8% $.12 7/00
John D. Desbrow 275,000 8% $.12 7/00
</TABLE>
The following table sets forth in summary form the aggregate options
exercised during fiscal year 1996, and the June 30, 1996 value of unexercised
options for NuOasis Gaming's President and four most highly compensated
executive officers other than the President.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money
Option/SAR's at Fiscal Options/SAR's at Fiscal
Year-End (#) Year-End ($)
Shares
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
- ---------------------------- ------------------ ------------ ----------------------------------- -------------------------
<S> <C> <C> <C> <C>
Fred G. Luke, President 481,176 Exercisable $ 173,205 Exercisable
and Director (1) 868,824 $ 104,258 1,650,000 Unexercisable $ 594,000 Unexercisable
NuVen Advisors, Inc. (2) _ _ 2,000,000 Exercisable $ 760,000 Exercisable
Steven H. Dong, CFO _ _ 275,000 Exercisable $ 99,000 Exercisable
John D. Desbrow, _ _ 275,000 Exercisable $ 99,000 Exercisable
Secretary
</TABLE>
(1) Options vest at a rate of 50,000 per month over a five year term
ending March 31, 1999.
(2) The Luke Family Trust (the "Luke Trust") owns 93% of NuVen Advisors,
formerly New World. Fred G. Luke, as Co-Trustee of the Luke Trust
determines the voting of such shares and, as a result, may be deemed
to control the Luke Trust.
(d) Long-Term Incentive Plans
Not applicable.
(e) Compensation of Directors
The Registrant has no standard arrangement for the compensation of
directors or their committee participation or special assignments. The
Registrant has established an Advisory Board to assist the Board of Directors.
Members of the Advisory Board are typically compensated at the approximate rate
of $1,000 per month. During fiscal 1996, Jonathan L. Small was paid
approximately $12,000 for his services as a Director. During fiscal 1996, John
D. Desbrow was paid approximately $11,000, for the eleven month period from July
1995 to May 1996 for his services rendered as a Director. No compensation was
paid to other Directors during fiscal 1996.
[NM\10-KSB:63096KSB]-45
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<PAGE>
(f) Contracts With Named Executive Officers
In September 1994, the Registrant entered into an Employment Agreement
with Fred G. Luke, the Registrant's Chairman and Chief Executive Officer. Mr.
Luke has been serving as the Registrant's Chairman and CEO since approximately
July 1993. From July 1993 through June 30, 1994, Mr. Luke received no
compensation for his services as CEO but did receive $9,000 for his services as
a Director. The terms of the Employment Agreement call for Mr. Luke to receive
approximately $10,000 per month, retroactive to July 1, 1994, for five (5) years
as a base salary; granted him an option to purchase 1,000,000 shares of the
Registrant's common stock exercisable at $1.10 per share; provides him with an
annual bonus based upon a number of factors related to the Registrant's growth
and performance which include; (a) serving on the Registrant's Board of
Directors and as its Chief Executive Officer; (b) providing advice concerning
mergers and acquisitions; (c) corporate finance; (d) day to day management; (e)
guidance with respect to general business decisions; (f) other duties commonly
performed by the Chief Executive Officer of a publicly-held company; and
requires the Registrant to purchase life insurance coverage, reimbursement for
vehicle expenses, and provide other fringe benefits. No bonuses have been
accrued, paid or are owed as of the date of this Report. The Registrant expensed
$120,000 and $120,000 during fiscal years 1996 and 1995, respectively, and had
no amounts due to Mr. Luke as of June 30, 1996.
In August 1995, NuOasis Gaming entered into an Employment Agreement
with Fred G. Luke, to save as NuOasis Gaming's President. Mr. Luke has been
serving as the NuOasis Gaming President since approximately March 31, 1994. The
terms of the Employment Agreement call for Mr. Luke to receive approximately
$4,500 per month, retroactive to April 1, 1994, for five (5) years as a base
salary; granted him an option to purchase 3,000,000 shares of NuOasis Gaming's
common stock at an exercise price of $.12 per share; provides him with an annual
bonus based upon a number of factors related to NuOasis Gaming's growth and
performance which include (a) serving on NuOasis Gaming's Board of Directors and
as its President; (b) providing advice concerning mergers and acquisitions; (c)
corporate finance; (d) day to day management; (e) guidance with respect to
general business decisions; (f) other duties commonly performed by the President
of a publicly-held company; and requires NuOasis Gaming to purchase life
insurance coverage, reimburse vehicle expenses, and provide other fringe
benefits. Between March 31, 1994 and September 30, 1994, Mr. Luke received no
cash payments for his services. In August 1995, NuOasis Gaming agreed to
retroactively compensate Mr. Luke for past services in the amount of $27,000 for
the period April 1, 1994 to September 30, 1994 and $59,000 for the period
October 1, 1994 to September 30, 1995. No bonuses have been accrued, paid or are
owed as of the date of this Report. NuOasis Gaming expensed $54,000 and $72,500,
during fiscal 1996 and 1995, respectively, and had $126,500 due to Mr. Luke as
of June 30, 1996.
Effective January 1, 1994, the Registrant and John D. Desbrow entered
into a Consulting Agreement for the engagement of Mr. Desbrow to perform legal
services and to hold the office of Secretary on behalf of the Registrant until
December 31, 1994. Under the Consulting Agreement the Registrant contracted to
pay Mr. Desbrow $150,000 payable in the Registrant's common stock issuable in
monthly increments in arrears. Under the terms of the Consulting Agreement, Mr.
Desbrow invoices the Registrant and applies the net proceeds received from the
sale of stock to the invoiced amounts. For purposes of any "profit" computation
under Section 16(b), Mr. Desbrow and the Registrant have agreed the price paid
for the shares is deemed to be $150,000. Pursuant to the terms of the Consulting
Agreement, the Registrant granted Mr. Desbrow an option to purchase 50,000
shares of the Registrant's common stock exercisable at a price of $.58 per
share. Effective Janaury 1, 1996, the Consulting Agreement was renewed through
December 31, 1996 and 50,000 shares were issued during fiscal 1996. An
additional option of 50,000 shares exercisable at a price of $1.53 per share was
granted during fiscal 1996. The Registrant expensed $150,000 and $150,000 during
fiscal 1996 and 1995, respectively, and had $70,378 due to Mr. Desbrow as of
June 30, 1996.
Effective April 1, 1994, NuOasis Gaming entered into a Consulting
Agreement with John D. Desbrow for the engagement of Mr. Desbrow to perform
legal services and to hold the office of Secretary, on behalf of NuOasis Gaming,
for the period from April 1, 1994 to March 31, 1995 for an amount of $36,000 per
annum. Additionally, in fiscal 1995 Mr. Desbrow billed and eventually received
from the sale of shares $4,000 for services rendered as a Director from April
1994 to July 1994. Effective April 1, 1995, the Consulting Agreement was renewed
through March 31, 1996 for an amount of $50,000 per annum. 1,050,000 shares of
NuOasis Gaming common stock were registered for issuance on Forms S-8 filed with
the Securities and Exchange Commission during the 1995 fiscal year. Under the
terms of the Consulting Agreement, Mr. Desbrow invoices NuOasis Gaming and
applies the net proceeds received from the sale of stock to the invoiced
amounts. For purposes of any "profit" computation under Section 16 (b), Mr.
Desbrow and NuOasis Gaming have agreed the price paid for the shares is deemed
to be $50,000. Effective April 1, 1996, the Consulting Agreement was renewed
through March 31, 1997 for an amount of $ 75,000 per annum and granted him an
option to purchase 275,000 shares of NuOasis Gaming common stock at an exercise
price of $.12 per share. NuOasis Gaming expensed $56,250 and $39,500 during
fiscal 1996 and 1995, respectively, and had $8,252 due from Mr. Desbrow as of
June 30, 1996.
[NM\10-KSB:63096KSB]-45
35
<PAGE>
Effective January 1, 1994, the Registrant entered into a Consulting
Agreement with Jon L. Lawver and J. L. Lawver Corp. pursuant to which Mr. Lawver
was to perform professional services and to hold the office of President of
Fantastic Foods for calendar year 1994. Pursuant to the Consulting Agreement the
Registrant agreed to pay Mr. Lawver 36,000 shares of the Registrant's common
stock, issuable in monthly increments in arrears and granted Mr. Lawver the
option to purchase 50,000 shares of the Registrant's common stock at an exercise
price of $.58 per share. Under the terms of the Consulting Agreement, Mr. Lawver
invoices the Registrant and applies the net proceeds received from the sale of
stock to the invoiced amounts. For purposes of any "profit" computation under
Section 16(b) Mr. Lawver and the Registrant have agreed the price paid for the
shares is deemed to be $100,000. Mr. Lawver's agreement was renewed for the year
ended June 30, 1995 and 124,000 shares were issued to him during fiscal 1995.
During fiscal 1996, the Consulting Agreement was again renewed with the same
terms for fiscal 1997 and 85,000 shares were issued to him during fiscal 1996 to
apply against services rendered. An additional option of 50,000 shares
exercisable at a price of $1.53 per share was granted during fiscal 1996. The
Registrant expensed $100,000 and $100,000 during fiscal 1996 and 1995,
respectively and had $14,991 due to Mr. Lawver at June 30,1996.
In July 1995, the Registrant entered into a Consulting Agreement with
Steven H. Dong, pursuant to which Mr. Dong is to perform accounting services and
to hold the office of Chief Financial Officer through June 30, 1996. Pursuant to
the agreement as amended in October 1995, the Registrant agreed to pay Mr. Dong
$145,000 per annum in cash or in the Registrant's common stock payable monthly
in arrears and granted him an option to purchase 100,000 shares of the
Registrant's common stock at an exercise price of $1.53 per share. Under the
terms of the Consulting Agreement, Mr. Dong invoices the Registrant and applies
the net proceeds received from the sale of stock to the invoiced amounts. For
purposes of any "profit" computation under Section 16(b) Mr. Dong and the
Registrant have agreed the price paid for the shares is deemed to be $145,000.
During fiscal 1996, the Consulting Agreement was renewed with the same terms
through June 30, 1997. No cash payments were made to Mr. Dong during fiscal 1996
or 1995, however 95,000 shares were issued during 1996 which were used to apply
against services rendered. The Registrant expensed $145,000 and $0 during fiscal
1996 and 1995 and had $42,635 due to Mr. Dong as of June 30, 1996.
In July 1995, NuOasis Gaming entered into a Consulting Agreement with
Mr. 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, NuOasis Gaming agreed to pay Mr. Dong $20,000 in cash or in
NuOasis Gaming's common stock, payable monthly in arrears, and granted him an
option to purchase 275,000 shares of NuOasis Gaming's common stock at an
exercise price of $.12 per share. Effective July 1, 1996, the Consulting
Agreement was renewed through June 30, 1997 for an amount of $39,000 per annum.
Cash payments of $5,000 were made to Mr. Dong by NuOasis Gaming during fiscal
1996 and no stock has been issued pursuant to this Consulting Agreement. NuOasis
Gaming expensed $20,000 during fiscal 1996, and had $15,000 due to Mr. Dong as
of June 30, 1996.
In January 1996, the Registrant entered into a consulting agreement
with Albert Rapuano, pursuant to which Mr. Rapuano is to perform gaming
consulting services and to hold the office of President of NuOasis International
through December 31, 1996. Pursuant to the agreement, the Registrant agreed to
pay Mr. Rapuano $250,000 per annum in cash or in the Registrant's common stock
payable monthly in arrears and granted him an option to purchase 500,000 shares
of the Registrant's common stock at an exercise price of $.91 per share. Under
the terms of the Consulting Agreement, Mr. Rapuano invoices the Registrant and
applies the net proceeds received from the sale of stock to the invoiced
amounts. For purposes of any "profit" computation under Section 16(b) Mr.
Rapuano and the Registrant have agreed the price paid for the shares is deemed
to be $250,000. No cash payments were made to Mr. Rapuano during fiscal 1996,
however, 70,000 shares were issued during 1996 which were used to apply against
services rendered. The Registrant expensed $115,000 and $0 during fiscal 1996
and 1995, respectively, and had $50,211 due to Mr. Rapuano as of June 30, 1996.
[NM\10-KSB:63096KSB]-45
36
<PAGE>
(g) Change of Control
Not applicable.
(h) Report on Repricing of Options
Not applicable.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) and (b) Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth information regarding the ownership of
the Registrant's voting securities by persons owning more than 5% of such
securities as of October 15, 1996, the most recent practicable date.
<TABLE>
<CAPTION>
Amount and Amount and
Nature of Nature of
Beneficial Beneficial
Name and Address Interest of $.01 Interest of Series
of Officers and par value Percent D Convertible Percent
Directors Common Stock of Class Preferred Stock of Class
- --------------------------- ---------------- -------- ------------------ --------
<S> <C> <C> <C> <C>
C/A/K Trustkantoor N.V.(2) 20,000,000 44.40% 0 0%
P.O. Box 210
Willemstad
Curacao
Dragon King Investment 3,000,000 6.66% 0 0%
Services Ltd.
8th Floor, Ruttonjee House
11 Duddell Street
Central Hong Kong
NuVen Advisors, Inc.(1)(3) 0 0% 24,000,000 100%
2 Park Plaza, Suite 470
Irvine, CA 92714
</TABLE>
(1) Gives effect to the one vote per share for each of the outstanding
shares of Common, Series C Preferred and Series D Preferred stock.
(2) The shares are held pursuant to an escrow for the purchase of
Replacement Property by NuOasis International, Inc.
(3) The Luke Family Trust (the "Luke Trust") owns 93% of NuVen Advisors,
formerly New World. Fred G. Luke, as Co-Trustee of the Luke Trust
determines the voting of such shares and, as a result, may be deemed
to control the Luke Trust.
[NM\10-KSB:63096KSB]-45
37
<PAGE>
The following sets forth information with respect to the Registrant's
voting stock beneficially owned by each current and former officer and director,
and by all current and former officers and directors as a group, as of October
15, 1996:
<TABLE>
<CAPTION>
Amount and Amount and Nature
Nature of of Beneficial
Beneficial Interest Interest of Series D
Name of Officers and of $.01 par value Percent Convertible Percent
Directors(1) Common Stock of Class(3) Preferred Stock of Class
- -------------------- ------------------- ----------- -------------------- --------
<S> <C> <C> <C> <C>
Fred G. Luke 11,100,000 19.91% 24,000,000(2) 100%
John D. Desbrow 171,000 .37% 0 0%
Steven H. Dong 102,000 .23% 0 0%
Jon Lawver(4) 103,000 .23% 0 0%
Albert Rapuano 500,000 1.11% 0 0%
All Officers and Directors as 11,976,000 21.18% 24,000,000 100%
a group
</TABLE>
(1) The address of each executive officer or Director is 2 Park Plaza, Suite
470, Irvine, CA 92614 unless otherwise shown.
(2) The Luke Trust owns 93% of NuVen Advisors Inc., formerly New World. Fred G.
Luke, as co- Trustee of the Luke Trust determines the voting of such shares and,
as a result, may be deemed to control the Luke Trust and the disposition of the
24,000,000 shares of the Registrant's Series D Preferred Stock.
(3) Percentage ownership amounts are computed for each holder assuming that
convertible securities and options held by each holder are exercised within 60
days, however, as of date of this Report, no shares are held by any officer
except for Fred G. Luke who holds 400,000 shares and John D. Desbrow who holds
71,000 shares.
(4) Options and shares are held by J.L. Lawver Corp. of which John Lawver is
the President of J.L. Lawver Corp.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(a) Transactions with Directors and Affiliates.
There were no related transactions or series of similar related
transactions during fiscal 1995 and 1996 that exceeded an aggregate amount of
$60,000 other than the following:
On March 17, 1994, Jonathan L. Small, Attorney at Law, became a member
of the Board of Directors to fill a vacancy caused by the resignation of a
former Director in June 1993. On October 29, 1993, the Registrant entered into a
Consulting Agreement with Mr. Small to retain his services to evaluate potential
acquisitions and to assist the Registrant in the general development and
execution of its business plan. Pursuant to the agreement, Mr. Small was issued
1,600 shares of the Registrant's common stock. On January 5, 1995, Mr. Small
entered into a Consulting Agreement effective November 1, 1994, with the
Registrant to retain Mr. Small to serve on the Board of Directors. 15,000 shares
were issued to Mr. Small during fiscal 1996 which were used to apply against
services rendered.
[NM\10-KSB:63096KSB]-45
38
<PAGE>
The Luke Trust and Lawver Corp. owns 93% and 7%, respectively, of
NuVen Advisors, formerly New World. Fred G. Luke, as trustee of the Luke Trust,
controls the Luke Trust and Mr. Lawver is the majority shareholder of Lawver
Corp. and thereby controls Lawver Corp.
On June 14, 1993, NuVen Advisors acquired 24,000,000 shares of the
Registrant's $.01 par value Series D Convertible Preferred Stock. At the time of
the transaction, NuVen Advisors was unrelated to the Registrant.
As a result, NuVen Advisors became the Control Person of the Registrant.
The Registrant, NuOasis Gaming, NuOasis International, NuOasis
Properties and CMA have entered into separate advisory and management agreements
with NuVen Advisors for the engagement of NuVen Advisors to perform professional
and advisory services. Each of the agreements provide for NuVen Advisors to be
paid $120,000 per year for services rendered. Each agreement also provides NuVen
Advisors with an option to purchase common stock of the respective companies;
the number of shares under each option varies as well as the length and
expiration of each agreement - See Note 9 of the footnotes to the accompanying
financial statements included herein at Item 7.
During fiscal year 1994, NuOasis Gaming entered into an agreement with
Structure America, Inc. ("SAI") to issue 1,000,000 shares of NuOasis Gaming for
consulting services. Such services were rendered during fiscal 1995. During
fiscal year 1996, NuOasis Gaming entered into another agreement with SAI to
perform consulting services. Pursuant to such agreement, NuOasis Gaming agreed
to issue 1,000,000 common shares of NuOasis Gaming to SAI and granted SAI an
option to purchase 1,000,000 common shares of NuOasis Gaming, exercisable at
$.12 per share. Under Rule 13d-3 (d) (1) (c), SAI is deemed the beneficial owner
of 2,000,000 shares of NuOasis Gaming even though the shares are not
outstanding. The agreement is fully contingent upon the final execution and
closing of the purchase of National Pools Corporation. NuOasis Gaming expensed
$75,000 and $54,000 during fiscal years 1996 and 1995, respectively and had
approximately $40,000 due to SAI as of June 30, 1996.
During fiscal year 1996, Nona renewed an agreement with SAI to perform
consulting services. Pursuant to such agreement, Nona incurred approximately
$465,000 for services performed during fiscal year 1996. Nona expensed
approximately $465,000 and $224,500 during fiscal years 1996 and 1995,
respectively and had approximately $6,000 due to SAI as of June 30, 1996.
(b) Indebtedness of Management
During fiscal 1996, 400,000 common shares were issued upon exercise of
options by the Chief Executive Officer of the Registrant in the amount of
440,000, or $1.10 per share. The Registrant received a note receivable in the
amount of $440,000 and cash payments in the aggregate amount of $40,000 were
made prior to year end and approximately $120,000 subsequent to year end. The
note bears interest of 10% and is due in May 1997. The note receivable has been
classified as Stockholder Receivable in the amount of $400,000 at June 30, 1996.
During fiscal 1996, 868,824 common shares of NuOasis Gaming were issued
upon exercise of options by the President of NuOasis Gaming in the amount of
$104,258, or $.12 per share. NuOasis Gaming received a note receivable in the
amount of $78,758, bearing interest of 10%, and a cash payment of $25,500 as
consideration for the exercise of these options. The note receivable has been
classified as Stockholder Receivable in the amount of $78,758 at June 30, 1996
and was fully paid subsequent to June 30, 1996.
(c) Transactions with Promoters
Not applicable.
[NM\10-KSB:63096KSB]-45
39
<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Consolidated Financial Statements
The Consolidated Financial Statements included in this Item are
indexed on Page F-1, "Index to Consolidated Financial Statements."
(b) Financial Statement Schedules
Not applicable.
(c) Exhibits
Unless otherwise noted, Exhibits are filed herewith.
Exhibit
Number Description
-------- ----------------------------------------------------------------
3.1* Articles of Incorporation
3.1(a)** Articles of Amendment of Articles of Incorporation
3.1(b) Certificate of Amendment of Articles of Incorporation of
International Casino Management, Inc.
3.1(c) Articles of Amendment to the Articles of Incorporation filed
September 26, 1996
3.2* Bylaws
3.3# Certificate of Designations and Preferences of Series C
Convertible Preferred Stock.
10.94o Consulting Agreement with Steven Dong
10.95o Consulting Agreement with Clifford Jones
10.96o Consulting Agreement with Louis Wiener
10.97o Consulting Agreement with Roy Warren
10.98o Consulting Agreement with Kenneth Scholl
10.99X Consulting Agreement with Lee Linton
10.100X Consulting Agreement with Clifford ("Buck") Jones II
10.101X Second Addendum to Fee Agreement with Morris Gore
10.102X Fee Agreement with Kenneth R. O'Neal
10.103X Fee Agreement with Geoffrey G. Riggs
[NM\10-KSB:63096KSB]-45
40
<PAGE>
Exhibit
Number Description
----------- ----------------------------------------------------------------
10.104X Fee Agreement with Jonathan L. Small
10.105X Addendum to Consulting Agreement with Sandra V. Alsina
10.106X Fee Agreement with Michael Manson, C.P.A.
10.107X Addendum to Consulting Agreement with Steven H. Dong
10.108X Third Addendum to Consulting Agreement with John D. Desbrow
10.109X Second Addendum to Consulting Agreement with J. L. Lawver Corp.
10.110X Non-Qualified Stock Option Agreement with Fred G. Luke
10.111o Engagement Letter and Fee Agreement with Woocox Advertising &
Communications
10.112o Third Addendum to Consulting Agreement with Structure America.
10.113o Second Addendum to Engagement Letter with OTC Communications
10.114o Consulting Agreement with Albert Rapuano
10.115o January 3, 1996 Addendum to Consulting Agreement with J.L. Lawver
10.116o 1996 Employee Stock Benefit Plan
10.117o Second Addendum to Fee Agreement with Morris C. Gore
10.118o Third Addendum to Fee Agreement with James R. Gordon
10.119o Contracting Agreement with Dynamic Telecommunications, Inc. dba
Dynatel
10.120 Lease Agreement with Theodore DeTello
10.121 Promissory Note and Security Agreement with Foothill Capital
Corporation
10.122o Asset Purchase Agreement dated September 28,1995 with Silver
Faith Development Limited
10.123o Assignment and Bill of Sale dated September 30, 1995 from Silver
Faith Development Limited
10.124 Assignment dated December 29, 1995 to NuOasis International,
Inc., a California Corporation
10.125o $21,000,000 Convertible Secured Promissory Note dated December
31, 1995 to Silver Faith Development Limited
10.126 Merger Agreement dated February 28, 1996 between NuOasis
International Inc., a California Corporation and Albion Aviation
Company Limited, a Bahamanian corporation
[NM\10-KSB:63096KSB]-45
41
<PAGE>
Exhibit
Number Description
---------- ---------------------------------------------------------------
10.127 Assumption Agreement and Release of Liability with Silver Faith
Development Limited dated May 16, 1996
10.128 Amendment, Modification and Ratification of Asset Purchase
Agreement with Silver Faith Development Limited and Beijing
Grand Canal Real Estate Development Co., Ltd.
10.129 Purchase and Sale Agreement dated August 8, 1996 between NuOasis
International Inc., and The Hartcourt Companies, Inc.
10.130 $12,000,000 Convertible Secured Promissory Note dated August 8,
1996 issued by The Hartcourt Companies, Inc. to NuOasis
International Inc.
10.131 Security Agreement dated August 8, 1996 between NuOasis
International Inc. and The Hartcourt Companies, Inc.
10.132 Assignment and Indemnification Agreement dated August 30, 1996
between NuOasis International, Inc. and The Hartcourt Companies,
Inc.
10.133 Assignment and Bill of Sale between NuOasis International, Inc.
and Silver Faith Development Limited
10.134 Agreement between NuOasis International, Inc. and Silver Faith
Development Limited
10.135 $3,000,000 Secured Contingent Promissory Note dated May 25, 1995
from Nona Morelli's II, Inc., to Ng Man Sun dba Dragon Sight
International Amusement (Macau) Company
10.136 Assignment dated December 29, 1995 from Nona Morelli's II, Inc.
to NuOasis International Inc.
10.137 Letter of Intent dated August 5, 1996 between the Registrant and
Ng Man Sun dba Dragon Sight International Amusement (Macau)
Company
10.138 Purchase Agreement dated August 30, 1996 between NuOasis
International Inc. and various purchasers
10.139 Option Agreement with Joseph Monterosso dated June 13, 1996
10.140 Casino Lease and Operating Management Contract between Societe
Loisirs Club Hammamet and Cleopatra Place Limited
10.141 Letter of Intent between Compagnie Monastirienne Immobiliere et
Touristique and Cleopatra Palace Limited
10.142 Letter of Intent dated September 24, 1996 between the Registrant
and Grand Hotel Krasnapolsky N.V.
10.143 Collateral Substitution Agreement dated December 29, 1995 between
the Registrant and Ng Man Sun
[NM\10-KSB:63096KSB]-45
42
<PAGE>
Exhibit
Number Description
---------- ----------------------------------------------------------------
10.144 Collateral Release Agreement dated September 30, 1996 between the
Registrant and Ng Man Sun
10.145 Agreement of Exchange dated September 30, 1996 between NuOasis
International, Inc. and C/A/K Trustkantoor N.V.
10.146 Operating Agreement between Mr. Ng Man Sun and Nona Morellis II,
Inc.
10.147 Consent to Sale of Interest and Termination of Operating
Agreement
10.148 Agreement dated July 31, 1996 between NuOasis International, Inc.
and Mr. Ng Man Sun
10.149 Casino Lease and Operating Management Contact between Societe'
d'Animation et de Loisirs Touristiques (S.A.L.T.) and Cleopatra
Palace Limited
10.150 Fourth Addendum to Consulting Agreement with John P. Desbrow
10.151 Assumption Agreement and Release of Liability with Ng Man Sun
dated December 29, 1995
10.152 Second Addendum to Consulting Agreement with Steven H. Dong
10.153 Agreement dated October 2, 1996 between NuOasis International,
Inc. and Cleopatra World, Inc.
22.1 Schedule of Subsidiaries of the Registrant
* Incorporated by reference from the like numbered exhibits filed
with the Registrant's Registration Statement on Form S-18, SEC
File No. 33-32127-D.
** Incorporated by reference from the like numbered exhibits filed
with the Registrant's Registration Statement on Form S-1, SEC
File No. 33-43402.
# Incorporated by reference from the like-numbered exhibits filed
with the Registrant's 10-K for the fiscal year ended June 30,
1992.
~ Incorporated by reference to Registration Statement on Form S-8,
SEC File No. 33-57270
o Incorporated by reference to Registration Statement on Form S-8,
SEC File No. 33-94498
X Incorporated by reference to Registration Statement on Form S-8,
SEC File No. 33-99060
o Incorporated by reference to Registration Statement on Form S-8,
SEC File No. 33-31064
o Incorporated by reference to Exhibit to Form 8-K dated December
31, 1995, filed on March 5, 1996
[NM\10-KSB:63096KSB]-45
43
<PAGE>
(d) Reports
(1) On June 19, 1995, the Registrant filed a Current Report on Form 8-K,
dated May 25, 1995, reporting the purchase of a forty percent (40%) net profits
interest in the gaming operations conducted at the Holiday Inn and Hyatt Hotels
in Macau (the "Gaming Interest").
(2) On July 24, 1995, the Registrant filed a Current Report on Form 8-K,
dated July 15, 1995 reporting effective the close of business on July 15, 1995
the resignation of Mr. Kenneth R. O'Neal as Director and Chief Financial Officer
of the Registrant.
(3) On August 28, 1995, the Registrant filed a Current Report on Form
8-K, dated August 18, 1995, reporting that effective August 18, 1995 the
Registrant dismissed BDO Seidman, LLP as the Registrant's certifying
accountants. The Registrant further reported the engagement of the accounting
firm of Raimondo, Pettit & Glassman as a successor auditing firm for the purpose
of examining the Registrant's consolidated financial statements for the fiscal
year ended June 30, 1995 and rendering an Independent Accountant's Report.
(4) On February 7, 1996, the Registrant filed a Current Report on Form
8-K dated January 22, 1996 reporting effective the close of business on January
22, 1996 the resignation of Jonathan L. Small as a Director of the Registrant
and the election of Carol Chen as a Director.
(5) On March 5, 1996 the Registrant filed a Current Report on Form 8-K
reporting the closing of an Asset Purchase Agreement pursuant to which the
Registrant purchased three duplex residential buildings totaling 104 units in a
master planned residential and commercial complex known as Peony Garden in
Beijing, China.
(6) On June 11, 1996 the Registrant filed a Current Report on Form 8-K
dated May 29, 1996 reporting effective the close of business on May 29, 1996 the
resignation of John D. Desbrow as a Director of the Registrant.
(7) On November 15, 1996, the Registrant filed a Current Report on Form
8-K dated October 29, 1996 reporting effective the close of business on October
29, 1996 the resignation of Carol Chen as a Director of the Registrant.
[NM\10-KSB:63096KSB]-45
44
<PAGE>
SIGNATURE
In accordance with Section 13 or 15 (d) of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
NONA MORELLI'S II, INC.
Date: December 7, 1996 By: /s/ Fred G. Luke
---------------------------------
Fred G. Luke
Chief Executive Officer
Date: December 7, 1996 By: /s/ Steven H. Dong
---------------------------------
Steven H. Dong
Chief Financial Officer
Date: December 7, 1996 By: /s/ John D. Desbrow
---------------------------------
John D. Desbrow, Secretary
In accordance with the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
NONA MORELLI'S II, INC.
Date: December 7, 1996 By: /s/ Fred G. Luke
-----------------------------
Fred G. Luke, Director
Date: December 7, 1996 By: /s/ Liu Mei Huan Chen, Director
-----------------------------
Liu Mei Huan Chen, Director
Date: December 7, 1996 By: /s/ Cheng Tai Chee, Director
----------------------------------
Cheng Tai Chee, Director
[NM\10-KSB:63096KSB]-45
<PAGE>
EXHIBIT 22.1
<TABLE>
<CAPTION>
SCHEDULE OF SUBSIDIARIES OF THE REGISTRANT
<S> <C> <C> <C>
Jurisdiction of Parent Percentage
Subsidiary Incorporation Corporation Ownership
- ------------------------------------ --------------- -------------------- ----------
Fantastic Foods International Inc. California Registrant 100%
NuOasis International Inc. Commonwealth Registrant 100%
of the Bahamas
NuOasis Properties Inc. Colorado Registrant 100%
NuOasis Gaming Inc. Delaware Registrant 44%(2)
NuOasis Las Vegas Inc.(1) Colorado Casino Management
of America Inc. (1) 100%
NuOasis Laughlin Inc.(1) Colorado Casino Management
of America Inc. (1) 100%
Casino Management of America Inc.(1) Utah NuOasis Gaming Inc. 100%
Ba-Mak Gaming International Inc.(3) Louisiana NuOasis Gaming Inc. 100%
Cleopatra Palace Limited Ireland NuOasis International 28%
Inc.
</TABLE>
(1) Have not commenced business.
(2) The Registrant currently has voting control of NuOasis Gaming, Inc. If
Series B Preferred shares held by the Registrant are converted into
common stock, the Registrant would own approximately 44% of the common
stock of NuOasis Gaming, Inc., as of June 30, 1996.
(3) Converted from Chapter 11 to Chapter 7 Bankruptcy proceeding on April
20, 1995.
[NM\10-KSB:63096KSB]-45
<PAGE>
NONA MORELLI'S II, INC.
Index to Consolidated Financial Statements
Description Page
Independent Auditors' Report ..............................................F-2
Consolidated Balance Sheet as of June 30, 1996 ............................F-3
Consolidated Statements of Operations for the years ended
June 30, 1996 and 1995 ..................................................F-4
Consolidated Statements of Stockholders' Equity for the years
ended June 30, 1996 and 1995 ............................................F-5
Consolidated Statements of Cash Flows for the years ended
June 30, 1996 and 1995 ..................................................F-6
Notes to Consolidated Financial Statements ................................F-8
F-1
<PAGE>
Raimondo, Pettit & Glassman
A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
CERTIFIED PUBLIC ACCOUNTANTS
UNION BANK TOWER, SUITE 1250
21515 HAWTHORNE BOULEVARD
TORRANCE, CALIFORNIA 90503
INDEPENDENT AUDITORS' REPORT
Board of Directors
NONA MORELLI'S II, INC.
Irvine, California
We have audited the accompanying consolidated balance sheet of Nona Morelli's
II, Inc. and subsidiaries (the "Company"), as of June 30, 1996, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years ended June 30, 1996 and 1995. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
June 30, 1996, and the results of its operations and its cash flows for the
years ended June 30, 1996 and 1995, in conformity with generally accepted
accounting principles
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has incurred recurring net losses
and negative cash flows from operating activities, has limited liquid resources,
and has negative working capital. Such matters raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans regarding
those matters are described in Note 1. The consolidated financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
/s/ Raimondo, Pettit & Glassman
---------------------------------
Raimondo, Pettit & Glassman
Torrance, California
November 8, 1996, except for information relating to Cleopatra Palace, Ltd. and
National Pools Corporation included in Notes 7, 12 and 13, as to which the date
is November 29, 1996.
[NM\10-KSB:63096FS.2] -45
F-2
<PAGE>
<TABLE>
<CAPTION>
NONA MORELLI'S II, INC.
Consolidated Balance Sheet
As of June 30, 1996
ASSETS June 30, 1996
- ------------------------------------------------------------------------------- ----------------------
<S> <C>
Current assets:
Cash and cash equivalents $ 50,436
Accounts receivable, net 136,061
Due from affiliate 3,887,435
Inventory 93,599
Other current assets 15,000
----------------------
Total current assets 4,182,531
Property and equipment:
Food manufacturing equipment 1,065,249
Other 84,911
Accumulated depreciation and amortization (804,556)
Total property and equipment, net 345,604
Other assets:
Beneficial ownership interest 7,004,598
Property held for sale 539,213
Deferred tax asset, net 860,902
Deposits and other 7,850
----------------------
Total other assets 8,412,563
----------------------
TOTAL ASSETS $ 12,940,698
=======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 327,215
Accrued expenses 353,968
Interest payable to affiliate 263,672
Due to affiliates 813,028
Income taxes payable 1,243,396
Current maturities of long-term debt to affiliate and others 3,105,216
----------------------
Total current liabilities 6,106,495 Long term liabilities:
Long-term debt 425,327
Total liabilities 6,531,822
Commitments and contingencies (Note 12) Stockholders' equity Preferred stock,
Series D, $.01 par value;
24,000,000 shares authorized, issued and outstanding at
June 30, 1996 (aggregate liquidation of up to $10,000,000) 240,000
Common stock, $.01 par value; 50,000,000 shares authorized;
45,022,300 shares issued and outstanding at June 30, 1996 450,223
Additional paid-in-capital 47,648,677
Accumulated deficit (30,220,100)
Cost of 20,000,115 treasury shares (10,002,425)
Common stock subscription and stockholders' receivables (1,707,499)
-----------------------
Total stockholders' equity 6,408,876
-----------------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 12,940,698
=======================
</TABLE>
See accompanying notes to consolidated financial statements
[NM\10-KSB:63096FS.2] -45
F-3
<PAGE>
<TABLE>
<CAPTION>
NONA MORELLI'S II, INC.
Consolidated Statements of Operations
For the Years Ended
June 30, 1996 and 1995
Years Ended June 30,
----------------------------------------------
1996 1995
----------------------- ----------------------
<S> <C> <C>
Food sales revenue $ 1,251,174 $ 1,555,119
Gaming revenue 11,407,317 3,292,273
----------------------- ----------------------
12,658,491 4,847,392
----------------------- ----------------------
Cost of food sales revenues 838,453 938,848
Cost of gaming revenue - 887,472
----------------------- ----------------------
838,453 1,826,320
----------------------- ----------------------
Gross profit 11,820,038 3,021,072
---------------------- ----------------------
Operating expenses:
Legal and professional fees 2,135,363 1,755,175
Depreciation and amortization 4,989,064 826,689
(Gain) loss on investments (38,510) 140,949
Minority interest (233,877) (506,363)
General and administrative expenses 1,340,059 1,677,355
Write down of gaming interest 6,663,741 -
Write down of beneficial ownership 2,600,000 -
Other valuation expense 1,839,483 -
---------------------- -----------------------
Total operating expenses 19,295,323 3,893,805
----------------------- ----------------------
Operating loss (7,475,285) (872,733)
----------------------- -----------------------
Other income (expenses):
Interest expense (309,757) (17,190)
Other income (expense) 63,334 (13,311)
----------------------- -----------------------
Total other expenses (246,423) (30,501)
----------------------- -----------------------
Net loss before income tax (provision) benefit (7,721,708) (903,234)
Income tax (provision) benefit (997,932) 615,436
----------------------- ----------------------
Net loss $ (8,719,640) $ (287,798)
======================= =======================
Net loss per common share $ (.20) $ (.03)
----------------------- -----------------------
Weighted average number of common shares
outstanding used to compute net loss per
common share 43,803,077 10,481,997
======================= ======================
</TABLE>
See accompanying notes to consolidated financial statements
[NM\10-KSB:63096FS.2] -45
F-4
<PAGE>
<TABLE>
<CAPTION>
NONA MORELLI'S II, INC.
Consolidated Statement of Stockholders' Equity
For the Years Ended June 30, 1996 and 1995
Preferred Common Treasury
Stock Stock Stock
---------------------------- ------------------------- ---------------------------
Shares Amount Shares Amount Shares Amount
-------------- ------------- ----------- ------------ ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance at July 1, 1994 24,883,500 $ 248,835 7,376,200 $ 73,762 115 $ (2,425)
Issuance of common stock for services 1,586,400 15,864
Issuance of common stock on conversion
of Series C preferred stock (870,000) (8,700) 1,741,000 17,410
Property dividend declared and paid, and
minority interest adjustment
Issuance of common stock for property 5,200 52
Issuance of common stock and transfer of
assets in the acquisition of Gaming Interest 32,000,000 320,000
Net Loss
-------------- ------------- ----------- ------------ ----------- --------------
Balance at June 30, 1995 24,013,500 240,135 42,708,800 427,088 115 (2,425)
Issuance of common stock for services 1,886,500 18,865
Exchange of Gaming Interest 20,000,000 (10,000,000)
Issuance of common stock on conversion
of Series C preferred stock (13,500) (135) 27,000 270
Issuance of common stock for exercised options 400,000 4,000
Change in common stock subscription and
stockholders receivable
Net Loss
-------------- ------------- ----------- ------------ ----------- --------------
Balance at June 30, 1996 24,000,000 $ 240,000 45,022,300 $ 450,223 20,000,115 $ (10,002,425)
-------------- ------------- =========== ============ =========== ==============
</TABLE>
<TABLE>
<CAPTION>
Additional Common Stock
Paid-In Subscription Accumulated
Capital Receivable (Deficit) Total
------------ -------------- ------------- ------------
<S> <C> <C> <C> <C>
Balance at July 1, 1994 $ 28,415,244 $ (3,289,536) $(21,137,662) $ 4,308,218
Issuance of common stock for services 1,345,850 1,361,714
Issuance of common stock on conversion
of Series C preferred stock (8,710) -
Property dividend declared and paid, and
minority interest adjustment (575,884) (75,000) (650,884)
Issuance of common stock for property 11,253 11,305
Issuance of common stock and transfer of
assets in the acquisition of Gaming Interest 15,680,000 2,342,722 18,342,722
Net Loss (287,798) (287,798)
------------- -------------- ------------- -------------
Balance at June 30, 1995 44,867,753 (946,814) (21,500,460) 23,085,277
Issuance of common stock for services 2,261,059 2,279,924
Exchange of Gaming Interest (10,000,000)
Issuance of common stock on conversion
of Series C preferred stock (135) -
Issuance of common stock for exercised options 520,000 (400,000) 124,000
Change in common stock subscription and
stockholders receivable (360,685) (360,685)
Net Loss (8,719,640) (8,719,640)
------------- -------------- ------------- -------------
Balance at June 30, 1996 $ 47,648,677 $ (1,707,499) $(30,220,100) $ 6,408,876
============= ============== ============= ============
</TABLE>
See accompanying notes to consolidated financial statements.
[NM\10-KSB:63096FS.2] -45
F-5
<PAGE>
<TABLE>
<CAPTION>
NONA MORELLI'S II, INC.
Consolidated Statements of Cash Flows
For Years Ended June 30, 1996 and 1995
1996 1995
--------------------- -----------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (8,719,640) $ (287,798)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 4,989,064 826,689
Services exchanged for common stock 1,139,227 1,361,714
Valuation expenses 11,103,224 -
Deferred taxes 3,800 (864,702)
(Gain) loss on investments (38,510) 140,949
Minority interest (233,877) (506,363)
Other 84,000 323,790
Increases (decreases) from changes in assets and liabilities:
Accounts receivable, net 19,280 108,724
Due from affiliate (1,776,307) (2,111,228)
Inventory 5,522 (27,297)
Other current assets 158,906 3,737
Deposits and other assets 29,230 -
Accounts payable (26,016) 322,205
Accrued expenses 287,360 149,145
Interest payable to affiliate 235,001 -
Due to affiliates 607,305 -
Income taxes payable 994,130 -
--------------------- ----------------------
Net cash provided by (used in) operating activities 8,861,699 (560,435)
--------------------- ----------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Beneficial ownership interest (9,604,598) -
Conversion of investment to cash 38,510 114,791
Purchase of leasehold improvements and equipment (100,305) -
--------------------- -----------------------
Net cash provided by (used in) investing activities (9,666,393) 114,791
--------------------- -----------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stockholders' receivables 65,500 -
Proceeds from issuance of note payable 350,000 -
Principal payments on notes payables (189,240) (122,177)
--------------------- -----------------------
Net cash provided by (used in) financing activities 226,260 (122,177)
--------------------- -----------------------
Net (decrease) increase in cash (578,434) (567,821)
Cash and cash equivalents, beginning of period 628,870 1,196,691
--------------------- ----------------------
Cash and cash equivalents, end of period $ 50,436 $ 628,870
===================== ======================
</TABLE>
See accompanying notes to consolidated financial statements
[NM\10-KSB:63096FS.2] -45
F-6
<PAGE>
<TABLE>
<CAPTION>
NONA MORELLI'S II, INC.
Consolidated Statements of Cash Flows
For Years Ended June 30, 1996 and 1995
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
1996 1995
--------------------- ---------------------
Cash paid during the year for:
<S> <C> <C>
Interest $ 144,685 $ 29,900
Income taxes $ 1,600 $ -
Non-cash investing and financing activities:
Purchase of assets for stock $ - $ 16,000,000
Purchase of assets for common stock subscription receivable $ - $ 2,342,722
Purchase of assets for note payable $ - $ 3,000,000
Common stock issued for services $ 1,324,267 $ 1,361,714
Stock issued for services on behalf of Cleopatra $ 955,439 $ -
Purchase of food equipment for media credits $ - $ 140,000
Common stock issued for stockholder notes receivable $ 518,758 $ -
</TABLE>
See accompanying notes to consolidated financial statements
[NM\10-KSB:63096FS.2] -45
F-7
<PAGE>
NONA MORELLI'S II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
Note 1. Summary of Significant Accounting Policies and Description of
Business
Description of Business
Nona Morelli's II, Inc. and its subsidiaries (the "Company") operates as a
holding company for leisure and entertainment-related businesses. At June 30,
1996, the company had three wholly-owned and one controlled subsidiary engaged
in food manufacturing and distribution, casino gaming and real estate
investments.
The activities of the Company's subsidiaries are domestic and international,
with existing food and gaming activities in the United States and Asia, and
proposed activities in North Africa and Europe.
Principles of Consolidation and Management Estimates
The Company was incorporated in the State of Colorado on February 6, 1989 as a
successor to Nona Morelli Limited Partnership. The consolidated financial
statements, and references therein to the Company, include the accounts of the
Company and its wholly-owned subsidiaries; NuOasis International, Inc. ("NuOasis
International"), Fantastic Foods International, Inc. ("Fantastic Foods") and
NuOasis Properties, Inc. ("NuOasis Properties"). In addition, the consolidated
financial statements include the accounts of the Company's controlled company --
NuOasis Gaming, Inc. ("NuOasis Gaming") and its wholly-owned subsidiaries,
Ba-Mak Gaming International, Inc. ("BGI"), Casino Management of America, Inc.
("CMA"), NuOasis Laughlin, Inc., ("NuOasis Laughlin"); and NuOasis Las Vegas,
Inc. ("NuOasis Las Vegas"). The Company currently maintains its executive
offices in Irvine, California. All material intercompany accounts and
transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents. This amount includes $0
and $604,371 of certificates of deposit at June 30, 1996 and 1995, respectively.
Fair Value of Financial Instruments
The carrying value of financial instruments included in current assets and
liabilities approximates fair value because of the short maturity of these
items.
Inventory
Inventory is stated at the lower of cost or market, computed on the first-in,
first-out basis.
Property and Equipment and Depreciation
Property and equipment, including amounts recorded under capital leases, are
stated at cost. Repairs and maintenance are charged to expense as incurred and
expenditures for improvements are capitalized.
[NM\10-KSB:63096FS.2] -45
F-8
<PAGE>
NONA MORELLI'S II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
During fiscal 1994, the Company transferred all of its pasta manufacturing
operations from Pueblo, Colorado to Southern California. At the end of fiscal
1994, the Company placed for sale its Pueblo facility consisting of land,
buildings and improvements, along with its food manufacturing equipment, and
reclassified them to assets held for sale. At June 30, 1996, property held for
sale was carried at its estimated net realizable value of approximately
$539,000.
During fiscal 1996, the Company remodeled and improved its food processing
equipment in its California locations and leased its Colorado facility held for
sale. In connection therewith, the Company reevaluated the use and value of its
older equipment and wrote off certain impaired equipment with a net book value
of $1,073,303 which has been recorded as Other Valuation Expense.
Depreciation of property and equipment, and amortization of assets under capital
leases are provided over the lesser of the estimated useful lives of the assets
or the lease term using the straight-line method. Estimated useful lives are 28
to 32 years for buildings, 7 to 10 years for factory equipment, 5 to 7 years for
furniture, fixtures and transportation equipment.
Depreciation expense, including amortization of assets under capital lease
arrangements, charged to operations was $360,520 and $416,252 for the years
ended June 30, 1996 and 1995, respectively.
Amortization of Gaming Interest
The Company amortizes its interest in the profits of the two Macau casinos (see
Note 2) over a period of five years using the straight line method. Amortization
during fiscal 1995 for the period since acquisition, May 25, 1995, through June
30, 1995, amounted to $410,437. Amortization for fiscal 1996 amounted to
$4,268,544.
Loss Per Share
The net loss per share is computed based upon the weighted average number of
shares of common stock and common stock equivalents outstanding during the
period. Common stock equivalents were not considered in the calculations as the
effect would have been anti-dilutive.
Income Taxes
The Company accounts for income taxes using the liability method. Income taxes
are provided on all revenue and expense items, regardless of the period in which
such items are recognized for tax purposes, except for those items representing
a permanent difference between pre-tax accounting income and taxable income. A
valuation allowance is recorded when it is more likely than not that benefits
resulting from deferred tax assets will not be realized.
Revenue Recognition
Food sales and related cost of sales are recognized upon shipment of food
products. Gaming revenues related to BGI are recognized based upon the gross
funds deposited in the gaming machines. Net gaming revenues are referred to in
the industry as "Net Win", the difference between gross funds deposited into the
gaming machines and payments to customers. Gaming operating expenses are paid
from the "Net Win".
Gaming revenues with respect to the Gaming Interest in the two Macau casinos
(see Note 2) are earned as the casinos report their net profits to the Company.
[NM\10-KSB:63096FS.2] -45
F-9
<PAGE>
NONA MORELLI'S II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
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 more clearly evident.
Reclassification of Prior Year Amounts
To enhance comparability, the 1995 financial statements have been reclassified,
where appropriate, to conform with the financial statement presentation used in
1996.
Going Concern
The Company has experienced recurring net losses, has limited liquid resources,
negative working capital and one of its operating subsidiaries was liquidated
during fiscal year 1995. Management's intent is to continue searching for
additional sources of capital and new operating opportunities. In the interim,
the Company will continue operating with minimal overhead and key administrative
functions will be provided by consultants who are compensated primarily in the
form of the Company's common stock. Management estimates that the Company will
need to utilize up to approximately $3,000,000 worth of common stock to fund its
operations through fiscal year 1997. Accordingly, the accompanying consolidated
financial statements have been presented under the assumption the Company will
continue as a going concern.
Recent Accounting Developments
In March 1995, the Financial Accounting Standards Board ("FASB") adopted
Statement No. 121 "Accounting for the Impairment of Long Lived Assets and for
Long Lived Assets to be Disposed Of" which requires entities to review long
lived assets impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable and provides
guidance as to measurement of the carrying value of asset to be disposed of. The
statement is effective for fiscal years beginning after December 15, 1995, and
the Company has not determined the effect the adoption of the statement will
have, but does not believe its implementation will have a material effect on its
financial position.
In October 1995, the FASB adopted Statement No. 123, "Accounting for Stock-Based
Compensation." This Statement encourages entities to adopt a fair value method
of accounting for stock-based compensation plans including stock options and
warrants issued to employees. For entities which do not adopt this method, the
Statement requires disclosure of the effect that the fair-value method would
have on net income and earnings per share. The Statement is effective for
transactions entered into in fiscal years that begin after December 15, 1995.
The Company has not determined the effect of this Statement nor has it decided
when it will adopt the provisions of this Statement.
Note 2. Acquisition and Liquidation of Investments
Sino International Management Corp.
In August 1993, the Company acquired a 50% interest in Sino International
Management Corp. ("Sino"), a Vancouver, BC, Canada-based development stage
casino property investment company in exchange for 200,000 shares of the
Company's common stock. At June 30, 1994, the Company assigned its equity
interest in Sino to its wholly-owned subsidiary, International Casino
Management, Inc., now NuOasis International.
In May 1995, the equity interest in Sino was transferred to Dragon as part of
the consideration given to purchase the Gaming Interest (see Gaming Interest
below).
[NM\10-KSB:63096FS.2] -45
F-10
<PAGE>
NONA MORELLI'S II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
Cleopatra Palace Limited
In October 1993, the Company acquired a 70% equity interest in Cleopatra Palace
Limited, an Irish corporation ("Cleopatra") in exchange for 1,689,000 shares of
its common stock and other assets. Cleopatra is the lessee of a 200,000 square
foot casino and Las Vegas-style showroom presently under construction (the "Cap
Gammarth Casino") pursuant to a Casino Lease Agreement and Operating Management
Contract dated October 8, 1993, with Societe Touristique Tunisie-Golfe.
In October 1994, Cleopatra entered into an agreement with Societe Loisirs Club
Hammamet ("Club Hammamet") to lease and operate a 60,000 square foot casino and
French-style cabaret presently under construction in Hammamet, Tunisia (the
"Hammamet Casino").
In May 1995, as part of the Gaming Interest acquisition, described herein, the
Company sold a 42% interest in Cleopatra to Dragon Sight International Amusement
(Macau) Company ("Dragon").
E.N. Phillips Company Acquisition
On January 13, 1994, the Company entered into a Stock Purchase and Business
Combination Agreement (the "ENP Agreement") with E.N. Phillips Company ("ENP"),
whereby ENP purchased all of the outstanding capital stock of CMA from the
Company. The ENP Agreement closed on March 30, 1994 (the "ENP Closing Date").
On September 30, 1994, ENP's name was changed to NuOasis Gaming, Inc. During
fiscal 1996, NuOasis Gaming changed its fiscal year from September 30 to June 30
in order to coincide with the Company's fiscal year end. The accounts of NuOasis
Gaming are consolidated herein at June 30, 1996 and include 12 months of
operations for both fiscal years ended 1996 and 1995.
Agreement to Purchase Vessel
In May 1994, the Company entered into an Asset Purchase Agreement for the
purchase of a former car ferry vessel (the "Vessel") in exchange for certain of
the Company's investment securities and shares of the Company's common stock. In
May 1995, as part of the Gaming Interest acquisition described below, the
Company relinquished its interest in the Vessel and, as a result, such
investment is no longer included in the Company's balance sheet.
Gaming Interest
On May 25, 1995 the Company purchased from Mr. Ng Man Sun ("Mr. Ng"), doing
business as Dragon, a 40% net profits interest in the gaming operations
conducted by Dragon at the Holiday Inn and Hyatt Hotels in Macau (the "Gaming
Interest").
The Gaming Interest was recorded as an investment in gaming property using the
accounting basis of the elements of the consideration given having an aggregate
book value of $21,342,722, and has been amortized on a straight line basis over
a period of five years. Amortization expense and accumulated amortization with
respect to the Gaming Interest was $4,268,544 and $410,437 for the years ended
June 30,1996 and 1995, respectively. The Company recorded $11,407,317 and
$2,111,228 in gaming revenues from the Gaming Interest for the year ended June
30, 1996, and for the period from May 25, 1995 to June 30, 1995, respectively.
The Company has entered into an agreement to sell the Gaming Interest and, as a
result, these revenues will not recur in future years.
On August 5, 1996, NuOasis International, holder of the Gaming Interest, entered
into an agreement with Mr. Ng to sell the Gaming Interest for 20,000,000 shares
of the Company's common stock issued by the Company in the original purchase of
the Gaming Interest. On or about September 30, 1996, the subject shares were
tendered by Mr. Ng to a third party escrow agent pending the closing of the
purchase of replacement properties which NuOasis International is currently
negotiating to purchase ("the Replacement Property").
[NM\10-KSB:63096FS.2] -45
F-11
<PAGE>
NONA MORELLI'S II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
At June 30, 1996, the Company recognized a $6.6 million write down of the book
value of the Gaming Interest to bring the value of the shares held in escrow for
the purchase of the Replacement Property to the basis of the stock originally
issued to Mr. Ng, which was $.50 a share or $10 million in aggregate. Since the
intended purchase of the Replacement Property will be effective later in fiscal
1997, the book value of the escrowed shares has been presented in a position
similar to treasury stock as of June 30, 1996 .
The gaming revenues for the six months ended June 30, 1996 were classified as
Due from Affiliate as of June 30, 1996 in the amount of approximately $3.9
million and were subsequently collected in August 1996. $3.2 million of the $3.9
million was used by the Company as full payment of the principal and accrued
interest on the original note issued as part of the purchase of the Gaming
Interest on May 25, 1995.
BGI
In October 1994, BGI filed for protection under Chapter 11 of the U.S.
Bankruptcy Code in the Eastern District of Louisiana. While under the protection
of Chapter 11, BGI continued to operate as a charitable bingo route operator in
Louisiana as Debtor-in-Possession. It was management's objective to reorganize
BGI's debt under Chapter 11 and fully continue its gaming operations.
Accordingly, BGI was accounted for as a continuing operation up through April
1995.
On April 20, 1995, upon motion from the United States Trustee, an order
converting the case to Chapter 7 was issued and a Chapter 7 Trustee was
appointed. The trustee took possession of BGI's assets and is in the process of
liquidating such assets for the benefit of BGI's bankruptcy estate. As such, all
gaming operations at BGI ceased and accordingly, BGI has been accounted for as a
disposition of an investment which resulted in (a) the write-off of $1,056,978
and $1,415,050 of total assets and liabilities, respectively; and (b) a net loss
on disposal of investment in the amount of approximately $140,949. Fiscal 1995
gaming revenues include approximately $1.2 million in BGI revenues which will
not be recurring in future years. As of the date of this report, the Trustee's
administration of the bankruptcy estate is ongoing.
Note 3. Accounts Receivable, Net
The following table sets forth the amounts due to the Company at June 30, 1996:
Food sales customers $ 169,929
Other 16,523
----------
186,452
Allowance for doubtful accounts (50,391)
$ 136,061
==========
[NM\10-KSB:63096FS.2] -45
F-12
<PAGE>
NONA MORELLI'S II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
Note 4. Inventories
Inventories relating to the Company's food manufacturing and distribution
segment as of June 30, 1996 are comprised of the following:
Raw materials $ 27,809
Finished goods 51,999
Packing materials and supplies 13,791
--------
$ 93,599
========
Note 5. Beneficial Ownership Interest
Effective December 31, 1995, the Company acquired from Silver Faith Development
Limited ("SFDL"), an affiliate of the Company and Mr. Ng., an interest in three
buildings currently under construction located in a large master planned
commercial and residential real estate development located in Beijing, Peoples
Republic of China ("PRC") known as The Peony Garden project ("Peony Garden").
The purchase price of the Company's interest in Peony Garden was $21 million for
which the Company issued an 8% Promissory Note in the principal amount of $21
million (the "Peony Garden Note"). The Peony Garden Note was non recourse and
fully collateralized by the interest acquired, with the outstanding principal
balance convertible into the shares of the Company's common stock. In January
1996, the Company made a prepayment of principal on the Peony Garden Note in the
amount of $9.6 million.
In April 1996, the Company requested a title opinion on Peony Garden in
conjunction with NuOasis International's efforts to receive financing on the
property. Upon receipt of the title opinion in October 1996, the Company learned
that under PRC law, real property cannot be transferred until completion of the
project. Since the project was not completed at June 30, 1996, and the Peony
Garden Note was non recourse other than against the Company's interest in Peony
Garden, the Company has presented its investment in Peony Garden as a beneficial
ownership interest in the real estate development.
Following the close of fiscal 1996, on August 8, 1996, the Company entered into
an agreement with The Hartcourt Companies, Inc. ("Hartcourt") to sell the
Company's entire interest in Peony Garden for $22 million, consisting of $10
million of Hartcourt common stock and a $12 million Convertible Promissory Note
secured by the Peony Garden interest being sold (the "Hartcourt Note"). The sale
closed on October 8, 1996 and, according to unaudited information received from
Hartcourt, the Company's investment in the Hartcourt stock represents an equity
interest of approximately 43%. Concurrent with the closing of the sale of the
Company's interest in Peony Garden, the Hartcourt Note was assigned to SFDL in
exchange for the Peony Garden Note (the "Note Swap"). No profit was recognized
on the Note Swap or the transaction since the difference between the sales price
and the Company's basis in Peony Garden represents approximately the amount of
interest on the Peony Garden Note that would otherwise have been capitalized
during the construction of the Peony Garden project. At June 30, 1996, the
beneficial ownership interest in Peony Garden of $9.6 million was reduced to the
value of the Company's equity in Hartcourt on or about the closing date of
approximately $7 million resulting in a $2.6 million write down. The Company's
ultimate realization of value from the investment in Hartcourt is dependent upon
many factors, such as changes in the equity value in Hartcourt, which itself is
dependent upon uncertainties surrounding Peony Garden, and upon the Company's
ability to dispose of its investment at its current basis. The Company intends
to exchange the Hartcourt equity investment for other equity investments.
[NM\10-KSB:63096FS.2] -45
F-13
<PAGE>
NONA MORELLI'S II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
Note 6. Long-Term Debt
Long-term debt for the years ended June 30, 1996 consist of the following:
Note Payable to affiliate - Dragon
8% interest, paid in August 1996 $ 3,000,000
Note Payable - Bank
Due November 1999, payable in monthly
principal installments of $7,290 plus interest
at Prime plus 4% 309,414
Mortgage Loan
Due August 2000, payable in monthly
principal installments of $2,455, with final
installment of $186,500, at 10.25% interest 221,129
------------
3,530,543
Current Maturities of Long Term Debt (3,105,216)
-------------
$ 425,327
=============
In October 1995, Fantastic Foods entered into a working capital loan agreement
(the "Loan") with a financial institution, whereby Fantastic Foods borrowed
$350,000 for a term of forty seven months bearing an interest rate of prime plus
4% (prime rate at June 30, 1996 was 8.25%) per annum and collateralized by all
accounts receivable, inventory, and equipment related to Fantastic Foods food
manufacturing activities.
All real property has been pledged to lenders under the terms of the mortgage
loan.
Minimum annual principal repayments of long-term debt in each of the next five
fiscal years, are as follows:
Year Ending Amounts
June 30, Due
- ---------- -----------
1997 3,105,216
1998 95,551
1999 97,124
2000 46,433
Thereafter 186,219
Total $ 3,530,543
===========
Note 7. Stockholders' Equity
Capitalization
There were no reverse stock splits or stock splits during the year ended June
30, 1996. Except for shares issued for services, there were no private offerings
conducted in fiscal 1996 or 1995.
[NM\10-KSB:63096FS.2] -45
F-14
<PAGE>
NONA MORELLI'S II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
Preferred Stock
The Company has authorized 25,000,000 shares of preferred stock, which are
divided into four classes or series: Series A, Series B, Series C and Series D.
All Series A and Series B preferred stock was redeemed by the Company prior to
or during fiscal 1993, and returned to the preferred stock treasury.
In October 1992, the Company conducted a private offering of Series C
Convertible Preferred Stock. The Series C Convertible Preferred Stock entitles
holders to receive the same dividends as common stockholders when and if
declared by the Board of Directors and, at June 30, 1994, was convertible, at
the option of the holder, commencing August 1, 1993 to one share of common stock
for each share of Series C Preferred Stock held, subject to adjustment. During
the year ended June 30, 1995, the Company amended and restated the Certificate
of Designations, Rights and Preferences of Series C Convertible Preferred Stock,
such that the Series C Preferred Stock is convertible at the option of the
holder to two shares of common stock for each share of Series C Preferred Stock,
and shall entitle the holder to receive common stock dividends when and if
declared by the Board of Directors at the rate of one share of common stock for
each ten shares of Series C Preferred Stock.
During the year ended June 30, 1995, 870,033 shares of Series C Convertible
Preferred Stock were converted to 1,740,066 shares of common stock. During
fiscal 1996 all remaining Series C Preferred Stock was converted to common
stock, and no Series C Preferred Stock remains outstanding at June 30, 1996.
During the year ended June 30, 1993, the Company designated a Series D Voting
Convertible Preferred Stock out of the 24,130,000 redeemed shares of Series A,
Series B and Series C Preferred Stock. The Series D Convertible Voting Preferred
Stock consists of 24,000,000 shares which were issued to New World Capital Inc.
(now NuVen Advisors) in exchange for the German Bonds with an estimated market
value, based upon independent legal and valuation opinions, discounted
approximately 50% at the date of transfer, of $10,000,000. Due to the lack of a
date and value certain as to the redemption and incomplete trading history of
the German Bonds, at June 30, 1993, the $10,000,000 aggregate estimated market
value of the German Bonds was fully reserved by the Company by a charge against
Additional Paid-in Capital.
The Series D Convertible Preferred Stock is redeemable, in whole or in part, at
the option of the Board of Directors, at any time, at a redemption price of up
to $24,000,000, or convertible, at the option of the holder, into a maximum of
10,000,000 shares of the Company's common stock. The right to convert the Series
D Convertible Preferred Stock expires in July 1998.
Common Stock Subscriptions and Stockholders' Receivable
Stock subscriptions and stockholders' receivable for the year ended June 30,
1996 consists of the following:
Amount
-----------
Stock Subscription Receivable - Cleopatra $ 946,814
Receivable from Cleopatra, net 189,259
Receivable from Officer 478,758
Receivables from Consultants 92,668
-----------
$ 1,707,499
In October 1993, the Company acquired a 70% equity interest in Cleopatra in
exchange for shares of the Company's common stock. In May 1995, the Company's
70% equity interest in Cleopatra decreased to 28% as a result of the Gaming
Interest acquisition (see Note 2).
[NM\10-KSB:63096FS.2] -45
F-15
<PAGE>
NONA MORELLI'S II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
At June 30, 1996, the investment related to Cleopatra is carried as a Common
Stock Subscription Receivable based on the market value of the Company's shares
issued discounted 50% at the date of issuance. The investment in Cleopatra is
maintained at cost, as a Common Stock Subscription Receivable until all of the
Company's common stock held by Cleopatra is sold and all financing commitments
have been fulfilled (Note 13).
During fiscal year 1996, the Company incurred expenses on behalf of Cleopatra
amounting to $955,439 which is included as a stockholders' receivable at June
30, 1996, net of an allowance for possible loss of $766,180 which is included in
Other Valuation Expense.
During fiscal year 1996, Cleopatra devoted most of its resources to completing
its gaming projects in Tunisia, raising financing to fulfill its commitments and
preparing for the opening of the casinos. As of the filing date of this Report,
Cleopatra has no operations.
Cleopatra's ability to continue as a going concern is dependent upon Cleopatra's
ability to fulfill its financial commitments (see Note 13) and the future
profitability of the casinos and other properties it will manage. Accordingly,
the uncertainties surrounding these matters raise substantial doubt about
Cleopatra's ability to continue as a going concern and about the Company's
ultimate recoverability of its investment. No adjustments have been made to the
accompanying consolidated financial statements of the Company for these
uncertainties at this time and it is at least possible that management's
estimate of the recoverability of its investment could change in the near term.
During fiscal 1996, 400,000 common shares were issued upon exercise of options
by the Chief Executive Officer of the Company in the amount of 440,000, or $1.10
per share. The Company received a note receivable in the amount of $440,000 and
cash payments in the aggregate amount of $40,000 were made prior to year end and
approximately $120,000 subsequent to year end. The note bears interest of 10%
and is due in May 1997. The note receivable has been classified as Stockholder
Receivable in the amount of $400,000 at June 30, 1996.
During fiscal 1996, 868,824 common shares of NuOasis Gaming were issued upon
exercise of options by the President of NuOasis Gaming in the amount of
$104,258, or $.12 per share. NuOasis Gaming received a note receivable in the
amount of $78,758, bearing interest of 10%, and a cash payment of $25,500 as
consideration for the exercise of these options. The note receivable has been
classified as Stockholder Receivable in the amount of $78,758 at June 30, 1996
and was fully paid subsequent to June 30, 1996.
Dividends
The Company has paid no cash dividends with respect to its common stock since
its inception. However, during fiscal 1995, the Company declared and paid a
property dividend of approximately 1.5 million shares of common stock of NuOasis
Gaming. No cash or property dividends were paid or declared during fiscal 1996.
As of the date of this Report, the Board of Directors of the Company have not
approved a dividend distribution policy.
Employee Stock Benefit Plan
An employee stock benefit plan ("ESBP") was established during fiscal year 1996
covering substantially all employees and consultants of the Company. There are
no mandatory contributions required by either the Company or the employees and
consultants, however, the ESBP provides for the issuance of up to 500,000 common
shares of the Company at the discretion of the Board of Directors. During fiscal
year 1996, 16,000 shares were issued under the ESBP. As of June 30, 1996, the
Board of Directors has not approved any additional issuances of common shares
under the ESBP.
[NM\10-KSB:63096FS.2] -45
F-16
<PAGE>
NONA MORELLI'S II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
Note 8. Stock Option Plan
A summary of the status of option transactions for the years ended June 30, 1996
and 1995 is as follows:
1996 1995
---------- ----------
Outstanding at beginning of year 1,320,000 200,000
Granted 700,000 1,120,000
Exercised (400,000) -
Canceled (60,000) -
---------- ----------
Outstanding at end of year 1,560,000 1,320,000
========== ==========
Range of option exercise prices
granted $0.91 - $1.53 $0.58 - $4.00
At June 30, 1996, options for 1,560,000 shares were fully vested and
exercisable. The Company recognized $84,000 in compensation expense for options
exercised during fiscal 1996.
During fiscal year 1996, the Chief Executive Officer of the Company exercised
400,000 options to purchase shares of common stock of the Company (Note 7).
Note 9. Related Party Transactions
Contracts With Executive Officers
In September 1994, the Company entered into an Employment Agreement with Fred G.
Luke, the Company's Chairman and Chief Executive Officer. Mr. Luke has been
serving as the Company's Chairman and CEO since approximately July 1993. From
July 1993 through June 30, 1994, Mr. Luke received no compensation for his
services as CEO but did receive $9,000 for his services as a Director. The terms
of the Employment Agreement call for Mr. Luke to receive approximately $10,000
per month, retroactive to July 1, 1994, for five (5) years as a base salary;
granted him an option to purchase 1,000,000 shares of the Company's common stock
exercisable at $1.10 per share; provides him with an annual bonus based upon a
number of factors related to the Company's growth and performance which include;
(a) serving on the Company's Board of Directors and as its Chief Executive
Officer; (b) providing advice concerning mergers and acquisitions; (c) corporate
finance; (d) day to day management; (e) guidance with respect to general
business decisions; (f) other duties commonly performed by the Chief Executive
Officer of a publicly-held company; and requires the Company to purchase life
insurance coverage, reimbursement for vehicle expenses, and provide other fringe
benefits. No bonuses have been accrued, paid or are owed as of the date of this
Report. The Company expensed $120,000 and $120,000 during fiscal years 1996 and
1995, respectively, and had no amounts due to Mr. Luke as of June 30, 1996.
In August 1995, NuOasis Gaming entered into an Employment Agreement with Fred G.
Luke, to save as NuOasis Gaming's President. Mr. Luke has been serving as the
NuOasis Gaming President since approximately March 31, 1994. The terms of the
Employment Agreement call for Mr. Luke to receive approximately $4,500 per
month, retroactive to April 1, 1994, for five (5) years as a base salary;
granted him an option to purchase 3,000,000 shares of NuOasis Gaming's common
stock at an exercise price of $.12 per share; provides him with an annual bonus
based upon a number of factors related to NuOasis Gaming's growth and
performance which include (a) serving on NuOasis Gaming's Board of Directors and
as its President; (b) providing advice concerning mergers and acquisitions; (c)
corporate finance; (d) day to day management; (e) guidance with respect to
general business decisions; (f) other duties commonly performed by the President
of a publicly-held company; and requires NuOasis Gaming to purchase life
insurance coverage, reimburse vehicle expenses, and provide other fringe
benefits. Between March 31, 1994 and September 30, 1994, Mr. Luke received no
cash payments for his services. In August 1995, NuOasis Gaming agreed to
retroactively compensate Mr. Luke for past services in the amount of $27,000 for
the period April 1, 1994 to September 30, 1994 and $59,000 for the period
October 1, 1994 to September 30, 1995. No bonuses have been accrued, paid or are
owed as of the date of this Report. NuOasis Gaming expensed $54,000 and $72,500,
during fiscal 1996 and 1995, respectively, and had $126,500 due to Mr. Luke as
of June 30, 1996.
[NM\10-KSB:63096FS.2] -45
F-17
<PAGE>
NONA MORELLI'S II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
Effective January 1, 1994, the Company and John D. Desbrow entered into a
Consulting Agreement for the engagement of Mr. Desbrow to perform legal services
and to hold the office of Secretary on behalf of the Company until December 31,
1994. Under the Consulting Agreement the Company contracted to pay Mr. Desbrow
$150,000 payable in the Company's common stock issuable in monthly increments in
arrears. Under the terms of the Consulting Agreement, Mr. Desbrow invoices the
Company and applies the net proceeds received from the sale of stock to the
invoiced amounts. For purposes of any "profit" computation under Section 16(b),
Mr. Desbrow and the Company have agreed the price paid for the shares is deemed
to be $150,000. Pursuant to the terms of the Consulting Agreement, the Company
granted Mr. Desbrow an option to purchase 50,000 shares of the Company's common
stock exercisable at a price of $.58 per share. Effective Janaury 1, 1996, the
Consulting Agreement was renewed through December 31, 1996 and 50,000 shares
were issued during fiscal 1996. An additional option of 50,000 shares
exercisable at a price of $1.53 per share was granted during fiscal 1996. The
Company expensed $150,000 and $150,000 during fiscal 1996 and 1995,
respectively, and had $70,378 due to Mr. Desbrow as of June 30, 1996.
Effective April 1, 1994, NuOasis Gaming entered into a Consulting Agreement with
John D. Desbrow for the engagement of Mr. Desbrow to perform legal services and
to hold the office of Secretary, on behalf of NuOasis Gaming, for the period
from April 1, 1994 to March 31, 1995 for an amount of $36,000 per annum.
Additionally, in fiscal 1995 Mr. Desbrow billed and eventually received from the
sale of shares $4,000 for services rendered as a Director from April 1994 to
July 1994. Effective April 1, 1995, the Consulting Agreement was renewed through
March 31, 1996 for an amount of $50,000 per annum. 1,050,000 shares of NuOasis
Gaming common stock were registered for issuance on Forms S-8 filed with the
Securities and Exchange Commission during the 1995 fiscal year. Under the terms
of the Consulting Agreement, Mr. Desbrow invoices NuOasis Gaming and applies the
net proceeds received from the sale of stock to the invoiced amounts. For
purposes of any "profit" computation under Section 16 (b), Mr. Desbrow and
NuOasis Gaming have agreed the price paid for the shares is deemed to be
$50,000. Effective April 1, 1996, the Consulting Agreement was renewed through
March 31, 1997 for an amount of $ 75,000 per annum and granted him an option to
purchase 275,000 shares of NuOasis Gaming common stock at an exercise price of
$.12 per share. NuOasis Gaming expensed $56,250 and $39,500, during fiscal 1996
and 1995, respectively, and had $8,252 due from Mr. Desbrow as of June 30, 1996.
Effective January 1, 1994, the Company entered into a Consulting Agreement with
Jon L. Lawver and J. L. Lawver Corp. pursuant to which Mr. Lawver was to perform
professional services and to hold the office of President of Fantastic Foods for
calendar year 1994. Pursuant to the Consulting Agreement the Company agreed to
pay Mr. Lawver 36,000 shares of the Company's common stock, issuable in monthly
increments in arrears and granted Mr. Lawver the option to purchase 50,000
shares of the Company's common stock at an exercise price of $.58 per share.
Under the terms of the Consulting Agreement, Mr. Lawver invoices the Company and
applies the net proceeds received from the sale of stock to the invoiced
amounts. For purposes of any "profit" computation under Section 16(b) Mr. Lawver
and the Company have agreed the price paid for the shares is deemed to be
$100,000. Mr. Lawver's agreement was renewed for the year ended June 30, 1995
and 124,000 shares were issued to him during fiscal 1995. During fiscal 1996,
the Consulting Agreement was again renewed with the same terms for fiscal 1997
and 85,000 shares were issued to him during fiscal 1996 to apply against
services rendered. An additional option of 50,000 shares exercisable at a price
of $1.53 per share was granted during fiscal 1996. The Company expensed $100,000
and $100,000 during fiscal 1996 and 1995, respectively and had $14,991 due to
Mr. Lawver at June 30, 1996.
[NM\10-KSB:63096FS.2] -45
F-18
<PAGE>
NONA MORELLI'S II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
In July 1995, the Company entered into a Consulting Agreement with Steven H.
Dong, pursuant to which Mr. Dong is to perform accounting services and to hold
the office of Chief Financial Officer through June 30, 1996. Pursuant to the
agreement as amended in October 1995, the Company agreed to pay Mr. Dong
$145,000 per annum in cash or in the Company's common stock payable monthly in
arrears and granted him an option to purchase 100,000 shares of the Company's
common stock at an exercise price of $1.53 per share. Under the terms of the
Consulting Agreement, Mr. Dong invoices the Company and applies the net proceeds
received from the sale of stock to the invoiced amounts. For purposes of any
"profit" computation under Section 16(b) Mr. Dong and the Company have agreed
the price paid for the shares is deemed to be $145,000. During fiscal 1996, the
Consulting Agreement was renewed with the same terms through June 30, 1997. No
cash payments were made to Mr. Dong during fiscal 1996 or 1995, however 95,000
shares were issued during 1996 which were used to apply against services
rendered. The Company expensed $145,000 and $0 during fiscal 1996 and 1995 and
had $42,635 due to Mr. Dong as of June 30, 1996.
In July 1995, NuOasis Gaming entered into a Consulting Agreement with Mr. 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, NuOasis Gaming agreed to pay Mr. Dong $20,000 in cash or in NuOasis
Gaming's common stock, payable monthly in arrears, and granted him an option to
purchase 275,000 shares of NuOasis Gaming's common stock at an exercise price of
$.12 per share. Effective July 1, 1996, the Consulting Agreement was renewed
through June 30, 1997 for an amount of $39,000 per annum. Cash payments of
$5,000 were made to Mr. Dong by NuOasis Gaming during fiscal 1996 and no stock
has been issued pursuant to this Consulting Agreement. NuOasis Gaming expensed
$20,000 during fiscal 1996, and had $15,000 due to Mr. Dong as of June 30, 1996.
In January 1996, the Company entered into a consulting agreement with Albert
Rapuano, pursuant to which Mr. Rapuano is to perform gaming consulting services
and to hold the office of President of NuOasis International through December
31, 1996. Pursuant to the agreement, the Company agreed to pay Mr. Rapuano
$250,000 per annum in cash or in the Company's common stock payable monthly in
arrears and granted him an option to purchase 500,000 shares of the Company's
common stock at an exercise price of $.91 per share. Under the terms of the
Consulting Agreement, Mr. Rapuano invoices the Company and applies the net
proceeds received from the sale of stock to the invoiced amounts. For purposes
of any "profit" computation under Section 16(b) Mr. Rapuano and the Company have
agreed the price paid for the shares is deemed to be $250,000. No cash payments
were made to Mr. Rapuano during fiscal 1996, however, 70,000 shares were issued
during 1996 which were used to apply against services rendered. The Company
expensed $115,000 and $0 during fiscal 1996 and 1995, respectively, and had
$50,211 due to Mr. Rapuano as of June 30, 1996.
Transactions with Directors and Affiliates
On March 17, 1994, Jonathan L. Small, Attorney at Law, became a member of the
Board of Directors to fill a vacancy caused by the resignation of a former
Director in June 1993. On October 29, 1993, the Company entered into a
Consulting Agreement with Mr. Small to retain his services to evaluate potential
acquisitions and to assist the Company in the general development and execution
of its business plan. Pursuant to the agreement, Mr. Small was issued 1,600
shares of the Company's common stock. On January 5, 1995, Mr. Small entered into
a Consulting Agreement effective November 1, 1994, with the Company to retain
Mr. Small to serve on the Board of Directors. 15,000 shares were issued to Mr.
Small during fiscal 1996 which were used to apply against services rendered.
The Luke Trust and Lawver Corp. owns 93% and 7%, respectively, of NuVen
Advisors, formerly New World. Fred G. Luke, as trustee of the Luke Trust,
controls the Luke Trust and Mr. Lawver is the majority shareholder of Lawver
Corp. and thereby controls Lawver Corp.
[NM\10-KSB:63096FS.2] -45
F-19
<PAGE>
NONA MORELLI'S II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
On June 14, 1993, NuVen Advisors acquired 24,000,000 shares of the Company's
$.01 par value Series D Convertible Preferred Stock. At the time of the
transaction, NuVen Advisors was unrelated to the Company. As a result, NuVen
Advisors became the Control Person of the Company. On June 14, 1993, Fred G.
Luke became a Director. On July 22, 1993, following the resignation of Frank
Morelli II, Fred G. Luke became the Company's Chief Executive Officer, Chief
Financial Officer and Chairman of the Board of Directors. The Luke Trust owns
93% of NuVen Advisors. Fred G. Luke, as Co-Trustee of the Luke Trust determines
the voting of such shares and, as a result, may be deemed to control the Luke
Trust and the disposition of 24,000,000 shares of the Company's Series D
Preferred Stock.
Effective February 1, 1994, the Company entered into an Advisory and Management
Agreement with NuVen Advisors for the engagement of NuVen Advisors to perform
professional and advisory services for calendar year 1995. Pursuant to the
Consulting Agreement, the Company agreed to pay NuVen Advisors $120,000
annually, payable monthly in $10,000 increments in arrears, and granted NuVen
Advisors an option to purchase 100,000 shares of the Company's common stock
exercisable at a price of $.80 per share. During fiscal 1996, the Advisory and
Management Agreement was renewed for fiscal 1997 with the same terms. The
Company expended $120,000 and $120,000 during fiscal 1996 and 1995,
respectively, and had $2,958 due to NuVen Advisors as of June 30, 1996.
Effective April 1, 1994, NuOasis Gaming entered into an Advisory and Management
Agreement with NuVen Advisors for the engagement of NuVen Advisors to perform
professional and advisory services. Pursuant to such Agreement, NuOasis Gaming
agreed to pay NuVen Advisors $180,000 annually, payable monthly in $15,000
increments in arrears, and granted NuVen Advisors an option to purchase
2,000,000 shares of common stock of NuOasis Gaming exercisable at a price of
$.10 per share. During fiscal 1996, the Advisory and Management Agreement was
renewed effective October 1, 1995, for $120,000 annually. NuOasis Gaming
expensed $135,000 and $180,000 during fiscal 1996 and 1995, respectively, and
had $118,000 due to NuVen Advisors as of June 30, 1996.
Effective July 1, 1994, NuOasis International entered into an Advisory and
Management Agreement with NuVen Advisors for the engagement of NuVen Advisors to
perform professional and advisory services for calendar year 1995. Pursuant to
such agreement, NuOasis International agreed to pay NuVen Advisors $120,000
annually, payable monthly in $10,000 increments in arrears, and granted NuVen
Advisors an option to purchase 1,100,000 shares of common stock of NuOasis
International exercisable at a price of 110% of the book value per share on the
day of the grant. During fiscal 1996, the Advisory and Management Agreement was
renewed for fiscal 1997 with the same terms. NuOasis International expended
$120,000 and $120,000 during fiscal 1996 and 1995, respectively, and had
$224,499 due to NuVen Advisors as of June 30, 1996.
Effective July 1, 1994, NuOasis Properties entered into an Advisory and
Management Agreement with NuVen Advisors for the engagement of NuVen Advisors to
perform professional and advisory services on behalf of NuOasis Properties for
the calendar year 1995. Pursuant to such agreement, NuOasis Properties agreed to
pay NuVen Advisors $120,000 annually, payable monthly in arrears in $10,000
increments, and granted NuVen Advisors an option to purchase 1,100,000 shares of
common stock of NuOasis Properties exercisable at a price of 110% of the book
value per share on the date of the grant. During fiscal 1996, the Advisory and
Management Agreement was renewed for fiscal 1997 with the same terms. Minimal
amounts were billed by NuVen Advisors to NuOasis Properties, as little activity
occurred in NuOasis Properties for fiscal 1996 and 1995. NuOasis Properties had
$80,000 due from NuVen Advisors as of June 30, 1996.
Effective April 1, 1994, CMA entered into an Advisory and Management Agreement
with NuVen Advisors for the engagement of NuVen Advisors to perform professional
and advisory services. Pursuant to such agreement CMA agreed to pay NuVen
Advisors $120,000 annually, payable monthly in $10,000 increments in arrears,
and granted NuVen Advisors an option to purchase up to 5% of CMA's common stock
outstanding at the time of exercise, exercisable at a price of 110% of the book
value of such shares. During fiscal 1996, the Advisory and Management Agreement
was renewed for fiscal 1997 with the same terms. CMA expended $120,000 and
$120,000 during fiscal 1996 and 1995, respectively, and had $159,000 due to
NuVen Advisors as of June 30, 1996.
[NM\10-KSB:63096FS.2] -45
F-20
<PAGE>
NONA MORELLI'S II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
During fiscal year 1994, NuOasis Gaming entered into an agreement with Structure
America, Inc. ("SAI") to issue 1,000,000 shares of NuOasis Gaming for consulting
services. Such services were rendered during fiscal 1995. During fiscal year
1996, NuOasis Gaming entered into another agreement with SAI to perform
consulting services. Pursuant to such agreement, NuOasis Gaming agreed to issue
1,000,000 common shares of NuOasis Gaming to SAI and granted SAI an option to
purchase 1,000,000 common shares of NuOasis Gaming, exercisable at $.12 per
share. Under Rule 13d-3 (d) (1) (c), SAI is deemed the beneficial owner of
2,000,000 shares of NuOasis Gaming even though the shares are not outstanding.
The agreement is fully contingent upon the final execution and closing of the
purchase of National Pools Corporation. NuOasis Gaming expensed $75,000 and
$54,000 during fiscal years 1996 and 1995, respectively and had approximately
$40,000 due to SAI as of June 30, 1996.
During fiscal year 1996, Nona renewed an agreement with SAI to perform
consulting services. Pursuant to such agreement, Nona incurred approximately
$465,000 for services performed during fiscal year 1996. Nona expensed
approximately $465,000 and $224,500 during fiscal years 1996 and 1995,
respectively and had approximately $6,000 due to SAI as of June 30, 1996.
Note 10. Income Taxes
The Company and its subsidiaries, NuOasis International, Fantastic Foods and
NuOasis Properties file a consolidated return for both federal and state
purposes. The Company's controlled subsidiary, NuOasis Gaming, files separate
consolidated returns with its subsidiaries.
The 1996 and 1995 provision for income taxes is as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------------------- ---------------------------------------
The Company The Company
and and
Subsidiaries NuOasis Gaming Subsidiaries NuOasis Gaming
(excluding and (excluding and
NuOasis Gaming) Subsidiaries NuOasis Gaming) Subsidiaries
--------------------- -------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Liability:
Current tax expense
Federal $ (784,210) $ - $ (192,070) $ -
State (209,920) - (57,196) -
--------------------- -------------------- ------------------- -------------------
Total current tax expense (994,130) - (249,266) -
--------------------- -------------------- ------------------- -------------------
Deferred taxes:
Federal 2,060,904 2,570,356 1,884,098 349,003
State 558,092 379,808 105,212 47,731
Change in valuation
allowance (2,622,798) (2,950,164) (1,124,608) (396,734)
--------------------- -------------------- ------------------- --------------------
Total deferred tax benefit
(provision) (3,802) 0 864,702 0
--------------------- -------------------- ------------------- -------------------
Income tax benefit (provision) $ (997,932) $ 0 $ 615,436 $ 0
===================== ==================== =================== ===================
</TABLE>
For the year ended June 30, 1996 and 1995, the Company's effective federal and
state income tax rate applied to book taxable income (loss) differs from the
statutory rate as follows:
1996 1995
-------- --------
Federal statutory rate (34.00%) (34.00%)
Minority interest (1.03%) -
Effect of foreign controlled
corporation loss for which no
deferred tax amount was recognized 45.91% -
Change in estimate of prior year liability (2.49%) -
Change in valuation allowance 17.11% (25.25%)
State taxes, net of federal effect (4.39%) (6.33%)
Utilization of net operating loss (4.36%) (1.36%)
Other (3.83%) (1.06%)
-------- --------
Effective tax rate 12.92% (68.00%)
======== ========
The Company utilized $989,356 and $192,353 in net operating losses to offset
federal and state taxable income for the years ended June 30, 1996 and 1995,
respectively.
At June 30, 1996, the components of net deferred tax asset are as follows:
<TABLE>
<CAPTION>
The Company NuOasis
and Gaming and
Subsidiaries Subsidiaries
(excluding
NuOasis Gaming)
------------------------ ------------------------
Current:
<S> <C> <C>
Deferred tax assets resulting
from temporary differences $ 21,588 $ 154,224
Valuation allowance (21,588) (154,224)
------------------------ ------------------------
Total current deferred tax asset $ 0 $ 0
======================== ========================
Non-Current:
Deferred tax liability
resulting from temporary
differences $ (136,967) $ -
Deferred tax assets resulting
from loss carry forward 4,723,686 2,795,940
Valuation allowance (3,725,817) (2,795,940)
------------------------- ------------------------
Total non-current tax asset 860,902 0
------------------------- ------------------------
Net deferred tax asset $ 860,902 $ 0
========================= ========================
</TABLE>
The deferred taxes result from temporary differences relating to the difference
in the basis of assets and liabilities for financial and tax reporting purposes.
The temporary differences relate mainly to the difference in basis of the Gaming
Interest, accounts receivable and the recognition of the benefit of prior year
losses carried forward.
As a result of changes in stock ownership which occurred in 1993 and 1995, the
Company's use of its net operating loss carry forwards may be limited by Section
382 of the Internal Revenue Code until such net operating loss carry forwards
expire. The Company intends to obtain independent third party valuation of its
stock for purposes of the calculation required by Section 382 in order to
determine whether such net operating loss carry forwards may be limited. As of
the date of this Report, the Company has not received such independent valuation
and, accordingly, has accrued its income tax provision in consideration of
Section 382.
[NM\10-KSB:63096FS.2] -45
F-21
<PAGE>
NONA MORELLI'S II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
Deferred tax assets have been computed using the maximum expiration terms of 13
and 5 years (or total net operating losses available of approximately $11.9
million and $7.8 million) for federal and state tax purposes, respectively. Net
operating losses expire from the years 2004 through 2009.
A valuation allowance was recorded at June 30, 1996 to offset benefits of net
operating losses in excess of any potential federal loss carry back. The change
in the valuation allowance in fiscal 1996 is due to the sale of cash flow
producing assets.
No provision was made or benefits recognized in 1996 for U.S. income taxes on
the undistributed earnings/ losses of the foreign subsidiary as it is the
Company's intention to utilize those earnings in the foreign operations for an
indefinite period of time or repatriate earnings only when tax effective to do
so. The foreign subsidiary had an accumulated deficit at June 30, 1996 which
would have resulted in an unrecognized temporary difference for an NOL
carryforward of approximately $9.6 million with a related unrecognized deferred
tax benefit of approximately $3.3 million.
Note 11. Segment Information and Concentration of Credit Risk
Industry Segments
The relative contributions to revenues, gross profit and identifiable assets of
the Company's active industry segments for the years ended June 30, 1996 and
1995 are as follows:
1996 1995
------------ -----------
Revenues
Food Manufacturing and Distribution $ 1,251,174 $ 1,555,119
Gaming/Entertainment $ 11,407,317 $ 3,292,273
Gross Profit
Food Manufacturing and Distribution $ 412,721 $ 616,271
Gaming/Entertainment $ 11,407,317 $ 2,404,801
Identifiable assets of the Company's food manufacturing and distribution segment
is approximately $1.9 million as of June 30, 1996.
Identifiable assets exclude intercompany loans, advances and investments.
Intercompany trade receivables between segments have also been excluded from
identifiable assets. Corporate assets are principally cash, marketable
securities, deferred charges and assets held for disposition.
Significant Customers and Concentration of Credit Risk
Approximately 90% of the Company's net revenues for the year ended June 30,
1996, resulted from its Gaming Interest in the two Macau casinos. At June 30,
1996, the Company has approximately $3.8 million of related gaming receivable
which was collected subsequent to year end.
The Company maintains several cash accounts with a bank. At June 30, 1996, the
aggregate bank balance of such accounts do not exceed the federally-insured
limit.
[NM\10-KSB:63096FS.2] -45
F-22
<PAGE>
NONA MORELLI'S II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
The Company had sales to five customers and three customers, each in excess of
10% of total food sales during fiscal 1996 and 1995, respectively all of whom
were distributors. At June 30, 1996, the Company had amounts due from four
customers, each in excess of 10% of total food sales receivables.
Note 12. Commitments and Contingencies
Operating Leases
The Company leases two manufacturing plants in California for its food
processing operations. The Company also leases certain equipment on
non-cancelable operating leases related to its food manufacturing activities.
NuVen Advisors provides office space to the Company and its subsidiaries, along
with general and administrative personnel, office furniture and equipment,
telephone and fax services, accounting and automobiles pursuant to the various
Management and Advisory Agreements.
At June 30, 1996 future rental payments due under non-cancelable operating
leases, ranging from 1-3 years for buildings and equipment related to its food
manufacturing activities, are as follows:
Year Ending Amounts
June 30, Due
------------------ ------------------
1996 $ 130,581
1997 11,400
1998 12,900
1999 12,100
2000 5,400
------------------
$ 172,381
==================
Rent expense charged to operations was $96,328 and $132,183 for the years ended
June 30, 1996 and 1995, respectively.
Legal Proceedings
In January 1995, Charles Arnold ("Arnold"), a consultant to the Company's prior
management, initiated a lawsuit against the Company, CMA and MDM Gaming
Partners, L.P. ("MDM"), alleging that the defendants have denied him a 1%
equitable interest in MDM, which was allegedly verbally promised to Arnold by
Frank J. Morelli, II and Frank J. Morelli, III for alleged professional services
rendered to MDM. Arnold is alleging damages in an amount of $90,000 in
connection with this claim. The Company and the other defendants have filed a
third-party complaint against FTF, Theodore E. DeTello, Frank J. Morelli, II and
Frank J. Morelli, III, seeking full indemnification from them for any damages to
which Arnold may be entitled in accordance with a certain Termination Agreement
dated December 17, 1993 between the parties. Counsel for the Morelli's has
recently indicated that the Morelli's would be taking the Fifth Amendment
against testifying in connection with this lawsuit. Since Arnold may not have
witnesses to prove the alleged existence of an oral promise, the likelihood of
any recovery against the Company, CMA or MDM appears to be remote. Counsel for
the parties have stipulated to binding arbitration to be held sometime in 1997.
A Complaint entitled Ruben Kitay et al vs. Nona Morelli's II, Inc., et al;
United States District Court for the Central District of California: Case No.
95-4375 RMT(SHx), filed on October 10, 1995, in the U.S. District Court for the
Central District of California and subsequently dismissed pursuant to
stipulation, was refiled by the Plaintiffs on April 12, 1996, in a complaint
entitled Gustavo Farias, et al v. Nona Morelli's II Inc., et al. The new
complaint named the Company, its officers, the Company's accounting firm and
other third parties as defendants in an alleged shareholder derivative action
(the "Refiled Action") refiled on behalf of certain shareholders of NuOasis
Gaming. The Refiled Action alleged securities fraud and RICO violations in
connection with a certain Stock Purchase and Business Combination Agreement
pursuant to which the Company acquired voting control of ENP (now NuOasis
Gaming), and the events surrounding the bankruptcy of BGI. The plaintiffs seek
damages in an amount not yet ascertained according to proof, interest,
rescission, imposition of a constructive trust, diminution of share value for
the individual plaintiffs, attorneys' fees and exemplary damages. Outside
counsel for the Company in the Refiled Action, and the management of both
NuOasis Gaming and the Company believe among other things, that the action was
initiated by Mike Savage, a former consultant of NuOasis Gaming, and persons
affiliated with him, as a part of an attempt to take control of NuOasis Gaming;
that the Plaintiffs do not have standing to file such litigation; that the
Plaintiffs have no competent and credible evidence to support their allegations;
that they have failed to state a proper claim; and that they do not qualify as
proper representatives in a shareholder action. After the filing of the
Company's Motion to Dismiss in the original action, the original action was
voluntarily dismissed by the Plaintiffs. The Company has filed a Motion to
Dismiss the Refiled Action. As of the date of this Report, all but three of the
Plaintiffs have dropped out of the litigation. In response to the Company's
Motion to Dismiss, the remaining Plaintiffs have voluntarily dismissed most of
the other Defendants and have dismissed the RICO claims. The Company's
accounting firm and chief financial officer have been dismissed as Defendants.
The Motion to Dismiss the remaining claims is currently pending.
[NM\10-KSB:63096FS.2] -45
F-23
<PAGE>
NONA MORELLI'S II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
In June 1993, prior management of the Company issued 450,000 pre-reverse split
shares of its common stock to Louis Siegel ("Siegel"), allegedly in
consideration for food conveyor equipment. However, new management found the
apparatus stored in the parking lot at the Pueblo, Colorado plant and discovered
that the equipment was nothing more than scrap metal. In September 1994, when
Mr. Siegel failed to provide an appraisal for the apparatus after a demand for
the same from the Company's Chief Executive Officer, the Company's Board of
Directors canceled the shares, finding that no consideration had been received
for the issuance of the shares. In July 1995, Siegel requested reinstatement of
the shares. The Company refused. No further developments occurred during fiscal
year 1996. However, on September 6, 1996, the Company was served with a
Complaint filed by Siegel against the Company in San Diego Superior Court
entitled Louis Siegel vs. Nona Morelli's II, Inc. Case No. 703222 seeking
compensatory damages in excess of $150,000, interest, punitive damages, costs of
suit and attorney's fees. Counsel for the Company and Siegel have stipulated to
a transfer of the action to the Superior Court for the County of Orange and the
Superior Court of Orange County assigned Case No. 772045 to the complaint. The
Company intends to vigorously defend the Complaint and is in the process of
filing a Demurrer and Motion to Strike the Complaint.
The Company is involved, both as plaintiff and defendant, in litigation that
originates in the normal course of business development or operations.
Respective counsels for the Company do not believe that any existing litigation
will result in an adverse judgment which would have a negative material impact
on the Company's financial condition. Accordingly, no provision has been made in
the accompanying financial statements for such contingencies.
Capital Requirements of Cleopatra
At June 30, 1996, Cleopatra has approximately $3,500,000 deposited with the
builders of the Cap Gammarth Casino and the Hammamet Casino. Cleopatra has
approximately $2,000,000 remaining to be paid, as security deposits and advance
rent, before it can take possession of the two casinos (see Note 13 of the
footnotes to the accompanying financial statements). Construction on the Cap
Gammarth Casino and Hammamet Casino is near completion. In addition, Cleopatra
estimates remaining expenditures and working capital requirements, including
security deposits and advance rental payments, related to equipping and opening
the two casinos to be approximately $15 million in aggregate.
[NM\10-KSB:63096FS.2] -45
F-24
<PAGE>
NONA MORELLI'S II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
To finance the expected $15 million in remaining expenditures on the Cap
Gammarth Casino and the Hammamet Casino, the Company is negotiating a joint
venture between NuOasis International and a European hotel management Company
whereby the European hotel management Company will contribute up to $13.5
million in exchange for a 50% interest in the joint venture (see Note 13 of the
footnotes to the accompanying financial statements). Alternatively, subject to
providing satisfactory collateral, the Company has arranged for a credit
facility with Banque Francaise de L'Orient (the "Bank") which Cleopatra may
utilize to borrow up to $25 million.
Through June 30, 1996 the Company and its subsidiaries have, with few
exceptions, financed all operations with internally generated funds and the
Company's common stock. Third party debt and equity financing has been pursued,
both domestically and internationally, without success. And, while the Company
and its subsidiaries have been able to meet their financial commitments through
the close of fiscal 1996, if for any reason, the proposed joint venture is not
formed, or if Cleopatra is unable to borrow from the Bank, or if Cleopatra or
NuOasis International are unable to otherwise meet their commitments under the
various agreements to provide the furniture, fixtures, equipment and working
capital for the proposed casinos once construction is completed, the Company may
be required to intercede and provide the requisite financing and working
capital, or be forced to sell all or a portion of their respective interest, or
lose their respective rights to the projects and properties entirely.
Commitments of Cleopatra
As discussed above, and in Note 13, the Company is actively pursuing financing
which may involve the pledge of or hypothecation of some or all of the Company's
assets. The Company has no commitment for material capital expenditures,
however, it is a guarantor of the obligation of Cleopatra under the Cap Gammarth
agreement.
Note 13. Subsequent Events
Cleopatra
Subsequent to the close of fiscal 1996, NuOasis International executed letters
of intent and was negotiating definitive agreements to acquire Replacement
Properties related to its international gaming and hospitality activities.
In July 1996, Cleopatra signed two letters of intent with a company owning a
hotel and casino project in Monastir, Tunisia, pursuant to which Cleopatra (or
its designee, Cleopatra World), would lease the casino and through NuOasis
International manage the hotel (to be re-named "Cleopatra Palace Resort -
Monastir"), and provide Las Vegas casino gaming management for the casino (the
"Monastir Casino").
In September 1996, the Company entered into an agreement in principle with a
European hotel management Company pursuant to which the parties plan to form a
joint venture. In exchange for a 50% interest in the new joint venture, the
European hotel operator will provide the new joint venture with up to $13.5
million in working capital and the Company, through NuOasis International, will
contribute or cause to be transferred its interest in the entities which hold
the rights to manage the Le Palace Hotel, the Cap Gammarth Casino, the Hammamet
Casino and the Monastir Casino.
In October 1996, the Company and Cleopatra entered into a reorganization
agreement with Cleopatra which will result in NuOasis International issuing
$13.5 million in secured promissory notes in consideration for 70% of the
outstanding stock of three Cleopatra subsidiaries, including Cleopatra Cap
Gammarth Casino, Cleopatra Hammamet Casino and Cleopatra Monastir. Additionally,
the Company and Cleopatra agreed to increase NuOasis International's equity
interest in Cleopatra from 28% to 33%.
[NM\10-KSB:63096FS.2] -45
F-25
<PAGE>
NONA MORELLI'S II, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
Additionally, following the restructuring agreement with Cleopatra, NuOasis
International executed an agreement to purchase a 50% interest in Cleopatra
World, Inc., a British Virgin island corporation ("Cleopatra World"), the lessor
of the Le Palace Hotel and the commercial center, residential complex, real
estate and improvements surrounding the Cap Gammarth Casino (the "Cap Gammarth.
Resort").
National Pools Corporation
On June 13, 1996, Nona entered into an Option Agreement with Joseph Monterosso,
President of National Pools Corporation ("NPC"), an individual previously
unrelated to the NuOasis Gaming or Nona, and granted such individual an option
to purchase the 250,000 Series B Preferred Shares of the NuOasis Gaming owned by
Nona at a purchase price of $13.00 per share, or a total of $3,250,000, with a
minimum purchase of 110,000 shares.
The exercise of the option is conditioned upon shareholder approval of a
proposal to increase the authorized number of shares of common stock of the
NuOasis Gaming by at least twenty million (20,000,000) shares. The option is
assignable and shall expire 90 days after the next Annual Meeting of
Shareholders of NuOasis Gaming.
On November 21, 1996, NuOasis Gaming's board of directors approved the
acquisition of NPC. The acquisition is expected to be financed by the issuance
of securities of NuOasis Gaming, however, a definitive agreement has not been
signed. Moreover, the acquisition is contingent upon the occurrence of certain
events including but not limited to: (a) NPC shareholder approval; (b) exercise
of that certain option agreement between Monterosso and Nona; (c) Monterosso
securing financing that would allow the exercise of the option by Monterosso
and/or one or more qualified private investors; (d) reaching an agreement to
sell CMA; and (e) shareholder approval of a proposal to increase the number of
authorized shares of common stock of NuOasis Gaming by at least 20,000,000
shares. There are no assurances that such transaction will occur, and because of
on-going negotiations and uncertainties surrounding the realization of such
transaction, NuOasis Gaming cannot determine the ultimate effect on NuOasis
Gaming's financial position at this time.
[NM\10-KSB:63096FS.2] -45
F-26
EXHIBIT 3.1(c)
Articles of Amendment to the Articles of Incorporation filed
September 26, 1996
ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION
OF NONA MORELLI'S II, INC.
- -------------------------------------------------------------------------------
Pursuant to Section 7-106-102 of the
Colorado Business Corporation Act of the State of Colorado
[Shareholder approval not required pursuant to ss.7-106-102 (4)
of the Colorado Business Corporation Act]
- -------------------------------------------------------------------------------
NONA MORELLI'S II, INC., a corporation organized and existing under the
laws of the State of Colorado ("the Company"), DOES HEREBY CERTIFY that pursuant
to the authority contained in Article VII of its Articles of Incorporation, and
in accordance with the provisions of ss.7-106-102 of the General Corporation Law
of the State of Colorado, the Company's Board of Directors has duly adopted
these Articles of Amendment of the Articles of Incorporation determining the
Designations, Rights and Preferences of the classes of its authorized Preferred
Stock, herein designated as Series C Convertible Preferred Stock and Series D
Convertible Preferred Stock:
Section 7.1 of Article VII, Capital, is hereby amended to read as
follows:
"Section 7.1. The aggregate number of shares which the Corporation
shall have the authority to issue is 75,000,000 shares, of which
25,000,000 shares shall be Preferred Stock and shall be issued at a par
value of $.01 per share, and 50,000,000 shares shall be Common Stock
and shall be issued at a par value of $.01 per share. No share shall be
issued until it has been paid for, and it shall thereafter be
nonassessable."
Section 7.2 and 7.3 of Article VII, Capital, are added to read as
follows:
"Section 7.2 A series of the class of Preferred Stock is hereby
created, such series to be designated as Series C Preferred Stock, with
the designations and amount thereof, together with the voting powers,
preferences and relative, participating, optional and other special
rights of the shares of each such series, and the qualifications,
limitations or restrictions thereof, to be as follows:
Section 7.2.1 Designation and Amount. One Million (1,000,000)
shares of Nona Morelli's II, Inc. (the "Company") authorized
preferred stock, par value $.01 per share, are designated as
shares of Series C Convertible Preferred Stock (the "Series C
Preferred Stock").
Section 7.2.2 Rank. The Series C Preferred Stock shall be
senior to the common stock and the Company's Series D
Convertible Preferred Stock.
Section 7.2.3 Dividends. The holders of the Series C Preferred
Stock shall be entitled to receive common stock dividends
when, as, and if declared by the Board of Directors of the
Company, at the rate of one share of $.01 par value per share
common stock (the "Common Stock") for each ten shares of
Series C Preferred Stock. Cash dividends will not be paid
to the holders of Series C Preferred Stock.
W:\NM\STK\ART.AMD
<PAGE>
Section 7.2.4 Liquidation Rights.
(a) In the event of any liquidation, dissolution, or
winding up of the Company, whether voluntary or
involuntary, the holders of the Series C Preferred
Stock then outstanding shall be entitled to be paid out
of the assets of the Company available for distribution
to its shareholders, before any payment or declaration
and setting apart for payment of any amount shall be
made in respect of any outstanding preferred stock
ranking junior to the Series C Preferred Stock or the
Common Stock, an amount equal to $1.00 per share. If
upon any liquidation, dissolution, or winding up of the
Company, whether voluntary or involuntary, the assets
to be distributed to the holders of the Series C
Preferred Stock shall be insufficient to permit the
payment to the holders thereof the full preferential
amount as provided herein, then all of the assets of
the Company available to be distributed shall be
distributed ratably to the holders of the Series C
Preferred Stock and other outstanding shares of
preferred stock.
(b) None of the following events shall be treated as or
deemed to be a liquidation hereunder:
(i) A merger, consolidation or
reorganization of the Company;
(ii) A sale or other transfer of all or
substantially all of the Company's
assets;
(iii) A sale of 50% or more of the Company's
capital stock then issued and
outstanding;
(iv) A purchase or redemption by the Company
of stock of any class; or
(v) Payment of a dividend or distribution
from funds legally available therefor.
Section 7.2.5 Voting Rights. In all matters the Series C
Preferred Stock shall have the same voting rights as the
Common Stock on a share-for-share basis. If the Company
effects a stock split which either increases or decreases the
number of shares of Common Stock outstanding and entitled to
vote, the voting rights of the Series C Preferred Stock shall
be proportionately increased or decreased to take into effect
such stock split.
Section 7.2.6 Conversion. The Series C Preferred Stock shall
have the following conversion rights (the "Conversion
Rights"):
W:\NM\STK\ART.AMD
<PAGE>
(a) Holder's Optional Right to Convert. Each share of
Series C Preferred Stock shall be convertible, at the
option of the holder, on the Conversion Basis in effect
at the time of conversion.
(b) Conversion Basis. The conversion basis of the Series C
Preferred Stock shall be two shares of Common Stock for
each share of Series C Preferred Stock, subject to
adjustment as provided in Paragraph 6(d) below (the
"Conversion Basis").
(c) Mechanics of Conversion. Before any holder of Series C
Preferred Stock shall be entitled to convert the same
into shares of Common Stock, he shall (i) give written
notice to the Company, at the office of the Company or
of its transfer agent for the Common Stock or the
Preferred Stock, that he elects to convert the same and
shall state therein the number of shares of Series C
Preferred Stock being converted; and (ii) surrender the
certificate or certificates therefor, duly endorsed.
Thereupon the Company shall promptly issue and deliver
to such holder of Series C Preferred Stock a
certificate or certificates for the number of shares of
Common Stock to which he shall be entitled. The
conversion shall be deemed to have been made and the
resulting shares of Common Stock shall be deemed to
have been issued immediately prior to the close of
business on the date of such notice and surrender of
the shares of Series C Preferred Stock.
(d) Adjustments to the Conversion Basis.
(i) Stock Splits and Combinations. At any
time after the Company first issues the
Series C Preferred Stock and while any
of the shares of Series C Preferred
Stock remain outstanding, if the Company
shall effect a subdivision or
combination of the Common Stock, the
Conversion Basis then in effect
immediately before that subdivision or
combination shall be proportionately
adjusted. Any adjustment under this
Paragraph 6(d)(i) shall become effective
at the close of business on the date the
subdivision or combination becomes
effective.
(ii) Reclassification, Exchange or
Substitution. At any time after the
Company first issues the Series C
Preferred Stock and while any of the
shares of Series C Preferred Stock
remain outstanding, if the Common Stock
issuable upon the conversion of the
Series C Preferred Stock shall be
changed into the same or a different
number of shares of any class or classes
of stock, whether by capital
reorganization, reclassification, or
otherwise (other than a subdivision or
combination of shares or stock dividend
provided for above, or a reorganization,
merger, consolidation, or sale of assets
provided for elsewhere in this Paragraph
6, then and in each such event the
holder of each share of Series C
Preferred Stock shall have the right
thereafter to convert such shares into
the kind and amount of shares of stock
and other securities and property
receivable upon such reorganization,
reclassification, or other change, by
holders of the number of shares of
Common Stock into which such shares of
Series C Preferred Stock might have been
converted immediately prior to such
reorganization, reclassification, or
change, all subject to further
adjustments as provided herein.
W:\NM\STK\ART.AMD
<PAGE>
(iii) Reorganization, Mergers, Consolidations
or Sales of Assets. At any time after
the Company first issues the Series C
Preferred Stock and while any of the
shares of Series C Preferred Stock
remain outstanding, if there shall be a
capital reorganization of the Common
Stock (other than a subdivision,
combination, reclassification, or
exchange of shares provided for
elsewhere in this Paragraph 6, or a
merger or consolidation of the Company
with or into another corporation, or the
sale of all or substantially all of the
Company's assets to any other person,
then as a part of such reorganization,
merger, consolidation, or sale,
provision shall be made so that the
holders of the Series C Preferred Stock
thereafter shall be entitled to receive
upon conversion of the Series C
Preferred Stock, the number of shares of
stock or other securities or property of
the Company, or of the successor
corporation resulting from such merger
or consolidation or sale, to which a
holder of Common Stock deliverable upon
conversion would have been entitled on
such capital reorganization, merger,
consolidation, or sale. In any such
case, appropriate adjustment shall be
made in the application of the
provisions of this Paragraph 6 with
respect to the rights of the holders of
the Series C Preferred Stock after the
reorganization, merger, consolidation,
or sale to the end that the provisions
of this Paragraph 6 (including
adjustment of the Conversion Basis then
in effect and the number of shares
issuable upon conversion of the Series C
Preferred Stock) shall be applicable
after that event as nearly equivalent as
may be practicable.
(iv) Notices of Record Date. In the event of
any reclassification or recapitalization
of the capital stock of the Company, any
merger or consolidation of the Company,
or any transfer of all or substantially
all of the assets of the Company to any
other corporation, entity, or person, or
any voluntary or involuntary
dissolution, liquidating, or winding up
of the Company, the Company shall mail
to each holder of Series C Preferred
Stock at least 30 days prior to the
record date specified therein, a notice
specifying the date on which any such
reorganization, reclassification,
transfer, consolidation, merger,
dissolution, liquidation, or winding up
is expected to become effective, and the
time, if any is to be fixed, as to when
the holders of record of Common Stock
(or other securities) shall be entitled
to exchange their shares of Common Stock
(or other securities) for securities or
other property deliverable upon such
reorganization, reclassification,
transfer, consolidation, merger,
dissolution, liquidation, or winding up.
W:\NM\STK\ART.AMD
<PAGE>
(v) Fractional Shares. No fractional shares
of Common Stock shall be issued upon
conversion of the Series C Preferred
Stock. In lieu of any fractional shares
to which the holder would otherwise be
entitled, the Company shall pay cash
equal to the product of such fraction
multiplied by the fair market value of
one share of the Company's Common Stock
on the date of conversion, as determined
in good faith by the Board of Directors.
(vi) Reservation of Stock Issuable Upon
Conversion. At such time as the Company
increases its authorized capital
resulting in a sufficient number of
shares of Common Stock becoming
available for the conversion of the
Series C Preferred Stock, the Company
shall reserve and keep available out of
its authorized but unissued shares of
Common Stock, solely for the purpose of
effecting the conversion of the shares
of the Series C Preferred Stock, a
number of its shares of Common Stock as
shall from time to time be sufficient to
effect the conversion of all outstanding
shares of the Series C Preferred Stock.
(vii) Notices. Any notice required by the
provisions of this Paragraph 6 to be
given to the holder of shares of the
Series C Preferred Stock shall be deemed
given when personally delivered to such
holder or five business days after the
same has been deposited in the United
States mail, certified or registered
mail, return receipt requested, postage
prepaid, and addressed to each holder of
record at his address appearing on the
books of the Company.
(viii) Payment of Taxes. The Company will pay
all taxes and other governmental charges
that may be imposed in respect of the
issue or delivery of shares of Common
Stock upon conversion of shares of
Series C Preferred Stock.
Section 7.2.7 Restrictions and Limitations.
(a) So long as any shares of Series C Preferred Stock
remain outstanding, the Company, without the vote or
written consent by the holders of a majority of the
then outstanding shares of Series C Preferred Stock
voting as a single class, shall not:
W:\NM\STK\ART.AMD
<PAGE>
(i) Redeem, purchase, or otherwise acquire
for value, any share or shares of Series
C Preferred Stock; and
(ii) Purchase, redeem, or otherwise acquire
(or pay into or set aside a sinking fund
for such purpose), any of the Common
Stock, provided, however, that this
restriction shall not apply to the
repurchase of shares of Common Stock
from employees, officers, directors,
consultants or other persons performing
services for the Company (such as sales
representatives or distributors)
pursuant to agreements under which the
Company has the option to repurchase
such shares at cost upon the occurrence
of certain events, such as the
termination of employment; or
(b) So long as any shares of Series C Preferred Stock
remain outstanding, the Company, without the approval
by vote or written consent of the holders of a majority
of the then outstanding shares of Series C Preferred
Stock, voting as a separate class, shall not take any
action which would:
(i) Alter or change any of the rights,
preferences, privileges of, or
limitations provided for herein for the
benefit of any shares of the Series C
Preferred Stock; or
(ii) Increase the authorized number of shares
of the Series C Preferred Stock.
Section 7.2.8 No Reissuance of Series C Preferred Stock. No
share or shares of Series C Preferred Stock acquired by the
Company by reason of conversion or otherwise shall be reissued
as Series C Preferred Stock, and all such shares thereafter
shall be returned to the status of undesignated and unissued
shares of preferred stock of the Company.
Section 7.2.9 No Redemption. The Series C Preferred Stock is
not redeemable by the Company, and the Company is not required
to establish any sinking fund or other fund for the benefit of
the holders of the Series C Preferred Stock.
Section 7.3 A series of the class of Preferred Stock of the Company, is
hereby created, such series to be designated Series D Voting
Convertible Preferred Stock, with the designations and amount thereof,
together with the voting powers, preferences and relative,
participating, optional and other special rights of the shares of each
such series and the qualifications, limitations or restrictions
thereof, to be as follows:
Section 7.3.1 Designation, Amount and Definitions .Twenty four
million (24,000,000) shares of the Company's Authorized
Preferred Stock, par value $.01 per share, are designated as
shares of Series D Voting Convertible Preferred Stock (The
"Series D Voting Preferred Stock").Unless the context
otherwise requires, the terms defined in this Section 7.3
shall have, for all purposes of this resolution, the meanings
herein specified:
W:\NM\STK\ART.AMD
<PAGE>
Common Stock. The term "Common stock" shall mean all shares
now or hereafter authorized of any class of Common stock of
the Corporation and any other stock of the Corporation,
howsoever designated, authorized after the Issue Date, which
has the right (subject always to prior rights of any class or
series of Preferred Stock) to participate in the distribution
of the assets and earnings of the Corporation without limit as
to per share amount.
Issue Date. The term "Issue Date" shall mean the date that
shares of Series D Preferred Stock are first issued by the
Corporation.
Junior Stock. The term "Junior Stock" shall mean, for purposes
of paragraph 7.3.2 below, any class or series of stock of the
Corporation authorized after the Issue Date not entitled to
receive any dividends in any dividend period unless any
dividends required to have been paid or declared and set apart
for payment on the Series D Preferred Stock shall have been so
paid or declared and set apart for payment and, for purposes
of paragraph 7.3.3 below, shall mean common stock and any
other class or series of stock of the Corporation authorized
after the Issue Date not entitled to receive any assets upon
liquidation, dissolution or winding up of the affairs of the
Corporation until the Series D Preferred Stock shall have
received the entire amount to which such stock is entitled
upon such liquidation, dissolution or winding up.
Parity Stock. The term "Parity Stock" shall mean, for purposes
of paragraph 2 below the common stock and any other class or
series of stock of the Corporation authorized after the Issue
Date entitled to receive payment of dividends subject only to
those preferential rights of dividends granted to the Series D
Preferred Stock and, for purposes of paragraph 7.3.3 below,
shall mean any class or series of stock of the Corporation
authorized after the Issue Date entitled to receive assets
upon liquidation, dissolution or winding up of the affairs of
the Corporation subject to only those preferential rights and
preference granted to the Series D Preferred Stock.
Senior Stock. The term "Senior Stock" shall mean, for purposes
of paragraph 7.3.2 below, any class or series of stock of the
Corporation authorized before the Issue Date of the Series D
Preferred Stock except for those preferential rights as
granted herein but the right to receive dividends providing
all dividends granted to the Series D Preferred Stock shall
have been paid or set aside to be paid, and, for purposes of
paragraph 7.3.3 below, shall mean any class or series of stock
of the Corporation authorized after the Issue Date ranking
equal to the Series D Preferred Stock and the right to
participate in any distribution upon liquidation, dissolution
or winding up of the affairs of the Corporation except for
those preferential rights granted to the Series D Preferred
Stock herein.
Subscription Price. The term "Subscription Price" shall mean
Forty One and Two-thirds cents ($.41667) per share.
Section 7.3.2 Dividends The Series D Preferred Stock,
notwithstanding the prior preferences, if any, granted to
any other class or series of stock before or after the Issue
Date shall entitle the holder of record thereof to dividends
at the rate of One Cent ($.01) per share.
W:\NM\STK\ART.AMD
<PAGE>
So long as any shares of Series D Preferred Stock shall be
outstanding, the Company shall not declare or pay on any
Junior Stock any dividend whatsoever, whether in cash,
property or otherwise (other than dividends payable in shares
of the class or series upon which such dividends are declared,
together with cash in lieu of fractional shares), nor shall
the Company make any distribution on any Junior Stock, nor
shall any Junior Stock be purchased or redeemed by the Company
or any of its subsidiaries of which it owns not less than 51%
of the outstanding voting stock, nor shall any monies be paid
or made available for a sinking fund for the purchase or
redemption of any Junior Stock, unless all dividends to which
the holders of Series D Preferred Stock shall have been
entitled for all previous dividend periods shall have been
paid or declared and a sum of money sufficient for the payment
thereof set apart.
Section 7.3.3 Distribution Upon Liquidation, Dissolution or
Winding Up In the event of any voluntary or involuntary
liquidation, dissolution or other winding up of the affairs of
the Company, and before any distribution or payment to any
other class of series of stock, the holders of the Series D
Preferred Stock shall be entitled to be paid the Subscription
Price per share plus accrued dividends, if any, in cash or in
property taken at its fair market value as mutually agreed by
the Board of Directors and the holders of the Series D
Preferred Stock. If such payment shall have been made in full
to the holders of the Series D Preferred Stock, and if payment
shall have been made in full to the holders of any Senior
Stock and Parity Stock of all amounts to which such holders
shall be entitled, the remaining assets and funds of the
Company shall be distributed among the holders of Junior
Stock, according to their respective shares. If, upon
liquidation, dissolution or other winding up of the affairs of
the Company, the net assets of the Company distributable among
the holders of the outstanding shares of Series D Preferred
Stock shall be insufficient to permit the payment in full of
such holder of the preferential amounts to which they are
entitled, then the entire assets of the Company shall be
distributed among the holders of the Series D Preferred Stock
ratably in proportion to the full amounts to which they would
otherwise be entitled. Neither the consolidation or merger of
the Company into or with another Company or Companys, nor the
sale of all or substantially all of the assets of the Company
to another Company or Companys shall be deemed liquidation,
dissolution or winding up of the affairs of the Company within
the meaning of this paragraph 3.
Section 7.3.4 Redemption Program Subject to the provisions of
the applicable Colorado Business Corporations Act, the
Company, at the option of the Board of Directors, may at any
time or from time to time redeem the whole or any part of the
outstanding Series D Preferred Stock. Upon redemption the
Company shall pay for each share redeemed the amount of One
Dollar $1.00 per share payable in cash/or in shares of the
Company's Common Stock plus such sum hereinafter being
referred to as the redemption price. Such redemption shall be
on an all-or-nothing basis.
At least thirty days previous notice by mail, postage prepaid,
shall be given to the holders of record of the Series D Preferred Stock
to be redeemed, such notice to be addressed to each such shareholder at
the address of such holder appearing on the books of the Company or
given to such holder to the Company for the purpose of notice, or if no
such address appears or is given, at the place where the principal
office of the Company is located. Such notice shall state the date
fixed for redemption and the redemption price, and shall call upon the
holder to surrender to the Company on said date at the place designated
in the notice such holder's certificate or certificates representing
the shares to be redeemed. On or after the date fixed for redemption
and stated in such notice, each holder of Series D Preferred Stock
called for redemption shall surrender the certificate evidencing such
shares to the Company at the place designated in such notice and shall
thereupon be entitled to receive payment of the redemption price. If
less than all the shares represented by any such surrendered
certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares. If such notice of redemption shall
have been duly given, and if on the date fixed for redemption funds
necessary for the redemption shall be available therefore,
notwithstanding that the certificates evidencing any Series D Preferred
Stock called for redemption shall not have been surrendered, the
dividends with respect to the shares so called for redemption shall
forthwith after such date cease and determine, except only the right of
the holders to receive the redemption price without interest upon
surrender of their certificates therefore.
If, on or prior to any date fixed for redemption or Series D
Preferred Stock, the Company deposits, with any bank or trust
company as a trust fund, the number of shares of Common Stock
of a sum sufficient to redeem, on the date fixed for
redemption thereof, the shares called for redemption, with
irrevocable instructions and authority to the bank or trust
company to give the notice of redemption thereof (or to
complete the giving of such notice if theretofore commenced)
and to pay, or deliver, on or after the date fixed for
redemption or prior thereto, the redemption price of the
shares to their respective holders upon the surrender of their
share certificates, then from and after the date of the
deposit (although prior to the date fixed for redemption), the
shares so called shall be redeemed and any dividends on those
shares shall cease to accrue after the date fixed for
redemption. The deposit shall constitute full payment of the
shares to their holders and from and after the date of the
deposit the shares shall no longer be outstanding and the
holders thereof shall cease to be shareholders with respect to
such shares, and shall have no rights with respect thereto
except the right to receive from the bank or trust company
payment of the redemption price of the shares without
interest, upon the surrender of their certificates therefore.
Any interest accrued on any funds so deposited shall be the
property of, and paid to, the Company. If the holders of
Series D Preferred Stock so called for redemption shall not,
at the end of six years from the date fixed for redemption
thereof, have claimed any funds so deposited, such bank or
trust company shall thereupon pay over to the Company such
unclaimed funds, and such bank or trust company shall
thereafter be relieved of all responsibility in respect
thereof to such holders and such holders shall look only to
the Company for payment of the redemption price.
Section 7.3.5 Voting Rights The holders of the Series D
Preferred Stock issued and outstanding, except as otherwise
provided by law or by the Articles of Incorporation of the
Company, shall have and possess the right to notice of
shareholders' meetings and the right to vote upon the election
of directors or any other matter together with holders of all
other classes of voting stock of the Company, on the basis of
one vote for each share of Series D Preferred Stock.
W:\NM\STK\ART.AMD
<PAGE>
Section 7.3.6 Conversion "Each share of Series D Convertible
Preferred Stock shall be convertible into .41667 shares of the
Corporation's common stock, notwithstanding the effects of any
stock dividend or forward or reverse stock split by the
Corporation subsequent to the issue date. In no event shall
the total number of Series D Convertible Preferred Stock
shares be converted into more than Ten Million (10,000,000)
shares of common stock. Such right to convert shall commence
as of the Issue Date and shall continue thereafter for a
period of five years, such period ending on the fifth
anniversary of the issue date. In the event that the holder(s)
of the Series D Convertible Preferred Stock elect to convert
such shares into common stock, the holder(s) of the Series D
Convertible Preferred Stock shall have sixty (60) days from
the date of such notice in which to tender their shares of
Series D Convertible Preferred Stock to the Corporation in
accordance with this paragraph.
Section 7.3.7 Exclusion of Other Rights Except as may
otherwise be required by law, the shares of Series D Preferred
Stock shall not have any preferences or relative,
participating, optional or other special rights, other than
those specifically set forth in this resolution (as such
resolution may be amended from time to time) and in the
Articles of Incorporation, as amended. The shares of Series D
Preferred Stock shall have no preemptive or subscription
rights.
Section 7.3.8 Protective Provisions So long as any of the
Series D Preferred Stock shall be outstanding, the Company
shall not without first obtaining the approval (by vote or
written consent, as provided by law) of the holders of at
least two-thirds of the total number of shares of Series D
Preferred Stock outstanding:
(a) Alter or change the rights, preferences or privileges
of the Series D Preferred Stock so as to adversely
affect in any manner the Series D Preferred Stock; or
(b) Increase the authorized number of Series D Preferred
Stock; or
(c) Create any new class of shares having preferences over
or being on a parity with the Series D Preferred Stock
as to dividends or assets, unless the purpose of
creation of such class is, and the proceeds to be
derived from the sale and issuance thereof are to be
used for, the retirement of all Series D Preferred
Stock then outstanding; or
(d) Repurchase any of the Company's common stock; or
(e) Merge or consolidate with any other Company, except
into or with a wholly-owned subsidiary of the Company
with the requisite shareholder approval; or
(f) Sell, convey or otherwise dispose of, or create or
incur any mortgage, lien, charge or encumbrance on or
security interest in or pledge of, or sell and
leaseback, all or substantially all of the property or
business of the Company; or
<PAGE>
(g) Incur, assume or guarantee any indebtedness (other than
such as may be represented by the obligation to pay
rent under leases) maturing more than 18 months after
the date on which it is incurred, assumed or guaranteed
by the Company, except purchase money obligations,
obligations assumed as part of the price of property
purchased, or the extension, renewal or refunding of
any thereof.
Section 7.3.9 Headings or Subdivisions The heading of the
various subdivisions hereof are for convenience of reference
only and shall not affect the interpretation of any of the
provisions hereto.
Section 7.3.10 Severability of Provisions If any right,
preference or limitation of the Series D Preferred Stock set
forth in this resolution (as such resolution may be amended
from time to time) is invalid, unlawful or incapable of being
enforced by reason of any rule of law or public policy, all
other rights, preferences and limitations set forth in this
resolution (as so amended) which can be given effect without
the invalid, unlawful or unenforceable right, preference or
limitation shall, nevertheless, remain in full force and
effect, and no right, preference or limitation herein set
forth shall be deemed dependent upon any other such right,
preference or limitation unless so expressed herein.
Section 7.3.11 Status of Reacquired Stock Stock of Series D
Preferred Stock which have been issued and reacquired in any
manner shall (upon compliance with any applicable provisions
of the State of Colorado) have the status of authorized and
unissued shares of Preferred Stock issuable in series
undesignated as to series and may be redesignated and
reissued."
The above designations of the rights, preferences and privileges of the
Series C Preferred Stock were adopted on June 1, 1995 by the Board of Directors
then in office.
The above designations of the rights, preferences and privileges of the
Series D Preferred Stock were adopted on April 30, 1993 by the Board of
Directors then in office.
IN WITNESS WHEREOF, said Nona Morelli's II, Inc. has caused these
Articles of Amendment to be duly executed by its Chief Executive Officer and
attested to by its Secretary this___ day of September, 1996.
NONA MORELLI'S II, INC.
By: /s/ Fred G. Luke
------------------------------------
Fred G. Luke,
Chief Executive Officer
ATTEST:
/s/ John D. Desbrow
---------------------------
John D. Desbrow, Secretary
EXHIBIT 10.120
LEASE AGREEMENT WITH THEODORE DETELLO
MASTER LEASE
THIS MASTER LEASE (the "Lease") is made as of the day of August, 1995,
between Fantastic Foods International, Inc., a California corporation
("Lessor"), and American Charities Underwriters Inc., a Colorado corporation
("Lessee").
WHEREAS, Lessee is engaged in the business of manufacturing and storage of
pizza; and
WHEREAS, the Lessee desires to rent from Lessor those certain premises set
forth in Item 3 of Exhibit "A" attached hereto, together with certain underlying
real property (the "Plant"); and
NOW, THEREFORE, in consideration of the mutual benefits to be derived from
the covenants contained herein, the Lessee and Lessor agree as follows:
1. PREMISES
Lessor hereby leases to Lessee and Lessee hereby rents from Lessor
those certain premises set forth in Item 3 of Exhibit "A" attached
hereto, which, together with the underlying real property, is herein
called the "Plant". Except as may otherwise be specifically provided
herein, Lessor shall accept the Plant in its existing condition as of
the date hereof.
2. TENANCY
This Lease shall commence on the date set forth in Item 4 of Exhibit
"A", and continue thereafter for a term of one (1) year, unless until
terminated pursuant to the terms hereof, or until sooner terminated for
default or breach of the terms, covenants or conditions hereinafter
provided.
3. USE
The Plant shall be occupied and used by Lessor solely for the purpose
of conducting therein the business or profession stated in Item 7 of
Exhibit "A", and for no other business or purpose. Lessor shall comply
with all applicable laws and governmental requirements pertaining to
its use of the Plant and shall not generate, handle, store or dispose
of hazardous or toxic materials within the Plant without the prior
written consent of Lessor.
4. RENT
Lessee shall pay to Lessor monthly rent in the amount stated in Item 5
of Exhibit "A" in advance on the first day of each and every calendar
month without notice or offset, the first monthly payment to be made
concurrently with the execution hereof. All rental and other payments
shall be made to Lessor at the address stated in Item 8 of Exhibit "A",
or such other place as Lessor shall from time to time designate in
writing. Rent for the first partial month shall be prorated on the
basis of the number of days in such month, and thereafter shall be
payable on the first day of each month. All payments hereunder shall be
paid in lawful money of the United States.
[FFI\AGR:TEDLEASE.AGR]
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<PAGE>
5. INSPECTION
Lessee shall permit Lessor and its agents to enter into and upon the
Plant at all reasonable times for the purpose of inspecting same,
cleaning windows and performing other janitorial services, or for the
purpose of maintaining the Plant in which the Plant is situated, or for
the purposes of making repairs, alterations or additions to any other
portion of the Plant, including the erection of scaffolding, props, or
other mechanical devices, or for the purpose of posting Notices of
Non-Responsibility for alterations, additions, or repairs, without any
abatement or rebate of rent to Lessee or damages for any loss of
occupation or quiet enjoyment of the Plant thereby occasioned. Lessor
and its agents may, during the last thirty (30) days of the term of
this Lease, at reasonable hours, enter upon the Plant and exhibit same
to prospective Lessees.
6. RULES AND REGULATIONS
The rules and regulations attached hereto as Exhibit "B", as well as
such rules and regulations as may be hereafter adopted by Lessor for
the safety, care and cleanliness of the Plant and the preservation of
good order thereon, are hereby expressly made a part hereof, and Lessor
agrees to obey all such rules and regulations.
7. SECURITY DEPOSIT
Lessee has deposited with Lessor the sum, if any, stated in Item 6 of
Exhibit "A", to be held by Lessor as security for the full and
faithful performance of every Lease term, covenant and condition to be
performed by Lessee. If Lessee defaults with respect to any term,
covenant or condition of this Lease, including but not limited to the
provisions relating to the payment of rent, Lessor may (but shall not
be required to) use, apply or retain all or any part of this security
deposit for the payment of any rent or other sum in default, or for
the payment of any other amount (including but not limited to the cost
of repairing and/or restoring the Plant during or at the expiration of
the term of this Lease) which Lessor may spend or become obligated to
spend by reason of Lessee's default or to compensate Lessor for any
other loss or damage which Lessor may suffer by reason of Lessee's
default to the full extent permitted by law. If any portion of said
deposit is so used or applied, Lessee shall within five (5) days after
written demand therefor deposit cash with Lessor in an amount
sufficient to restore the security deposit to its original amount.
Lessee's failure to do so shall be a material breach of this Lease.
Lessor shall not be required to keep this security deposit separate
from its general funds, and Lessee shall not be entitled to interest
on such deposit. If Lessee shall fully and faithfully perform every
term, covenant and condition of this Lease to be performed by it, the
security deposit or any balance thereof shall be returned to Lessee
promptly following the expiration of the Lease term, provided that
Lessor may retain the security deposit until such time as any amount
due from Lessor has been determined and paid in full. Should Lessor
sell its interest in the Plant during the term hereof and if Lessor
deposits with the purchaser thereof the then unappropriated funds
deposited by Lessee, thereupon Lessee shall be discharged from any
further liability with respect to such deposit.
[FFI\AGR:TEDLEASE.AGR]
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<PAGE>
8. ALTERATIONS
Lessee shall make no alterations, additions or improvements to the
Plant without the prior written consent of Lessor, and Lessor may
impose, as a condition to such consent, such requirements as Lessor in
its sole discretion may deem reasonable or desirable, including but not
limited to a requirement that all work be covered by a lien and
completion bond satisfactory to Lessor and requirements as to the
manner, time and contractor or contractors by which such work shall be
done. Any request for Lessor's consent shall be made in writing and
shall contain architectural plans describing such work in detail
reasonably satisfactory to Lessor. Failure of Lessor to respond to such
request within thirty (30) days shall be deemed a denial of such
request. Unless Lessor otherwise agrees in writing, all such
alterations, additions or improvements affixed or built into the Plant
(but excluding moveable trade fixtures and furniture) shall became the
property of Lessor as provided in Paragraph 11 below, and shall be
surrendered with the Plant, as a part thereof, at the end of this Lease
term, except that Lessor may, by written notice to Lessee given at
least twenty (20) days prior to the end of this Lease term, require
Lessee to remove all or any alterations, decorations, additions,
improvements and the like installed by Lessee, and to repair the Plant,
or at Lessee's option to pay all costs relating to any damage to the
Plant arising from such removal.
9. SURRENDER OF PLANT; REMOVAL OF PROPERTY
Upon the expiration of the term of this Lease, or upon any earlier
termination of this Lease, Lessee shall quit and surrender possession
of the Plant to Lessor in as good order, condition and repair as when
received or as hereafter may be improved by Lessor or Lessee,
reasonable wear and tear and repairs which are Lessee's obligation
excepted, and shall, without expense to Lessor, remove or cause to be
removed from the Plant all debris and rubbish, all furniture,
equipment, business and trade fixtures, freestanding cabinet work and
other articles of personal property owned by Lessee or installed or
placed by Lessee at its expense in the Plant, and all similar articles
of any other persons claiming under Lessee unless Lessee exercises its
option to have any subleases or subtenancies assigned to it. Lessee
shall repair all damage to the Plant resulting from such removal, which
repair shall include the patching and filling of holes and repair of
structural damage. In the event that Lessee shall fail to comply with
the provisions of this Paragraph, Lessor may make such repairs and the
cost thereof shall be additional rent payable by the Lessee upon
demand. If requested by Lessor, Lessee shall execute, acknowledge and
deliver to Lessor an instrument in writing releasing and quitclaiming
to Lessor all right, title and interest of Lessee in and to the Plant
by reason of this Lease or otherwise.
10. OPTION TO BUY PLANT
Lessor grants to Lessee, or its assigns, the option to purchase the
Plant, together with the building and the personal property and
equipment appurtenant thereto, which are the subject of this Lease,
and all additions and improvements to them, if any, that may be made
during the term of this Lease, upon and subject to the following terms
and conditions:
[FFI\AGR:TEDLEASE.AGR]
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<PAGE>
A. The purchase price shall be:
(i) The sum of Six Hundred Sixty Thousand Dollars ($660,000)
(the "Option Price").
(ii) Plus such amount, if any, as may be added to the Option
Price, as provided below, in the event of inflationary
changes occurring in the currency of the Unites States, or
in the event of the occurrence of any other factor or
factors that shall result in what commonly is known as
"currency inflation," and which, at the time of the exercise
of the option, shall have caused or resulted in inflated
market values and inflated rentals of real property in
Pueblo, Colorado.
B. The option shall be exercised between the date hereof and the
expiration date of this Lease, by the Lessee or its assigns
serving upon the Lessee by registered mail ninety (90) days'
written notice of its or their election to exercise the option.
C. If, after the mailing of such notice of election to exercise the
option, the Lessor shall be of the opinion that a state of
currency inflation, as defined in subsection"(b)" of paragraph
"1" exists, the Lessor, within ten (10) days after the mailing of
such notice of election, shall serve upon the Lessee or its
assigns by registered mail a notice to such effect, which notice
shall further state the amount by which the Lessor claims that
the Option Price should be increased by reason of such inflation.
D. Within ten (10) days after the service of the Lessor's notice,
the Lessee or its assigns shall, by notice in writing served on
the Lessee by registered mail, assent to, or dissent from, the
Lessor's claim for an increase in the Option Price by reason of
such inflation. If the Lessee or its assigns shall so assent to
the Lessor's claim, then, and in such event, the Option Price
shall be augmented in accordance with the Lessor's claim. If,
however, the Lessee or its assigns shall dissent from the
Lessor's claim, the option shall not thereby be avoided, but the
dispute between the Lessor and the Lessee or its assigns as to
such claim shall be submitted to arbitration, for the purpose of
determining the following issues:
(i) Whether, at the time of exercise of the option, a condition
or state of inflation, as defined above, existed;
(ii) Whether, as the result of such inflation, market values and
rentals of real property in Pueblo, Colorado have been
inflated; and
(iii)By what sum, if any, the Option Price should be increased
by reason of the existence of the inflation referred to in
both subparagraphs "(a)" and "(b)".
[FFI\AGR:TEDLEASE.AGR]
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<PAGE>
E. In the notice of dissent above referred to, the Lessee or its
assigns shall name its or their arbitrator. Within five (5) days
thereafter, the Lessor shall, by written notice served by
registered mail upon the Lessee or its assigns, designate its
arbitrator, and the two (2) arbitrators so chosen shall, within
five (5) days thereafter, appoint in writing a third arbitrator.
If the two (2) arbitrators shall be unable to agree upon such
third arbitrator within the period of five (5) days, any party to
this agreement may thereafter make application to the Court of
Pueblo County, or to any judge of that court, for the appointment
of such third arbitrator. A decision of a majority of the
arbitrators on the three (3) issues above set out shall be
binding upon the parties to this agreement; and the parties shall
bear equally the expenses and cost of such arbitration.
F. If the Lessor shall fail to serve a notice of claim of inflation,
or notice of the designation of its arbitrator, as provided
above, then, and in either or both of such events, the Lessee or
its assigns shall be entitled to purchase the Plant for the
Option Price.
If the Lessee or its assigns shall fail to serve a notice of dissent,
as provided above, then is such event, the Option Price shall be
augmented by the amount of the increase claimed by the Lessor in its
claim for an increase by reason of inflation.
11. SUBLETTING OR ASSIGNMENT
Lessee shall not assign this Lease, or any interest therein, or sublet
the Plant or any part thereof, or allow any other person (the agents
and servants of Lessor excepted) to occupy or use the Plant, or any
portion thereof, without the prior written consent of Lessor. Any such
assignment or subletting without Lessor's consent shall be void and
shall, at the option of Lessor, terminate this Lease. This Lease shall
not, nor shall any interest therein, be assignable as to the interest
of Lessee by operation of law without the written consent of Lessor.
12. NOTICES
Any notice, election, demand, consent, approval or other communication
to be given or other document to be delivered by either party to the
other hereunder shall be in writing and shall be delivered by personal
service or telegram, telex, telecopier or other electronic facsimile
transmission, or by any "overnight" or "one-day" express mailing
service, or by certified or registered mail, prepaid and return receipt
requested, to the other party at the address set forth in Item 8 of
Exhibit "A". Either party may from time to time, by written notice to
the other, served in the manner herein provided, designate a different
address. If any notice or other document is sent by certified or
registered mail as above, the same shall be deemed served or delivered
two (2) business days after the mailing. All other notices shall be
deemed given when received. If more than one Lessor is named under this
Lease, service of any notice upon any one of said Lessors shall be
deemed as service upon all of them.
[FFI\AGR:TEDLEASE.AGR]
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<PAGE>
13. ATTORNEYS' FEES
Should either party institute legal proceedings against the other
arising out of this Lease, the prevailing party shall be entitled to
recover reasonable attorneys' fees and costs, to be fixed by the court
in said action.
14. REMEDIES
The waiver by Lessee of any breach of any term, covenant or condition
herein contained shall not be deemed to be a waiver of such term,
covenant or condition or any subsequent breach of the same or any other
term, covenant or condition herein contained. The acceptance of rent
hereunder shall not be construed to be a waiver of any breach by Lessee
of any term, covenant or condition of this Lease. No payment by Lessee
of a lesser amount than the rent and other sums required by this Lease
shall be deemed to be other than a partial payment on account of the
earliest due sums, notwithstanding any check endorsement or letter to
the contrary. It is understood and agreed that the remedies herein
given to Lessee and those awarded by statutes of the State of
California shall be cumulative, and the exercise of any one remedy by
Lessee shall not be to the exclusion of any other remedy.
15. LATE PAYMENTS
A. Any installment of rent due under this Lease or any other sum not
paid to Lessor within five (5) days of the date when due shall
bear interest at the maximum legal rate permitted by law from the
date due until the same shall have been fully paid. The payment
of such interest shall not excuse or cure any default by Lessor
under this Lease.
B. Lessor hereby acknowledges that the late payment by Lessee to
Lessor of rent and other sums due hereunder will cause Lessee to
incur costs not contemplated by this Lease, the exact amount of
which will be extremely difficult to ascertain. Such costs may
include, but are not limited to, administrative, processing and
accounting charges, and late charges which may be imposed on
Lessor by the terms of any other sum due from Lessee shall not be
received by Lessor or Lessor's designee within five (5) days
after the date due, then Lessee shall pay to Lessor, in addition
to the interest provided above, a late charge in the amount of
One Hundred Dollars ($100.00). The parties agree that such late
charge represents a fair and reasonable estimate of the cost
Lessor will incur by reason of late payment by Lessee. Acceptance
of such late charge by Lessor shall in no event constitute a
waiver of Lessee's default with respect to such overdue amount,
nor prevent Lessor from exercising any of its other rights and
remedies.
16. LESSOR'S INSURANCE
Lessee, at its sole cost and expense, shall provide the insurance
described in Exhibit "C" attached hereto.
[FFI\AGR:TEDLEASE.AGR]
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<PAGE>
17. LESSOR'S INDEMNITY
A. Lessee shall defend, indemnify and hold harmless Lessor, its
agents, employees, and any and all affiliates of Lessor,
including without limitation, any corporations or other entities
controlling, controlled by or under common control with Lessor,
from and against any and all claims or liabilities arising from
Lessee's use or occupancy of the Plant, the Plant or the Common
Facilities (as hereinafter defined) or the conduct of its
business or from any activity, work, or thing done, permitted or
suffered by Lessee in or about the Plant and the Plant or Common
Facilities arising from any breach or default in the performance
of any obligation on Lessee's part to be performed hereunder, or
arising from any act or negligence of Lessee, or of its agents,
employees, visitors, patrons, guests, invitees or licensees,
including vendors servicing Lessee, and for and against all
costs, attorneys' fees, expenses and liabilities incurred or any
actions or proceedings brought thereon. In case Lessor, its
agents or affiliates shall be made a party to any litigation
commenced by or against Lessor, then Lessee shall protect and
hold Lessor harmless and shall pay all costs, expenses and
reasonable attorneys' fees, legal expenses, expenses of discovery
proceedings, travel and fees for expert witnesses incurred or
paid by Lessor in connection with such litigation. Lessor may at
its option, require Lessee to assume Lessor's defense in any
action covered by this Paragraph through counsel satisfactory to
Lessor.
B. The term "Common Facilities" shall mean all areas within the
exterior boundaries of the Plant or appurtenant thereto which are
not now or hereafter held for exclusive use by persons entitled
to occupy space in the Plant, and other areas and improvements
provided by Lessor for the common use of Lessee and Lessee's and
its respective employees and invitees, including, without
limiting the generality of the foregoing, parking areas,
driveways, truckways, delivery passages, loading docks,
sidewalks, ramps, landscaped and painted areas, exterior
stairways, hallways and interior stairwells not located within
the Plant, common entrances and lobbies, elevators, bus stops,
retaining walls and restrooms not located within the Plant,
lighting fixtures, building and/or project identification signs,
irrigation systems and controllers, drains and sewers.
18. LESSOR'S NON-LIABILITY
A. Lessee, as a material party of the consideration to Lessor,
hereby assumes all risk of damage to property or injury to
person, in, upon or about the Plant from any cause whatsoever
other than ultimately determined to be Lessor's sole negligence
or willful misconduct and for any damage to the Plant resulting
from any negligence or willful misconduct of any employee, agent,
visitor or licensee of Lessor.
B. Lessor shall not be liable to Lessee, and Lessee hereby waives
all claims against Lessor for any injury or damage to any person
or property in or about the premises of the Plant or from any
cause whatsoever, other than ultimately determined to be Lessor's
sole negligence or willful misconduct. Specifically, Lessor or
its agents or employees shall not be liable for any damage to
property entrusted to Lessee's employees in the Plant, nor for
loss of or damage to any property by theft or otherwise, nor for
any injury or damage to persons or property or loss or
interruption of business or loss of income resulting from, but
not limited to, the following causes, unless ultimately
determined to be caused by or due to the sole negligence or
willful misconduct of Lessor, its agents or employees: fire,
explosion, falling plaster, steam, gas, electricity, water or
rain which may leak or flow from or into any part of the Plant or
from the breakage, leakage, obstruction or other defects of the
pipes, sprinklers, wires, appliances or plumbing or air
conditioning or electrical works therein, whether such damage or
injury results from conditions arising in the Plant or in other
portions of the Plant. Neither Lessor nor its agents shall be
liable for interference with the light or other incorporeal
hereditament, nor shall Lessor be liable for any latent defect of
the Plant. Lessee shall give prompt notice to Lessor in case of
fire or accidents in the Plant and of defects therein or in the
fixtures or equipment.
[FFI\AGR:TEDLEASE.AGR]
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<PAGE>
C. Lessee understands that Lessor will not carry insurance of any
kind on Lessee's furniture or furnishings, fixtures or equipment,
and that Lessor shall not be obligated to repair any damage
thereto or replace the same. Lessor shall have the right to
change the name, number or designation of the Plant in which the
Plant is located without notice or liability to Lessee.
19. MISCELLANEOUS
A. SUBSEQUENT EVENTS. Lessor and Lessee 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 Lessor or Lessee without the prior written
consent of the other party.
[FFI\AGR:TEDLEASE.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:
(i) In the case of Lessee:
American Charities Underwriters Inc.
1745 N. Erie
Pueblo, Colorado 81001
(ii) In the case of Lessor:
Fantastic Foods International Inc.
5345 3rd Street
Irwindale, California 91706
Telephone: (818) 814-3775
Telefax: (818) 814-3090
or to such other person or address designated by Lessee or Lessor
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, notwithstanding any
conflict-of-law provision to the contrary.
J. Binding Effect. This Agreement shall be binding upon the parties
hereto and inure to the benefit of the parties, their respective
heirs, administrators, executors, successors, and assigns.
K. Entire Agreement. This Agreement contains the entire agreement
between the parties hereto and supersedes any and all prior
agreements, arrangements, or understandings between the parties
relating to the subject matter of this Agreement. No oral
understandings, statements, promises, or inducements contrary to
the terms of this Agreement exist. No representations,
warranties, covenants, or conditions, express or implied, other
than as set forth herein, have been made by any party.
[FFI\AGR:TEDLEASE.AGR]
- 10 -
<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. 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 hereto have executed this Lease consisting
of the foregoing Paragraphs 1 through 18, Exhibits "A" through "C" and, if any
Rider pages and/or Addendum to Lease which follow, as of the day and year first
hereinabove set forth.
"Lessor" "Lessee"
FANTASTIC FOODS INTERNATIONAL INC. AMERICAN CHARITIES UNDERWRITERS INC.
By: By:/s/ Theodore E. DeTello
------------------------------- ------------------------------------
Name: Theodore E. DeTello
Title:
By: By:
------------------------------- ------------------------------------
Name:
Title:
[FFI\AGR:TEDLEASE.AGR]
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<PAGE>
EXHIBIT "A"
THE PLANT
In the event of any conflict, inconsistency or ambiguity created by or
between this Exhibit "A" and the Lease to which it is attached, which Lessee
acknowledges it has read in full, the terms and conditions of the Lease shall
govern.
1. Lessee: Theodore E. DeTello
dba: American Charities Underwriters Inc.
2. Address including Bldg Name/Ste No.: 1745 N. Erie, Pueblo, Colorado
3. Rentable Area: 28,700 +/- square feet
4. Term commerce: January 1, 1996
5. Rental: Four Thousand Dollars and no/100 ($4,000.00) per month
6. Security Deposit: Zero Dollars ($0)
7. Permitted Use: Manufacturing pizzas and storage of same
8. Address for Payments and Notices:
Lessor Lessee
Fantastic Foods International Inc. American Charities
2 Park Plaza, Suite 470 Underwriters Inc.
Irvine, California 92714 1745 N. Erie
Pueblo, Colorado 81001
[FFI\AGR:TEDLEASE.AGR]
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<PAGE>
EXHIBIT "B"
RULES AND REGULATIONS
The following Rules and Regulations shall be n effect at the Building. Lessor
reserves the right to adopt reasonable nondiscriminatory modification and
additions at any time. In the case of any conflict between these regulations and
the Lease, the Lease shall be controlling.
1. Except with the prior written consent of Lessor, Lessee shall not sell, or
permit the retail sale of, newspapers, magazines, periodicals, or theater
tickets, in or from the Plant, nor shall Lessee carry on, or permit or
allow any employee or other person to carry on, the business of
stenography, typewriting or any similar business in or from the Plant for
the service or accommodation of occupants of any other portion of the
Plant. Lessee shall not allow the Plant to be utilized for any
manufacturing of any kind, or the business of a public barber shop, beauty
parlor, or a manicuring and chiropodist business, or any business other
than that specifically provided for the Lease.
2. The sidewalks, halls, passages, elevators, stairways, and other common
areas shall not be obstructed by Lessee or use by it for storage or for any
purpose other than for ingress to and egress from the Plant. The halls,
passages, entrances, elevators, stairways, balconies and roof are not for
the use of the general public, and Lessor shall in all cases retain the
right to control and prevent access to those areas of all persons whose
presence, in the judgment of Lessor, shall be prejudicial to the safety,
character, reputation and interests of the Plant and its Lessees. Nothing
contained in this Lease shall be construed to prevent access to persons
with whom Lessee normally deals only for the purpose of conducting its
business on the Plant (such as Lessees' customers, office suppliers and
equipment vendors and the like) unless those persons are engaged in illegal
activities. Neither Lessee nor any employee or contractor of Lessee shall
go upon the roof of the Plant without the prior written consent of Lessor.
3. The sashes, sash doors, windows, glass lights, solar film and/or screen,
and any lights or skylights that reflect or admit light into the halls or
other places of the Office Building shall not be covered or obstructed. The
toilet rooms, water and wash closets and other water apparatus shall not be
used for any purpose other than that for which they were constructed, and
no foreign substance of any kind shall be thrown in those facilities, and
the expense of any breakage, stoppage or damage resulting from the
violation of this rule shall be borne by Lessee.
4. No sign, advertisement or notice visible from the exterior of the Plant
shall be inscribed, painted or affixed by Lessee on any part of the Plant
without the prior written consent of Lessor. If Lessor shall have given its
consent at any time, whether before or after the execution of this Lease,
that consent shall in no way operate as a waiver or release of any of the
provisions of this Lease, and shall be deemed to relate only to the
particular sign, advertisement or notice so consented to by Lessor and
shall not be construed as dispensing with the necessity of obtaining the
specific written consent of Lessor with respect to any subsequent sign,
advertisement, or notice. If Lessor, by a notice in writing to Lessee,
shall object to any curtain, blind, tinting, shade or screen attached to,
or hung in, or used in connection with, any window or door of the Plant,
the use of the curtain, blind, tinting, shade or screen shall be
immediately discontinued by Lessee. No awnings shall be permitted on any
part of the Plant.
[FFI\AGR:TEDLEASE.AGR]
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<PAGE>
5. Lessee shall not do or permit anything to be done in the Plant, or bring or
keep anything in the Plant, which shall in any way increase the rate of
fire insurance of the Plant, or on the property kept in the Plant, or
obstruct or interfere with the rights of other Lessees, or in any way
injure or annoy them, or conflict with the regulations of the Fire
Department or the fire laws, or with any insurance policy upon the Plant,
or any portion of the Plant or its contents, or with any rules and
ordinances established by the Board of Health or other governmental
authority.
6. No safes, computers or other objects larger or heavier than the freight
elevators of the Plant are limited to carry shall be brought into or
installed in the Plant. Lessor shall have the right to prescribe and
approve of the weight and position of safes, computers or other large or
heavy objects which shall, if deemed necessary by Lessor, be placed on some
type of applicable platform prescribed by Lessor to distribute the weight.
8. Lessee shall not sweep or throw, or permit to be swept or thrown, from the
Plant any dirt or other substance into any of the corridors or halls or
elevators, or out of the doors or windows or stairways of the Plant, and
Lessee shall not use, keep or permit to be used or kept any foul or noxious
gas or substance in the Plant, or permit or suffer the Plant to be occupied
or use in a manner offensive or objectionable to Lessor or other occupants
of the Plant by reasons of noise, odors and/or vibrations, or interfere in
any way with other Lessees or those having business with other Lessees, nor
shall any animals or birds be kept by Lessee in or about the Plant. Smoking
or carrying lighted cigars or cigarettes in the elevators and restrooms of
the Plant is prohibited.
9. No cooking shall be done or permitted by Lessor on the Plant, except
pursuant to the normal use of a microwave oven and coffee maker for the
benefit of Lessee's employees and invitees, nor shall the Plant be used for
the storage of merchandise or for lodging.
10. Lessee shall not use or keep in the Plant any kerosene, gasoline, or
inflammable fluid or any other illuminating material, or use any method of
heating other than that supplied by Lessor.
11. If Lessee desires telephone or telegraph connections, Lessor will direct
electricians as to where and how the wires are to be introduced. No boring
or cutting for wires or otherwise shall be made without directions from
Lessor.
12. Upon the termination of its tenancy, Lessee shall deliver to Lessor all the
keys to offices, rooms and toilet rooms and all access cards which shall
have been furnished to Lessee or which Lessee shall have had made. In the
event of the loss of any keys or cards so furnished, Lessee shall pay
Lessor for those items.
13. Lessee shall not affix any floor covering to the floor of the Plant in any
manner except by a past, or other material which may easily be removed with
water, the use of cement or other similar adhesive materials being
expressly prohibited. The method of affixing any floor covering shall be
subject to approval by Lessor. The expense of repairing any damage
resulting from a violation of this rule shall be borne by Lessee.
[FFI\AGR:TEDLEASE.AGR]
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<PAGE>
14. On Saturdays, Sundays and legal holidays, and on other days between the
hours of 6:00 p.m. and 8:00 a.m., access to the Plant, or to the halls,
corridors, elevators or stairways in the Plant, or to the Plant, may be
refused unless the person seeking access complies with any access control
system that Lessor may establish. Lessor shall in no case be liable for
damages for the admission to or exclusion from the Plant of any person whom
Lessor has the right to exclude under Rules 2 or 19 of this Exhibit. In
case of invasion, mob, riot, public excitement, or other commotion, or in
the event of any other situation reasonably requiring the evacuation of the
Plant, Lessor reserves the right at its election and without liability to
Lessee to prevent access to the Plant by closing the doors or otherwise for
the safety of Lessee and protection of property in the Plant.
15. Lessee shall see that the windows, transoms and doors of the Plant are
closed and securely locked before leaving the Plant and shall observe
strict care not to leave windows open, if applicable, when it rains. Lessee
shall exercise extraordinary care and caution that all water faucets or
water apparatus are entirely shut off before Lessee or Lessee's employees
leave the Plant, and that all electricity, gas or air shall likewise be
carefully shut off, so as to prevent waste or damage, and for any default
or carelessness Lessee shall make good all injuries sustained by other
Lessees or occupants of the Plant or Lessee.
16. Lessee shall not alter any lock or install a new or additional lock or any
bolt on any door of the Plant without the prior written consent of Lessor.
If Lessor gives its consent, Lessee shall in each case promptly furnish
Lessor with a key for any new or altered lock.
17. Lessee shall not install equipment, such as but not limited to electronic
tabulating or computer equipment, requiring electrical or air conditioning
service in excess of that to be provided by Lessor under the Lease.
18. Lessee shall furnish and utilize masonite or plastic floor mats so as to
minimize carpet damage resulting from the use of rollers on chairs.
19. Lessor shall have full and absolute authority to regulate or prohibit the
entrance to the Plant of any vendor, supplier, purveyor, petitioner,
proselytizer or other similar person. In the event any such person is a
guest or invitee of Lessee, Lessor shall notify Lessee in advance of each
desired entry, and Lessor shall authorize the person so designated to enter
the Plant, provided that in the sole and absolute discretionary judgment of
Lessor, such person will not be involved in general solicitation
activities, or the proselytizing, petitioning, or disturbance of other
Lessees or their customers or invitees, or engaged or likely to engage in
conduct which may in Lessor's opinion distract from the use of the Plant
for its intended purpose. Notwithstanding the foregoing, Lessor reserves
the absolute right and discretion to limit or prevent access to the Plant
by any food or beverage vendor, whether or not invited by Lessee, and
Lessor may condition such access upon the vendor's execution of an entry
permit agreement which may contain provisions for insurance coverage and/or
the payment of a fee to Lessor.
20. Lessor may from time to time grant Lessee individual and temporary
variances from these Rules, provided that any variance does not have a
material adverse effect on the use and enjoyment of the Plant by Lessee.
[FFI\AGR:TEDLEASE.AGR]
- 15 -
<PAGE>
EXHIBIT "C"
LESSEE'S INSURANCE
The following standards for Lessee's Insurance shall be in effect at the Plant.
Lessor reserves the right to adopt reasonable nondiscriminatory modifications
and additions to those standards. Lessee agrees to obtain and present evidence
to Lessor that it has fully complied with the insurance requirements.
1. Lessee shall, at its sole cost and expense, commencing on the date Lessee
is given access to the Plant for any purpose and during the entire Term,
procure, pay for and keep in full force and effect: (i) comprehensive
general liability insurance with respect to the Plant and the operations of
or on behalf of Lessee in, on or about the Plant, including but not limited
to personal injury, non-owned automobile, blanket contractual, independent
contractors, broad form property damage, fire legal liability, products
liability (if a product is sold from the Plant), liquor law liability (if
alcoholic beverages are sold, served or consumed within the Plant), and
cross liability and severability of interest clauses, which policy(ies)
shall be written on an "occurrence" basis and for not less than $1,000,000
with a $1,000,000 umbrella liability policy combined single limit (with a
$50,000 minimum limit on fire legal liability) per occurrence for bodily
injury, death, and property damage liability, or the current limit of
liability carried by Lessee, whichever is greater, and subject to such
increases in amounts as Lessor may determine from time to time; (ii)
workers' compensation insurance coverage as required by law, together with
employers' liability insurance coverage; (iii) with respect to
improvements, alterations, and the like required or permitted to be made by
Lessee under this Lease, builder's all-risk insurance, in amounts
satisfactory to Lessor; (iv) insurance against fire, vandalism, malicious
mischief and such other additional perils as may be included in a standard
"all risk" form in general use in Orange County, California, insuring
Lessee's leasehold improvements, trade fixtures, furnishings, equipment and
items of personal property of Lessee located in the Plant, in an amount
equal to not less than ninety percent (90%) of their actual replacement
cost (with replacement cost endorsement)l and (v) business interruption
insurance in amounts satisfactory to Lessor. In no event shall the limits
of any policy be considered as limiting the liability of Lessee under this
Lease.
2. All policies of insurance required to be carried by Lessee pursuant to this
Exhibit "C" shall be written by responsible insurance companies authorized
to do business in the State of California and Colorado, and with a Best's
policyholder rating of not less than "A" subject to final acceptance and
approval by Lessor. Any insurance required of Lessee may be furnished by
Lessee under any blanket policy carried by it or under a separate policy. A
true and exact copy of each paid up policy evidencing the insurance
(appropriately authenticated by the insurer) or a certificate of insurance,
certifying that the policy has been issued, provides the coverage required
by this Exhibit "C" and contains the required provisions, shall be
delivered to Lessor prior to the date Lessee is given the right of
possession of the Plant. Proper evidence of the renewal of any insurance
coverage shall also be delivered to Lessor not less than thirty (30) days
prior to the expiration of the coverage. Lessor may at any time, and from
time to time, inspect and/or copy any and all insurance policies required
by this Lease.
[FFI\AGR:TEDLEASE.AGR]
- 16 -
<PAGE>
3. Each policy evidencing insurance required to be carried by Lessee pursuant
to this Exhibit "C" shall contain the following provisions and/or clauses
satisfactory to Lessor: (i) provision that the policy and the coverage
provided shall be primary and that any coverage carried by Lessee shall be
noncontributory with respect to any policies carried by Lessee; (ii) a
provision including Lessee and any other parties in interest designated by
Lessor as an additional insured, except as to workers compensation
insurance; (iii) a waiver by the insurer of any right to subrogation
against Lessor, its agents, employees, contractors and representatives
which arises or might arise by reason of any payment under the policy or by
reason of any act or omission of Lessee, its agents, employees, contractors
or representatives; and (iv) a provision that the insurer will not cancel
or change the coverage provided by the policy without first giving Lessor
thirty (30) days prior written notice.
4. In the event that Lessee fails to procure, maintain and/or pay for, at the
times and for the durations specific in this Exhibit "C", any insurance
required by this Exhibit "C", or fails to carry insurance required by any
governmental authority, Lessor may at its election procure that insurance
and that insurance and pay the premiums, in which event Lessee shall repay
Lessor all sums paid by Lessor, together with interest at the maximum rate
permitted by law and any related costs or expenses incurred by Lessor
within ten (10) days following Lessor's written demand to Lessee.
[FFI\AGR:TEDLEASE.AGR]
- 17 -
<PAGE>
April 12, 1996
AMERICAN CHARITIES UNDERWRITERS
715 North Grand Avenue
Pueblo, Colorado 81003
RE: Lease Agreement between Fantastic Foods International ("Fantastic")
and American Charities Underwriters Inc. ("ACU") dated August 31, 1995
(the "Lease")
Gentlemen:
When countersigned in the space provided below, this letter (the "Agreement")
will serve as an addendum to the Lease and the option granted therein by
Fantastic, as Lessor, to ACU, as Lessee, to purchase the Building (as defined in
the Lease).
Subject to the following conditions, Nona Morelli's II Inc. ("Nona") and
Fantastic agree to the assumption by ACU of Nona's note to Ohio National Life
Insurance Company and the underlying First Trust Deed obligations of Nona
related to the Building (the "Ohio National Note"), and Fantastic agrees to
reduce the Purchase Price (as defined in the Lease) to $450,000, payable (a) by
ACU's assumption of the present balance due under the Ohio National Note of
approximately $240,000; and, (b) by the execution of a Second Trust Deed in
favor of Fantastic in the principal amount of $210,000. Such Second Trust Deed
to be payable from the net proceeds of any refinancing utilizing the Building,
but in any event no later than December 31, 1996.
This agreement is subject to:
1. Written confirmation that the assumption of the Ohio National
Note by ACU will effect a full release of Nona and Fantastic by
Ohio National Life Insurance Company, or their successor in
interest, as to the Ohio National Note; and,
2. ACU bringing current the monthly payments due under Ohio National
Note (such payments to be credited against the payments due to
Fantastic under the Lease; and
3. Written confirmation from the proposed new lender, addressed to
Fantastic, of the amount, terms and timing of ACU's proposed
refinancing of the Building.
If this correctly sets forth your understanding of the proposed revision of the
terms of the Lease, please execute and return a countersigned copy of this
Agreement to me before April 30, 1996.
This offer contained herein is not binding unless signed by all parties and,
even if fully executed, it will automatically terminate and be of no further
force or effect if not returned to me before April 30, 1996.
[NM\AGR:ACPUEBLD]-2
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<PAGE>
Sincerely,
/s/ Fred G. Luke
- ----------------------------------------
Fred G. Luke
Chief Executive Officer
AGREED AND ACCEPTED
This ---------- day of April, 1996
AMERICAN CHARITIES UNDERWRITERS INC.
By:-------------------------------------
Name:
AGREED AND ACCEPTED
This ---------- day of April, 1996
FANTASTIC FOODS INTERNATIONAL INC.
By:-------------------------------------
Name:
[NM\AGR:ACPUEBLD]-2
- 19 -
EXHIBIT 10.121
PROMISSORY NOTE AND SECURITY AGREEMENT
WITH FOOTHILL CAPITAL CORPORATION
SECURED PROMISSORY NOTE
$350,000.00 Los Angeles, California
October 26, 1995
FOR VALUE RECEIVED, the undersigned ("Maker") hereby promises to pay to
FOOTHILL CAPITAL CORPORATION, a California corporation ("Foothill"), or order,
at 11111 Santa Monica Boulevard, Suite 1500, Los Angeles, California 90025-3333,
or at such other address as the holder of this Secured Promissory Note ("Note")
may specify in writing, the principal sum of Three Hundred Fifty Thousand
Dollars ($350,000.00) or, if less, the then outstanding principal amount of the
term loan made by Foothill in connection with that certain Security Agreement,
dated as of even date herewith, between Maker and Foothill (as hereafter
amended, restated, supplemented, or modified from time to time, the
"Agreement"), plus interest and the Monthly Service Charge (defined below) in
the manner and upon the terms and conditions set forth below. This Note is made
in connection with the Agreement, the provisions of which are incorporated
herein by reference. All capitalized terms used herein, unless otherwise defined
herein, shall have the meanings ascribed to them in the Agreement.
1. Rate and Payment of Interest
The principal balance of this Note shall bear interest from the date
hereof until paid in full at a per annum rate equal to four (4)
percentage points above the Reference Rate. For purposes of this Note,
"Reference Rate" means the highest of the variable rates of interest
per annum most recently announced by: (a) Bank of America, N.T. & S.A.,
San Francisco, California; (b) Mellon Bank, N.A., Pittsburgh,
Pennsylvania; and (c) Citibank, N,A., New York, New York, or any
successor to any of the foregoing institutions, as its "Prime Rate" or
"Reference Rate", as the case may be, whether or not such announced
rate is the best rate available from such financial institution, all as
determined by Foothill. In the event that the Reference Rate is changed
from time to time hereafter, the applicable rate of interest hereunder
automatically and immediately shall be increased or decreased by an
amount equal to the Reference Rate change. The rates of interest
charged hereunder shall be based upon the average Reference Rate in
effect during the month. Upon the occurrence of an Event of Default
under the Agreement, the rate of interest on this Note shall, at the
option of the holder of this Note, be increased to eight (8) percentage
points above the Reference Rate. Interest charged on this Note shall be
computed on the basis of a three hundred sixty (360) day year for
actual days elapsed.
In no event shall the interest rate or rates payable under
this Note, plus any other amounts paid in connection herewith, exceed the
highest rate permissible under any law that a court of competent jurisdiction
shall, in a final determination, deem applicable. Maker and Foothill intend
legally to agree upon the rate or rates of interest (and the other amounts paid
in connection herewith) and manner of payment stated within this Note; provided,
however, that anything contained herein to the contrary notwithstanding, if said
interest rate or rates of interest (or other amounts paid in connection
herewith) or the manner of payment exceeds the maximum allowable under
applicable law, then, ipso facto as of the date of this Note, Maker is and shall
be liable only for the payment of such maximum as allowed by law, and payment
received from Maker in excess of such legal maximum, whenever received, shall be
applied to reduce the principal balance of this Note to the extent of such
excess.
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2. Schedule of Payments
Principal, interest, and the Monthly Service Charge under this Note
shall be due and payable according to the following schedule:
A. Interest and the Monthly Service Charge shall be due and
payable in arrears on the first (1st) day of each month
commencing December 1, 1995, and continuing thereafter until
this Note has been paid in full;
B. Forty-seven (47) installments of principal, each in the
amount of Seven Thousand Two Hundred Ninety Dollars
($7,290.00), shall be due and payable on the first (1st) day
of each month commencing December 1, 1995;
C. One (1) installment of principal in the amount Seven
Thousand Three Hundred Seventy Dollars ($7,370.00) (or the
outstanding remaining principal balance of this Note, if
such outstanding principal balance is other than $7,370.00)
shall be due and payable on November 1, 1999; and
D. Any remaining outstanding principal, together with all
accrued and unpaid interest thereon and any other sums owing
in connection herewith (including, but not limited to,
Monthly Service Charges that remain unpaid), shall be due
and payable in full on November 1, 1999.
3. Monthly Service Charges
In addition to the interest and other amounts due under this Note, a
service charge of 3/10 of one percent (.3%) per month shall be payable
monthly in arrears based on the average daily outstanding principal
balance of this Note, calculated on the basis of a 360-day year and
paid for actual days elapsed (the "Monthly Service Charge").
4. Prepayment
Voluntary prepayments of the principal balance of this Note shall be
permitted at any time; provided that each such prepayment shall be
accompanied by all interest and any Monthly Service Charges that have
accrued and remain unpaid with respect to the amount of principal being
repaid and a prepayment fee equal to the following:
(i) Ten percent (10%) of the amount prepaid with respect to any
prepayments made prior to June 1, 1997; and
(ii) Three percent (3%) of the amount prepaid with respect to any
prepayments made on or after June 1, 1997, and prior to
November 1, 1999.
Amounts repaid or prepaid with respect to this Note may not be
re-borrowed. Partial prepayments of principal shall be applied to
scheduled payments of principal in the inverse order of their maturity.
[FFI\PNO:FOOT1026.PNO]
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5. Holder's Right of Acceleration
Upon the occurrence of an Event of Default under the Agreement,
including, but not limited to, the failure to pay any installment of
principal, interest, or Monthly Service Charge hereunder when due, the
holder of this Note may, at its election and without notice to Maker,
declare the entire balance hereof (including, but not limited to, all
principal, interest, and Monthly Service Charges) immediately due and
payable.
6. Additional Rights of Holder
If any installment of principal, interest, or Monthly Service Charges
hereunder is not paid when due, the holder shall have the following
rights in addition to the rights set forth herein, in the Agreement,
and under law:
A. the right to compound interest and the Monthly Service
Charge by adding the unpaid interest and/or Monthly Service
Charge to principal, with such amount thereafter bearing
interest and the Monthly Service Charge at the rates
provided in this Note; and
B. if any installment is more than ten (10) days past due, the
right to collect a charge equal to the greater of Fifteen
Dollars ($15.00) or five percent (5%) of the late payment
for each month in which it is late. This charge is a result
of a reasonable endeavor by Maker and the holder to estimate
the holder's added costs and damages resulting from Maker's
failure to make timely payments under this Note; hence Maker
agrees that the charge shall be presumed to be the amount of
damage sustained by the holder since it is extremely
difficult to determine the actual amount necessary to
reimburse the holder for damages.
7. General Provisions
A. If this Note is not paid when due, Maker further promises to
pay all costs of collection, foreclosure fees, and
reasonable attorneys' fees incurred by the holder, whether
or not suit is filed hereon, together with the fees, costs
and expenses as provided in the Agreement.
B. Maker hereby consents to any and all renewals, replacements,
and/or extensions of time for payment of this Note before,
at, or after maturity.
C. Maker hereby consents to the acceptance, release, or
substitution of security for this Note.
D. Presentment for payment, demand, notice of dishonor,
protest, and notice of protest are hereby expressly waived.
E. No delay or omission on the part of the holder of this Note
in exercising any right shall operate as a waiver thereof or
of any other right.
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F. Any waiver of any rights under this Note, the Agreement, or
under any other agreement, instrument, or paper signed by
Maker is neither valid nor effective unless made in writing
and signed by the holder of this Note.
G. A waiver by the holder of this Note upon any one occasion
shall not be construed as a bar or waiver of any right or
remedy on any future occasion.
H. Should any one or more of the provisions of this Note be
determined illegal or unenforceable, all other provisions
shall nevertheless remain effective.
I. This Note cannot be changed, modified, amended, or
terminated orally.
J. The validity of this Note, its construction, interpretation,
and enforcement, and the rights of the parties hereto shall
be determined under, governed by, and construed in
accordance with the laws of the State of California, without
reference to the principles of conflicts of laws thereof.
8. Security for this Note
This Note is secured by collateral described in the Agreement, and is
subject to all of the terms and conditions thereof, including, but not
limited to, the remedies specified therein or granted in connection
therewith.
9. Venue; Jurisdiction; Waiver of Trial by Jury
MAKER AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH
THIS NOTE SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL
COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, OR,
AT THE SOLE OPTION OF FOOTHILL, IN ANY OTHER COURT IN WHICH FOOTHILL
SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT
MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. MAKER WAIVES, TO
THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO
ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO
THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 9.
MAKER, TO THE EXTENT IT MAY LEGALLY DO SO, HEREBY EXPRESSLY WAIVES ANY
RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, CAUSE OF ACTION,
OR PROCEEDING ARISING UNDER OR WITH RESPECT TO THIS NOTE, OR IN ANY WAY
CONNECTED WITH, OR RELATED TO, OR INCIDENTAL TO, THE DEALINGS OF THE
PARTIES HERETO WITH RESPECT TO THIS NOTE OR THE TRANSACTIONS RELATED
THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
IRRESPECTIVE OF WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE.
MAKER, TO THE EXTENT IT MAY LEGALLY DO SO, HEREBY AGREES THAT ANY SUCH
CLAIM, DEMAND, ACTION, CAUSE OF ACTION, OR PROCEEDING SHALL BE DECIDED
BY A COURT TRIAL WITHOUT A JURY AND THAT THE HOLDER OF THIS NOTE MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 9 WITH ANY COURT
AS WRITTEN EVIDENCE OF THE CONSENT OF MAKER TO THE WAIVER OF ITS RIGHT
TO TRIAL BY JURY.
[FFI\PNO:FOOT1026.PNO]
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IN WITNESS WHEREOF, this Note has been executed and delivered on the
date first set forth above.
Fantastic Foods International, Inc.,
a California corporation
By: /s/ J.L. Lawver
---------------------------------
Name: J.L. Lawver
Its: President
[FFI\PNO:FOOT1026.PNO]
<PAGE>
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is entered into as of October 26, 1995, between
FOOTHILL CAPITAL CORPORATION, a California corporation ("Foothill"), with a
place of business located at 11111 Santa Monica Boulevard, Suite 1500, Los
Angeles, California 90025-3333, and FANTASTIC FOODS INTERNATIONAL, INC., a
California corporation ("Borrower"), with its chief executive office located at
5345 Third Street, Irwindale California 91706.
The parties agree as follows:
1. Definitions and Construction
1.1 Definitions. As used in this Agreement, the following terms
shall have the following definitions:
"Accounts" means all presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations
owing to Borrower arising out of the sale or lease of goods or
the rendition of services by Borrower, whether or not earned
by performance, and any and all credit insurance, guaranties,
and other security therefor, as well as all merchandise
returned to or reclaimed by Borrower and Borrower's Books
relating to any of the foregoing.
"Agreement" means this Security Agreement and any extensions,
riders, supplements, notes, amendments, or modifications to or
in connection with this Security Agreement.
"Borrower's Books" means all of Borrower's books and records
including: ledgers; records indicating, summarizing, or
evidencing Borrower's assets or liabilities, or the
Collateral; all information relating to Borrower's business
operations or financial condition; and all computer programs,
disc or tape files, printouts, runs, or other computer
prepared information, and the equipment containing such
information.
"Closing Date" means the date on which Foothill makes the loan
to Borrower under the Term Note.
"Code" means the California Uniform Commercial Code.
"Collateral" means each of the following: the Accounts;
Borrower's Books; the Equipment; the General Intangibles; the
Inventory; the Negotiable Collateral; any money, or other
assets of Borrower which hereafter come into the possession,
custody, or control of Foothill; and the proceeds and
products, whether tangible or intangible, of any of the
foregoing, including proceeds of insurance covering any or all
of the Collateral, and any and all Accounts, Equipment,
General Intangibles, Inventory, Negotiable Collateral, money,
deposit accounts, or other tangible or intangible property
resulting from the sale or other disposition of the
Collateral, or any portion thereof or interest therein, and
the proceeds thereof.
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"Equipment" means all of Borrower's present and hereafter
acquired machinery, machine tools, motors, equipment,
furniture, furnishings, fixtures, vehicles (including motor
vehicles and trailers), tools, parts, dies, jigs, goods,
including, without limitation, the items of Borrower's
equipment set forth on Schedule E-1 attached hereto, and any
interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions,
additions, and improvements to any of the foregoing, wherever
located.
"Event of Default" has the meaning set forth in Section 8.
"Foothill Expenses" means all: costs or expenses (including
taxes, photocopying, notarization, telecommunication, and
insurance premiums) required to be paid by Borrower under any
of the Loan Documents that are paid or advanced by Foothill;
documentation, filing, recording, publication, appraisal
(including periodic Collateral appraisals), and search fees
assessed, paid, or incurred by Foothill in connection with
Foothill's transactions with Borrower; costs and expenses
incurred by Foothill in the disbursement of funds to Borrower
(by wire transfer or otherwise); charges paid or incurred by
Foothill resulting from the dishonor of checks; costs and
expenses paid or incurred by Foothill to correct any default
or enforce any provision of the Loan Documents, or in gaining
possession of, maintaining, handling, preserving, storing,
shipping, selling, preparing for sale, or advertising to sell
the Collateral, or any portion thereof, whether or not a sale
is consummated; costs and expenses paid or incurred by
Foothill in examining Borrower's Books; costs and expenses of
third party claims or any other suit paid or incurred by
Foothill in enforcing or defending the Loan Documents; and
Foothill's reasonable attorneys' fees and expenses incurred in
advising, structuring, drafting, reviewing, administering,
amending, terminating, enforcing (including attorneys' fees
and expenses incurred in connection with a "workout," a
"restructuring," or an Insolvency Proceeding concerning
Borrower or any guarantor of the Obligations), defending, or
concerning the Loan Documents, whether or not suit is brought.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, consistently
applied.
"General Intangibles" means all of Borrower's present and
future general intangibles and other personal property
(including choses or things in action, goodwill, patents,
trade names, trademarks, service marks, copyrights,
blueprints, drawings, purchase orders, customer lists, monies
due or recoverable from pension funds, route lists, monies due
under any royalty or licensing agreements, infringement
claims, computer programs, computer discs, computer tapes,
literature, reports, catalogs, deposit accounts, insurance
premium rebates, tax refunds, and tax refund claims) other
than goods and Accounts, and Borrower's Books relating to any
of the foregoing.
"Insolvency Proceeding" means any proceeding commenced by or
against any person or entity under any provision of the United
States Bankruptcy Code, as amended, or under any other
bankruptcy or insolvency law, including assignments for the
benefit of creditors, formal or informal moratoria,
compositions, extensions generally with its creditors, or
proceedings seeking reorganization, arrangement, or other
similar relief.
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"Inventory" means all present and future inventory in which
Borrower has any interest, including goods held for sale or
lease or to be furnished under a contract of service and all
of Borrower's present and future raw materials, work in
process, finished goods, and packing and shipping materials,
wherever located, and any documents of title representing any
of the above and Borrower's Books relating to any of the
foregoing.
"Judicial Officer or Assignee" means any trustee, receiver,
controller, custodian, assignee for the benefit of creditors,
or any other person or entity having powers or duties like or
similar to the powers and duties of a trustee, receiver,
controller, custodian, or assignee for the benefit of
creditors.
"Loan Documents" means, collectively, this Agreement, the Term
Note and any other agreement entered into in connection with
this Agreement, together with all alterations, amendments,
changes, extensions, modifications, refinancings, refundings,
renewals, replacements, restatements, or supplements, of or to
any of the foregoing.
"Negotiable Collateral" means all of Borrower's present and
future letters of credit, notes, drafts, instruments,
documents, leases, and chattel paper, and Borrower's Books
relating to any of the foregoing.
"Obligations" means all loans, advances, debts, principal,
interest (including any interest that, but for the provisions
of the United States Bankruptcy Code, would have accrued),
premiums, liabilities (including all amounts charged to
Borrower's loan account pursuant to any agreement authorizing
Foothill to charge Borrower's loan account), obligations,
fees, lease payments, guaranties, covenants, and duties owing
by Borrower to Foothill of any kind and description (whether
pursuant to or evidenced by the Loan Documents, by any note or
other instrument, or by any other agreement between Foothill
and Borrower, and whether or not for the payment of money),
whether direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter arising, and including
any debt, liability, or obligation owing from Borrower to
others that Foothill may have obtained by assignment or
otherwise, and further including all interest not paid when
due and all Foothill Expenses that Borrower is required to pay
or reimburse by the Loan Documents, by law, or otherwise.
"Pay-Off Letters" means letters, in form and substance
reasonably satisfactory to Foothill, from other lenders,
secured creditors, or lessors respecting the amount necessary
to (a) repay in full all of the obligations of Borrower owing
to such lenders, secured creditors, and/or lessors and (b)
obtain (i) terminations/releases of all of the security
interests or liens existing in favor of such lenders, secured
creditors, and/or lessors in and to the properties or assets
of Borrower and (ii) good and marketable title to such
properties or assets (in the case of leased property).
"Permitted Liens" means: (a) liens and security interests held
by Foothill; and (b) liens for unpaid taxes that are not yet
due and payable.
[FFI\AGR:FOOTSEC.AGR]
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"Term Note" means that certain Secured Promissory Note, of
even date herewith, by Borrower to the order of Foothill, in
the original principal amount of Three Hundred Fifty Thousand
Dollars ($350,000), and any extensions, renewals,
replacements, or substitutions therefor.
1.2 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP.
When used herein, the term "financial statements" shall
include the notes and schedules thereto.
1.3 Code. Any terms used in this Agreement which are defined in
the Code shall be construed and defined as set forth in the
Code unless otherwise defined herein.
1.4 Construction. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the
singular, to the singular include the plural, and the term
"including" is not limiting. The words "hereof," "herein,"
"hereby," "hereunder," and similar terms in this Agreement
refer to this Agreement as a whole and not to any particular
provision of this Agreement. Section, subsection, clause, and
exhibit references are to this Agreement unless otherwise
specified.
1.5 Schedules and Exhibits. All of the schedules and exhibits
attached to this Agreement shall be deemed incorporated
herein by reference.
2. Fees
Borrower shall pay to Foothill the following fees:
2.1 Closing Fee. A one time closing fee of Seven Thousand
Dollars ($7,000) which is earned, in full, on the Closing
Date and is due and payable by Borrower to Foothill in
connection with this Agreement on the Closing Date;
2.2 Appraisal and Documentation Fees . Foothill's customary
appraisal fee of Seven Hundred Fifty Dollars ($750) per day
per appraiser, plus out-of-pocket expenses for each appraisal
of the Collateral performed by Foothill or its agents.
3. Conditions to Effectiveness: Term of Agreement
3.1 Conditions Precedent. The obligation of Foothill to make the
loan evidenced by the Term Note is subject to the
fulfillment, to the satisfaction of Foothill and its
counsel, of each of the following conditions on or before
the Closing Date:
(a) The Closing Date shall occur on or before October
31, 1995;
(b) Other than with respect to Permitted Liens (if
any), Borrower's existing lenders, creditors, and
lessors shall have executed and delivered Pay-Off
Letters, UCC termination statements, bills of
sale, and other documentation evidencing the
termination of their liens and security interests
in the assets of Borrower (and the transfer of
title to such assets to Borrower, in the case of
leased property) or a subordination agreement in
form and substance satisfactory to Foothill in its
sole discretion;
[FFI\AGR:FOOTSEC.AGR]
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<PAGE>
(c) Foothill shall have received copies of Borrower's
Bylaws and Articles or Certificate of Incorporation,
as amended, modified, or supplemented to the Closing
Date, certified by the Secretary of Borrower;
(d) Foothill shall have received a certificate of
corporate status with respect to Borrower, dated
within ten (10) days of the Closing Date, by the
Secretary of State of the state of incorporation of
Borrower, which certificate shall indicate that
Borrower is in good standing in such state;
(e) Foothill shall have received a certificate from the
Secretary of Borrower attesting to the resolutions of
Borrower's Board of Directors authorizing its
execution and delivery of this Agreement and the
other Loan Documents to which Borrower is a party and
authorizing specific officers of Borrower to execute
same;
(f) Foothill shall have received certificates of
corporate status with respect to Borrower, each dated
within ten (10) days of the Closing Date, such
certificates to be issued by the Secretary of State
of the states in which its failure to be duly
qualified or licensed would have a material adverse
effect on the financial condition or assets of
Borrower, which certificates shall indicate that
Borrower is in good standing;
(g) Foothill shall have received the insurance
certificates, certified copies of policies, required
by Section 6.7 hereof along with a 438BFU Lender's
Loss Payable Endorsement naming Foothill as sole loss
payee, all in form and substance satisfactory to
Foothill and its counsel;
(h) Foothill shall have received each of the following
documents and agreements, in form and substance
satisfactory to Foothill and its counsel, duly
executed, and each such document and agreement shall
be in full force and effect:
(1) This Agreement;
(2) Secured Promissory Note; and
(3) Validity Guaranty from Jon L. Lawver,
individually;
(i) Foothill shall have received searches reflecting the
filing of its financing statements and fixture
filings, and shall have received certificates of
title with respect to the Collateral which shall have
been duly executed in order to perfect all of the
security interests granted to Foothill;
(j) Foothill shall have received landlord and
mortgagee waivers from the lessors and mortgagees
of the locations where the Equipment is located;
[FFI\AGR:FOOTSEC.AGR]
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(k) Foothill shall have received the Closing Fee
referenced in Section 2.1, all of Foothill Expenses
incurred as of the Closing Date, and all other costs
and expenses incurred by Foothill in connection
herewith, including without limitation, audit fees,
search fees, appraisal fees, documentation, recording
and filing fees, and the fees and costs of Morgan,
Lewis & Bockius LLP, for the negotiation, preparation
and documentation of the Loan Documents;
(l) All representations and warranties set forth in this
Agreement and the other Loan Documents are true and
correct as of the Closing Date, no "Event of Default"
has occurred under this Agreement or any of the other
Loan Documents, and all of the Loan Documents are in
full force and effect: and
(m) All other documents and legal matters in connection
with the transactions contemplated by this Agreement
shall have been delivered or executed or recorded and
shall be in form and substance satisfactory to
Foothill and its counsel.
3.2 Term. This Agreement shall become effective upon the execution
and delivery hereof by Borrower and Foothill, and shall
continue in full force and effect until all Obligations have
been indefeasibly paid in full.
4. Creation of Security Interest
4.1 Grant of Security Interest. Borrower hereby grants to Foothill
a continuing security interest in all currently existing and
hereafter acquired or arising Collateral in order to secure
prompt repayment of any and all Obligations and in order to
secure prompt performance by Borrower of each of its covenants
and duties under the Loan Documents. Foothill's security
interest in the Collateral shall attach to all Collateral
without further act on the part of Foothill or Borrower.
4.2 Delivery of Additional Documentation Required. Borrower shall
execute and deliver to Foothill, prior to or concurrently with
Borrower's execution and delivery of this Agreement and at any
time thereafter at the request of Foothill, all financing
statements, continuation financing statements, fixture
filings, security agreements, chattel mortgages, pledges,
assignments, endorsements of certificates of title,
applications for title, affidavits, reports, notices, letters
of authority, and all other documents that Foothill may
reasonably request, in form satisfactory to Foothill, to
perfect and continue perfected Foothill's security interests
in the Collateral and in order to fully consummate all of the
transactions contemplated under the Loan Documents.
4.3 Power of Attorney. Borrower hereby irrevocably makes,
constitutes, and appoints Foothill (and any of Foothill's
officers, employees, or agents designated by Foothill) as
Borrower's true and lawful attorney, with power to: (a) sign
the name of Borrower on any of the documents described in
Section 4.2 or on any other similar documents to be
executed, recorded, or filed in order to perfect or continue
perfected Foothill's security interest in the Collateral;
(b) endorse Borrower's name on any checks, notices,
acceptances, money orders, drafts, or other item of payment
or security that may come into Foothill's possession; (c) at
any time that an Event of Default has occurred or Foothill
deems itself insecure, make, settle, and adjust all claims
under Borrower's policies of insurance in respect of the
Collateral and make all determinations and decisions with
respect to such policies of insurance. The appointment of
Foothill as Borrower's attorney, and each and every one of
Foothill's rights and powers, being coupled with an
interest, is irrevocable until all of the Obligations have
been fully repaid and performed and Foothill's obligation to
provide advances hereunder is terminated.
[FFI\AGR:FOOTSEC.AGR]
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<PAGE>
4.4 Right to Inspect. Foothill (through any of its officers,
employees, or agents) shall have the right, from time to time
hereafter, to inspect Borrower's Books and to check, test, and
appraise the Collateral in order to verify Borrower's
financial condition or the amount, quality, value, condition
of, or any other matter relating to, the Collateral.
5. Representations and Warranties
Borrower represents and warrants as follows:
5.1 Prior Encumbrances. Borrower has good and indefeasible title
to the Collateral, free and clear of liens, claims, security
interests, or encumbrances except for Permitted Liens. Except
with respect to certain machinery and equipment that will be
purchased with the proceeds of the loan represented by the
Term Note, none of the Collateral has been purchased by
Borrower within the six (6) months period preceding the
Closing Date, except for sales to Borrower in the ordinary
course of the seller's business.
5.2 Location of Equipment. The Equipment is not now and shall not
at any time hereafter be stored with a bailee, warehouseman,
or similar party without Foothill's prior written consent.
Borrower shall keep the Equipment only at the following
locations: (i) 5345 Third Street, Irwindale, California 91706
and (ii) 119 West Live Oak, Units B, C, and D, Arcadia,
California 91007. None of the Equipment has been located,
during the six (6) month period prior to the Closing Date, in
any jurisdiction other than the county(ies) and state(s) set
forth in this Section.
5.3 Location of Chief Executive Office. The chief executive office
of Borrower is located at the address indicated in the first
paragraph of this Agreement and Borrower covenants and agrees
that it will not, without thirty (30) days prior written
notification to Foothill, relocate such chief executive
office.
5.4 Fictitious Business Name(s). Borrower uses only the
following Fictitious Business Names and none other: (a)
Morelli Foods, Inc., (b) The Pasta Fresca Co., Inc., (c)
Nona Morelli, (d) Santino's, and (e) Pasta Fresca Co.
5.5 Due Organization and Qualification. Borrower is and shall at
all times hereafter be duly organized and existing and in
good standing under the laws of the state of its
incorporation and qualified and licensed to do business in,
and in good standing in, any state in which the conduct of
its business or its ownership of the Collateral requires
that it be so qualified.
[FFI\AGR:FOOTSEC.AGR]
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5.6 Due Authorization: No Conflict. The execution, delivery, and
performance of the Loan Documents are within Borrower's
corporate powers, have been duly authorized, and are not in
conflict with nor constitute a breach of any provision
contained in Borrower's Articles or Certificate of
Incorporation, or By-laws, nor will they constitute an event
of default under any material agreement to which Borrower is
a party.
5.7 Litigation. There are no actions or proceedings pending by or
against Borrower before any court or administrative agency and
Borrower does not have knowledge or belief of any pending,
threatened, or imminent litigation, governmental
investigations, or claims, complaints, actions, or
prosecutions involving Borrower or any guarantor of the
Obligations, except for ongoing collection matters in which
the Borrower is the plaintiff.
5.8 No Material Adverse Change in Financial Condition. All
financial statements relating to Borrower or any guarantor of
the Obligations that have been or may hereafter be delivered
by Borrower to Foothill have been prepared in accordance with
GAAP and fairly present Borrower's financial condition as of
the date thereof and Borrower's results of operations for the
period then ended. There has not been a material adverse
change in the financial condition of Borrower since the date
of the latest financial statements submitted to Foothill on or
before the Closing Date.
5.9 Solvency. Borrower's assets at a fair valuation exceed the
amount of all of its debts at a fair valuation and Borrower is
able to pay all of its debts (including trade debts and
contingent liabilities) as they become due.
5.10 Environmental Condition. None of Borrower's properties or
assets has ever been used by Borrower or, to the best of
Borrower's knowledge, by previous owners or operators in the
disposal of, or to produce, store, handle, treat, release, or
transport, any hazardous waste or hazardous substance. None of
Borrower's properties or assets has ever been designated or
identified in any manner pursuant to any environmental
protection statute as a hazardous waste or hazardous substance
disposal site, or a candidate for closure pursuant to any
environmental protection statute. No lien arising under any
environmental protection statute has attached to any revenues
or to any real or personal property owned or operated by
Borrower. Borrower has not received a summons, citation,
notice, or directive from the Environmental Protection Agency
or any other federal or state governmental agency concerning
any action or omission by Borrower resulting in the releasing
or disposing of hazardous waste or hazardous substances into
the environment.
5.11 Reliance by Foothill; Cumulative. Each warranty and
representation contained in this Agreement shall be
conclusively presumed to have been relied on by Foothill
regardless of any investigation made or information possessed
by Foothill. The warranties and representations set forth
herein shall be cumulative and in addition to any and all
other warranties and representations that Borrower shall now
or hereinafter give, or cause to be given, to Foothill.
[FFI\AGR:FOOTSEC.AGR]
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6. Affirmative Covenants
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until payment in full of the Obligations, and
unless Foothill shall otherwise consent in writing, Borrower shall do
all of the following:
6.1 Financial Statements, Reports, Certificates. Borrower agrees
to deliver to Foothill: (a) as soon as available, but in any
event within thirty (30) days after the end of each month
during each of Borrower's fiscal years, a company prepared
balance sheet, income statement, and cash flow statement
covering Borrower's operations during such period; and (b) as
soon as available, but in any event within ninety (90) days
after the end of each of Borrower's fiscal years, financial
statements of Borrower for each such fiscal year, reviewed by
independent certified public accountants acceptable to
Foothill, by such accountants to have been prepared in
accordance with GAAP, together with a certificate of such
accountants addressed to Foothill stating that such
accountants do not have knowledge of the existence of any
event or condition constituting an Event of Default, or that
would, with the passage of time or the giving of notice,
constitute an Event of Default. Such reviewed financial
statements shall include a balance sheet, profit and loss
statement, and cash flow statement, and such accountants'
letter to management. Borrower shall have issued written
instructions to its independent certified public accountants
authorizing them to communicate with Foothill and to release
to Foothill whatever financial information concerning Borrower
that Foothill may request. If Borrower is a parent company of
one or more subsidiaries, or affiliates, or is a subsidiary or
affiliate of another company, then, in addition to the
financial statements referred to above, Borrower agrees to
deliver financial statements prepared on a consolidated basis.
Borrower hereby irrevocably authorizes and directs all
auditors, accountants, or other third parties to deliver to
Foothill, at Borrower's expense, copies of Borrower's
financial statements, papers related thereto, and other
accounting records of any nature in their possession, and to
disclose to Foothill any information they may have regarding
Borrower's business affairs and financial conditions.
6.2 Other Reports. Borrower agrees to deliver to Foothill (i)
within twenty-one (21) business days after Borrower's payroll
taxes are due, evidence that such payroll taxes have been
timely and fully paid, and (ii) promptly after receipt by
Borrower, copies of the quarterly statements delivered by ADP
to Borrower regarding evidence that such payroll taxes have
been paid.
6.3 Tax Returns. Borrower agrees to deliver to Foothill copies of
each of Borrower's future federal income tax returns, and any
amendments thereto, within thirty (30) days of the filing
thereof with the Internal Revenue Service.
6.4 Title to Equipment. Upon Foothill's request, Borrower shall
immediately deliver to Foothill, properly endorsed, any and
all evidences of ownership of, certificates of title, or
applications for title to any items of Equipment.
[FFI\AGR:FOOTSEC.AGR]
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<PAGE>
6.5 Maintenance of Equipment. Borrower shall keep and maintain the
Equipment in good operating condition and repair, and make all
necessary replacements thereto so that the value and operating
efficiency thereof shall at all times be maintained and
preserved. Borrower shall not permit any item of Equipment to
become a fixture to real estate or an accession to other
property, and the Equipment is now and shall at all times
remain personal property.
6.6 Taxes. All assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed
against Borrower or any of its property have been paid, and
shall hereafter be paid in full, before delinquency or before
the expiration of any extension period. Borrower shall make
due and timely payment or deposit of all federal, state, and
local taxes, assessments, or contributions required of it by
law, and will execute and deliver to Foothill, on demand,
appropriate certificates attesting to the payment or deposit
thereof. Borrower shall make timely payment or deposit of all
tax payments and withholding taxes required of it by
applicable laws, including those laws concerning F.I.C.A.,
F.U.T.A., state disability, and local, state, and federal
income taxes, and shall, upon request, furnish Foothill with
proof satisfactory to Foothill indicating that Borrower has
made such payments or deposits.
6.7 Insurance.
(a) Borrower, at its expense, shall keep the Collateral
insured against "all risks" including loss or damage
by fire, theft, explosion, sprinklers, and all other
hazards and risks, and in the full insurable value
thereof. Borrower also shall maintain business
interruption, public liability, and property damage
insurance relating to Borrower's ownership and use of
the Collateral.
(b) All such policies of insurance shall be in such
form, with such companies, and in such amounts as
may be satisfactory to Foothill. All such policies
of insurance (except those of public liability and
property damage) shall contain a 438BFU lender's
loss payable endorsement, or an equivalent
endorsement in a form satisfactory to Foothill,
showing Foothill as loss payee thereof, and shall
contain a waiver of warranties, and shall specify
that the insurer must give at least ten (10) days
prior written notice to Foothill before canceling
its policy for any reason. Borrower shall deliver
to Foothill certified copies of such policies of
insurance and evidence of the payment of all
premiums therefor. All proceeds payable under any
such policy shall be payable to Foothill to be
applied on account of the Obligations.
6.8 Foothill Expenses. Borrower shall immediately and without
demand reimburse Foothill for all sums expended by Foothill
which constitute Foothill Expenses and Borrower hereby
authorizes and approves all advances and payments by Foothill
for items constituting Foothill Expenses. Any Foothill
Expenses not paid promptly by Borrower shall constitute
Obligations and shall accrue interest at the rate and in the
manner of Obligations existing under the Term Note.
[FFI\AGR:FOOTSEC.AGR]
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<PAGE>
6.9 No Setoffs or Counterclaims. All payments hereunder and under
the other Loan Documents made by or on behalf of Borrower
shall be made without setoff or counterclaim and free and
clear of, and without deduction or withholding for or on
account of, any federal, state or local taxes.
7. Negative Covenants
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until payment in full of the Obligations,
Borrower will not do any of the following without Foothill's Prior
written consent:
7.1 Liens. Create, incur, assume, or permit to exist, directly or
indirectly, any lien on or with respect to any of the
Collateral, of any kind, whether now owned or hereafter
acquired, or any income or profits therefrom, except for
Permitted Liens.
7.2 Restrictions on Fundamental Changes. Enter into any
acquisition, merger, consolidation, reorganization, or
recapitalization, or reclassify its capital stock, or
liquidate, wind up, or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, assign, lease,
transfer, or otherwise dispose of, in one transaction or a
series of transactions, all or any substantial part of its
business, property, or assets, whether now owned or hereafter
acquired, or acquire by purchase or otherwise all or
substantially all the assets, stock, or other evidence of
beneficial ownership of any person or entity.
7.3 Extraordinary Transactions and Disposal of Collateral. Sell,
lease, or otherwise dispose of, move, relocate, or transfer,
whether by sale or otherwise, any of the Collateral (except
that Inventory may be sold by Borrower in the ordinary course
of Borrower's business in accordance with past practice).
7.4 Change Name. Change Borrower's name, business structure, or
identity, or add any new fictitious name.
8. Events of Default
Any one or more of the following events shall constitute an event of
default (each, an "Event of Default") under this Agreement:
8.1 If Borrower fails to pay when due and payable or when declared
due and payable, any portion of the Obligations (whether of
principal, interest [including any interest which, but for the
provisions of the United States Bankruptcy Code, would have
accrued on such amounts], fees and charges due Foothill,
taxes, reimbursement of Foothill Expenses, or otherwise);
8.2 If Borrower fails or neglects to perform, keep, or observe any
term, provision, condition, covenant, or agreement contained
in this Agreement, in any of the Loan Documents, or in any
other present or future agreement between Borrower and
Foothill;
[FFI\AGR:FOOTSEC.AGR]
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<PAGE>
8.3 If there is a material impairment of the prospect of repayment
of any portion of the Obligations owing to Foothill or a
material impairment of the value or priority of Foothill's
security interests in the Collateral;
8.4 If any material portion of Borrower's assets is attached,
seized, subjected to a writ or distress warrant, or is levied
upon, or comes into the possession of any Judicial Officer or
Assignee;
8.5 If an Insolvency Proceeding is commenced by Borrower;
8.6 If an Insolvency Proceeding is commenced against Borrower;
8.7 If Borrower is enjoined, restrained, or in any way prevented
by court order from continuing to conduct all or any
material part of its business affairs;
8.8 If a notice of lien, levy, or assessment is filed of record
with respect to any of Borrower's assets by the United States
Government, or any department, agency, or instrumentality
thereof, or by any state, county, municipal, or governmental
agency, or if any taxes or debts owing at any time hereafter
to any one or more of such entities becomes a lien, whether
choate or otherwise, upon any of Borrower's assets and the
same is not paid on the payment date thereof:
8.9 If a judgment or other claim becomes a lien or encumbrance
upon any material portion of Borrower's assets;
8.10 If there is a default in any material agreement to which
Borrower is a party with third parties resulting in a right by
such third parties, whether or not exercised, to accelerate
the maturity of Borrower's indebtedness thereunder;
8.11 If any misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or
report made to Foothill by Borrower or any officer, employee,
agent, or director of Borrower, or if any such warranty or
representation is withdrawn by any officer or director; or
8.12 If the obligation of any guarantor or other third party under
any loan document is limited or terminated by operation of law
or by the guarantor or other third party thereunder, or any
guarantor or other third party becomes the subject of an
Insolvency Proceeding.
9. Foothill's Rights and Remedies
9.1 Rights and Remedies. Upon the occurrence of an Event of
Default Foothill may, at its election, without notice of its
election and without demand, do any one or more of the
following, all of which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or
otherwise, immediately due and payable;
[FFI\AGR:FOOTSEC.AGR]
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<PAGE>
(b) Terminate this Agreement and any of the other Loan
Documents as to any future liability or obligation of
Foothill, but without affecting Foothill's rights and
security interest in the Collateral and without
affecting the Obligations;
(c) Without notice to or demand upon Borrower or any
guarantor, make such payments and do such acts as
Foothill considers necessary or reasonable to
protect its security interest in the Collateral.
Borrower agrees to assemble the Collateral if
Foothill so requires, and to make the Collateral
available to Foothill as Foothill may designate.
Borrower authorizes Foothill to enter the premises
where the Collateral is located, to take and
maintain possession of the Collateral, or any part
of it, and to pay, purchase, contest, or
compromise any encumbrance, charge, or lien that
in Foothill's determination appears to be prior or
superior to its security interest and to pay all
expenses incurred in connection therewith. With
respect to any of Borrower's owned premises,
Borrower hereby grants Foothill a license to enter
into possession of such premises and to occupy the
same, without charge, for up to one hundred twenty
(120) days in order to exercise any of Foothill's
rights or remedies provided herein, at law, in
equity, or otherwise;
(d) Without notice to Borrower (such notice being
expressly waived) set off and apply to the
Obligations any and all (i) balances and deposits
of Borrower held by Foothill, or (ii) indebtedness
at any time owing to or for the credit or the
account of Borrower held by Foothill;
(e) Store, maintain, repair, prepare for sale,
advertise for sale, and sell (in the manner
provided for herein) the Collateral. Foothill is
hereby granted a license or other right to use,
without charge, Borrower's labels, patents,
copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks,
and advertising matter, or any property of a
similar nature, as it pertains to the Collateral,
advertising for sale and selling any Collateral
and Borrower's rights under all licenses and all
franchise agreements shall inure to Foothill's
benefit;
(f) Sell the Collateral at either a public or private
sale, or both, by way of one or more contracts or
transactions, for cash or on terms, in such manner
and at such places (including Borrower's premises)
as Foothill determines is commercially reasonable.
It is not necessary that the Collateral be present
at any such sale;
(g) Foothill may credit bid and purchase at any public
sale.
Foothill shall give notice of the disposition of the
Collateral as follows:
(i) Foothill shall give Borrower and each
holder of a security interest in the
Collateral who has filed with Foothill a
written request for notice, a notice in
writing of the time and place of public
sale, or, if the sale is a private sale
or some other disposition other than a
public sale is to be made of the
Collateral, then the time on or after
which the private sale or other
disposition is to be made;
[FFI\AGR:FOOTSEC.AGR]
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<PAGE>
(ii) The notice shall be personally delivered
or mailed, postage prepaid, to Borrower
as provided in Section 12, at least five
(5) calendar days before the date fixed
for the sale, or at least five (5)
calendar days before the date on or
after which the private sale or other
disposition is to be made, unless the
Collateral is perishable or threatens to
decline speedily in value. Notice to
persons other than Borrower claiming an
interest in the Collateral shall be sent
to such addresses as they have furnished
to Foothill; and
(iii) If the sale is to be a public sale,
Foothill also shall give notice of the
time and place by publishing a notice
one time at least five (5) calendar days
before the date of the sale in a
newspaper of general circulation in the
county in which the sale is to be held.
9.2 Deficiency: Excess Proceeds. Any deficiency that exists
after disposition of the Collateral as provided above will
be paid immediately by Borrower. Any excess will be
returned, without interest and subject to the rights of
third parties, by Foothill to Borrower.
9.3 Remedies Cumulative. Foothill's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall
be cumulative. Foothill shall have all other rights and
remedies not inconsistent herewith as provided under the Code,
by law, or in equity. No exercise by Foothill of one right or
remedy shall be deemed an election, and no waiver by Foothill
of any Event of Default shall be deemed a continuing waiver.
No delay by Foothill shall constitute a waiver, election, or
acquiescence by it.
10. Taxes and Expenses Regarding the Collateral
If Borrower fails to pay any monies (whether taxes, rents, assessments,
insurance premiums, or otherwise) due to third persons or entities, or
fails to make any deposits or furnish any required proof of payment or
deposit, all as required under the terms of this Agreement, then, to
the extent that Foothill determines that such failure by Borrower could
have a material adverse effect on Foothill's interests in the
Collateral, in its discretion and without prior notice to Borrower,
Foothill may do any or all of the following: (a) make payment of the
same or any part thereof; or (b) obtain and maintain insurance policies
of the type described in Section 6.7, and take any action with respect
to such policies as Foothill deems prudent. Any amounts paid or
deposited by Foothill shall constitute Foothill Expenses, shall be
immediately charged to Borrower and become additional Obligations,
shall bear interest at the then applicable rate set forth in the Term
Note, and shall be secured by the Collateral. Any payments made by
Foothill shall not constitute an agreement by Foothill to make similar
payments in the future or a waiver by Foothill of any Event of Default
under this Agreement. Foothill need not inquire as to, or contest the
validity of, any such expense, tax, security interest, encumbrance, or
lien and the receipt of the usual official notice for the payment
thereof shall be conclusive evidence that the same was validly due and
owing.
[FFI\AGR:FOOTSEC.AGR]
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11. Waivers: Indemnification
11.1 Demand; Protest; etc. Borrower waives demand, protest, notice
of protest, notice of default or dishonor, notice of payment
and nonpayment, notice of any default, nonpayment at maturity,
release, compromise, settlement, extension, or renewal of
accounts, documents, instruments, chattel paper, and
guarantees at any time held by Foothill on which Borrower may
in any way be liable.
11.2 Foothill's Liability for Collateral. So long as Foothill
complies with its obligations, if any, under Section 9207 of
the Code, Foothill shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b)
any loss or damage thereto occurring or arising in any manner
or fashion from any cause; (c) any diminution in the value
thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person. All
risk of loss, damage, or destruction of the Collateral shall
be borne by Borrower.
11.3 Indemnification. Borrower agrees to indemnify Foothill and its
officers, employees, and agents and hold Foothill harmless
against: (a) all obligations, demands, claims, and liabilities
claimed or asserted by any other party, and (b) all losses in
any way suffered, incurred, or paid by Foothill as a result of
or in any way arising out of, following, or consequential to
transactions with Borrower whether under this Agreement, or
otherwise. This provision shall survive the termination of
this Agreement.
12. Notices
Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other agreement entered
into in connection therewith shall be in writing and (except for
financial statements and other informational documents which may be
sent by first-class mail, postage prepaid) shall be personally
delivered or sent by registered or certified mail, postage prepaid,
return receipt requested, or by prepaid telex, TWX, telefacsimile, or
telegram (with messenger delivery specified) to Borrower or to
Foothill, as the case may be, at its addresses set forth below:
If to Borrower: Fantastic Foods International, Inc.
5345 Third Street
Irwindale, California 91706
Attn: Jon L. Lawver
If to Foothill: Foothill Capital Corporation
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attn: Small Business Lending
Division Manager
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given
to the other. All notices or demands sent in accordance with this
Section 12, other than notices by Foothill in connection with Sections
9504 or 9505 of the Code, shall be deemed received on the earlier of
the date of actual receipt or three (3) calendar days after the
deposit thereof in the mail. Borrower acknowledges and agrees that
notices sent by Foothill in connection with Sections 9504 or 9505 of
the Code shall be deemed sent when deposited in the mail or
transmitted by telefacsimile or other similar method set forth above.
[FFI\AGR:FOOTSEC.AGR]
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13. Choice of Law and Venue; Jury Trial Waiver
THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION, INTERPRETATION, AND
ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED
UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS
OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS
OF LAW. THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE
STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF
CALIFORNIA OR, AT THE SOLE OPTION OF FOOTHILL, IN ANY OTHER COURT IN
WHICH FOOTHILL SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH
HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH OF
BORROWER AND FOOTHILL WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE
LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS
BROUGHT IN ACCORDANCE WITH THIS SECTION 13. BORROWER AND FOOTHILL
HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS
OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. BORROWER AND FOOTHILL REPRESENT THAT EACH HAS
REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT
TO A TRIAL BY THE COURT.
14. Destruction of Borrower's Documents
All documents, agings, or other papers delivered to Foothill may be
destroyed or otherwise disposed of by Foothill four (4) months after
they are delivered to or received by Foothill, unless Borrower
requests, in writing, the return of said documents, schedules, or other
papers and makes arrangements, at Borrower's expense, for their return.
15. General Provisions
15.1 Effectiveness. This Agreement shall be binding and deemed
effective when executed by Borrower and Foothill.
15.2 Successors and Assigns. This Agreement shall bind and inure
to the benefit of the respective successors and assigns of
each of the parties; provided, however, that Borrower may
not assign this Agreement or any rights or duties hereunder
without Foothill's prior written consent and any prohibited
assignment shall be absolutely void. No consent to an
assignment by Foothill shall release Borrower from its
Obligations. Foothill may assign this Agreement and its
rights and duties hereunder. Foothill reserves the right to
sell, assign, transfer, negotiate, or grant participations
in all or any part of, or any interest in Foothill's rights
and benefits hereunder. In connection therewith, Foothill
may disclose all documents and information which Foothill
now or hereafter may have relating to Borrower or Borrower's
business. To the extent that Foothill assigns its rights and
obligations hereunder to a third party, Foothill shall
thereafter be released from such assigned obligations to
Borrower and such assignment shall effect a novation between
Borrower and such third party.
[FFI\AGR:FOOTSEC.AGR]
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15.3 Section Headings. Headings and numbers have been set forth
herein for convenience only. Unless the contrary is
compelled by the context, everything contained in each
paragraph applies equally to this entire Agreement.
15.4 Interpretation. Neither this Agreement nor any uncertainty
or ambiguity herein shall be construed or resolved against
Foothill or Borrower, whether under any rule of construction
or otherwise. On the contrary, this Agreement has been
reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words
used so as to fairly accomplish the purposes and intentions
of all parties hereto.
15.5 Severability of Provisions. Each provision of this Agreement
shall be severable from every other provision of this
Agreement for the purpose of determining the legal
enforceability of any specific provision.
15.6 Amendments in Writing. This Agreement cannot be changed or
terminated orally. All prior agreements, understandings,
representations, warranties, and negotiations, if any, are
merged into this Agreement.
15.7 Counterparts. This Agreement may be executed in any number
of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered,
shall be deemed to be an original, and all of which, when
taken together, shall constitute but one and the same
Agreement.
15.8 Revival and Reinstatement of Obligations. If the incurrence
or payment of the Obligations by Borrower or the transfer by
either or both of such parties to Foothill of any property
of either or both of such parties should for any reason
subsequently be declared to be improper under any state or
federal law relating to creditors' rights, including,
without limitation, provisions of the United States
Bankruptcy Code relating to fraudulent conveyances,
preferences, and other voidable or recoverable payments of
money or transfers of property (collectively, a "Voidable
Transfer"), and if Foothill is required to repay or restore,
in whole or in part, any such Voidable Transfer, or elects
to do so upon the reasonable advice of its counsel, then, as
to any such Voidable Transfer, or the amount thereof that
Foothill is required to repay or restore, and as to all
reasonable costs, expenses and attorneys' fees of Foothill
related thereto, the liability of Borrower shall
automatically be revived, reinstated, and restored and shall
exist as though such Voidable Transfer had never been made.
[FFI\AGR:FOOTSEC.AGR]
17
<PAGE>
15.9 Integration. This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties
with respect to the transactions contemplated hereby and shall
not be contradicted, modified, or qualified by any other
agreement, oral or written, whether before or after the date
hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed at Los Angeles, California.
"Borrower"
Fantastic Foods International, Inc.,
a California corporation
By: /s/ J.L. Lawver
----------------------------------
Name: J.L. Lawver
Title: President
ACCEPTED AND EFFECTIVE
THIS 26TH DAY OF OCTOBER, 1995.
"Foothill"
Foothill Capital Corporation,
a California corporation
By: /s/ Pamela S. Ferro
----------------------------------
Name: Pamela S. Ferro
Title: Vice President
[FFI\AGR:FOOTSEC.AGR]
18
<PAGE>
Schedule E-1
Equipment
[FFI\AGR:FOOTSEC.AGR]
19
<PAGE>
Pasta Fresca Company
============== ===============================================================
00101 EXTRUDER: MARCHIO DEPOSITATO: S/N 1021
00108 PASTA SHEETER, P. DOMINIONI
00116 PACKAGE MACHINE, MULTI-VAC: S/N 573-032
00202A TORTELLINI MACHINE, SAIMA: MODEL T4B, S/N B101-4
00202B TORTELLINI MACHINE, SAIMA
00202C TORTELLINI MACHINE, SAIMA, (NOT VIEWED) DESKTOP
00208 PASTEURIZER, P. DOMINIONI: S/N 270
00218 DRYER, P. DOMINIONI, 3-DOOR
00301 MIXER, TORESANI, MODEL 50A; S/N 86152
00311 PASTA SHEETER, TORESANI; S/N N.A.
00318 PASTA SHEETER, SAIMA; S/N 010/1
00401 PASTEURIZER, PASTA, 30"; S/N N.A.
00410 FREEZE TUNNEL, PASTA; S/N 90-01-60
00501 PASTA CUTTER, FLAT SAIMA
00511 PACKAGING MACHINE, MULTI-VAC, MODEL M855-F-PC; S/N 1094/1
00519 CASE SEALER, 3M; S/N 5332
00601 REFRIGERATOR, WALK-IN 22 X 32 X 14'
00610 FREEZER, WALK-IN, 28 X 25 X 16'
00701 PASTA CUTTER, CALIBRATOR, DOMINIONI
00801 MIXER, TORESANI, 100 KG CAP; S/N N.A. (NOT VIEWED) DESKTOP
00806 PASTA SHEETER, TORESANI
00811 TORTELLINI MACHINE, DOMINIONI; S/N N.A.
00818 LABELER, UNI-LASE
00823 (2) SHRINK WRAPPERS, SERGENT; S/N (1) 46963 & (1) N.A.
00902 PACKAGING MACHINE, MULTI-VAC; S/N 1352
00908 SHRINK WRAPPER, X-RITE; S/N 001045
[FFI\AGR:FOOTSEC.AGR]
20
<PAGE>
Pasta Fresca Company
============== ================================================================
01001 LOT PIZZA EQUIPMENT: (2)PIZZA OVENS S/N 14566-11-88/17894-82-20;
DOUGH MIXER S/N 70260; DIVIDER ROUNDER S/N 1299; (3) DOUGH
ROLLERS S/N 11-6792, 11140 & 4410; PROOFER
01101 TORTELLINI MACHINE, IMA
01108 FORKLIFT TRUCK, MITSUBISHI, 2700# CAP: S/N 52032
01115 COOKER/BLANCHER, RIETZ
01201 PALLET TRUCK, WALK BEHIND, 1500# CAP.; S/N N.A.
01301 MIXER, VULCAN, MODEL L-60; S/N 300353
01307 TORTELLINI MACHINE, DOMINIONI
01313 RAVIOLI MACHINE, DOMINIONI; S/N 2559
01319 PASTA CUTTER, DOMINIONI
01401 PASTA MACHINE, DOMINIONI
01407 CHEESE/MEAT GRINDER
01411 MEAT GRINDER, BENCH; S/N 64969
01417 DOUGH SHEETER, PASTA, DOMINIONI; S/N 2442
01501 PASTEURIZER, DOMINIONI
01506 EXTRUDER, L. PARMIGIANA; S/N 200463
01512 REFRIGERATOR, PHOENIX
01615 PALLET LIFT TRUCK, CROWN; S/N 36953
01621 PACKAGING MACHINE, MULTI-VAC; S/N 968-152
01701 RAVIOLI MACHINE, TORESANI
01707 DOUGH SHEETER, IMA
01713 GNOCCI MACHINE, DOMINIONI; S/N 3099
01719 EXTRUDER, SAIMA, S/N H4/12
01801 TORTELLINI MACHINE, DOMINIONI
01807 MIXER, BLAKESLEE; S/N 224421AAA
01815 EXTRUDER, PASTA, EDLEWEISS; S/N 8501
[FFI\AGR:FOOTSEC.AGR]
21
<PAGE>
Pasta Fresca Company
============== ================================================================
01901 REFRIGERATOR, WALK-IN, 7 X 11 X 8
01907 REFRIGERATOR, WALK-IN, 9 X 12 X 8
02002 REFRIGERATOR, STANLEY DOUCETTE
02007 PALLET LIFT TRUCK, ROL-LIFT; S/N 2659
02012 LOT SAUCE PRODUCTION SYSTEM W(3) KETTLES; S/N'S 39442, 25991/5350
02020 PACKAGING MACHINE, HOLOMATIC; S/N 32775
02101 FREEZER, WALK-IN, 8'7" X 8'7" X 8'
02109 REFRIGERATOR, WALK-IN, 12 X 19 X 8
02114 PUMP/FILLER, FILAMATIC
02120 VERTICAL CHOPPER / MIXER, HOBART
02201 CASE SEALER, 3M; S/N 1355
02208 PACKAGING / HEAT SEALER UNIT; S/N AP-1166 (NOT VIEWED); DESKTOP
02214 KETTLE, 60 GALLON, ELECTRIC; S/N 29783
02301 REFRIGERATOR, TRUE, 3-DOOR
02306 2 BURNERS, WELLS, ELECTRIC; S/N 7506 & 7507
02312 CONVECTION OVEN, BLODGETT; S/N 058261739112
02318 EXHAUST HOOD, 6' WIDE W/HALON SYSTEM
Grand Total
============== ===============================================================
[FFI\AGR:FOOTSEC.AGR]
22
EXHIBIT 10.124
ASSIGNMENT DATED DECEMBER 29, 1995 TO
NUOASIS INTERNATIONAL, INC., A CALIFORNIA CORPORATION
ASSIGNMENT
KNOW ALL THESE MEN BY THESE PRESENTS:
THIS ASSIGNMENT AND BILL OF SALE is made and entered into by and
between Nona Morelli's II Inc., a Colorado corporation ("Assignor"), and NuOasis
International Inc., a California corporation ("Assignee").
WITNESSETH: That for and in consideration of the issuance of shares of
Assignee's $.01 par value common stock, and other good and valuable
consideration, the receipt of which is hereby acknowledged, Assignor hereby
bargains, sells, grants and conveys unto Assignee all of its rights, duties, and
obligations under the Asset Purchase Agreement made by it with Silver Faith
Development Limited, a Hong Kong corporation, ("Silver Faith") dated September
28, 1995 (the "Agreement"), concerning the purchase of certain real estate and
improvements located in Mainland China, commonly known as the Peony Garden
Project, more fully described in such Agreement which is attached hereto as
Exhibit "A" and incorporated herein by reference.
By its acceptance of this assignment, Assignee assumes the performance
of all of Assignor's duties and obligations under the Agreement, and will hold
Assignor harmless from any liability or loss resulting from the performance or
non-performance of these duties and obligations.
Assignor warrants that it has the power and authority, and does hereby
sell and transfer the Agreement to Assignee, free and clear of all liens and
encumbrances.
For the same consideration, Assignor covenants with Assignee, its
heirs, successors, and assigns that Assignor is the lawful owner of and has good
title to the Agreement, free and clear of all liens, encumbrances or adverse
claims; that the Agreement is in full force and effect, and that Assignor will
warrant and forever defend any claims of default, or breach by Silver Faith.
IN WITNESS WHEREOF, I have caused this instrument to be executed
effective the 29th day of December, 1995.
"Assignor"
NONA MORELLI'S II INC.
By:-----------------------------------------
Name:
Title:
<PAGE>
EXHIBIT "A"
to the
Assignment
dated December 29, 1995
ASSET PURCHASE AGREEMENT
EXHIBIT 10.125
$21,000,000 CONVERTIBLE SECURED PROMISSORY NOTE DATED DECEMBER 31, 1995
TO SILVER FAITH DEVELOPMENT LIMITED
CONVERTIBLE SECURED PROMISSORY NOTE
U.S. $21,000,000 December 31, 1995
Irvine, California
FOR VALUE RECEIVED, Nona Morelli's II Inc., a corporation organized
under the laws of the United States, State of Colorado, with its principal place
of business in California ("Maker"), hereby promises to pay to Silver Faith
Development Limited, a corporation organized under the laws of Hong Kong
("Payee" or "Holder") the principal sum of Twenty One Million Dollars
(US$21,000,000) payable, including all principal and accrued interest, at the
rate of eight percent (8%) per annum, on December 31, 1996 (the "Due Date").
This Convertible Secured Promissory Note (the "Note") is issued by Maker
pursuant to the Asset Purchase Agreement dated September 28, 1995 (the "Purchase
Agreement").
To secure the payment of this Note, Maker hereby grants to the Payee,
pursuant to a Security Agreement dated of even date between Maker and Holder a
security interest in the real property set forth in Exhibit "A" hereto (the
"Collateral"). Upon default, the Holder may resort to any remedy against the
Collateral available to a secured party under the Uniform Commercial Code;
provided, however, that notwithstanding anything contained herein to the
contrary this Note is non-recourse and Holder may not maintain an action against
Maker.
All documents and instruments now or hereafter evidencing and/or
securing the indebtedness evidenced hereby or any part thereof, including but
not limited to this Note and the Security Agreement of even date, are sometimes
collectively referred to herein as the "Security Documents."
All agreements in this Note and all other Security Documents are
expressly limited so that in no contingency or event whatsoever, whether by
reason of acceleration of maturity of the indebtedness evidenced hereby or
otherwise, shall the amount agreed to be paid hereunder for the use, forbearance
or detention of money exceed the highest lawful rate permitted under applicable
usury laws. If, for any circumstance whatsoever, fulfillment of any provision of
this Note or any other Security Document at the time performance of such
provision shall be due, shall involve exceeding any usury limit prescribed by
law which a court of competent jurisdiction may deem applicable hereto, then,
ipso facto, the obligations to be fulfilled shall be reduced to allow compliance
with such limit, and if, from any circumstance whatsoever, Payee shall ever
receive as interest an amount which would exceed the highest lawful rate, the
receipt of such excess shall be deemed a mistake and shall be canceled
automatically or, if theretofore paid, such excess shall be credited against the
principal amount of the indebtedness evidenced hereby to which the same may
lawfully be credited, and any portion of such excess not capable of being so
credited shall be refunded immediately to Maker. Maker and Payee affirm that the
indebtedness evidenced represents the total consideration for the Property being
acquired by Maker pursuant to the Purchase Agreement.
Maker shall pay to Payee all reasonable costs, expenses, charges,
disbursements and attorneys' fees incurred by Payee following an Event of
Default in collecting, enforcing or protecting this Note or any other Security
Document, whether incurred in or out of court, including appeals and bankruptcy
proceedings.
<PAGE>
If Maker utilizes the Collateral in any way to secure financing, Maker
agrees to pay the net proceeds of such financing to Payee to the extent of the
principal balance of the Note, and all accrued and unpaid interest, before
distributing any of such financing proceeds for other purposes.
Notwithstanding the Due Date referenced above, this Note shall not be
due and payable prior to the expiration of three (3) calendar months after the
full completion of construction of the Collateral.
The unpaid principal balance of this Note is convertible, in whole or
in part, into shares of the Maker's common stock. Such option to convert this
Note into shares of Maker's common stock becomes exercisable thirty (30) days
prior to the Delivery Date (as defined in the Purchase Agreement) and remains in
effect until this Note is converted or paid in full. The price at which Holder
may convert shall be determined by dividing the unpaid principal balance on the
Note by the ten (10) day moving average bid price for such stock immediately
preceding the date of notice to convert.
Each of the following events or occurrences shall constitute an "Event
of Default" hereunder: (a) if default is made in the payment of any installment
hereunder, or of any monetary amount payable hereunder, under the terms of any
Security Document, or under the terms of any other obligation of Maker to Payee
hereunder, within thirty (30) days following the date the same is due; (b) if
default is made in the performance of any other promise or obligation described
herein, in any Security Document, or in any other document evidencing or
securing any indebtedness of Maker to Payee following thirty (30) days prior
notice to Maker of such default and the failure of Maker to cure such default
within said thirty (30) day period; (c) if Maker shall execute an assignment of
any of its property for the benefit of creditors, fail to meet any obligations
herein described, be unable to meet its debts as they mature, suspend its active
business or be declared insolvent by any court, suffer any judgment or decree to
be rendered against it in an amount greater than US$10,000, suffer a receiver to
be appointed for any of its property, voluntarily seek relief or have
involuntary proceedings brought against it under any provision now in force or
hereinafter enacted of any law relating to bankruptcy, or forfeit its charter,
dissolve, or terminate its existence; (d) if any writ of attachment, garnishment
or execution shall be issued against Maker; (e) if any tax lien be assessed or
filed against Maker; (f) if any warranty, representation or statement made or
furnished to Payee by or on behalf of Maker, including but not limited to any
information provided to Payee in conjunction with the Purchase Agreement.
Upon the occurrence of any Event of Default, which is not cured within
thirty (30) days after notice of such default is given by Payee or at any time
thereafter when any Event of Default may continue, Payee may, at its option and
in its sole discretion, declare the entire balance of this Note to be
immediately due and payable, and upon such declaration all sums outstanding and
unpaid under this Note shall become and be in default, matured and immediately
due and payable, without presentment, demand, protest or notice of any kind to
Maker or any other person, all of which are hereby expressly waived, anything in
this Note or any other Security Document to the contrary notwithstanding.
Payee and Maker hereby agree to trial by court and irrevocably agree to
waive jury trial in any action or proceeding (including but not limited to any
counterclaim) arising out of or in any way related to or connected with this
Note or any other Security Document, the relationship created thereby, or the
origination, administration or enforcement of the indebtedness evidenced and/or
secured by this Note or any other Security Document.
2
<PAGE>
This Note has been delivered to Payee and accepted by Payee in the
County of Orange, State of California, and shall be governed and construed
generally according to the laws of said State except to the extent that
creation, validity, perfection or enforcement of any liens or security interests
securing this Note are governed by the laws of another jurisdiction. Venue of
any action brought pursuant to this Note or any other Security Document, or
relating to the indebtedness evidenced hereby or the relationships created by or
under the Security Documents shall, at the election of the party bringing the
action, be brought in the Superior Court of the State of California in Orange
County or a United States federal court located in or having jurisdiction over
Orange County. Maker and Payee each waives any objection to the jurisdiction of
or venue in any such court and to the service of process issued by such court
and agrees that each may be served by any method of process described in the
Code of Civil Procedure of the State of California or United States Federal
Rules of Civil Procedure. Maker and Payee each waives the right to claim that
any such court is an inconvenient forum or any similar defense.
If, in any jurisdiction, any provision of this Note shall, for any
reason, be held to be invalid, illegal, or unenforceable in any respect, such
holding shall not affect any other provisions of this Note, and this Note shall
be construed, to the extent of such invalidity, illegality or unenforceability
(and only to such extent) as if any such provision had never been contained
herein. Any such holding of invalidity, illegality or unenforceability in one
jurisdiction shall not prevent valid enforcement of any affected provision if
allowed under the laws of another relevant jurisdiction.
No waiver by the holder of any payment or other right under this Note
shall operate as a waiver of any other payment or right.
As used in this Note, the term "person" shall include, but is not
limited to, natural persons, corporations, partnerships, trusts, joint ventures
and other legal entities, and all combinations of the foregoing natural persons
or entities, and the term "obligation" shall include any requirement to pay any
indebtedness and/or perform any promise, term, provision, covenant or agreement
included or provided for in this Note or any other Security Document.
This Note and any and all certificates issued in replacement thereof or
in exchange therefor, will bear a restrictive transfer legend in the following
form:
THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), BUT HAVE BEEN ISSUED IN RELIANCE UPON REGULATION S PROMULGATED
BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION UNDER THE ACT.
THE SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED TO A "U.S.
PERSON" (AS DEFINED IN REGULATION S) OR TO ANY PERSON WITH A UNITED
STATES ADDRESS DURING THE RESTRICTED PERIOD FOLLOWING ISSUANCE OF THE
SECURITIES. FOLLOWING EXPIRATION OF THE RESTRICTED PERIOD, ANY RESALE
OR TRANSFER OF THE SECURITIES TO A U.S. PERSON OR INTO THE UNITED
STATES MUST BE MADE IN ACCORDANCE WITH REGULATION S, PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE ACT.
3
<PAGE>
Executed by the undersigned the year and day first above written.
NONA MORELLI'S II INC.
By: /s/ Fred G. Luke
------------------------------------
Name: Fred G. Luke
Title: Chief Executive Officer
4
EXHIBIT 10.126
MERGER AGREEMENT DATED FEBRUARY 28, 1996 BETWEEN NUOASIS
INTERNATIONAL INC., A CALIFORNIA CORPORATION AND ALBION
AVIATION COMPANY LIMITED, A BAHAMANIAN CORPORATION
MERGER AGREEMENT
THIS MERGER AGREEMENT is made and entered into as of the 28th day of
February, 1996, by and between ALBION AVIATION COMPANY LIMITED, a corporation
organized under the laws of the Commonwealth of the Bahamas (the "Surviving
Corporation"), and NUOASIS INTERNATIONAL, INC., a California corporation
("NuOasis"). The Surviving Corporation and NuOasis are hereinafter sometimes
referred to collectively as the "Constituent Corporations."
RECITALS:
A. NuOasis is a privately held company engaged in the lawful act or activity
for which a corporation may be organized under the General Corporation Law
of California other than the banking business, the trust company business
or the practice of a profession permitted to be incorporated by the
California Corporations Code.
B. The Surviving Corporation is a corporation organized under the
International Business Companies Act (1990) of the Commonwealth of the
Bahamas.
C. The Boards of Directors of NuOasis and the Surviving Corporation have
determined that it is advisable that NuOasis merge with and into the
Surviving Corporation, and that the shareholders of NuOasis exchange their
shares of the capital stock of NuOasis for shares of the common stock of
the Surviving Corporation. The transaction contemplated hereby is
hereinafter referred to as the "Merger".
D. The Constituent Corporations desire to enter into and adopt this Merger
Agreement for the purpose of setting forth certain terms and provisions
that will govern the Merger and to consummate the Merger as a "change in
domicile merger" in accordance with the provisions of the applicable laws
of the Commonwealth of the Bahamas.
E. The principal purpose of the Merger is to effectuate a change in corporate
domicile from California to the Commonwealth of the Bahamas, to set forth a
new capital structure and to reduce the number of issued and outstanding
shares of NuOasis.
PROVISIONS:
NOW, THEREFORE, in consideration of the mutual agreement hereinafter set
forth, in accordance with the provisions of the applicable laws of the
Commonwealth of the Bahamas and the General Corporation Law of the 1995
Corporations Code of the State of California and for the purpose of setting
forth the terms and conditions of the Merger, the mode of completing the Merger,
and the manner of converting the shares of the capital stock of NuOasis into
shares of the common stock of the Surviving Corporation, the parties agree as
follows:
[NUOINTL\AGR:NUOBVIMG.AGR]-2
1
<PAGE>
I. THE REORGANIZATION
1.1 The Effective Time. The Merger shall be accomplished by filing appropriate
articles of merger with the governing authority of the Commonwealth of the
Bahamas and the Secretary of State of the State of California in the form
provided for by the business corporation laws of such State and
Principality as soon as practicable after execution of this Merger
Agreement. The term "Effective Time" shall mean the time of the
effectiveness of the Merger under the International Business Companies Act
(No. 2 of 1990) of the Commonwealth of the Bahamas provided that the
Articles of Merger and Merger Agreement are filed with the Secretary of
State of the State of California within six months after the time of
effectiveness in the Commonwealth of the Bahamas.
1.2 Manner of Merger. At the Effective Time, NuOasis shall be merged into the
Surviving Corporation, which shall be the corporation that survives the
Merger. The corporate existence of the Surviving Corporation with all its
purposes, powers and objects shall continue unaffected and unimpaired by
the Merger; and, as the corporation surviving the Merger, the Surviving
Corporation shall by governed by the laws of the Commonwealth of the
Bahamas and shall succeed to all rights, assets, liabilities and
obligations of NuOasis, as provided in the General Corporation Law of the
1995 Corporations Code of the State of California. The separate existences
and corporate organizations of the Surviving Corporation and NuOasis shall
cease at the Effective Time, and thereafter the Surviving Corporation shall
continue as the Surviving Corporation under the laws of the Commonwealth of
the Bahamas under the new name of NuOasis International, Inc., a
corporation organized under the Commonwealth of the Bahamas. All the
property, real, personal, and mixed, and all debts of other obligations due
to NuOasis, shall be transferred to and shall be vested in the Surviving
Corporation, without further act or deed, as provided in the business
corporation laws of the Commonwealth of the Bahamas and the General
Corporation Law of the 1995 California Corporations Code of the State of
California.
1.3 Articles of Incorporation and Bylaws of the Surviving Corporation. At the
Effective Time
(a) The Articles of Incorporation of the Surviving Corporation shall be
amended to change its name to "NuOasis International, Inc."
(b) The Bylaws of the Surviving Corporation shall be the Bylaws of the
Corporation surviving this Merger, except as they may thereafter be
altered, amended or repealed in accordance with law, or in accordance
with the Articles of Incorporation of the Surviving Corporation or its
Bylaws.
(c) The directors and officers of the Surviving Corporation shall be the
directors and officers of the corporation surviving this Merger, until
their successors shall have been elected and qualified, or as
otherwise provided by the International Business Companies Act of the
Commonwealth of the Bahamas and in the Bylaws of the Surviving
Corporation. If at the Effective Time a vacancy exists in the Board of
Directors of in any of the offices of the Surviving Corporation, such
vacancy shall thereafter be filled in the manner provided in the
Bylaws of the Surviving Corporation.
[NUOINTL\AGR:NUOBVIMG.AGR]-2
- 2 -
<PAGE>
1.4 Status and Conversion of Shares. The manner of converting the shares of
capital stock of NuOasis outstanding immediately prior to the Merger into
shares of common stock of the Surviving Corporation shall be as follows:
(a) At the Effective Time, every One Hundred Thousand (100,000) shares of
the issued and outstanding no $.01 par value common stock of NuOasis
shall by virtue of the Merger and without any action on the part of
the holder thereof become and be converted into one (1) share of the
no par value common stock of the Surviving Corporation. One whole
share in the Surviving Corporation shall be issued to any shareholder
of NuOasis with respect to any fractional share in the Surviving
Corporation resulting from such division.
(b) Any shares of the capital stock of NuOasis that may be held in
treasury as of the Effective Time shall be canceled as of the
Effective Time, and shall not thereafter be issued or outstanding.
(c) After the Effective Time, each holder of a certificate or certificates
theretofore representing outstanding shares of the capital stock of
NuOasis may surrender such certificate or certificates to such agent
or agents as shall be appointed by the Surviving Corporation (the
"Exchange Agent"), and shall be entitled to receive in exchange
therefor a certificate or certificates representing the number of
whole shares of capital stock of the Surviving Corporation into which
the shares of capital stock of NuOasis theretofore represented by the
certificates so surrendered have been converted.
(d) If any certificate evidencing shares of the capital stock of NuOasis
is to be issued in a name other than the name in which the certificate
surrendered is registered, the certificate so surrendered shall be
properly endorsed and shall otherwise be in proper form for transfer.
The person requesting the transfer shall pay to the Exchange Agent any
transfer or other fees or taxes required by reason of the issuance of
a certificate in name other than that of the registered holder of the
certificate surrendered.
(e) The Surviving Corporation may, without notice to any person, terminate
all exchange agencies at any time after 120 days following the
Effective Time. After such termination, all exchanges, payments and
notices provided for in this Agreement to be made to or by the
Exchange Agent shall be made to or by the Surviving Corporation or its
agent.
(f) On February 15, 1996, notice of the proposed merger was given to all
shareholders of record of NuOasis. On February 28, 1996, holders of a
majority of the outstanding shares of the $.01 par value common stock
of NuOasis approved the Merger. No shareholder voted against the
Merger or elected dissenter's rights. Under California law, all
NuOasis shareholders, by voting in favor of the Merger, have waived
any dissenter's rights under the General Corporation Law of the 1995
Corporation's Code of the State of California.
[NUOINTL\AGR:NUOBVIMG.AGR]-2
- 3 -
<PAGE>
(g) The sole share of no par value common stock of the Surviving
Corporation shall be canceled as of the Effective Time and shall not
thereafter be issued or outstanding.
II. MISCELLANEOUS
2.1 Amendments. This Merger Agreement may be amended with the approval of the
Boards of Directors of the Constituent Corporations at any time before or
after the approval hereof by their respective shareholders, but after any
such approval no amendment shall be made that substantially and adversely
changes the terms hereof as to any party without the approval of the
shareholders of such party.
2.2 Extension; Waiver. At any time before the Effective Time, the Board of
Directors of either of the Constituent Corporations may (a) extend the time
for the performance of any of the obligations or other acts of another
party hereto, or (b) waive compliance by another party with any of the
agreements or conditions contained herein. Any such extension or waiver
shall be valid only if set forth in an instrument in writing duly executed
and delivered on behalf of such party.
IN WITNESS WHEREOF, the Constituent Corporations have executed this Merger
Agreement as of the day and year first above written.
"Surviving Corporation"
ALBION AVIATION COMPANY LIMITED
a corporation organized under the laws
of the Commonwealth of the Bahamas
By:------------------------------------
Name:
Title:
"NuOasis"
NUOASIS INTERNATIONAL, INC.
a California corporation
By:------------------------------------
Name:
Title:
[NUOINTL\AGR:NUOBVIMG.AGR]-2
- 4 -
EXHIBIT 10.27
ASSUMPTION AGREEMENT AND RELEASE OF LIABILITY WITH SILVER FAITH
DEVELOPMENT LIMITED DATED MAY 16, 1996
[SILVER FAITH DEVELOPMENT LETTERHEAD]
May 16, 1996
Mr. John D. Desbrow
Secretary
NONA MORELLI'S II INC.
2 Park Plaza, Suite 470
Irvine, California 92714
RE: Ratification, Assumption and Release Agreement
Dear Mr. Desbrow:
Silver Faith Development Limited ("SFD") wishes to confirm its agreement with
and acknowledgment of the transfer of that certain Convertible Security
Promissory Note in the principal amount of US$21,000,000 executed in favor of
SFD (the "Note") pursuant to the Purchase Agreement between Nona and SFD dated
September 28, 1995 (the "Purchase Agreement") from Nona Morelli's II Inc.
("Nona"), as "Maker", to NuOasis International Ltd., a corporation organized
under the laws of the Bahamas ("NuOasis").
The undersigned further acknowledges receipt of US$9,600,000 as a payment
against the Note, reducing the principal amount due under the Note to
US$11,400,000.
The undersigned also acknowledges notice of the assignment of the Note from Nona
to NuOasis, effective December 29, 1995, and consents to such assignment. And,
in connection with such assignment, the undersigned hereby releases Nona from
all liability on its part under the Note and agrees to look solely to NuOasis,
and the underlying Peony Garden property which secures such Note, for payment.
If any provisions of the Purchase Agreement or this Agreement are in conflict
with any statute, rule or law, then such provisions shall be deemed null and
void to the extent of such conflict, but without invalidating any other
provisions of this Agreement, or the Purchase Agreement.
Sincerely,
/s/ Silver Faith Development Limited
------------------------------------------
SILVER FAITH DEVELOPMENT LIMITED
[SFD\CORR:NMRATREL.LTR]
EXHIBIT 10.128
AMENDMENT, MODIFICATION AND RATIFICATION OF ASSET PURCHASE AGREEMENT
WITH SILVER FAITH DEVELOPMENT LIMITED AND BEIJING GRAND CANAL REAL
ESTATE DEVELOPMENT CO., LTD.
AMENDMENT, MODIFICATION AND RATIFICATION
OF ASSET PURCHASE AGREEMENT
This Amendment, Modification and Ratification of Asset Purchase
Agreement (the "Agreement") is entered into this day of September 1996,
effective the 28th day of September 1995, by and between Silver Faith
Development Ltd., a corporation organized under the laws of Hong Kong ("Silver
Faith"), Nona Morelli's II Inc., a corporation organized under the laws of the
United States, state of Colorado ("Nona") and Beijing Grand Canal Real Estate
Development Co., Ltd., a joint venture enterprise approved by the Beijing
Municipal Foreign Trade Bureau, approval number (1993) 049, ("CJV")
WHEREAS all parties hereto desire to amend, modify and ratify the
transaction contemplated by that certain Asset Purchase Agreement (the "Asset
Purchase Agreement") dated September 25, 1595 executed by Silver Faith and Nona
in order to allow for a subsequent sale of the Property described in the Asset
Purchase Agreement (the "Property").
NOW THEREFORE, for and in consideration of Ten Dollars (USD10) and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto do hereby amend, modify and ratify the
Asset Purchase Agreement based upon the following promises, representations,
warranties and covenants.
1. As the Property is located in Beijing, the purchase, sale,
assignment or transfer of the Property is and shall only be governed by the laws
of the Peoples Republic of China (PRC).
2. CJV is the sole developer and owner of the Property and has the
legal right to develop, own and sell the Property under PRC law.
3. Silver Faith is, and at all times subsequent to September 28, 1995
was, the Managing Equity Partner of CJV.
4. The intent of Silver Faith and Nona in entering the Asset Purchase
Agreement was to grant, transfer and convey all of the right, title and interest
of CJV and/or Silver Faith in and to the Property through a pre-sale contract,
as that concept applies to the sale and purchase transaction on the property
under construction, under PRC law. CJV approves, ratifies, and confirms all
actions heretofore taken in furtherance of that intent.
5. CJV and/or Silver Faith shall, at its own cost and effort, take any
and all necessary actions to comply with any national, state or local PRC laws,
including but not limited to (1) a local regulation of Beijing on real estate
property sales that requires use of the standard form contract prepared and
printed by the Beijing Municipal Housing and Land Administration Bureau (the
"Bureau"), (2) pre-sale transaction registration at the Market Administration
Department or the Bureau (the "Department"), and (3) the property title transfer
formalities at the Department, in order to fully vest in Nona, its successors
and assigns all of the right, title and interest of CJV and/or Silver Faith in
and to the Property.
[NM\AGR:PEONYAMD.PUR]
1
<PAGE>
6. CJV bargains, sells, grants, transfers and conveys unto Nona, its
successors and assigns all of CJV's right, title and interest in and to the
Property.
7. Silver Faith bargains, sells, grants, transfers and conveys unto
Nona, its successors and assigns all of Silver Faith's right, title and interest
in and to the Property and under the CJV.
8. CJV and Silver Faith agree to hold harmless Nona, its successors
and assigns, from any liability or loss resulting from the performance or
non-performance by CJV or Silver Faith of the duties and obligations under the
agreement of CJV, including but not limited to the completion of construction on
the Property.
9. CJV and Silver Faith irrevocably appoint Nona as CJV and Silver
Faith's true and lawful attorney, with full power of substitution and
revocation, in CJV and Silver Faith's name, or otherwise, but at Nona's own cost
and expense, to demand and receive the real, personal or leasehold interests
due, or to become due attributable to the Asset Purchase Agreement and this
Amendment, and to sue, and to commence any lawful action, suit and proceeding
for the enforcement of such interest, and to acknowledge satisfaction, or to
discharge same as fully as CJV or Silver Faith might, or could do if the Asset
Purchase Agreement and this Amendment had not been made.
10. CJV, Silver Faith and Nona have the power and authority to execute
this Amendment under and as required by applicable law.
[rest of page intentionally left blank]
[NM\AGR:PEONYAMD.PUR]
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed, effective the 18th of September 1995.
CJV
Beijing Grand Canal Real Estate
Development Co., Ltd., a joint venture
enterprise organized under the laws of
the Peoples Republic of China
By: Silver Faith Development Ltd.
Its: Managing Equity Partner
By: /s/ Cheng Tai Chee
------------------------------------
Name: Cheng Tai Chee
Title:Director
Silver Faith
Silver Faith Development Ltd., a
corporation organized under the laws
of Hong Kong
By: /s/ Silver Faith Development Ltd.
-----------------------------------
Nona
Nona Morelli's II Inc., a
corporation organized under the laws
of the United States, state of
Colorado
By: /s/ Fred G. Luke
-----------------------------------
Name: Fred G. Luke
Title: Chief Executive Officer
[NM\AGR:PEONYAMD.PUR]
3
EXHIBIT 10.129
PURCHASE AND SALE AGREEMENT DATED AUGUST 8, 1996 BETWEEN NUOASIS
INTERNATIONAL INC., AND THE HARTCOURT COMPANIES, INC.
PURCHASE AND SALE AGREEMENT
DATED: 8, August 1996
PARTIES:
1. "Hartcourt"
The Hartcourt Companies, Inc., a corporation organised under the laws of
the United States, State of Utah.
2. "NuOasis"
NUOASIS INTERNATIONAL INC., a corporation organised under the laws of the
Commonwealth of the Bahamas.
RECITALS:
1.1 NuOasis is the owner and developer of a commercial real estate project
located in mainland China commonly known as the Peony Gardens Property,
more fully described in Schedule "1" annexed hereto (the "Property"); and,
1.2 Hartcourt wishes to purchase the Property.
OPERATIVE PROVISIONS:
1. PURCHASE AND SALE
1.1 Upon the terms and subject to the conditions of this Agreement, on the
Closing Date, NuOasis agrees to sell and transfer the Property to
Hartcourt and Hartcourt agrees to purchase and accept the Property for
the consideration set forth in this Agreement.
1.2 In exchange for the Property, Hartcourt shall pay to NuOasis the sum
of Twenty Two Million Dollars (USD22,000,000), hereinafter referred to
as the "Purchase Price", consisting of a Convertible Secured
Promissory Note in the principal amount of Twelve Million Dollars
(USD12,000,000) in the form annexed hereto as Schedule 2 (the
"Hartcourt Note") and the greater of Two Million (2,000,000) shares of
Hartcourt common stock or that number of shares of Hartcourt common
stock having a market value equal to Ten Million Dollars
(USD10,000,000) at Closing (the "Shares"). For the purpose of this
Agreement, "Market Value" shall mean fifty percent (50%) of the thirty
(30) days moving average closing "bid" price for Hartcourt common
stock as quoted by the United States National Association of
Securities Dealers Electronic Bulletin Board immediately preceding the
Closing Date.
- 1 -
<PAGE>
2. CLOSING
2.1 The closing of the delivery and transfer of the Property (the
"Closing") shall occur at the offices of Hartcourt on a date ("Closing
Date") to be mutually agreed upon by Hartcourt and NuOasis after (i)
exchange of all books, records, financial information, documents, and
other materials deemed necessary to completion of the transaction
contemplated under this Agreement, and (ii) completion of all review
periods provided for in this Agreement. Exchange of documents under
this Agreement shall begin as soon as possible after execution hereof.
In any case, the Closing Date shall be no later than 30th September
1996.
2.2 At the Closing, the following transactions shall occur and documents
shall be exchanged, all of which shall be deemed to occur
simultaneously:
2.2.1 NuOasis will deliver, or cause to be delivered, to Hartcourt:
2.2.1.1 the documents necessary to establish the interest in the
Property and to transfer ownership of NuOasis' right, title
and interest in and to the Property to Hartcourt, in form
and substance acceptable to Hartcourt;
2.2.1.2 such other documents, instruments, and/or certificates,
if any, as are required to be delivered pursuant to the
provisions of this Agreement, or which are reasonably
determined by the parties to be required to effectuate the
transactions contemplated in this Agreement, or as otherwise
may be reasonably requested by Hartcourt in furtherance of
the intent of this Agreement.
2.2.1.3 certificates or other conveyance documents acceptable to
NuOasis transferring the Purchase Price to NuOasis;
2.3 From time to time after the Closing, upon the reasonable request of
any party, the party to whom the request is made shall deliver such
other and further documents, instruments, and/or certificates as may
be necessary to more fully vest in the requesting party the
consideration provided for in this Agreement or to enable the
requesting party to obtain the rights and benefits contemplated by
this Agreement.
[NUOINTL\AGR:NUOBVIMG.AGR]-2
- 2 -
<PAGE>
3. REPRESENTATIONS AND WARRANTIES OF HARTCOURT
Hartcourt represents and warrants to NuOasis that:
3.1 Hartcourt is a corporation, validly existing and in good standing
under the laws of the United States, State of Utah, with the power and
authority to carry on its business as now being conducted. The
execution and delivery of this Agreement and the consummation of the
transaction contemplated in this Agreement have been, or will be prior
to Closing, duly authorized by all requisite action on the part of
Hartcourt. This Agreement has been duly executed and delivered by
Hartcourt and the Hartcourt Note the Shares to be issued by Hartcourt
hereunder will constitute validly issued shares and a binding, and
enforceable obligation of the corporation.
3.2 To the best of Hartcourt's knowledge and belief, the execution and
performance of this Agreement will not violate, or result in a breach
of, or constitute a default in, any provisions of applicable law, any
agreement, instrument, judgment, order or decree to which Hartcourt is
a party or to which it is subject so as to give rise to a claim by
anyone against the Hartcourt Note or Shares which would in any way
effect the enforceability or validity of this Agreement or Hartcourt's
ability to conclude the transaction contemplated under this Agreement.
- 3 -
<PAGE>
3.3 The Shares. The Shares to be issued pursuant to this Agreement will be
issued at Closing, free and clear of liens, claim, and encumbrances,
and Hartcourt can issue such shares without the consent or approval of
any person, firm, corporation, or government authority.
3.4 Capitalization. The capitalization of Hartcourt is attached hereto and
incorporated herein as Schedule "3".
3.5 Financial Information. Hartcourt has provided NuOasis, or will provide
prior to Closing, copies of its Annual Report containing audited
financial statements for the years ending 31st December 1994 and 1995,
and all other information included in such reports or delivered to
NuOasis pursuant to this Agreement, shall be referred to as the
"Hartcourt Financials". Except as set forth in the Hartcourt
Financials, Hartcourt has no obligations or liabilities (whether
accrued, absolute, contingent, liquidated or otherwise, including
without limitation any tax liabilities due or to become due) which are
not fully disclosed and adequately provided for excepting current
liabilities incurred and obligations under agreements entered into in
the usual and ordinary course of business since the date of the
Hartcourt Financials, none of which (individually or in the aggregate)
are material except as expressly indicated there use is not a
guarantor or otherwise contingently liable for any material amount of
indebtedness. Except as indicated in the Hartcourt Financials, there
exists no default under the provisions of any instrument evidencing
any indebtedness or of any agreement in relation thereto.
3.6 Litigation. To the best knowledge and belief of Hartcourt, except as
disclosed in the Hartcourt Financials or pursuant to this Agreement,
there is neither pending nor threatened, any action, suit or
arbitration to which its Hartcourt property, assets or business is or
is likely to be subject and in which an unfavorable outcome, ruling or
finding will or is likely to have a material adverse effect on the
condition, financial or otherwise, or create a material liability on
the part of Hartcourt, or which would conflict with this Agreement or
any action taken or to be taken in connection with it.
3.7 Tax Matter. To the extent that its tax filings, liabilities, payments,
or provisions for payment could give rise to a claim against or affect
the right of ownership to the Shares, Hartcourt has filed or will file
all federal, state, and local income, excise, property, and other tax
returns, forms, or reports, which are due or required to be filed by
it and has paid, or made adequate provision for payment of all taxes,
interest, penalty fee, assessment, or deficiencies shown to be due or
claimed to be due or which have or may become due on or in respect of
such returns or reports.
[NUOINTL\AGR:NUOBVIMG.AGR]-2
- 37 -
<PAGE>
3.8 Contracts. Except as disclosed pursuant to this Agreement, or in the
Hartcourt Financials, there are no contracts, actual or contingent
obligations, agreement, franchises, license agreements, or other
commitments between Hartcourt third parties which are material to its
business, financial condition, or results of operation, taken as a
whole. For purposes of the preceding sentence, the term "material"
refers to any obligation or liability which by its terms calls for
aggregate payments of more than Ten Thousand Dollars (USD10,000).
3.9 Material Contract Breaches: Defaults. To the best of Hartcourt's
Knowledge and relief, it has not materially breached, nor has it any
knowledge of any pending or threatened claims or any legal basis for a
claim that it has materially breached, any of the terms or conditions
of any agreements, contracts, or commitments to which it is a party or
is bound and which might give rise to a claim by anyone against the
Note or the Shares, and there is no event of default or other event
which, with notice or lapse of time or both, would constitute a
default in any material rise to a claim against the Note or the Shares
in respect of which Hartcourt has not taken adequate steps to prevent
such a default from occurring.
- 4 -
<PAGE>
3.10 Securities Laws. Hartcourt is a public company and represents that, to
the best of its knowledge, except as disclosed in the Hartcourt
Financials, it has no existing or threatened liabilities, claims,
lawsuits, or basis for the same with respect to this original stock
issuance to its founders, its initial public offering, or any dealings
with its stockholders, the public, the brokerage community, the United
States Securities And Exchange Commission ("SEC"), any U.S. state
regulatory agencies, or other person. Hartcourt is currently a
non-reporting company and is not required to file quarterly or yearly
reports. Hartcourt is in the process of filing its Form 10 with the
SEC. Hartcourt is currently published in Standard and Poors and is
cleared therefore for secondary trading in Standard and Poors approved
states.
3.11 Brokers. Hartcourt has agreed to pay a finder's fee with respect to
the transaction contemplated in this Agreement to Asian International
Development Ltd. ("AID"), its assignees or nominees, and to Guangoong
Investments Ltd. ("GIL"), its assignees or nominees in an amount to be
negotiated. To the best of Hartcourt's knowledge, no other person or
entity is entitled, or intends to claim that it is entitled, to
receive any fees or commissions in connection with this transaction,
further agrees to indemnify and hold harmless NuOasis against
liability to AID, GIL or any broker claiming fees of any kind or
nature.
3.12 Approvals. Except as otherwise provided in this Agreement, to
Hartcourt's best knowledge and belief no authorization, consent, or
approval of, or registration or filing with any governmental
authority, or any other person, is required to be obtained or made by
connection with Hartcourt's execution, delivery, or performance of
this Agreement.
3.13 Full disclosure. The information concerning set forth in this
Agreement, and in the Hartcourt Financials, is, to the best of
Hartcourt'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.
3.14 Date of Representations and Warranties. Each of the representations
and warranties of set forth in this Agreement is true and correct at
and as of the Closing Date, with the same force and effect as though
made at and as of the Closing Date, except for changes permitted or
contemplated by this Agreement.
- 5 -
<PAGE>
4. REPRESENTATIONS AND WARRANTIES OF NUOASIS
NuOasis represents and warrants to Hartcourt that:
4.1 NuOasis is the owner of the Property and will certify in form and
substance acceptable to Hartcourt at Closing.
4.2 NuOasis is a corporation duly incorporated, validly existing and in
good standing under the laws of the Commonwealth of Bahamas, with the
corporate power and authority to carry on its business as now being
conducted. In addition, NuOasis is duly qualified to do business in
each jurisdiction in which the nature of its business requires it to
be so qualified, except to the extent that the failure to so qualify
does not have a material adverse effect on the business of NuOasis,
taken as a whole. The execution and delivery of this Agreement and the
consummation of the transactions contemplated in this Agreement have
been, or will be prior to Closing, duly authorized by all requisite
corporate actions on the part of NuOasis, to the extent, if any, that
such authorizations are necessary. This Agreement has been duly
executed and delivered by NuOasis and constitutes the valid, binding,
and enforceable obligation of NuOasis.
4.3 NuOasis has provided to Hartcourt, or will provide prior to Closing,
appraisals, construction costs and budgets, and all other information
related to the Property in the possession of NuOasis, or available for
NuOasis. Such information shall be referred to as the "Property
Reports". All financial statements and reports included in the
Property Reports and prepared by NuOasis, are prepared in accordance
with generally acceptable accounting standards and present fairly the
condition of the Property. Except as indicated, there exists no
default under the provisions of any instrument evidencing NuOasis'
ownership of the Property and NuOasis is not a guarantor or otherwise
contingently liable for any material amount of indebtedness relating
thereto.
4.4 To the best knowledge and belief of NuOasis, there is neither pending
nor threatened, any action, suit, arbitration, proceeding (whether
federal, state, local or foreign) or claim to which NuOasis or the
Property is or is likely to be named as a party in which an
unfavorable outcome, ruling or finding will or is likely to have a
material adverse effect on the condition, financial or otherwise, of
the Property, or create any material liability on the part of owners
of the Property, or which would conflict with this Agreement or any
action taken or to be taken in connection with it.
- 6 -
<PAGE>
4.5 To NuOasis's best knowledge and belief, no authorization, consent, or
approval of, or registration or filing with, any governmental
authority or any other person is required to be obtained or made by
NuOasis in connection with the execution, delivery, or performance of
this Agreement.
4.6 The information concerning NuOasis set forth in this Agreement and in
the Property Reports is, to the best of NuOasis'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.
5. CONDITIONS PRECEDENT TO OBLIGATIONS OF NUOASIS
All obligations of NuOasis under this Agreement are subject to the
fulfillment, prior to or as of the Closing Date, of each of the following
conditions:
5.1 The representations and warranties by Hartcourt set forth in this
Agreement shall be true and correct at and as of the Closing Date,
with the same force and effect as though made at and as of the Closing
Date, except for changes permitted or contemplated by this Agreement.
5.2 Hartcourt shall have performed and complied with all covenants,
agreements, and conditions required by this Agreement to be performed
or complied with by it prior to or at the Closing.
5.3 Hartcourt shall have taken all corporate and other action necessary to
issue the Shares and the Hartcourt Note constituting the Purchase
Price to NuOasis pursuant to this Agreement.
5.4 All instruments and documents delivered to NuOasis pursuant to the
provisions of this Agreement shall be satisfactory to NuOasis and its
legal counsel.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF HARTCOURT
All obligations of NuOasis under this Agreement are subject to the
fulfillment, prior to or as of the Closing Date, of each of the following
conditions:
- 7 -
<PAGE>
6.1 The representations and warranties by NuOasis set forth in this
Agreement shall be true and correct with the same force and effect as
though made at and as of the Closing Date, except for changes
permitted or contemplated by this Agreement.
6.2 NuOasis shall have performed and complied with all covenants,
agreements, and conditions required by this Agreement to be performed
or complied with by it prior to or at the Closing.
6.3 NuOasis shall have taken all corporate and other action necessary to
transfer NuOasis ownership and title to the Property to Hartcourt.
6.4 Before Closing, NuOasis will have delivered the Property Reports to
Hartcourt. NuOasis shall specifically provide to Hartcourt schedules
of all costs related to the Property as of 31st March, 1996 and all
other documents necessary to substantiate to Hartcourt's sole
satisfaction the agreed value of not less than Twenty Two Million
Dollars (USD22,000,000). Upon receipt and review of the Property
Reports, Hartcourt shall have fifteen(15) business days to raise
objections to the information contained in the Property Reports, which
shall be accomplished by submission of a written list of such
objections to NuOasis, and to conduct a valuation of the Property. If
there are objections, or if the valuation of the Property, as
determined by Hartcourt, or a recognised independent appraiser acting
for Hartcourt, is less than Twenty-Two Million Dollars(USD22,000,000),
then Hartcourt shall have the option to terminate this Agreement
without penalty. Alternatively, Hartcourt may elect, in its sole
discretion, to waive objections and proceed with Closing.
6.5 All instruments and documents delivered to Hartcourt pursuant to the
provisions of this Agreement shall be satisfactory to Hartcourt and
its legal counsel. NuOasis shall provide to Hartcourt prior to Closing
evidence satisfactory to Hartcourt that the representations of NuOasis
herein and the interest in the Property is legally created and duly
enforceable.
7. TERMINATION
7.1 This Agreement may be terminated at any time prior to the Closing Date
without liability on the part of either Hartcourt or NuOasis:
- 8 -
<PAGE>
7.1.1 by mutual consent of Hartcourt and NuOasis;
7.1.2by Hartcourt or NuOasis, (unless the action or proceeding
referred to is caused by a breach or default on the part of
Hartcourt or NuOasis of any of their representations, warranties,
or obligations under this Agreement), if there shall be any
actual or threatened action or proceeding by or before any court
or any other governmental body which shall seek to restrain,
prohibit, or invalidate the transactions contemplated by this
Agreement and which, in the judgment of Hartcourt or NuOasis,
made in good faith and based upon the advice of legal counsel,
makes it inadvisable to proceed with the transactions
contemplated by this Agreement;
7.1.3by NuOasis or Hartcourt (as the case may be) if, as provided
herein upon Hartcourt's disapproval of the Value of the Property
or NuOasis' disapproval of the Value of the Shares or the
financial condition of Hartcourt, including but not limited to
its capitalisation, at any time prior to Closing.
8. TERMINATION WITH CAUSE
If this Agreement is terminated for breach or otherwise for cause, the
non-breaching party shall be reimbursed by the other party of all expenses
and costs related to this Agreement in the amount of Fifty Thousand Dollars
(USD50,000).
9. MISCELLANEOUS PROVISIONS
9.1 All representations, warranties, and covenants made by any party in
this Agreement shall survive the Closing hereunder and the
consummation of the transactions contemplated hereby for three (3)
years from the Closing Date. Hartcourt and NuOasis are executing and
carrying out the provisions of this Agreement in reliance on the
representations, warranties, and covenants and agreements contained in
this Agreement or at the Closing of the transactions herein provided
for including any investigation upon which it might have made or any
representations, warranty, agreement, promise, or information, written
or oral, made by the other party or any other person other than as
specifically set forth herein.
- 9 -
<PAGE>
9.2 All costs and expenses in the proposed sale and transfer described in
this Agreement shall be borne by the following manner:
9.2.1each party has been represented by its own attorney(s) in this
transaction, shall pay the fees of its own attorney(s), except as
may be expressly set forth herein to the contrary.
9.2.2each party shall bear its reasonable shares of all other Closing
costs and expenses arising from this Agreement.
9.3 At any time and from time to time, after the effective date, each
party will execute such additional instruments and take such action as
may be reasonably requested by the other party to confirm or perfect
title to any property transferred hereunder or otherwise to carry out
the intent and purposes of this Agreement.
9.4 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.
9.5 All notices and other communications hereunder shall either be in
writing and shall be deemed to have been given if delivered in person,
sent by overnight delivery service or sent by facsimile transmission,
to the parties hereto, or their designees, as follows:
To Hartcourt: The Hartcourt Companies, Inc.
19104 Norwalk Blvd.
Artesia, California 90703
Telephone: +1 310 403-1126
Facsimile: +1 310 403-1130
To NuOasis: NuOasis International Inc.
First Directors Limited
43 Elizabeth Avenue
Nassau, The Bahamas
Telephone: +44 1624 815544
Facsimile: +44 1624 815548
- 10 -
<PAGE>
9.6 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.
9.7 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.
9.8 Notwithstanding that this Agreement was negotiated and is being
contracted for in the Bahamas and any conflict-of-law provision to the
contrary, the Agreement shall be governed by the laws of the
Commonwealth of the Bahamas.
9.9 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.
9.10 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.
9.11 If any part of this Agreement is deemed to be unenforceable the
balance of the Agreement shall remain in full force and effect.
9.12 This Agreement may be amended only by a written instrument executed by
the parties or their respective successors or assigns.
9.13 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.
- 11 -
<PAGE>
9.14 Time is of the essence of this Agreement and of each and every
provision hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
THE HARTCOURT COMPANIES INC.
/s/ Alan Phan
By:-------------------------------
Name: Alan Phan
Title: President
NuOASIS INTERNATIONAL INC.
By:-------------------------------
Name:
Title:
- 12 -
EXHIBIT 10.130
$12,000,000 CONVERTIBLE SECURED PROMISSORY NOTE DATED
AUGUST 8, 1996 ISSUED BY THE HARTCOURT COMPANIES, INC.
PURCHASE AND SALE AGREEMENT
DATED: 8, August 1996
PARTIES:
1. "Hartcourt"
The Hartcourt Companies, Inc., a corporation organised under the laws of
the United States, State of Utah.
2. "NuOasis"
NUOASIS INTERNATIONAL INC., a corporation organised under the laws of the
Commonwealth of the Bahamas.
RECITALS:
1.1 NuOasis is the owner and developer of a commercial real estate project
located in mainland China commonly known as the Peony Gardens Property,
more fully described in Schedule "1" annexed hereto (the "Property"); and,
1.2 Hartcourt wishes to purchase the Property.
OPERATIVE PROVISIONS:
1. PURCHASE AND SALE
1.1 Upon the terms and subject to the conditions of this Agreement, on the
Closing Date, NuOasis agrees to sell and transfer the Property to
Hartcourt and Hartcourt agrees to purchase and accept the Property for
the consideration set forth in this Agreement.
1.2 In exchange for the Property, Hartcourt shall pay to NuOasis the sum
of Twenty Two Million Dollars (USD22,000,000), hereinafter referred to
as the "Purchase Price", consisting of a Convertible Secured
Promissory Note in the principal amount of Twelve Million Dollars
(USD12,000,000) in the form annexed hereto as Schedule 2 (the
"Hartcourt Note") and the greater of Two Million (2,000,000) shares of
Hartcourt common stock or that number of shares of Hartcourt common
stock having a market value equal to Ten Million Dollars
(USD10,000,000) at Closing (the "Shares"). For the purpose of this
Agreement, "Market Value" shall mean fifty percent (50%) of the thirty
(30) days moving average closing "bid" price for Hartcourt common
stock as quoted by the United States National Association of
Securities Dealers Electronic Bulletin Board immediately preceding the
Closing Date.
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2. CLOSING
2.1 The closing of the delivery and transfer of the Property (the
"Closing") shall occur at the offices of Hartcourt on a date ("Closing
Date") to be mutually agreed upon by Hartcourt and NuOasis after (i)
exchange of all books, records, financial information, documents, and
other materials deemed necessary to completion of the transaction
contemplated under this Agreement, and (ii) completion of all review
periods provided for in this Agreement. Exchange of documents under
this Agreement shall begin as soon as possible after execution hereof.
In any case, the Closing Date shall be no later than 30th September
1996.
2.2 At the Closing, the following transactions shall occur and documents
shall be exchanged, all of which shall be deemed to occur
simultaneously:
2.2.1 NuOasis will deliver, or cause to be delivered, to Hartcourt:
2.2.1.1 the documents necessary to establish the interest in the
Property and to transfer ownership of NuOasis' right, title
and interest in and to the Property to Hartcourt, in form
and substance acceptable to Hartcourt;
2.2.1.2 such other documents, instruments, and/or certificates,
if any, as are required to be delivered pursuant to the
provisions of this Agreement, or which are reasonably
determined by the parties to be required to effectuate the
transactions contemplated in this Agreement, or as otherwise
may be reasonably requested by Hartcourt in furtherance of
the intent of this Agreement.
2.2.1.3 certificates or other conveyance documents acceptable to
NuOasis transferring the Purchase Price to NuOasis;
2.3 From time to time after the Closing, upon the reasonable request of
any party, the party to whom the request is made shall deliver such
other and further documents, instruments, and/or certificates as may
be necessary to more fully vest in the requesting party the
consideration provided for in this Agreement or to enable the
requesting party to obtain the rights and benefits contemplated by
this Agreement.
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3. REPRESENTATIONS AND WARRANTIES OF HARTCOURT
Hartcourt represents and warrants to NuOasis that:
3.1 Hartcourt is a corporation, validly existing and in good standing
under the laws of the United States, State of Utah, with the power and
authority to carry on its business as now being conducted. The
execution and delivery of this Agreement and the consummation of the
transaction contemplated in this Agreement have been, or will be prior
to Closing, duly authorized by all requisite action on the part of
Hartcourt. This Agreement has been duly executed and delivered by
Hartcourt and the Hartcourt Note the Shares to be issued by Hartcourt
hereunder will constitute validly issued shares and a binding, and
enforceable obligation of the corporation.
3.2 To the best of Hartcourt's knowledge and belief, the execution and
performance of this Agreement will not violate, or result in a breach
of, or constitute a default in, any provisions of applicable law, any
agreement, instrument, judgment, order or decree to which Hartcourt is
a party or to which it is subject so as to give rise to a claim by
anyone against the Hartcourt Note or Shares which would in any way
effect the enforceability or validity of this Agreement or Hartcourt's
ability to conclude the transaction contemplated under this Agreement.
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3.3 The Shares. The Shares to be issued pursuant to this Agreement will be
issued at Closing, free and clear of liens, claim, and encumbrances,
and Hartcourt can issue such shares without the consent or approval of
any person, firm, corporation, or government authority.
3.4 Capitalization. The capitalization of Hartcourt is attached hereto and
incorporated herein as Schedule "3".
3.5 Financial Information. Hartcourt has provided NuOasis, or will provide
prior to Closing, copies of its Annual Report containing audited
financial statements for the years ending 31st December 1994 and 1995,
and all other information included in such reports or delivered to
NuOasis pursuant to this Agreement, shall be referred to as the
"Hartcourt Financials". Except as set forth in the Hartcourt
Financials, Hartcourt has no obligations or liabilities (whether
accrued, absolute, contingent, liquidated or otherwise, including
without limitation any tax liabilities due or to become due) which are
not fully disclosed and adequately provided for excepting current
liabilities incurred and obligations under agreements entered into in
the usual and ordinary course of business since the date of the
Hartcourt Financials, none of which (individually or in the aggregate)
are material except as expressly indicated there use is not a
guarantor or otherwise contingently liable for any material amount of
indebtedness. Except as indicated in the Hartcourt Financials, there
exists no default under the provisions of any instrument evidencing
any indebtedness or of any agreement in relation thereto.
3.6 Litigation. To the best knowledge and belief of Hartcourt, except as
disclosed in the Hartcourt Financials or pursuant to this Agreement,
there is neither pending nor threatened, any action, suit or
arbitration to which its Hartcourt property, assets or business is or
is likely to be subject and in which an unfavorable outcome, ruling or
finding will or is likely to have a material adverse effect on the
condition, financial or otherwise, or create a material liability on
the part of Hartcourt, or which would conflict with this Agreement or
any action taken or to be taken in connection with it.
3.7 Tax Matter. To the extent that its tax filings, liabilities, payments,
or provisions for payment could give rise to a claim against or affect
the right of ownership to the Shares, Hartcourt has filed or will file
all federal, state, and local income, excise, property, and other tax
returns, forms, or reports, which are due or required to be filed by
it and has paid, or made adequate provision for payment of all taxes,
interest, penalty fee, assessment, or deficiencies shown to be due or
claimed to be due or which have or may become due on or in respect of
such returns or reports.
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<PAGE>
3.8 Contracts. Except as disclosed pursuant to this Agreement, or in the
Hartcourt Financials, there are no contracts, actual or contingent
obligations, agreement, franchises, license agreements, or other
commitments between Hartcourt third parties which are material to its
business, financial condition, or results of operation, taken as a
whole. For purposes of the preceding sentence, the term "material"
refers to any obligation or liability which by its terms calls for
aggregate payments of more than Ten Thousand Dollars (USD10,000).
3.9 Material Contract Breaches: Defaults. To the best of Hartcourt's
Knowledge and relief, it has not materially breached, nor has it any
knowledge of any pending or threatened claims or any legal basis for a
claim that it has materially breached, any of the terms or conditions
of any agreements, contracts, or commitments to which it is a party or
is bound and which might give rise to a claim by anyone against the
Note or the Shares, and there is no event of default or other event
which, with notice or lapse of time or both, would constitute a
default in any material rise to a claim against the Note or the Shares
in respect of which Hartcourt has not taken adequate steps to prevent
such a default from occurring.
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3.10 Securities Laws. Hartcourt is a public company and represents that, to
the best of its knowledge, except as disclosed in the Hartcourt
Financials, it has no existing or threatened liabilities, claims,
lawsuits, or basis for the same with respect to this original stock
issuance to its founders, its initial public offering, or any dealings
with its stockholders, the public, the brokerage community, the United
States Securities And Exchange Commission ("SEC"), any U.S. state
regulatory agencies, or other person. Hartcourt is currently a
non-reporting company and is not required to file quarterly or yearly
reports. Hartcourt is in the process of filing its Form 10 with the
SEC. Hartcourt is currently published in Standard and Poors and is
cleared therefore for secondary trading in Standard and Poors approved
states.
3.11 Brokers. Hartcourt has agreed to pay a finder's fee with respect to
the transaction contemplated in this Agreement to Asian International
Development Ltd. ("AID"), its assignees or nominees, and to Guangoong
Investments Ltd. ("GIL"), its assignees or nominees in an amount to be
negotiated. To the best of Hartcourt's knowledge, no other person or
entity is entitled, or intends to claim that it is entitled, to
receive any fees or commissions in connection with this transaction,
further agrees to indemnify and hold harmless NuOasis against
liability to AID, GIL or any broker claiming fees of any kind or
nature.
3.12 Approvals. Except as otherwise provided in this Agreement, to
Hartcourt's best knowledge and belief no authorization, consent, or
approval of, or registration or filing with any governmental
authority, or any other person, is required to be obtained or made by
connection with Hartcourt's execution, delivery, or performance of
this Agreement.
3.13 Full disclosure. The information concerning set forth in this
Agreement, and in the Hartcourt Financials, is, to the best of
Hartcourt'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.
3.14 Date of Representations and Warranties. Each of the representations
and warranties of set forth in this Agreement is true and correct at
and as of the Closing Date, with the same force and effect as though
made at and as of the Closing Date, except for changes permitted or
contemplated by this Agreement.
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4. REPRESENTATIONS AND WARRANTIES OF NUOASIS
NuOasis represents and warrants to Hartcourt that:
4.1 NuOasis is the owner of the Property and will certify in form and
substance acceptable to Hartcourt at Closing.
4.2 NuOasis is a corporation duly incorporated, validly existing and in
good standing under the laws of the Commonwealth of Bahamas, with the
corporate power and authority to carry on its business as now being
conducted. In addition, NuOasis is duly qualified to do business in
each jurisdiction in which the nature of its business requires it to
be so qualified, except to the extent that the failure to so qualify
does not have a material adverse effect on the business of NuOasis,
taken as a whole. The execution and delivery of this Agreement and the
consummation of the transactions contemplated in this Agreement have
been, or will be prior to Closing, duly authorized by all requisite
corporate actions on the part of NuOasis, to the extent, if any, that
such authorizations are necessary. This Agreement has been duly
executed and delivered by NuOasis and constitutes the valid, binding,
and enforceable obligation of NuOasis.
4.3 NuOasis has provided to Hartcourt, or will provide prior to Closing,
appraisals, construction costs and budgets, and all other information
related to the Property in the possession of NuOasis, or available for
NuOasis. Such information shall be referred to as the "Property
Reports". All financial statements and reports included in the
Property Reports and prepared by NuOasis, are prepared in accordance
with generally acceptable accounting standards and present fairly the
condition of the Property. Except as indicated, there exists no
default under the provisions of any instrument evidencing NuOasis'
ownership of the Property and NuOasis is not a guarantor or otherwise
contingently liable for any material amount of indebtedness relating
thereto.
4.4 To the best knowledge and belief of NuOasis, there is neither pending
nor threatened, any action, suit, arbitration, proceeding (whether
federal, state, local or foreign) or claim to which NuOasis or the
Property is or is likely to be named as a party in which an
unfavorable outcome, ruling or finding will or is likely to have a
material adverse effect on the condition, financial or otherwise, of
the Property, or create any material liability on the part of owners
of the Property, or which would conflict with this Agreement or any
action taken or to be taken in connection with it.
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<PAGE>
4.5 To NuOasis's best knowledge and belief, no authorization, consent, or
approval of, or registration or filing with, any governmental
authority or any other person is required to be obtained or made by
NuOasis in connection with the execution, delivery, or performance of
this Agreement.
4.6 The information concerning NuOasis set forth in this Agreement and in
the Property Reports is, to the best of NuOasis'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.
5. CONDITIONS PRECEDENT TO OBLIGATIONS OF NUOASIS
All obligations of NuOasis under this Agreement are subject to the
fulfillment, prior to or as of the Closing Date, of each of the following
conditions:
5.1 The representations and warranties by Hartcourt set forth in this
Agreement shall be true and correct at and as of the Closing Date,
with the same force and effect as though made at and as of the Closing
Date, except for changes permitted or contemplated by this Agreement.
5.2 Hartcourt shall have performed and complied with all covenants,
agreements, and conditions required by this Agreement to be performed
or complied with by it prior to or at the Closing.
5.3 Hartcourt shall have taken all corporate and other action necessary to
issue the Shares and the Hartcourt Note constituting the Purchase
Price to NuOasis pursuant to this Agreement.
5.4 All instruments and documents delivered to NuOasis pursuant to the
provisions of this Agreement shall be satisfactory to NuOasis and its
legal counsel.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF HARTCOURT
All obligations of NuOasis under this Agreement are subject to the
fulfillment, prior to or as of the Closing Date, of each of the following
conditions:
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6.1 The representations and warranties by NuOasis set forth in this
Agreement shall be true and correct with the same force and effect as
though made at and as of the Closing Date, except for changes
permitted or contemplated by this Agreement.
6.2 NuOasis shall have performed and complied with all covenants,
agreements, and conditions required by this Agreement to be performed
or complied with by it prior to or at the Closing.
6.3 NuOasis shall have taken all corporate and other action necessary to
transfer NuOasis ownership and title to the Property to Hartcourt.
6.4 Before Closing, NuOasis will have delivered the Property Reports to
Hartcourt. NuOasis shall specifically provide to Hartcourt schedules
of all costs related to the Property as of 31st March, 1996 and all
other documents necessary to substantiate to Hartcourt's sole
satisfaction the agreed value of not less than Twenty Two Million
Dollars (USD22,000,000). Upon receipt and review of the Property
Reports, Hartcourt shall have fifteen(15) business days to raise
objections to the information contained in the Property Reports, which
shall be accomplished by submission of a written list of such
objections to NuOasis, and to conduct a valuation of the Property. If
there are objections, or if the valuation of the Property, as
determined by Hartcourt, or a recognised independent appraiser acting
for Hartcourt, is less than Twenty-Two Million Dollars(USD22,000,000),
then Hartcourt shall have the option to terminate this Agreement
without penalty. Alternatively, Hartcourt may elect, in its sole
discretion, to waive objections and proceed with Closing.
6.5 All instruments and documents delivered to Hartcourt pursuant to the
provisions of this Agreement shall be satisfactory to Hartcourt and
its legal counsel. NuOasis shall provide to Hartcourt prior to Closing
evidence satisfactory to Hartcourt that the representations of NuOasis
herein and the interest in the Property is legally created and duly
enforceable.
7. TERMINATION
7.1 This Agreement may be terminated at any time prior to the Closing Date
without liability on the part of either Hartcourt or NuOasis:
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<PAGE>
7.1.1 by mutual consent of Hartcourt and NuOasis;
7.1.2by Hartcourt or NuOasis, (unless the action or proceeding
referred to is caused by a breach or default on the part of
Hartcourt or NuOasis of any of their representations, warranties,
or obligations under this Agreement), if there shall be any
actual or threatened action or proceeding by or before any court
or any other governmental body which shall seek to restrain,
prohibit, or invalidate the transactions contemplated by this
Agreement and which, in the judgment of Hartcourt or NuOasis,
made in good faith and based upon the advice of legal counsel,
makes it inadvisable to proceed with the transactions
contemplated by this Agreement;
7.1.3by NuOasis or Hartcourt (as the case may be) if, as provided
herein upon Hartcourt's disapproval of the Value of the Property
or NuOasis' disapproval of the Value of the Shares or the
financial condition of Hartcourt, including but not limited to
its capitalisation, at any time prior to Closing.
8. TERMINATION WITH CAUSE
If this Agreement is terminated for breach or otherwise for cause, the
non-breaching party shall be reimbursed by the other party of all expenses
and costs related to this Agreement in the amount of Fifty Thousand Dollars
(USD50,000).
9. MISCELLANEOUS PROVISIONS
9.1 All representations, warranties, and covenants made by any party in
this Agreement shall survive the Closing hereunder and the
consummation of the transactions contemplated hereby for three (3)
years from the Closing Date. Hartcourt and NuOasis are executing and
carrying out the provisions of this Agreement in reliance on the
representations, warranties, and covenants and agreements contained in
this Agreement or at the Closing of the transactions herein provided
for including any investigation upon which it might have made or any
representations, warranty, agreement, promise, or information, written
or oral, made by the other party or any other person other than as
specifically set forth herein.
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<PAGE>
9.2 All costs and expenses in the proposed sale and transfer described in
this Agreement shall be borne by the following manner:
9.2.1each party has been represented by its own attorney(s) in this
transaction, shall pay the fees of its own attorney(s), except as
may be expressly set forth herein to the contrary.
9.2.2each party shall bear its reasonable shares of all other Closing
costs and expenses arising from this Agreement.
9.3 At any time and from time to time, after the effective date, each
party will execute such additional instruments and take such action as
may be reasonably requested by the other party to confirm or perfect
title to any property transferred hereunder or otherwise to carry out
the intent and purposes of this Agreement.
9.4 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.
9.5 All notices and other communications hereunder shall either be in
writing and shall be deemed to have been given if delivered in person,
sent by overnight delivery service or sent by facsimile transmission,
to the parties hereto, or their designees, as follows:
To Hartcourt: The Hartcourt Companies, Inc.
19104 Norwalk Blvd.
Artesia, California 90703
Telephone: +1 310 403-1126
Facsimile: +1 310 403-1130
To NuOasis: NuOasis International Inc.
First Directors Limited
43 Elizabeth Avenue
Nassau, The Bahamas
Telephone: +44 1624 815544
Facsimile: +44 1624 815548
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<PAGE>
9.6 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.
9.7 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.
9.8 Notwithstanding that this Agreement was negotiated and is being
contracted for in the Bahamas and any conflict-of-law provision to the
contrary, the Agreement shall be governed by the laws of the
Commonwealth of the Bahamas.
9.9 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.
9.10 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.
9.11 If any part of this Agreement is deemed to be unenforceable the
balance of the Agreement shall remain in full force and effect.
9.12 This Agreement may be amended only by a written instrument executed by
the parties or their respective successors or assigns.
9.13 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.
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<PAGE>
9.14 Time is of the essence of this Agreement and of each and every
provision hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
THE HARTCOURT COMPANIES INC.
/s/ Alan Phan
By:-------------------------------
Name: Alan Phan
Title: President
NuOASIS INTERNATIONAL INC.
By:-------------------------------
Name:
Title:
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SCHEDULE "1"
to the
Purchase and Sale Agreement
Dated July 1996
THE PROPERTY
1 - 1
<PAGE>
SCHEDULE "2"
to the
Purchase and Sale Agreement
Dated July 1996
CONVERTIBLE SECURED PROMISSORY NOTE
THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), BUT HAVE
BEEN ISSUED IN RELIANCE UPON REGULATION S PROMULGATED BY THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION UNDER THE ACT. THE SECURITIES MAY NOT BE SOLD
OR OTHERWISE TRANSFERRED TO A "U.S. PERSON" (AS DEFINED IN REGULATION S) OR TO
ANY PERSON WITH A UNITED STATES ADDRESS DURING THE RESTRICTED PERIOD FOLLOWING
ISSUANCE OF THE SECURITIES. FOLLOWING EXPIRATION OF THE RESTRICTED PERIOD, ANY
RESALE OR TRANSFER OF THE SECURITIES TO A U.S. PERSON OR INTO THE UNITED STATES
MUST BE MADE IN ACCORDANCE WITH REGULATION S, PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT, OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE ACT.
2 - 1
<PAGE>
CONVERTIBLE SECURED PROMISSORY NOTE
U.S. $12,000,000 August 8, 1996
Artesia, California
FOR VALUE RECEIVED, The Hartcourt Companies, Inc., a corporation
organised under the laws of the United States, State of Utah, with its principal
place of business in Artesia, California ("Maker"), hereby promises to pay to
NuOasis International, Inc., a company organised under the laws of the
Commonwealth of the Bahamas ("Payee"or "Holder") the principal sum Twelve
Million Dollars (US$12,000,000) with principal and accrued interest at the rate
of eight percent (8%) per annum due and payable 30 days after demand or August
31, 1997, whichever first occurs (the "Due Date"). This Convertible Secured
Promissory Note (the "Note") is issued by Maker pursuant to the Purchase and
Sale Agreement of even date (the "Purchase Agreement").
To secure the payment of this Note, Maker hereby grants to the Holder
pursuant to a Security Agreement dated of even date between Maker and Holder a
security interest in the property set forth in Exhibit "A" hereto (the
"Collateral"). Upon default, the Holder may resort to any remedy against the
Collateral available to a secured party under the United States Uniform
Commercial Code, or laws of the Peoples Republic of China. Notwithstanding
anything to the contrary herein, this Note is without recourse. Payee and Holder
agree to look solely to the Collateral for satisfaction in the event of default.
All documents and instruments now or hereafter evidencing and/or
securing the indebtedness evidenced hereby or any part thereof, including but
not limited to this Note and the Security Agreement of even date, are sometimes
collectively referred to herein as the "Security Documents."
All agreements in this Note and all other Security Documents are
expressly limited so that in no contingency or event whatsoever, whether by
reason of acceleration of maturity of the indebtedness evidenced hereby or
otherwise, shall the amount agreed to be paid hereunder for the use, forbearance
or detention of money exceed the highest lawful rate permitted under applicable
usury laws. If, for any circumstance whatsoever, fulfillment of any provision of
this Note or any other Security Document at the time performance of such
provision shall be due shall involve exceeding any usury limit prescribed by law
which a court of competent jurisdiction may deem applicable hereto, then, ipso
facto, the obligations to be fulfilled shall be reduced to allow compliance with
such limit, and if, from any circumstance whatsoever, Payee shall ever receive
as interest an amount which would exceed the highest lawful rate, the receipt of
such excess shall be deemed a mistake and shall be canceled automatically or, if
theretofore paid, such excess shall be credited against the principal amount of
the indebtedness evidenced hereby to which the same may lawfully be credited,
and any portion of such excess not capable of being so credited shall be
refunded immediately to Maker. Maker and Payee affirm that the indebtedness
evidenced represents the partial consideration for the Property being acquired
by Maker pursuant to the Purchase Agreement.
Maker shall pay to Holder all reasonable costs, expenses, charges,
disbursements and attorneys' fees incurred by Holder following an Event of
Default in collecting, enforcing or protecting this Note or any other Security
Document, whether incurred in or out of court, including appeals and bankruptcy
proceedings.
2 - 2
<PAGE>
If Maker utilizes the Collateral in any way to secure financing, Maker
agrees to pay the net proceeds of such financing to Holder to the extent of the
principal balance of the Note, and all accrued and unpaid interest, before
distributing any of such financing proceeds for other purposes.
CONVERSION FEATURES OF THE NOTE
This Note is convertible into shares of the Maker's common stock as
hereinafter provided. At the election of Holder, the Note is convertible into
the greater of that number of shares of common stock of Maker with a current
market value at the date of conversion equal to the unpaid principal balance due
on the Note. "Market Value" for the purpose of this Note shall mean fifty
percent (50%) of the moving average bid price of such shares for the ten (10)
business days immediately preceeding notice of conversion.
EXTENSION OF THE DUE DATE
In the event the Maker hereof makes any principal reduction payments on
this Note on or before October 31, 1996, then the Due Date of this Note shall be
extended as follows: For each One Million Dollars (US$1,000,000) of principal
reduction payments made on the Note, the Due Date shall be extended by thirty
(30) days.
EVENTS OF DEFAULT
Each of the following events or occurrences shall constitute an "Event
of Default" hereunder: (a) if default is made in the payment of any monetary
amount payable hereunder, under the terms of any Security Document, or under the
terms of any other obligation of Maker to Payee hereunder, within ten (10) days
following the date the same is due; (b) if default is made in the performance of
any other promise or obligation described herein, in any Security Document, or
in any other document evidencing or securing any indebtedness of Maker to Payee
following ten (10) days prior notice to Maker of such default and the failure of
Maker to cure such default within ten (10) day period; (c) if Maker shall
execute an assignment of any of its property for the benefit of creditors, fail
to meet any obligations herein described, be unable to meet its debts as they
mature, suspend its active business or be declared insolvent by any court,
suffer any judgment or decree to be rendered against it in an amount greater
than US$10,000, suffer a receiver to be appointed for any of its property,
voluntarily seek relief or have involuntary proceedings brought against it under
any provision now in force or hereinafter enacted of any law relating to
bankruptcy, or forfeit its charter, dissolve, or terminate its existence; (d) if
any writ of attachment, garnishment or execution shall be issued against Maker;
(e) if any tax lien be assessed or filed against Maker; (f) if any warranty,
representation or statement made or furnished to Payee by or on behalf of Maker,
including but not limited to any information provided to Payee in conjunction
with the Purchase Agreement.
Upon the occurrence of any Event of Default, which is not cured within
ten (10) days after notice of such default is given by Holder or at any time
thereafter when any Event of Default may continue, Holder may, at its option and
in its sole discretion, declare the entire balance of this Note to be
immediately due and payable, and upon such declaration all sums outstanding and
unpaid under this Note shall become and be in default, matured and immediately
due and payable, without presentment, demand, protest or notice of any kind to
Maker or any other person, all of which are hereby expressly waived, anything in
this Note or any other Security Document to the contrary notwithstanding.
2 - 3
<PAGE>
Payee and Maker hereby agree to trial by court and irrevocably agree to
waive jury trial in any action or proceeding (including but not limited to any
counterclaim) arising out of or in any way related to or connected with this
Note or any other Security Document, the relationship created thereby, or the
origination, administration or enforcement of the indebtedness evidenced and/or
secured by this Note or any other Security Document.
This Note has been delivered to Payee and accepted by Payee in the
Commonwealth of the Bahamas and shall be governed and construed generally
according to the laws of said jurisdiction except to the extent that creation,
validity, perfection or enforcement of any liens or security interests securing
this Note are governed by the laws of another jurisdiction. Venue of any action
brought pursuant to this Note or any other Security Document, or relating to the
indebtedness evidenced hereby or the relationships created by or under the
Security Documents shall, at the election of the party bringing the action, be
brought in a United States federal court of appropriate jurisdiction located in
or having jurisdiction over the Maker. Maker and Payee each waives any objection
to the jurisdiction of or venue in any such court and to the service of process
issued by such court and agrees that each may be served by any method of process
pursuant to the laws of the Commonwealth of the Bahamas or, if applicable, as
described in the United States Federal Rules of Civil Procedure. Maker and Payee
each waives the right to claim that any such court is an inconvenient forum or
any similar defense.
If, in any jurisdiction, any provision of this Note shall, for any
reason, be held to be invalid, illegal, or unenforceable in any respect, such
holding shall not affect any other provisions of this Note, and this Note shall
be construed, to the extent of such invalidity, illegality or unenforceability
(and only to such extent) as if any such provision had never been contained
herein. Any such holding of invalidity, illegality or unenforceability in one
jurisdiction shall not prevent valid enforcement of any affected provision if
allowed under the laws of another relevant jurisdiction.
As used in this Note, the term "person" shall include, but is not
limited to, natural persons, corporations, partnerships, trusts, joint ventures
and other legal entities, and all combinations of the foregoing natural persons
or entities, and the term "obligation" shall include any requirement to pay any
indebtedness and/or perform any promise, term, provision, covenant or agreement
included or provided for in this Note or any other Security Document.
This Note and any and all certificates issued in replacement thereof or
in exchange therefor, will bear a restrictive transfer legend in the following
form:
"THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), BUT HAVE
BEEN ISSUED IN RELIANCE UPON REGULATION S PROMULGATED BY THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION UNDER THE ACT. THE SECURITIES MAY NOT BE SOLD
OR OTHERWISE TRANSFERRED TO A "U.S. PERSON" (AS DEFINED IN REGULATION S) OR TO
ANY PERSON WITH A UNITED STATES ADDRESS DURING THE RESTRICTED PERIOD FOLLOWING
ISSUANCE OF THE SECURITIES. FOLLOWING EXPIRATION OF THE RESTRICTED PERIOD, ANY
RESALE OR TRANSFER OF THE SECURITIES TO A U.S. PERSON OR INTO THE UNITED STATES
MUST BE MADE IN ACCORDANCE WITH REGULATION S, PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT, OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE ACT."
2 - 4
<PAGE>
Executed by the undersigned the year and day first above written.
The Hartcourt Companies, Inc.
a Utah corporation
By:------------------------------------
Name:
Title:
2 - 5
<PAGE>
EXHIBIT "A"
to the
Convertible Secured Promissory Note
dated August 8, 1996
THE COLLATERAL
A - 1
<PAGE>
SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement") is executed as of this 8th day
of August, 1996, by The Hartcourt Companies, Inc., a Utah corporation
(hereinafter referred to as the "Debtor"), with its principal place of business
located at 19104 South Norwalk Blvd., Artesia, California 90703, in favor of
NuOasis International Inc., a corporation organised under the laws of the
Commonwealth of the Bahamas, its successors and assigns (hereinafter referred to
as the "Secured Party").
WHEREAS, the following recitals of fact are a material part of this
Agreement; and,
WHEREAS, Secured Party is granting credit to Debtor pursuant to a
Convertible Secured Promissory Note (the "Note") dated of even date which is
required to be secured by the property described in Exhibit "A" to the Note (all
of which documents and instruments evidencing and/or securing indebtedness of
Debtor to Secured Party are collectively referred to herein, along with this
Agreement, as the "Security Documents"). Secured Party is unwilling to grant
credit to Debtor unless Debtor grants to Secured Party the security interest
granted herein according to the terms and conditions hereof.
1. In consideration of the granting of credit to Debtor by Secured Party,
Debtor hereby grants to Secured Party a security interest (hereinafter
referred to as the "Security Interest") in the property described on
Exhibit "A" attached hereto and made a part hereof, whether now owned
or hereafter acquired, including all proceeds and products thereof and
additions and accessions thereto (hereinafter referred to as the
"Collateral"). This Agreement and the rights hereby granted shall
secure the following (hereinafter collectively referred to as the
"Obligations"):
A. Principal and Interest. The principal amount of Borrower's
indebtedness to Secured Party with interest thereon as specified
in the Security Documents and any renewals, extensions or
modifications thereof; and
B. Expenses. The expense of all legal proceedings, including
attorneys' fees, brought by the Secured Party to enforce the Note
or this Agreement and all other costs and expenses paid or
incurred by the Secured Party in respect of or in connection with
the Collateral; and
C. Performance. The observance and performance by the Debtor of all
of the terms, provisions, covenants and obligations on its part
to be observed or performed under the Note and this Agreement;
and
D. Other. Any and all indebtedness, obligations and liabilities of
any kind and nature of the Debtor to Secured Party, direct or
indirect, absolute or contingent, due or to become due, now
existing or hereafter arising.
A - 2
<PAGE>
2. DEBTOR'S WARRANTIES, COVENANTS AND AGREEMENTS
Debtor hereby warrants, covenants and agrees that:
A. Purpose. The Collateral covered by this Agreement is used or purchased
for use primarily for business purposes. Although proceeds of
Collateral are covered by this Agreement, this shall not be construed
to mean that Secured Party consents to any sale of the Collateral,
except in ordinary course of business.
B. Transfer of Collateral Prohibited. Debtor will not, without obtaining
the prior written consent of Secured Party, transfer or permit any
transfer of the Collateral or any part thereof to be made, or any
interest therein to be created by way of a sale (except as permitted
above), or by way of a grant of a security interest, or by way of levy
or other judicial process.
C. Access and Inspection. Debtor will, at all reasonable times, allow
Secured Party or its representatives free and complete access to all
of the Debtor's records for such inspection and examination as Secured
Party deems necessary. Debtor shall also upon request of Secured Party
from time to time submit up-to-date schedules of the items comprising
the Collateral in such detail as Secured Party shall require.
D. Third Party Claims. Debtor at its cost and expense will protect and
defend this Agreement, all of the rights of Secured Party hereunder
and the Collateral against the claims and demands of all other
parties. Debtor will promptly notify Secured Party of any levy,
distraint or other seizure by legal process or otherwise of any part
of the Collateral, and of any threatened or filed claims or
proceedings that might in any way affect or impair any of the terms of
the Agreement.
E. Insurance. Debtor at its expense will obtain and maintain in force
insurance policies including fire and flood insurance, covering losses
or damage to the Collateral. The insurance policies to be obtained by
Debtor shall be in form and amounts acceptable to Secured Party.
Secured Party is hereby irrevocably appointed Debtor's attorney in
fact to endorse any check or draft that may be payable to the Debtor,
alone or jointly with other payees, so that the Secured Party may
collect the proceeds payable for any loss under such insurance. The
proceeds of such insurance, less any costs and expenses incurred or
paid by the Secured Party in the collection thereof, shall be applied
in Secured Party's sole discretion either toward the costs of the
repair or replacement of the items damaged or destroyed, or on account
of any sums secured hereby, whether or not then due or payable.
F. Notices. Debtor will give Secured Party immediate written notice of
any change in location of Debtor's place of business.
3. EVENTS OF DEFAULT
The occurrence of any of the following events shall constitute and is
hereby defined to be an "Event of Default":
A. Breach of Security Agreement Any failure or neglect to observe or
perform any of the terms, provisions, promises, agreements or
covenants of this Agreement and the continuance of such failure or
neglect after notice thereof to the Debtor; or
A - 3
<PAGE>
B. Failure to Pay. Any failure of the Debtor to pay any amount of
principal and/or interest, or any other sum due under the Note within
ten (10) days following the date such amount became due and payable;
or
C. False Statements. Any warranty, representation or statement contained
in this Agreement or otherwise made or furnished to the Secured Party
by or on behalf of the Debtor shall be or shall prove to have been
false when made or furnished; or
D. Destruction or Demise of Collateral. Any loss, theft, substantial
damage, destruction of, or the attachment of an encumbrance to any of
the Collateral, or the voluntary or involuntary transfer of any of the
Collateral (and said Collateral is not immediately replaced, restored
or returned) or the transfer of possession thereof to anyone, or the
sale, creation of a security interest, lien, attachment, levy,
garnishment, distraint, or other process of, in or upon any of the
Collateral, and if such attachment or other similar process is not
bonded or released within thirty (30) days after levy.
E Breach of Conversion Rights. If the Debtor shall fail to honor the
Secured Party's conversion rights under the Note following thirty (30)
days prior notice to Debtor and following Secured Party's compliance
with all the procedures of Debtor for conversion and the failure of
Debtor to either tender the shares issuable upon conversion or to
notify Secured Party of additional third party requirements (i.e.
transfer agent) within said thirty (30) day period.
4. SECURED PARTY'S REMEDIES
Upon the occurrence of any Event of Default hereunder, Secured Party shall
have the following rights and remedies:
A. Acceleration and Possession. Secured Party may, at its option, declare
all or any part of the Obligations immediately due and payable and
Debtor shall on demand by Secured Party deliver the Collateral to the
Secured Party. Secured Party may, without further notice or demand and
without legal process, take possession of the Collateral wherever
found and, for this purpose, may enter upon any property occupied by
or in the control of Debtor.
B. All Remedies Available. Secured Party may pursue any legal remedy
available to collect all sums secured hereby and to enforce its title
in and right to possession of the Collateral, and to enforce any and
all other rights or remedies available to it, and no such action shall
operate as a waiver of any other right or remedy of the Secured Party
under the terms hereof or under applicable law.
C. Waiver of Defenses. Debtor waives any requirements of presentment,
protest, notices of protest, notices of dishonor, and all other
formalities. Debtor waives all rights and/or privileges it might
otherwise have to require Secured Party to proceed against or exhaust
the Collateral encumbered hereby or the Note or to proceed against any
guarantor of the Obligations or to pursue any other remedy available
to Secured Party in any particular manner or order under the legal or
equitable doctrine or principle of marshaling and/or suretyship and
further agrees that Secured Party may proceed against any or all of
the Collateral encumbered hereby in the event of default in such order
and manner as Secured Party in its sole discretion may determine. Any
Debtor that has signed this Agreement as a surety or accommodation
party, or that has subjected its property to this Agreement to secure
the indebtedness of another hereby expressly waives the benefits of
the provisions of any laws which could delay, defeat or render more
costly the Secured Party's realization upon the Collateral, waives any
defense arising by reason of any disability or other defense of Debtor
or by reason of the cessation from any cause whatsoever of the
liability of Debtor, and waives the benefit of any statutes of
limitation affecting the enforcement hereof.
A - 4
<PAGE>
D. Sale of Collateral. Secured Party may sell all or any part of the
Collateral at public or private sale either with or without having
such Collateral at the place of sale, and with notice to Debtor as
provided herein. The proceeds of such sale, after deducting therefrom
all expenses of Secured Party in taking, storing, repairing and
selling the Collateral (including attorneys' fees and court costs)
shall be applied to the payment of any part or all of the Obligations
and any other indebtedness or liability of Debtor to Secured Party,
and any surplus thereafter remaining shall be paid to any person that
may be legally entitled thereto. In the event of a deficiency between
such net proceeds from the sale of Collateral and the total amount of
Obligations owing by Debtor, Debtor will promptly upon demand pay the
amount of such deficiency to Secured Party.
E. Secured Party as Purchaser. At any sale, public or private, of the
Collateral or any part thereof, made in the enforcement of the rights
and remedies of Secured Party, Secured Party may purchase any part or
parts of the Collateral or all thereof offered at such sale.
F. Notice of Sale. Secured Party shall give Debtor reasonable notice of
any sale or other disposition of the Collateral or any part thereof.
Debtor agrees that notice shall be conclusively deemed to be
reasonable and effective if such notice is mailed by registered or
certified mail postage prepaid, to Debtor at Debtor's principal place
of business at least ten (10) days prior to such sale or other
dispositions.
G. Applicable Law Remedies. Secured Party shall have all the rights and
remedies afforded a Secured Party under applicable law.
5. MISCELLANEOUS PROVISIONS
A. Waivers and Cumulative Remedies. No Event of Default hereunder by
Debtor shall be deemed to have been waived by Secured Party except by
a writing to that effect signed by Secured Party and no waiver of any
such Event of Default shall operate as a waiver of any other Event of
Default on a future occasion, or as a waiver of that Event of Default
after written notice thereof and demand by Secured Party for strict
performance of this Agreement. All rights, remedies and privileges of
Secured Party hereunder shall be cumulative and not alternative, and
shall, whether or not specifically so expressed, inure to the benefit
of the Secured Party, its successors and assigns, and all obligations
of the Debtor shall bind its successors and legal representatives.
A - 5
<PAGE>
B. Debtor's Possession of Collateral. Until an Event of Default, the
Debtor may retain possession of the Collateral and may use it in any
lawful manner not inconsistent with this Agreement or with the
provisions of any policies of insurance thereon.
C. Waiver of Jury Trial. Secured Party and Debtor hereby agree to trial
by court and irrevocably waive jury trial in any action or proceeding
(including but not limited to any counterclaim) arising out of or in
any way related to or connected with this Agreement, the Note, the
relationship created thereby, or the origination, administration or
enforcement of the indebtedness evidenced and/or secured by this
Agreement.
D. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining
provisions of this Agreement.
E. Written Amendment Required. No modification, rescission, waiver,
release or amendment of any provision of this Agreement shall be made
except by a written agreement subscribed by Debtor and Secured Party.
F. Full Force and Effect. This Agreement shall remain in full force and
effect until all of the indebtedness and any extensions or renewals
thereof shall be paid in full.
G. Successors and Assigns. Secured Party and Debtor as used herein shall
include the heirs, executors or administrators, or successors or
assigns of those parties. The provisions of this Agreement shall apply
to the parties according to the context hereof and without regard to
the number or gender of words and expressions used herein.
H. Financing Statements. A carbon, photographic or other reproduced copy
of this Agreement and/or any financing statement relating hereto shall
be sufficient for filing and/or recording as a financing statements.
Notwithstanding the foregoing, Debtor shall provide, shall execute and
shall cooperate with Secured Party in the execution and filing of such
financing statements, documents and instruments as Secured Party may
reasonably request in order to perfect the security interest granted
to Secured Party hereunder or otherwise to carry out the purposes of
this Agreement.
I. Governing Law. This Security Agreement and the transaction evidenced
hereby shall be construed under the laws of the United States, as the
same may from time to time be in effect.
IN WITNESS WHEREOF, this Agreement has been executed and delivered on
behalf of and in the name of Debtor on the date indicated above.
The Hartcourt Companies, Inc.
a Utah corporation
By:-------------------------------
Name:
Title:
A - 6
<PAGE>
SCHEDULE "3"
to the
Purchase and Sale Agreement
Dated August 8, 1996
CAPITALIZATION
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 110,001,000 shares of
capital stock, composed of 100,000,000 shares of common stock, par value $0.001
per share ("Common Stock"), 1,000 shares of Preferred Stock, par value $.01 per
share ("Original Preferred Stock"), and 10,000,000 shares of Preferred Stock,
par value $.01 per share ("Class A Preferred Stock").
COMMON STOCK
Voting Rights. Subject to the voting rights of holders of Original
Preferred Stock described below, each holder of shares of Common Stock is
entitled to one vote for each share of Common Stock for the election of
directors and on each other matter submitted to a vote of the stockholders of
the Company. Until December 31, 2010, holders of Common Stock, are entitled to
elect two-fifths (2/5) of the authorized number of members of the Board of
Directors. The holders of Common Stock have exclusive voting power on all
matters at any time no Preferred Stock with superior voting rights is issued and
outstanding.
Liquidation Rights. Upon liquidation, dissolution or winding up of the
Company, holders of shares of Common Stock are entitled to share ratably in
distributions of any assets after payment in full or provision for all amounts
due creditors and provision for any liquidation preference of any other class or
series of stock of the Company then outstanding.
Dividends. Dividends may be declared by the Board of Directors and paid
from time to time to the holders of Common Stock in cash, stock, or otherwise,
as may be determine by the Board of Directors, out of the net profits or surplus
of the Company.
ORIGINAL PREFERRED STOCK
Voting Rights. The holders of Original Preferred Stock are not entitled
to vote on any matters except those affecting the Original Preferred Stock, the
election of directors (to the extent described below) and as otherwise required
by law. Until December 31, 2010, holders of Original Preferred Stock, voting as
a single class, are entitled to elect three-fifths (3/5) of the authorized
number of members of the Board of Directors.
Liquidation Rights. In the event of any liquidation, dissolution or
winding up of the Company, holders of Original Preferred Stock are entitled to
be paid the full par value of the Original Preferred Stock, $.01 per share.
Conversion Rights. The holders of shares of Original Preferred Stock
are entitled to convert each share of Original Preferred Stock into 1,000 shares
of fully paid non-assessable Common Stock.
3 - 1
<PAGE>
Dividends.The holders of shares of Original Preferred Stock are not
entitled to receive any dividends. Class A Preferred Stock
General. The 10,000,000 shares of authorized and unissued Class A
Preferred Stock may be issued pursuant to action by the Company's Board of
Directors and without further action by the Company's stockholders with such
designations, powers, preferences and other rights and qualifications,
limitations and restrictions thereof as the Board of Directors may designate,
including but not limited to: (i) the distinctive designation of each series and
the number of shares that will constitute such series; (ii) the dividend rate on
the shares of such series, any restriction, limitation or condition upon the
payment of such dividends, whether dividends shall be cumulative and the dates
on which dividends are payable; (iii) the prices at which, and the terms and
conditions on which, the shares of such series may be redeemed, if such shares
are redeemable; (iv) any preferential amount payable upon shares of such series
may be converted into other securities, if such shares are convertible; and (v)
the voting rights, including the right to vote as a class on designated matters
such as, but not limited to, the merger, consolidation or sale of substantially
all of the Company's assets, or the approval of designated action by a greater
than two thirds (2/3) affirmative vote, and if so, the terms and conditions
thereof and any limitations thereon.
3 - 2
EXHIBIT 10.131
SECURITY AGREEMENT DATED AUGUST 8, 1996 BETWEEN NUOASIS
INTERNATIONAL INC. AND THE HARTCOURT COMPANIES INC.
SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement") is executed as of this 8th day
of August, 1996, by The Hartcourt Companies, Inc., a Utah corporation
(hereinafter referred to as the "Debtor"), with its principal place of business
located at 19104 South Norwalk Blvd., Artesia, California 90703, in favor of
NuOasis International Inc., a corporation organised under the laws of the
Commonwealth of the Bahamas, its successors and assigns (hereinafter referred to
as the "Secured Party").
WHEREAS, the following recitals of fact are a material part of this
Agreement; and,
WHEREAS, Secured Party is granting credit to Debtor pursuant to a
Convertible Secured Promissory Note (the "Note") dated of even date which is
required to be secured by the property described in Exhibit "A" to the Note (all
of which documents and instruments evidencing and/or securing indebtedness of
Debtor to Secured Party are collectively referred to herein, along with this
Agreement, as the "Security Documents"). Secured Party is unwilling to grant
credit to Debtor unless Debtor grants to Secured Party the security interest
granted herein according to the terms and conditions hereof.
1. In consideration of the granting of credit to Debtor by Secured Party,
Debtor hereby grants to Secured Party a security interest (hereinafter
referred to as the "Security Interest") in the property described on
Exhibit "A" attached hereto and made a part hereof, whether now owned
or hereafter acquired, including all proceeds and products thereof and
additions and accessions thereto (hereinafter referred to as the
"Collateral"). This Agreement and the rights hereby granted shall
secure the following (hereinafter collectively referred to as the
"Obligations"):
A. Principal and Interest. The principal amount of Borrower's
indebtedness to Secured Party with interest thereon as specified
in the Security Documents and any renewals, extensions or
modifications thereof; and
B. Expenses. The expense of all legal proceedings, including
attorneys' fees, brought by the Secured Party to enforce the Note
or this Agreement and all other costs and expenses paid or
incurred by the Secured Party in respect of or in connection with
the Collateral; and
C. Performance. The observance and performance by the Debtor of all
of the terms, provisions, covenants and obligations on its part
to be observed or performed under the Note and this Agreement;
and
D. Other. Any and all indebtedness, obligations and liabilities of
any kind and nature of the Debtor to Secured Party, direct or
indirect, absolute or contingent, due or to become due, now
existing or hereafter arising.
1
<PAGE>
2. DEBTOR'S WARRANTIES, COVENANTS AND AGREEMENTS
Debtor hereby warrants, covenants and agrees that:
A. Purpose. The Collateral covered by this Agreement is used or purchased
for use primarily for business purposes. Although proceeds of
Collateral are covered by this Agreement, this shall not be construed
to mean that Secured Party consents to any sale of the Collateral,
except in ordinary course of business.
B. Transfer of Collateral Prohibited. Debtor will not, without obtaining
the prior written consent of Secured Party, transfer or permit any
transfer of the Collateral or any part thereof to be made, or any
interest therein to be created by way of a sale (except as permitted
above), or by way of a grant of a security interest, or by way of levy
or other judicial process.
C. Access and Inspection. Debtor will, at all reasonable times, allow
Secured Party or its representatives free and complete access to all
of the Debtor's records for such inspection and examination as Secured
Party deems necessary. Debtor shall also upon request of Secured Party
from time to time submit up-to-date schedules of the items comprising
the Collateral in such detail as Secured Party shall require.
D. Third Party Claims. Debtor at its cost and expense will protect and
defend this Agreement, all of the rights of Secured Party hereunder
and the Collateral against the claims and demands of all other
parties. Debtor will promptly notify Secured Party of any levy,
distraint or other seizure by legal process or otherwise of any part
of the Collateral, and of any threatened or filed claims or
proceedings that might in any way affect or impair any of the terms of
the Agreement.
E. Insurance. Debtor at its expense will obtain and maintain in force
insurance policies including fire and flood insurance, covering losses
or damage to the Collateral. The insurance policies to be obtained by
Debtor shall be in form and amounts acceptable to Secured Party.
Secured Party is hereby irrevocably appointed Debtor's attorney in
fact to endorse any check or draft that may be payable to the Debtor,
alone or jointly with other payees, so that the Secured Party may
collect the proceeds payable for any loss under such insurance. The
proceeds of such insurance, less any costs and expenses incurred or
paid by the Secured Party in the collection thereof, shall be applied
in Secured Party's sole discretion either toward the costs of the
repair or replacement of the items damaged or destroyed, or on account
of any sums secured hereby, whether or not then due or payable.
F. Notices. Debtor will give Secured Party immediate written notice of
any change in location of Debtor's place of business.
3. EVENTS OF DEFAULT
The occurrence of any of the following events shall constitute and is
hereby defined to be an "Event of Default":
A. Breach of Security Agreement Any failure or neglect to observe or
perform any of the terms, provisions, promises, agreements or
covenants of this Agreement and the continuance of such failure or
neglect after notice thereof to the Debtor; or
2
<PAGE>
B. Failure to Pay. Any failure of the Debtor to pay any amount of
principal and/or interest, or any other sum due under the Note within
ten (10) days following the date such amount became due and payable;
or
C. False Statements. Any warranty, representation or statement contained
in this Agreement or otherwise made or furnished to the Secured Party
by or on behalf of the Debtor shall be or shall prove to have been
false when made or furnished; or
D. Destruction or Demise of Collateral. Any loss, theft, substantial
damage, destruction of, or the attachment of an encumbrance to any of
the Collateral, or the voluntary or involuntary transfer of any of the
Collateral (and said Collateral is not immediately replaced, restored
or returned) or the transfer of possession thereof to anyone, or the
sale, creation of a security interest, lien, attachment, levy,
garnishment, distraint, or other process of, in or upon any of the
Collateral, and if such attachment or other similar process is not
bonded or released within thirty (30) days after levy.
E Breach of Conversion Rights. If the Debtor shall fail to honor the
Secured Party's conversion rights under the Note following thirty (30)
days prior notice to Debtor and following Secured Party's compliance
with all the procedures of Debtor for conversion and the failure of
Debtor to either tender the shares issuable upon conversion or to
notify Secured Party of additional third party requirements (i.e.
transfer agent) within said thirty (30) day period.
4. SECURED PARTY'S REMEDIES
Upon the occurrence of any Event of Default hereunder, Secured Party shall
have the following rights and remedies:
A. Acceleration and Possession. Secured Party may, at its option, declare
all or any part of the Obligations immediately due and payable and
Debtor shall on demand by Secured Party deliver the Collateral to the
Secured Party. Secured Party may, without further notice or demand and
without legal process, take possession of the Collateral wherever
found and, for this purpose, may enter upon any property occupied by
or in the control of Debtor.
B. All Remedies Available. Secured Party may pursue any legal remedy
available to collect all sums secured hereby and to enforce its title
in and right to possession of the Collateral, and to enforce any and
all other rights or remedies available to it, and no such action shall
operate as a waiver of any other right or remedy of the Secured Party
under the terms hereof or under applicable law.
C. Waiver of Defenses. Debtor waives any requirements of presentment,
protest, notices of protest, notices of dishonor, and all other
formalities. Debtor waives all rights and/or privileges it might
otherwise have to require Secured Party to proceed against or exhaust
the Collateral encumbered hereby or the Note or to proceed against any
guarantor of the Obligations or to pursue any other remedy available
to Secured Party in any particular manner or order under the legal or
equitable doctrine or principle of marshaling and/or suretyship and
further agrees that Secured Party may proceed against any or all of
the Collateral encumbered hereby in the event of default in such order
and manner as Secured Party in its sole discretion may determine. Any
Debtor that has signed this Agreement as a surety or accommodation
party, or that has subjected its property to this Agreement to secure
the indebtedness of another hereby expressly waives the benefits of
the provisions of any laws which could delay, defeat or render more
costly the Secured Party's realization upon the Collateral, waives any
defense arising by reason of any disability or other defense of Debtor
or by reason of the cessation from any cause whatsoever of the
liability of Debtor, and waives the benefit of any statutes of
limitation affecting the enforcement hereof.
3
<PAGE>
D. Sale of Collateral. Secured Party may sell all or any part of the
Collateral at public or private sale either with or without having
such Collateral at the place of sale, and with notice to Debtor as
provided herein. The proceeds of such sale, after deducting therefrom
all expenses of Secured Party in taking, storing, repairing and
selling the Collateral (including attorneys' fees and court costs)
shall be applied to the payment of any part or all of the Obligations
and any other indebtedness or liability of Debtor to Secured Party,
and any surplus thereafter remaining shall be paid to any person that
may be legally entitled thereto. In the event of a deficiency between
such net proceeds from the sale of Collateral and the total amount of
Obligations owing by Debtor, Debtor will promptly upon demand pay the
amount of such deficiency to Secured Party.
E. Secured Party as Purchaser. At any sale, public or private, of the
Collateral or any part thereof, made in the enforcement of the rights
and remedies of Secured Party, Secured Party may purchase any part or
parts of the Collateral or all thereof offered at such sale.
F. Notice of Sale. Secured Party shall give Debtor reasonable notice of
any sale or other disposition of the Collateral or any part thereof.
Debtor agrees that notice shall be conclusively deemed to be
reasonable and effective if such notice is mailed by registered or
certified mail postage prepaid, to Debtor at Debtor's principal place
of business at least ten (10) days prior to such sale or other
dispositions.
G. Applicable Law Remedies. Secured Party shall have all the rights and
remedies afforded a Secured Party under applicable law.
5. MISCELLANEOUS PROVISIONS
A. Waivers and Cumulative Remedies. No Event of Default hereunder by
Debtor shall be deemed to have been waived by Secured Party except by
a writing to that effect signed by Secured Party and no waiver of any
such Event of Default shall operate as a waiver of any other Event of
Default on a future occasion, or as a waiver of that Event of Default
after written notice thereof and demand by Secured Party for strict
performance of this Agreement. All rights, remedies and privileges of
Secured Party hereunder shall be cumulative and not alternative, and
shall, whether or not specifically so expressed, inure to the benefit
of the Secured Party, its successors and assigns, and all obligations
of the Debtor shall bind its successors and legal representatives.
4
<PAGE>
B. Debtor's Possession of Collateral. Until an Event of Default, the
Debtor may retain possession of the Collateral and may use it in any
lawful manner not inconsistent with this Agreement or with the
provisions of any policies of insurance thereon.
C. Waiver of Jury Trial. Secured Party and Debtor hereby agree to trial
by court and irrevocably waive jury trial in any action or proceeding
(including but not limited to any counterclaim) arising out of or in
any way related to or connected with this Agreement, the Note, the
relationship created thereby, or the origination, administration or
enforcement of the indebtedness evidenced and/or secured by this
Agreement.
D. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining
provisions of this Agreement.
E. Written Amendment Required. No modification, rescission, waiver,
release or amendment of any provision of this Agreement shall be made
except by a written agreement subscribed by Debtor and Secured Party.
F. Full Force and Effect. This Agreement shall remain in full force and
effect until all of the indebtedness and any extensions or renewals
thereof shall be paid in full.
G. Successors and Assigns. Secured Party and Debtor as used herein shall
include the heirs, executors or administrators, or successors or
assigns of those parties. The provisions of this Agreement shall apply
to the parties according to the context hereof and without regard to
the number or gender of words and expressions used herein.
H. Financing Statements. A carbon, photographic or other reproduced copy
of this Agreement and/or any financing statement relating hereto shall
be sufficient for filing and/or recording as a financing statements.
Notwithstanding the foregoing, Debtor shall provide, shall execute and
shall cooperate with Secured Party in the execution and filing of such
financing statements, documents and instruments as Secured Party may
reasonably request in order to perfect the security interest granted
to Secured Party hereunder or otherwise to carry out the purposes of
this Agreement.
I. Governing Law. This Security Agreement and the transaction evidenced
hereby shall be construed under the laws of the United States, as the
same may from time to time be in effect.
IN WITNESS WHEREOF, this Agreement has been executed and delivered on
behalf of and in the name of Debtor on the date indicated above.
The Hartcourt Companies, Inc.
a Utah corporation
By:-------------------------------
Name:
Title:
5
<PAGE>
SCHEDULE "3"
to the
Purchase and Sale Agreement
Dated August 8, 1996
CAPITALIZATION
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 110,001,000 shares of
capital stock, composed of 100,000,000 shares of common stock, par value $0.001
per share ("Common Stock"), 1,000 shares of Preferred Stock, par value $.01 per
share ("Original Preferred Stock"), and 10,000,000 shares of Preferred Stock,
par value $.01 per share ("Class A Preferred Stock").
COMMON STOCK
Voting Rights. Subject to the voting rights of holders of Original
Preferred Stock described below, each holder of shares of Common Stock is
entitled to one vote for each share of Common Stock for the election of
directors and on each other matter submitted to a vote of the stockholders of
the Company. Until December 31, 2010, holders of Common Stock, are entitled to
elect two-fifths (2/5) of the authorized number of members of the Board of
Directors. The holders of Common Stock have exclusive voting power on all
matters at any time no Preferred Stock with superior voting rights is issued and
outstanding.
Liquidation Rights. Upon liquidation, dissolution or winding up of the
Company, holders of shares of Common Stock are entitled to share ratably in
distributions of any assets after payment in full or provision for all amounts
due creditors and provision for any liquidation preference of any other class or
series of stock of the Company then outstanding.
Dividends. Dividends may be declared by the Board of Directors and paid
from time to time to the holders of Common Stock in cash, stock, or otherwise,
as may be determine by the Board of Directors, out of the net profits or surplus
of the Company.
ORIGINAL PREFERRED STOCK
Voting Rights. The holders of Original Preferred Stock are not entitled
to vote on any matters except those affecting the Original Preferred Stock, the
election of directors (to the extent described below) and as otherwise required
by law. Until December 31, 2010, holders of Original Preferred Stock, voting as
a single class, are entitled to elect three-fifths (3/5) of the authorized
number of members of the Board of Directors.
Liquidation Rights. In the event of any liquidation, dissolution or
winding up of the Company, holders of Original Preferred Stock are entitled to
be paid the full par value of the Original Preferred Stock, $.01 per share.
Conversion Rights. The holders of shares of Original Preferred Stock
are entitled to convert each share of Original Preferred Stock into 1,000 shares
of fully paid non-assessable Common Stock.
3 - 1
<PAGE>
Dividends.The holders of shares of Original Preferred Stock are not
entitled to receive any dividends. Class A Preferred Stock
General. The 10,000,000 shares of authorized and unissued Class A
Preferred Stock may be issued pursuant to action by the Company's Board of
Directors and without further action by the Company's stockholders with such
designations, powers, preferences and other rights and qualifications,
limitations and restrictions thereof as the Board of Directors may designate,
including but not limited to: (i) the distinctive designation of each series and
the number of shares that will constitute such series; (ii) the dividend rate on
the shares of such series, any restriction, limitation or condition upon the
payment of such dividends, whether dividends shall be cumulative and the dates
on which dividends are payable; (iii) the prices at which, and the terms and
conditions on which, the shares of such series may be redeemed, if such shares
are redeemable; (iv) any preferential amount payable upon shares of such series
may be converted into other securities, if such shares are convertible; and (v)
the voting rights, including the right to vote as a class on designated matters
such as, but not limited to, the merger, consolidation or sale of substantially
all of the Company's assets, or the approval of designated action by a greater
than two thirds (2/3) affirmative vote, and if so, the terms and conditions
thereof and any limitations thereon.
3 - 2
EXHIBIT 10.132
ASSIGNMENT AND INDEMNIFICATION AGREEMENT DATED AUGUST 30, 1996 BETWEEN
NUOASIS INTERNATIONAL, INC. AND THE HARTCOURT COMPANIES, INC.
ASSIGNMENT AND INDEMNIFICATION AGREEMENT
This Assignment and Indemnification Agreement is executed by and
between NuOasis International Inc., a company organised under the laws of the
Commonwealth of the Bahamas, ("Assignor" or "NuOasis") and The Hartcourt
Companies Inc., a corporation organised under the laws of the United States,
State of Utah, ("Assignee" or "Hartcourt").
RECITALS:
WHEREAS, under the Purchase and Sale Agreement between Hartcourt and
NuOasis dated August 8, 1996 (the Purchase Agreement) a condition of the Closing
requires NuOasis to deliver, or cause to be delivered, to Hartcourt the
documents necessary to establish the interest in the Property, (as that term is
defined in the Purchase Agreement), and to transfer ownership of NuOasis' right,
title, and interest in and to the Property to Hartcourt, in form and substance
acceptable to Hartcourt;
WHEREAS, NuOasis has delivered to Hartcourt all documents and tangible
things that establish NuOasis' interest in and to the Property, including but
not limited to that: (a) Valuation and Report of Three apartment buildings Peony
Gardens, Tongxian within Beijing City, The Peoples Republic of China dated
August 23, 1995 and prepared by Midland Property Consultants Ltd, a copy of
which is attached hereto as Exhibit "A" and incorporated herein by reference for
all purposes; (b) Assignment dated December 29, 1995 by and between Nona
Morelli's II, Inc., a Colorado corporation ("Nona") and NuOasis, a copy of which
is attached hereto as Exhibit "B" and incorporated herein by reference for all
purposes; (c) Assignment and Bill of Sale dated September 30, 1995 by and
between Silver Faith Development Ltd, a Hong Kong company ("Silver Faith") and
Nona, a copy of which is attached hereto as Exhibit "C" and incorporated herein
by reference for all purposes; and (d) Asset Purchase Agreement dated September
28, 1995 between Silver Faith and Nona (the "Silver Faith Agreement") and
Amendment, Modification and Ratification of Asset Purchase Agreement effective
September 28, 1995, a copy of which is attached hereto as Exhibit "D" and
incorporated herein by reference for all purposes;
WHEREAS, NuOasis assumed all of Nona's duties and obligations related
to the Property, including payment of the Twenty One Million Dollars
(USD21,000,000) principal amount due under that certain Convertible Secured
Promissory Note dated December 30, 1995 payable to Silver Faith (the "Silver
Faith Note"), a copy of which is attached hereto as Exhibit "E" and incorporated
herein by reference for all purposes;
WHEREAS, in January 1996, NuOasis made a Nine Million Six Hundred
Thousand Dollar principal payment on the Silver Faith Note, reducing the
principal balance due thereunder to Eleven Million Four Hundred Thousand Dollars
(USD11,400,000);
WHEREAS, the principal reduction and assumption of duties and
obligations described in the foregoing two paragraphs were confirmed and
acknowledged by Silver Faith in a letter dated May 16, 1996, a copy of which is
attached hereto as Exhibit "F" and incorporated herein by reference for all
purposes; and
[NUOINTL\AGR:ASSIGN.DOC]
<PAGE>
WHEREAS, Assignee's officer, directors, and representatives have been
delivered documents necessary to establish the interest in and to the Property,
inspected the Property and received copies of licenses and permits related to
the construction and sale of the Property at the offices of Silver Faith, and
satisfied themselves as to what documents, in form and substance, are necessary
to transfer ownership in and to the Property.
NOW THEREFORE, for and in consideration of Ten Dollars (USD10) and
other good and valuable consideration as set forth more fully in the Purchase
Agreement and herein, the receipt of which is hereby acknowledged Assignor
hereby bargains, sells, grants, transfers, and conveys unto Assignee all of its
right, title, and interest in and to the Property, and all rights, obligations
and duties accruing to Assignor under the Silver Faith Agreement.
FURTHER, in consideration for the Purchase Price (as defined in the
Purchase Agreement), Assignor agrees to indemnify and hold harmless Assignee
from any liability or loss resulting from the performance or non-performance of
the duties and obligations under the Silver Faith Note.
FURTHER, Assignor's intent hereunder is to transfer and convey its
right, title and interest in and to the Property as it may have under the Silver
Faith Agreement to Assignee and Assignee accepts such assignment as a full and
sufficient consideration for the Purchase Price set forth in the Purchase
Agreement.
FURTHER, Assignor covenants, warrants and represents that it has the
power and authority to execute this Assignment and Indemnification Agreement as
required by applicable law.
FURTHER, Assignor covenants, warrants and represents that it has the
power and authority, and does hereby sell and transfer to Assignee its rights in
and to the Property pursuant to the Silver Faith Agreement, free and clear of
all liens and encumbrances created by or through Assignor, and subject to that
certain joint venture agreement (the "CJV") a copy of which is attached hereto
as Exhibit "G" and incorporated herein by reference for all purposes.
<PAGE>
FURTHER, Assignee warrants that it is satisfied, through its inspection
of documents and by way of this Assignment and Indemnification Agreement, as to
Assignor's Closing obligation "to deliver, or cause to be delivered, to
Hartcourt the documents necessary to establish the interest in the Property, and
to transfer ownership of NuOasis' right, title, and interest in and to the
Property to Hartcourt, in form and substance acceptable to Hartcourt."
FURTHER Assignor irrevocably appoints Assignee as Assignor's true and
lawful attorney, with full power of substitution and revocation, in Assignor's
name, or otherwise, but at Assignee's own cost and expense, to demand and
receive the real, personal or leasehold interests due, or to become due
attributable to the Silver Faith Agreement, and to sue, and to commence any
lawful action, suit and proceeding for the enforcement of such interest, and to
acknowledge satisfaction, or to discharge same as fully as Assignor might, or
could do if this Assignment and Indemnity Agreement had not been made.
IN WITNESS WHEREOF, Assignor and Assignee have caused this Assignment
and Indemnification Agreement to be executed this day of September 1996.
"Assignor"
NuOasis International Inc.,
a company organised under the laws of
the Commonwealth of the Bahamas
By:------------------------------------
Name:
Title:
"Assignee"
The Hartcourt Companies Inc.,
a company organised under the laws of
the United States, State of Utah
By:------------------------------------
Name:
Title:
[NUOINTL\AGR:ASSIGN.DOC]
<PAGE>
EXHIBIT "A"
to the
Assignment and Indemnification Agreement
dated September, 1996
THE VALUATION AND REPORT
[NUOINTL\AGR:ASSIGN.DOC]
<PAGE>
EXHIBIT "B"
to the
Assignment and Indemnification Agreement
dated September, 1996
THE ASSIGNMENT FROM NONA TO NUOASIS
[NUOINTL\AGR:ASSIGN.DOC]
<PAGE>
EXHIBIT "C"
to the
Assignment and Indemnification Agreement
dated September, 1996
THE ASSIGNMENT AND BILL OF SALE DATED
SEPTEMBER 28, 1995 BETWEEN SILVER FAITH AND NONA
[NUOINTL\AGR:ASSIGN.DOC]
<PAGE>
EXHIBIT "D"
to the
Assignment and Indemnification Agreement
dated September, 1996
THE ASSET PURCHASE AGREEMENT DATED SEPTEMBER 28, 1995
BETWEEN SILVER FAITH AND NONA
AND AMENDMENT, MODIFICATION AND RATIFICATION
OF ASSET PURCHASE AGREEMENT EFFECTIVE SEPTEMBER 28, 1995
[NUOINTL\AGR:ASSIGN.DOC]
<PAGE>
EXHIBIT "E"
to the
Assignment and Indemnification Agreement
dated September, 1996
THE SILVER FAITH NOTE
[NUOINTL\AGR:ASSIGN.DOC]
<PAGE>
EXHIBIT "F"
to the
Assignment and Indemnification Agreement
dated September, 1996
THE ASSUMPTION AGREEMENT BETWEEN SILVER FAITH AND NUOASIS
[NUOINTL\AGR:ASSIGN.DOC]
<PAGE>
EXHIBIT "G"
to the
Assignment and Indemnification Agreement
dated September, 1996
THE JOINT VENTURE AGREEMENT
[NUOINTL\AGR:ASSIGN.DOC]
EXHIBIT 10.133
ASSIGNMENT AND BILL OF SALE BETWEEN NUOASIS INTERNATIONAL, INC.,
AND SILVER FAITH DEVELOPMENT LIMITED
ASSIGNMENT
AND
BILL OF SALE
KNOW ALL THESE MEN BY THESE PRESENTS:
THIS ASSIGNMENT is made and entered into by and between Silver Faith
Development Limited, a corporation organized under the laws of Hong Kong
("Assignor"), and NuOasis International, Inc., a corporation organized under the
laws of the Commonwealth of the Bahamas ("Assignee").
WITNESSETH: That for and in consideration of Ten Dollars (USD$10) and
other good and valuable consideration, the receipt of which is hereby
acknowledged, Assignor hereby bargains, sells, grants and conveys unto Assignee,
that certain Convertible Secured Promissory Note dated December 31, 1995 in the
principal amount of $21,000,000 executed by Nona Morelli's II, Inc. as Maker in
favor of Assignee as Payee, a copy of which Promissory Note is attached hereto
as Exhibit "A" and incorporated herein by reference (the "Convertible Secured
Promissory Note").
Assignor warrants that it has the power and authority, and does hereby
sell and transfer the Promissory Note, free and clear of all liens and
encumbrances.
For the same consideration Assignor covenants with Assignee, its heirs,
successors, and assigns that Assignor is the lawful owner of and has
merchantable title to the Note; and that Assignor will warrant and forever
defend title to the Note against all persons whomsoever, lawfully claiming or
attempting to claim an interest in same.
IN WITNESS WHEREOF, the undersigned has caused this instrument to be
executed effective the of August, 1996.
"Assignor"
SILVER FAITH DEVELOPMENT LIMITED
a corporation organised under the laws of
Hong Kong
By: /s/ Silver Faith Development Limited
--------------------------------------
Name:
Title:
<PAGE>
EXHIBIT "A"
to the
Assignment and Bill of Sale
dated August , 1996
CONVERTIBLE SECURED PROMISSORY NOTE
THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), BUT HAVE
BEEN ISSUED IN RELIANCE UPON REGULATION S PROMULGATED BY THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION UNDER THE ACT. THE SECURITIES MAY NOT BE SOLD
OR OTHERWISE TRANSFERRED TO A "U.S. PERSON" (AS DEFINED IN REGULATION S) OR TO
ANY PERSON WITH A UNITED STATES ADDRESS DURING THE RESTRICTED PERIOD FOLLOWING
ISSUANCE OF THE SECURITIES. FOLLOWING EXPIRATION OF THE RESTRICTED PERIOD, ANY
RESALE OR TRANSFER OF THE SECURITIES TO A U.S. PERSON OR INTO THE UNITED STATES
MUST BE MADE IN ACCORDANCE WITH REGULATION S, PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT, OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE ACT.
EXHIBIT 10.134
AGREEMENT BETWEEN NUOASIS INTERNATIONAL, INC. AND
SILVER FAITH DEVELOPMENT LIMITED
AGREEMENT
DATED: 30th August, 1996
PARTIES:
1. "NuOasis" NuOasis International Inc., a corporation
organised under the laws of the Commonwealth
of the Bahamas.
2. "Silver Faith" Silver Faith Development Limited., a
corporation organised under the laws of Hong
Kong
RECITALS:
1.1 On September 30, 1995, Nona Morelli's II Inc., a Colorado corporation
("Nona"), the sole shareholder of NuOasis, entered into a Purchase and
Sale Agreement with Silver Faith pursuant to which Nona issued a
Convertible Secured Promissory Note of such date (the "Nona Note") in
the principal amount of Twenty One Million Dollars (USD21,000,000) a
copy of which is annexed hereto as Schedule 1; and,
1.2 NuOasis assumed Nona's rights and obligations under the Nona Note by
way of the Assignment dated December 31, 1995 (the "Assignment"), a
copy of which is annexed hereto as Schedule 2; and,
1.3 NuOasis wishes to purchase the Nona Note from Silver Faith pursuant to
the terms hereof.
OPERATIVE PROVISIONS:
1. Purchase of the Note
On the basis of the representations and warranties herein contained,
subject to the terms and conditions set forth herein, and for the
Consideration (as defined herein), NuOasis agrees to purchase the Nona
Note for Twelve Million Three Hundred Thousand Dollars (USD
12,000,000), which represents the current outstanding principal balance
of Eleven Million Four Hundred Thousand Dollars (USD 11,400,000) plus
interest of approximately Six Hundred Thousand Dollars (USD 600,000),
and Silver Faith agrees to assign, deliver and transfer the Nona Note
to NuOasis.
2. The Consideration
The consideration ("Consideration") to be paid to Silver Faith in
exchange for the Nona Note shall consist of that certain Convertible
Secured Promissory Note dated July 31, 1996 in the principal amount of
Twelve Million Dollars (USD 12,000,000) issued by The Hartcourt
Companies Inc.("Hartcourt"), a copy of which is annexed hereof as
Schedule 3 (the "Hartcourt Note").
1
<PAGE>
3. Effective Date and Closing
The closing and effective date of the exchange contemplated by this
Agreement (the "Closing") shall occur upon such date that the parties
have satisfied their respective obligations and covenants contained
herein, but shall not be later than 30th September 1996. At the
Closing, Silver Faith shall deliver the Nona Note to NuOasis and
NuOasis shall deliver the Hartcourt Note to Silver Faith, along with
any opinions, certificates, exhibits, etc. reasonably requested by the
other party.
4. Representations and Warranties of Silver Faith
Silver Faith hereby represents and warrants to NuOasis that:
4.1 Silver Faith is a corporation organized under the laws of Hong
Kong; and
4.2 Silver Faith is not a defendant or a plaintiff against whom a
counterclaim has been made or reduced to judgement, in any
litigation or proceedings before any Hong Kong, Peoples
Republic of China, or Chinese provincial or municipal
government, or any department, board, body or agency thereof,
which could result in a claim against the Nona Note; and
4.3 This Agreement has been duly executed by Silver Faith and the
execution and performance hereof will not violate, or result
in a breach of, or constitute a default in any agreement,
instrument, judgement, order or decree to which Silver Faith
is a party or to which Silver Faith is subject; and
4.4 Silver Faith's right to transfer the Nona Note is not in
violation of any preemptive rights of any person or of any
agreement to which Silver Faith is bound; and
4.5 The Nona Note will be transferred without any encumbrances or
adverse claims and is not subject to any interest or right of
any third person; and Silver Faith warrants that it has the
full right and power to transfer the Nona Note pursuant to
this Agreement; and
4.6 No representation or warranty contained herein, nor statement
in any document, certificate or schedule furnished or to be
furnished pursuant to this Agreement by Silver Faith or in
connection with the transaction contemplated hereby, contains
or contained any untrue statement of a material fact, nor does
it omit to state a material fact necessary to make any
statement of fact contained herein not misleading.
5. Representations and Warranties of NuOasis
NuOasis hereby represents and warrants to Silver Faith that:
5.1 This Agreement has been duly executed by NuOasis 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, judgement, order or decree to which
NuOasis is a party or to which the Hartcourt Note is subject;
and
2
<PAGE>
5.2 The Hartcourt Note is not subject to any claims or causes of
action created by or through Nona or NuOasis, and NuOasis is
not a defendant, nor a plaintiff against whom a counterclaim
has been made or reduced to judgement, in any litigation or
proceedings before any U.S., federal or state government, or
the Commonwealth of the Bahama's, or any department, board,
body or agency thereof, involving the Hartcourt Note as of the
date hereof; and
5.3 The Hartcourt Note is not subject to any interest or right of
any third person created by or through Nona or NuOasis, and
NuOasis has the full right and power to transfer the Hartcourt
Note pursuant to this Agreement; and
5.4 No representation or warranty contained herein, nor statement
in any document, certificate or schedule furnished or to be
furnished pursuant to this Agreement by NuOasis, or in
connection with the transaction contemplated hereby, contains
or contained any untrue statement of a material fact, nor does
it omit to state a material fact necessary to make any
statement of fact contained herein not misleading.
6. Availability of Information
Silver Faith and NuOasis represent that, by virtue of their respective
business activities and economic bargaining power or otherwise, they
have been able to conduct their own due diligence and have had access
to or have been furnished with, prior to or concurrently with the
execution hereof, the information which they consider to be adequate to
make a decision to exchange the Hartcourt Note for the Nona Note.
7. Termination
This Agreement may be terminated at anytime prior to the date of
Closing by either party if (a) there shall be any actual or threatened
action or proceeding by or before any court or any other governmental
body which shall seek to restrain, prohibit, or invalidate the
transaction contemplated by this Agreement, and which, in the judgment
of such party giving notice to terminate and based upon the advice of
legal counsel, makes it inadvisable to proceed with the transaction
contemplated by this Agreement; or (b) if this transaction has not
closed by 30th September 1996 by reason of circumstances beyond the
control of the parties hereto.
8. Miscellaneous
8.1 The officers of NuOasis and Silver Faith executing this
Agreement are duly authorized to do so and each party has
taken all action required by law or otherwise to properly and
legally execute this Agreement.
8.2 Any notice under this Agreement shall be deemed to have been
sufficiently given if sent by registered or certified mail,
postage prepaid, addressed as follows:
3
<PAGE>
To Silver Faith: Silver Faith Development Limited
Room 3078, Diamond Square
3/F Shun Tak Centre
200 Connaught Road, Central Hong Kong
Telephone: +852-2-559-8859
Facsimile: +852-2-540-5020
To NuOasis: NuOasis International Inc.
43 Elizabeth Avenue
Nassau, Bahamas
Telephone: +44 1624 815544
Facsimile: +44 1624 815548
or to any other address which may hereafter be designated by
either party by notice given in such manner. All notices shall
be deemed to have been given as of the date of receipt.
8.3 This Agreement sets forth the entire understanding between the
parties hereto and no other prior written or oral statement or
agreement shall be recognized or enforced.
8.4 If a court of competent jurisdiction determines that any
clause or provision of this Agreement is invalid, illegal or
unenforceable, the other clauses and provisions of the
Agreement shall remain in full force and effect and the
clauses and provision which are determined to be void, illegal
or unenforceable shall be limited so that they shall remain in
effect to the extent permissible by law.
8.5 Neither party may assign this Agreement without the express
written consent of the other party and any approved assignment
shall be binding on and inure to the benefit of such successor
or, in the event of death or incapacity, on assignor's heirs,
executors, administrators and successors.
8.6 Notwithstanding that this Agreement was negotiated and is
being contracted for in Hong Kong, it shall be governed by the
laws of the Commonwealth of the Bahamas, notwithstanding any
conflict-of-law provision to the contrary.
8.7 If any legal action or other preceding (nonexclusively
including arbitration) is brought for the enforcement of or to
declare any right or obligation under this Agreement or as a
result of a breach, default or misrepresentation in connection
with any of the provisions of this Agreement, or otherwise
because of a dispute among the parties hereto, the prevailing
party will be entitled to recover actual attorney's fees
(including for appeals and collection) and other expenses
incurred in such action or proceeding, in addition to any
other relief to which such party may be entitled.
8.8 Nothing in this Agreement, expressed or implied, is intended
to confer upon any person, other than the parties hereto and
their successors, any rights or remedies under or by reason of
this Agreement, unless this Agreement specifically states such
intent.
4
<PAGE>
8.9 It is understood and agreed that this Agreement may be
executed in any number of identical counterparts, each of
which may be deemed an original for all purposes.
8.10 At any time, and from time to time after the Closing, each
party will execute such additional instruments and take such
action as may be reasonably requested by the other party to
confirm or perfect title to the Hartcourt Note and the Nona
Note to be exchanged hereunder, or otherwise to carry out the
intent and purposes of this Agreement.
8.11 Silver Faith and NuOasis warrant that neither party has
incurred any liability, contingent or otherwise, for brokers'
or finders' fees or commissions relating to this Agreement for
which the other party shall have responsibility. Except as
otherwise provided herein, all fees, costs and expenses
incurred by either party relating to this Agreement shall be
paid by the party incurring same.
8.12 Every right and remedy provided herein shall be cumulative
with every other right and remedy, whether conferred herein,
at law, or in equity, and may be enforced concurrently
herewith, and no waiver by any party of the performance of any
obligation by the other shall be construed as a waiver of the
same or any other default then, theretofore, or thereafter
occurring or existing. At any time prior to Closing, this
Agreement may be amended by a writing signed by all parties
hereto.
8.13 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.
SIGNED AND DELIVERED as a DEED )
)
by: /s/ Silver Faith Development Limited (a Director) )
)
on behalf of )
SILVER FAITH DEVELOPMENT LIMITED )
SIGNED AND DELIVERED as a DEED )
)
by: /s/ NuOasis International Inc. (a Director) )
)
on behalf of )
NUOASIS INTERNATIONAL INC. )
5
<PAGE>
SCHEDULE "1"
to the
Agreement
dated 30th August, 1996
THE NONA NOTE
<PAGE>
SCHEDULE "2"
to the
Agreement
dated 30th August, 1996
THE ASSIGNMENT
<PAGE>
SCHEDULE "3"
to the
Agreement
dated 30th August, 1996
THE HARTCOURT NOTE
EXHIBIT 10.135
$3,000,000 SECURED CONTINGENT PROMISSORY NOTE DATED MAY 25, 1995
FROM NONA MORELLI'S II, INC., TO NG MAN SUN DBA DRAGON SIGHT
INTERNATIONAL AMUSEMENT (MACAU) COMPANY
SECURED CONTINGENT PROMISSORY NOTE
FOR VALUE RECEIVED, effective on the 25th day of May, 1995, Nona Morelli's
II Inc, a corporation ("Maker") promises to pay to Mr Ng Man Sun, doing business
as Dragon Sight International Amusement (Macau) Company ("Holder"), the
principal sum of Three Million Dollars (US$3,000,000) with interest at the rate
of eight percent (8%) per annum.
RATE OF INTEREST
Interest shall accrue at a rate per annum equal to the lesser of (a) three
percent (3%) or (b) the percentage which is the sum of (i) the "base rate of
interest" announced publicly by First Los Angeles Bank, Newport Beach,
California, from time to time (360-day basis) then in effect and most recently
available before the date on which the interest rate determination is made (the
"Base Rate") plus (ii) one percent (1%). A determination of the interest rate
from time to time in effect shall be made prospectively on the date hereof and
on the first day of each calendar month thereafter until this Note shall be paid
in full. Interest hereunder shall be calculated on the actual number of days
elapsed on the basis of a 360-day year.
RATE OF INTEREST ON DEFAULT
Interest on the unpaid principal together with all accrued and unpaid interest
shall, after the maturity hereof, whether by demand, acceleration, or otherwise,
automatically accrue and shall be payable at the rate per annum equal to the
lesser of (a) three percent (3%) or (b) the percentage which is the sum of (i)
one percent (1%), plus (ii) the Base Rate.
PAYMENT OF PRINCIPAL AND INTEREST
Payments of principal and interest under this Note shall be payable on or before
June 30, 1996, with accrued interest, at the applicable rate set forth above,
beginning on the first business day of June 1995 and thereafter on the first
business day of each succeeding calendar month until the entire remaining
balance together with all accrued but unpaid interest hereunder is paid.
Each payment shall, when made, be credited first on interest then due, and the
remaining on principal, and interest shall thereupon cease upon the principle so
credited.
SECURITY
This Note is secured by a Security Agreement of even date herewith executed by
Maker as Debtor granting to Holder a security interest in 250,000 shares of
Class B Preferred Stock of NuOasis Gaming Inc, a Delaware corporation (the
"NuOasis Shares") pursuant to which Maker has pledged the NuOasis Shares as
collateral for payment of this Note. This Note is further subject to and
governed by the provisions contained in or referred to in said Security
Agreement of even date. Notwithstanding the terms of said Security Agreement,
this Note is not negotiable. This Note may be assigned by Holder, but only
subject to all defenses which Maker may have against Holder. Further, payment of
this Note does not constitute a personal or corporate obligation of Maker.
[TS-11:CMAIFTF.PNO]
1
<PAGE>
ACCELERATION
The entire remaining balance of this Note together with all accrued but unpaid
interest hereunder, and all other obligations, direct and contingent, of Maker
or any endorser hereof to Holder shall, at the election of Holder, become
immediately due and payable, without demand or notice, upon the occurrence of
any of the following:
(a) Maker becomes bankrupt (including but not limited to, the
commencement of a case under Title 11 of the United States Code
as now constituted or hereafter amended, or under any other
applicable federal or state bankruptcy law) or makes an
assignment for the benefit of creditors;
(b) The appointment for Maker, voluntarily or involuntarily, of a
receiver, trustee, liquidator, custodian, or sequester or other
similar official) in equity, bankruptcy, or under any provision
of any law of any state or the United States of America, or
otherwise:
(c) Maker's dissolution; or
(d) Default in any payment or performance required under this Note.
FAILURE TO EXERCISE RIGHTS
No failure or delay on the part of Holder in the exercise of any power, right,
or privilege under this Note shall operate as a waiver thereof or of any other
power, right, or privilege, nor shall any single or partial exercise of any such
power, right, or privilege preclude any further exercise thereof or of any other
power, right, or privilege.
PRE-PAYMENT
The entire principal balance of this Note or any part thereof may be prepaid
without penalty or premium on any interest payment date upon not less than ten
(10) days prior written notice.
OFFSET FOR NOTE
This Note is issued under an Asset Purchase Agreement dated May 1, 1995, between
the Holder and the Maker. The Maker expressly reserves against the Holder, and
any subsequent holder of this Note, the right to offset against any and all sums
payable hereunder an amount equal to any and all damages sustained by the Maker
by reason of any breach or default by the Holder under the Purchase Agreement.
LIMIT ON INTEREST
Notwithstanding anything to the contrary contained herein, the total liability
for payments in the nature of interest, additional interest, and other charges
shall not exceed the limits imposed by the applicable interest rate laws. If any
payments in the nature of interest, additional interest, and other charges made
hereunder are held to be in excess of the limits imposed by the applicable
interest rate laws, it is agreed that any such amount held to be in excess shall
be considered payment of principal hereunder and the indebtedness evidenced
hereby shall be reduced by such amount so that the total liability for payments
in the nature of interest, additional interest, and other charges shall not
exceed the limits imposed by the applicable interest rate laws in compliance
with the desires of Maker and Holder.
[TS-11:CMAIFTF.PNO]
2
<PAGE>
WAIVER OF PRESENTMENT, ETC.
Maker and endorsers, and each of them, hereby waive diligence, demand,
presentment for payment, protest and notice of protest, notice of dishonor, and
notice of nonpayment of this Note, and specifically consent to and waive notice
of any kind of any renewal, extension, or enforcement of this Note. The pleading
of any statute of limitations as a defense to any demand against Maker or
endorsers is expressly waived by each and all of said parties. Maker and
endorsers, and each of them, waive trial by jury in any litigation arising out
of or relating to this Note in which Holder is an adverse party and further
waive the right to interpose any defense, setoff, or counterclaim of any nature
or description.
BENEFIT
Subject to the terms and conditions contained herein, the provisions of this
Note shall inure to the benefit of and shall be binding upon the assigns,
successors in interest, or personal representatives of Maker and Holder,
respectively.
SEVERABILITY
Every provision in this Note is intended to be severable. In the event any term
or provision hereof is declared by a court of competent jurisdiction to be
illegal or invalid for any reason whatsoever, such illegality or invalidity
shall not affect the balance of the terms and provisions hereof, which terms and
provisions shall remain binding and enforceable.
TIME OF ESSENCE
Time is of the essence in the performance of each and every obligation under
this Note to be performed by Maker.
"Maker"
NONA MORELLI'S II INC.
a Colorado corporation
By:---------------------------------------
Name:
Title:
[TS-11:CMAIFTF.PNO]
3
EXHIBIT 10.136
ASSIGNMENT DATED DECEMBER 29, 1995 FROM NONA MORELLI'S II, INC.
TO NUOASIS INTERNATIONAL INC.
ASSIGNMENT
AND
BILL OF SALE
KNOW ALL THESE MEN BY THESE PRESENTS:
THIS ASSIGNMENT AND BILL OF SALE is made and entered into by and
between Nona Morelli's II Inc., a Colorado corporation ("Assignor"), and NuOasis
International Inc., a California corporation ("Assignee").
WITNESSETH: That for and in consideration of the issuance of shares of
Assignee's $.01 par value common stock, and other good and valuable
consideration, the receipt of which is hereby acknowledged, Assignor hereby
bargains, sells, grants and conveys unto Assignee, all of Assignor's interest in
the 40% net profits interest in the gaming activities conducted at the Diamond
Casino located in the Holiday Inn, Macau, and the Tapia Casino, located in the
Hyatt Regency Hotel, Macau, acquired from Dragon Sight International Amusement
(Macau) Company pursuant to that certain Asset Purchase Agreement dated May 1,
1995, more fully described in such agreement attached hereto as Exhibit "A" and
incorporated herein by reference (the "Net Profits Interest").
Assignor warrants that it has the power and authority, and does hereby
sell and transfer the Net Profits Gaming Interest to Assignee, free and clear of
all liens and encumbrances.
For the same consideration, Assignor covenants with Assignee, its
heirs, successors, and assigns that Assignor is the lawful owner of and has good
title to the Net Profits Gaming Interest, free and clear of all liens,
encumbrances or adverse claims; that the Net Profits Gaming Interest is valid
and enforceable; and that Assignor will warrant and forever defend title to the
Net Profits Gaming Interest against all persons whomsoever, lawfully claiming or
attempting to claim an interest in same.
IN WITNESS WHEREOF, I have caused this instrument to be executed
effective the 29th day of December, 1995.
"Assignor"
NONA MORELLI'S II INC.
By:-----------------------------------------
Name:
Title:
[NM\BOS:NUOINPI]
1
<PAGE>
EXHIBIT "A"
to the
Assignment and Bill of Sale
dated December 29, 1995
NET PROFITS GAMING INTEREST
[NM\BOS:NUOINPI]
2
EXHIBIT 10.137
LETTER OF INTENT DATED AUGUST 5, 1996 BETWEEN THE REGISTRANT AND NG MAN
SUN DBA DRAGON SIGHT INTERNATIONAL AMUSEMENT (MACAU) COMPANY
August 5, 1996
Mr. Ng Man Sun
DRAGON SIGHT INTERNATIONAL
AMUSEMENT (MACAU) COMPANY
Room 3078, Diamond Square
3/F Shun Tak Centre
200 Connaught Road, Central Hong Kong
RE: The 40% Net Profits Interest acquired on May 25, 1995 by Nona
Morelli's II Inc., a Colorado corporation ("Nona"), the sole
shareholder of NuOasis International Inc., a Bahamas
corporation ("NuOasis") from Mr. Ng Man Sun doing business as
Dragon Sight International Amusement (Macau) Company
("Dragon") at the Hyatt and Holiday Inn Hotels in Macau, as
described in the Agreement attached hereto as Exhibit "A" (the
"Net Profits Interest")
Dear Mr. Ng:
When countersigned by you in the space provided below, this letter (the
"Agreement") shall serve as the agreement between yourself, individually and
doing business as Dragon Sight International Amusement (Macau) Company
(collectively, "you") and Nona to resolve the conflict between you and the
government of Macau resulting from statements made to the Macau Gaming
Commission which have served to interfere with the contractual and future
business relationship between you and Nona and NuOasis. NuOasis is the successor
to the Net Profits Interest by virtue of an Assignment of such interest from
Nona in December 1995.
1. REPATRIATION OF NET PROFITS INTEREST
Nona will cause NuOasis to assign to you, or your designees, effective
July 1, 1996, all of the Net Profits Interest, in consideration for
which you and such designees will sell, assign and transfer to NuOasis,
or its designees, a mutually agreed number of the shares of common
stock originally issued by Nona to make the purchase of the Net Profits
Interest.
2. SETTLEMENT OF OUTSTANDING BALANCE ON NOTE
Nona will cause NuOasis to purchase the Three Million (USD3,000,000)
Contingent Secured Promissory Note issued to you by Nona on May 25,
1995 for an amount equal to the current outstanding principal and
accrued interest, a copy of which is attached hereto as Exhibit "B",
which is approximately Three Million Two Hundred Eighty Thousand
Dollars (USD3,280,000) as of today's date.
3. PAYMENT OF ACCRUED NET PROFITS INTEREST REVENUES
You will deposit with NuOasis, in its account at Po Sang Bank, the Net
Profits Interest revenues accruing to the 40% Net Profits Interest of
NuOasis from January 1 through June 30, 1996.
[W:\NM\CORR\DSIRELEA]-2
1
<PAGE>
4. RELEASE BY YOU
Except for obligations and rights expressly set forth and reserved by
this Agreement, you hereby release, acquit and forever discharge Nona,
NuOasis and their respective agents, servants and employees,
successors, heirs, legal representatives and assigns, and all persons,
natural or corporate, in privity with them from any and all claims,
causes of action, or controversies of any kind whatsoever, whether
known or unknown, whether accrued or to accrue, including but not
limited to claims at common law pursuant to the laws of the United
States and the State of Colorado, or pursuant to any other laws or
statutes, including but not limited to all matters relating or
pertaining to the purchase and ownership of the Net Profits Interest
through the date hereof. Except as otherwise provided herein, the
foregoing release releases all claims as to any alleged
misrepresentations, false statements, securities law violations
relating or pertaining to Nona or NuOasis, the business affairs of Nona
or NuOasis, or the management of Nona or NuOasis, through the date
hereof. It is expressly understood and agreed that the foregoing
release constitutes a general release of each and every claim which you
have or may have against Nona or NuOasis, or their officers and
directors as of the date hereof.
5. RELEASE BY NONA AND NUOASIS
Except for obligations and rights expressly set forth and reserved by
this Agreement, Nona and NuOasis hereby release, acquit, and forever
discharge you, your respective agents, servants, and employees, heirs,
legal representatives and assigns, and all persons natural, or
corporate, in privity with you from any and all claims, causes of
action, or controversies of any kind whatsoever, whether known or
unknown, whether accrued or to accrue, including but not limited to
claims at common law pursuant to the laws of the United States and the
States of Colorado and California, and Macau, or pursuant to any other
laws or statutes, including but not limited to all matters relating or
pertaining to the sale and operation of the casinos underlying the Net
Profits Interest by you through the date hereof. It is expressly
understood and agreed that the foregoing release constitutes a general
release of each and every claim which Nona or NuOasis have or may have
against you as of the date hereof.
[W:\NM\CORR\DSIRELEA]-2
2
<PAGE>
6. WAIVER AND RELEASE OF UNKNOWN CLAIM
It is expressly understood that this release extends to claims which
the parties hereto may not know or suspect to exist in their favor at
the time of executing this Agreement, which if known may have
materially affected their settlement.
This waiver and release of unknown claims is applicable to statutes and
principles of common law of the United States or the State of Colorado
and California, or of any and all other states of the United States or
foreign jurisdictions, and are hereby knowingly and voluntarily waived
and relinquished by the parties hereto. The parties each acknowledge
that these waivers are essential and material terms of this Agreement,
without which the consideration set forth herein and the agreement
reached herein would not have been made.
7. NO PRIOR ENCUMBRANCES OR ASSIGNMENT
You agree and covenant that you have not assigned, pledged or otherwise
in any manner whatsoever encumbered, conveyed or transferred the shares
of common stock to be transferred by you, and the Note or any claim or
any cause of action, either by instrument in writing or otherwise,
which you believe you may have against Nona or NuOasis, or their
officers, agents or representatives, arising out of or relating to the
subject matter of this Agreement.
8. NO DETRIMENTAL RELIANCE
The parties agree that as a part of the consideration for this
Agreement, and before executing this Agreement, each party hereto has
been fully informed of and understands the terms, contents, conditions
and effects of this Agreement; that in executing this Agreement and
negotiating the terms thereof, each has had the benefit of the advice
of attorneys of its own choosing; and, that no promise or
representation of any kind has been made to any party by another party
hereto, or anyone acting for them, except as is expressly stated in
this Agreement. The parties represent that they have relied completely
and solely on their own judgement and the advice of their attorneys in
executing this Agreement.
9. NO LIABILITY
The parties agree that the consideration described in this Agreement,
and the covenants set forth herein, are given by the parties in
compromise and settlement of a dispute in order that each party may but
its peace. Such consideration, agreement and covenants are in no way to
be construed as an admission of liability on the part of any party
hereto. Each party specifically denies any such liability or
responsibility and specifically denies all such allegations made
against said party.
[W:\NM\CORR\DSIRELEA]-2
3
<PAGE>
10. EVENTS THAT WOULD MAKE THIS AGREEMENT VOID
This Agreement shall be void and of no effect if any one of the
following events occurs:
A. Failure to Accept Agreement. If you fail to accept, sign and
deliver this Agreement by August 16, 1996.
B. Failure to Remit Proceeds of Net Profits Interest. If you fail to
remit the proceeds of the Net Profits Interest for the six (6)
months ended June 30, 1996 of HK$30,065,235.20.
C. NuOasis' Failure to Tender Net Profits Interest. If NuOasis shall
fail to tender the Net Profits Interest to you or your designees.
D. NuOasis' Failure to Satisfy Outstanding Financial and Interest
Due on the Note. If NuOasis fails to satisfy outstanding
financial and interest due on the Note by check to you on or
before August 16, 1996 (the "Closing Date").
In the event this Agreement is terminated pursuant to this paragraph,
this Agreement shall be of no further force or effect and no
obligation, right, or liability shall arise hereunder, And, further,
each party shall bear its own costs in connection with the negotiation,
preparation, and execution of this Agreement.
11. REPRESENTATION BY COUNSEL
Each of the parties have been or have had the opportunity to be
represented by the counsel in entering into this Agreement. Each of the
parties affirms to the others that it has consulted and discussed the
provisions of this Agreement with its counsel and fully understands the
legal effect of each such provisions.
12. FACTUAL DIFFERENCE
Each of the parties understands and accepts the risk that the facts,
pursuant to which this Agreement is entered into may be different from
the facts now known or believed by each such party to be true. This
Agreement shall remain in all respects effective and shall not be
subject to termination or rescission by virtue of any such difference
in facts.
[W:\NM\CORR\DSIRELEA]-2
4
<PAGE>
13. NEGOTIATED TRANSACTION
The drafting and negotiations of this Agreement has been participated
in by each of the parties. For all purposes, this Agreement shall be
deemed to have been drafted jointly by each of the parties.
14. FURTHER DOCUMENTATION AND ASSISTANCE
You agree, following the consummation of the repatriation of the Net
Profits Interest, to cooperate with Nona, its officers and directors,
to execute additional instruments and take such action as may be
reasonably requested by Nona or NuOasis to carry out the intent and
purpose of this Agreement.
15. MISCELLANEOUS
A. Authority. The persons executing this Agreement are duly
authorized to do so. Further, Nona and you each represent,
through such executors, that each has taken all action required
by law or otherwise to properly and legally execute and carry out
the terms of this Agreement.
B. Notices. Any notice under this Agreement shall be deemed to have
been sufficiently given if sent by registered or certified mail,
postage prepaid, addressed as follows:
To You: Dragon Sight International Amusement
(Macau)Company
Room 3078, Diamond Square
3/F Shun Tak Centre
200 Connaught Road, Central Hong Kong
Telephone: +852-2-559-8859
Facsimile: +852-2-540-5020
To NuOasis: NuOasis International Inc.
43 Elizabeth Avenue
Nassau, Bahamas
Telephone: +44 1624 815544
Facsimile: +44 1624 815548
To Nona: Nona Morelli's II Inc.
2 Park Plaza, Suite 470
Irvine, California 92614
Telephone: (714) 833-5381
Telefax: (714) 833-7854
or to any other address which may hereafter be designate by
either party by notice given in such manner. All notices shall be
deemed to have been given as of the date of receipt.
[W:\NM\CORR\DSIRELEA]-2
5
<PAGE>
C. Entire Agreement. This agreement sets forth the entire
understanding between the parties hereto and no other prior
written or oral statement or agreement shall be recognized or
enforced.
D. Severability. If a court of competent jurisdiction determines
that any clause or provision of this Agreement is invalid,
illegal, or unenforceable, the other clauses and provisions of
the Agreement shall remain in full force and effect and the
clauses and provisions which determined to be void, illegal, or
unenforceable shall be limited so that they shall remain in
effect to the extent permissible by law.
E. Assignment. Neither party may assign this Agreement without the
express written consent of the other party, however, any such
Assignment shall be binding on and inure to the benefit of such
successor, or, in the event of death or incapacity, on their
heirs, executors, administrators and successors of any party.
F. Applicable Law. This Agreement shall be construed and enforced in
accordance with the laws of the United States, State of
California
G. Attorney's Fees. If any legal action or other preceding
(nonexclusively including arbitration) is brought for the
enforcement of or to declare any right or obligation under this
Agreement or as a result of a breach, default or
misrepresentation in connection with any of the provisions of
this Agreement, or otherwise because of dispute among the parties
hereto, the prevailing party will be entitled to recover actual
attorney's fees (including for appeals and collection) and other
costs incurred in such action or proceeding , in addition to any
other relief to which such party may be entitled.
H. Counterparts. It is understood and agreed that this Agreement may
be executed in any number of identical counterparts, each of
which may be deemed an original for all purposes.
I. Further Documents. Nona and you will at any time, and from time
to time after the date of this Agreement, cooperate with each
other and execute such additional instruments and take such
action as may be reasonably requested by the other party to
confirm and to carry out the intent and purpose of this
Agreement.
[W:\NM\CORR\DSIRELEA]-2
6
<PAGE>
J. Amendment or Waiver. No waiver by any party of the performance of
any obligation by the other shall be construed as a waiver of the
same or any other default, then, theretofore, or thereafter
occurring or existing. This Agreement may only be amended by a
writing signed by all parties hereto.
K. 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.
L. Facsimile Transmission. If a party signs this Agreement and then
transmits an electronic facsimile of the signature page to
another party, the party who receives the transmission may rely
upon the electronic facsimile as a signed original of this
Agreement.
Sincerely,
/s/ John D. Desbrow
- ---------------------------
John D. Desbrow
Secretary and General Counsel
ACCEPTED THIS ----- Day of August, 1996
Mr. Ng Man Sun, doing business as
Dragon Sight International
Amusement (Macau) Company
- ------------------------------
[W:\NM\CORR\DSIRELEA]-2
7
<PAGE>
EXHIBIT "A"
to the
Letter Agreement
Dated August 5, 1996
THE NET PROFITS INTEREST
[W:\NM\CORR\DSIRELEA]-2
8
<PAGE>
EXHIBIT "B"
to the
Letter Agreement
Dated 5, 1996
[W:\NM\CORR\DSIRELEA]-2
9
EXHIBIT 10.138
PURCHASE AGREEMENT DATED AUGUST 30, 1996 BETWEEN
NUOASIS INTERNATIONAL INC. AND VARIOUS PURCHASERS
PURCHASE AGREEMENT
DATED: 30th, August 1996
PARTIES:
1. "NuOasis" NuOasis International Inc., a corporation
organized under the laws of the Commonwealth
of the Bahamas.
2. "Purchaser" Those persons identified on Schedule 1
attached hereto whether one or more, and
incorporated herein by reference for all
purposes, who agree to be parties to this
agreement as evidenced by their execution
hereof.
RECITALS:
1.1 On May 25, 1995, Nona Morelli's II Inc., a Colorado corporation
("Nona"), the sole shareholder of NuOasis, acquired from Dragon a forty
percent (40%) net profits interest in the gaming operations conducted
by Ng, doing business as Dragon Sight International Amusement (Macau)
Company ("Dragon") at the Hyatt and Holiday Inn Hotels in Macau, as
described in the Assignment annexed hereto as Schedule "2" (the
"Interest"); and,
1.2 Nona assigned all of its right, title and interest in the Interest to
NuOasis by way of the Assignment dated December 29, 1995, a copy of
which is annexed hereto as Schedule 3 (the "Assignment"); and,
1.3 Purchaser wishes to acquire the Interest and, pursuant to the terms
hereof, agrees to purchase the Interest from NuOasis.
OPERATIVE PROVISIONS:
1. Exchange
On the basis of the representations and warranties herein contained,
subject to the terms and conditions set forth herein, and for the
Consideration (as defined herein), NuOasis agrees to transfer the
Interest to Purchaser and Purchaser agrees to transfer the
Consideration to NuOasis or its designee.
2. The Consideration
The consideration ("Consideration") to be assigned and transferred to
NuOasis in exchange for the Interest shall consist of Twenty Million
Dollars (USD20,000,000) of marketable securities consisting of not less
than Twenty Million (20,000,000) shares of common stock of Nona, or
other securities acceptable to NuOasis in its sole discretion.
<PAGE>
3. Effective Date and Closing
The closing and effective date of the exchange contemplated by this
Agreement (the "Closing") shall occur upon such date that the parties
have satisfied their respective obligations and covenants contained
herein, but shall not be later than 30th September, 1996. At the
Closing, Purchaser shall deliver the Consideration to NuOasis and
NuOasis shall deliver the Interest to Purchaser, along with any
opinions, certificates, exhibits, etc. reasonably requested by the
other party.
4. Representations and Warranties of Purchaser
Purchaser and each of them, hereby represent and warrant to NuOasis
that:
4.1 It is a corporation duty organised and validly existing as of the
date hereof; and
4.2 It is not defendant or a plaintiff against whom a counterclaim
has been made or reduced to judgement. in any litigation or
proceedings before any federal, provincial or municipal
government, or any department, board, body or agency thereof.
which could result in a claim against the Consideration; and
4.3 This Agreement has been duly executed by in the capacities stated
on Schedule 3, 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, judgement,
order or decree to which Purchaser is a party or to which it
maybe subject; and
4.4 It's right to transfer the Consideration is not in violation of
any preemptive rights of any person or of any agreement to which
it is bound; and
4.5 The Consideration will be transferred without any adverse claims
to any interest or right by any third party.
4.6 No representation or warranty contained herein, nor statement in
any document, certificate or schedule furnished or to be
furnished pursuant to this Agreement by Purchaser or in
connection with the transaction contemplated hereby, contains or
contained any untrue statement of a material fact, nor does it
omit to state a material fact necessary to make any statement of
fact contained herein not misleading.
<PAGE>
5. Representations and Warranties of NuOasis
NuOasis hereby represents and warrants to Purchaser that:
5.1 This Agreement has been duly executed by NuOasis 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, judgement, order or decree to which the Interest is a
party or to which NuOasis is subject; and
5.2 The Interest is not subject to any claims or causes of action
created by or through NuOasis, and NuOasis is not a defendant,
nor a plaintiff against whom a counterclaim has been made or
reduced to judgement, in any litigation or proceedings before any
U.S., federal or state government, or the Commonwealth of the
Bahama's, or any department, board, body or agency thereof,
involving the Interest as of the date hereof; and
5.3 NuOasis. and NuOasis has the full right and power to transfer
such and enter into and carry out this Agreement; and
5.4 No representation or warranty contained herein, nor statement in
any document, certificate or schedule furnished or to be
furnished pursuant to this Agreement by NuOasis, or in connection
with the transaction contemplated hereby, contains or contained
any untrue statement of a material fact, nor does it omit to
state a material fact necessary to make any statement of fact
contained herein not misleading.
6. Availability of Information
Purchaser and NuOasis represent that, by virtue of their respective
business activities and economic bargaining power or otherwise, they
have been able to conduct their own due diligence and have had access
to or have been furnished with, prior to or concurrently with the
execution hereof, the information which they consider to be adequate to
make a decision ta exchange the Interest for the consideration.
7. Termination
This Agreement may be terminated at anytime prior to the date of
Closing by either Purchaser, by unanimous electron in the event of more
than one, or by NuOasis if (a) there shall be any actual or threatened
action or proceeding by or before any court or any other governmental
body which shall seek to restrain, prohibit, or invalidate the
transaction contemplated by this Agreement, and which. in the judgment
of such party giving notice to terminate and based upon the advice of
legal counsel, makes it inadvisable to proceed with the transaction
contemplated by this Agreement; or (b) if this transaction has not
closed by 30th September, 1996.
<PAGE>
8. Miscellaneous
8.1 The officers of NuOasis and Purchaser executing this Agreement
are duly authorized to do so and each party has taken all action
required by law or otherwise to properly and legally execute this
Agreement.
8.2 Any notice under this Agreement shall be deemed to have been
sufficiently given if sent by registered or certified mail,
postage prepaid, addressed as follows:
To NuOasis: NuOasis International Inc.
43 Elizabeth Avenue
Nassau, Bahamas
Telephone: +44 1624 815544
Facsimile: +44 1624 815548
To Purchaser: As shown on Schedule 1.
or to any other address which may hereafter be designated by
either party by notice given in such manner. All notices shall be
deemed to have been given as of the date of receipt.
8.3 This Agreement sets forth the entire understanding between the
parties hereto and no other prior written or oral statement or
agreement shall be recognised or enforced.
8.4 If a court of competent jurisdiction determines that any clause
or provision of this Agreement is invalid, illegal or
unenforceable the other clauses and provisions of the Agreement
shall remain in full force and effect and the clauses and
provision which are determined to be void, illegal or
unenforceable shall be limited so that they shall remain in
effect to the extent permissible by law.
8.5 Neither party may assign this Agreement without the express
written consent of the other party and any approved assignment
shall be binding on and inure to the benefit of such successor
or, in the event of death or incapacity, on assignor's heirs,
executors, administrators and successors.
8.6 Notwithstanding that this Agreement was negotiated and is being
contracted for in Hong Kong, it shall be governed by the laws of
the Commonwealth of the Bahamas, notwithstanding any
conflict-of-law Provision to the contrary.
8.7 If any legal action or other preceding is brought for the
enforcement of or to declare any right or obligation under this
Agreement or as a result of a breach, default or
misrepresentation in connection with any of the provisions of
this Agreement, or otherwise because of a dispute among the
parties hereto, the prevailing party will be entitled to recover
actual attorney's fees (including for appeals and collection) and
other expenses incurred in such action or proceeding, in addition
to any other relief to which such party may be entitled.
<PAGE>
8.8 Nothing in this Agreement, expressed or implied, is intended to
confer upon any person, other than the parties hereto and their
successors, any rights or remedies under or by reason of this
Agreement, unless this Agreement specifically states such intent.
8.9 It is understood and agreed that this Agreement may be executed
in any number of identical counterparts, each of which may be
deemed an original for all purposes.
8.10 At any time, and from time to time after the Closing, each party
will execute such additional instruments and take such action as
may be reasonably requested by the other party to confirm or
perfect title to the Interest and Consideration to be transferred
hereunder, or otherwise to carry out the intent and purposes of
this Agreement.
8.11 Purchaser and NuOasis each warrant that none of them have
incurred any liability, contingent or otherwise, for brokers' or
finders' fees or commissions relating to this Agreement for which
the other party or parses shall have responsibility. Except as
otherwise provided herein, all fees, costs and expenses incurred
by either party relating to this Agreement shall be paid by the
party incurring same.
8.12 Every right and remedy provided herein shall be cumulative with
every other right and remedy, whether conferred herein, at law,
or in equity, and may be enforced concurrently herewith, and no
waiver by any party of the performance of any obligation by the
other shall be construed as a waiver of the same or any other
default then theretofore, or thereafter occurring or existing. At
any time prior to Closing, this Agreement may be amended by a
writing signed by all parties hereto.
8.13 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.
SIGNED AND DELIVERED as a DEED )
)
by: /s/ D.L. Colquitt (a Director) )
----------------------------------- )
for and on behalf of First Directors Limited )
)
and: /s/ R.B. Emery (a Director) )
----------------------------------- )
for and on behalf of First Directors Limited )
)
on behalf of )
NUOASIS INTERNATIONAL INC. )
<PAGE>
SIGNED AND DELIVERED as a DEED )
)
by: (a Director) )
)
and: (a Director) )
)
on behalf of )
PERFECT WAY INVESTMENT LIMITED )
/s/ PERFECT WAY INVESTMENT LIMITED )
(Continued on next page)
<PAGE>
(Signature page continued)
SIGNED AND DELIVERED as a DEED )
)
by: (a Director) )
)
and: (a Director) )
)
on behalf of )
RISEN INVESTMENT LIMITED )
/s/ RISEN INVESTMENT LIMITED )
SIGNED AND DELIVERED as a DEED )
)
by: (a Director) )
)
and: (a Director) )
)
on behalf of )
SHARP PROFIT INVESTMENT LIMITED )
/s/ SHARP PROFIT INVESTMENT LIMITED )
SIGNED AND DELIVERED as a DEED )
)
by: (a Director) )
)
and: (a Director) )
)
on behalf of )
SUNNING STAR ENTERPRISES LIMITED )
/s/ SUNNING STAR ENTERPRISES LIMITED )
SIGNED AND DELIVERED as a DEED )
)
by: (a Director) )
)
and: (a Director) )
)
on behalf of )
UP FIELD INVESTMENT LIMITED )
/s/ UP FIELD INVESTMENT LIMITED )
SIGNED AND DELIVERED as a DEED )
)
by: (a Director) )
)
and: (a Director) )
)
on behalf of )
WORLDFIX INVESTMENT LIMITED )
/s/ WORLDFIX INVESTMENT LIMITED )
(Continued on next page)
<PAGE>
(Signature page continued)
SIGNED AND DELIVERED as a DEED )
)
by: (a Director) )
)
and: (a Director) )
)
on behalf of )
DRAGON STAR SECURITIES LIMITED )
/s/ DRAGON STAR SECURITIES LIMITED )
SIGNED AND DELIVERED as a DEED )
)
by: (a Director) )
)
and: (a Director) )
)
on behalf of )
)
SIGNED AND DELIVERED as a DEED )
)
by: (a Director) )
)
and: (a Director) )
)
on behalf of )
)
<PAGE>
SCHEDULE "1"
TO THE PURCHASE AGREEMENT
DATED 30, AUGUST 1996
PURCHASER
Description of Securities Constituting
Name the Consideration
- ------------------------------------ ---------------------------------------
PERFECT WAY INVESTMENT LIMITED
Rm. 1406, Eastern Commercial Centre,
393-407 Hennessy Road,
Causeway Bay,
Hong Kong
RISEN INVESTMENT LTD
Rm. 3002, 3/F,
Diamond Square,
Shun Tak Centre,
200 Connaught Road,
Central, Hong Kong
SHARP PROFIT INVESTMENT LIMITED
Rm. 3078, 3/F,
Diamond Square,
Shun Tak Centre,
200 Connaught Road,
Central, Hong Kong
SUNNING STAR ENTERPRISES LTD
Rm. 3078, 3/F,
Diamond Square,
Shun Tak Centre,
200 Connaught Road,
Central, Hong Kong
UP FIELD INVESTMENT LTD
Rm. 3078, 3/F,
Diamond Square,
Shun Tak Centre,
200 Connaught Road,
Central, Hong Kong
WORLDFIX INVESTMENT LTD
Rm. 3002-3006, 3/F,
Shun Tak Centre,
200 Connaught Road,
Central, Hong Kong
DRAGON STAR INVESTMENTS LTD
9/F, 1 Robinson Road,
Hong Kong
EXHIBIT 10.139
OPTION AGREEMENT WITH JOSEPH MONTEROSSO
DATED JUNE 13, 1996
OPTION AGREEMENT
THIS OPTION AGREEMENT is entered into this 13th day of June, 1996,
by and between NONA MORELLI'S II, INC., a Colorado corporation ("NONA"), and JOE
MONTEROSSO, ("MONTEROSSO") on the basis of the following recitals.
WHEREAS, MONTEROSSO wants to acquire an option to purchase 250,000
Series B Preferred Shares of NuOasis Gaming, Inc., a Delaware corporation (the
"Shares") from NONA; and
WHEREAS, NONA is willing to grant MONTEROSSO an option to purchase the
Shares subject to certain conditions precedent.
NOW, THEREFORE, for and in consideration of the mutual promises herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, NONA and MONTEROSSO agree as follows:
It shall be a condition precedent to the exercise of the option created
by this Agreement that:
[1]. NuOasis Gaming, Inc., a Delaware corporation shall hold an annual
or special meeting of shareholders in compliance with state and federal law,
including the rules and regulations of the Securities and Exchange Commission.
[2]. The shareholders of NuOasis Gaming, Inc., a Delaware corporation,
at its annual meeting of shareholders tenatively scheduled for May 1996 pursuant
to its Proxy Statement dated April __, 1996, approve the proposal to increase
the authorized number of shares of common stock by at least 20 million shares.
Upon the occurrence of the aforementioned condition precedent,
MONTEROSSO shall have thirty (30) calendar days to exercise the option.
NONA grants to MONTEROSSO and/or his assigns an option as hereinafter
described. The option consists of the right to purchase up to 250,000 shares of
Series B Preferred Stock of NuOasis Gaming for $13.00 per share, with a minimum
purchase of 110,000 Shares on terms and conditions substantially similar to
those set forth in Exhibit 1 attached hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
NONA MORELLI'S II, INC. JOE MONTEROSSO
/s/ Fred G. Luke /s/ Joe Monterosso
- --------------------------- ----------------------------------
Fred G. Luke, CEO Joe Monterosso, an individual
1
<PAGE>
EXHIBIT 1 to OPTION AGREEMENT DATED JUNE 13, 1996
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement"), is entered into this
day of ________, 1996, by and between NONA MORELLI'S II, INC., a Colorado
corporation ("NONA"), and JOE MONTEROSSO or his assigns ("MONTEROSSO") on the
basis of the following recitals.
WHEREAS, NuOasis Gaming, Inc., a Delaware corporation ("NGI") has
issued 250,000 Series B Preferred Shares to NONA.
WHEREAS, NONA desires to sell, assign and transfer to MONTEROSSO up to
250,000 shares of Series B Preferred Stock of NuOasis Gaming for $13.00 per
share, with a minimum purchase of 110,000 (the "NGI Shares"), and MONTEROSSO
desires to purchase the NGI Shares for Three Million Three Hundred Thousand
Dollars ($3,300,000) upon and subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, for and in consideration of the mutual promises herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, NONA and MONTEROSSO agree as follows:
1. Sale of NGI Shares.
Upon and subject to all the terms and conditions of this Agreement, at
the Closing NONA shall assign and transfer the NGI Shares to
MONTEROSSO, and as full consideration therefor MONTEROSSO shall pay
NONA in certified funds Three Million Three Hundred Thousand Dollars
($3,300,000) or $13.00 per share with a minimum purchase of 110,000
Shares.
2. Effective Date and Closing; Delivery of NGI Shares.
A. Date and Place. The closing of this Agreement and transfer of the
NGI Shares (the "Closing") shall occur at the office of NONA at
such time or date as the parties hereafter may mutually agree.
The time and date of the Closing are herein called the "Closing
Date".
B. Payment. At the Closing, MONTEROSSO shall deliver to NONA in
certified funds $3,300,000 or $13.00 per share with a minimum
purchase of 110,000 Shares.
C. Delivery of MONTEROSSO Shares. NONA shall deliver to MONTEROSSO a
stock certificate or certificates registered in the name of
MONTEROSSO the NGI Shares, and MONTEROSSO shall deliver to NONA
and NGI written confirmation, in form reasonably satisfactory to
NONA and NGI, of its investment intent with regard to such
shares, and such other or further documentation as NONA and NGI
then may reasonably require in order to comply with
then-applicable federal and state securities laws or applicable
stock exchange requirements. The number, type and kind of the NGI
Shares delivered to MONTEROSSO, in each case, shall be adjusted
to reflect all stock splits, stock dividends, reverse stock
splits, reclassifications, mergers and similar capital changes
that shall have occurred in the outstanding Series B Preferred
Stock of NGI prior to the Closing; provided, however, that
neither the foregoing provision, nor any other provision of this
Agreement, shall be construed to confer on MONTEROSSO any of the
rights, powers or benefits of ownership of shares of NGI
(including without limitation cash dividends, voting rights, or
stock purchase rights) as to any NGI Shares that shall not
actually have been issued and delivered to MONTEROSSO pursuant to
this Section 2C.
1
<PAGE>
D. Delivery of Other Documents. At the Closing, each party hereto
shall deliver to the other party such other and further
documents, instruments and information as are herein required to
be delivered at the Closing by such party or as are customarily
delivered at the closing of a transaction of the type provided
for in this Agreement.
From time to time after the Closing, upon the reasonable request
of either party, the other party will deliver such other and
further instruments and documents as may be necessary to more
fully vest in the requesting party the consideration provided for
in this Agreement or to enable the requesting party to obtain the
rights and benefits contemplated by this Agreement.
3. Representations and Warranties of NONA.
NONA hereby covenants with and represents and warrants to MONTEROSSO
that:
A. The NGI Shares. The NGI Shares are and will be as of the Closing
Date, owned, of record and beneficially, by MONTEROSSO free and
clear of liens, claims and encumbrances, and NONA has all
necessary right and power to enter into and perform this
Agreement and to assign and sell the NGI Shares to MONTEROSSO as
provided herein. Any necessary shareholder approval of NONA's
shareholders will be obtained prior to Closing.
B. Authority. NONA has the full corporate power and authority to
enter into this Agreement and to carry out the transactions
contemplated by this Agreement. The Board of Directors of NONA
have duly authorized the execution, delivery, and performance of
this Agreement. Upon execution this Agreement constitutes the
valid, binding and enforceable obligation of NONA.
C. Status of NGI NGI is duly organized, validly existing, and in
good standing under the laws of Delaware.
D. No Conflict with Other Instrument. Except as disclosed herein the
execution of this Agreement will not violate or breach any
document, instrument, agreement, contract, or commitment to which
NONA is a party.
E. Full Disclosure. The information concerning NGI set forth herein
and in the NGI Disclosure Documents, is complete and accurate in
all material respects and does not contain any untrue statement
of a material fact or omit to state a material fact require to
make the statements made, in light of the circumstances under
which they were made, not misleading.
F. Financial Statements. Financial statements of NGI for the year
ending September 30, 1995 ("NGI Financials"), have been or will
be delivered to MONTEROSSO prior to the Closing Date. To the best
knowledge of NONA, except as set forth in the NGI Financials,
there are no liabilities, either fixed or contingent, not
reflected in such financial statements other than contracts or
obligations in the ordinary and usual course of business, which
would constitute liens or other liabilities which, if disclosed,
would alter substantially the financial condition of NGI as
reflected in such financial statements.
2
<PAGE>
G. Capitalization of NGI. The capitalization of NGI is, as of the
date hereof, comprised of 30,000,000 shares of authorized common
stock, $.01 par value, of which 30,000,000 shares are issued and
outstanding and 1,000,000 shares of authorized preferred stock of
which 170,000 shares of 14% Preferred Stock are issued and
outstanding and 250,000 shares of Series B Convertible Preferred
Stock are issued and outstanding.
H. Compliance with Laws, Rules and Regulations. NONA represents and
warrants that it is in compliance with all applicable federal
laws, rules and regulations; and all applicable state laws, rules
and regulations relating to its ownership of NGI except to the
extent that non-compliance would not materially and adversely
affect the business, operations, properties, assets, or condition
of NONA and its subsidiaries or except to the extent that
non-compliance would not result in the incurring of any material
liability for NONA.
I. Conduct of Business. Since September 30, 1995, except as
disclosed in the NGI Disclosure Documents, NGI has not (i)
discharged or satisfied any liens other than those securing, or
paid any obligation or liability other than, current liabilities
shown on the NGI Financials and current liabilities incurred
since the date of the NGI Financials, in each case in the usual
or ordinary course of business, (ii) mortgaged, pledged or
subjected to lien any of their tangible or intangible assets
(other than purchase money liens incurred in the ordinary course
of business for such assets not yet paid for), (iii) sold,
transferred or leased any of their assets except in the usual and
ordinary course of business, (iv) canceled or compromised any
material debt or claim, or waived or released any right of
material value, (v) suffered any physical damage, destruction or
loss (whether or not covered by insurance) materially adversely
affecting its properties, business or prospects, (vi) entered
into any transaction other than in the usual and ordinary course
of business, except as contemplated by this Agreement, (vii)
encountered any labor difficulties or labor union organizing
activities, (viii) made or agreed to any wage or salary increase
or entered into any employment agreement, (ix) issued or sold any
securities or granted any options with respect thereto, except as
disclosed pursuant to this Agreement, (x) amended its Articles of
Incorporation, (xi) agreed to declare or pay any distributions
with respect to their outstanding capital stock, or (xii)
suffered or experienced any change in, or condition affecting,
the condition (financial or otherwise) of their properties,
assets, liabilities, business, operations or prospects, other
than changes, events or conditions in the ordinary course of
their business none of which has (individually or in the
aggregate) been materially adverse, except as disclosed in the
NGI Financials.
J. Litigation. To the best knowledge and belief of NONA, except as
disclosed in the NGI Disclosure Documents, there is neither
pending nor threatened, any action, suit or arbitration to which
NGI's property, assets or business is or is likely to be subject
and in which an unfavorable outcome, ruling or finding will or is
likely to have a material adverse effect on the condition,
financial or otherwise, or properties, assets, business or
operations of NGI, or create any material liability on the part
of NGI or conflict with this Agreement or any action taken or to
be taken in connection herewith.
K. Contracts. Except as disclosed in the NGI Disclosure Documents,
there are no contracts, actual or contingent obligations,
agreements, franchises, license agreements, or other commitments
to which NGI is a party or by which it or any of its properties
or assets are bound which are material to the business, financial
condition, or its results of operation.
3
<PAGE>
For purposes of the preceding sentence, the term "material"
refers to any obligation or liability which by their terms calls
for aggregate payments of more than $10,000.
L. Material Contract Breaches; Defaults. To the best of NONA's
knowledge and belief, NGI has not materially breached, nor have
they any knowledge of any pending or threatened claims or any
legal basis for a claim that NGI has materially breached, any of
the terms or conditions of any agreements, contracts, or
commitments to which they are a party or is bound and which are
material to the business, financial condition, or results of
operations of NGI, taken as a whole. To the best of NONA's
knowledge and belief, NGI is not in default in any material
respect under the terms of any outstanding contract, agreement,
lease, or other commitment which is material to the business,
operations, properties, assets, or condition of NGI, and there is
no event of default or other event which, with notice or lapse of
time or both, would constitute a default in any material respect
under any such contract, agreement, lease, or other commitment in
respect of which MONTEROSSO has not taken adequate steps to
prevent such a default from occurring.
M. Investments. NGI has provided, or will provide, prior to Closing,
a complete and accurate description of the NGI assets, including
but not limited to a list of all investments of NGI, which
accurately sets forth the nature of NGI's interest or ownership
in each investment and, if applicable, the jurisdictions in which
the respective investments have been incorporated, organized, and
currently doing business. Except for the entities identified on
the list to be provided to MONTEROSSO, there is no corporation,
limited partnership, limited partnership, joint venture,
association, trust, or other entity or organization which NGI
directly or indirectly controls or in which NGI directly or
indirectly owns any equity interest or any other interest.
N. Corporate Records. Copies of all corporate books and records,
including but not limited to stock transfer ledgers, and any
other documents and records of NGI will be provided at Closing.
All such records and documents are complete, true, and correct.
O. Brokers. NONA has not agreed to pay any brokerage fees, finder's
fees, or other fees or commissions with respect to the
transactions contemplated in this Agreement. To the best of
NONA's knowledge, no person or entity is entitled, or intends to
claim that they are entitled, to receive any such fees or
commissions in connection with such transactions. NONA further
agrees to indemnify and hold harmless MONTEROSSO against
liability to any broker claiming to act on behalf of NONA.
P. Date of Representations and Warranties. Each of the
representations and warranties of NONA set forth in this
Agreement are true and correct at and as of the Closing Date,
with the same force and effect as though made at and as of the
Closing Date, except for changes permitted or contemplated by
this Agreement.
4. Representations and Warranties of MONTEROSSO
MONTEROSSO hereby represents and warrants that, effective this date and
the Closing Date, the representations and warranties listed below are
true and correct.
A. Organization and Authority. MONTEROSSO is an individual with the
full power and authority to enter into this Agreement and to
carry out the transactions contemplated by this Agreement.
B. Qualification. As of the Closing Date, MONTEROSSO will be fully
qualified to complete this transaction.
4
<PAGE>
C. No Conflict. The execution of this Agreement will not violate or
breach any document, instrument, agreement, contract, or
commitment material to the business of MONTEROSSO or to which
MONTEROSSO is a party, and has been duly authorized by all
appropriate and necessary action.
D. Full Disclosure. The information concerning MONTEROSSO set forth
in this Agreement is complete and accurate in all material
respects and does not contain any untrue statement of a material
fact or omit to state a material fact required to make the
statements made, in light of the circumstances under which they
were made, not misleading.
E. Ability to Carry Out Agreement. To the best of MONTEROSSO's
knowledge and belief, the execution and performance of this
Agreement will not violate, or result in a breach of, or
constitute a default in, any provisions of applicable law, any
agreement, instrument, judgment, order or decree to which
MONTEROSSO is a party or to which MONTEROSSO is subject. Other
than such violations, breaches, or defaults which, individually
or in the aggregate, will not have a material adverse effect on
the enforceability or validity of this Agreement or on the
transactions contemplated under this Agreement. No consents of
any persons under any contract or agreement required to be
disclosed or disclosed pursuant to this Agreement are required
for the execution, delivery, and performance by MONTEROSSO of
this Agreement.
F. Brokers. MONTEROSSO has not agreed to pay any brokerage fees,
finder's fees, or other fees or commissions with respect to the
transactions contemplated in this Agreement. To the best of
MONTEROSSO's knowledge, no person or entity is entitled, or
intends to claim that they are entitled, to receive any such fees
or commissions in connection with such transactions. MONTEROSSO
further agrees to indemnify and hold harmless NONA against
liability to any broker claiming to act on behalf of MONTEROSSO.
G. Approvals. Except as otherwise provided in this Agreement, to
MONTEROSSO's best knowledge and belief no authorization, consent,
or approval of, or registration or filing with, any governmental
authority or any other person is required to be obtained or made
by MONTEROSSO in connection with the execution, delivery, or
performance of this Agreement.
H. Date of Representations and Warranties. Each of the
representations and warranties of MONTEROSSO set forth in this
Agreement is true and correct at and as of the Closing Date, with
the same force and effect as though made at and as of the Closing
Date, except for changes permitted or contemplated by this
Agreement.
5. Damages and Limit of Liability of NONA
NONA shall be liable to MONTEROSSO for any material breach of the
representations, warranties, and covenants contained herein which
results in a failure to perform any obligations under this Agreement,
but only to the extent of the expenses incurred by MONTEROSSO in
connection with such breach or failure to perform Agreement.
5
<PAGE>
6. Termination
This Agreement may be terminated at any time prior to the Closing Date:
A. By MONTEROSSO or NONA:
(1) If there shall be any actual or threatened action or
proceeding by or before any court or any other governmental
body which shall seek to restrain, prohibit, or invalidate
the transactions contemplated by this Agreement and which,
in the judgment of such Board of Directors made in good
faith and based upon the advice of legal counsel, makes it
inadvisable to proceed with the transactions contemplated by
this Agreement; or
(2) If the Closing shall not have occurred prior to June 15,
1996 or such later date as shall have been approved by
parties hereto, other than for reasons set forth herein.
B. By MONTEROSSO. If NONA shall fail to comply in any material
respect with any of its covenants or agreements contained in this
Agreement, or if any of the representations or warranties of NONA
contained herein shall be inaccurate in any material respect.
In the event this Agreement is terminated pursuant to this
paragraph, this Agreement shall be of no further force or effect,
and no obligation, right, or liability shall arise hereunder and
each party shall bear its own costs in connection with the
negotiation, preparation, and execution of this Agreement and any
due diligence conducted pursuant to this Agreement.
7. Private Transaction
MONTEROSSO understands that the NGI Shares have not been registered
under the Act and the transfer of such shares hereunder is made
pursuant to an exemption from registration pursuant to Regulation D and
Section 4(2) of the Act, and NONA's reliance on such exemption is
predicted in part on the representations set forth herein and in the
Investment Letter attached hereto as Exhibit "A" ("Investment Letter").
8. Access to Information
MONTEROSSO and NONA represent that, by virtue of their respective
economic bargaining power or otherwise, they have had access to or has
been furnished with, prior to or concurrently with the execution
hereof, the same kind of information that would be available in a
registration statement under the Act should registration of the NGI
Shares been necessary, and that they have had the opportunity to ask
questions of and receive answers from the other party, or any party
acting on their behalf, concerning the business of MONTEROSSO and that
they have had the opportunity to obtain any additional information, to
the extent that MONTEROSSO and NGI possesses such information or can
acquire it without unreasonable expense or effort, necessary to verify
the accuracy of information obtained or furnished by NGI or NONA.
9. Indemnification by NONA
As provided herein, NONA shall indemnify and hold harmless MONTEROSSO
for two (2) years following the date of Closing under this Agreement
against and in respect of any liability, damage, or deficiency, all
actions, suits, proceedings, demands, assessments, judgments, costs and
expenses resulting from any misrepresentations, breach of covenant or
warranty, or from any misrepresenta tion contained in any certificate
furnished to MONTEROSSO hereunder.
6
<PAGE>
10. Indemnification by MONTEROSSO
As provided herein, MONTEROSSO shall indemnify and hold harmless NONA
for two (2) years following the date of Closing under this Agreement
against and in respect of any liability, damage, or deficiency, all
actions, suits, proceedings, demands, assessments, judgments, costs and
expenses resulting from any misrepresentations, breach of covenant or
warranty, or from any misrepresenta tion contained in any certificate
furnished to NONA hereunder.
11. Additional Covenants
Between the date hereof and the Closing Date, except with the prior
written consent of MONTEROSSO, NONA shall cause NGI to:
A. Conduct Business as Usual: NGI shall conduct its business only in
the usual and ordinary course and the character of such business
shall not be changed nor any different business be undertaken
without the written consent of MONTEROSSO.
B. NGI to Maintain Current Capital Structure: Except for shares
previously authorized by NGI's Board of Directors to be issued,
no change shall be made in the authorized or issued capital stock
of NGI without the written consent of MONTEROSSO.
C. Avoid Special Settlements: Without MONTEROSSO's consent NGI shall
not discharge or satisfy any lien or encumbrance or obligation or
liability, other than current liabilities shown on the financial
statements contained in the MONTEROSSO Disclosure Documents, and
current liabilities incurred since that date in the ordinary
course of business.
D. Avoid Distributions: NGI shall not make any payment or
distribution to its stockholders or purchase for cash or redeem
any of its shares of capital stock.
E. Avoid Encumbrance or Cancellation of Debt: NGI shall not
mortgage, pledge, or subject to lien or encumbrance any of its
assets, tangible or intangible not in the ordinary course of
business. NGI shall not cancel any debts or claims or waive any
rights not in the ordinary course of business.
F. Provide Additional Information: NGI and the officers of NGI will
agree that after the Closing, they will continue to furnish
MONTEROSSO with such additional documentation and information
regarding NGI as is reasonably requested.
12. Documents at Closing
At the Closing the following transactions shall occur, all of such
shall transactions being deemed to occur simultaneously:
A. Action by NONA. NONA will deliver, or cause the following to be
delivered to MONTEROSSO:
(1) Stock certificate(s) for the NGI Shares to be issued to
MONTEROSSO pursuant to this Agreement together with such
good and sufficient stock powers, and other good and
sufficient instruments of sale, conveyance, transfer, and
assignment, in form and substance satisfactory to
MONTEROSSO's counsel, as shall be required or as may be
appropriate in order to effectively vest in MONTEROSSO good,
indefeasible, and marketable title to the NGI Shares free
and clear of all liens and encumbrances of every nature;
7
<PAGE>
(2) A certificate executed by the NONA to the effect that all
representations and warranties made by NONA under this
Agreement are true and correct as of the Closing, the same
as though originally given to MONTEROSSO on said date; (3) A
certificate dated at or about the date of the Closing to the
effect that NGI is in good standing under the laws of
Delaware;
(3) Such other instruments, documents, and certificates, if any,
as are required to be delivered pursuant to the provisions
of this Agreement, or which may be reasonably requested by
MONTEROSSO in furtherance of the intent of this Agreement.
B. Action by MONTEROSSO. MONTEROSSO will deliver or cause to be
delivered to NONA:
(1) A certified check in the sum of $3,000,000 made payable to
NONA;
(2) A certificate of MONTEROSSO to the effect that all
representations and warran ties of MONTEROSSO made under
this Agreement are reaffirmed on the Closing Date, the same
as though originally given to NONA on said date;
(3) Such other instruments and documents as are required to be
delivered pursuant to the provisions of this Agreement, or
otherwise reasonably requested by NONA.
13. Miscellaneous
A. Further Assurances. At any time and from time to time, after the
effective date, each party will execute such additional
instruments and take such action as may be reasonably requested
by the other party to confirm or perfect title to the NGI Shares
transferred hereunder or otherwise to carry out the intent and
purposes of this Agreement.
B. Waiver. Any failure on the part of any party hereto to comply
with any of its obligations, agreements, or conditions hereunder
may be waived in writing by the party to whom such compliance is
owed.
C. Costs and Expenses. Except as otherwise provided herein, all
fees, costs and expenses incurred by either party relating to
this Agreement shall be paid by the party incurring the same.
8
<PAGE>
D. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been given if delivered in
person or sent by prepaid first class registered or certified
mail, return receipt requested to the parties hereto, or their
designees, as follows:
To NONA: Nona Morelli's II, Inc.
2 Park Plaza, Suite 470
Irvine, California 92714
Telephone: (714) 833-5381
Telefax: (714) 833-7854
To MONTEROSSO: Joe Monterosso
c/o Nationa Pools Corporation
550 15th Street
San Francisco, CA 94103
Telephone: (415) 575-0222
Telefax: (415) 861-4177
E. 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.
F. 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.
G. 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.
H. 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.
I. Entire Agreement. This Agreement contains the entire agreement
between the parties hereto and supersedes any and all prior
agreements, arrangements, or understandings between the parties
relating to the subject matter hereof. No oral understandings,
statements, promises, or inducements contrary to the terms of
this Agreement exist. No representations, warranties, covenants,
or conditions, express or implied, other than as set forth
herein, have been made by any party.
J. Severability. If any part of this Agreement is deemed to be
unenforceable the balance of the Agreement shall remain in full
force and effect.
K. 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.
9
<PAGE>
L. 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 the day
and year first above written.
"MONTEROSSO"
Joe Monterosso
By:-----------------------------------------
Name: Joe Monterosso
"NONA"
NONA MORELLI'S II, INC.
By:-----------------------------------------
Name: Fred G. Luke
Title: Chief Executive Officer
10
<PAGE>
EXHIBIT "A"
to the
Stock Purchase Agreement
Dated -----, 1996
INVESTMENT LETTER
The Undersigned hereby represents to Nona Morelli's II, Inc. ("NONA "), that:
(1) The shares of Series B Preferred Stock of NuOasis Gaming, Inc. ("NGI")
(the "Securities"), which are being acquired by the Undersigned, are
being acquired for the Undersigned's own account and for investment and
not with a view to the public resale or distribution thereof;
(2) The Undersigned will not sell, transfer or otherwise dispose of the
Securities except in compliance with the Securities Act of 1933, as
amended (the "Act"), and are being transferred in reliance on
exemptions, including but not limited to Section 4(2) of the Act;
(3) The Undersigned acknowledges that the Undersigned has been furnished
with disclosure documents which the undersigned feels necessary to make
an economic decision to acquire the Securities;
(4) The Undersigned further acknowledges that it has had an opportunity to
ask questions of and receive answers from duly designated
representatives of NONA and NGI concerning the terms and conditions
pursuant to which the Securities are being purchased. The Undersigned
has been afforded an opportunity to examine such documents and other
information which it has requested for the purpose of verifying the
financial stability of NGI;
(5) The Undersigned is fully aware of the applicable limitations on the
resale of the Securities. These restrictions for the most part are set
forth in Rule 144. If Rule 144 is available to the Undersigned, the
Undersigned may make only routine sales of the Securities in limited
amounts, in accordance with the terms and conditions of that Rule;
(6) By reason of the Undersigned's knowledge and experience in financial
and business matters in general, and investments in particular, the
Undersigned is capable of evaluating the merits and bearing the
economic risks of an investment in the Securities and fully understands
the speculative nature of the Securities and the possibility of such
loss;
(7) The present financial condition of the Undersigned is such that it is
under no present or contemplated future need to dispose of any portion
of the Securities to satisfy an existing or contemplated undertaking,
need or indebtedness.
Very truly yours,
By:-----------------------------------------
Name: Joe Monterosso
11
CASINO LEASE AND OPERATING MANAGEMENT CONTRACT BETWEEN SOCIETE
LOISIRS CLUB HAMMAMET AND CLEOPATRA PLACE LIMITED
CASINO LEASE AND OPERATING
MANAGEMENT CONTRACT
SOCIETE LOISIRS CLUB HAMMAMET
OWNER
CLEOPATRA PALACE LIMITED
LESSEE
<PAGE>
SOCIETE LOISIRS CLUB HAMMAMET
CASINO LEASE AND OPERATING MANAGEMENT CONTRACT
THIS DOCUMENT WITNESSETH:
ON THE HAND, SOCIETE LOISIRS CLUB HAMMAMET, domiciled in Tunis, Tunisia
("Owner")
AND ON THE OTHER HAND, CLEOPATRA PALACE LIMITED, the casino operating
company of Dublin, Ireland ("Lessee"), the shareholders of which are as follows:
Gabriel Tabarani; Alem Yaghi; Clifford Jones and Nona Morelli's II, Inc, a
Colorado (U.S.A.) corporation.
WHEREAS, Owner is the present owner of a building, now under
construction (the "Casino-Property") as more fully described in Exhibit A which
is incorporated by reference; and
WHEREAS, Owner presently has an agreement in principle which will allow
it to obtain a governmental license or Permit which legally authorises it to
operate and maintain a gaming casino (the "Casino ) with slot machines, table
games and video machines in Tunisia (the "Gambling License") subject to
compliance by Owner and by Lessee with all applicable Tunisian laws and
regulations; and
WHEREAS, the parties hereto desire to enter into this Lease for the
Casino Property ir; which Lessee shall operate a Casino with the particular
location of the Casino Property being more fully described in Exhibit B.
NOW, THEREFORE, in consideration of the covenants and conditions herein
to be kept and performed by the parties hereto, and other good and valuable
consideration, the receipt and sufficiency whereof is hereby acknowledged, the
following shall be, and hereby is understood and agreed:
1. Lease. Owner does hereby lease the Casino-Property and Gambling
License to Lessee for a fIxed rental as follows:
A. First year beginning 31st December 1994 or occupancy
(whichever is the latest) when the space designated as that
for housing the Casino Property is deemed to be ready for
occupancy, according to building and other such regulations
as per the initial control office (SOCOTEC) certificate.
Lessee will pay, the sum of One Million United States
Dollars (US 1,000,000), payable to the owner in its entirety
on occupancy.
B. Second year beginning one (1 ) year from the date of
occupancy by Lessee as mentioned above, as the sum of Two
Million United States Dollars (US $2,000,000.00), payable to
the Owner in its entirety one year after occupancy;
<PAGE>
C. Third year beginning two (2) years from the date of
occupancy by Lessee as mentioned above, the sum of Two and
One-Half Million United States Dollars (US $2,500,000.00),
payable to the Owner in its entirety two years after
occupancy;
D. Fourth year beginning three years form the date of occupancy
by Lessee as mentioned in 1 A above the sum of Three Million
United States Dollars (US $3,000,000.00), payable to the
Owner in its entirety three years after occupancy;
E. Fifth year and thereafter, yearly increases of Two Hundred
Fifty Thousand Dollars (US $250,000.00) up to a total rental
per year of Five Million Dollars (US $5,000,000.00) per
annum, payable to the Owner in its entirety four years after
occupancy and of each year of this Agreement thereafter, as
hereunder:
US $3,250,000.00 four years after occupancy;
US $3,500,000.00 five years after occupancy;
US $3,750,000.00 six years after occupancy;
US $4,000,000.00 seven years after occupancy;
US $4,250,000.00 eight years after occupancy;
US $4,500,000.00 nine years after occupancy;
US $4,750,000.00 ten years after occupancy;
US $5,000,000.00 eleven years after occupancy,
and
US $5,000,000.00 twelve, thirteen and fourteen years
after occupancy.
2. Operation. Lessee shall manage the Casino-Property by and through
experienced and professionally competent operators, reasonably
acceptable to Owner. Lessee shall have full and complete control of
the operation of the Casino, subject only to the terms and conditions
of this Agreement.
3. License. Owner shall maintain the Gambling License for and during the
entire term of this Agreement, and Owner hereby authorises the Lessee
to operate the Casino during the term of this Agreement in accordance
with the provisions of the Gambling License, the laws of Tunisia, and
other terms of this Agreement. Commencement of the initial term and
the continuation of this Agreement and Lessee's and Owner's
obligations hereunder are subject to Owner obtaining and maintaining
in effect the Gambling License, without prejudice to Clause 4 below.
4. Compliance. Lessee shall comply with the laws of Tunisia in operating
the Casino-Property under the Gambling License in accordance with the
terms of this Agreement. If the Casino license is to be frozen or
withdrawn temporarily by the Tunisian Authority for any reason caused
by the Lessee, the Lessee will keep paying the rent during that period
up to one year. In the event that Lessee is unable to cure the default
that caused the license to be frozen or withdrawn, the contract
automatically terminates, unless agreed otherwise between the two
parties. Where the contract terminates because of the fault of or
actions attributable to the Lessee, the Owner has the right to take
back the building and all the fittings, furniture and equipment
supplied originally and owned by the Lessee, without compensation.
<PAGE>
5. Term. This Agreement shall be effective when signed by the parties but
the initial term of this Agreement shall be fifteen (15) years from
the date of occupancy by Lessee as stated above, i.e. December 1994.
This Agreement shall be renewed after renegotiation two years prior to
its termination as defined in this Agreement, i.e. renegotiated by not
later than 31st December 2007.
6. Lessee during the term of the Agreement will be responsible for the
payment to the Owner of charges incurred for the interior and external
maintenance of the Casino Property including but not limited to the
air conditioning and ventilation system(s), electrical and plumbing
outlets and carpeting, and all other landlord and Lessee fittings.
7. The Owner recognises that Lessee in order to obtain full enjoyment of
the Casino facilities requires that the hotel complex be completed by
1st June 1995; otherwise the Lessee has the right to suspend the
payments of the rental during the time from that date until the hotel
is completed, and the lease shall be extended by that same period of
time.
8. Surrender at Termination. At the expiration of the term of this
Agreement, or upon the earlier termination thereof, Lessee shall
surrender and return the Casino-Property in the condition thereof
existing at the commencement of the term, ordinary wear and tear, and
damage by fire or other casualty, excepted. Lessee shall be entitled
to retain all of its furniture, gambling machines, equipment' records,
supplies inventories and other personal property utilised in the
operation of the Casino-Property except as provided in Clause 4 above.
9. Operating Capital. Lessee shall provide and expend a minimum of Three
Million United States Dollars (US $3,000,000.00) in funds to equip the
Property.
10. Deposit. As security for the lease payment(s), and the execution of
all the terms and conditions of this Agreement, the Lessee shall
deposit the sum of One Million United States Dollars (US$1,000,000) in
the following two ways:
A- Five hundred thousand United States Dollars (US$500,000) in
the form of a bank guarantee issued by a prime bank
acceptable to Owner. This guarantee to be effective as of
the date of signing of this Agreement
B- a cash payment of Five hundred thousand United States
Dollars (US$500,000) to the account of the Owner in Tunis or
any other place designated by Owner, within 45 days (forty
five days) from the date of this Agreement. An interest rate
of 7% (seven per cent) per year will be payable to Lessee by
the Owner on this amount until it is returned to Lessee.
<PAGE>
Both (A & B) and interest thereon will be released by Owner to Lessee
by 31st December 1998, upon faithful performance of the terms and
conditions of this Agreement by the Lessee.
11. Furniture. Furnishings. Fixtures and Equipment.
A. Owner shall, at its sole expense, make ready the
Casino-Property for occupancy according to building and
other such regulations as per the control office (SOCOTEC)
certificate, painted and fitted with carpet of local
manufacture. This includes all costs of roads, adequate
parking, access corridors, walkways, and landscaping.
B. Lessee shall, at its sole expense, "provide all gaming
devices and related equipment necessary for the operation of
the Casino including decoration and chandeliers as required
by Lessee to a standard befitting a property of this stature
without prejudice to Clause 9 above. Parking attendants for
the Casino Property shall be employees of the Lessee. Such
costs will not include items specified in (B) below.
12. Conduct of Business.
A. During the term of this Agreement, the Casino and Gambling
License shall be used solely for the purposes of this
Agreement. Lessee shall manage and operate the Casino to the
best of its ability; and in a proper, efficient and
businesslike manner; and to the extent that the ambiance of
a high class casino shall at all times be maintained,
without prejudice to clauses aforegoing. Lessee shall keep
the Casino open and available for business on all days of
the months of January through December [twelve (12) months]
not less than eight (8) hours per day, but only during the
times when there is sufficient business to justify the
operation, except when prevented by force majeure. In such
an occurrence, Lessee is entitled to a rebate/reduction of
50% of the rent so due for six (6) months after which both
the Owner and/or the Lessee may terminate this Agreement
B. Lessee shall employ and train all employees of the
Casino-Property. All such employees shall be the employees
of the Lessee. All employees of the Casino-Property shall be
neatly and cleanly attired and if any of the
Casino-Property's employees shall, in any way, bring
discredit upon the Country of Tunisia or any city therein,
they shall be immediately discharged, and any and all costs
incurred thereon are to the responsibility of the Lessee.
C. Lessee shall comply, and the Casino-Property shall be
operated so as to comply, with all laws and regulations
presently in force or subsequently enacted by Tunisia.
<PAGE>
D. Lessee shall operate and provide in the Casino Property all
casino facilities and casino services normally operated and
provided in casinos of comparable class.
E. Lessee shall be entitled to operate service liquor bars
within the Casino- Property for the purpose of selling
drinks of patrons of the Casino as well as dispensing
complimentary beverages.
13. Relationship of the Parties. Nothing herein contained shall be
construed as effecting a co-partnership of joint venture between the
parties, and it is the express intent of the parties that the
relationship between them shall be solely and exclusively that of
Landlord and Tenant, under the terms and conditions hereof.
14. Hold Harmless. Owner and Lessee shall, at all times during the term of
Agreement, indemnify and save, protect and keep harmless each other
from and against any and all liability, cost, damage, expense, and
fine, whatsoever, which may arise or be claimed by a person or persons
for any loss of money or damage to any property whatsoever, or injury
to or death of any person whomsoever, consequent upon or arising from
or out of any act of omission of the other.
15. Insurance. During the term of this Agreement, Lessee shall maintain,
at Lessee's expense, with a reputable insurance company or companies
reasonably satisfactory to Owner, personal injury and property
liability insurance with coverage of no less than $1,000,000.00 for
personal injury and no less than $500,000 for property damage, and
Owner shall be listed as an additional insured. In addition, Lessee
shall cause employees to be duly insured by such policies of Workman's
Compensation or similar insurance as may be required by applicable
laws. The Lessee shall obtain and keep in effect an insurance policy
covering the risk of fire, flood, and subsidence damage to the
Casino-Property. Owner shall be listed as additional insured. Such
insurance shall include loss of revenue for a 24 month period.
16. Right of Inspection. Owner shall have the right to enter upon and/or
inspect any part of the property at any time; provided however, such
visits or inspections shall be conducted with as little disturbance as
possible to the operations of the Casino and in the company of a
representative of the Lessee. Such access to the Casino-Property shall
not be unreasonably withheld.
17. Assignment. Lessee may assign this Agreement, or may assign or
transfer its interest in the property, and any of its rights, or
privileges under this Agreement so long as the Gambling Licenses
remain in the name of the Owner, and so long as Lessee remains in
control of the operation of the Casino-Property. Assignment of this
Agreement requires the prior written consent of Owner, which shall not
be unreasonably withheld.
<PAGE>
18. Appearance of Premises. It is expressly understood and agreed that the
appearance of the property which have been provided by the Owner at
its expense, including the placing of signs and the general conduct of
the business on the Casino-Property Area, will have a material effect
on the reputation of Owner. The Owner, therefore, hereby expressly
reserves the right to control and regulate the appearance of the
property at all times during the term of this Agreement, including,
but not limited to the regulation of any signs, advertisements or
other promotional material used in connection with the operation of
the Casino. Lessee shall have the right to advertise the Casino but
the format of the advertising shall be in keeping with the dignity of
the complex housing the Casino-Property, and the Owner shall not
unreasonably withhold its approval of the form of such advertising.
Lessee will annually prepare a specification book for a programme of
promotional and touristic activities. No structural, material or other
alterations to the external or internal appearance of the
Casino-Property may be undertaken by the Lessee except with the
express written permission of the Owner.
19. Entertainment. Lessee shall have the right to decide if any
entertainment is needed in the Casino-Property. Lessee shall be
responsible for the payment for all entertainment in the
Casino-Property. Any such entertainment shall be in accordance with
the regulations of Tunisia.
20. Default. If, at any time during the term of this Agreement, one or
more of the following events shall occur, Owner may forthwith
terminate this Agreement:
A. Lessee shall fail to make any payment due under this
Agreement on or prior to the date upon which it is due, and
such failure shall continue for thirty (30) days after
written notice. In such an event the Lessee shall pay the
Owner 2% per month on the sum so delayed.
B. Lessee shall fail or refuse to fully perform or comply with
any other agreement, covenant, or undertaking, which it is
required by this Agreement to perform or comply with, or
shall otherwise violate any provision hereof, and such
failure shall continue for thirty (30) days after written
notice. Provided that, if Lessee is diligently attempting to
cure a non-monetary default but cannot reasonably do so in
thirty (30) days, the cure period shall continue as long as
reasonably necessary for Lessee to cure the non-monetary
default, in the exercise of reasonable diligence. Should the
lease be terminated under the above conditions, the owner
retains the right to receive the rental for the remaining
term of this Agreement.
21. Notices. Unless a party hereto shall in writing direct otherwise, all
notices to be served or rendered under this Agreement shall be
properly served and rendered if sent by Registered Mail directed to:
<PAGE>
Owner: Loisirs Club Hammamet
30, Rue Assamaoual - Notre Dames
1002 Tunis, Tunisie
Telephone: 2161-794-450
Telefax: 2161-793-953
Copy to: GMH
29, venue de la Porte Neuve
L-27 Luxembourg
Telephone: 352-470-168
Telefax: 352-470-352
Lessee: Cleopatra Palace Limited
c/o Gabriel Tabarani
Chartwell House, 80 Wimbledon Parkside
London SW19 SLN England
Telephone: 081-789-6762
Copy to: Mohamed Moncef Barouni
6 Rue d' Argentine - Le Belvedere
1002 Tunis
Telephone: 2161-285-868
Telefax: 2161-786-553
Any party may change its address for notice by written notice and such
change shall be effective upon actual receipt of same.
22. Governing Law. This Agreement is subject to and shall be interpreted
in accordance with the laws of Tunisia.
23. Arbitration. If at any time hereafter, any dispute shall arise between
Owner and Lessee hereto with respect to this Agreement or the right to
claim an abatement of their obligations by reason of a force majeure,
then such dispute shall be referred to arbitration by three (3)
disinterested persons, one each to be appointed by Owner and Lessee
and the third party to be appointed by the other two in writing. If
either party shall refuse or fail to appoint an arbitrator within ten
(10) days after such a request or if the two appointed arbitrators
refuse or fail to appoint the third arbitrator within ten (10) days
after their appointment, then either party to this Agreement may
request a Judge, in the first instance, in Tunisia, to appoint the
third arbitrator. Parties shall abide by such an appointment. The
appointment arbitrators shall proceed in accordance with the
arbitration stipulations of the Code of Laws of Tunisia.
<PAGE>
IN WITNESS WHEREOF, this Agreement is executed in duplicate copies, of like
terms and effect, on this day the Tenth of October, 1994.
"Owner" "Lessee"
Loisirs Club Hammamet Cleopatra Palace Ltd
an Irish Corporation
By: /s/ Jinan Abdulla By: /s/ Gabriel Tabarani
------------------------------- ------------------------------------
Jinan Abdulla Gabriel Tabarani
<PAGE>
SOCIETE LOISIRS CLUB HAMMAMET
CASINO LEASE AND OPERATING MANAGEMENT CONTRACT
THIS DOCUMENT WITNESSETH:
ON THE HAND, SOCIETE LOISIRS CLUB HAMMAMET, domiciled in Tunis, Tunisia (
"Owner" )
AND ON THE OTHER HAND CLEOPATRA HAMMAMET LIMITED
the casino operating company of Avenue Hedi CHAKER Immeuble Ben SALAH 1002 Tunis
( "Lessee" ):
WHEREAS, Owner is the present owner of a building, now under
construction ( the "Casino-Property" ) as more fully described in Exhibit A
which is incorporated by reference; and
WHEREAS, Owner presently has an agreement in principle which will allow
the operating company to obtain a governmental license or permit which legally
authorises it to operate and maintain a gaming casino (the " Casino ") with slot
machines, table games and video machines in Tunisia (the "Gambling License")
subject to compliance by Owner and by lessee with all applicable Tunisian laws
and regulations; and
WHEREAS, the parties hereto desire to enter into this lease for the
Casino Property in which lessee shall operate a Casino with the particular
location of the Casino Property being more fully described in Exhibit B.
NOW, THEREFORE, in consideration of the covenants and conditions herein
to be kept and performed by the parties hereto, and other good and valuable
consideration, the receipt and sufficiency whereof is hereby acknowledged, the
following shall be, and hereby is understood and agreed:
1. Lease. Owner does hereby lease the Casino-Property to lessee for a
fixed rental as follows:
A. First Year beginning 31st December 1995 or occupancy when
the space designated as that for housing the Casino-Property
is deemed to be ready for occupancy, according to building
and other such regulations as per the initial control office
(SOCOTEC) certificate. Lessee will pay in Tunisian Dinars a
net sum equivalent to Two Million US Dollars ( $ US
2.000.000 ) payable to the owner in two payments, half of
the sum on occupancy and the other half when Casino open for
business .
B. Second year beginning one (1) year from the date of
occupancy by lessee as mentioned above, the net sum in
Tunisian Dinars equivalent to Two Million five hundred
thousand US Dollars (US $ 2.500.000), payable to the Owner
in its entirety one year after occupancy;
<PAGE>
C. Third year beginning two (2) years from the date of
occupancy by Lessee as mentioned above. the net sum in
Tunisian Dinars equivalent to Three Million US Dollars ( $
US. 3.000.000 ), payable to the Owner in its entirety two
years after occupancy;
D. Fourth year beginning three years from the date of occupancy
by Lessee as mentioned in 1A above the net sum in Tunisian
Dinars equivalent to Three Million two hundred and fifty
thousand US Dollars ( $ US. 3.250.000 ), payable to the
Owner in its entirety three years after occupancy;
E. Fifth year and thereafter, yearly increases in Tunisian
Dinars equivalent of Two Hundred Fifty Thousand US Dollars (
$ US. 250.000 ) up to a total rental per year of a net sum
in Tunisian Dinars equivalent to Five million US Dollars ( $
US. 5.000.000 ) per annum, payable to the owner in its
entirety four years after occupancy and of each year of this
Agreement thereafter, as hereunder payable in Tunisian
Dinars a net sum equivalent to:
$ US. 3.250.000 four years after occupancy
$ US. 3.500.000 five years after occupancy
$ US. 3.750.000 six years after occupancy
$ US. 4.000.000 seven years after occupancy
$ US. 4.250.000 eight years after occupancy
$ US. 4.500.000 nine years after occupancy
$ US. 4.750.000 ten years after occupancy
$ US. 5.000.000 eleven years after occupancy
and
$ US. 5.000.000 twelve, thirteen and fourteen years
after occupancy
2. Operation. Lessee shall manage the Casino-Property by and through
experienced and professionally competent operators, reasonably
acceptable to Owner. Lessee shall have full and complete control of
the operation of the Casino, subject only to the terms and conditions
of this Agreement.
3. License. Lessee shall obtain and maintain the Gambling License for and
during the entire term of this agreement, and Owner hereby authorises
the Lessee to operate the Casino during the term of this agreement in
accordance with the provisions of the Gambling License, the laws of
Tunisia, and other terms of this Agreement. Commencement of the
initial term and the continuation of this Agreement and Lessee's and
Owner's obligations hereunder are subject to Lessee obtaining the
Gambling License, without prejudice to clause 4 below.
4. Compliance. Lessee shall comply with the laws of Tunisia in operating
the Casino-Property under the Gambling License in accordance with the
terms of this Agreement. If the Casino license is to be frozen or
withdrawn temporarily by the Tunisian Authority for any reason caused
by the Lessee, the Lessee will keep paying the rent during that period
up to one year. In the event that Lessee is unable to cure the default
that caused the license to be frozen or withdrawn, the contract
automatically terminates, unless agreed otherwise between the two
parties. Where the contract terminates because of the default of or
actions attributable to the Lessee, the Owner has the right to take
back the building and all the filings, furniture and equipment
supplied originally and owned or leased by the Lessee, without
compensation.
<PAGE>
5. Term. This agreement shall be effective when signed by the parties but
the initial term of this Agreement shall be fifteen (15) years from
the date of occupancy by the lessee as stated above, i.e. December
1995 or shortly after. This Agreement shall be automatically renewed
for two ( 2 ) successive ten ( 10 ) years terms, unless same is
terminated by lessee upon written notice to owner one (1) full year in
advance of the expiration of the initial term, or any of the
additional ten ( 10 ) year term. A yearly increase of the last rent
for the additional periods of the present lease has been agreed upon
between the two parties as follows:
- Ten per cent ( 10 % ) for the first year of the first
additional term.
- Five per cent ( 5 % ) per year for the four following years
of that period.
- Ten per cent ( 10 % ) for the first year of the second five
years period.
- Five per cent ( 5 % ) per year for the remaining four years
of that period.
- Ten per cent ( 10 % ) for the first year of the third
additional five years.
- Five per cent ( 5 % ) per year for the following four years
of this additional term.
- Ten per cent ( 10 % ) for the first of the fourth additional
five years term.
- Five per cent ( 5 % ) per year for the remaining four years
of this last additional term
6. Lessee during the term of the Agreement will be responsible for the
payment to the Owner of charges incurred for the interior and external
maintenance of the Casino-Property including but not limited to the
air conditioning and ventilation system(s), electrical and plumbing
installations and carpeting, and all other landlord and Lessee
fittings.
7. The Owner recognises Lessee in order to obtain full enjoyment of the
Casino facilities that the hotel complex be completed on or before the
date of the opening of the Casino; otherwise the Lessee has the right
to suspend the payments of the rental during the time from that date
until the hotel is completed, and the lease shall be extended by that
same period of time.
8. Surrender at Termination. At the expiration of the term of this
Agreement or the additional terms, or upon the earlier termination
thereof, Lessee shall surrender and return the Casino-Property in the
condition thereof existing at the commencement of the term, ordinary
wear and tear, and damage by fire or other casualty, excepted. Lessee
shall be entitled to retain all of its furniture, gambling machines,
equipment, records, supplies inventories and other personal property
utilised in the operation of the Casino-Property except as provided in
Clause 4 above.
<PAGE>
9. Operating Capital. Lessee shall provide and expend a minimum of Three
Million Tunisian Dinars ( T.D. 3.000.000 ) in funds to equip the
Property, and operate the casino.
10. Deposit. As security for the lease payment(s), and the execution of
all the terms and conditions of this Agreement, the Lessee shall
deposit in Tunisian Dinars the equivalent of the sum of One Million
and One Half US Dollars ( $ US. 1.500.000 ) in the following ways:
A- The equivalent of five hundred thousand US Dollars ( $ US.
500.000 ) in the form of cash. This payment to be effective
as of the date of signing of this agreement
B- A cash payment in Tunisian Dinars equivalent of Five hundred
thousand US Dollars ( $ US. 500.000 ) to be paid to owner at
the same time when the owner releases the L.C. N// SB -
51880/94/676 issued by first Los Angeles Bank for the amount
of ( US $ 500.000 ). Such payment should be effected on or
before the 1st November 1995.
C- A cash payment in Tunisian Dinars equivalent to five hundred
thousand US Dollars ( $ US. 500.000 ) on or before 15th
November 1995.
D- An interest of 7% ( seven per cent ) per year will be paid
on A, B, and C above by the owner to the lessee together
with the cash deposits on 31st December 1999.
11. Furniture, Furnishings Fixtures and Equipment
A. Owner shall, at its sole expense, make ready the
Casino-Property for occupancy according to building and
other such regulations as per the control office (SOCOTEC)
certificate, painted and fitted with carpet of local
manufacture. This includes all costs of roads, parking
spaces, access corridors, walkways and landscaping.
B. Lessee shall, at its sole expense, provide all gaming
devices and related equipment necessary for the operation of
the casino including drapes, quality decoration and
chandeliers as required by lessee to a standard befitting a
property of this stature without prejudice to Clause 9
above. Parking attendants for the casino-property shall be
employees of the lessee. Such costs will not include items
specified in ( B ) below.
12. Conduct of Business
A. During the term of this Agreement, the Casino and Gambling
License shall be used solely for the purposes of this
Agreement. Lessee shall manage and operate the casino to the
best of its ability; and in a proper, efficient and
businesslike manner; and to the extent that the ambiance of
a high class casino shall at all times be maintained,
without prejudice to clauses aforegoing. Lessee shall keep
the casino open and available for business on all days of
the months of January through December (Twelve "12" months)
not less than eight ( 8 ) hours per day, but only during
the times when there is sufficient business to justify the
operation, except when prevented by force majeure. In such
an occurrence, Lessee is entitled to a rebate/reduction of
50% of the rent so due for six ( 6) months after which both
the Owner and/or the Lessee may terminate this Agreement.
<PAGE>
B. Lessee shall employ and train all employees of the
Casino-Property. All such employees shall be the employees
of the Lessee. All employees of the Casino-Property shall be
neatly and cleanly attired and if any of the
Casino-Property's employees shall, in any way, bring
discredit upon the Country of Tunisia or any city therein,
they shall be immediately discharged, and any and all costs
incurred thereon are to the responsibility of the Lessee.
C. Lessee shall comply, and the Casino-Property shall be
operated so as to comply, with all laws and regulations
presently in force or subsequently enacted by Tunisia.
D. Lessee shall operate and provide in the Casino-Property all
casino facilities and casino services normally operated and
provided in casinos of comparable class.
E. Lessee shall be entitled to operate service liquor bars
within the Casino Property for the purpose of selling drinks
of patrons of the Casino as well as dispensing complementary
beverages.
13. Relationship of the Parties. Nothing herein contained shall be
construed as effecting a co-partnership of joint venture between the
parties, and it is the express intent of the parties that the
relationship between them shall be solely and exclusively that of
Landlord and Tenant, under the terms and conditions hereof
14. Hold Harmless. Owner and Lessee shall, at all times during the term of
this Agreement, indemnify and save, protect and keep harmless each
other from and against any and all liability, cost, damage, expense,
and fine, whatsoever, which may arise or be claimed by a person or
persons for any loss of money or damage to any property whatsoever, or
injury to or death of any person whomsoever, consequent upon or
arising from or out of any act of omission of the other.
15. Insurance. During the term of this Agreement, Lessee shall maintain,
at Lessee's expense, with a reputable insurance company or companies
reasonably satisfactory to Owner, personal injury and property
liability insurance with coverage of no less than $ 1,000,000.00 for
personal injury and no less than $ 500,000 for property damage, and
Owner shall be listed as an additional insured. In addition, Lessee
shall cause employees to be duly insured by such policies of Workman's
Compensation or similar insurance as may be required by applicable
laws. The Lessee shall obtain and keep in effect an insurance policy
covering the risk of fire, flood, and subsidence damage to the
Casino-Property. Owner shall be listed as additional insured. Such
insurance shall include loss of rent for a 24 month period.
<PAGE>
16. Right of Inspection. Owner shall have the right to enter upon and/or
inspect any part of the property at any time; provided however, such
visits or inspections shall be conducted with as little disturbance as
possible to the operations of the casino and in the company of a
representative of the Lessee. Such access to the Casino-Property shall
not be unreasonably withheld.
17. Assignment. Lessee may assign this Agreement, or may assign or
transfer its interest in the property, and any of its rights, or
privileges under this Agreement so long as the Gambling Licenses
remain in the name of the Operator, and so long as Lessee remains in
control of the operation of the Casino-Property. Assignment of this
Agreement requires the prior written consent of Owner, which shall not
be unreasonably withheld.
18. Appearance of Premises. It is expressly understood and agreed that the
appearance of the property which have been provided by Owner at its
expense, including the placing of signs and the general conduct of the
business on the Casino-Property Area, will have a material effect on
the reputation of Owner. The Owner, therefore, hereby expressly
reserves the right to control and regulate the appearance of the
property at all times during the term of this Agreement, including,
but not limited to the regulation of any signs, advertisements or
other promotional material used in connection with the operation of
the casino Lessee shall have the right to advertise the casino but the
format of the advertising shall be in keeping with the dignity of the
complex housing the Casino-Property, and the Owner shall not
unreasonably withhold its approval of the form of such advertising.
Lessee will annually prepare a specification book for a programme of
promotional and touristic activities. No structural, material or other
alterations to the external or internal appearance of the
Casino-Property may be undertaken by the Lessee except with the
express written permission of the Owner.
19. Entertainment. Lessee shall have the right to decide if any
entertainment is needed in the Casino-Property. Lessee shall be
responsible for the payment for all entertainment in the
Casino-Property. Any such entertainment shall be in accordance with
the regulations of Tunisia.
20. Default. If, at any time during the term of this Agreement, one or
more of the following events shall occur, Owner may forthwith
terminate this Agreement:
A. Lessee shall fail to make any payment due under this
Agreement on or prior to the date upon which it is due, and
such failure shall continue for thirty ( 30 ) days after
written notice. In such an event the lessee shall pay the
owner 2% per month on the sum so delayed.
B. Lessee shall fail or refuse to fully perform or comply with
any other agreement, covenant, or undertaking, which it is
required by this Agreement to perform or comply with, or
shall otherwise violate any provision hereof, and such
failure shall continue for thirty ( 30 ) days after written
notice. Provided that, if lessee is diligently attempting to
cure a non-monetary default but cannot reasonably do so in
thirty ( 30 ) days, the cure period shall continue as long
as reasonably necessary for Lessee to cure the non-monetary
default, in the exercise of reasonable diligence. Should the
lease be terminated under the above conditions, the Owner
retains the right to receive the rental for the remaining
term of this Agreement.
<PAGE>
21. Notices. Unless a party hereto shall in writing direct otherwise, all
notices to be served or rendered under this Agreement shall be
properly served and rendered if sent by Registered Mail directed to:
Owner: Loisirs Club Hammamet
30, Rue Essamaouel - Notre Dame
1002 Tunis, Tunisie
Telephone: 216 1 794 450
Telefax: 216 1 793 953
Copy to: GMH
29, Avenue de la Porte Neuve
L - 2227 Luxembourg
Telephone: 352 470 168
Telefax: 352 470 352
Lessee: Cleopatra Hammamet Ltd.
Avenue Hedi CHAKER
Immeuble Ben SALAH
1002 Tunis
Copy to: Mohamed Moncef Barouni
6 Rue d'Argentine - Le Belvedere
1002 Tunis
Telephone: 2161-285-868
Telefax: 2161- 786-553
Any party may change its address for notice by written notice and such
change shall be effective upon actual receipt of same.
22. Governing Law. This Agreement is subject to and shall be interpreted
in accordance with the laws of Tunisia
23. Arbitration. If any time hereafter, any dispute shall arise between
Owner and Lessee hereto with respect to this Agreement or the right to
claim an abatement of their obligations by reason of a force majeure,
then such dispute shall be referred to arbitration by three ( 3 )
disinterested persons, one each to be appointed by Owner and Lessee
and the third party to be appointed by the other two in writing. If
either party shall refuse or fail to appoint an arbitrator within ten
( 10 ) days after such a request or if the two appointed arbitrators
refuse or fail to appoint the third arbitrator within ten ( 10 ) days
after their appointment, then either party to this Agreement may
request a Judge, in the first instance, in Tunisia, to appoint the
second and/or the third arbitrator. Parties shall abide by such an
appointment. The appointed arbitrators shall proceed in accordance
with the arbitration stipulations of the Code of Laws of Tunisia.
<PAGE>
IN WITNESS WHEREOF, this Agreement is executed in duplicate copies, of
like terms and effect, on this day of ----------, 199---.
" Owner" " Lessee"
Loisirs Club Hammamet
EXHIBIT 10.141
LETTER OF INTENT BETWEEN COMPAGNIE MONASTIRIENNE IMMOBILIERE ET
TOURISTIQUE AND CLEOPATRA PALACE LIMITED
LETTER OF INTENT
BETWEEN:
Compagnie Monastirienne Immobiliere et Touristique S.A. 15, Rue su ler Juin,
Tunis, Tunisia, represented by Mr. Mohamed Ali Mabrouk, General, Manager
hereinafter called "The Owner".
AND,
Cleopatra Palace Limited, Flat 2 Chartwell House, 80 Wimbledon Parkside London
SW19 5LN England. Represented by Mr. Gabriel Tabarani, President, hereinafter
called "Cleopatra".
The owner has an important development plan in SKANES, MONASTIR focused
basically on real estate, casino and hotel facilities.
The owner is ready to invest in the construction of a casino of approximately
3000 square meters that could be extended to 5000 square meters.
The owner is interested in leasing the casino under terms and conditions to be
agreed. Therefore the two parties have agreed as follows:
1-RESPONSIBILITIES OF THE OWNER:
The owner will bear all costs incurred in the interior construction and fitting
out of the casino building including exterior works such as the provision of
roads, adequate car parking space...and putting the building into such condition
that Cleopatra may immediately commence its business activities.
2-RESPONSIBILITIES OF CLEOPATRA:
Cleopatra will lease the casino for twenty (20) years renewable for two (2)
periods of five (5) years each; will manage and conduct the casino to profits to
the best of its ability and in a proper efficient and business like manner to
the intent that ambiance of a high class casino shall at all time thereafter be
maintained.
Cleopatra shall bear the cost of all equipment to be used for the purposes of
gaming, such equipment to include gaming tables, slot machines and related
equipment, including chips and tokens to be used for gaming.
Cleopatra shall bear the costs of close circuit television and computer
equipment. All such equipment shall remain at all times the property of
Cleopatra. Cleopatra will provide technical assistance including architectural
services and engineering consultation.
1
<PAGE>
3-THE RENTAL AGREEMENT:
Cleopatra undertakes to pay the Owner an annual rental of:
- -15% of the casino's cost incurred by the Owner for the first two (2) years -
plus 10% of the second year rental for the third year - plus 10% of the third
year rental for the fourth year - plus 10% of the fourth year rental for the
years 5, 6, and 7 - 25% of the casino's costs for the years 8, 9, 10, 11, 12,
13, 14 and 15. - plus 13% of the fifteen year rental for years 16, 17, 18, 19,
and 20.
Based on casino's cost of US $3,000,000 the annual rent will be as follows
Year 1...............................................450,000 US$
Year 2...............................................450,000 US$
Year 3...............................................495,000 US$
Year 4...............................................545,000 US$
Year 5...............................................600,000 US$
Year 6...............................................600,000 US$
Year 7...............................................600,000 US$
Year 8...............................................750,000 US$
Year 9...............................................750,000 US$
Year 10..............................................750,000 US$
Year 11..............................................750,000 US$
Year 12..............................................750,000 US$
Year 13..............................................750,000 US$
Year 14..............................................750,000 US$
Year 15..............................................750,000 US$
Year 16..............................................850,000 US$
Year 17..............................................850,000 US$
Year 18..............................................850,000 US$
Year 19..............................................850,000 US$
Year 20..............................................850,000 US$
The rental agreed will be payable in equivalent Tunisian Dinars in the first of
each quarter. Bearing in mind that the delivery of the casino by the Owner to
Cleopatra must be on the first of May, 1998,
Cleopatra shall pay the Owner the amount of 450,000 US$ prior to the opening of
the casino as part of the rent. Such payment shall be made in accordance with
the advancement of the casino construction.
2
<PAGE>
These installments shall be delivered as follows in US $:
- - 50,000 shall be paid after the work has started - 150,000 shall be paid after
the roof is installed - 150,000 shall be paid when the casino carpeting is
finished
- - 100,000 shall be paid when Cleopatra accepts the casino as ready for use.
The payment will be reimbursed on four (4) years time as follows:
- - 1st of May, 1999...................................100,000 US$
- - 1st of May, 2000...................................100,000 US$
- - 1st of May, 2001...................................125,000 US$
- - 1st of May, 2002 ..................................125,000 US$
The Owner and Cleopatra will sign the lease agreement within one (1) month.
THE OWNER
/s/ Compagnie Monastirienne Immobiliere et Touristique S.A.
CLEOPATRA
/s/ Cleopatra Palace Limited
3
<PAGE>
CASINO LEASE
COMPAGNIE MONASTIRIENNE IMMOBILIERE ET
TOURISTIQUE
"OWNER"
CLEOPATRA PALACE LIMITED
"LESSEE"
<PAGE>
THE DOCUMENT WITNESSETH
ON THE ONE HAND, Compagnie Monastirienne Immobiliere et Touristique S.A. 15, Rue
su ler Juin, Tunis, Tunisia, represented by Mr. Mohamed Ali Mabrouk, General,
Manager hereinafter called "The Owner".
ON THE OTHER HAND, Cleopatra Palace Limited, Flat 2 Chartwell House, 80
Wimbledon Parkside London SW19 5LN England. Represented by Mr. Gabriel Tabarani,
President, hereinafter called "The Lessee"
WHEREAS, the Owner has an important development plan in SKANES MONASTIR focused
basically on real estate, casino and hotel facilities
The Owner is ready to invest in the construction of a casino and approximately
3000 square meters that could be extended to 5000 square meters.
The Owner is interested in leasing the casino under terms and conditions to be
agreed. Therefore the two parties have agreed as follows:
WHEREAS, the parties hereto desire to enter into the Lease for the casino on
which Lessee shall operate (The "Casino") with the particular location of the
Casino (the "Casino Area") being more fully described in Exhibit A.
NOW, THEREFORE, in consideration of the covenants and conditions herein to be
kept and performed by the parties hereto, and other good and valuable
consideration, the receipt and sufficiency whereof is hereby acknowledged, the
following shall be, and hereby is understood and agreed:
ARTICLE 1: Lease:
Owner does hereby lease the Casino and the Casino area to Lessee for an annual
rental of: -15% of the casino's cost incurred by the Owner for the first two (2)
years - plus 10% of the second year rental for the third year - plus 10% of the
third year rental for the fourth year - plus 10% of the fourth year rental for
the years 5, 6, and 7 - 25% of the casino's costs for the years 8, 9, 10, 11,
12, 13, 14 and 15. - plus 13% of the fifteen year rental for years 16, 17, 18,
19, and 20.
Based on casino's cost of US $3,000,000 the annual rent will be as follows:
Year 1 450,000 US$
Year 2 450,000 US$
Year 3 495,000 US$
Year 4 545,000 US$
Year 5 600,000 US$
Year 6 600,000 US$
Year 7 600,000 US$
Year 8 750,000 US$
Year 9 750,000 US$
Year 10 750,000 US$
Year 11 750,000 US$
Year 12 750,000 US$
Year 13 750,000 US$
Year 14 750,000 US$
Year 15 750,000 US$
Year 16 850,000 US$
Year 17 850,000 US$
Year 18 850,000 US$
Year 19 850,000 US$
Year 20 850,000 US$
<PAGE>
The rental agreed will be payable in equivalent Tunisian Dinars in the first of
each quarter. Bearing in mind that the delivery of the casino by the Owner to
Cleopatra must be on the first of May, 1998,
Cleopatra shall pay the Owner the amount of 450,000 US$ prior to the opening of
the casino as part of the rent. Such payment shall be made in accordance with
the advancement of the casino construction.
These installments shall be delivered as follows in US $:
- - 50,000 shall be paid after the work has started - 150,000 shall be paid after
the roof is installed - 150,000 shall be paid when the casino carpeting is
finished
- - 100,000 shall be paid when Cleopatra accepts the casino as ready for use.
The payment will be reimbursed on four (4) years time as follows:
- - 1st of May, 1999 100,000 US$
- - 1st of May, 2000 100,000 US$
- - 1st of May, 2001 125,000 US$
- - 1st of May, 2002 125,000 US$
ARTICLE 2: Operation:
Lessee shall manage the Casino by and through experienced operators, reasonable
acceptable to Own. Lessee shall have full and complete control of the operation
of the
<PAGE>
ARTICLE 3: License:
The Lessee shall obtain the Gambling License from the Tunisian Authority. Owner
shall provide the necessary assistance to Lessee to obtain and maintain the
gambling license for and during the entire term of this Agreement, and Owner
hereby authorizes the Lessee to operate the casino during the term of this
Agreement in accordance with the provisions of the Gambling License, the laws of
Tunisia, and the continuation of this Agreement and Lessee's obligations
hereunder are subject to Lessee obtaining and maintaining in effect, the
Gambling License.
ARTICLE 4: Compliance:
Lessee shall comply with the laws of Tunisia to operate the Casino under the
Gambling License in accordance with the terms of this Agreement.
ARTICLE 5: Terms:
This Agreement is considered to have come into force immediately upon signature
by the parties. The initial term of this Agreement shall be twenty (20) years,
commencing on the date (1st May, 1998), shall expire on the last day of the
twentieth year, (The "Initial Term "). Three months before expiry of the Initial
Term, the Owner and the Lessee may inform each other of their intention, either
to prorogate the lease or to terminate Initial Term. If no such notice is
served, the present Agreement shall be renewed for a five year option period.
Subject to the Licensing provisions referenced below. This Agreement shall be
automatically renewed for two (2) successive five (5) year terms, unless same is
terminated by Lessee upon written notice to Owner ninety (90) days in advance of
the expiration of the initial term, or any of the additional five (5) year term.
In the event the casino area is not ready to occupancy twenty-four (24) months
after commencement of the construction of the Casino, then, Lessee may terminate
this agreement and receive a return of the full deposit made by him to the Owner
plus interest at seven-and-one-half percent (7 1/2%) per annum, or if premises
are not ready and the said date, Lessee is entitled to complete at his expenses
and withhold funds from rent until repaid.
ARTICLE 6: Surrender at Termination:
At the expiration of the term of this Agreement, or upon the earlier termination
thereof, Lessee shall surrender and return the Casino and Casino area in the
condition thereof existing at the commencement of the term, ordinary wear and
tear, and damage by fire or other casualty, excepted. Provided, Lessee shall be
entitled to retain all of its furniture, gambling machines, equipment, records,
supplies, inventories and other personal property utilized in the operation of
the Casino. It is understood that anything supplied or paid by the Lessee for
the performance of the Casino operation shall be his property.
<PAGE>
ARTICLE 7: Operating Capital:
Lessee shall provide the appropriate amount of funds to equip and operate the
Casino during the term of this Agreement . The Lessee shall exercise reasonable
skill, care and diligence in the performance of his obligations under this
Agreement.
ARTICLE 8: Books and records:
Lessee shall be responsible for the maintenance of such records and books of
account as may reasonably reflect the operation of the Casino and shall preserve
such records and books of account during the term of this Agreement and shall
permit Owner (or its authorized representatives) and auditors to examine and
audit such records and books of account at any and all reasonable times. Lessee
shall cause the books and records of Lessee to be audited annually, at Lessee's
expense, and shall furnish Owner with a copy of the audit, but Owner shall not
be required to accept the audit and may audit or examine any of the Lessee's
books and records on reasonable notice to Lessee, at Owner's expense.
ARTICLE 9: Taxes:
Lessee agrees to pay all taxes, licenses, charges and fees levied or assessed on
Lessee by any governmental authority in connection with/or incident to the
performance of this Agreement, Lessee agrees to require the same agreements from
any of its subcontractors.
ARTICLE 10: Furniture, Furnishings, Fixtures & Equipment:
A- Owner shall, at its sole expense, complete and finish out the Casino and
Casino area, decorated and fixtured, including but not limited to, carpets and
drapes. This includes all costs of roads adequate parking, access corridors,
walkways, landscaping and generally putting the buildings into such condition
that Lessee may commence its business activities. Such costs will not include
items specified in (B) below.
B- Lessee shall at its sole expense, provide all gaming devices and relating
equipment necessary for the operation of the Casino.
C- It is understood that any gaming devices and related equipment provided by
Lessee shall remain the property of the Lessee.
D- Lessee shall, at all times, keep and maintain the inside of the Casino area
and the furniture, furnishings, fixtures and equipment of the Casino in good
order and repair, reasonable wear and tear excepted. Owner will allocate the
maximum possible parking for the Casino, and the parking attendants for Casino
parking shall be the responsibility of Lessee.
<PAGE>
ARTICLE 11: Conduct of Business:
A -Cleopatra will manage and conduct the casino to profits to the best of its
ability and in a proper efficient and business like manner to the intent that
ambiance of a high class casino shall at all time thereafter be maintained.
Cleopatra shall bear the cost of all equipment to be used for the purposes of
gaming, such equipment to include gaming tables, slot machines and related
equipment, including chips and tokens to be used for gaming.
Cleopatra shall bear the costs of close circuit television and computer
equipment.
All such equipment shall remain at all times the property of Cleopatra.
Cleopatra will provide technical assistance including architectural services and
engineering consultation.
B- During the term of this Agreement, the Casino and Gambling License shall be
used solely for the purpose of this Agreement. Lessee shall manage and operate
the Casino to the best of its ability; and in a proper efficient, and
businesslike manner, and to the intent that the ambiance of a high class Casino
shall at all times be maintained. Lessee shall keep the Casino open and
available for business on all days for the months of January through December
(twelve (12) months) no less than eight (8) hours per day, but only during the
times when there is sufficient business to justify the operation, except when
prevented by force majeure. The phrase " prevented by force majeure"as used in
this Agreement, shall be deemed to mean prevented by government regulation; wars
or civil strife, which might impede travel to and from Tunisia, riots, civil
commotion; war; hostilities; invasion, act of foreign enemies, rebellion
revolution, insurrection, and any operation of the forces of nature against
which precautions could not reasonable have been expected to have been taken.
Rent under this Agreement shall abate so long as Casino operations are prevented
by force majeure, provided that if the force majeure continues for six (6)
months, Lessee may at its convenience terminate its Agreement.
C- Lessee shall employ and train all employees of the Casino. All such employees
shall be the employee of the Lessee. All employees of the Casino shall be neatly
and cleanly attired and if any of the Casino's employees shall in any way bring
discredit upon the country of Tunisia or any city therein, they shall be
immediately discharged.
D- Lessee shall comply, and the casino shall be operated so as to comply, with
all laws and regulations presently in force or subsequently enacted by Tunisia.
E- Lessee shall operate and provide in the Casino all casino services normally
operated and provided in casinos or comparable class.
F - Lessee shall be entitled to operate service liquor bars within the Casino
area for the purpose of selling drinks to patrons of the Casino as well as
dispensing complimentary beverages.
<PAGE>
ARTICLE 12: Relationship of the parties:
Nothing herein contained shall be construed as effecting a co-partnership or
joint venture between the parties, and it is the express intent of the parties
that the relationship between them shall be solely and exclusively that of
Landlord and Tenant, under the terms and conditions hereof.
ARTICLE 13: Hold Harmless:
Owner and Lessee shall at all times during the term of this Agreement defend,
indemnify and hold harmless each other from any liability or penalty which may
be imposed by reason of act or omission of a third party, and also for all
claims, suits or proceedings that may be brought against Owner or Lessee with
respect to such cause.
ARTICLE 14: Insurance:
During the term of this Agreement, Lessee shall maintain, at Lessee's expense,
in a reasonable insurance company or companies reasonably satisfactory to Owner,
personal injury and property liability insurance with coverage of no less than
$1,000,000.00 for personal injury and no less than $500,000.00 for property
damage, and Owner shall be listed as an additional insured by such policies of
workmen's compensation or similar insurance as may be required by applicable
laws.
ARTICLE 15: Untenantability and Hostilities:
If, during the term of this Agreement, any of the Casino area are made wholly
untenantable by fire or other casualty so that said premises cannot be properly
utilized as a casino facility, then Lessee's obligations (including the
obligation to pay rent) shall abate during such period, until such time as the
operation of the Casino may resume. If such condition continues for more than
twelve (12) months, then the Lessee may terminate this Agreement.
ARTICLE 16: Right of Inspection:
Owner shall have the right to enter upon and/or inspect any part of the casino
area at any time and may also inspect any part of the Casino area at any time
and may also inspect any of the gambling equipment, other special equipment,
bankrolls, safe, or accounts used and maintained on casino area at any time;
provided, however, such visits or conditions shall be conducted with as little
disturbance as possible to the operations of the Casino and in the company of
representative of Lessee.
ARTICLE 17: Assignment:
Lessee agrees not to sublease or assign Agreement or its interest in the Casino
or its interest in Casino, and any of its rights or privileges under this
Agreement without the written prior consent of Owner which shall not be
unreasonably withheld. Assignment of the present Agreement or the subcontracting
of the work or services to be performed hereunder, is so stated by the Owner
shall not relieve Lessee or its duties or conditions hereunder.
<PAGE>
ARTICLE 18: Appearance of Premises:
It is expressly understood that the appearance of the Casino and the Casino area
have been provided by the Owner at its expense, including placing if signs and
the general conduit of the business on Casino area, will have a material effect
on the reputation of Owner. The Owner hereby expressly reserves the right to
control and regulate the appearance of the Casino and the Casino area and at all
times during the term of this Agreement, including but not limited to the
regulation of any signs, advertisement or other promotional material used in
connection with the operation of the Casino. Lessee shall have the right to
advertise the Casino but the format of the advertising shall be in keeping with
the dignity of the Casino, and the Owner shall not unreasonably withhold its
approval of the form of such advertising.
ARTICLE 19: Entertainment:
Lessee shall have the right to decide if entertainment is needed in the Casino.
Lessee shall be responsible for the payment for all entertainment in the Casino.
ARTICLE 20: Default:
Default by Lessee:
At any time during the term of this Agreement, one or more of the following
events shall occur, Owner may forthwith terminate this agreement.
Lessee shall fail to make any payment due under this Agreement prior to the date
upon which it is due, and such failure to continue for thirty (30) days after
written notice;
Lessee shall fail or refuse to fully perform or comply with this Agreement,
covenant, or undertaking, which is rendered by this Agreement to perform or
comply with, or shall otherwise violate any provision hereof, and such failure
shall continue for thirty (30) days after written consent.
Provided that, if Lessee is diligently attempting to cure a non-monetary default
but cannot reasonably do so in thirty (30) days, the cure period shall continue
as long as reasonable necessary for Lessee to cure the non-monetary default, in
the exercise of reasonable diligence.
ARTICLE 20.2: Default by Owner :
The Lessee may by written notice to the Owner terminate this agreement if he
considers that the Owner is not discharging his obligations under this
Agreement, stating the reasons therefore. In the event that the Owner does not
respond to such notice within fifteen (15) days, the Lessee may deem the
Agreement terminated, or at his convenience the Lessee may correct defaults at
the Owner's expense and withhold rents until Lessee has been repaid Lessee's
costs.
<PAGE>
ARTICLE 20.3: Claims for Default:
Any claim for damages arising out of default and termination shall be agreed
between the Owner and the Lessee or, failing agreement, shall be referred to
arbitration in accordance with Clause 25 of this Agreement.
ARTICLE 21: Notices:
Unless a party hereto shall in written direct other, all notices to be served
and rendered if sent by Registered mail directed to:
OWNER: Compagnie Monastirienne Immobiliere et Touristique S.A. 15, Rue
su ler Juin, Tunis, Tunisia
COPY TO:
LESSEE: Cleopatra Palace Limited, Flat 2 Chartwell House, 80 Wimbledon
Parkside London SW19 5LN England.
COPY TO:
Any party may change its address for notice by written notice and such change
shall be effective upon actual receipt of same.
ARTICLE 22: Governing Law:
This Agreement is subject to and shall be interpreted in accordance with the
laws of Tunisia.
ARTICLE 23: Arbitration:
Any dispute between Owner and Lessee arising from the execution or
interpretation of the provisions in this Agreement, if not settled amicable,
shall be settled by an arbitral tribunal consisting of three arbitrators whose
award shall be final and enforceable.
Each of the above mentioned party shall appoint an arbitrator and the two
arbitrators before proceeding to arbitration shall appoint a Chairman who shall
be the Chairman of the arbitral tribunal. If the two arbitrators as mentioned
above fail within a delay of 30 days after their appointment to appoint the
Chairman, then each party may request the first President of the Appeal Court of
Tunis to appoint such Chairman. The same procedure shall apply if either party
abstain from appointing its arbitrator.
The arbitration shall be conducted in Tunisia.
<PAGE>
ARTICLE 24: Promotional Material:
Lessee will annually prepare a specification book for a program of promotional
and touristic activities.
ARTICLE 25: Language and Interpretation:
The condition of the Agreement are drawn in English its interpretation should be
in conformity with the parties's intention and the technical meaning.
The headings in the Agreement shall not be used in its interpretation.
The singular includes the plural, the masculine includes the feminine, and
vise-versa where the context requires.
If there is conflict between provisions of the Agreement, the last to be written
chronologically shall prevail, unless otherwise specified.
ARTICLE 26: Alterations:
Should circumstances arise which call for modifications of the agreement these
may be made by mutual consent given in writing. Proposals in this respect from
any party shall be given due consideration by the other party.
ARTICLE 27: Savings Clause:
In the event any provision of this Agreement is inconsistent with or contrary to
any applicable law, rule, regulation, code, or other, said provision shall be
deemed to be modified to the extend required to comply with said law, rule
regulation, code or order and as so modified said provision and this Agreement
shall continue in full force and effect.
WITNESS WHEREOF, this Agreement is executed in duplicate of like terms and
effect, on this
CLEOPATRA PALACE LIMITED
By: /s/ Cleopatra Palace Limited
COMPAGNIE MONASTIRIENNE IMMOBILIERE ET TOURISTIQUE
By: /s/ Compagnie Monastirienne Immobiliere et Touristique S.A.
EXHIBIT 10.142
LETTER OF INTENT DATED SEPTEMBER 24, 1996 BETWEEN
THE REGISTRANT AND GRAND HOTEL KRASNAPOLSKY N.V.
NuOasis International Inc.
43 Elizabeth Avenue o Nassau, Bahamas
Telephone (011) 44-171-493-1166 o Facsimile (011) 44-171-493-1197
October 7, 1996
Board of Directors
Grand Hotel Krasnopolsky N.V.
Dam 9 - 1012 JS
Amsterdam, The Netherlands
RE: Formation and capitalization of a joint enterprise, to be
incorporated under the laws of the Netherlands Antilles (the
"NV Company") and jointly owned in equal proportions by
NuOasis International Inc., a corporation organized under the
laws of the Commonwealth of the Bahamas ("NuOasis") and Grand
Hotel Krasnopolsky N.V., a corporation organized under the
laws of The Netherlands ("GHK")
Gentlemen:
This letter agreement, when countersigned as indicated below ("Agreement"), will
confirm and memorialize the agreement by and among, on the one hand, Nona
Morelli's II Inc., a corporation organized under the laws of the United States
("Nona") and its wholly-owned subsidiary, NuOasis, and on the other hand, Grand
Hotel Krasnopolsky N.V., a corporation organized under the laws of The
Netherlands ("GHK"), to enter into the within-described series of transactions
(the "Transaction") whereby GHK (or its designee) and NuOasis will cause the
formation of the NV Company (as defined herein) and capitalize such enterprise
with cash, securities and assets, all upon and subject to the following terms
and conditions.
This Agreement is made and entered into by NuOasis based upon the following
facts:
A. NuOasis has the right to acquire seventy percent (70%) of the
share capital of Cleopatra Palace Limited, an Irish corporation
("Cleopatra") and NuOasis Resort & Casino, Margarita A.V.V., an
Aruba corporation in organization ("NuOasis Margarita"); and,
B. Cleopatra is the owner of all of the issued and outstanding share
capital of Cleopatra Cap Gammarth Limited ("Cleopatra Gammarth"),
Cleopatra Hammamet Limited ("Cleopatra Hammamet"), and Cleopatra
Palace Monastir Limited, a corporation in organization
("Cleopatra Monastir"), corporations serving as subsidiaries of
Cleopatra and organized under the laws of Tunisia; and,
C. Cleopatra Hammamet has the right to conduct casino gaming in the
province of Hammamet, Tunisia pursuant to an order issued by the
government of Tunisia (the "Hammamet License") at a casino gaming
facility located in Hammamet (the "Hammamet Casino"), designed
and built to suit Cleopatra pursuant to the Casino Lease and
Management Operating contract with Societe Loisirs Club Hammamet
(the "Hammamet Lease") which conveys to Cleopatra Hammamet
certain use and operating rights to the Hammamet Casino; and,
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Grand Hotel Krasnopolsky N.V.
October 7, 1996
D. Cleopatra Gammarth has the right to conduct casino gaming in the
province of Cap Gammarth, Tunisia pursuant to an order issued by
the government of Tunisia (the "Cap Gammarth License") at a
casino gaming facility (the "Cap Gammarth Casino"), located on
the premises of the Le Palace Hotel, itself a part of the hotel
and commercial park known as Cleopatra Palace Resort at Cap
Gammarth, designed and built to suit Cleopatra pursuant to the
Casino Lease and Management Operating contract with Societe
Loisirs Club Cap Gammarth (the "Cap Gammarth Lease") which
conveys to Cleopatra Gammarth certain use and operating rights to
the Cap Gammarth Casino; and,
E. Cleopatra World has the rights to manage the Le Palace Hotel and
adjoining commercial establishments, including eight (8)
third-party operated restaurants and fifty-four (54) clothing and
consumer goods retail shops, an independent health club, a
stand-alone beach club and forty (40) deluxe apartments
(collectively, the "Gammarth Hotel"); and,
F. Cleopatra Monastir, a corporation in organization, has the right
to manage and option to purchase the 1,000-room hotel and
entertainment complex known presently as the "Jockey Club" (the
"Monastir Hotel"), in the town of Monastir, Tunisia, and to
conduct casino gaming in a 50,000 square foot casino facility
(the "Monastir Casino"), to be built to suit for Cleopatra
pursuant to the Agreement with (the "Monastir Lease"), which
conveys to Cleopatra certain use, operating and management rights
to the existing hotel and entertainment complex and to the
proposed casino; and,
G. NuOasis Margarita, a corporation in organization, has an
agreement in principle to acquire, develop and own in perpetuity
a 418-room deluxe hotel and 50,000 square foot gaming casino
currently known as the "Curacao Beach Hotel", presently under
construction on the Island of Margarita, in the southern
Caribbean, which NuOasis intends to complete, open and operate as
the "NuOasis Resort & Casino - Margarita Isle (the "Margarita
Resort").
H. As soon as practicable after the execution hereof, GHK and
NuOasis wish to enter into a joint business enterprise in the
form of a new limited liability company under the laws of the
Netherlands Antilles (the "NV Company") for the purpose of
acquiring, constructing, developing, operating and/or managing
real and leasehold interests in hotels, food services and casino
gaming and non-gaming-related activities (generally referred to
herein as "Properties"); and,
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Grand Hotel Krasnopolsky N.V.
October 7, 1996
I. The initial Properties to be acquired, developed, operated and
managed by the NV Company will be the Hammamet Casino, the
Gammarth Casino and the Le Palace Hotel. Subject to the initial
level of capitalization of the NV Company, as set forth herein,
it may also acquire, develop, operate and manage the Monastir
Casino, the Monastir Hotel, the Margarita Resort, and purchase a
controlling ownership interest in the Le Palace Hotel.
Based upon these facts, and the representations and warranties contained herein,
our agreement is as follows:
1. Formation and Capitalization of NV Company
Subject to the satisfaction (or waiver) of the terms and conditions
contained herein, at the Closing (as herein defined), NuOasis and GHK
shall cause the formation of NV Company with authorized share capital
of the equivalent of Forty Million Dollars (USD40,000,000), comprised
of Forty Thousand (40,000) shares with nominal value of the equivalent
of One Hundred Dollars (USD100) per share. Immediately following the
formation of NV Company, GHK and NuOasis shall each subscribe for share
capital of the NV Company as follows:
A. Subscription by NuOasis. NuOasis will transfer, or cause
Cleopatra to transfer to the NV Company, in consideration for a
fifty percent (50%) interest in the NV Company, its rights to
seventy percent (70%) interest in Cleopatra Hammamet, Cleopatra
Gammarth, Cleopatra Monastir and Cleopatra World, and its rights
to fifty percent (50%) interest in NuOasis Margarita (as defined
herein and collectively referred to herein as the "NuOasis
Subsidiaries"); and,
B. Subscription by GHK. GHK will initially transfer, or cause to be
transferred to the NV Company the sum of Twenty Million Dollars
(USD20,000,000), less the "Pre- Closing Contributions" (as
defined herein), for use by the NV Company to complete the
construction, development and opening of the two (2) casinos
comprising the principal assets of Cleopatra Hammamet and
Cleopatra Gammarth, to manage and acquire the rights and
ownership interest of Cleopatra World. Subscription payments by
GHK shall be made as follows:
(i) USD3,500,000 upon formation of the NV Company and Closing
hereunder;
(ii) USD12,000,000 payable in two (2) equal installments of
USD6,000,000 due thirty (30) days and again sixty (60) days
following Closing herein;
(iii)USD4,500,000 payable upon execution of the Hotel Management
Agreement (as defined herein) with respect to the Le Palace
Hotel.
GHK may elect, at its discretion, to make further
contributions to fund the development of the Monastir Hotel,
Monastir Casino and Margarita Resort ("Secondary
Contribution").
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Grand Hotel Krasnopolsky N.V.
October 7, 1996
2. Advances by GHK
During the period immediately following the execution hereof and ending
the Closing Date (the "Pre-Closing Period"), GHK agrees to provide an
amount of cash (the "Pre-Closing Contributions") up to the lesser of
USD2,000,000, or such amount as may be required to pay the costs and
expenses incurred or becoming due during the Pre-Closing Period
(whether before or after the formation of the NV Company), for the
operation of the Le Palace Hotel, the Hammamet Casino and the Gammarth
Casino in accordance with the budgets for the respective facilities
(the "Pre-Opening Budget"), attached hereto and incorporated by
reference as Schedule "1".
Such Pre-Closing Contributions (if any) will be collateralized by
NuOasis by the pledge and delivery to a mutually acceptable
escrowholder of shares of Nona common stock equal in value to 120% of
the aggregate Pre-Closing Contributions.
3. Use of Capital by NV Company
A. Completion of Development, Construction and Opening of NV Company
Properties. Upon Closing the NV Company will acquire majority
ownership rights and the obligations to complete, open for
business and manage or supervise the management of the initial
Properties. It is mutually agreed that the GHK Capitalization,
consisting of up to USD20,000,000 will be utilized by the NV
Company, unless otherwise agreed by the Operating Committee (as
defined below), as follows:
(i) USD6,500,000 will be utilized to finance the remaining
Pre-Opening Budget costs and expenses related to the
Hammamet Casino; and,
(ii) USD7,000,000 will be utilized to finance the remaining
Pre-Opening Budget costs and expenses related to the
Gammarth Casino; and,
(iii)USD4,500,000 will be utilized to finance and retire debt of
Cleopatra World related to the opening and working capital
requirements of the Le Palace Hotel.
B. Reimbursement of Costs Paid by NuOasis Pending Closing. Up to
USD5,000,000 - USD1,000,000 out of Pre-Opening Contributions (if
any) may be utilized to reimburse NuOasis or Cleopatra for costs
and expenses incurred during the Pre-closing Period in the
furtherance of the development, completion and opening of the
subject Properties and contained in the Pre-Opening Budget which,
as of the date hereof, have been or will be incurred or accrued
directly by NuOasis or Nona on behalf of the subject facilities.
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Grand Hotel Krasnopolsky N.V.
October 7, 1996
4. Closing
The closing of this Transaction (the "Closing") shall occur within five
(5) business days following the formation of the NV Company, at the
office of GHK or such other place or time as the parties hereafter may
mutually agree following the execution hereof.
At Closing NuOasis shall cause the transfer to the NV Company of
seventy percent (70%) of the share capital of (a) Cleopatra Hammamet;
(b) Cleopatra Cap Gammarth; and (c) Cleopatra World.
5. Non-Disclosure; Non-Circumvention
NuOasis and GHK, for themselves and on behalf of their Affiliates (as
defined below), agree that, for a period of two (2) years immediately
following the termination of this Agreement, they will not:
A. Disclose. Disclose or make known to any person, firm or
corporation not already in the public domain, including but not
limited to the names or nature of the business opportunities,
businesses, or addresses of any of the projects, Properties or
customers of the other party or its Affiliates, any information
pertaining to them; or,
B. Circumvent. Call on, solicit, or take away, attempt to call on,
solicit, or attempt to take away any of the Properties, projects,
business opportunities, properties (owned or in the negotiating
stage), or customers of the other parties or their Affiliates, on
whom the parties hereof called or became acquainted with during
the process of investigating the feasibility of the transaction
contemplated by this Agreement, either for itself or for any
other person, firm or corporation.
For the purposes of this Agreement, an "Affiliate" of, or person
affiliated with, a specified person is a person that directly or
indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the person specified.
The term associate means (I) a corporation or organization (other than
the NV Company) of which such person is an officer or partner or is,
directly or indirectly, the beneficial owner of ten percent (10%) or
more of any class of equity securities; (ii) any trust or other estate
in which such a person has a substantial beneficial interest or as to
which such person serves as trustee or in a similar capacity; and,
(iii) any relative or spouse of such person, or any relative or such
spouse, who has the same home as such person or is director or officer
of the parties hereto.
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Grand Hotel Krasnopolsky N.V.
October 7, 1996
6. Representations and Warranties of NuOasis
In connection herewith, and as an inducement to GHK to enter into this
Agreement, NuOasis confirms that:
A. The NuOasis Subsidiaries. The shares of the NuOasis Subsidiaries,
when delivered, will be free and clear of liens, claims and
encumbrances; NuOasis has all necessary right and power to enter
into this Agreement and to cause the transfer to NV Company
NuOasis' seventy percent (70%) of the equity of Cleopatra
Hammamet, Cleopatra Gammarth, Cleopatra World, Cleopatra Monastir
and fifty percent (50%) of NuOasis Margarita, Cleo Aruba, to NV
Company as contemplated herein; and, that any necessary approval
by regulatory authorities, shareholders of NuOasis or third
parties will be obtained prior to Closing.
B. Status of the NuOasis Subsidiaries. The NuOasis Subsidiaries with
the exception of NuOasis Margarita and Cleopatra World, which are
incorporated under the laws of the Netherlands Antilles and
British Virgin Islands, respectively, are duly organized, validly
existing, and in good standing under the laws of their
jurisdiction.
C. Capitalization of the NuOasis Subsidiaries. The capitalization of
the NuOasis Subsidiaries is, as of the date hereof is comprised
of the following: (I) 1,000 shares of authorized capital stock,
TD1,000 par value, of which all 1,000 shares are issued and
outstanding as to Cleopatra Hammamet; (ii) 1,000 shares of
authorized capital stock, TD1,000 par value, of which all 1,000
shares are issued and outstanding as to Cleopatra Gammarth; (iii)
50,000 shares of authorized capital stock, USD1.00 par value, of
which all 50,000 shares are subscribed but not yet issued and
outstanding as to Cleopatra World; (iv) 1,000 shares of
authorized capital stock, TD1,000 par value, of which all 1,000
shares are subscribed but not yet issued and outstanding as to
Cleopatra Monastir; and (v) 100,000 shares of authorized capital
stock, NAD1.00 par value, of which all 100,000 shares are
subscribed but not yet issued and outstanding as to NuOasis
Margarita.
D. Compliance with Laws, Rules and Regulations. The NuOasis
Subsidiaries are in compliance with all applicable laws, rules
and regulations, relating to their business, except to the extent
that non-compliance would not materially and adversely affect
their respective business, operations, or value of their assets.
E. Value of the Principal Assets of the NuOasis Subsidiaries.
NuOasis' investment in the NuOasis Subsidiaries, directly and
indirectly through Cleopatra and by way of costs and expenses
incurred by NuOasis and Nona for the benefit of such
subsidiaries, as of the date hereof, is approximately
USD17,100,000 represented by USD16,000,000 invested by NuOasis
which NuOasis or Cleopatra have or are in the process of
utilizing to provide working capital to and guarantees for the
use of Cleopatra Hammamet, Cleopatra Gammarth, Cleopatra World
and Cleopatra Monastir, and approximately USD1,100,000 in costs
and expenses incurred by Nona for which NuOasis and/or Cleopatra
have assumed responsibility for reimbursement. The allocation of
such investments by NuOasis are identified in Schedule "2"
attached hereto (the "Investments").
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Grand Hotel Krasnopolsky N.V.
October 7, 1996
In addition, pursuant to the agreement in principle with the
present owners of the Margarita Resort, NuOasis has agreed to
purchase the property for USD12,500,000 and a commitment to
complete the construction and furnishing of the property, and
contribute the facility to NuOasis Margarita in exchange for its
50% interest in NuOasis Margarita.
Also, pursuant to the agreement in principle with the present
owners of Le Palace Hotel, Cleopatra World has agreed to purchase
the majority interest, being 55%, in the Tunisian corporation
which owns the Le Palace Hotel for USD18,500,000, payable
USD6,500,000 in cash at closing and USD12,000,000 in the form of
a promissory note, the terms of which have not yet been
finalized.
F. Changes in Valuation of NuOasis Subsidiaries. Since September 30,
1996 except as set forth in Schedule "A" attached hereto (the
"Valuations"), as may be amended from time to time prior to
Closing, the value of the principal assets of the NuOasis
Subsidiaries, net to the interest of being transferred to the NV
Company pursuant hereto is USD as set forth in Schedule "8" have
not (I) discharged or satisfied any liens other than those
securing, or paid any obligation or liability which materially
change the values shown on the Valuations.
7. NuOasis Subsidiaries; Conduct of Business
Between the date hereof and the date of Closing or termination hereof,
except with the prior written notice to GHK, NuOasis shall cause the
NuOasis Subsidiaries to:
A. Conduct Business as Usual: Conduct their business only in the
usual and ordinary course and the character of such business
shall not be changed nor any different business be undertaken;
B. Maintain Current Capital Structure: Refrain from making any
changes in their authorized or issued capital stock;
C. Avoid Special Settlements: Not discharge or satisfy any lien or
encumbrance or obligation or liability, other than current
liabilities shown on their respective financial statements
contained in the Valuations, and current liabilities incurred
since that date in their respective course of business;
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Grand Hotel Krasnopolsky N.V.
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D. Avoid Distributions: Not make any payment or distribution to
their respective stockholders, or purchase for cash or redeem any
of their respective share capital;
E. Avoid Encumbrance or Cancellation of Debt: Not mortgage, pledge,
or subject to lien or encumbrance any of their respective assets,
tangible or intangible not in the ordinary course of business;
F. Provide Additional Information: Furnish GHK with such
documentation and information regarding the NuOasis Subsidiaries
as is reasonably requested.
8. Agreement to Cause NV Company to Retain GHK for Management of Hotel
Properties
Upon Closing the NV Company will cause Cleopatra World to enter into a
Management and Food Service Agreement in form and content to the
agreement attached hereto as Schedule "5" with GHK (the "Hotel
Properties Manager"), as to the Le Palace Hotel, and as to other
hotels acquired by the NV Company. The Hotel Properties Manager shall
supervise all hotel and food service aspects of the Le Palace Hotel
and other hotel properties acquired by NV Company, and shall authorize
the disbursement of funds by the NV Company for such development and
management in accordance with the Pre-Opening Budget for Le Palace
Hotel as set forth herein or, as to all such future hotel properties
with the approval of the Operating Committee.
9. Agreement to Cause NV Company to Retain NuOasis for Management of
Casino Gaming Properties
Upon Closing the NV Company will cause the Properties to enter into a
Gaming Management Agreement identical in form and content to the
agreement attached hereto as Schedule "6" (the "Casino Management
Agreement") with NuOasis ("Casino Properties Manager") who will
configure the operational design of the respective casinos and manage
the day-to-day operations of all casinos acquired or to be managed by
the NV Company.
10. Adoption of By-Laws of NV Company
The NV Company shall approve and adopt By-Laws identical in form and
content to the agreement attached hereto as Schedule "7" (the "NV
By-Laws") which shall call for the formation of an Operating
Committee, which shall have four (4) members, two (2) of which shall
be selected by NuOasis and two (2) of which shall be selected by GHK
(the "Operating Committee"). The Operating Committee shall make all
determinations by majority vote; provided that (i) a unanimous vote
shall be required to approve the sale of all or substantially all of
the NV Company's assets or equity interest, and (ii) in the event of
an impasse with respect to any determination to be made by majority
vote, the membership of the Operating Committee shall be temporarily
increased to five (5) members, with the fifth member to be selected by
mutual agreement between GHK and NuOasis, in order to resolve such
impasse by majority vote.
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Grand Hotel Krasnopolsky N.V.
October 7, 1996
11. Conditions Precedent to Consummate Transaction
The obligation of GHK or NuOasis to effect the Transaction
contemplated by this Agreement is subject to:
A. Formation of NV Company; Adoption of By-Laws. The NV Company
shall be duly formed as contemplated herein, and the NV By-Laws
shall be approved by GHK and NuOasis.
B. Appointment of NV Company Directors. As soon as reasonably
practicable after the formation of the NV Company, but in any
event on or before the Closing Date, NuOasis and GHK shall each
appoint two (2) directors who shall be elected as Directors of
the NV Company.
C. Acceptance of the Value of the NuOasis Subsidiaries. GHK shall be
satisfied with the results of its due diligence review of the
NuOasis Subsidiaries, including without limitation its review of
(a) the Valuations, (b) matters related to governmental
permitting and approvals, (c) legal aspects of the respective
Leases, (d) physical aspects of the respective Properties, (e)
revenues expected to be generated by gaming devices and tables at
the respective casinos, (f) projected income and expenses for the
respective hotels, (g) all documentation evidencing the
transactions described in this Agreement to be signed on or
before the Closing, and (h) all other matters related to the
feasibility of the Transaction.
D. Capitalization of NV Company by GHK. GHK shall tender the GHK
Capitalization, less the aggregate amount of its Pre-Closing
Contributions (the GHK Capitalization after subtracting out the
Pre-Closing Contributions shall hereinafter be referred to as the
"Pre-Closing Capital"), for development, construction and
continuing working capital purposes, in accordance with the
respective budgets, or amended budget adopted by the parties
hereto, or for purposes as otherwise required by the terms of any
of the respective Leases.
E. Activities Covered. The respective management agreements to be
entered into by the NV Company, NuOasis and GHK on the Closing
Date shall be executed by all parties.
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Grand Hotel Krasnopolsky N.V.
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12. Additional Documents
NuOasis and GHK each agree to execute such additional instruments and
take such action as may be reasonably requested by the other party to
effect the formation and capitalization of the NV Company or otherwise
to carry out the intent and purposes of this Agreement.
13. Notices
All notices and other communications hereunder shall be in writing and
shall be sent by prepaid first class mail to the parties at the
following addresses, as amended by the parties with written notice to
the other:
To NuOasis: NuOasis International Inc.
43 Elizabeth Avenue
Nassau, Bahamas
Telephone: +44-171-493-1166
Facsimile: +44-171-493-1197
With copy to: Bruno Hunziker
Gruninger Hunziker Roth
Thunstrasse 83, CH-3000
Bern 16, Switzerland
Telephone: +41 (0) 31 356 5050
Facsimile: +41 (0) 31 356 5059
To GHK: Grand Hotel Krasnopolsky N.V.
DAM 9 - 1012 JS
Amsterdam, The Netherlands
Telephone: + (31) 30 554 6011
Facsimile: + (31) 30 554 6127
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.
14. Applicable Law
This Agreement was negotiated and shall be constructed under and
governed by the laws of The Netherlands, notwithstanding any
conflict-of-law provision to the contrary.
[NUOINLTD\AGR:GHKJVCO.LOI]-5
<PAGE>
Grand Hotel Krasnopolsky N.V.
October 7, 1996
15. Remedies on Disclosure or Circumvention
The parties hereto mutually acknowledge and agree that the damage
caused by breach or violation of the non-disclosure and
non-circumvention terms and covenants contained herein are difficult to
measure and, given such [LIQUIDATED DAMAGE CLAUSE]
16. Authority
The persons executing this Agreement are duly authorized to do so.
Further, the parties hereto each represent, through such executors,
that each has taken all action required by law or otherwise to properly
and legally execute and carry out the terms of this Agreement.
17. Entire Agreement
This Agreement sets forth the entire understanding between the parties
hereto and no other prior written or oral statement or agreement shall
be recognized or enforced.
18. Severability
If a court of competent jurisdiction determines that any clause or
provision of this Agreement is invalid, illegal, or unenforceable, the
other clauses and provisions of the Agreement shall remain in full
force and effect and the clauses and provisions which determined to be
void, illegal, or unenforceable shall be limited so that they shall
remain in effect to the extent permissible by law.
19. Assignment
Neither party may assign this Agreement without the express written
consent of the other party. And, in the event of any approved
arrangement, such assignment shall be binding on and inure to the
benefit of such successor, or, in the event of death or incapacity, on
their heirs, executors, administrators and successors of any party.
20. Waiver
No waiver by any party of the performance of any obligation by the
other shall be construed as a waiver of the same or any other default,
then, theretofore, or thereafter occurring or existing. This Agreement
may only be amended by a writing signed by all parties hereto.
21. 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.
[NUOINLTD\AGR:GHKJVCO.LOI]-5
<PAGE>
Grand Hotel Krasnopolsky N.V.
October 7, 1996
22. Facsimile Counterparts
If a party signs this Agreement and then transmits an electronic
facsimile of the signature page to the other party, the party who
receives the transmission may rely upon the electronic facsimile as a
signed original of this Agreement.
Sincerely,
NuOasis International Inc.
ACCEPTED AND AGREED
THIS ----- DAY OF ----------, 1996
Grand Hotel Krasnopolsky N.V.
By:-------------------------------
Name:
[NUOINLTD\AGR:GHKJVCO.LOI]-5
<PAGE>
SCHEDULE "1"
to the
Agreement
Dated October 7, 1996
<TABLE>
<CAPTION>
PRE-OPENING BUDGET
Cleopatra Cleopatra Le Palace Cleopatra Purchase of NuOasis
Hammamet Gammarth Hotel Monastir Interest in Margarita
Expenditure Casino Casino Mngmnt Casino Le Palace Hotel Resort
- ---------------------------------------- ------------- ---------- ----------- --------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Security Deposit $ 1,000 $ 1,000 $ 3,000
Advance Rent * - -
Gaming devices and related supplies 2,286 2,286
Table games and related supples
Furniture, fixtures and equipment
(non-gaming) 1,285 1,325
Pre-Opening working capital 500 500
Pre-Opening advertising 400 400
Bankroll 2,000 2,000
Contingency 500 500
TOTAL
</TABLE>
<PAGE>
SCHEDULE "2"
to the
Agreement
Dated October 7, 1996
THE INVESTMENTS
<PAGE>
SCHEDULE "3"
to the
Agreement
Dated October 7, 1996
THE HOTEL PROPERTIES MANAGER
<PAGE>
SCHEDULE "4"
to the
Agreement
Dated October 7, 1996
THE CASINO MANAGEMENT AGREEMENT
<PAGE>
SCHEDULE "5"
to the
Agreement
Dated October 7, 1996
THE NV BY-LAWS
<PAGE>
SCHEDULE "6"
to the
Agreement
Dated October 7, 1996
NET INTEREST BEING TRANSFERRED TO THE NV COMPANY
<PAGE>
SCHEDULE "A"
to the
Letter Agreement
Dated October 7, 1996
THE VALUATIONS
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF USE OF CAPITAL BY NV COMPANY
Cleopatra Cleopatra Le Palace Cleopatra Purchase of NuOasis
Hammamet Gammarth Hotel Monastir Interest in Margarita
Expenditure Casino Casino Mngmnt Casino Le Palace Resort Hotel
- ---------------------------------------- ----------- ----------- ------------ --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Security Deposit $ $ 1,000,000 $ 3,000,000 $ $ - $ -
Advance Rent 1,600,000 - - - -
Gaming devices and related supplies 2,400,000 2,500,000 - - 2,500,000
Furniture, fixtures and equipment
(non-gaming) 1,285,000 2,375,000 - - 11,000,000
Pre-Opening working capital 210,000 300,000 1,450,000 5,000,000(1) 12,000,000
Bankroll 2,000,000 2,000,000 - - 2,000,000
TOTAL $ 7,495,000 $ 8,275,000 $ 4,450,000 $ $ 5,000,000 $ 16,500,000
=========== =========== ============ =========== ============= ============
</TABLE>
[NUOINLTD\AGR:GHKJVCO.LOI]-5
EXHIBIT 10.143
COLLATERAL SUBSTITUTION AGREEMENT DATED DECEMBER 29, 1995
BETWEEN THE REGISTRANT AND NG MAN SUN
COLLATERAL SUBSTITUTION AGREEMENT
This Collateral Substitution Agreement (the "Agreement") is made this 29th
day of December 1995, by and between Nona Morelli's II Inc, a Colorado
corporation ("Nona") and Silver Faith Holdings Limited, a corporation organized
under the laws of Hong Kong ("Silver Faith").
WHEREAS, on May 1, 1995, Nona and Dragon Sight International Amusement
(Macau) Company ("Dragon") entered into an Asset Purchase Agreement (the
"Purchase Agreement") pursuant to which Nona purchased from Dragon a Net Profits
Interest (as defined in the Purchase Agreement); and,
WHEREAS, a closing of the Asset Purchase Agreement occurred on May 23,
1995; and,
WHEREAS, the consideration delivered to Dragon in the purchase of the Net
Profits Interest consisted of, among other things, a promissory note in the
principal amount of US$3,000,000 (the "Note") and a security agreement of the
same date ("Security Agreement") conveying to Dragon a security interest in
certain securities owned by Nona consisting of 250,000 shares of Series B
Preferred Stock of NuOasis Gaming Inc. (the "NuOasis Shares" or "Original
Collateral"); and,
WHEREAS, Silver Faith owns or has the right to acquire the Note, Security
Agreement and Original Collateral; and,
WHEREAS, Nona and Silver Faith have agreed to a substitution of certain
other assets of Nona for the NuOasis Shares as collateral for the Note and the
Security Agreement.
NOW, THEREFORE, in consideration of and in reliance on the mutual promises
and representations and warranties contained in this Agreement, and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Silver Faith and Nona agree as follows:
1. Pledge of Substitute Collateral
In consideration for the release of the NuOasis Shares as the Original
Collateral, as provided for herein, Nona hereby pledges and grants to Silver
Faith a security interest in (a) 10,000 shares of no par value common stock of
Fantastic FoodsInternational Inc., a California corporation ("Fantastic
Shares"), (b) 6,000,000 New Class D Warrants to Purchase Common Stock of NuOasis
Gaming Inc., a Delaware corporation (the "NuOasis New Class D Warrants"), and
(c) One Million (1,000,000) shares of capital stock of Cleopatra Palace Limited,
a corporation organized under the laws of Ireland ("Cleopatra Shares").
Collectively, the Fantastic Shares, the NuOasis New Class D Warrants and the
Cleopatra Shares are referred to herein as the "New Collateral", and are valued,
for the purpose of this Agreement, at US$3,000,000 as allocated in Exhibit "A"
attached hereto.
2. Release of Original Collateral
Inconsideration for Nona's assignment and transfer of the New
Collateral, Silver Faith hereby releases any and all claims which it may have to
the NuOasis Shares pursuant to the Note or Security Agreement, or otherwise, and
agrees to convey and deliver to Nona, to have and to hold forever, all of Silver
Faith's security interest in the NuOasis Shares, and any claims of Silver Faith
related to the NuOasis Shares. And, Silver Faith warrants that it has the power
and authority, and does hereby agree to transfer same to Nona at Closing, free
and clear of all liens and encumbrances.
[NM\AGR:SFHCOLAT.AGR]-4
1
<PAGE>
3. No Prior Encumbrances or Assignment
Silver Faith represents and covenants that it has not assigned,
pledged or otherwise in any manner whatsoever conveyed or transferred to any
third party the NuOasis Shares, or any security interest therein, either by
instrument in writing or otherwise.
4. Transfer of New Collateral by Nona
Nona agrees to transfer to Silver Faith, or its designee(s), the New
Collateral pursuant to the following terms and conditions:
A) Assignment. Nona will deliver certificates and
other appropriate documents evidencing Nona's
title to the respective securities comprising the
New Collateral, together with properly signed and
guaranteed stock powers, if applicable. Such
assignment shall be made on an assignment separate
from such certificates at Closing.
B) Authority to Transfer. Nona represents and
warrants that it has full legal power, right and
authority to enter into this Agreement and to
convey the New Collateral, as provided herein,
free and clear of encumbrances, and that duly
authorized corporate action, if appropriate, has
or will be taken by Nona prior to the date of
Closing.
5. Effective Date and Closing
It is mutually understood and agreed that this Agreement may require
the consent and execution of third parties, and, as a result, effecting the
exchange of the Original Collateral for the New Collateral ("Closing") may take
up to 60 days from the date hereof. Notwithstanding the actual date of Closing,
the effective date of this Agreement shall be the date first written above
("Effective Date").
[NM\AGR:SFHCOLAT.AGR]-4
2
<PAGE>
6. No Detrimental Releases
Silver Faith and Nona expressly acknowledge and agree that before
executing this Agreement, each party hereto has been fully informed of the
terms, contents, conditions and effects of this Agreement; that in executing
this Agreement and negotiating the terms thereof, each has had the benefit of
the advise of attorneys of its own choosing; and, that no promise or
representation of any kind has been made to any party by another party hereto,
or anyone acting for them, except as it expressly stated in this Agreement.
7. Miscellaneous
A. Survival of Representations and Warranties. All
representations, warranties, and covenants made by
any party in this Agreement shall survive the
Closing hereunder and the consummation of the
transactions contemplated hereby for three (3)
years from the Closing Date. Silver Faith and Nona
are executing and carrying out the provisions of
this Agreement in reliance on the representations,
warranties, and covenants and agreements contained
in this Agreement orat the Closing of the
transactions herein provided for including any
investigation upon which it might have made or any
representations, warranty, agreement, promise, or
information, written or oral, made by the other
party or any other person other than as
specifically set forth herein.
B. Costs and Expenses. Each party shall bear its
share of all costs and expenses incurred in this
proposed exchange and transfer.
C. Further Assurances. At any time and from time to
time, after the effective date, each party will
execute such additional instruments and take such
action as may be reasonably requested by the other
party to confirm or perfect title to any property
transferred hereunder or otherwise to carry out
the intent and 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.
[NM\AGR:SFHCOLAT.AGR]-4
3
<PAGE>
E. Notices. All notices and other communications
hereunder shall either be in writing and shall be
deemed to have been given if delivered in person,
sent by overnight delivery service or sent by
facsimile transmission, to the parties hereto, or
their designees, as follows:
To Silver Faith:
Silver Faith Holdings Limited Room 3078,
Diamond Square 3/F Shun Tak Centre
200 Connaught Road, Central, Hong Kong
Telephone: 011-852-2-559-8859
Facsimile: 011-852-2-540-5020
To Nona:
Nona Morelli's II Inc.
2 Park Plaza, Suite 470
Irvine, California 92714
Telephone:(714) 553-3232
Facsimile:(714) 833-7854
F. 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.
G. 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.
H. Governing Law. Notwithstanding that this Agreement
was negotiated and is being contracted for in
Macau and any conflict-of-law provision to the
contrary, the Agreement shall be governed by the
laws of the United States, State of California.
I. 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.
J. 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.
K. Severability. If any part of this Agreement is
deemed to be unenforceable the balance of the
Agreement shall remain in full force and effect.
L. Amendment. This Agreement may be amended only by a
written instrument executed by the parties or
their respective successors or assigns.
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. Time is of the Essence. Time is of the essence of
this Agreement and of each and every provision
hereof.
[NM\AGR:SFHCOLAT.AGR]-4
4
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
"Nona"
NONA MORELLI'S II INC.
a Colorado corporation
/s/ Fred G. Luke
By:----------------------------------------
Name: Fred G. Luke
Title: Chief Executive Officer
SILVER FAITH HOLDINGS LIMITED
a Hong Kong corporation
By:-----------------------------------------
Name:
Title:
[NM\AGR:SFHCOLAT.AGR]-4
5
<PAGE>
EXHIBIT "A"
to the
Collateral Substitution Agreement
dated December 29, 1995
NEW COLLATERAL
- Ten Thousand (10,000) shares of common stock of Fantastic
Foods International Inc., a California corporation,
Certificate No. 1, issued June 29, 1993 (the "Fantastic
Shares") valued at US$1,250,000
- Six Million (6,000,000) New Class D Warrants to Purchase
Common Stock of NuOasis Gaming Inc., a Delaware corporation,
Certificate No. (the "NuOasis New Class D Warrants"), valued
at US$250,000.
- One Million (1,000,000) shares of capital stock of Cleopatra
Palace Limited, a corporation organized under the laws of
Ireland, Certificate No. (the "Cleopatra Shares") valued at
US$1,500,000.
[NM\AGR:SFHCOLAT.AGR]-4
6
EXHIBIT 10.144
COLLATERAL RELEASE AGREEMENT DATED SEPTEMBER 30, 1996
BETWEEN THE REGISTRANT AND NG MAN SUN
COLLATERAL RELEASE AGREEMENT
This Collateral Release Agreement (the "Agreement") is made this --th day
of September 1996, by and between Nona Morelli's II Inc, a Colorado corporation
("Nona") and Mr. Ng Man Sun, doing business as Dragon Sight International
Amusement (Macau) Company ("Dragon").
WHEREAS, on May 1, 1995, Nona and Dragon Sight International Amusement
(Macau) Company ("Dragon") entered into an Asset Purchase Agreement (the
"Purchase Agreement") pursuant to which Nona purchased from Dragon a Net Profits
Interest (as defined in the Purchase Agreement); and,
WHEREAS, a closing of the Asset Purchase Agreement occurred on May 23,
1995; and,
WHEREAS, the consideration delivered to Dragon in the purchase of the Net
Profits Interest consisted of, among other things, a promissory note in the
principal amount of US$3,000,000 (the "Note") and a security agreement of the
same date ("Security Agreement") conveying to Dragon a security interest in
certain securities owned by Nona consisting of 250,000 shares of Series B
Preferred Stock of NuOasis Gaming Inc. (the "NuOasis Shares" or "Original
Collateral"); and,
WHEREAS, in a Collateral Substitution Agreement dated on or about December
31, 1995 Nona and Dragon agreed to a substitution of certain other assets of
Nona more particularly described in Exhibit "A" hereto (the "New Collateral")
for the NuOasis Shares as substitute collateral for the Note and the Security
Agreement.
WHEREAS, the Note has been paid in full and Nona and NuOasis International,
Inc., the current obligor under the Note, each desire a written release of the
security interest granted by Nona in the New Collateral to Dragon.
NOW, THEREFORE, in consideration of and in reliance on the mutual promises
and representations and warranties contained in this Agreement, and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Dragon and Nona agree as follows:
1. Release of Substitute Collateral
Dragon hereby releases any and all claims which it may have to (a) Ten
Thousand (10,000) shares of no par value common stock of Fantastic
Foods International Inc., a California corporation ("Fantastic
Shares"), (b) Six Million (6,000,000) New Class D Warrants to Purchase
Common Stock of NuOasis Gaming Inc., a Delaware corporation (the
"NuOasis New Class D Warrants"), and (c) One Million (1,000,000) shares
of capital stock of Cleopatra Palace Limited, a corporation organized
under the laws of Ireland ("Cleopatra Shares"), (collectively referred
to herein as the "New Collateral"), pursuant to the Collateral
Substitution Agreement and Note and Security Agreement, or otherwise,
and hereby conveys and delivers to Nona, to have and to hold forever,
all of Dragon's security interest in the New Collateral, and any claims
of Dragon related to the New Collateral. And, Dragon warrants that it
has the power and authority, and does hereby transfer same to Nona,
free and clear of all liens and encumbrances.
2. No Prior Encumbrances or Assignment
Dragon represents and covenants that it has not assigned, pledged or
otherwise in any manner whatsoever conveyed or transferred to any third
party, including Silver Faith Holdings Limited, the New Collateral, or
any security interest therein, either by instrument in writing or
otherwise.
[NM\AGR:DRNREL.AGR]
1
<PAGE>
4. Transfer of New Collateral by Dragon
Dragon agrees to transfer to Nona, or its designee(s), the New
Collateral pursuant to the following terms and conditions:
A) Assignment. Dragon will deliver certificates and other
appropriate documents evidencing Dragon's security interest
in the respective securities comprising the New Collateral,
together with properly signed and guaranteed stock powers,
if applicable. Such assignment shall be made on an
assignment separate from such certificates at Closing.
B) Authority to Transfer. Dragon represents and warrants that
it has full legal power, right and authority to enter into
this Agreement and to convey the New Collateral, as provided
herein, free and clear of encumbrances, and that duly
authorized corporate action, if appropriate, has or will be
taken by Dragon prior to the date of Closing.
5. Effective Date and Closing
It is mutually understood and agreed that this Agreement may require
the consent and execution of third parties, and, as a result, effecting
the release of the New Collateral ("Closing") may take up to 60 days
from the date hereof. Notwithstanding the actual date of Closing, the
effective date of this Agreement shall be the date first written above
("Effective Date").
[NM\AGR:DRNREL.AGR]
2
<PAGE>
6. No Detrimental Releases
Dragon and Nona expressly acknowledge and agree that before executing
this Agreement, each party hereto has been fully informed of the terms,
contents, conditions and effects of this Agreement; that in executing
this Agreement and negotiating the terms thereof, each has had the
benefit of the advise of attorneys of its own choosing; and, that no
promise or representation of any kind has been made to any party by
another party hereto, or anyone acting for them, except as it expressly
stated in this Agreement.
7. Miscellaneous
A. Survival of Representations and Warranties. All
representations, warranties, and covenants made by any party
in this Agreement shall survive the Closing hereunder and
the consummation of the transactions contemplated hereby for
three (3) years from the Closing Date. Dragon and Nona are
executing and carrying out the provisions of this Agreement
in reliance on the representations, warranties, and
covenants and agreements contained in this Agreement or at
the Closing of the transactions herein provided for
including any investigation upon which it might have made or
any representations, warranty, agreement, promise, or
information, written or oral, made by the other party or any
other person other than as specifically set forth herein.
B. Costs and Expenses. Each party shall bear its share of all
costs and expenses incurred in this proposed exchange and
transfer.
C. Further Assurances. At any time and from time to time, after
the effective date, each party will execute such additional
instruments and take such action as may be reasonably
requested by the other party to confirm or perfect title to
any property transferred hereunder or otherwise to carry out
the intent and 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.
[NM\AGR:DRNREL.AGR]
3
<PAGE>
E. Notices. All notices and other communications hereunder
shall either be in writing and shall be deemed to have been
given if delivered in person, sent by overnight delivery
service or sent by facsimile transmission, to the parties
hereto, or their designees, as follows:
To Dragon: Dragon Sight International Amusement
(Macau) Company
Room 3078, Diamond Square
3/F Shun Tak Centre
200 Connaught Road, Central Hong Kong
Telephone: 011-852-2-559-8859
Facsimile: 011-852-2-540-5020
To Nona: Nona Morelli's II Inc.
2 Park Plaza, Suite 470
Irvine, California 92714
Telephone: (714) 553-3232
Facsimile: (714) 833-7854
F. 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.
G. 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.
H. Governing Law. Notwithstanding that this Agreement was
negotiated and is being contracted for in Macau and any
conflict-of-law provision to the contrary, the Agreement
shall be governed by the laws of the United States, State of
California.
I. 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.
J. 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.
K. Severability. If any part of this Agreement is deemed to be
unenforceable the balance of the Agreement shall remain in
full force and effect.
L. Amendment. This Agreement may be amended only by a written
instrument executed by the parties or their respective
successors or assigns.
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.
[NM\AGR:DRNREL.AGR]
4
<PAGE>
N. 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 the day and
year first above written.
"Nona"
NONA MORELLI'S II INC.
a Colorado corporation
/s/ Fred G. Luke
By:-----------------------------------------
Name: Fred G. Luke
Title: Chief Executive Officer
Ng Man Sun , doing business as
DRAGON SIGHT INTERNATIONAL AMUSEMENT
(MACAU) COMPANY
/s/ Ng Man Sun
---------------------------------------
Ng Man Sun
[NM\AGR:DRNREL.AGR]
5
<PAGE>
EXHIBIT "A"
to the
Collateral Release Agreement
dated September ---, 1996
NEW COLLATERAL
- Ten Thousand (10,000) shares of common stock of Fantastic
Foods International Inc., a California corporation,
Certificate No. 1, issued June 29, 1993 (the "Fantastic
Shares").
- Six Million (6,000,000) New Class D Warrants to Purchase
Common Stock of NuOasis Gaming Inc., a Delaware corporation,
Certificate No. NWD001 (the "NuOasis New Class D Warrants").
- One Million (1,000,000) shares of capital stock of Cleopatra
Palace Limited, a corporation organized under the laws of
Ireland, Certificate No. (the "Cleopatra Shares").
[NM\AGR:DRNREL.AGR]
6
EXHIBIT 10.145
AGREEMENT OF EXCHANGE DATED SEPTEMBER 30, 1996 BETWEEN
NUOASIS INTERNATIONAL, INC. AND C/A/K TRUSTKANTOOR N.V.
AGREEMENT OF EXCHANGE
THIS AGREEMENT OF EXCHANGE ("Agreement") is made and entered into
effective as of the day of September, 1996, by and between NuOasis
International, Inc., a company organised under the laws of the Commonwealth of
the Bahamas and a resident at all times outside the United States (hereinafter
referred to as "Party A"), and CAK Trustkantoor N.V., a trust company organised
under the laws to the Netherlands Antilles and a resident at all times outside
the United States (hereinafter referred to as "Escrow Holder").
RECITALS:
WHEREAS, Party A is the present owner of that certain asset known as
the Gaming Interest, being equal to forty percent (40%) of the Gaming Profits
(net distributable after-tax) from the Casinos (i.e., the gaming operations
conducted pursuant to an arrangement between Ng Man Sun, doing business as
Dragon Sight International Amusement (Macau) Co. and Sociedade DeTurismo
Diversocs De Macau at the Holiday Inn and Hyatt Hotels in Macau) more
particularly described in Exhibit "A" attached hereto and incorporated herein by
reference and as described in the Contract (as hereinafter defined) (the
"Relinquished Property");
WHEREAS, Party A and all of those persons listed on Schedule 1 attached
hereto and incorporated herein by reference (collectively referred to herein as
"Purchasers"), have entered into that certain Purchase Agreement dated August
30, 1996, and as thereafter amended (the "Contract"), pursuant to which Party A
has agreed to transfer and convey the Relinquished Property to the Purchaser in
exchange for the purchase price as stated in the Contract, and as adjusted at
closing (referred to herein as the "Purchase Price");
WHEREAS, Party A desires to make an exchange of the Relinquished
Property for other assets to be located in the future;
WHEREAS, Escrow Holder is willing to accept the assignment of Party
A's rights under the Contract; and
WHEREAS, Escrow Holder has entered into this Agreement pursuant to
which the Escrow Holder has agreed to hold money and/or other assets, including
without limitation, stocks, bonds, promissory notes and all other types of
property, real, personal, tangible or intangible, in an Escrow Account.
NOW THEREFORE, for and in consideration of the mutual covenants,
conditions and agreements set forth herein, Party A and Escrow Holder hereby
agree as follows:
1. Exchange of Properties. On the Closing Date (as hereinafter
defined), Party A hereby agrees to transfer and convey to Escrow Holder all of
its right, title and interest in the Contract, in consideration of and in
exchange for the transfer and conveyance to Party A of other assets, including
without limitation, stocks, bonds, promissory notes and all other types of
property, real, personal, tangible or intangible, whether one or more, the
"Replacement Property": (I) which is designated by Party A pursuant to Section 2
of this Agreement no later than forty-five (45) days after the Closing (as
hereinafter defined), and (ii) the cost of which does not exceed, in the
aggregate, the "Exchange Credit" (as hereinafter defined) at the time of its
acquisition, subject to Party A's right to arrange for additional equity or debt
in order to pay costs of acquisition in excess of the Exchange Credit. For
purposes of this Agreement, the term "Exchange Credit" shall mean, at any given
point in time, the sum of: (I) net proceeds from the Purchase Price, including
any indebtedness assumed or taken subject to by the purchasing party, less
closing costs with regard to the sale of the Relinquished Property and repayment
of debt secured by the Relinquished Property and all related obligations
thereto, plus (ii) the amount of interest, if any, which has then accrued to
Escrow Holder with respect to the Escrow Account.
[NUOINTL\AGR:CAK.EXC]
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<PAGE>
2. Acquisition of Replacement Property.
(a) Identification. At such time or times as Party A locates
other assets, including without limitation, stocks, bonds, promissory notes and
all other types of property, real, personal, tangible or intangible which it
desires for Escrow Holder to cause to be acquired and conveyed to it pursuant to
this Agreement as "Replacement Property," Party A shall give written notice (an
"Identification Notice") that: (I) is delivered to Escrow Holder and states that
such property or assets will constitute Replacement Property pursuant to this
Agreement, (ii) is in such form or forms as satisfies the requirements of Escrow
Holder, (iii) is given within forty-five (45) days of the Closing
("Identification Period"), and (iv) specifically describes the Replacement
Property. Party A may give an Identification Notice: (I) more often than once
and (ii) with respect to more than one asset. Any Identification Notice may be
revoked by Party A within forty-five (45) days of Closing but thereafter may not
be revoked.
(b) Acquisition. Subject to the limitations of Section 2(c)
and (d) hereof, if Party A provides to Escrow Holder an Identification Notice
with respect to a specific item of Replacement Property, Escrow Holder shall use
its reasonable efforts to: (I) enter into or accept the assignment of a binding
written contract with the owner or owners of the Replacement Property for the
acquisition of Replacement Property acceptable to Party A and (ii) cause the
transfer and conveyance of the Replacement Property to Party A within 180 days
of the Closing. Escrow Holder may, at its election, cause the owner or owners of
the Replacement Property to deliver to Party A a deed and/or other closing
documents conveying title directly from the owner of the Replacement Property to
Party A and Party A shall execute all closing documents required of it.
(c) Maximum Payment. In no event shall Escrow Holder be
required to provide consideration to acquire the Replacement Property: (I) in
any form other than cash and/or debt which is secured by the Replacement
Property and/or is the obligation of Party A, or (ii) expend in the acquisition
of the Replacement Property an aggregate amount (including the expenses incurred
in such acquisition or acquisitions), which exceeds the amount of the then
outstanding Exchange Credit, subject to Party A's right to arrange for
additional equity or debt in order to pay costs of acquisition in excess of the
Exchange Credit.
[NUOINTL\AGR:CAK.EXC]
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<PAGE>
(d) Debt Assumption. Other Limitations. Escrow Holder shall not
be required to (I) enter into any agreement to acquire the Replacement Property
which is not reasonably acceptable to it, (ii) assume any loan secured by the
Replacement Property or to execute any promissory note or other evidence of
indebtedness in connection with its acquisition or acquisitions which would
impose any liability upon Escrow Holder or (iii) execute any agreement or
participate in any transaction, which in the opinion of counsel to Escrow
Holder, would require Escrow Holder to engage in any unlawful or fraudulent
actions.
(e) Limitation Period. Upon the expiration of one hundred eighty
(180) days after the Closing, Party A shall have the right to require Escrow
Holder to transfer to it the Exchange Credit then unexpended in the acquisition
of the Replacement Property; provided, however, if Party A has not identified
Replacement Property by the end of the Identification Period, then Party A shall
have the right to require Escrow Holder to transfer to it the balance of the
Exchange Credit then unexpended in the acquisition of the Replacement Property.
Escrow Holder shall transfer all amounts due Party A pursuant to the immediately
preceding sentence within five (5) days of written demand therefor from Party A.
The payment by Escrow Holder to Party A of the balance of the Exchange Credit
pursuant to this paragraph shall terminate the obligations of Escrow Holder to
deliver the Replacement Property to Party A.
3. Escrow Account.
a. Appointment of Escrow Holder. Party A appoints Escrow Holder as the
Escrow Holder set forth herein, and Escrow Holder accepts such appointment.
b. Deposit. The sum of the net proceeds or other assets received from
the sale of the Relinquished Property, as defined herein (the "Deposit") shall
be delivered to Escrow Holder to be held by Escrow Holder in accordance with the
terms hereof. Subject to and in accordance with the terms and conditions hereof,
Escrow Holder agrees that it shall receive, hold in escrow and release or
distribute the Deposit and all interest earned thereon, if any. All interest and
other earnings on the Deposit shall become part of the Deposit for all purposes,
and that all losses resulting from the investment or reinvestment thereof from
time to time and all amounts charged thereto to compensate or reimburse the
Escrow Holder from time to time for amounts owing to it hereunder shall from the
time of such loss or charge no longer constitute part of the Deposit. From time
to time Party A may deposit or direct deposit of additional funds or assets with
the Escrow Holder to be held, invested and disbursed hereunder and which shall
be considered a part of the Deposit.
c. Investment of the Deposit. Escrow Holder shall cause the Deposit to
be held, or invested and reinvested after receipt of same in short-term interest
bearing investments, such as bank certificates of deposit, money market funds,
overnight repurchase accounts and treasury bills. Receipt or investment of the
Deposit shall be confirmed by Escrow Holder as soon as practicable by account
statement unless otherwise indicated; and any discrepancies therewith shall be
noted by Party A to Escrow Holder within a reasonable time prior to the next
account statement. Unless otherwise directed, Escrow Holder may use a
broker-dealer of its own selection, including a broker-dealer owned by or
affiliated with Escrow Holder or any of its affiliates. Party A shall be liable
for all brokerage costs and related expenses incurred hereunder. Escrow Holder
shall not be liable for and shall be indemnified by Party A from all liability
for losses on any investments, market risk due to premature liquidation, or
other actions taken in compliance with this Agreement. Notwithstanding the
foregoing, Escrow Holder may, in its sole and absolute discretion, accept
written directions or instructions from Party A, which Escrow Holder believes to
be genuine, but Escrow Holder shall not be liable for executing, failing to
execute or for any mistake in the execution of such orders except in case of
willful misconduct.
d. Disbursement of Deposit. Escrow Holder is hereby authorized to make
disbursements of the Deposit only as follows:
(i) Upon (a) notification from Party A, that a property or asset
has been identified, instructing Escrow Holder to disburse
an amount to make the initial deposit, if any, for or to
effectuate the acquisition of Replacement Property in
compliance with this Agreement and specifying:
[NUOINTL\AGR:CAK.EXC]
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<PAGE>
(1) The amount of such initial deposit or purchase price
required for the acquisition of the identified
Replacement Property;
(2) The manner in which such initial deposit or purchase
price is to be made available;
(3) The person or persons to which such initial deposit or
purchase price is to be transferred; and
(4) The date the initial deposit or purchase price is
required to be delivered.
(ii) Upon receipt of a written notification signed by Party A
stating that there has been a failure, within forty-five
(45) days from the date of Escrow Holder's receipt of the
Deposit to identify sufficient Replacement Properties which
are suitable for an exchange under and in accordance with
this Agreement;
(iii)Upon receipt of a written notification from Party A stating
that all Replacement Property previously identified pursuant
to this Agreement has been transferred and conveyed to Party
A within 180 days after the date of the closing of the sale
of the Relinquished Property by Party A, all funds then
remaining in the Deposit, after all fees and expenses have
been paid, shall be disbursed to Party A;
(iv) As permitted by this Agreement, to Escrow Holder; and
(v) Into the registry of the court in accordance with Sections 5
or 8 hereof.
[NUOINTL\AGR:CAK.EXC]
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<PAGE>
e. Tax Matters. Party A hereto shall provide Escrow Holder with its
taxpayer identification number or certification of foreign taxpayer exemption at
the execution hereof. Failure to so provide such forms may prevent or delay
investment of the Deposit and/or final disbursement of the Deposit and may incur
a penalty and cause Escrow Holder to be required to withhold tax on any interest
payable hereunder. All interest, if any, earned on the Deposit shall be paid to
Party A.
f. Scope of Undertaking. Escrow Holder's and Escrow Holder's duties
and responsibilities shall be purely ministerial and shall be limited to those
expressly set forth in this Agreement. Escrow Holder is not a principal,
participant or beneficiary of any transaction underlying this Agreement and
shall have no duty to inquire beyond the terms and provisions hereof. Escrow
Holder and Escrow Holder shall have no responsibility or obligation of any kind
in connection with this Agreement or the Deposit, and shall not be required to
deliver the same or any part thereof or take any action with respect to any
matters that might arise in connection therewith, other than to receive, hold,
invest and deliver the Deposit as herein provided. Without limiting the
generality of the foregoing, it is hereby expressly agreed and stipulated by the
parties hereto that Escrow Holder shall not be required to exercise any
discretion hereunder and shall have no investment or management responsibility
and, accordingly, shall have no duty to, or liability for its failure to,
provide investment recommendations or investment advice to the parties or either
of them. Escrow Holder shall not be liable for any error in judgment, any act or
omission, any mistake of law or fact, or for anything it may do or refrain from
doing in connection herewith, except for, subject to Section 4 hereinbelow, its
own willful misconduct. It is the intention of the parties hereto that Escrow
Holder shall not be required to use, advance or risk its own funds or otherwise
incur financial liability in the performance of any of its duties or the
exercise of any of its rights and powers hereunder.
4. Reliance; Liability. After Escrow Holder receives the consent of
Party A, Escrow Holder shall not be liable for following the instructions
contained in any written notice, instruction or request or other paper furnished
to it hereunder or pursuant hereto and believed by it to have been signed or
presented by the proper part. Escrow Holder shall be responsible for holding,
investing, reinvesting and disbursing the Deposit; provided, however, that in no
event shall Escrow Holder be liable for any lost profits, lost savings or other
special, exemplary, consequential or incidental damages in excess of Escrow
Holder's fee hereunder and provided, further, that Escrow Holder shall have no
liability for any loss arising from any cause beyond its control, including, but
not limited to, the following: (a) acts of God, force majeure, including,
without limitation, war (whether or not declared or existing), revolution,
insurrection, riot, civil commotion, accident, fire, explosion, stoppage of
labor, strikes and other differences with employees; (b) the act, failure or
neglect of any other party or any agent or correspondent or any other person
selected by Escrow Holder; (c) any delay, error, omission or default of any
mail, courier, telegraph, cable or wireless agency or operator; or (d) the acts
or edicts of any government or governmental agency or other group or entity
exercising governmental powers. Escrow Holder is not responsible or liable in
any manner whatsoever for the sufficiency, correctness, genuineness or validity
of the subject matter of this Agreement or any part hereof or for the
transaction or transactions requiring or underlying the execution of this
Agreement, the form or execution hereof or for the identity or authority of any
person executing this Agreement or any part hereof or depositing the Deposit.
5. Right of Interpleader. Should any controversy arise involving the
parties hereto or any other person, firm or entity with respect to this
Agreement or the Deposit, or should a substitute Escrow Holder fail to be
designated as provided in Section 8 hereof, or if Escrow Holder should be in
doubt as to what action to take, Escrow Holder shall have the right, but not the
obligation, either to (a) withhold delivery of the Deposit until the controversy
is resolved, the conflicting demands are withdrawn, or its doubt is resolved, or
(b) institute a bill of interpleader in any court of competent jurisdiction to
determine the rights of the parties hereto. The right of Escrow Holder to
institute such a bill of interpleader shall not, however, be deemed to modify
the manner in which Escrow Holder is entitled to direct disbursements of the
Deposit as herein set forth other than to tender the Deposit into the registry
of such court. In the event Escrow Holder is a party to any dispute, Escrow
Holder shall have the additional right to refer such controversy to binding
arbitration. Should a bill of interpleader be instituted, or should Escrow
Holder be threatened with litigation or become involved in litigation or binding
arbitration in any manner whatsoever in connection with this Agreement or the
Deposit, then, Party A agrees to pay Escrow Holder from the Deposit its
attorney's fees and any and all other disbursements, expenses, losses, costs and
damages of Escrow Holder in connection with or resulting from such threatened or
actual litigation or arbitration prior to any disbursement hereunder.
[NUOINTL\AGR:CAK.EXC]
5
<PAGE>
6. Lien. Escrow Holder is hereby given a lien upon all the rights,
titles and interest of the other parties hereto in all Deposits to protect
Escrow Holder's rights, including without limitation, rights of payment and to
indemnity and reimbursement, as provided hereunder, which lien may be enforced
by Escrow Holder without notice, by set off, or by appropriate foreclosure
proceedings.
7. Consultation with Legal Counsel. Escrow Holder may consult with its
counsel or other counsel satisfactory to it concerning any question relating to
its duties or responsibilities hereunder or otherwise in connection herewith and
shall not be liable for any action taken, suffered or omitted by it in good
faith upon the advice of such counsel.
8. Resignation. Escrow Holder may resign hereunder upon 10 days' prior
written notice to Party A. If Party A fails to designate a substitute Escrow
Holder within 10 days after the giving of such notice, Escrow Holder may
institute a bill of interpleader as contemplated by Section 5 hereof. Escrow
Holder's sole responsibility after the notice period expires shall be in
accordance with the directions of a final order or judgment of a court of
competent jurisdiction, at which time Escrow Holder's obligations hereunder
shall cease and terminate.
9. Performance of Contract. Notwithstanding anything to the contrary
set forth herein, Party A shall not have the right following the Closing to
receive, pledge, borrow or otherwise obtain the benefits of the Relinquished
Property or the Exchange Credit, or any income or interest which has accrued
with respect to the same, except as provided in Section 2 or 3 of this
Agreement.
10. Closing. The transfer by Party A to Escrow Holder of all of its
right, title and interest in the Contract shall occur prior to closing. The
closing ("the Closing") shall be effective the 30th day of September, 1996 (the
"Closing Date") or on such other date as may be mutually agreed to by Party A
and Escrow Holder. The transfer by Party A to Escrow Holder of the Contract
shall be made pursuant to an Agreement for Assignment of Rights substantially in
the form of Exhibit B attached hereto. Party A hereby agrees to execute and
deliver a deed or other assignment conveying title to the Relinquished Property
pursuant to the terms of the Contract, and any other required conveyance and
closing documents, directly to the Purchasers under the Contract.
11. Execution of Documents: Further Documentation. Each party hereto
agrees to execute any and all additional documents and/or instruments necessary
to carry out the terms of this Agreement. The costs incurred in the preparation
of any documents required to conclude the transfer of the Relinquished Property
or the Replacement Property shall be borne by Party A.
12. Conflict With Prior Agreements. If and to the extent that this
Agreement is in conflict with any prior written or oral agreement or
understanding between the parties hereto, the terms of this Agreement shall
prevail. No modification or waiver of the terms of the Agreement shall be valid
unless made in writing signed by both parties.
13. Arbitration. Any dispute arising out of this Agreement, whether for
interpretation or enforcement of its terms, shall be determined and settled by
arbitration under the then prevailing commercial rules of the International
Arbitration Association. Arbitration shall be held in Willemstad, Curacao. Any
reward rendered in such arbitration shall be final and binding on each of the
parties and judgment may be entered thereon in a court of competent
jurisdiction.
14. Attorneys' Fees. In the event any of the parties to this Agreement
institutes legal action or arbitration proceedings against any other party to
interpret or enforce this Agreement, or to obtain damages for any alleged breach
hereof, the prevailing party in such action or proceeding shall be entitled to
reasonable attorneys' and experts' fees in addition to all other recoverable
costs and damages.
[NUOINTL\AGR:CAK.EXC]
6
<PAGE>
15. Survival. The terms of this Agreement shall survive the delivery
of the conveyance documents to the Relinquished Property and receipt by Party A
of the conveyance documents to the Replacement Property pursuant to this
Agreement.
16. Time. Time is of the essence of this Agreement.
17. Binding. This Agreement shall inure to the benefit of, and shall be
binding upon, the parties hereto their estates, heirs, representatives,
successors in interest and assigns; provided, however, that Party A shall have
no right to assign this Agreement or any of its rights hereunder without the
prior written consent of Escrow Holder.
18. Choice of Laws; Cumulative Rights. This Agreement and the Deposit
shall be construed under and governed by the laws of the Netherlands Antilles,
including its conflict of law rules. All of Escrow Holder's rights hereunder are
cumulative of any other rights it may have by law or otherwise.
19. Assignment. This Agreement shall not be assigned by Party A or
Escrow Holder without the prior written consent of either party.
20. Severability. Every provision of this Agreement is intended to be
severable. If any term or provision hereof is illegal or invalid for any reasons
whatsoever, such illegality or invalidity shall not affect the validity or
legality of the remainder of this Agreement.
21. Termination. Upon disbursement of all the Deposit as specified in
Section 3 hereof, this Agreement shall terminate.
22. Notices. All notices required or permitted to be given pursuant to
this Agreement shall be in writing and shall be effective upon personal delivery
or confirmed telefax to the party to whom they are addressed at the following
address:
To Party A:
NuOasis International, Inc.
43 Elizabeth Avenue
P.O. Box CB-13022
Nassau, Bahamas
Telephone: (809) 356-2903
Telefax: (809) 326-8434
To Escrow Holder:
CAK Trustkantoor N.V.
Do Ruyterkade 58A
P.O. Box 210
Willemstad, Curacao
Netherlands Antilles
Telephone: 5999-613277
Telefax: 5999-612720
Any party may change its address for notice by giving notice to the
other party in accordance with this paragraph.
[NUOINTL\AGR:CAK.EXC]
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<PAGE>
23. No Agency. Party A and Escrow Holder mutually agree that Escrow
Holder is acting as an independent principal in the transaction described herein
and shall not be deemed as an agent for Party A in any capacity.
24. Payment to Escrow Holder. Escrow Holder shall be entitled to a fee
for services rendered through closing of the Relinquished Property. Such fee
will be paid from the Escrow Account upon funding of the Escrow Account. After
closing of the Relinquished Property, Escrow Holder shall prepare an Assignment
of Rights and related documentation which may be required to effectuate the
transfer of the Replacement Property to Party A.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first above written.
"Party A"
NuOasis International, Inc.,
a company organised under the laws of the
Commonwealth of the Bahamas
By:----------------------------------------
Name:
Its:
"Escrow Holder"
CAK Trustkantoor N.V.,
a company organised under the laws of the
Netherlands Antilles
By:----------------------------------------
Name:
Its:
8
<PAGE>
EXHIBIT "A"
to the
Agreement of Exchange
dated September ---, 1996
RELINQUISHED PROPERTY
9
<PAGE>
EXHIBIT "B"
to the
Agreement of Exchange
dated September , 1996
AGREEMENT OF ASSIGNMENT OF RIGHTS
THIS AGREEMENT (the "Agreement") is effective this ----- day of
- -------, 1996 by and between NuOasis International Inc., a company organised
under the laws of the Commonwealth of the Bahamas and a resident at all times
outside the United States ("Party A"), and C/A/K Trustkantoor N.V. a trust
company organised under the laws of the Netherlands Antilles and a resident at
all times outside the United States (hereinafter referred to as "Escrow
Holder"), with notice of this Agreement provided to those entities, as
Purchasers under the Purchase Agreement dated August 30, 1996 ("Acquiring
Party").
WHEREAS, Party A and Acquiring Party have entered into that certain
Purchase Agreement dated August 30, 1996, and as thereafter amended, by and
between Party A and Acquiring Party, attached hereto as Exhibit "A" (the
"Contract"); wherein Party A agreed to dispose of by means of a sale, its
interest in, among other things that asset or assets described in the Contract
(the "Relinquished Property");
WHEREAS, Party A and Escrow Holder have entered into that certain
Exchange Agreement dated as of September ____, 1996;
WHEREAS, the parties hereto wish to assign Party A's rights to the
Relinquished Property under the Contract to Escrow Holder;
NOW THEREFORE, in consideration of the mutual covenants and
promises set forth herein, Party A and Escrow Holder agree as follows:
1. Assignment of Rights. Party A hereby transfers and assigns to
Escrow Holder all of its rights, title and interest under the Contract.
Acquiring Party shall be notified of the assignment of Party A's rights, title
and interest to Escrow Holder in the Contract prior to closing under the
Contract.
2. Assignment of Deposit. At the time this Agreement becomes
effective, Party A will cause any deposit which has been made under the Contract
by the Acquiring Party to be released to the Escrow Holder.
3. Enforcement of Rights. Escrow Holder has assumed all rights of
Party A under the Contract pursuant to this Agreement; provided, however, if for
any reason Escrow Holder fails to enforce any of the rights assigned to it under
the Contract by this Agreement, Party A may enforce the rights under the
Contract assigned to Escrow Holder.
4. Assumption of Obligations. Escrow Holder does not hereby assume any
of the obligations, representations or warranties of Party A under the Contract.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, to be effective immediately before the transfer of title to the
Relinquished Property by Party A pursuant to the Exchange Agreement. This
Agreement, however, shall be null and void in the event Party A or its assigns
do not convey title to the Relinquished Property on or before September 30,
1996, or at such future date as is mutually agreed to by the parties hereto.
"Party A"
NuOasis International, Inc.,
a company organised under the laws of the
Commonwealth of the Bahamas
By:-----------------------------------------
Name:
Its:
"Escrow Holder"
CAK Trustkantoor N.V.,
a company organised under the laws of the
Netherlands Antilles
By:-----------------------------------------
Name:
Its:
11
<PAGE>
EXHIBIT "A"
to the
Agreement for Assignment of Rights
dated September , 1996
THE CONTRACT
12
<PAGE>
SCHEDULE "1"
to the
Agreement of Exchange
dated September , 1996
NAME(S) OF PURCHASERS OF THE RELINQUISHED PROPERTY
13
EXHIBIT 10.146
OPERATING AGREEMENT BETWEEN
MR. NG MAN SUN AND NONA MORELLIS II INC.
OPERATING AGREEMENT
Casino Gaming Interests
THIS AGREEMENT is made and entered into this day of February 1996 by
and between Mr. Ng Man Sun ("Ng") doing business as Dragon Sight International
Amusement [Macau] Company (hereinafter collectively referred to as "Dragon") and
NuOasis International Inc, a corporation organized under the laws of the United
States, state of California (hereinafter referred to as "NuOasis").
WHEREAS, the parties hereto are the Owners (as defined herein) one
hundred percent (100%) of the interest in the profits generated by the casino
gaming activities conducted by Dragon at the Hyatt Hotel Tapia Island and the
Holiday Inn Hotel in Macau (hereinafter referred to as the "Casinos"), all as
more particularly described in Exhibit "B" attached hereto and by this reference
made a part hereof; and,
WHEREAS, the parties hereto desire to more clearly define and set forth
the procedures and methods for the operation of the Casinos.
NOW, THEREFORE, in consideration of the premises mutual covenants and
agreements contained herein, and for the purpose of operating the jointly-owned
interest in the Casinos, the parties hereto agree as follows:
1. Definitions
A. Net Profits Interest - means each Owners interest in the net
operating profits from the casino gaming facilities as more particularly
described in the attached Exhibit "A", and as the same may be amended or
supplemented from time to time by written agreement of the parties hereto.
B. Owners - shall mean Dragon and NuOasis, and their respective
successors in interest.
C. Operator - means any of the parties to this Agreement who is
designated or who is subsequently selected or becomes the person or party
responsible for the operation and maintenance of the Casinos in the manner and
procedure set forth in this Agreement.
D. Non-Operators - shall mean any Owner who is or are not designated
or selected as the Operator of the Casinos.
E. Quarter - means calendar quarter, or that multi-monthly accounting
period stipulated by the Operator.
[NUOINTL\AGR:NGTERM.AGR]
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<PAGE>
F. Accounting Procedure - means the procedure, plan and method
established by the Operator to be utilized in the determination of the expenses
allocatable to the operation and the administration of the Casinos.
G. Costs - means all expenditures incurred pursuant to this Agreement
and determined in accordance with the Accounting Procedure and such other
expenditures as are herein chargeable as costs of the operating Casinos.
2. Operation of The Casinos
A. Ownership and Sharing of Revenues and Costs - Exhibit "B", attached
hereto and as amended from time to time, lists all of the Owners of the Casinos
and their respective percentage or Net Profits Interests under this Agreement.
Unless changed by other provisions, all costs and liabilities incurred in
operations of the Casinos under this Agreement shall be borne and paid, and all
equipment and material acquired in operations of the Casino shall be owned by
the parties, as their interests are shown in said exhibit. All revenues and
operating costs will be borne by the Operator for the joint account of all
Owners and the net operating profits shall also be owned by the parties in the
same manner during the term hereof; provided, however, this shall not be deemed
an assignment or cross-assignment of interests covered hereby.
B. Management of the Casinos subject to the provisions of this
Agreement - the Operator shall have the right and obligation to manage, maintain
and operate the Casinos for the exclusive benefit of the Owners, and shall
supervise and control all matters necessary to the accomplishment of the
purposes of and in accordance with the terms and conditions of this Agreement.
C. The Operator - Dragon is hereby designated as the initial Operator
of the Casinos.
D. Resignation or Replacement of Operator - The Operator may resign at
any time upon sixty (60) days' written notice to the Owners; provided, however,
that a sale or transfer by the Operator of its entire interest in the Casinos
shall constitute a resignation as the Operator effective as of the date of the
sale or transfer. In the event of sale or transfer by the Operator of its entire
interest in the Casinos, the Operator shall however continue to act for a
maximum of sixty (60) days as the Operator to permit selection of a Successor
Operator unless the Successor Operator takes over the duties of Operator prior
to the expiration of such period.
The Operator may be removed by the affirmative vote of Owners of at
least fifty percent (50%) in the Net Profits Interest in the Casinos, and such
removal shall be effective sixty (60) days after delivery to the Operator of
written notice of removal, this period to be utilized by the Owners to select a
Successor Operator Pursuant to the terms hereof.
In the event the Operator is removed under the foregoing situation,
then the majority interest Owner at that time shall act as temporary Operator
until the Successor Operator is selected.
[NUOINTL\AGR:NGTERM.AGR]
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<PAGE>
E. Election of Successor Operator - Upon the resignation or removal of
the Operator, a Successor Operator shall be mutually agreed upon by the Owners.
In the event there are, at any time, more than two Owners, the Successor
Operator shall be selected by the affirmative vote of at least fifty percent
(50%) interest in the Net Profits Interest in the Casinos. Each Owner shall have
a voting interest equal to its percentage of Net Profits Interest in the
Casinos. Should the parties be unable to agree on a new Operator, the selection
of the Successor Operator shall be determined by a board of arbitration.
F. Compliance with Rules and Regulations - The Operator shall perform
its duties and discharge its obligations hereunder in a good and workmanlike
manner in accordance with the rules, order, laws or regulations of any
governmental, regulatory or administrative body with jurisdiction over the
Casinos or operations thereof.
G. No Liens or Encumbrances - The Operator shall keep the Casinos free
from all liens and encumbrances occasioned by operations hereunder, except only
the lien granted to the Operator herein and such other liens as may be
authorized by the Owners.
H. Hold Harmless - The Operator shall hold each Owner harmless from any
lien or encumbrance on its or his interest in the Casinos resulting from the
failure of the Operator to pay, liquidate and discharge all claims, obligations
and charges attributable to such interest for which such Owner has theretofore
paid to the Operator such Owner's proportionate part.
I. Employee Costs and Relations - The Operator shall furnish the labor,
supervision, marketing and accounting, and other services reasonably necessary
and required for the efficient operation of the Casinos. The number of employees
utilized in the conduct of operations hereunder, their selection, hours of labor
and compensation shall be determined by the Operator. Such employees shall be
the employees of the Operator, which shall pay their wages, salaries and
employee benefits; provided, however, that the wages and salaries paid to such
casino employees shall be at rates not exceeding those being paid from time to
time for similar work on other operations in the general area of the Casinos.
J. Emergency Expenditures - In case of explosion, fire, flood or other
emergency, the Operator may take such action and incur such expense (without
regard to any limitation on expenses elsewhere herein provided) as in the
Operator's good faith and opinion are required to deal with the emergency and to
safeguard life and property. The Operator shall report, as promptly as possible,
the details of the emergency to the Owners, which report, if oral, shall be
confirmed in writing.
K. Operator Reports - The Operator shall conduct all operations
hereunder in a good and workmanlike manner and, in the absence of any specific
written instructions unanimously agreed to by all Owners, shall have the right
and duty to conduct such operations in accordance with its best judgment of what
a prudent Operator would do under the same or similar circumstances. The
Operator shall consult with Owners and obtain the affirmative approval of all
Owners, with respect to all matters of importance arising in connection with the
ownership, operation and maintenance of the Casinos.
[NUOINTL\AGR:NGTERM.AGR]
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<PAGE>
L. Owners Right to Audit - Any Owner shall have the right, at its or
his expense, to cause books and records of the Casinos to be audited by Owner's
personnel or representatives or by independent certified public accountants.
M. Indemnification - Inasmuch as the Operator is responsible for the
operation, management, maintenance and operation of Casinos, Operator shall, at
its sole cost and expense, indemnify, protect and save Owners, and their
respective directors, officers and employees, from and against any and all
actions, or causes of action, claims, demands, liabilities, loss, damage,
injury, cost or expense of whatever kind or nature, including costs of
litigation, attorney fees, and reasonable expenses in connection therewith,
brought or presented by any person, firm or corporation whatsoever (including
but not limited to, third parties, employees of Owners, employees of Operator,
and their dependents and personal representatives) for injuries to or the death
of any person, or damage to or loss of property alleged or claimed to have been
caused by, or to have resulted from the negligence of Operator in connection
with the operation, maintenance or management of the Casinos. Operator further
agrees that its obligations of indemnification hereunder including any and all
expenses, costs, claims, penalties or liability of whatever kind or nature
resulting from the failure of Operator to abide by and comply with any and all
applicable laws, codes, rules or regulations of any governmental, administrative
or regulatory authority or body with jurisdiction over the ownership, operation
or management of the Casinos.
3. Distribution of Net Profits, Costs and Expenses
A. Development and Operating Costs - Except as herein otherwise
specifically provided, Operator shall promptly pay and discharge expenses
incurred in the development and operation of the Casinos pursuant to this
Agreement and shall charge such operations, or each of the Owners directly, if
allowed by the nature of their respective interest, with their respective
proportionate share upon the expense basis provided in the Accounting Procedure.
Operator shall keep an accurate record of the joint account hereunder, showing
expenses incurred and charges and credits made and received.
Operator, at its election, shall have the right from time to time to
demand and received from the other owners directly, if allowed by the nature of
their respective interest, payment in advance of their respective share of the
estimated amount of the expense to be incurred in operation of the Casinos
during the next succeeding quarter, which right may be exercised only by
submission to each such owner of an itemized statement of such estimated
expense, together with an invoice for its share thereof. Each such statement and
invoice for the payment in advance of estimated expense shall be submitted on or
before the 20th day of the next preceding quarter. Each owner shall pay to
Operator its proportionate share of such estimate within fifteen (15) days after
such estimate and invoice is received. If any owner fails to pay its share of
said estimate within said time, the amount due shall bear interest as provided
for herein until paid. Proper adjustment shall be made quarterly between
advances and actual expense to the end that each owner shall bear and pay its
proportionate share of actual expenses incurred, and no more.
[NUOINTL\AGR:NGTERM.AGR]
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<PAGE>
B. Expension Costs - All costs and expenses incurred in enlargements
and expansions of and additions to the Casinos shall be charged and paid by
Owners, in the proportion of their respective interests in the Net Profits
Interests in the Casinos, in whichever of the following methods Owners deem
proper in each particular instance.
C. Net Operating Profits - All net operating profits generated from
operations at the Casinos shall be credited and paid to the Owners in the
proportion of their respective Net Profits Interest in the Casinos upon the
basis set in Exhibit "B" attached hereto.
D. Record Keeping - Operator shall keep accurate and systematic records
and accounts with respect to the investment in and the operation and maintenance
of the Casinos, to which shall be charged all costs and expenses properly
chargeable thereto under this Agreement and to which shall be credited all
receipts from all sources. Such entries shall be supported, where appropriate,
by purchase order, invoices, payrolls and other customary records.
E. Owners Failure to Pay Costs - Operator shall initially pay all such
costs and expenses incurred in the operation, maintenance, management,
administration and supervision of the Casinos and, if required by the nature of
such Owners interest in the Casinos, each Owner shall reimburse Operator for its
or his proportionate part thereof as herein provided. Should any Owner hereto
fail to reimburse Operator for such Owner's proportionate part of such costs and
expenses within twenty (20) business days after the receipt of statement
therefor, same shall bear interest at the rate of ten percent (10%) per annum
from the expiration of such twenty (20) business day period until paid, and if
such default shall thereafter continue for an additional period of thirty (30)
business days, Operator shall have the right, at its option, at any time
thereafter while such default continues, to foreclose the lien hereinafter
provided for upon the interest of such defaulting Owner.
F. Limitation of Expenditures - Operator, if making or incurring a
single expenditure or the undertaking of any project hereunder over and above
the normal operating and maintenance functions in excess of One Million Hong
Kong Dollars ($1,000,000) in lieu of advancing costs and expenses, may, at its
election, require the other Owner or Owners, if required by the nature of such
Owners interest in the Casinos, to advance their respective proportions of the
costs and expenses of operating, maintaining, managing, administering and
supervising the Casinos by submitting on or before the last day of the calendar
quarter an itemized estimate of such costs and expenses for the succeeding
calendar quarter, together with request for payment by each of the Owners of
their proportionate parts thereof.
G. Adjustments to Owners Account - All books of account, records,
charts and files of Operator bearing on matters dealt with in this Agreement
shall be preserved for a period of four (4) years (and longer, if required by
any governmental authority having jurisdiction), and shall, at the request of
Non-Operating Owners, be made available at reasonable times for inspection,
audit, the making of copies and the taking of data therefrom. Any errors in the
accounts, calculations or statements of Operator which are discovered within two
(2) years after the rendering of the statement containing the error shall be
corrected and appropriate adjustment made; and if it be an error in the amount
of any payment made or due to be made by one party to the other, appropriate
payments or refunds or credits shall be made during the month in which the error
or errors are discovered, acknowledged or finally determined.
[NUOINTL\AGR:NGTERM.AGR]
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<PAGE>
H. Accounting - Subject to the terms hereof, all income received by
Operator and derived from the operation of the Casinos, from whatever source
derived, shall be distributed or accounted for to the respective Owners, as
their Net Profits Interests may appear, on a quarterly basis.
4. Security of Operator
A. Lien in Favor of Operator - To secure the payment of all sums
(including interest, court costs and reasonable attorney's fees) due, or to
become due, to Operator hereunder, each Owner hereby grants to Operator a first
and superior lien upon Owner's interest in Net Profits Interest in the Casinos,
which lien may be enforced and foreclosed as any other mortgage lien when such
Owner is in default in payments to Operator. Operator shall have the right, in
event of default by an Owner in making any payment provided for herein, to
collect, receive and retain Owner's interest in said Net Profits Interest in the
Casinos, and proceeds of a sale, for application on said indebtedness (including
interest) until same is paid.
B. Financing Statement - Upon request by the Operator, the Owners shall
execute a Memorandum of Operating Agreement, Security Agreement and Financing
Statement to secure the lien and security interest to the Operator. Such
Memorandum may be filed of record to perfect the lien and security interest
granted to Operator when the Operating Agreement becomes effective.
5. Voting of Owners
Each Owner shall have a voting interest equal to its percentage of
ownership in the Net Profits Interest in the Casinos. Failure of an Owner to
vote on any matter requiring approval of the Owners shall constitute a vote
against the proposal. Any vote hereunder may be taken by mail and, if so taken,
the failure of an Owner to return its or his ballot within twenty (20) business
days after receipt thereof shall constitute a vote against the proposal.
6. Insurance
A. Coverage Required - Operator shall carry the following insurance:
(i) Workmen's Compensation and Employer's Liability Insurance
in accordance with the laws of Macau, covering all employees engaged in
the performance of work hereunder.
[NUOINTL\AGR:NGTERM.AGR]
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<PAGE>
(ii) Comprehensive General Liability Insurance, including
premises and operations liability, protective liability, contractual
liability and product liability (if applicable), with limits for bodily
injury or death and with limits for property damage in amounts typical
for other gaming activities conducted in Macau.
(iii) Insurance covering physical damage to the Casinos on a
Named Peril basis, to include but not be limited to fire and lightning,
extended coverage (windstorm, tornado, hail, explosion, riot, civil
commotion, smoke, aircraft and land vehicles) and vandalism and
malicious mischief.
B. Cost - The cost of all such insurance (including any deductible
amounts under the provisions of any of the policies) shall be charged as an
expense of operating the Casinos.
C. Subcontractors, Consultants and Vendors - Operator shall require
that all contractors performing work or services for the Casinos carry insurance
of the kinds described above, in such amounts as Operator shall determine.
D. Claims in excess of coverage: Additional Insurance - All losses,
costs and expenses (including court costs and attorney's fees) not covered or
only partially covered by such insurance, shall be charged against the
operations of the Casinos in the proportion of the perspective Net Profits
Interests in the Casinos, except as otherwise provided for herein. Any Owner may
individually purchase, at its or his sole expense, additional insurance to
protect such Owner against losses not covered by insurance carried by the
Operator.
7. Transfer of Interests
All sales, transfers, assigns or other conveyances of the interest of
any Owner in the Casinos shall be made expressly subject to this Agreement and
shall not be binding on any of the parties hereto other than the Owner selling,
transferring, assigning or conveying the same, unless and until a certified copy
of the instrument evidencing such change in ownership has been delivered to
Operator and Owners. All such sales, transfers, assigns or conveyances of an
interest in the Casinos, whether expressly so stated or not, shall operate to
impose upon the party or parties acquiring such interests, its or their
proportionate part of all costs and expenses and other obligations chargeable
hereunder to such interest and shall likewise operate to give and grant to the
party, or parties acquiring such interest, its or their proportionate part of
all benefits accruing hereunder, effective as of the date of such transfer.
8. Confidentiality
Proprietary data and information with respect to the Casinos and the
Owners shall be treated as confidential and shall not be divulged to others by
the Operator or the Owners unless mutual agreement to the contrary is obtained
from all parties concerned, or unless such disclosure is required of by law or
court order. Operator and Non-Operator(s) further agree that no party hereto
shall distribute any information or photographs regarding the Casinos or the
Operator to the press or other media without the approval of all parties. The
only exception to the foregoing shall be that in the event of an emergency
involving extensive property damage, operating failure, loss of human life or
other clear emergency exclude care. Operator is authorized to furnish such
minimum, strictly factual information as shall be necessary to satisfy the
legitimate public interest on the part of the press and duly constituted
authorities if time does not permit the obtaining of prior approval by
Non-Operator(s). Operator shall thereupon promptly advise Non-Operator(s) of the
information so furnished. This paragraph shall survive termination of this
Agreement for a period of two (2) years.
[NUOINTL\AGR:NGTERM.AGR]
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<PAGE>
9. Term and Option to Purchase
A. Term - This Agreement shall be effective as of the date first
written above and shall continue in full force and effect until terminated by
either party upon ninety (90) days' written notice to the other. Termination of
this Agreement shall not, however, relieve any of the parties of any liabilities
or obligations incurred hereunder.
B. Owners Right to Purchase - If, in the judgment of any Owner, the
operation of the Casinos is unprofitable and such Owner desires to discontinue
operations of the Casinos, such Owner will notify all other Owners in writing of
that fact. Any Owner, or Owners, desiring to continue operation of the Casinos
shall thereafter have the option for a period of forty-five (45) days to acquire
all of the interest in the Casinos owned by the Owner desiring to abandon
operations by paying to such Owner a sum equal to such Owner's proportionate
share of the fair market value of the Casinos. Fair market value for this
purpose is defined as the highest price that a willing and well-informed buyer
would pay and a willing and well-informed seller would accept if the property
were immediately exposed to the market for a reasonable period of time. Should
the parties be unable to agree on the fair market value, they shall jointly
select a qualified, independent appraiser to determine such value. The findings
of such appraiser shall be binding on all parties, and the appraiser's fee shall
be equally shared by the parties involved. The Owner desiring to abandon
operations may, at its or his option, require the Owners desiring to continue
operations to assume all costs of operation while said appraisal is in progress,
in which event all net profits from the Casinos made and income accruing during
such period shall belong to the Owners desiring to continue Casinos operations.
It is agreed by the parties hereto that the provisions of this paragraph shall
not apply to any Owner, or Owners, who merely desire to sell or transfer their
interest in the Casinos without terminating the operation of the Casinos.
C. Discontinued Operations - If no Owner desires to continue the
operations of the Casinos, or if the Owners desiring to continue operations of
the Casinos do not exercise the option granted them by subparagraph B above,
Operator shall pursue whichever one of the following options the Owners shall
approve:
(i) Operator shall dismantle the Casinos and make division of
the salvageable material if feasible and practicable. The cost of
dismantling the Casinos shall be charged against the Owners in
proportion to their Net Profits Interest.
[NUOINTL\AGR:NGTERM.AGR]
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<PAGE>
(ii) Operator shall sell Casinos intact or as salvage and,
after payment or any costs and expenses remaining unpaid, including,
but not limited to, costs of selling said Casinos and/or the cost of
cleaning up the Casinos sites, the net proceeds from such sale thereof
shall be divided among the Owners in proportion to their respective Net
Profits Interests in said Casinos.
10. Relationship of Parties
It is the intention of the parties hereto that neither this Agreement
nor the operations hereunder shall create a partnership or association. The
duties, obligations and liabilities of the Owners are intended to be and shall
be separate and not joint or collective, and nothing contained in this
Agreement, or any other agreement made pursuant hereto, shall ever be construed
to create a partnership or association or to impose a partnership duty,
obligation, or liability with respect to any one or more of the Owners. Each
Owner shall be individually responsible only for its own obligations under this
Agreement and, if the nature of such Owners interest requires it to do so, shall
be liable only for its proportionate share of the costs and expenses incurred in
the operation, maintenance, management or supervision of the Casinos.
11. Laws, Regulations and Force Majeure
A. Applicable Law - This Agreement and the maintenance and operation of
the Casinos shall be subject to all valid and applicable laws, orders, rules and
regulations made by duly constituted governmental or regulatory authorities or
bodies with jurisdiction.
B. Regulatory Reporting - It shall be the Operator's obligation to
complete and submit any and all reports, etc., required by the rules, orders or
regulations of any duly constituted governmental or regulatory body or authority
with jurisdiction over the ownership, maintenance and operation of the Casinos,
and Non-Operator(s) agree to assist Operator in every possible way in the
preparation of any such report by providing Operator any and all necessary data,
records and information when so requested by Operator.
C. Force Majeure - Performance, other than of the obligation to pay
money, by Operator of its covenants hereunder shall be excused for and so long
as and to the extent that such performance is prevented by strikes, fires,
floods, weather, lightning, explosions, Acts of God or the public enemy,
governmental laws or regulations, inability or delay in obtaining right-of-way
permits, easements, or material, and other happenings beyond the control of
Operator, whether or not similar or dissimilar to the matters herein
specifically enumerated. Performance shall be resumed within a reasonable time
after such cause has been removed. Operator shall not be required, against its
will, to settle any labor dispute.
12. Further Burdens
If any party hereto hereafter creates a royalty or net profits
interest from its interest in the Casino or other burden against its interest in
the Casinos, the party or parties entitled to receive the Net Profits Interest
from the Casinos shall receive such net profits from the Casinos free and clear
of burdens against such net profits from the Casinos created by such party, and
the party creating such subsequent burden shall save the other parties harmless
with respect to claims against their respective interest.
[NUOINTL\AGR:NGTERM.AGR]
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<PAGE>
13. Bankruptcy
If, following the granting of relief under any bankruptcy code to any
Owner hereto as debtor thereunder, this Agreement should be held to be an
executory contract under such bankruptcy code, then any remaining Owners shall
be entitled to a determination by debtor or any trustee for debtor within thirty
(30) days from the date an order for relief is entered under such bankruptcy
code as to the rejection or assumption of this Agreement. In the event of an
assumption, such party seeking determination shall be entitled to adequate
assurances as to the future performance of debtor's obligation hereunder and the
protection of the interest of all parties. The debtor shall satisfy its
obligation to provide adequate assurances which are acceptable to the other
Owner(s).
14. Rights of Operator Against a Defaulting Party
Unless the nature of the interest held by the Owner(s) of the Casinos
precludes it, in the course of operating the casinos if any party fails or is
unable to pay its proportionate share of costs in excess of revenues, Operator
shall have the right to enforce the lien as provided herein, or Operator shall
have the right to enforce the lien as provided herein. If the defaulting party
is the Operator, the Non-Operator(s) shall select a new Operator pursuant to the
terms hereof.
15. Tax Election
Each of the parties hereto subject to United States taxation hereby
elects, under the authority of Section 761(a) of the United States Internal
Revenue Code of 1954, to be excluded from the application of all of the
provisions of Sub-chapter K of Chapter 1 of Sub-title 1A of the United States
Internal Revenue Code of 1954 (the "US Tax Code"). If the income tax laws of the
jurisdiction in which any property of the Casinos covered hereby is located
contain or may hereafter contain provisions similar to those contained in the
Sub-chapter K of the US Tax Code under which a similar election is permitted,
each of the parties hereto agrees that such election shall be exercised. Each
party hereto authorizes and directs the Operator to execute such an election or
elections on its behalf, if appropriate, and to file the election with the
proper governmental office or agency. If requested by the Operator or any Owner
so to do, each party agrees to execute and join in such an election.
16. Miscellaneous
A. Beneficial Ownership - If at any time the interest of any party
hereto is divided among and owned by two (2) or more co-owners, Operator may at
its discretion require such co-owners to appoint a single representative with
full authority to receive notices, approve expenditures, receive billings for
and approve and pay such party's share of the expenses, and to deal generally
with, and with the power to bind, the co-owners of such party's interest within
the scope of the operations embraced in this Agreement.
[NUOINTL\AGR:NGTERM.AGR]
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<PAGE>
B. Survival - All representations, warranties, and covenants made by
any party in this Agreement shall survive the termination hereof for two (2)
years from the effective date of such termination.
C. Additional Documents - At any time and from time to time, after the
effective date of this Agreement, each party will execute such additional
instruments and take such action as may be reasonably requested by the other
party to confirm or perfect title to its interest in the Casinos, or otherwise
to carry out the intent and purposes of this Agreement.
D. 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. Notices - All notices and other communications hereunder shall
either be in writing and shall be deemed to have been given if delivered in
person, sent by overnight delivery service or sent by facsimile transmission, to
the parties hereto, or their designees, as follows:
To Dragon: Mr Ng Man Sun
Dragon Sight International Amusement
(Macau) Company
Room 3078, Diamond Square
3/F Shun Tak Centre
200 Connaught Road Central Hong Kong
Telephone: 011-852-2-559-8859
Facsimile: 011-852-2-540-5020
To NuOasis: NuOasis International Inc.
c/o Nona Morelle's II Inc.
2 Park Plaza, Suite 470
Irvine, California USA 92714
Telephone: +714-833-2094
Facsimile: +714-833-7854
F. 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.
[NUOINTL\AGR:NGTERM.AGR]
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<PAGE>
G. 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.
H. Applicable Law - Notwithstanding that this Agreement was negotiated
and is being contracted for in the Bahamas and any conflict-of-law provision to
the contrary, the Agreement shall be governed by the laws of the Commonwealth of
the Bahamas.
I. Assignment - 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.
M. 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.
N. Severability - If any part of this Agreement is deemed to be
unenforceable the balance of the Agreement shall remain in full force and
effect.
O. Amendment - This Agreement may be amended only by a written
instrument executed by the parties or their respective successors or assigns.
P. 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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
NuOasis International Inc.
Attest:
By: /s/ Fred G. Luke
-----------------------------------
Name: Name: Fred G. Luke
Title: Title: President
[NUOINTL\AGR:NGTERM.AGR]
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<PAGE>
Mr Ng Man Sun, doing business as
Dragon Insight International Amusement
(Macau) Company
Attest:
By:/s/ Ng Man Sun
------------------------------------
Name: Ng Man Sun
Title:
[NUOINTL\AGR:NGTERM.AGR]
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<PAGE>
EXHIBIT "A"
To the
OPERATING AGREEMENT
OWNERS
Mr Ng Man Sun
Dragon Sight International Amusement
(Macau) Company
3/E, 200 Connaught Road
Hong Kong Central
Nona Morelli's II Inc
2 Park Plaza, Suite 470
Irvine, California USA
92714
[NUOINTL\AGR:NGTERM.AGR]
<PAGE>
EXHIBIT "B"
To the
OPERATING AGREEMENT
THE CASINOS
The Casinos consist of two gaming facilities owned and operated by Dragon Sight
International Amusement (Macau) Company ("Dragon"), the Diamond Casino Holiday
Inn and Macau and the Harbour Island Diamond Casino (Hyatt Regency), Macau. The
Diamond Casino Holiday Inn opened in February, 1994. The Harbour Island Diamond
Casino opened in March, 1991.
Dragon is a sub-licensee, pursuant to an "arrangement" with STDM, who holds a
master gaming permit granted by the government of Portugal to Sociedade De
Tourism Diversocs De Macau ("STDM"). There is no written contract between STDM
and Dragon; Dragon conducts is business at the will of STDM. The arrangement
between Dragon and STDM requires Dragon to equip and manage each casino for
which Dragon is allowed to retain a percentage of the "net win" equal to 12.5
percent of Macau and Hong Kong resident customers and 42.5 percent of "foreign
passport" customers. The balance of the "net win" in both categories is paid to
STDM.
STDM is the lessee of each casino and the annual leasehold costs are paid by
STDM out of its share of net winnings. Dragon's costs are limited tot he
marketing, promotion and operation of the casinos. Gaming is primarily card
games; there are no slot machines in the two casinos.
[NUOINTL\AGR:NGTERM.AGR]
EXHIBIT 10.147
CONSENT TO SALE OF INTEREST AND TERMINATION
OF OPERATING AGREEMENT
CONSENT TO SALE OF INTEREST
AND
TERMINATION OF OPERATING AGREEMENT
This Consent to Sale of Interest and Termination of Operation Agreement
("Agreement") is entered into by and between NuOasis International Inc
("NuOasis") and Mr Ng Man Sun, doing business as Dragon Sight International
Amusement Co (Macau) Company ("Dragon" or "Operator").
Whereas, effective May 25, 1995 NuOasis, as successor in interest to the
ownership interest of Nona Morelli's II Inc in the net profits of the two casino
gaming activities conducted by Dragon at the Hyatt and Holiday Inn hotels in
Macau, became a party to the Operating Agreement, a copy of which is attached
hereto as Exhibit A (the "Operating Agreement"); and,
Whereas, NuOasis has sold its interest in the Casinos (as defined in the
Operating Agreement), and the purchasers of such interest and the Operator wish
to terminate the Operating Agreement; and,
Whereas, the sale of the NuOasis interest requires the notice to and consent of
the other Owner(s) of the Casinos; and,
Whereas, the parties to the Operating Agreement wish to terminate such
agreement.
Now, therefore, in consideration for the mutual promises and agreements
contained herein, the parties hereto, as the Owners of the Casinos, mutually
agree as follows:
1. Dragon, as Operator and sole Owner of the balance of the Net Profits Interest
in the Casinos, consents to the sale of the interest in the Casinos held by
NuOasis.
2. Effective the effective date of the NuOasis sale of its interest in the
Casinos, the Operating Agreement is terminated and shall thereafter be null and
void.
In witness thereof, the parties hereto have executed this Agreement the day and
year first above written.
NuOasis International Inc.
By: /s/ Fred G. Luke
------------------------------------
Name: Fred G. Luke
Title: Director
[NUOINTL\AGR:NGTERM.AGR]
EXHIBIT 10.148
AGREEMENT DATED JULY 31, 1996 BETWEEN NUOASIS
INTERNATIONAL INC. AND NG MAN SUN
AGREEMENT
DATED: 31st July, 1996.
PARTIES:
1. "NuOasis" NUOASIS INTERNATIONAL INC., a corporation organised
under the laws of the Commonwealth of the Bahamas
2. "Dragon" MR. NG MAN SUN, DOING BUSINESS AS DRAGON SIGHT
INTERNATIONAL AMUSEMENT (MACAU) COMPANY
RECITALS:
1.1 On May 25, 1995, Nona Morelli's II Inc. a Colorado corporation
("Nona"), the sole shareholder of NuOasis, acquired from Dragon a forty
percent (40%) net profits interest in the gaming operations conducted
by Dragon at the Hyatt and Holiday Inn Hotels in Macau, (the "Net
Profits Interest"); and,
1.2 As partial consideration for the purchase of the Net Profits Interest
on May 25, 1996, Nona issued a Contingent Security Promissory Note in
the principal amount of Three Million Dollars (USD3,000,000) in favor
of Dragon, a copy of which is annexed hereto as Schedule "1" (the
"Note"); and
1.3 Nona assigned all of its right, title and interest in the Net Profits
Interest and its obligations under the Note to NuOasis by way of the
Assumption Agreement dated December 29, 1995; and,
1.4 Dragon and Nona have agreed, as part of the settlement of a dispute
between them, to the retirement of the Note, by way of purchase by a
third party or otherwise; and,
1.5 NuOasis has agreed to purchase the Note pursuant to the terms hereof.
OPERATIVE PROVISIONS
1. NuOasis hereby purchases from Dragon and Dragon hereby sells the Note
to NuOasis, subject only to Seller's receipt of the Purchase Price (as
defined below).
2. The Purchase Price for the Note shall be Three Million Two Hundred
Eighty Thousand Dollars (US$3,280,000), payable in cash at Closing.
3. Dragon hereby warrants to NuOasis as follows:
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3.1 At Closing Dragon shall deliver the Note in its original
form to NuOasis in proper form for transfer, with signatures
guaranteed in favor of NuOasis or its designee, transferring
all right, title and interest in and to the Note to NuOasis,
or such designee; and,
3.2 This Agreement has been duly executed by Dragon 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, order or decree to
which the Note is subject or to which Dragon is a party;
and,
3.3 The Note is not subject to any claims or causes of action
created by or through Dragon, and Dragon is not a defendant,
nor a plaintiff against whom a counterclaim has been made or
reduced to judgment, in any litigation or proceedings before
any federal or state government of Macau or other
jurisdiction, or any department, board, body or agency
thereof, involving the Note; and,
3.4 Dragon has the full right and power to transfer such and
enter into and carry out this Agreement; and,
3.5 No representation or warranty contained herein, nor
statement in any document, certificate or schedule furnished
or to be furnished pursuant to this Agreement by Dragon, or
in connection with the transaction contemplated hereby,
contains or contained any untrue statement of a material
fact, nor does it omit to state a material fact necessary to
make any statement of fact contained herein not misleading.
4. NuOasis hereby warrants to Dragon as follows:
4.1 It is a corporation duly organized and validly existing
under the laws of the Commonwealth of the Bahamas as of the
date hereof; and,
4.2 It is not a defendant or a plaintiff against whom a
counterclaim has been made or reduced to judgment, in any
litigation or proceedings before any federal, provincial or
municipal government of the Commonwealth of the Bahamas, or
other jurisdiction, or any department, board, body or agency
thereof, which could result in a claim against the Purchase
Price; and,
4.3 This Agreement has been duly executed in the capacity stated
on the signature page hereof, 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, order or decree to which NuOasis is a
party or to which it may be subject; and,
[NUOINTL\AGR:NG73196.AGR]
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4.4 No representation or warranty contained herein, nor
statement in any document, certificate or schedule furnished
or to be furnished pursuant to this Agreement by Dragon, or
in connection with the transaction contemplated hereby,
contains or contained any untrue statement of a material
fact, nor does it omit to state a material fact necessary to
make any statement of fact contained herein not misleading.
5. This Agreement sets out the entire agreement and understanding of the
parties and is in substitution for any previous agreements or contracts
between NuOasis and Dragon in respect to the Note, which shall herewith
be deemed to have been terminated by mutual consent.
6. The validity, construction and performance of this Agreement shall be
governed by the laws of the Commonwealth of the Bahamas.
7. Delivery of the Note ("Closing") shall occur forty eight (48) hours
following NuOasis' written notice to Dragon that NuOasis wishes to
effect a Closing.
8. All disputes, claims or proceedings between the parties relating to the
validity, construction or performance of this Agreement shall be
subject to the exclusive jurisdiction of the Commonwealth of the
Bahamas to which the parties irrevocably submit.
9. Any notice to be given by a party under this Agreement must be in
writing (in the English language) and must be given by delivery at or
sending by first class post or other faster postal service, or telex,
facsimile transmission or other means of telecommunication in
permanent written form (provided the addressee has his or its own
facilities for receiving such transmissions) to the last known postal
address or relevant telecommunications number of the other party.
Where notice is given by sending in a prescribed manner it shall be
deemed to have been received when in the ordinary course of the means
of transmission it would be received by the addressee. To prove the
giving of a notice it shall be sufficient to show it was dispatched. A
notice shall have effect from the sooner of its actual or deemed
receipt by the addressee.
10. This Agreement may be executed in more than one counterpart, each of
which shall be deemed to constitute an original and shall become
effective when one or more counterparts have been signed by all of the
parties hereto and when such a counterpart so executed has been
delivered to each of the parties hereto.
[NUOINTL\AGR:NG73196.AGR]
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IN WITNESS WHEREOF this Agreement has been entered into by the parties hereto as
a deed the day and year first below written
SIGNED and DELIVERED as a DEED )
)
)
By: /s/ Roger Bryan Emery )
-------------------------------------------------------- )
Roger Bryan Emery (Representing First Directors )
Limited) (a Director) )
)
)
/s/ Darren Lee Colquitt )
-------------------------------------------------------- )
Darren Lee Colquitt (Representing First Directors )
Limited) (a Director) )
)
on behalf of NUOASIS INTERNATIONAL INC. )
SIGNED and DELIVERED as a DEED )
)
)
By: /s/ Ng Man Sun )
-------------------------------------------------------- )
Ng Man Sun )
)
on behalf of DRAGON SIGHT INTERNATIONAL AMUSEMENT (Macau) )
COMPANY )
[NUOINTL\AGR:NG73196.AGR]
<PAGE>
SCHEDULE "1"
to the
Agreement
Dated 31 July, 1996
THE NOTE
[NUOINTL\AGR:NG73196.AGR]
<PAGE>
SECURED CONTINGENT PROMISSORY NOTE
FOR VALUE RECEIVED, effective on the 25th day of May, 1995, Nona
Morelli's II Inc, a corporation ("Maker") promises to pay to Mr Ng Man Sun,
doing business as Dragon Sight International Amusement (Macau) Company
("Holder"), the principal sum of Three Million Dollars (US$3,000,000) with
interest at the rate of eight percent (8%) per annum.
Rate of Interest
Interest shall accrue at a rate per annum equal to the lesser of (a) three
percent (3%) or (b) the percentage which is the sum of (i) the "base rate of
interest" announced publicly by First Los Angeles Bank, Newport Beach,
California, from time to time (360-day basis) then in effect and most recently
available before the date on which the interest rate determination is made (the
"Base Rate") plus (ii) one percent (1%). A determination of the interest rate
from time to time in effect shall be made prospectively on the date hereof and
on the first day of each calendar month thereafter until this Note shall be paid
in full. Interest hereunder shall be calculated on the actual number of days
elapsed on the basis of a 360-day year.
Rate of Interest on Default
Interest on the unpaid principal together with all accrued and unpaid interest
shall, after the maturity hereof, whether by demand, acceleration, or otherwise,
automatically accrue and shall be payable at the rate per annum equal to the
lesser of (a) three percent (3%) or (b) the percentage which is the sum of (i)
one percent (1%), plus (ii) the Base Rate.
Payment of Principal and Interest
Payments of principal and interest under this Note shall be payable on or before
June 30, 1996, with accrued interest, at the applicable rate set forth above,
beginning on the first business day of June 1995 and thereafter on the first
business day of each succeeding calendar month until the entire remaining
balance together with all accrued but unpaid interest hereunder is paid.
Each payment shall, when made, be credited first on interest then due, and the
remaining on principal, and interest shall thereupon cease upon the principle so
credited.
Security
This Note is secured by a Security Agreement of even date herewith executed by
Maker as Debtor granting to Holder a security interest in 250,000 shares of
Class B Preferred Stock of NuOasis Gaming Inc, a Delaware corporation (the
"NuOasis Shares") pursuant to which Maker has pledged the NuOasis Shares as
collateral for payment of this Note. This Note is further subject to and
governed by the provisions contained in or referred to in said Security
Agreement of even date. Notwithstanding the terms of said Security Agreement,
this Note is not negotiable. This Note may be assigned by Holder, but only
subject to all defenses which Maker may have against Holder. Further, payment of
this Note does not constitute a personal or corporate obligation of Maker.
[NUOINTL\AGR:NG73196.AGR]
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Acceleration
The entire remaining balance of this Note together with all accrued but unpaid
interest hereunder, and all other obligations, direct and contingent, of Maker
or any endorser hereof to Holder shall, at the election of Holder, become
immediately due and payable, without demand or notice, upon the occurrence of
any of the following:
(a) Maker becomes bankrupt (including but not limited to, the
commencement of a case under Title 11 of the United States
Code as now constituted or hereafter amended, or under any
other applicable federal or state bankruptcy law) or makes
an assignment for the benefit of creditors;
(b) The appointment for Maker, voluntarily or involuntarily, of
a receiver, trustee, liquidator, custodian, or sequester or
other similar official) in equity, bankruptcy, or under any
provision of any law of any state or the United States of
America, or otherwise;
(c) Maker's dissolution; or
(d) Default in any payment or performance required under this
Note.
Failure to Exercise Rights
No failure or delay on the part of Holder in the exercise of any power, right,
or privilege under this Note shall operate as a waiver thereof or of any other
power, right, or privilege, nor shall any single or partial exercise of any such
power, right, or privilege preclude any further exercise thereof or of any other
power, right, or privilege.
Pre-Payment
The entire principal balance of this Note or any part thereof may be prepaid
without penalty or premium on any interest payment date upon not less than ten
(10) days prior written notice.
Offset for Note
This Note is issued under an Asset Purchase Agreement dated May 1, 1995, between
the Holder and the Maker. The Maker expressly reserves against the Holder, and
any subsequent holder of this Note, the right to offset against any and all sums
payable hereunder an amount equal to any and all damages sustained by the Maker
by reason of any breach or default by the Holder under the Purchase Agreement.
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Limit on Interest
Notwithstanding anything to the contrary contained herein, the total liability
for payments in the nature of interest, additional interest, and other charges
shall not exceed the limits imposed by the applicable interest rate laws. If any
payments in the nature of interest, additional interest, and other changes made
hereunder are held to be in excess of the limits imposed by the applicable
interest rate laws it is agreed that any such amount held to be in excess shall
be considered payment of principal hereunder and the indebtedness evidenced
hereby shall be reduced by such amount so that the total liability, for payments
in the nature of interest, additional interest, and other charges shall not
exceed the limits imposed by the applicable interest rate laws in compliance
with the desires of Maker and Holder.
Waiver of Presentment, Etc.
Maker and endorsers, and each of them, hereby waive diligence, demand,
presentment for payment, protest and notice of protest, notice of dishonor, and
notice of nonpayment of this Note, and specifically consent to and waive notice
of any kind of any renewal, extension, or enforcement of this Note. The pleading
of any statute of limitations as a defense to any demand against Maker or
endorsers is expressly waived by each and all of said parties. Maker and
endorsers, and each of them, waive trial by jury in any litigation arising out
of or relating to this Note in which Holder is an adverse party and further
waive the right to interpose any defense, setoff, or counterclaim of any nature
or description.
Benefit
Subject to the terms and conditions contained herein, the provisions of this
Note shall inure to the benefit of and shall be binding upon the assigns,
successors in interest, or personal representatives of Maker and Holder,
respectively.
Severability
Every provision in this Note is intended to be severable. In the event any term
or provision hereof is declared by a court of competent jurisdiction to be
illegal or invalid for any reason whatsoever, such illegality or invalidity
shall not affect the balance of the terms and provisions hereof, which terms and
provisions shall remain binding and enforceable.
[NUOINTL\AGR:NG73196.AGR]
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Time of Essence
Time is of the essence in the performance of each and every obligation under
this Note to be performed by Maker.
"Maker"
NONA MORELLI'S II INC.
a Colorado corporation
By: /s/ Fred G. Luke
------------------------------------
Name: Fred G. Luke
Title: Chief Executiv Officer
[NUOINTL\AGR:NG73196.AGR]
EXHIBIT 10.149
CASINO LEASE AND OPERATING MANAGEMENT CONTRACT BETWEEN
SOCIETE' D' ANIMATION ET DE LOISIRS TOURISTIQUES (S.A.L.T.)
AND CLEOPATRA PALACE LIMITED
CASINO LEASE AND OPERATING
MANAGEMENT CONTRACT
Societe d' Animation et de Loisirs Touristiques
(S.A.L.T.)
"OWNER"
CLEOPATRA PALACE LIMITED
"LESSEE"
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THIS DOCUMENT WITNESSETH,
ON THE ONE HAND, SOCIETE D' ANIMATION ET DE LOISIRS TOURISTIQUES (S.A.L.T.),
S.A. represented by Mr. Ibrahim A. KARAWI, acting as the chairman of the board
of directors, domiciled in Tunis, Residence du Lac - Bloc B - App. B 32, Les
Berges du Lac - Tunis hereinafter called "The Owner"
ON THE OTHER HAND, CLEOPATRA PALACE LIMITED, Dublin, Ireland, represented by its
General Manager Mr. Gabriel TABARANI hereinafter called "The Lessee"
AND NONA MORELLI'S II, INC., Guarantor, represented by Mr. Fred G. LUKE.
WHEREAS, Owner is the present owner of (1) casino, showroom, now under
construction (the Casino area) as more fully described in Exhibit A which is
incorporated by reference, and
WHEREAS, Societe Touristique Tunisie Golfe (S.T.T.G.) S.A. represented by Mr.
Ahmed AL IBRAHIM, acting as chairman of the board of Directors, domiciled in
Tunis, Rue Ibn Aljazzar No 8, Tunisia, is the owner of a hotel of six hundred
and thirty (630) beds, two (2) tennis courts, a shopping center, two hundred and
fifty (250) apartments, convention facilities and entertainment, sport and
health center area mentioned above and as more fully described in exhibit B
which is incorporated by reference.
WHEREAS, Owner presently has an agreement in principal which will allow it to
obtain a governmental licence or permit which legally authorizes it to operate
and maintain a gaming casino with slot machines, table games and video machines
in Tunisia (the "Gambling License") subject to compliance by Lessor and by
Lessee with all applicable Tunisian laws and regulations; and
WHEREAS, the parties hereto desire to enter into this Lease for the casino on
which Lessee shall operate (The "Casino") with the particular location of the
casino (the "Casino area") being more fully described in Exhibit A.
NOW THEREFORE, in consideration of the covenants and conditions here in to be
kept and performed by the parties hereto, and other good and valuable
consideration, the receipt and sufficiency whereof is hereby acknowledged, the
following shall be, and hereby is understood and agreed:
ARTICLE 1 : Lease. Owner does hereby lease the casino and casino area to Lessee
for a fixed rental of three million dollars US ($ 3,000,000) per annum, payable
quarterly in arrears ("Rent")
ARTICLE 2 : Operation. Lessee shall manage the Casino by and through experienced
operators, reasonably acceptable to Owner. Lessee shall have full and complete
control of the operation of the casino, subject only to the terms and conditions
of this agreement.
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ARTICLE 3 : License. The Lessee shall obtain the Gambling License from the
Tunisian Authority. Owner shall provide the necessary assistance to Lessee to
obtain and maintain the gambling License for and during the entire term of this
Agreement, and Owner hereby authorizes the Lessee to operate the casino during
the term of this Agreement in accordance with the provisions of the Gambling
License, the laws of Tunisia, and the continuation of this Agreement and
Lessee's and Lessor's obligations hereunder are subject to Lessee obtaining and
maintaining in effect, the Gambling license.
ARTICLE 4 : Compliance. Lessee shall comply with the laws of Tunisia to operate
the casino under the Gambling License in accordance with the terms of this
Agreement.
ARTICLE 5 : Term. This Agreement is considered to have come into force
immediately upon signature by the parties. The initial term of this Agreement
shall be twenty (20) years, commencing on the date (1st January 1995), shall
expire on the last day of the twentieth year, (The "Initial Term"). Three months
before the expiry of the initial period, the Owner and the Lessee may inform
each other of their intention, either to prorogate the lease or to terminate it.
If no such notice is served, the present Agreement shall be renewed for a ten
year option period.
Subject to the Licensing provisions referenced below, this Agreement shall be
automatically renewed for two (2) successive five (5) year terms, unless same is
terminated by Lessee upon written notice to owner ninety (90) days in advance of
the expiration of the initial term, or any of the additional five (5) year term.
In the event the casino area is not ready for occupancy by (1st of July 1996)
Lessee may terminate this agreement and receive a return of the full Deposit
made by him to the owner plus interest at seven and one half percent (7 1/2 %)
per annum, or if premises are not ready at the said date, Lessee is entitled to
complete at his expenses and with hold funds from rent until repaid.
ARTICLE 6 : Surrender at Termination. At the expiration of the term of this
Agreement, or upon the earlier termination thereof, Lessee shall surrender and
return the casino and casino area in the condition thereof existing at the
commencement of the term, ordinary wear and tear, and damage by fire or other
casualty, excepted. Provided, Lessee shall be entitled to retain all of its
furniture, gambling machines, equipment, records, supplies, inventories and
other personal property utilized in the operation of the casino. It is
understood that anything supplied or paid by the Lessee for the performance of
the casino operation shall be his property.
ARTICLE 7 : Operating Capital. Lessee shall provide the appropriate amount of
funds to equip and operate the casino during the term of this Agreement, in
addition to the Deposit referenced below. The Lessee shall exercise reasonable
skill, care and diligence in the performance of his obligations under this
Agreement.
ARTICLE 8 : Additional Rent. The Rent shall increase in the third (3rd) year of
the commencement of the initial term by Three Hundred Thousand Dollars ($
300,000.00) per year (which is an additional $ 75,000 per quarter), and shall
increase by an additional Three Hundred Thousand Dollars per year ($ 75,000
maximum per quarter) each year thereafter, until the rent reaches a maximum of
Five Million One Hundred Thousand Dollars ($ 5,100,000.00) per year, which is
One Million Two Hundred Seventy-five Thousand Dollars ($ 1,275,000) per quarter
("Rent Ceiling"). When the Rent Ceiling is reached, there shall be no further or
additional rent increases.
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ARTICLE 9 : Books and records. Lessee shall be responsible for the maintenance
of such records and books of account as may reasonably reflect the operation of
the casino and shall preserve such records and books of account during the term
of this Agreement and shall permit Owner (or its authorized representatives) and
auditors to examine and audit such records and books of account at any and all
reasonable times. Lessee shall cause the books and records of Lessee to be
audited annually, at Lessee's expense, and shall furnish owner with a copy of
the audit, but Owner shall not be required to accept the audit and may audit or
examine any of Lessee's books and records, on reasonable notice to Lessee, at
Owner's expense.
ARTICLE 10 : Taxes. Lessee agrees to pay all taxes, licenses, charges and fees
levied or assessed on Lessee by any governmental authority in connection with/or
incident to the performance of this Agreement, Lessee agrees to require the same
agreements from any of its subcontractors
Lessee agrees to reimburse Owner on demand for all such taxes, fees licenses and
charges which Owner may be required or deem it necessary to pay on account of
the agents, employees and representative of Lessee or its assignees. Upon
demand, Lessee agrees to furnish Owner with the information required to enable
it to make the necessary reports and pay such taxes, fees, licenses and charges.
ARTICLE 11 : Furniture, Furnishings, Fixtures and Equipment
A- Owner shall, at its own expenses, complete and finish out the casino and the
casino area, decorated and fixtured, including, but not limited to, carpets and
drapes. This includes all costs of roads, adequate parking, access corridors,
walkways, landscaping and generally putting the building into such condition
that Lessee may commence its business activities. Such costs will not include
items specified in (B) below.
B- Lessee shall, at its sole expense, provide all gaming devices and relating
equipment necessary for the operation of the casino.
C- It is understood that any gaming devices and related equipment provided by
Lessee shall remain the property of the Lessee.
D- Lessee shall, at all times, keep and maintain the inside of the casino area
and the furniture, furnishings, fixtures and equipment of the casino in good
order and repair, reasonable wear and tear excepted. Owner will allocate the
maximum possible parking for the casino, and the parking attendants for casino
parking shall be the responsibility of Lessee.
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ARTICLE 12 : Conduct of Business
A- During the term of this Agreement, the casino and Gambling License shall be
used solely for the purposes of this Agreement. Lessee shall manage and operate
the casino to the best of its ability; and in a proper, efficient and
businesslike manner; and to the intent that the ambience of a high class casino
shall at all times be maintained. Lessee shall keep the casino open and
available for business on all days for the months of January through December
(twelve [12] months) not less that eight (8) hours per day, but only during the
times when there is sufficient business to justify the operation, except when
prevented by force majeure. The phrase "prevented by force majeure", as used in
this Agreement, shall be deemed to mean prevented by government regulation, wars
or civil strife which might impede travel to and from Tunisia; riots; civil
commotion; war; hostilities, invasion, act of foreign enemies, rebellion,
revolution, insurrection, and any operation of the forces of nature against
which precautions could not reasonably have been expected to have been taken.
Rent under this Agreement shall abate so long as casino operations are prevented
by force majeure, provided that if the force majeure continues for six (6)
months, Lessee may at its convenience terminate its Agreement.
B- Lessee shall employ and train all employees of the casino. All such employees
shall be the employees of the Lessee. All employees of the casino shall be
neatly and cleanly attired and if any of the casino's employees shall in any way
bring discredit upon the country of Tunisia or any city therein, they shall be
immediately discharged.
C- Lessee shall comply, and the casino shall be operated so as to comply, with
all laws and regulations presently in force or subsequently enacted by Tunisia.
D- Lessee shall operate and provide in the casino all casino facilities and
casino services normally operated and provided in casinos of comparable class.
E- Lessee shall be entitled to operate liquor bars within the casino area for
the purpose of selling drinks to patrons of the casino as well as dispensing
complimentary beverages.
ARTICLE 13 : Relationship of the parties. Nothing herein contained shall be
construed as effecting a co-partnership or joint venture between the parties,
and it is the express intent of the parties that the relationship between them
shall be solely and exclusively that of Landlord and Tenant, under the terms and
conditions hereof.
ARTICLE 14 : Hold Harmless. Owner and Lessee shall at times during the term of
this agreement defend, indemnify and hold harmless each other from any liability
or penalty which may be imposed by reason of act or omission of a third party,
and also from all claims, suits or proceedings that may be brought against owner
or Lessee with respect to such clause.
ARTICLE 15 : Insurance. During the term of this Agreement, Lessee shall
maintain, at Lessee's expense, in a responsible insurance company or companies
reasonably satisfactory to owner, personal injury and property liability
insurance with coverages of no less than One Million Dollars ($ 1,000,000.00)
for personal injury and no less than Five Hundred Thousand Dollars ($
500,000.00) for property damage, and Owner shall be listed as an additional
insured by such policies as workmen's compensation or similar insurance as may
be required by applicable laws.
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ARTICLE 16 : Untenantability and Hostilities. If, during the term of this
Agreement, any of the casino are made wholly untenantable by fire or other
casualty so that said premises cannot be properly utilized as a casino facility,
then Lessee's obligations (including the obligation to pay rent) shall abate
during such period, until such time as the operation of the casino may resume.
If such condition continues for more than twelve (12) months, then the Lessee
may terminate this agreement.
ARTICLE 17 : Right of Inspection. Owner shall have the right to enter upon
and/or inspect any part of the casino area at any time and may also inspect any
of the gambling equipment, other special equipment, bankrolls, safe, or accounts
used and maintained on said casino area at any time; provided, however, such
visits or inspections shall be conducted with as little disturbance as possible
to the operations of the casino and in the company of a representative of
Lessee.
ARTICLE 18 : Assignment. Lessee agrees not to sublease or assign this Agreement
or its interest in the casino, and any of its rights and privileges under this
Agreement without the written prior consent of Owner which shall not be
unreasonably withheld.
ARTICLE 19 : Appearance of Premises. It is expressly understood and agreed that
the appearance of the casino and the casino area which have been provided by the
owner at its expense, including the placing of signs and the general conduct of
the business on the casino area, will have a material effect on the reputation
of owner. The owner therefore hereby expressly reserves the right to control and
regulate the appearance of the casino and the casino area at all times during
the terms of this Agreement, including, but not limited to the regulation of any
signs, advertisements or other promotional material used in connection with the
operation of the casino. Lessee shall have the right to advertise the casino but
the format of the advertising shall be in keeping with the dignity of the
casino, and the owner shall not unreasonably withhold its approval of the form
of such advertising.
ARTICLE 20 : Entertainment. Lessee shall have the right to decide if any
entertainment is needed in the casino; Lessee shall be responsible for the
payment of all entertainment in the casino area
ARTICLE 21 : Condition to owner's performance.
As a condition precedent to owner's performance, Lessee will provide evidence
that it has at least Six Million Dollars ($ 6,000,000.00) of working capital,
and that it is capable of working under this Agreement.
ARTICLE 22 : Default.
22.1 Default by lessee :
If, at any time during the term of this Agreement, one or more of the following
events shall occur, owner may forthwith terminate this Agreement.
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A. Lessee shall fail to make any payment due under this Agreement on
or prior to the date upon which it is due, and such failure shall continue for
thirty (30) days after written notice;
B. Lessee shall fail or refuse to fully perform or comply with any
other agreement, covenant, or undertaking, which is required by this Agreement
to perform or comply with, or shall otherwise violate any provision hereof, and
such failure shall continue for thirty (30) days after written consent.
Provided that, if lessee is diligently attempting to cure a non-monetary default
but cannot reasonably do so in thirty (30) days, the cure period shall continue
as long as reasonably necessary for lessee to cure the non-monetary default, in
the exercise of reasonable diligence.
22.2 Default by owner :
The Lessee may by written notice to the owner terminate this agreement if he
considers that the owner is not discharging his obligations under this
agreement, stating the reasons therefore. In the event that the owner does not
respond to such notice within fifteen (15) days, the Lessee may deem the
agreement terminated, or at his convenience the lessee may correct defaults at
the Owner's expense and withhold rents until Lessee has been repaid Lessee's
costs.
22.3 Claims for default :
Any claim for damages arising out of default and termination shall be agreed
between the Owner and the Lessee or, failing agreement, shall be referred to
arbitration in accordance with clause 25 of this agreement.
ARTICLE 23 : Notices. Unless a party hereto shall in written direct otherwise,
all notices to be served and rendered if sent by Registered Mail directed to:
OWNER : Society d'Animation et de Loisirs Touristiques
"S.A.L.T."
Residence du Lac Bloc B - Appt. B 32
Les Berges du Lac
Tunis, TUNISIA
COPY TO :
LESSEE : Cleopatra Palace Limited
c/o Gabriel Tabarani
Chartwell House
80 Wimbledon Parkside
London SW19 5LN, ENGLAND
Any party may change its address for notice by written notice and such change
shall be effective upon actual receipt of same.
- 7 -
<PAGE>
ARTICLE 24 : Governing Law. This agreement is subject to and shall be
interpreted in accordance with the laws of Tunisia.
ARTICLE 25 : Arbitration. Any dispute between Owner and Lessee arising from the
execution or interpretation of the provisions of this Agreement, if not settled
amicably, shall be settled by an arbitral tribunal consisting of three
arbitrators whose award shall be final and enforceable.
Each of the above mentioned parties shall appoint an arbitrator and the two
arbitrators, before proceeding to arbitration, shall appoint a Chairman who
shall be the Chairman of the arbitral tribunal. If the two arbitrators as
mentioned above fail within a delay of 30 days after their appointment to
appoint the Chairman, then each party may request the first President of the
Appeal Court of Tunis to appoint such chairman. The same procedure shall apply
if either party abstains from appointing its arbitrator.
- - The arbitration shall be conducted in Tunisia.
ARTICLE 26 : Promotional Material Lessee will annually prepare a specification
book for a program of promotional and tourist activities.
ARTICLE 27 : Other obligations.
Nona Morello's II, Inc. shall secure and guarantee Lessee's performance under
this Agreement.
Lessee shall provide a yearly revolving Letter of Credit so as to maintain the
security for Lessee's performance to Owner under this agreement for one year's
rent including additional as established by the Agreement.
In the event that payments are not made in accordance with this Agreement,
Lessee shall instruct the bank holding the common stock to sell it and pay the
proceeds to Owner as liquidated damages. If Lessee fails to instruct the bank
holding the common stock within a delay of fifteen (15) days, Owner shall be
entitled, upon sending a notice to both Lessee and the bank, to authorize the
bank to proceed to the sale of the said common stock.
During the period of lease of the Casino as defined under this Agreement, should
the market value of the stock drop below the outstanding balance due, then in
that event Lessee commits itself to increase the number of shares of NONA stock
in escrow to the amount of shares necessary to maintain a market value equal to
the outstanding balance due.
ARTICLE 28: Language and interpretation.
The conditions of the Agreement are drawn in English. It's interpretation should
be in conformity with the parties' intention and the technical meaning. The
headings in the agreement shall not be used in its interpretation.
The singular includes the plural, the masculine includes the feminine, and
vice-versa where the context requires.
If there is a conflict between provisions of the agreement, the last to be
written chronologically shall prevail, unless otherwise specified.
ARTICLE 29 : Alterations.
Should circumstances arise which call for modifications of the agreement, these
may be made by mutual consent given in writing. Proposals in this respect from
any party shall be given due consideration by the other party.
- 8 -
<PAGE>
ARTICLE 30 : Savings Clause.
In the event any provision of this Agreement is inconsistent with or contrary to
any applicable law, rule, regulation, code or order said provision shall be
deemed to be modified to the extent required to comply with said law, rule,
regulation, code or order and as so modified, said provision and this Agreement
shall continue in full force and effect.
IN WITNESS WHEREOF, This Agreement is executed in duplicate copies, of like
terms and effect, on this day ---------- of ----------------------.
LESSEE : /s/ Cleopatra Palace Limited
----------------------------------
CLEOPATRA PALACE LIMITED
OWNER : /s/ Societe D'Animation et de Loisirs
Touristiques "S.A.L.T."
----------------------------------
SOCIETE D'ANIMATION ET DE LOISIRS
TOURISTIQUES "S.A.L.T."
GUARANTOR : /s/ Nona Morelli's II, Inc.
----------------------------------
NONA MORELLI'S II, INC.
-9-
EXHIBIT 10.150
FOURTH ADDENDUM TO CONSULTING AGREEMENT
WITH JOHN D. DESBROW
JOHN D. DESBROW
ATTORNEY AT LAW
2 PARK PLAZA, SUITE 470
IRVINE, CALIFORNIA 92714
TEL: (714) 833-2094 FAX: (714) 833-7854
December 27, 1995
Nona Morelli's II, Inc.
2 Park Plaza, Suite 470
Irvine, California 92714
RE: Fourth Addendum to Consulting Agreement
Gentlemen:
This letter will serve as the Fourth Addendum to my Consulting
Agreement dated January 1, 1994 with Nona Morelli's II, Inc. (the "Company").
This Addendum will confirm the renewal of the Consulting Agreement for calendar
year 1996.
As soon as practicable following execution of this Addendum the Company
agrees to include in a Form S-8 Registration Statement at its expense a
sufficient number of shares in order to pay for professional services invoiced
in calendar year 1996.
If the foregoing is agreeable, please indicate your approval
by dating and signing below and returning an original copy to me.
Very truly yours,
/s/ John D. Desbrow
------------------------------------
John D. Desbrow
APPROVAL AND ACCEPTANCE
READ AND ACCEPTED.
NONA MORELLI'S II, INC.
By: /s/ Fred G. Luke
------------------------------
Name: Fred G. Luke
Title: Chief Executive Officer
[JDD\AGR:4THADDCN.AGR]
EXHIBIT 10.151
ASSUMPTION AGREEMENT AND RELEASE OF LIABILITY
WITH NG MAN SUN DATED DECEMBER 29, 1995
ASSUMPTION AGREEMENT AND RELEASE OF LIABILITY
The undersigned corporation, NuOasis International, Inc., a California
corporation, hereby assumes all obligations on the part of Nona Morelli's II,
Inc. as Maker of that certain Secured Contingent Promissory Note in the
principal amount of $3,000,000 executed in favor of Ng Man Sun, doing business
as Dragon Sight International Amusement (Macau) Co. (the "Note"). The
undersigned agrees to be bound by all the terms, provisions, covenants and
conditions of the Note.
The undersigned agrees to pay all expenses (including attorneys' fees
and legal expenses) paid or incurred by Ng Man Sun, doing business as Dragon
Sight International Amusement (Macau) Co. in endeavoring to collect the Note, or
any part thereof, and in enforcing this Assumption Agreement.
If any provisions of this Assumption Agreement are in conflict with any
statute, rule or law, then such provisions shall be deemed null and void to the
extent of such conflict, but without invalidating any other provisions of this
Assumption Agreement.
December 29, 1995 NUOASIS INTERNATIONAL, INC.,
a California corporation
By: /s/ Fred G. Luke
----------------------------------
Fred G. Luke, President
The undersigned, Ng Man Sun, doing business as Dragon Sight
International Amusement (Macau) Co., releases Nona Morelli's II, Inc. from all
liability on the part of Nona Morelli's II, Inc. to be performed under the Note.
NG MAN SUN, doing business
as Dragon Sight
International Amusement
(Macau) Co.
/s/ Ng Man Sun
---------------------------------------
Ng Man Sun
[NUOINTL\AGR:NGNOTE.AGR]
EXHIBIT 10.152
SECOND ADDENDUM TO CONSULTING AGREEMENT
WITH STEVEN H. DONG
STEVEN H. DONG
CERTIFIED PUBLIC ACCOUNTANT
2 PARK PLAZA., SUITE 470
IRVINE, CA 92614
TEL: (714) 833-2094 FAX: (714) 833-7854
July 1, 1996
Nona Morrelli's II, Inc.
2 Park Plaza, Suite 470
Irvine, California 92714
RE: Second Addendum to and Renewal of Consulting Agreement
This letter will serve as a Second Addendum to the undersigned's Consulting
Agreement dated July 1, 1995 (the "Consulting Agreement") with Nona Morelli's
II, Inc., (the "Company"). Pursuant to the Consulting Agreement, this Addendum
confirms the renewal of the Consulting Agreement and related Addendum, dated
October 4, 1995, for the fiscal year ended June 30, 1997.
As soon as practicable following execution of this Addendum, the Company agrees
to include in a Form S-8 Registration Statement at its expense a sufficient
number of common shares of the Company in order to pay for professional services
rendered.
The Company agrees that it will indemnify, defend and hold the Consultant
harmless from and against all demands, claims, actions, prosecutions, losses,
damages, liabilities, costs and expenses, including without limitation interest,
penalties, and attorney's fees and expenses, asserted against, resulting to,
imposed upon or incurred by Consultant, directly or indirectly, resulting from
any dispute, claim, suit, proceeding, or cause of action arising from or in any
way connected to the providing of services to the Company under the Consulting
Agreement and this Addendum to and Renewal of Consulting Agreement.
If the foregoing is agreeable, please indicate your approval by dating and
signing below.
Very truly yours,
/s/ Steven H. Dong, CPA
----------------------------------
Steven H. Dong, CPA
("Consultant")
APPROVAL AND ACCEPTANCE
READ AND ACCEPTED THIS 1st day of July, 1996.
NONA MORELLI'S II, INC.
By: /s/ Fred G. Luke
------------------------------
Name: Fred G. Luke
Title: Chief Executive Officer
[nm/agr/dongamend11.AGR]
EXHIBIT 10.153
AGREEMENT DATED OCTOBER 2, 1996 BETWEEN
NUOASIS INTERNATIONAL, INC.
AND CLEOPATRA WORLD, INC.
NuOasis International Inc.
43 Elizabeth Avenue, Box N-8680 (Diamond) Nassau, Bahamas
Telephone (809) 356-2903 (Diamond) Facsimile (809) 326-8434
October 2, 1996
Board of Directors
CLEOPATRA WORLD INC.
Box 3186, Road Town
Tortola, British Virgin Islands
RE: Purchase of shares of capital stock of Cleopatra World Inc.,
a corporation organised under the laws of The British Virgin
Islands ("Cleopatra World")
Gentlemen:
NuOasis International, Inc. ("NuOasis") wishes to acquire shares of capital
stock of Cleopatra World ("Cleopatra World Shares").
When executed by an authorized officer of Cleopatra World this letter (the
"Agreement") will set out the understanding and agreement regarding such a
transaction. It is our understanding and representation that:
1. NuOasis has the right to acquire Three Million Dollars (US$3,000,000)
of common stock of The Hartcourt Companies Inc., a corporation
organised under the laws of the United States, state of Utah (the
"Hartcourt Shares"); and
2. Pursuant to the Lease Agreement dated the 5th day of November, 1995
(the "Lease") between Cleopatra and Societe Touristique Tunisie Golfe
S.A. ("Owner"), Cleopatra World is the Lessee of the Le Palace Hotel
and adjoining commercial centre, sports and fitness centre, beach club
and apartment complex (collectively, the "Property"), a copy of which
is annexed hereto as Schedule "1"; and
3. Pursuant to the Lease Cleopatra is required to deposit with the Owner
securities having a market value equal to US$3,000,000, to be held by
the Owner as a Security Deposit.
Based upon these facts and the representations contained herein, we
agree as follows:
1. NuOasis to Provide Security Deposit
Upon acceptance of this Agreement by Cleopatra World NuOasis will
deposit the Hartcourt Shares with Owner to satisfy the Security Deposit
set forth under the Lease.
2. Issuance of Additional Shares
Upon deposit of the Hartcourt Shares by NuOasis as set forth herein
Cleopatra World will issue and deliver to NuOasis shares of its capital
stock equal in number to not less than fifty percent (50%) of the total
issued and outstanding share capital of Cleopatra World at such date
but giving effect to the transaction contemplated by this Agreement.
[NUOINLTD\AGR:CLEOWSUB.AGR]-6
<PAGE>
3. In connection with this proposal, and as an inducement to NuOasis to
provide the aforementioned Security Deposit, Cleopatra World confirms
that:
A. The Cleopatra World Shares, when delivered, will be free and
clear of liens, claims and encumbrances; Cleopatra World has
all necessary right and power to enter into this Agreement
and to cause such issuance of the Cleopatra World Shares to
NuOasis as contemplated herein; and, any necessary
shareholder approval of Cleopatra World's shareholders will
be obtained prior to Closing.
B. Cleopatra World is duly organised, validly existing, and in
good standing under the laws of the British Virgin Islands
and that the Lease is in full force and effect.
C. The capitalization of Cleopatra World is, as of the date
hereof, comprised of 50,000 shares of authorized common
stock, US$.01 par value, of which approximately 15,000
shares are presently issued and outstanding.
D. Cleopatra World is in compliance with all applicable laws,
rules and regulations, relating to its operation of the
Property, except to the extent that non-compliance would not
materially and adversely affect the business, operations,
properties, assets, or condition of the Property or its
individual assets or contracts.
E. Any and all originals of accounting books and records, and
any other documents and records related to the Property or
the Lease and maintained by Cleopatra World will be
available for review by NuOasis prior to Closing.
4. Each party hereto agrees to execute such additional instruments and
take such action as may be reasonably requested by the other party to
effect the transaction, or otherwise to carry out the intent and
purposes of this Agreement.
5. All notices and other communications hereunder shall be in writing and
shall be sent by prepaid first class mail to the parties at the
following addresses, as amended by the parties with written notice to
the other:
To NuOasis: NuOasis International Inc.
43 Elizabeth Avenue, Box N-5680
Nassau, Bahamas
Telephone: (809) 356-2903
Facsimile: (809) 326-8434
To Cleopatra World: Cleopatra World Inc.
Box 3186, Road Town
Tortola, British Virgin Islands
[NUOINLTD\AGR:CLEOWSUB.AGR]-6
<PAGE>
With copy to: Cleopatra Palace Ltd.
Flat 2, Chartwell House
80 Wimbledon Parkside
London SW19 5LN, ENGLAND
Telephone: +44-171-602-9988
Facsimile: +44-181-788-8089
6. 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.
7. This Agreement was negotiated, and shall be governed by the laws of
the Commonwealth of the Bahamas notwithstanding any conflict-of-law
provision to the contrary.
Sincerely,
NuOasis International Inc.
By: /s/ NuOasis International Inc.
-----------------------------------
NuOasis International Inc.
ACCEPTED AND AGREED IN PRINCIPLE
THIS ----- DAY OF OCTOBER, 1996
Cleopatra World Inc.
By: /s/ Cleopatra World Inc.
-----------------------------------
Cleopatra World Inc.
[NUOINLTD\AGR:CLEOWSUB.AGR]-6
<PAGE>
SCHEDULE "1"
to the
Agreement
Dated October 2, 1996
THE LEASE
[NUOINLTD\AGR:CLEOWSUB.AGR]-6
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 50,436
<SECURITIES> 0
<RECEIVABLES> 4,023,496
<ALLOWANCES> 0
<INVENTORY> 93,599
<CURRENT-ASSETS> 15,000
<PP&E> 1,150,160
<DEPRECIATION> (804,556)
<TOTAL-ASSETS> 12,940,698
<CURRENT-LIABILITIES> 6,106,495
<BONDS> 0
0
240,000
<COMMON> 450,223
<OTHER-SE> 5,718,653
<TOTAL-LIABILITY-AND-EQUITY> 12,940,698
<SALES> 12,658,491
<TOTAL-REVENUES> 12,658,491
<CGS> 838,453
<TOTAL-COSTS> 838,453
<OTHER-EXPENSES> 19,295,323
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 309,757
<INCOME-PRETAX> (7,721,708)
<INCOME-TAX> (997,932)
<INCOME-CONTINUING> (8,719,640)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,719,640)
<EPS-PRIMARY> (.20)
<EPS-DILUTED> 0
</TABLE>
