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SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street N.W., Washington, D.C. 20549
AMENDMENT NO. 1 TO
FORM 10 - SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER - 1-14815
ZSTAR ENTERPRISES, INC.
(Exact Name Of Registrant As Specified In Its Charter)
NEVADA 98-019-6675
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization)
4323 West 12th Avenue
Vancouver, B.C., Canada, V6R 2P9
(604) 224-5851 Fax: (604) 224-5838
Attention: Chui Keung Ho
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(Address, Including Zip Code, And Telephone Number, Including Area Code,
Of Registrant's Principal Executive Offices)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which each
to be so registered class is sought to be registered
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Common Stock OTC Electronic Bulletin Board
Securities Registered Pursuant to Section 12(b) of the Act:
Common Shares $.001 par value
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Title of each class to be so registered
Total Number of Pages: 53
Index to Exhibits Appears on Page: 52
(Filing stipulated in United States Dollars Unless Otherwise Stated)<PAGE>
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INFORMATION REQUIRED IN REGISTRATION STATEMENT
TABLE OF CONTENTS
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PAGE
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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS. . . . . . . . . . . . . . . . . . .1
PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
ITEM 1. DESCRIPTION OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . .2
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION . . . . . . 19
ITEM 3. DESCRIPTION OF PROPERTY . . . . . . . . . . . . . . . . . . . . . . 26
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS. . . . 27
ITEM 6. EXECUTIVE COMPENSATION. . . . . . . . . . . . . . . . . . . . . . . 30
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. . . . . . . . . . . 31
ITEM 8. DESCRIPTION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . 31
PART II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE COMPANY'S COMMON EQUITY
AND OTHER SHAREHOLDER MATTERS . . . . . . . . . . . . . . . . . . . 33
ITEM 2. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . 33
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTING. . . . . . . . . . . . 34
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES . . . . . . . . . . . . . . 34
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS . . . . . . . . . . . . . 35
PART F/S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
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ITEM 1 INDEX TO EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . 53
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-SB includes forward-looking statements. All statements, other than
statements of historical fact, included in this Form 10-SB, including, without
limitation, statements under "Description of Business" and "Management's
Discussion and Analysis or Plan of Operation" regarding the Company's business
strategy and plans and objectives of management of the Company for future
operations, are forward-looking statements within the meaning of the "safe
harbour" provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements are not guarantees of future performance and
are subject to certain risks, uncertainties and assumptions that are difficult
to predict; therefore, actual results may differ materially from those
expressed, forecasted, or contemplated by any such forward-looking statements.
Important factors that could cause actual results to differ materially from the
Company's expectations are disclosed in this Form 10-SB, including, without
limitation, in conjunction with the forward-looking statements included in this
Form 10-SB.
Unless required by law, the Company undertakes no obligation to update publicly
any forward-looking statements, whether as a result of new information, future
events or otherwise.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
A. INTRODUCTION
Zstar Enterprises, Inc. ("Company") was organized under the laws of the State on
Nevada on June 17, 1998. The Company is authorized to issue 30,000,000 shares of
Common Stock with a par value of $.001 per share, of which 10,550,000 shares are
issued and outstanding as of January 31, 1999.
The Company is a NEW Nevada corporation formed by a small founding group with
the intention of (i) providing internet - based hotel discounting services, and
(ii) serving as a holding company for one or more future businesses not yet
identified.
The Company has, on February 28, 1999, acquired all of the issued and
outstanding shares of stock of Apex Canadian Holidays Ltd., a British Columbia,
Canada, corporation ("Apex"), for a sum of $50,000, full and final payment of
which was made on April 28, 1999. A description of Apex's operations has been
more fully set forth in Paragraph C below.
The Company proposes to sell hotel rooms, at discount rates, directly to
travelers who make their own arrangements via the World Wide Web. The Company
also proposes to sell rooms at wholesale rates to travel agencies. The Company
recognizes the growing influence that the Internet has on communications and
commerce. The Company believes that the travel sector is one of the areas that
will see tremendous new business opportunities through the Internet. The
Company intends to create an easy-to-use website where individuals can research,
design and book their own hotel packages at discount prices.
Offering an electronic means to access hotel products will allow the Company to
have worldwide sales opportunities 24 hours a day and to accumulate knowledge
about client preferences and buying habits. The accumulated data base of user
preferences will enable the Company to offer its customers specifically designed
travel packages.
B. THE INDUSTRY
THE TRAVEL INDUSTRY
The travel industry is one of the largest industries in the world. For example,
in 1994, Americans took over 220 million trips and spent over $140 billion on
travel. International travel continues to grow as airfares become relatively
less expensive.
Business travel, tourism and the visiting-friends-and-relatives ("VFR") are all
important segments of the industry's customer base.
Leisure travel, or tourism and VFR travel, is usually booked by individuals who
are seeking low cost, convenience and knowledge when they book their travel.
Business travelers,
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whether individuals or an entity's corporate travel coordinator are looking
for ways to control costs, negotiate long term price arrangements and
standardize travel booking procedures.
The traveling public has traditionally relied on travel agencies to provide
information and to make bookings. Agencies act as middlemen between the
traveler and the provider and receive a commission from the provider for their
service.
Historically the travel industry has been at the forefront of adopting new
technological innovations with proprietary systems such as Computer Reservations
Systems ("CRS"). Travel agencies have been performing a "middleman" function and
using their specialized technology infrastructure and knowledge to justify their
costs. New technologies and the "capping" of commissions are rendering the
traditional service providers un-competitive.
Several trends are affecting the travel industry:
- - increased competition through globalization and deregulation
- - changing consumer demands because of changing lifestyles: e.g. specialized
adventure travel
- - increased expectations by consumers for convenience and customized packages
- - consumers are becoming more knowledgeable and are growing accustomed to
using technology
- - the Internet and electronic commerce are changing how travel products are
bought and sold
THE INTERNET
The Internet is the world's largest telecommunications network in existence
today and has brought low cost global computer telecommunications within the
reach of all businesses and many consumers in almost all developed and
third-world growth economies.
The Internet and Internet technology has been growing and evolving since its
inception over 30 years ago. From its inceptions, the Internet was intended as
more than just a computer network, but as a means of facilitating collaboration
and development at great speed among groups like academics, industry researchers
and business entrepreneurs.
Originally created as a means of information exchange for the U.S. Department of
Defense, it quickly became adopted by others who developed the network to
support open global academic and research activities. People would be able to
send messages, research material and various other types of communications
electronically. Data would be converted and sent over telephone lines through a
vast computer network. Transmission time was much faster than mail or fax with
the added advantage of being low cost: no long-distance charges were incurred
since messages were relayed to a local computer network.
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Innumerable individuals, companies, researchers etc. now use the Internet and
its technologies to significantly enhance their specific activity or pursuit.
The worldwide network of hosts (sites) has grown from 2000 to 1 million in the
past eight years and is likely to exceed 100 million hosts over the next five
years.
The Internet Business Center made the following data available collected from
the 10th Annual software Publishing Association Conference:
- - It is estimated that 60% of U.S. households will have PC's by the end of
1998
- - 12% of households with PC's have modems
- - 6% of households with PC's subscribe to on-line Internet services
- - the Internet is growing between 6% and 12% per month
- - there are Internet sites in 137 countries
- - the cost of subscribing to an Internet service is declining
- - many major businesses (226 of the 490 largest companies) already have a
presence on the Internet
- - 39% of all communications companies have a presence on the Internet
- - 24% of information technology firms have a presence on the Internet
Reasons why people use the internet according to Georgia Tech Research
Corporation's ("GTRC") 1998 survey (Of the users surveyed, over one third said
that they were willing to pay fees for information services, providing quality
was ensured):
[GRAPHIC]
- - 86.03% Searching
- - 63.01% Browsing
- - 54.05% Work
- - 51.21% Education
- - 47.02% Communication
- - 45.48% Entertainment
- - 18.65% Shopping
(RESPONDENTS ANSWERED MORE THAN ONE CATEGORY,
CAUSING TOTAL TO BE GREATER THAN 100%)
The Internet has quickly become a mainstream component of everyday life. In
June 1998 it was estimated that there were approximately 37 million North
Americans on-line. Accessing the Internet is now the third most popular use of
computers behind playing games and word processing.
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The Internet has created a whole new level of commercial transactions called
e-Commerce. Today it is possible to buy everything from groceries to a car
on-line. A recent Roper Starch back-up survey conducted in June 1998 indicated
that 75% of people on-line have used the Internet to research an item and 22%
have actually made a purchase via the Web. A poll commissioned by the
Information Technology Association of America in early 1998 estimated that 15%
of all adult Americans have used the Internet to make a purchase.
While research shows varying results regarding the use of the Internet, it is
clear that the growing numbers indicate that the Internet will be one of the
most important tools for both businesses and individuals in the coming years.
[GRAPHIC]
GROWTH
People are spending more time on-line, both at home and at work. In 1994, only
three million Americans were connected to the Internet. A joint study by IDC and
Relevant Knowledge claims that home Internet users will grow to 102 million in
2002 and the percentage using the Internet for electronic commerce will grow to
50%. The U.S. Department of Commerce estimates that Internet traffic is doubling
every 100 days.
Conservative estimates put the number of worldwide users of the Internet at 60
million with nearly 70% living in Canada or the United States. eMarketer
predicts that Asia/Pacific Rim, South America and several underdeveloped parts
of the world will have more Internet users than the U.S. by the year 2000. By
the year 2002, it is expected that there will be 228 million users worldwide,
with American users representing only 37% of such user base.
True globalization of Internet use and electronic commerce will occur over the
next few years due to:
- - the deregulation and lower costs of telecommunications in previously
controlled markets.
- - increased computer use and modem penetration
- - the attraction of electronic commerce to foreign businesses looking to draw
revenues from a worldwide market
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E-COMMERCE
Electronic Commerce ("e-Commerce") is the buying and selling of information,
products or services via computer networks. e-Commerce is allowing buyers and
sellers to communicate directly rather than through third parties.
Consumer oriented industries, such as travel, where service and information play
a large part in the buying process, are becoming important e-commerce
participants. Generally speaking, the more time consuming and difficult a
purchase category is, the more likely it is that consumers will use the Internet
versus standard means.
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Comparison of Online Consumer Revenue Projections, in Millions
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MULTI-MEDIA
YEAR E-LAND FORRESTER RESEARCH GROUP JUPITER COWLES/SIMBA IDC
<S> <C> <C> <C> <C> <C> <C>
1995 $ 450 N/A $ 350 N/A $ 614 $ 1,000
1996 $ 750 $ 518 $ 520 $ 575 $ 993 N/A
1997 $ 1,500 $1,138 $ 850 $1,250 N/A N/A
1998 $ 3,700 $2,371 N/A N/A N/A N/A
1999 $ 6,100 $3,990 N/A N/A N/A N/A
2000 $10,000 $6,579 $6,500 $7,300 $4,270 $117,000
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The travel industry, particularly in relation to airline reservations, was an
early entrant into e-Commerce. Internet users quickly discovered the advantages
to travel planning and booking on-line. Rather than rely on an airline or agent
to give you the best fares, a person could design an itinerary and explore all
the options and prices available before booking.
[GRAPHIC]
An e-commerce study by dePaul University found that 60% of Internet users aged
30 to 49 years have already made at least one purchase electronically. Other
studies estimate that between 15% and 24% of all Internet users have made a
purchase on-line. A report recently released by the Deloitte & Touche
Consulting Group estimates that by the Year 2000, e-commerce will grow by 300%
and that
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many businesses will be conducting over half of their business over the
Internet.
[GRAPHIC]
A report by eMarketer concludes that consumer e-commerce will grow to $26.6
billion US by 2002 and business-to-business e-commerce will climb to $268
billion US from an estimated $5.6 billion in 1997.
The U.S. Department of Commerce has suggested that e-commerce will surpass $300
million in the next two years. This is partially based on their estimate that
Internet usage is doubling every 100 days.
IMPLICATIONS FOR THE TRAVEL INDUSTRY
Technology can promote products in a less expensive and more interactive way
than is currently possible in the travel industry.
Multimedia (sound, video and images) allows customers to better understand a
hotel property without having to interact with a sales representative or travel
agent.
Print material is expensive, becomes quickly outdated and is expensive to
distribute. A website, which can be continually maintained and updated avoids
those costs.
Costs to hotels or other travel service providers will also fall dramatically.
For example, an airline ticket costs $8 to process by conventional means but can
be done over the Web for $1. A traditional bank transaction, by comparison,
costs $1.07, while the same transaction over the Web costs one cent.
Internet-based travel sites will be able to offer customers two things that are
currently not available through conventional travel booking means:
- - CONVENIENCE: available 24 hours a day, from home or office; information on
several different travel products all in one place--reducing research costs
- - CUSTOMIZATION: by noting preferences and anticipating needs, a properly
maintained site can target customers with special offers or even integrate
products from other suppliers such as travelers checks and cameras.
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According to Jupiter Communications, on-line travel revenues are expected to
grow from $827 million or less than one percent of all travel revenues in
1997 to $8.9 billion or 8.2% of all travel revenues by the year 2002.
Forrester Research on the other hand reports that travel revenues on-line
were $276 million in 1997 and are expected to exceed $1.5 billion by the year
2000.
In a recent poll, between 65% and 75% of those using the Internet said that
they would consider making a purchase on-line, especially hotel reservations
or airline tickets. Of users who have already made purchases vial the
Internet, 5% have purchased travel services. Today however, eStats estimates
that travel accounts for 24% of all on-line revenues.
[GRAPHIC]
C. APEX CANADIAN HOLIDAYS LTD.
Apex is a Canadian private company, incorporated on October 24, 1996, with
principal offices in British Columbia, Canada. The management and staff of
Apex have over 25 years of combined hospitality industry experience. Apex
specializes in the sale of hotel rooms (retail and wholesale) and land tour
packages primarily in the Asian and North American markets.
Apex currently has hotel room sales of approximately Cdn$0.65 million
annually. The company also has a website at www.apexholidays.com that will
become the portal for users of the Company's service (subject to consummation
of the transaction set forth in the Letter of Intent). The website will
undergo a design upgrade in order to meet the Company's objectives. LYNX
Internet and Marketing of Vancouver, BC., Canada, will be responsible for the
website upgrade as well as management of the site.
Apex's sales for 1998 were adversely affected by the Asian crisis, however,
the Company's management believes that the sales will improve this year to
more traditional levels as Apex has already seen an increase in revenue for
the first few months of this current year.
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Apex's Financial Summary (in Canadian dollars):
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Description 1998 1997 1996
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Sales $645,864 $1,124,618 $1,129,696
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Gross Margin 80,195 113,476 109,898
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(Net Loss) (2,445) (388) (12,815)
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The Company plans to use proprietary internet software that it is currently
developing to independently enhance Apex's existing web site with plans to
eventually create a virtual "shopping centre" of travel products. Eventually,
the Company anticipates being able to expand its website content to include
properties in Europe, Australia and South America.
By acquiring Apex, an established travel hotel and land tour service company,
the Company has acquired an established client base. The acquisition of Apex
will also give the Company access to management personnel with expertise and
experience in the travel related business. Apex already has established
infrastructures, such as hotel contracts, that will give the Company an
immediate ability to offer properties to website users.
KEY PERSONNEL OF APEX
YEH LOH, MANAGER OF APEX
Ms. Loh has been a travel consultant and tour coordinator since 1987. She
specializes in designing tour products and negotiating rates with suppliers and
wholesalers. Ms. Loh has traveled extensively and lived in Asia and Canada, and
has a strong, first-hand knowledge of the Asia Pacific travel markets. Ms. Loh
is trilingual, speaking English, Chinese, and Malay.
MARY S.Y. JIE, TRAVEL CONSULTANT FOR APEX
Ms. Jie has been a travel consultant and tour coordinator since 1994. She
specializes in client bookings, and reconfirmation's. Ms. Jie has lived in Hong
Kong, Australia and Canada and has a strong, first-hand knowledge of the Asia
Pacific travel markets. Ms. Jie is bilingual, speaking both English and
Cantonese.
LYNX INTERNET AND MARKETING.
Zstar has entered into an agreement with LYNX Internet & Marketing ("LYNX")
of Vancouver, British Columbia, Canada, a local Internet service provider and
website designer to develop a website that will meet the Company's business
objectives. In
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addition, LYNX will be responsible for the management of the website and will
provide office and hardware server space, and use of its CO-3 communication
line (currently more efficient/faster than ISDN lines). Subsequent to the
consummation of its acquisition of Apex, the Company will move to larger
facilities, if necessary, so that it can retain the flexibility necessary to
upgrade to the most current technology. The agreement provides for an
operations site, service and partial equipment access for $1,000 per month.
The Company has determined that this agreement is sufficient for its first
12-18 months of business activity.
OPERATIONS
With the acquisition of Apex, the Company now has a fully functional travel and
hospitality related company. The employees of Apex are expected to be primarily
involved in customer service, confirming bookings with hotels and
sales/negotiations with hotel properties.
The Company's management presently anticipates that, if and when the Company's
website becomes fully operational, the Company will require additional
employees. Specifically:
- - One employee in accounting
- - One employee in administration
- - One employee in Information Systems
- - Two employees in Marketing/Sales
The Company is not subject to any collective bargaining agreement. It is
anticipated that the Company's employees will be covered by an employee stock
option plan; however, at this stage, the terms of such a plan have not been
determined.
Although the primary contact with the Company will be via its website, a
toll-free telephone number will also be made available in the event that clients
need immediate customer service. The Company plans to develop a marketing
strategy for its services using trade shows, trade press and strategic
advertising on internet browsers such as Yahoo or Lycos.
Technology and management information systems work is expected to be provided on
an outsourced basis by LYNX. It is the Company's intention that LYNX will
maintain the Company's server capabilities and software programs so that the
Company and its clients experience minimal downtime.
The Company expects to have a small, in-house accounting staff to handle
collections, payables and bookkeeping duties. The Company also expects to have
virtually no receivables because of the nature of its business transactions.
Payments will be received from clients as cash (bank drafts) or credit card
charges and the Company will be responsible for remitting payments to the
relevant hotel a net of commissions. If a client chooses to pay the hotel
directly, the hotel will remit the commission to the Company. The
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Company may, from time to time, choose to engage independent consultants who
have expertise in the internet-related travel business, and in other forms of
e-commerce.
The Company anticipates that it will voluntarily file periodic reports as
required by the Securities and Exchange Act of 1934 (the "1934 Act"), even if
its statutory obligation to file such reports is suspended thereunder.
The Company may, from time to time, choose to engage independent consultant's
who have expertise in the internet-related travel business, and in other
forms of e-commerce.
D. PRODUCTS AND SERVICES
The Company does not expect to be dependent on any suppliers for any
essential raw material, energy or other items. The Company does not have any
existing supply contracts (except with LYNX).
The Company will offer customized hotel packages at discount prices through
an Internet website. Internet visitors will be able to arrange and book
their own hotel rooms conveniently and securely over the Company's website.
Asian and North American properties will be featured ranging from urban
locations to vacation settings. The Company anticipates that strategic
partnerships will expand its product offerings so that airfares, land tours,
car rentals and other travel arrangements may be booked through web site
links offered at the site.
The Company plans to be unique in three ways:
(i) it will represent smaller, independent hotels such as bed and
breakfast inns or specialty properties that are unlikely to be affiliated
with any central reservations systems or large chains. This will enable
the target hotels to get greater exposure, in a cost-effective manner. The
Company will earn revenues on a commission basis and through the sale of
advertising on its site. Other hotel websites usually charge their listing
hotels a listing or participation fee.
(ii) the Company will offer hotel rooms at discounted prices to retail
customers and wholesale rates to travel agencies. Travelers who book
through traditional means such as a retail travel agency, toll-free number
or travel website generally pay "rack" or retail prices for their hotel
rooms. It is envisaged that travelers who book directly through the
Company's service will receive hotel rates that are approximately 30% lower
than regular retail rates. Travel agencies will receive wholesale rates
that will be at a discount to the retail rate. Travel agents will have
access to the Company's site via a password which will allow them access to
the wholesale rates available to "trade" clientele.
(iii) the Company's product will be customized. Various travel agencies
and tour companies offer hotel and tour packages. As the Company's system
expands, it will be able to target users with offerings designed especially
with their preferences in mind.
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Users will simply access the Company's site and browse through it using a
dedicated search engine. Booking hotel rooms will be very simple, allowing
the client to specify a number of criteria including destination, price
range, number of nights, number of people and so on.
PRODUCT DELIVERY
Clients accessing the Company's website and making bookings will do so by
credit card or by special account number/password. The Company will require
approximately 48 hours to confirm the reservation with the hotel. When the
reservation is made, the Company will send the client a confirmation via
e-mail and will charge the credit card. A voucher for the hotel reservation
will also be sent to the client via mail or courier.
SUPPLIERS & ADVERTISERS
The Company intends to enter into agreements with both hotels and with hotel
re-sellers to list their properties in return for commissions on rooms sold.
The Company will sell banner advertising and links to sites that offer
complementary products or services. For example, airlines, tour companies
and car rental agencies would be potential advertising clients.
FUTURE PRODUCT LINE ADDITIONS
Products will be added based primarily on what is being sought by the
Company's website users. This will be determined through information
gathered through on-line questionnaires.
The Company anticipates that it will add other key travel products such as
land tour packages and car rentals on a graduated basis. "Accessory"
products such as travelers checks, insurance, cameras, etc., may also be
added as either direct sale items or links through other web sites offering
such items for sale.
TECHNOLOGY
Users of the Company's service will be able to log on to the Company's
website, browse hotel properties, make inquiries as to room availability and
book their own reservations.
The Company proposes to design its service using existing internet software
and hardware technologies. An integrated hardware and software system will
be strategically designed to provide an efficient, secure service for users.
COMPETITIVE ADVANTAGES
It is anticipated that the Company will possess three distinct competitive
advantages:
(i) LOW COST: The Company proposes to design and maintain an
interactive and integrated website capable of providing information
on an extensive list
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of smaller, independent hotels. The estimated cost to create the
site is $5,000, and another $1,000 per month will be required to
maintain the site.
The hotels represented by the Company will pay a commission on
bookings. Commission rates vary between 8% and 10%.
Traditionally, hotels have relied on sales calls, trade shows and
print materials such as brochures and directories to promote their
properties. Print materials are costly, become outdated quickly
and have a high cost of distribution. A website may be updated
with photos and text in a very timely and cost effective manner.
Special limited time promotions, for example, may be featured and
conveyed to a much wider potential audience than print media. A
website may also feature downloadable multimedia presentations,
which can be a strong sales tool for a hotel property.
(ii) CUSTOMER FOCUS: A numbers of travelers prefer the intimacy and
uniqueness of smaller hotel properties. The Company will target
this customer base. Users who visit the site will be asked
questions relating to their travel needs and preferences. The
Company will process this information and, based on an
understanding of its users needs will select the right hotels for
presentation and selection.
(iii) PRODUCT LEADERSHIP: As the Company's site evolves, it will provide
destination information relating to the city, region, climate, visa
requirements, points of interest, etc.. The Company will also have
directions to get to a particular property as well as products
useful for the trip, such as traveler's checks and insurance.
REVENUE PROJECTIONS
It is envisaged that the Company will earn revenues in the form of
commissions and advertising fees. It is anticipated that hotels will remit
to the Company commissions ranging between 8% and 10% for rooms booked
through the Company's website. In addition, banner advertising and website
links are projected to generate revenues of $1.6 million per year by the 5th
year of the Company's operations. Operating costs, including staff,
technology, maintenance and selling and administrative are expected to be
$1.0 million by Year 5. Initial capital raised in the amount of $241,000 is
being used to develop software, working capital, and capital assets.
BUSINESS OBJECTIVES USING THE INTERNET
- - Use the internet as an improvement to the current business communications
environment, and as an adjunct to the Company's advertising and marketing
strategy, or part of an on-line sales effort.
- - Increase corporate name recognition in a low-cost manner.
- - To survey, and to be in regular communications with, customers.
- - To sell the Company's product globally.
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- - The Company's target customer profile fits the demographics of the internet
user community.
- - To match the Company's communications network to the internet
communications environment.
E. MARKETING STRATEGY
As an Internet-based service, the Company will have a presence on the World
Wide Web. Key to the Company's success will be the strategic use of Internet
links and keywords. Its strongest product feature will be that hotel rooms
will be sold at very competitive prices pursuant to pre-existing contracts
that the Company will have with individual hotels. The key to the successful
marketing of the service will be strategic use of the Internet itself as a
marketing tool. The Company plans to develop an effective marketing strategy
that includes registering with key search engines such as Yahoo and Alta
Vista. The Company may also choose to advertise on various internet portals.
The Company's services will also be outlined in various print materials
including brochures and inserts to be included in a variety of mail-outs such
as credit car bills or frequent flyer statements.
During the Company's initial marketing phase in Canada, United States and
Europe, local press will be targeted with press releases. Advertising will
be purchased in key publications such as Conde Nast Traveler, Destinations,
various in-flight magazines and local newspaper travel sections.
The Company will also participate in travel trade shows and new product
forums that feature travel or Internet-based products.
TARGET SEGMENTS
The Company's target market segment is both travelers and travel agents with
access to the Internet and likelihood to participate in e-commerce. As
nearly as can be determined from independent studies, this could be as many
as 100 million potential users by the year 2002.
Further, the Company intends to target travelers who are interested in
smaller, more intimate or more unique hotel properties than can be typically
found through other Internet sites. Demographic studies show that a growing
number of travelers are seeking the unusual or out-of-the-ordinary when they
make travel arrangements.
COMPETITION
There are a number of web sites currently providing hotel reservations via
the Internet. The Company's research shows that all of them provide rooms at
retail or 'rack' rates. Some of the Web sites charge a listing fee for
hotels plus a regularly monthly participation fee. Others are affiliated
with international central reservations systems and participating
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hotels are also part of those systems. Set forth below are the websites that
the Company's management foresees will be in direct competition with the
Company.
TRAVELOCITY (www.travelocity.com)
Travelocity is owned by SABRE Interactive and represents 32,000 hotels. Users
must log on and register every time they visit the site.
ALL THE HOTELS ON THE WEB (www.all-hotels.com)
This site offers links to over 10,000 hotels with sites on the World Wide Web.
It is a directory of hotel websites organized by region. The site does not have
any affiliation with any of the hotels it lists.
THE HOTEL GUIDE (www.hotelguide.com)
This site offers 60,000 hotels worldwide and only offers direct booking on-line
for a few. Users can generate a form that can be printed out and faxed to the
hotel of choice.
TRAVEL WEB (www.travelweb.com)
The Travel Web has access to 9,000 hotels in 125 countries. The site is
published by PEGASUS systems Inc. that is in turn owned by 15 of the world's
largest hotel and travel companies. This site offers hotels, airline and car
reservations. In 1996, it sold over $5 million in hotel rooms and since then,
their on-line hotel revenues have increased by 40% per month. Sales have been
made to users in more than 60 countries and are today estimated to be one
million dollars per month.
INTERNET TRAVEL NETWORK (www.itn.net)
This site has more than 2.5 million registered users, double what it had one
year ago. Its overall revenues have increased by 500% since last year. Users
access airlines, hotels and car reservations via ITN's public and partner sites.
ITN accesses multiple central reservations systems to offer its services.
THIRD PARTY INTERNET SERVICE PROVIDER (ISP)
The Company will enter into an agreement with its chosen ISP that will clearly
outline the terms and conditions of service.
The contract will specify the level of performance to be delivered by the ISP to
ensure that the Company's clients are not met with busy signals or "downed"
systems. The Company and the ISP will outline the amount of "uptime" and
acceptable "downtime" that can be expected. The Company will require that there
is limited downtime so as to prevent lost sales opportunities.
The Company's chosen ISP will provide secure communications with adequate
firewalls so that the Company's clients may be assured of secured reservations
and transmission of credit card information over the Internet.
F. MARKETING
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The Company recognizes that its success will depend on how well it structures
its Internet based advertising and marketing strategy. The physical location of
the Company in an electronic environment is not the determining factor but
rather creating links and paths from search engines and other sites to allow as
many potential clients as possible to access the Company's site. The Company's
management is aware that most people find Internet sites primarily through
recommendations, electronic directories, magazines or journals and Usenet
groups and will develop a strategy to get its site name recognition through
each method.
The Company may also become involved in Usenet discussion groups in specialty
subjects such as "travel", "travel, Asia" and so on to generate leads for
targeted advertising and promotion.
E-mail mailing lists with target demographics may currently be purchased, just
like traditional mailing lists. In addition, many demographic groups are
already organized around discussion groups. The Company may register its
website with the various informal directories on the Internet.
CORPORATE PRESENCE
The Internet is a means by which the Company can gain market presence and
increase consumer awareness of its products. The Company can also use its
Internet presence as a unique tool to attract hotel properties and to have them
offer their products through the Company's website. Having a presence on the
Internet will allow the Company to be associated with new areas of technology
and to be a leading edge travel service provider.
ADVERTISING ON INTERNET ON-RAMPS
In many cases, internet portals provide a welcome screen that supports
advertising. The Company will investigate opportunities to advertise with such
operators.
DIRECTORIES
The Company will register its domain name with as many electronic directories as
possible such as Yahoo and Alta Vista, and will regularly update all links.
ADVERTISING
The Internet can be used for advertising in a manner similar to print. Internet
advertising may also be used as an enhancement to the Company's business cards,
letterhead and brochures. The Company's Internet address included in a brochure
or trade magazine advertisement for example, provides potential clients with the
ability to access additional information that is more detailed and potentially
more current than the print medium.
USENET NEWSGROUPS
A Usenet newsgroup is an ideal way to find out who is interested in the
Company's type of products and services. The Company plans to regularly
participate in ongoing
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discussions in order to build its credibility and goodwill. When
appropriate, the Company will provide select announcements to well-matched
newsgroups, for example announcing the addition of new hotel properties in a
particular country of interest. The Company may also set up its own
newsgroup where users can get useful information about a particular subject
area on which the Company is focusing, for example "travel, Asia, Bali".
E-MAIL LISTS AND SERVICES
E-mails lists are the electronic equivalent of the more traditional direct
mailing lists.
To build or obtain e-mailing lists, the Company may monitor newsgroups that are
likely to attract the types of people likely to be interested in its products,
then collect the addresses of participants in order to create a mailing list.
The Company could also purchase an e-mailing list from a reputable broker and
use this for direct customer solicitations.
In addition, the Company proposes to get customers to sign up voluntarily. A
check-box on the Company's website could get visitors to the site the
opportunity to sign on to the Company's e-mailing list.
CUSTOMER SERVICE & SALES SUPPORT
The Internet offers the ability to provide customer support 24 hours a day,
seven days a week. The Company will provide an e-mail address for clients that
will direct requests or queries to service personnel.
Sales support can be implemented using varying degrees of automation or
personnel-based approaches. For example, clients could send a reservation
request to the Company's e-mail server, which would automatically send back an
acknowledgment of receipt response.
A potential side benefit of a customer support e-mail address is that it may be
used to entice clients to sign up for an e-mail mailing list for new products
and follow-up surveys. This will allow the Company to take an active marketing
role for special promotions, new products and so on.
ONE-ON-ONE CUSTOMER COMMUNICATIONS
The Internet provides a great opportunity for the Company to interact one-on-one
with its client base via e-mail.
E-mail allows the Company, its clients and its hotel properties to interact over
distance and without worry about time zones or office hours. No party is bound
by the physical location of the other and e-mail allows business to be
transacted without the nuisance of "telephone tag" situations.
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<PAGE>
E-mail can also lead to savings for the Company in terms of reduced clerical
support and mailing costs.
CLIENT RESERVATION TRACKING
Clients like to be kept informed of, and in the case of requesting a hotel
booking, would like to know, the status of their reservations. The Company will
have the ability to instantly satisfy this need through the use of various
Internet tools.
The Company will keep an order's status readily available on its computer system
and by implementing an Internet-based client reservation tracking system, will
be able to reduce overhead by reducing the number of personnel required to staff
customer service lines. A good example of this type of service is Federal
Express' website that allows customers to track the progress of their package by
entering their waybill number.
THE COMPANY'S ONLINE CATALOGUE
The Company intends to offer its clients a virtual catalogue of hotel properties
and related travel products.
Using material provided by its roster of hotels, the Company will create
on-line, interactive, multimedia presentations which may include color photos,
animations, digital movies and music in order to give clients the most thorough
view of their hotel choices possible. Clients will be able to view guestrooms,
lobbies, and amenities as well as take short "sightseeing" trips to local
attractions. This multimedia experience will help give clients the most
information possible to make their booking decisions easier and more
pleasurable.
The value of an electronic catalogue is the convenience to customers of being
able to access it almost immediately rather than waiting for a copy to arrive by
mail. The Company's catalogue will also be available in a downloadable format so
that clients can view it off-line. Online ordering capabilities will be built in
to the catalogue. Moreover, the content of the Company's electronic catalogue
can be easily kept up to date.
USING FTP AND ELECTRONIC INFOMERCIALS
The Company may also provide product and service details using FTP (file
transfer protocol). A potential client could download an infomercial from the
Company's FTP site.
Some other ways that the Company could generate advertising for its site
include:
- - having trade or other publications review the site
- - write articles about the site for submission to various publications
- - contact trade directories to list the site
BUSINESS RELATIONSHIPS
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The Company will seek to create partnerships with companies that may have some
synergy with the Company's business in order to cross-post each other's site
address. The Company's sales and marketing personnel will actively work to
develop inter-corporate relationships and spot new opportunities.
G. PROPRIETARY INFORMATION
To-date, the Company has made no cash expenditure on research and development.
The Company has not yet commenced operations and is not dependent on any
proprietary information and/or licensing agreements. Competing technology
enabling others to offer the same product and/or service as the Company already
exists. This sector is relatively easy to enter with affordable start-up and
operating costs.
The Company will not have any patents covering its products and there can be no
assurance that the Company will be able to protect its proprietary rights
thereto. In order to reduce the competitive forces, the Company intends to
enter into long-term service contracts with its business subscribers and
strategic partners. The commercial success of the Company may also depend upon
its products and services not infringing any intellectual property rights of
others.
H. REGULATIONS
To management knowledge, none of the Company's services are subject to material
regulations. However, the operations of the Company may require licenses and
permits from various governmental authorities. There can be no assurance that
the Company will be able to obtain all necessary licenses and permits that may
be required to carry out its business plan.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
A. MILESTONES
The Company is currently in its early stage of development, and expects to reach
milestones more fully set forth below by entering into agreements with one or
more investors or investor groups. The Company currently requires $260,000 in
capital to commence commercial operations, which it proposes to raise from
overseas financial institutions and/or wealthy individuals. There are currently
no agreements or understandings with any person or entity with respect to the
aforesaid private placement.
COMPLETION
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<TABLE>
<CAPTION>
<S> <C>
Complete Private Placement ($260,000) July/31/99
Technical Development July/31/99
Recruitment of Participating Hotels October/31/99
Alpha Testing October/31/99
Staff Hiring and Training Aug/31/99
Beta Test Jan/31/00
Implementation of Marketing Plan Feb/29/00
Begin Online sales March/30/00
Develop Strategic Partnerships July/31/00
</TABLE>
In the event the Company has not achieved certain milestones, or consummated a
$260,000 financing by July 31, 1999, the Company will have (i) severe cash flow
and liquidity problems, and (ii) may cease at that point to be a viable
commercial entity. There can be no assurance that the Company will be able to
consummate such financing before such date, or that even if such financing is
consummated on or before such date, that the Company will not face liquidity
problems or that each financing will be on economic and other terms acceptable
to the Company.
Since its incorporation, the Company has successfully completed its first round
of financing pursuant to which it has raised approximately $241,500. The
Company proposes to complete its second round of financing, in the amount of
$260,000 by July 31, 1999. In addition, Lynx Internet and Marketing has begun
developing an internet shopping program for the Company's proposed website. It
is anticipated that the program will be completed and tested by October 31,
1999.
B. FINANCING REQUIREMENTS
The Company requires a total equity investment of $500,000 to be made during the
first 24 months of operations (of which $241,000 has already been raised). All
proceeds raised will be used specifically for start-up costs, purchase of
capital assets, marketing and for working capital.
<TABLE>
<CAPTION>
<S> <C> <C>
Phase I - START UP, YEAR 1
Equipment and Start-Up Costs $ 35,000
Consulting $ 40,000
Software Development $ 50,000
Marketing $ 25,000
Working Capital $100,000
--------
$250,000
--------
Phase II - FULL OPERATIONS, YEAR 2
Working Capital $250,000
--------
Total Requirements $500,000
--------
--------
</TABLE>
** The Company's available working capital will be sufficient to meet its
administration costs for approximately 12 months. The Company will spend
the funds available to it to seek the balance of the financing to carry out
its proposed plan.
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<PAGE>
- - The net proceeds from offerings that are not expended immediately may be
deposited in interest or non-interest bearing accounts, or invested in
government obligations, certificates of deposit, commercial paper, money
market mutual funds or similar investments. The Company is currently not
in arrears of the payment of dividends, interest, or principal payment on
borrowing, nor is the Company in default on any debt covenants at the
present time or during the most recently completed financial statements.
C. WORKING CAPITAL REQUIREMENTS
The Company does not anticipate having any cash flow or liquidity problems over
the next six months; however, in the event that the Company does not succeed in
consummating the said private placement financing on or before July 31, 1999,
the Company may be unable to operate and will have severe cash flow and
liquidity problems which may force it to immediately cease conducting business.
The Company is not in default or in breach of any note, loan, lease or other
indebtedness or financing arrangement requiring the Company to make payments.
There are no significant amounts of the Company's trade payables. The Company
is not subject to any unsatisfied judgments, liens or settlement obligations.
The following table sets forth selected audited financial information with
respect to the Company for the periods indicated. The data is derived from
financial statements prepared in accordance with accounting principles generally
accepted in Canada ("Canadian GAAP"), which differ in certain respects from
those in the United States. See Part F/S, Exhibit I (Note 8) of the audited
financial statements included elsewhere in this Filing for certain
reconciliation's to accounting principles generally accepted in the United
States ("US GAAP"). The selected financial data should be read in conjunction
with "Management's Discussion and Analysis or Plan of Operation," and the
audited financial statements and accompanying notes included elsewhere in this
Filing.
<TABLE>
<CAPTION>
BALANCE SHEET DATA (IN U.S.$)
AS AT FEBRUARY 28, 1999
<S> <C>
Cash $__________
Working Capital $__________
Total Assets $__________
Shareholders' Equity $__________
INTERIM STATEMENT OF LOSS DATA (IN U.S.$)
FROM JUNE 17, 1998 TO FEBRUARY 28, 1999
Revenue $ -
Expenses $__________
Net Loss for the Period $__________
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Net Loss per Common Share $__________
Shares Outstanding 10,550,000
</TABLE>
RISK FACTORS FORESEEN BY MANAGEMENT
a. SUCCESS OF BUSINESS - The Company may not be successful in its effort to
further its Business. Even if the Company were to successfully meet the goals
set forth in its business plan, that the aforesaid goals may not be achieved
within the respective time-frames set forth therein. The limited extent of the
Company's assets and the Company's stage of development as well as the Company's
limited operating history make it subject to the risks associated with start-up
companies.
b. MANAGEMENT - The Company's present management structure, although adequate
for the early stage of its operations, will likely require to be significantly
augmented as operations commence and expand. The ability of the Company to
recruit and retain capable and effective individuals is unknown, although there
are many such people within the industry worldwide. The Company's current
officers have no prior experience in the internet industry. The loss of the
services of its current officers, or the inability of the Company to attract,
motivate and retain highly qualified executive personnel in the future, could,
if and when the Company commences commercial operations, have a material adverse
effect upon the Company's operations.
c. COMPETITION - The Company intends to enter into markets which are
relatively new and are, therefore, difficult to predict in terms of the level of
demand for the Company's product and services. In addition, such markets are or
likely will be subject to intense competition from both private and public
businesses nationally and/or around the world, many of whom have greater
financial and technical resources than the Company. Such competition as well as
any future competition may adversely affect the Company's success in the
marketplace. There can be no assurance that the Company will be able to
successfully compete therewith.
d. FINANCIAL ASSUMPTIONS - The Company will rely on internally prepared
forecasted financial statements, which are predicated on certain assumptions,
including assumptions of revenue and expense and the occurrence of certain
future events, which in turn were based on management's considered assessment of
prevailing conditions and management's best estimates of future events. Should,
for example, product yields or prices deviate from the levels assumed in the
internal forecasted statements, then the Company's projected revenue and profits
will be adversely affected. Similarly, should the Company's actual costs exceed
the assumed levels, then the impact on the Company's projected profits would
likewise be adverse. In the final analysis, any return to an investor in the
Company will in large part be determined by management's ability to execute the
Company's plan as projected, and there can be no assurances provided of their
success with respect thereto. There can be no assurances whatsoever as to the
future financial performance of the Company. They are based upon current
information and certain extrinsic factors, some of which are beyond the control
of the Company, and/or subject to
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various assumptions, such as the Company's ability to obtain additional
financing and its ability to implement its plan.
e. ABSENCE OF OPERATING HISTORY - The Company was incorporated on June 17,
1998 and has yet to commence operations. To date, the Company has attempted to
raise capital to fund the implementation of the initial goals. The Company has
no revenues from operations, has yet to produce a profit and, has no significant
assets. Failure to achieve projected rates of market penetration could
significantly affect the Company's pattern of revenues and expenses, and
accordingly future cash flow. Therefore, the Company's stockholders should be
prepared to bear the economic risk of losing their entire investment.
f. PUBLIC MARKET - There is not now, and there may never be, a public market
of any kind for the securities issued by the Company, including the Shares.
There is no assurance that the price of the Shares in any market which may
develop will be greater than the offering price. As a result of these factors,
holders of the Company's Common Stock may not be able to liquidate their
investment.
g. PENNY STOCK - The Company's securities may be deemed "penny stock" as
defined in Rule 3a51-1 of the Securities and Exchange Act of 1934, as amended.
Such a designation could have a material adverse effect on the development of
the public market for shares of the Company's common stock or, if such a market
develops, its continuation, since broker-dealers are required to personally
determine whether an investment in such securities is suitable for customers
prior to any solicitation of any offer to purchase these securities. Compliance
with procedures relating to sale by broker-dealers of "penny stocks" may make it
more difficult for purchasers of the Company's common stock to resell their
shares to third parties or to otherwise dispose of such shares.
h. ABILITY TO RAISE ADDITIONAL CAPITAL - The Company may not be able to raise
additional funds for expansion and/or growth; and, if not available, the
investors may lose their entire investment. Additional financing may come in
the form of securities offerings or from bank financing. If additional shares
are issued to raise capital, existing shareholders will suffer a dilution of
their stock ownership in the Company, however, the book value of their shares
will not be diluted, provided additional shares are sold at a price greater than
that paid by any of them. Management of the Company currently does not
anticipate that subsequent Offerings will dilute the book value of its common
stock. In the event the Company has not achieved certain milestones, or
consummated a $260,000 financing by July 31, 1999, the Company will have (i)
severe cash flow and liquidity problems, and (ii) may cease at that point to be
a viable commercial entity.
i. INDEMNIFICATION OF OFFICERS - Pursuant to the Company's Articles of
Incorporation, the Company's management is indemnified by the Company against
liabilities for any act performed in their capacity as agents of the Company to
the maximum extent permitted by Nevada law. Amounts paid in satisfaction of
such indemnification obligations will increase the Company's expenses, and
negatively impact its operating results.
j. POTENTIAL CONFLICTS OF INTEREST - There are various interrelationships
between the officers and directors of the Company which create conflicts of
interest that might be detrimental to the Company. The officers and directors
will not be able to devote full time
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<PAGE>
to the affairs of the Company as each has other business interests to which
they devote some of their time.
k. NO FORESEEABLE DIVIDENDS - The Company does not anticipate paying dividends
on its Common Stock in the foreseeable future but plans to retain earnings, if
any, for the operation, growth and expansion of its business.
l. PERMITS AND LICENSES - The operations of the Company may require licenses
and permits from various governmental authorities. There can be no assurance
that the Company will be able to obtain all necessary licenses and permits that
may be required to carry out its plan.
m. INTELLECTUAL PROPERTY - The Company does not have any patents for its
technology and there can be no assurance that the Company will be able to
protect its proprietary rights from use by its competitors. The commercial
success of the Company may also depend upon its products and services not
infringing any intellectual property rights of others and upon no such claims of
infringement being made.
n. CURRENCY FLUCTUATION - The Company's potential operations make it subject
to foreign currency fluctuation and such fluctuation may adversely affect the
Company's financial position and results. Management will undertake to hedge
currency risks by negotiating its joint venture agreement cash receipts in U.S.
dollars. There can be no assurance that steps taken by management to address
foreign currency fluctuations will eliminate all adverse effects and
accordingly, the Company may suffer losses due to adverse foreign currency
fluctuation. Such fluctuations may also influence future contribution margins.
o. CURRENT TECHNOLOGY - The technology necessary to create a service such as
the one the Company will be offering exists today and is readily accessible,
therefore, there would be ease of entry and exit for would-be competitors.
p. INTERNET - Use of the Internet by consumers is at a very early stage of
development, and market acceptance of the Internet as a medium is subject to a
high level of uncertainty. The Company expects to experience significant
fluctuations in operating results in future periods due to a variety of factors,
including, but not limited to, (i) market acceptance of the Internet as a medium
for consumers, (ii) the Company's ability to create and deliver internet content
in order to attract users to its websites to purchase its product and/or
services, and to attract advertisers to its websites, (iii) there can be no
assurance that the Company's content will be attractive to a sufficient number
of users to generate significant revenues, (iv) intense competition from other
providers of related content over the Internet, (v) delays or errors in the
Company's ability to effect electronic commerce transactions, (vi) the Company's
ability to upgrade and develop its systems and infrastructure in a timely and
effective manner (vii) technical difficulties, system downtime or Internet
brownouts, (viii) the Company's ability to attract customers at a steady rate
and maintain customer satisfaction, (ix) seasonality of the industry, (x)
seasonality of advertising sales, (xi) Company promotions and sales programs,
(xii) the amount and timing of operating costs and capital expenditures relating
to expansion of the Company's business, operations and infrastructure and the
implementation of marketing programs, key agreements and
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<PAGE>
strategic alliances, (xiii) the level of returns experienced by the Company;
and (xiv) general economic conditions and economic conditions specific to the
Internet, on-line commerce industry.
q. RISK ASSOCIATED WITH THE YEAR 2000 - The Year 2000 issue is the result of
computer programs written using two digits rather than four to define the
applicable year. As a result, date-sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result in
system failures or miscalculations causing disruptions of operations, including,
among others, a temporary inability to process transactions, send invoices or
engage in similar normal business activities. Management believes that the
Company does not have a material exposure to the Year 2000 issue with respect to
its own information systems since its existing systems correctly define the Year
2000. The Company intends to conduct an analysis throughout its development
stage to determine the extent to which its major suppliers' systems (insofar as
they relate to the Company's business) are subject to the Year 2000 issue. The
Company is currently unable to predict the extent to which the Year 2000 issue
will affect its suppliers, or the extent to which it would be vulnerable to its
suppliers' failure to remediate any Year 2000 issues on a timely basis. In
particular, most of the purchases from the Company's Internet website will be
made with credit cards and the Company's operations may be materially adversely
affected to the extent its customers are unable to use their credit cards due to
Year 2000 issues that are not rectified by their credit card providers.
r. TELECOMMUNICATION - The Company's services are dependent on the use of the
Internet and telephone connections. Any interruptions, delays or capacity
problems experienced on the Internet or with the telephone connection could
adversely effect the ability of the Company to provide its services. The
telecommunications industry is subject to regulatory control. Any amendments to
current regulations could have a material adverse effect on the Company's
business, results of operations and prospects. The Company's business is highly
dependent on its computer and telecommunications systems for the operation and
quality of its services. The temporary or permanent loss of all or a portion of
either system, or significant replacement delays, for whatever reason, could
have a materially adverse effect on the Company's business, financial condition
and results of operations.
Note: In addition to the above risks, businesses are often subject to risks
not foreseen or fully appreciated by management. In reviewing this Filing,
potential investors should keep in mind other possible risks that could be
important.
RESULTS OF OPERATIONS
a. REVENUES -The Company is a development stage enterprise that has earned no
revenue since its inception. The Company believes that future revenues will
result largely from the sale of hotel bookings, advertising space on the
Company's website, and related sponsorship programs.
b. COST OF REVENUE - Since its inception, the Company has incurred no costs of
revenues. The Company expects that future cost of revenues will consist of
payments to
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third parties from resale of hotel rooms, ISPs', artists, royalties, and
profit participation payable to strategic alliance partners and others.
c. PRODUCT DEVELOPMENT EXPENSES - Product development expenses consist
principally of website and other software engineering, graphic design, certain
non-recoverable advances to artists, artist relations, telecommunications
charges, and the cost of computer operations, including related salaries, rent
and depreciation, that support the Company's business.
d. SALES AND MARKETING EXPENSES - Since its inception, the Company has
incurred no sales and marketing costs. The Company expects that future costs
will consist primarily of costs associated with the Company's various strategic
alliances, external advertising, promotion, trade show, advertising sales and
personnel expenses associated with marketing of the Company's website.
e. GENERAL AND ADMINISTRATIVE EXPENSES - General and administrative expenses
currently consist of management consulting fees, accounting, legal and
expenditures for applicable overhead costs. The Company expects general and
administrative expenses to continue to increase in absolute dollars as the
Company expands its staff and incurs additional costs related to the growth of
its business.
f. LACK OF COMMITMENTS AND ORDERS - There are currently no commitments for any
of the Company's products or services.
ITEM 3. DESCRIPTION OF PROPERTY
The Company does not presently own or lease any properties and at this time has
no agreements to acquire any properties. The Company intends or attempt to
acquire assets or a business for cash and/or in exchange for its securities
which assets or business is determined to be desirable for its objectives.
The Company's office space is provided by Joist Management Limited on a rent
free basis and it is anticipated that this arrangement will remain until such
time as the Company successfully consummates its next round of funding.
Management believes that this space will meet the Company's needs for the
foreseeable future. The Company plans to move to different facilities as its
customer base expands and it upgrades equipment.
The Company has no investments in real estate, securities, or other forms of
property.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's issued and outstanding shares of Common Stock as of
April 30, 1999 by (i) each person known to the Company beneficially to own 5% or
more of the shares of its Common Stock, (ii) each of the Company's directors,
(iii) each of the Company's executive officers named in the tables below, and
(iv) all directors and officers as a group. The persons named in the tables
below have sole voting and investment power with respect
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<PAGE>
to all shares of Common Stock shown as beneficially owned by them, subject to
community property laws where applicable.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
SECURITY OWNERSHIP OF CERTAIN NUMBER OF SHARES TITLE OF PERCENT OF CLASS
BENEFICIAL OWNERS BENEFICIALLY CLASS BENEFICIALLY
OWNED OWNED
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
NONE
- ---------------------------------------------------------------------------------------
SECURITY OWNERSHIP OF AND NUMBER OF SHARES TITLE OF PERCENT OF CLASS
EXECUTIVE OFFICERS BENEFICIALLY CLASS BENEFICIALLY
OWNED OWNED
- ---------------------------------------------------------------------------------------
CHUI KEUNG HO 500,000 Common 4.74%
30/F SOUTHORN CENTRE,
HENNESSY ROAD,
WAN CHAI, HONG KONG;
PH (852) 2952-9988
Chief Executive Officer,
President and Sole Director
- ---------------------------------------------------------------------------------------
All Directors and Officers as 500,000 Common 4.74%
Group (2)
- ---------------------------------------------------------------------------------------
</TABLE>
- - None of the Officer and Directors as a group are holders of any options,
warrants, right conversion privileges or similar items. The Company's
management anticipates that an employee stock option plan will be put in
place after the Company is successful in consummating its next round of
financing.
- - The Company has not granted any options, warrants, rights or conversion
privileges. The Company is unaware of any voting trust or similar
agreement among its shareholders.
- - Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock subject
to stock options and warrants currently exercisable or exercisable within
60 days are deemed to be outstanding for calculating the percentage
ownership of the person holding such options and the percentage ownership
of any group of which the holder is a member, but are not deemed
outstanding for calculating the percentage of any other person. The
persons named in the table have sole voting and investment power with
respect to all shares of capital stock shown beneficially owned by them.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Pursuant to the Company's Bylaws, each officer and director will serve until the
next annual meeting of the shareholders or until their death, resignation,
retirement, removal, or disqualification, or until their successors have been
duly elected and qualified. Vacancies in the existing Board of Directors are
filled by majority vote of the remaining Directors.
27
<PAGE>
Officers of the Company serve at the will of the Board of Directors. There
is no family relationship between any executive officer and director of the
Company.
The principal Executive Officers and Directors of the Company and of Apex are as
follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NAME AGE DIRECTOR TERM(S)
AND OFFICER
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Chui Keung Ho 39 Chief Executive Officer, Since June 1998
President and Director
- --------------------------------------------------------------------------------
Shelley James 39 Treasurer, Secretary, Since June 1998
Chief Financial Officer
and Director
- --------------------------------------------------------------------------------
Yeh Loh 35 Manager (Apex) Since 1997
- --------------------------------------------------------------------------------
</TABLE>
CHUI KEUNG HO, a businessman, age 39, is the Chief Executive Officer, President
and a Director of the Company. For the last 10 years Mr. Ho has been involved
in strategic planning, start-up operations and business management for Practical
Brand Plastic Moulding Ltd., a Hong Kong company and Okane International
Enterprises, Inc., a Nevada corporation. Mr. Ho has extensive knowledge in
manufacturing and importing/exporting businesses in Hong Kong and China.
SHELLEY JAMES, a businesswoman, age 39, is the Chief Financial Officer,
Secretary/Treasurer and a Director of the Company. Miss James has a background
in business administration and marketing and for the past 15 years has been
involved in marketing management, strategic planning and corporate
administration for small and medium-sized private and public companies. For
example: International Aqua Foods Ltd., 1995 to present (a multi-national fish
farming company); Business consultation, 1994 to 1995 (professional business
consultation); Nelson Juvenile Product Inc., 1988 to 1994 (multi-national import
and export company); Kazari International Inc., 1998 (a start-up internet
company). Miss James received a Diploma of Technology from the BC Institute of
Technology in 1985 and a Masters of Business Administration from Simon Fraser
University, British Columbia, Canada, in 1994.
YEH LOH, a travel industry professional, age 35, has been a travel consultant
and tour coordinator since 1987. She specializes in designing tour products and
negotiating rates with suppliers and wholesalers. Ms. Loh has traveled
extensively and lived in Asia and Canada, and has a strong, first-hand knowledge
of the Asia Pacific travel markets. Ms. Loh is tri bilingual, speaking English,
Chinese and Malay.
- - The Company intends to put in place at the corporate level an experienced
management and technical/operational team capable of meeting the needs of
the organization as it grows and develops, and of implementing the various
aspects of the plan discussed herein.
- - None of the Company's current Officers or Directors have ever worked for or
managed any other operational company in the same business or industry as
the
28
<PAGE>
Company or in a related business or industry, however, Ms. Loh, who is
the Manager of Apex has had travel industry experience.
- - The Directors and Officers of the Company's management are associated with
other firms involved in a range of business activities. Consequently,
there are potential inherent conflicts of interest in their acting as
Officers and Directors of the Company.
- - The Officers and Directors of the Company are now and may in the future
become shareholders, Officers or Directors of other companies which may be
formed for the purpose of engaging in business activities similar to those
conducted by the Company. Accordingly, additional direct conflicts of
interest may arise in the future with respect to such individuals acting on
behalf of the Company or other entities. Moreover, additional conflicts of
interest may arise with respect to opportunities which come to the
attention of such individuals in the performance of their duties or
otherwise. The Company does not currently have a right of first refusal
pertaining to opportunities that come to the Directors and Officers
attention insofar as such opportunities may relate to the Company's
proposed business operations.
- - The Officers and Directors are, so long as they are Officers or Directors
of the Company, subject to the restriction that all opportunities
contemplated by the Company's plan of operation which come to their
attention, either in the performance of their duties or in any other
manner, will be considered opportunities of, and be made available to, the
Company. A breach of this requirement will be a breach of the fiduciary
duties of the Officer or Director. If the Company or the companies in
which the Officers and Directors are affiliated with both desire to take
advantage of an opportunity, then said Officers and Directors would abstain
from negotiating and voting upon the opportunity. However, all Directors
may still individually take advantage of opportunities if the Company
should decline to do so. Except as set forth herein, the Company has not
adopted any other conflict of interest policy with respect to such
transactions.
- - Management of the Company is uncertain whether the non-management
shareholders will exercise their voting rights to continue to elect the
current director(s) to the Company's board.
- - Although corporate policy does not prohibit such a transaction, there is no
present potential that the Company may acquire or merge with a business or
company in which the Company's promoters, management or their respective
affiliates or associates directly or indirectly have an ownership interest.
- - Any remedy available under Nevada corporate law if management's fiduciary
duties are compromised, will most likely be prohibitively expensive and
time consuming to pursue.
- - The Company has been in discussions with Onyx Trading Corporation, a
broker-dealer with offices in Seattle, Washington, to act as a market maker
for the Company's securities. Additional discussions between the parties
will be required to finalize any market making relationship, however, such
discussions will take place only after this Registration Statement is
declared effective.
29
<PAGE>
- - Mr. Ho anticipates that he will devote approximately 30% of his available
time to the affairs of the Company; Ms. James anticipates that she will
devote approximately 20% of her time to the affairs of the Company; and,
Ms. Loh will be devoting all of her available time to the affairs of Apex.
ITEM 6. EXECUTIVE COMPENSATION
The following table sets forth the total compensation for the Manager of Apex.
None of Apex's other employees have compensation package exceeding that of Ms.
Loh.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE (APEX)
- ------------------------------------------------------------------------------
NAME AND YEAR SALARY(S) OTHER ANNUAL UNDERLYING
PRINCIPAL COMPENSATION OPTIONS (#)
POSITION
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ANNUAL COMPENSATION
- ------------------------------------------------------------------------------
Yeh Loh 1998 $18,000 -0- -0-
Manager
- ------------------------------------------------------------------------------
</TABLE>
- - As of to-date the Company has no compensation, incentive stock option
and/or bonus plans for its Directors and/or Officers. However, the
Company intends to develop and implement such programs in the future.
- - As of the date of this report no Officer or Director of the Company is
compensated directly by the Company. The Company did not pay any bonuses,
or grant any stock awards, options or stock appreciation rights, or pay any
other form of compensation or perquisites for its fiscal year ending
February 28, 1999. It is anticipated that, if and when the $260,000
financing is consummated (anticipated to be on or before July 31, 1999),
the Company will commence paying industry-standard salaries to all of its
Officers.
- - The Company is not a party to any employment or consulting agreements
between the Company and any Executive Officers. The Company presently
anticipates that, at some point after the consummation of the $260,000
financing, if and when this occurs, the Company will enter into an
employment agreement with it Executive Officers.
- - It is possible that persons associated with management may refer a
prospective merger or acquisition candidate to the Company. In the event
the Company consummates a transaction with any entity referred by
associates of management, such associate may be compensated for his or her
referral in the form of a finder's fee. It is anticipated that this fee
will be either in the form of common stock issued by the Company as part of
the terms of the proposed transaction, or will be in the form of cash
consideration. The amount of such finder's fee will be negotiated on an
"arm's length" basis between the respective parties. Any such arrangement
is
30
<PAGE>
expected to be comparable to consideration normally paid in like
transactions. No member of management of the Company will receive any
finder's fee, either directly or indirectly, as a result of their
respective efforts to implement the Company's business objectives outlined
in this Filing.
None of the Directors or Executive Officers of the Company or any associates or
affiliates of the Company, are or have been indebted to the Company at any time.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
COMPANY'S FOUNDERS
In June 1998, the Company issued 500,000 shares of Common Stock to the Founder,
Chui Keung Ho, President of the Company, for aggregate proceeds of $500. The
stock issuance was approved by the written consent of the Directors of the
Company on June 17, 1998.
As of the date of this filing, there are no directors, officers, key personnel
or principal stockholders related by blood or marriage.
FUTURE TRANSACTIONS
It is also contemplated that the Company may in the future enter into
transactions with management, directors and affiliates which, even though may
involve conflicts of interest, shall have been deemed to be fair and equitable
transactions in the best interest of the Company. There are currently no present
plans, proposals, arrangements or understandings, nor have the Company's
officers, directors, their affiliates or associates had any preliminary contact
or discussions, with any representatives of the owners of any business or
company regarding the possibility of an acquisition or merger transaction.
In the event that the Company is involved in a merger transaction, it will seek
shareholder approval, and will provide its shareholders with complete disclosure
documentation, including audited financial statements, prior to consummating
such transaction.
ITEM 8. DESCRIPTION OF SECURITIES
The Company's authorized capital stock consists of 30,000,000 shares of Common
Stock, of which 10,550,000 were issued and outstanding as of April 30, 1999.
The holders of Common Stock (i) have equal ratable rights to dividends, when, as
and if declared by the Board of Directors of the Company; (ii) are entitled to
vote at all meetings of shareholders; (iii) to share ratably in all of the
assets of the Company available for distribution or winding up of the affairs of
the Company; (iv) do not have preemptive subscription or conversion rights, and
there are no redemption or sinking fund applicable thereto; and (v) are entitled
to one non-cumulative vote per share, on all matters which shareholders may vote
on at all meetings of shareholders. Since the holders of shares of Common Stock
do not have cumulative voting rights, the holders of more than 50% of such
31
<PAGE>
outstanding shares, voting for the election of directors, can elect all of the
directors to be elected, if they so choose, and, in such event, the holders of
the remaining shares will not be able to elect any of the Company's directors.
These securities carry NONE of the following:
- - Cumulative voting rights
- - Other special voting rights
- - Preemptive rights to purchase in new issues of shares
- - Preference as to dividends or interest
- - Restriction on the declaration or payment of dividends
- - Preference upon liquidation
- - Other special rights or preferences
- - Convertible provisions
- - Securities are notes or other types of debt securities
To-date there are no shares of Preferred Stock authorized and/or issued.
Apart from discussions with Onyx Trading Corporation as discussed herein, the
Company has no plans, proposals, arrangements or understandings with any person
with regard to the development of a trading market in any of the Company's
securities.
TRANSFER AGENT
The transfer agent for the shares of Common Stock is Interwest Transfer Company,
Inc., 1981 East Murray Holladay Road, Suite 100, Salt Lake City, Utah, 84117.
32
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE COMPANY'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
Presently, the Company's stock is not listed for sale on any exchange or
trading medium. The Company intends to seek the listing of its Common Stock
on the OTC Electronic Bulletin Board upon the effectiveness of this Filing.
Until such time, there is no public market for the Company's Common Stock.
HOLDERS
There are currently 38 holders of the Company's Common Stock.
DIVIDENDS
THE COMPANY HAS NEVER DECLARED OR PAID DIVIDENDS ON THE COMMON STOCK.
MOREOVER, THE COMPANY CURRENTLY INTENDS TO RETAIN ANY FUTURE EARNINGS FOR USE
IN ITS BUSINESS AND, THEREFORE, DOES NOT ANTICIPATE PAYING ANY DIVIDENDS ON
THE COMMON STOCK IN THE FORESEEABLE FUTURE.
RESALE RESTRICTIONS
The offering price of the Shares of Common Stock sold by the Company was
arbitrarily determined by the management of the Company. The offering price
does not bear any relationship to assets, book value, or earnings of the
Company.
- - No restrictions or limitations on resale are believed to apply to the
securities issued, other than restrictions on resale which may apply under
the securities or "Blue Sky" laws of certain states in which such resale
may occur. f such restrictions.
- - There are no independent bank or savings and loan association or other
similar depository institution acting as escrow agent for proceeds escrowed
until minimum proceeds are raised.
ITEM 2. LEGAL PROCEEDINGS
The Company is not aware of any pending or threatened legal proceedings as of
the date of this Filing. No federal, state or local governmental agency is
presently contemplating any proceeding against the Company (5%). No director
or executive officer or owner of record or beneficially of more than five
percent (5%) of the Company's Common Stock is a party adverse to the Company
or has a material interest adverse to the Company in any legal or quasi-legal
proceeding. However, the Company may, from time to time, be subject to legal
proceedings arising from its undertakings in the ordinary course of business.
33
<PAGE>
There has been to date no petition under the Bankruptcy Act or any State
insolvency law filed by or against the Company or its Officers, Directors or
other key personnel.
Apart from statutory business licenses, the Company is unaware of any
material permits or licenses that it will require in order to conduct its
Business.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTING
There have been no changes in, or disagreements with, the Company's
independent accountant. The Company's principal independent accountant has
not resigned or been dismissed. During June 1998, the month of the Company's
organization, Mike Bingham, Chartered Accountants, of Vancouver, British
Columbia, Canada was engaged as the principal accountant to audit the
Company's financial statements.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
- - In June 1998, the Company issued 1,500,000 shares of its Common Shares to
its initial shareholders for a cash consideration of $1,500.00 ($0.001 per
share). In July 1998, the Company issued an additional 9,000,000 shares
of its Common Stock for a cash consideration of $90,000 ($0.01 per share).
- - Thereafter, in October 1998 the Company issued 50,000 common shares for a
cash consideration of $150,000 ($3.00 per share).
As of March 31, 1999, 10,550,000 shares of the Company's Common Stock have
been issued and sold pursuant to Rule 504 of Regulation D promulgated under
the Securities Act of 1933, as amended. As permitted by Rule 504,
certificates for these securities were issued without restrictive legends.
However, 500,000 of these shares were purchased by Chui Keung Ho, one of the
directors and officers of the Registrant and may only be publicly sold
pursuant to Rule 144. The existing and the offered securities have been and
are being offered and sold pursuant to the exemption available under Rule
504. Securities issued pursuant to Rule 504 are not "restricted securities"
as such term is defined in Rule 144. Accordingly, with the exception of
shares owned by "affiliates" (as such term is defined in Rule 144) of the
Company, all of the Company's shares of Common Stock that will exist after
the approval, if granted, of the Company's application to have its shares of
Common Stock traded on the OTC Bulletin Board, may be resold in brokerage
transactions without restriction. Shares owned by affiliates, which are
restricted securities, are so restricted for at least an initial period of
one year from the purchase thereof. Shares owned by affiliates may then be
sold in brokerage transactions subject to the volume limitation requirements
of Rule 144, which provides that persons owning control stock would be
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of (i) 1% of the then outstanding shares of Common
Stock, or (ii) the average weekly reported trading volume on all national
securities exchanges, the NASDAQ National Market, and the OTC Bulletin Board
during the four calendar weeks preceding such sale. Any "free trading" and
unrestricted shares which may be owned by "affiliates" of the issuer are
likewise subject to the foregoing limitation on resale without regard to when
they were acquired or how long they have been held. Rule 144 also permits,
under certain circumstances, the sale of shares without any quantity
limitation by a person who has
34
<PAGE>
satisfied a two year holding period and who is not, and has not been for the
preceding three months, an affiliate of the Company. If a substantial number
of shares owned by the initial shareholders were sold in the market, the
market price of the Common Stock would be adversely affected
There is not now, and there may never be, a public market of any kind for the
securities issued by the Company.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
a. The Articles of Incorporation of the Registrant, together with its By-laws,
provide that the Company shall indemnify its officers and directors, and
may indemnify its other employees and agents, to the fullest extent
permitted by applicable law.
b. Under certain circumstances, the laws of the State of Nevada permit, and in
some cases require, corporations to indemnify officers, directors, agents
and employees who have been a party to, or are threatened to be made a
party to, litigation.
Under the Company's Articles of Incorporation, and as permitted by the laws
of the State of Nevada, a director is not liable to the Company or its
shareholders for damages for breach of fiduciary duty. Such limitation of
liability does not affect liability for (i) acts or omissions not in good
faith or which involve intentional misconduct, fraud, or a knowing violation
of the law, (ii) any transaction from which the director directly or
indirectly derived an improper personal benefit, (iii) the payment of any
unlawful distribution, or (iv) violations of federal and state securities laws
35
<PAGE>
PART F/S
INTERIM FINANCIAL STATEMENTS
CONTENTS:
Interim Balance Sheet
Interim Statement of Loss and Deficit
Interim Statement of Shareholders' Equity
Interim Statement of Changes in Financial Position
Notes to the Interim Financial Statements
Comments by Auditor for U.S. Readers on
Canada-U.S. Reporting Difference
36
<PAGE>
Auditor's Report
To the Shareholders
Zstar Enterprises, Inc.
I have audited the interim balance sheet of Zstar Enterprises, Inc. as at
October 23, 1998 and the interim statements of loss and deficit,
shareholders' equity and changes in financial position for the period from
June 17, 1998 to October 23, 1998. These interim financial statements are
the responsibility of the Company's management. My responsibility is to
express an opinion on these interim financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards
in Canada. Those standards require that I plan and perform and audit to
obtain reasonable assurance whether the interim financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the interim financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall interim financial statement presentation.
In my opinion, these interim financial statements present fairly, in all
material respects, the financial position of the Company as at October 23,
1998 and the results of its operations and the changes in its financial
position for the period form June 17, 1998 to October 23, 1998 in accordance
with generally accepted accounting principles in Canada.
Vancouver, British Columbia (/s/)
November 2, 1998 Chartered Accountant
37
<PAGE>
<TABLE>
<CAPTION>
INTERIM BALANCE SHEET
AS AT OCTOBER 23, 1998
ASSETS
CURRENT $
<S> <C>
Cash 185,125
Prepaid expenses 2,580
-------
INCORPORATION COSTS 2,000
-------
189,705
=======
<CAPTION>
LIABILITIES
CURRENT
Accounts payable and accrued liabilities 12,000
SHAREHOLDERS' EQUITY
CAPITAL STOCK (NOTE 3)
Authorized -30,000,000 common shares with par value of $.001
Issued -10,550,000 common shares 10,550
CONTRIBUTED SURPLUS (NOTE 3) 222,950
DEFICIT (55,795)
--------
177,705
--------
</TABLE>
Approved by the Board
/s/ Director
-------------------------------------
/s/ Director
----------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
38
<PAGE>
INTERIM STATEMENT OF LOSS AND DEFICIT
FOR THE PERIOD FROM JUNE 17, 1998 TO OCTOBER 23, 1998
(in U.S. Dollars)
<TABLE>
<CAPTION>
EXPENSES $
<S> <C>
Audit 2,000
Bank charges 177
Legal 5,000
Management and consulting fees (Note 2) 48,618
--------
NET LOSS FOR THE PERIOD AND DEFICIT, END OF PERIOD 55,795
--------
</TABLE>
39
<PAGE>
INTERIM STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM JUNE 17 TO OCTOBER 23, 1998
(in U.S. Dollars)
<TABLE>
<CAPTION>
Par Contributed Shareholder
# of Common Price per Value Surplus Accumulated Equity
Shares Share (Note 3) (Note 3) Deficit (Deficit)
<S> <C> <C> <C> <C> <C> <C>
Common shares issued for cash $ $ $ $
- June 1998 (on inception) 1,500,000 $.001 1,500 - - 1,500
- July 1998 9,000,000 $.01 9,000 81,000 - 90,000
- October 1998 50,000 $3.00 50 149,950 - 150,000
Share issue costs for the period - (8,000) - (8,000)
Net loss for the period (55,795) (55,795)
---------- ------ ------- -------- --------
10,550,000 10,550 222,950 (55,795) 177,705
========== ====== ======= ======== ========
</TABLE>
40
<PAGE>
INTERIM STATEMENT OF CHANGES IN FINANCIAL POSITION
FOR THE PERIOD FROM JUNE 17, 1998 TO OCTOBER 23, 1998
(in U.S. Dollars)
<TABLE>
<CAPTION>
$
OPERATING ACTIVITIES
<S> <C>
Net loss for the period (55,795)
Net change in non-cash working capital balances 9,420
--------
(46,375)
--------
FINANCING ACTIVITIES
Issuance of capital stock 241,500
share issue costs (8,000)
--------
INVESTING ACTIVITY
Incorporation costs (2,000)
--------
Change in cash during the period, and cash, end of period 185,125
========
</TABLE>
41
<PAGE>
NOTES TO INTERIM FINANCIAL STATEMENTS
OCTOBER 23, 1998
(in U.S. Dollars)
NOTE 1 INCORPORATION AND OPERATIONS
The Company was incorporated on June 17, 1998 in Nevada, U.S.A.
The Company was organized with the intent to serve as a holding company which
will acquire and/or form joint venture with corporate entities conducting
various types of business throughout the world. While growth of the Company
may involve future programs yet to be determined, management has identified
and secured certain initial target acquisitions and joint ventures. The
Company currently has no subsidiaries and has not yet commenced operations.
NOTE 2 RELATED PARTY TRANSACTION
Joist Management Ltd. is related by management contract to provide
administrative and general office services to the Company at a rate of
$10,000 per month until May 31, 1999. None of the shareholders, officer or
directors of Joist Management Ltd. are shareholders of Zstar Enterprises,
Inc. During the period, the Company was charged $47,420 for administrative
services.
NOTE 3 CAPITAL STOCK AND CONTRIBUTED SURPLUS
During the period, the Company issued the following common shares:
<TABLE>
<CAPTION>
Total Capital
Cash Stock Contributed
# of Shares Proceeds at Par Value Surplus
<S> <C> <C> <C>
1,500,000 at $0.001 $ 1,500 $ 1,500 $ -
9,000,000 at $ 0.01 90,000 9,000 81,000
50,000 at $ 3.00 150,000 50 149,950
-------- ------- --------
$241,500 $10,550 $230,950
Less share issue costs: 8,000 - $ 8,000
-------- ------- --------
$233,500 $10,550 $222,950
======== ======= ========
</TABLE>
42
<PAGE>
NOTES TO INTERIM FINANCIAL STATEMENTS
OCTOBER 23, 1998
(in U.S. Dollars)
NOTE 4 PROPOSED ACQUISITION OF APEX CANADIAN HOLIDAYS LTD.
On September 2, 1998, the Company signed a letter of intent to acquire 100% of
the shares of Apex Canadian Holidays Ltd., a Canadian company, for cash
consideration of $50,000. A condition of the stock purchase is that Zstar
Enterprises, Inc. first raise $500,000 through a private placement. The letter
of intent is not binding on either party.
NOTE 5 INCOME TAXES
The Company has an interim net loss and other expenditures which may give rise
to future income tax benefits. The potential benefit from these losses has not
been reflected in these financial statements.
NOTE 6 LOSS PER SHARE
Loss per share information has not been disclosed as it is not considered
meaningful at this stage of the Company's development.
NOTE 7 CONTINUING OPERATIONS
These financial statements have been based upon accounting principles which
pressure the realization of assets and settlement of liabilities as they become
due in the course of continuing operations. The Company's ability to maintain
operations is contingent upon successful completion of additional financing
arrangements.
NOTE 8 RECONCILIATION TO ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED
STATES
There are no significant differences between Canadian and U.S. accounting
principles requiring adjustment to the financial statements of the Company
except for the following additional disclosure for development stage companies.
Under U.S. GAAP, the deficit shown on the balance sheet in the shareholders'
equity section would be titled to reflected that this was the accumulated
deficit during the development stage of the Company. This does not change the
reported deficit, only the description thereof.
43
<PAGE>
COMMENTS BY AUDITOR FOR U.S. READERS
ON CANADA-U.S. REPORTING DIFFERENCE
to the Shareholders,
Zstar Enterprises, Inc.
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by conditions and events that cast substantial doubt on
the Company's ability to continue as a going concern, such as those described in
Note 7 to the interim financial statements of Zstar Enterprises, Inc. for the
period from June 17, 1998 to October 23, 1998. My report to the shareholders
dated November 2, 1998 is expressed in accordance with Canadian reporting
standards which do not permit a reference to such events and conditions in the
auditor's report when these adequately disclosed in the financial statements.
Vancouver, British Columbia /s/
November 2, 1998 Chartered Accountant.
44
<PAGE>
PROFORMA FINANCIAL STATEMENTS REFLECTING INTENDED ACQUISITION OF APEX
PROFORMA INTERIM CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(in U.S. dollars)
CONTENTS:
Proforma Interim Consolidated Balance Sheet
Proforma Interim Consolidated Statement of Loss and Deficit
Proforma Interim Consolidated Statement of Shareholders' Equity
Proforma Interim Consolidated Statement of Changes in Financial Position
NOTES TO THE PROFORMA INTERIM CONSOLIDATED FINANCIAL STATEMENTS
45
<PAGE>
PROFORMA INTERIM CONSOLIDATED BALANCE SHEET
AS AT DECEMBER 31, 1998
( in U.S. Dollars)
ASSETS
<TABLE>
<S> <C>
Current $
Cash 599,426
Accounts receivable 65,656
Prepaid expenses 21,900
--------
686,982
--------
CAPITAL ASSETS (net) 3,317
GOODWILL 60,444
INCORPORATION COSTS 2,000
--------
752,743
--------
--------
LIABILITIES
CURRENT
Accounts payable and accrued liabilities 155,238
--------
SHAREHOLDERS' EQUITY
CAPITAL STOCK (NOTE 6)
Authorized -30,000,000 common shares with par value of $.001
Issued -10,716,667 common shares 10,716
CONTRIBUTED SURPLUS (NOTE 6) 722,784
DEFICIT (135,995)
--------
597,505
--------
752,743
--------
--------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
46
<PAGE>
PROFORMA INTERIM CONSOLIDATED STATEMENT OF LOSS AND DEFICIT
FOR THE PERIOD FROM JUNE 17, 1998 TO DECEMBER 31, 1998
(in U.S. Dollars)
<TABLE>
<S> <C>
EXPENSES $
Audit 2,000
Bank charges 377
Legal 20,000
Management and consulting fees (note 5) 113,618
--------
135,995
--------
--------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
47
<PAGE>
PROFORMA INTERIM CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE PERIOD FORM JUNE 17, 1998 TO DECEMBER 31, 1998
(in U.S. Dollars)
<TABLE>
<CAPTION>
Par Contributed Shareholder
# of Common Price per Value Surplus Accumulated Equity
Shares Share (Note 6) (Note 6 ) Deficit (Deficit)
<S> <C> <C> <C> <C> <C> <C>
Common shares issued for cash $ $ $ $
- June 1998 1,500,000 $.001 1,500 - - 1,500
(on inception)
- July 1998 9,000,000 $ .01 9,000 81,000 - 90,000
- October 1998 50,000 $3.00 50 149,950 - 150,000
- May 1999 166,667 $3.00 166 499,834 - 500,000
Share issue costs for the period - (8,000) - (8,000)
Net loss for the period - (135,995) (135,995)
---------- -------------------------------------------------------
10,716,667 10,716 722,784 (135,995) 597,505
---------- -------------------------------------------------------
---------- -------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
48
<PAGE>
PROFORMA INTERIM CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
FOR THE PERIOD FROM JUNE 17, 1998 TO DECEMBER 31, 1998
(in U.S. Dollars)
<TABLE>
<S> <C>
OPERATING ACTIVITIES $
Net loss for the period (135,995)
Net change in non-cash working capital balances 9,420
--------
(126,575)
--------
FINANCING ACTIVITIES 741,500
Issuance of capital stock (8,000)
--------
Share issue costs 733,500
--------
INVESTING ACTIVITIES
Assets acquired on business acquisition (50,000)
Incorporation costs (2,000)
--------
(52,000)
--------
Change in cash during the period 554,925
Cash acquired on business acquisition 44,501
--------
Cash, end of period 599,426
--------
--------
</TABLE>
The accompanying notes are an integral part of these financial statements
49
<PAGE>
NOTES TO INTERIM FINANCIAL STATEMENTS
DECEMBER 31, 1998
(in U.S. Dollars)
NOTE 1 PURPOSE OF PROJECTION
The purpose of this projection is to illustrate the effect of the proposed
acquisition (Note 4) as if it occurred on or about December 31, 1998.
Specifically, it has been assumed that $500,000 is raised through a private
placement and the Company paid $ 50,000 for the Apex acquisition. The letter
of intent is non-binding.
Included in the projection are the actual results for the interim period
ended October 23, 1998 for which audited financial statements have been
prepared. Management has estimated expenditures for the Proforma period from
October 24, 1998 to December 31, 1998 and combined these with October 23,
1998 expenditures to arrive at December 31, 1998 period to date figures.
Management prepared this projection on October 31, 1998.
The Company will be following the consolidation method in accounting for its
proposed investment in Apex Canadian Holidays Ltd. For purposes of these
Proforma financial statements, the Company has included the actual balance
sheet for Apex Canadian Holidays Ltd. as at its year end date of February 28,
1998 as an estimate of its Proforma balance sheet on December 31, 1998.
Since this projection is based on assumptions regarding future events, actual
results will vary from the information presented and the variations may be
material.
NOTE 2 INCORPORATION AND NATURE OF BUSINESS
The Company was incorporated on June 17, 1998 in Nevada. U.S.A.
The Company was organized with the intent to be a holding company which will
acquire and/or form joint ventures with corporate entities conducting various
types of businesses throughout the world.
NOTE 3 BASIS OF CONSOLIDATION
These Proforma consolidated interim financial statements include the accounts
of Zstar Enterprises, Inc. and its 100% subsidiary, Apex Canadian Holidays
Ltd.
NOTE 4 ACQUISITION OF APEX CANADIAN HOLIDAYS LTD.
On December 31, 1998 the Company proposes to purchase 100% of the common
shares of Apex Canadian Holidays Ltd. for cash consideration of $50,000. The
underlying assets and liabilities acquired have been assigned the following
values:
50
<PAGE>
<TABLE>
<S> <C>
Cash $ 44,501
Accounts receivable 65,656
Prepaid expenses and deposits 19,320
Capital assets 3,317
Goodwill 60,444
Accounts payable and accrued liabilities (143,238)
----------
$ 50,000
----------
----------
</TABLE>
The investment in Apex Canadian Holidays Ltd. exceeded the book value of the
net assets acquired by $52,444. This excess has been allocated to goodwill
and is being amortized over 40 years.
NOTE 5 RELATED PARTY TRANSACTION
Joist Management Ltd. is related by management contract to provide
administrative and general office services to the Company at a rate of
$10,000 per month until May 31, 1999. None of the shareholders, officers or
directors of Joist Management Ltd. are shareholders of Zstar Enterprises,
Inc. During the period, the Company was charged $112,720 for administrative
services.
NOTE 6 CAPITAL STOCK AND CONTRIBUTED SURPLUS
During the period, the Company issued the following common shares:
<TABLE>
<CAPTION>
Total Capital
Cash Stock Contributed
# of Shares Proceeds At Par value Surplus
<S> <C> <C> <C>
1,500,000 at $0.001 $ 1,500 $ 1,500 $ -
9,000,000 at $0.01 90,000 9,000 81,000
50,000 at $3.00 150,000 50 149,950
166,667 at $3.00 500,000 166 499,834
-------- ------- --------
$741,500 $10,716 $730,784
Less shares issue costs: 8,000 - 8,000
-------- ------- --------
$733,500 $10,716 $722,784
-------- ------- --------
-------- ------- --------
</TABLE>
51
<PAGE>
NOTE 7 INCOME TAXES
The Company has an interim net loss and other expenditures which may give
rise to future income tax benefits. The potential benefit from these losses
has not been reflected in these financial statements.
NOTE 8 LOSS PER SHARE
Loss per share information has not been disclosed as it is not considered
meaningful at this stage of the Company's development.
NOTE 9 CONTINUING OPERATIONS
These financial statements have been based upon accounting principles which
presume the realization of assets and settlement of liabilities as they
become due in the course of continuing operations. The Company's ability to
maintain operations is contingent upon successful completion of additional
financing arrangements.
52
<PAGE>
PART III
ITEM 1 INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT # DESCRIPTION
--------- -----------
<S> <C>
Exhibit 3(i) Articles of Incorporation
Exhibit 3(ii) By-laws
Exhibit 4.1 Specimen stock certificate evidencing
shares of Common Stock
Exhibit 4.2 Form of Subscription Agreement used by
the Company
Exhibit 10 Management Agreement dated June 20,
1998; Web Development and Hosting Agreement
dated October 15, 1998
Exhibit 11 Statement re: computation per share
earnings is stated elsewhere in this
Filing
Exhibit 27 Financial data schedule
Exhibit 99 Securities Purchase Agreement with
Apex Travel Ltd. dated as of February
28, 1999; Promissory Note dated February
28, 1999
</TABLE>
53
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
ZSTAR ENTERPRISES, INC.
------------------------
Chui Keung Ho, President
Date: April 30, 1999
54
<PAGE>
EXHIBIT 3(i)
ARTICLES OF INCORPORATION
OF
ZSTAR ENTERPRISES, INC.
I, the person hereinafter named as incorporator, for the purpose of associating
to establish a corporation under the provisions and subject to the requirements
of Title 7, Chapter 78 of Nevada Revised Statutes, and the acts amendatory
thereof, and hereinafter sometimes referred to as the General Corporation Law of
the State of Nevada, do hereby adopt and make the following Articles of
Incorporation.
ARTICLE I.
NAME
The name of this corporation is Zstar Enterprises, Inc.
ARTICLE II.
AGENT FOR SERVICE OF PROCESS
The name of this corporation's initial agent in the State of Nevada for services
of process is CSC Services of Nevada, Inc. The address of the agent is 502 East
John Street, Carson City, Nevada, 89706.
ARTICLE III.
STOCK
The corporation is authorized to issue only one class of shares of stock, to be
known as "common stock." The total number of shares that the corporation is
authorized to issue is Thirty Million (30,000,0000), all of which are of a par
value of $0.001 each.
ARTICLE IV.
DIRECTORS
The governing board of the corporation shall be styled as a 'Board of
Directors," and any member of the Board shall be styled as a "Director."
The number of members constituting the first Board of Directors of the
corporation is two(2). The names of post office boxes or street addresses,
either residence or business, of said members are as follows:
Chui Keung Ho 30/F Southorn Centre, 130 Hennessy Road, Wan Chai, Hong
Kong
Roberto Chu Prolong Leticia, 941 Dept 202, Peru
The number of Directors of the corporation may be increased or decreased in the
manner provided in the Bylaws of the corporation; provided, that the number of
directors shall never be less than one. In the interim between elections of
directors by stockholders entitled to vote, all vacancies, including vacancies
caused by an increase in the number of directors and including vacancies
resulting from the removal of directors by the stockholders entitled to vote
which are not filled by said stockholders, may be filled by the remaining
directors, though less than a quorum.
<PAGE>
ARTICLE V.
LIMITATION OF DIRECTOR LIABILITY
The personal liability of the directors of the corporation is hereby eliminated
to the fullest extent permissible under the General Corporation Law of the State
of Nevada, as the same may be amended and supplemented.
ARTICLE VI
INDEMNIFICATION
The corporation shall, to the fullest extent permitted by the General
Corporation Law of the State of Nevada, as the same may be amended and
supplemented (the "Law"), indemnify any and all persons whom it shall have power
to indemnify under the Law from and against any and all of the expenses,
liabilities, or other matters referred to in or covered by the Law. The
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any Bylaw, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his or her official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
director, officer, employee, or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
ARTICLE VII.
INCORPORATOR
The name of post office box or street address, either residence or business of
the incorporator signing these Articles of Incorporation are as follows:
Kellie E. Davidson c/o Jones, Day, Reavis & Pogue
555 West 5th Street, Suite 4600
Los Angeles, Ca., 90013
IN WITNESS WHEREOF, I do hereby execute these Articles of Incorporation on June
16, 1998.
S/ Kellie E. Davidson
_________________________
Kellie E. Davidson, Incorporator
<PAGE>
EXHIBIT 3(ii)
BYLAWS
OF
ZSTAR ENTERPRISES, INC.
TABLE OF CONTENTS
ARTICLE I Offices
Section 1. Principal Executive Office
Section 2. Other Offices
ARTICLE II Shareholders
Section 1. Place of Meetings
Section 2. Annual Meetings
Section 3. Special Meetings
Section 4. Notice of Annual or Special Meetings
Section 5. Quorum
Section 6. Adjourned Meetings and Notice Thereof
Section 7. Voting
Section 8. Record Date
Section 9. Consent of Absentees
Section 10. Action Without Meeting
Section 11. Proxies
Section 12. Inspectors of Election
ARTICLE III Directors
Section 1. Powers
Section 2. Committees
Section 3. Number of Directors
Section 4. Election and Term of Office
Section 5. Vacancies
Section 6. Resignation
Section 7. Place of Meetings
Section 8. Annual Meetings
Section 9. Special Meetings
Section 10. Quorum
Section 11. Participation in Meetings by Conference Telephone
Section 12. Waiver of Notice
Section 13. Adjournment
Section 14. Fees and Compensation
Section 15. Action Without Meeting
ARTICLE IV Officers
Section 1. Officers
Section 2. Election
Section 3. Subordinate Officers
Section 4. Removal and Resignation
Section 5. Vacancies
Section 6. President
<PAGE>
Section 7. Vice Presidents
Section 8. Secretary
Section 9. Chief Financial Officer
Section 10. Chairman of the Board
ARTICLE V Other Provisions
Section 1. Inspection of Corporate Records
Section 2. Inspection of Bylaws
Section 3. Endorsement of Documents; Contracts
Section 4. Certificates of Stock
Section 5. Representation of Shares of Other Corporations
Section 6. Annual Report to Shareholders
Section 7. Construction and Definitions
Section 8. Compensation
Section 9. Indemnification of Agents of the
Corporation; Purchase of Liability Insurance
Section 10. Corporate Loans and Guarantees to Directors and Officers
ARTICLE VI Amendments
BYLAWS
FOR THE REGULATION, EXCEPT AS
OTHERWISE PROVIDED BY STATUTE OR ITS
ARTICLES OF INCORPORATION,
OF
ZSTAR ENTERPRISES, INC.
(A NEVADA CORPORATION)
ARTICLE I. OFFICES.
SECTION 1. PRINCIPAL EXECUTIVE OFFICE. The principal executive office
of the Corporation shall be fixed and located at such place as the Board of
Directors (herein referred to as the "Board") shall determine. The Board is
granted full power and authority to change said principal executive office
from one location to another.
SECTION 2. OTHER OFFICES. Branch or subordinate offices may be
established at any time by the Board at any place or places.
ARTICLE II. SHAREHOLDERS.
SECTION 1. PLACE OF MEETINGS. Meetings of shareholders shall be held
at the principal executive office of the Corporation unless another place
within or without the State of Nevada is designated by the Board.
SECTION 2. ANNUAL MEETINGS. The annual meetings of shareholders shall
be held on the fourth Friday in May of each year, at 10:00 A.M., local time,
or such other date or such other time as may be fixed by the Board, provided,
however, that should said day fall upon a Saturday, Sunday or legal holiday
observed by the Corporation at its principal executive office, then any such
annual meeting of shareholders shall be held
<PAGE>
at the same time and place on the next day thereafter ensuing which is a
business day. At such meetings, directors shall be elected and any other
proper business may be transacted.
SECTION 3. SPECIAL MEETINGS. Special meetings of the shareholders may
be called at any time by the Board, the Chairman of the Board, the President
or by the holders of shares entitled to cast not less than ten percent of the
votes at such meeting.
SECTION 4. NOTICE OF ANNUAL OR SPECIAL MEETINGS. Written notice of
each annual or special meeting of shareholders shall be given not less than
10 nor more than 60 days before the date of the meeting to each shareholder
entitled to vote thereat.
Such notice shall be given either personally or by first-class mail,
postage prepaid, or by other means of written communication, addressed to the
shareholder at the address of such shareholder appearing on the books of the
Corporation or given by the shareholder to the Corporation for the purpose of
notice, or if no such address appears or is given, at the place where the
principal executive office of the Corporation is located or by publication at
least once in a newspaper of general circulation in the county in which the
principal executive office is located. After notice is given by mail, the
Secretary or the Assistant Secretary, if any, or transfer agent, shall
execute an affidavit of mailing in accordance with this section.
The notice shall state the place, date and hour of the meeting and (i)
in the case of a special meeting, the general nature of the business to be
transacted, and no other business may be transacted, or (ii) in the case of
the annual meeting, those matters which the Board, at the time of the mailing
of the notice, intends to present for action by the shareholders, but,
subject to the provisions of applicable law, any proper matter may be
presented at the meeting for such action. The notice of any meeting at which
directors are to be elected shall include the names of nominees intended at
the time of notice to be presented by the Board for election.
SECTION 5. QUORUM. A majority of the shares entitled to vote,
represented in person or by proxy, shall constitute a quorum at any meeting
of the shareholders. Subject to the Articles of Incorporation of the
Corporation (herein referred to as the "Articles of Incorporation"), the
shareholders present at a duly called or held meeting at which a quorum is
present may continue to do business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum, if any action
taken (other than adjournment) is approved by at least a majority of the
shares required to constitute a quorum.
SECTION 6. ADJOURNED MEETINGS AND NOTICE THEREOF. Any meeting of
shareholders, whether or not a quorum is present, may be adjourned from time
to time by the vote of a majority of the shares, the holders of which are
either present in person or represented by proxy thereat, but in the absence
of a quorum (except as provided in Section 5 of this Article) no other
business may be transacted at such meeting.
It shall not be necessary to give any notice of the time and place of
the adjourned meeting or of the business to be transacted thereat, other than
by announcement at the meeting at which such adjournment is taken; provided,
however, when any shareholders' meeting is adjourned for more than 45 days
or, if after adjournment a new record date is fixed for the adjourned
meeting, notice of the adjourned meeting shall be given as in the case of an
original meeting.
SECTION 7. VOTING. The shareholders entitled to notice of any meeting
or to vote at any such meeting shall be only those persons in whose names
shares are registered in the stock records of the Corporation on the record
date determined in accordance with Section 8 of this Article.
Except as provided below and except as may be otherwise provided in the
Articles of Incorporation, each outstanding share, regardless of class, shall
be entitled to one vote on each matter submitted to a vote of shareholders.
Subject to the requirements of the next sentence, every shareholder entitled
to vote at any
<PAGE>
election of directors may cumulate such shareholder's votes and give one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which such shareholder's shares are
normally entitled, or distribute the shareholder's votes on the same
principle among as many candidates as the shareholder thinks fit. No
shareholder shall be entitled to cumulate votes (i.e., cast for any candidate
a number of votes greater than the number of votes which such shareholder
normally is entitled to cast) unless such candidate or candidates' names have
been placed in nomination prior to the voting and any shareholder has given
notice at the meeting prior to the voting of such shareholder's intention to
cumulate the shareholder's votes.
Any holder of shares entitled to vote on any matter may vote part of the
shares in favor of the proposal and refrain from voting the remaining shares
or vote them against the proposal, other than elections to office, but, if
the shareholder fails to specify the number of shares such shareholder is
voting affirmatively, it will be conclusively presumed that the shareholder's
approving vote is with respect to all shares such shareholder is entitled to
vote.
Elections for directors need not be by ballot unless a shareholder
demands election by ballot at the meeting and before the voting begins.
Provided that the quorum requirements of Section 5 above are satisfied:
the affirmative vote of a majority of the shares represented and voting at a
duly held meeting at which a quorum is present (which shares voting
affirmatively also constitute at least a majority of the required quorum)
shall be the act of the shareholders, unless the vote of a greater number or
voting by classes is required by the Nevada General Corporation Law or the
Articles of Incorporation, provided that whenever under the Nevada General
Corporation Law shares are disqualified from voting on any matter, they shall
not be considered outstanding for purposes of the determination of a quorum
at any meeting to act upon, or the required vote to approve action upon any
matter; and in any election of directors, the candidates receiving the
highest number of affirmative votes of the shares entitled to be voted for
them, up to the number of directors to be elected by such shares, are
elected; votes against the director and votes withheld shall have no legal
effect.
SECTION 8. RECORD DATE. The Board may fix, in advance, a record date
for the determination of the shareholders entitled to notice of, or to vote
at, any meeting of the shareholders, or the shareholders entitled to receive
payment of any dividend or other distribution, or any allotment of rights, or
to exercise rights in respect of any other lawful action. The record date so
fixed shall be not more than 60 days nor less than 10 days prior to the date
of the meeting nor more than 60 days prior to any other action.
If no record date is fixed by the Board, (i) the record date for
determining shareholders entitled to notice of, or to vote at, a meeting of
shareholders shall be at the close of business on the business day next
preceding the day on which notice is given or, if notice is waived, at the
close of business on the business day next preceding the day on which the
meeting is held, and (ii) the record date for determining shareholders
entitled to give consent to corporate action in writing without a meeting,
when no prior action by the Board has been taken, shall be the day on which
the first written consent is given.
A determination of shareholders of record entitled to notice of, or to
vote at, a meeting of shareholders shall apply to any adjournment of the
meeting unless the Board fixes a new record date for the adjourned meeting.
The Board shall fix a new record date if the meeting is adjourned for more
than 45 days from the date set for the original meeting.
SECTION 9. CONSENT OF ABSENTEES. The transactions of any meeting of
shareholders, however called and noticed, and wherever held, are as valid as
though had at a meeting duly held after regular call and notice, if a quorum
is present either in person or by proxy, and if, either before or after the
meeting, each of the persons entitled to vote, not present in person or by
proxy, signs a written waiver of notice, or a consent to the holding of the
meeting, or an approval of the minutes thereof. All such waivers, consents
or approvals
<PAGE>
shall be filed with the corporate records or made a part of the minutes of
the meeting. Neither the business to be transacted at nor the purpose of any
annual or special meeting of shareholders, need be specified in any written
waiver of notice, except as provided in the Nevada General Corporation Law.
SECTION 10. ACTION WITHOUT MEETING. Subject to the applicable section
of the Nevada General Corporation Law, any action which, under any provision
of the Nevada General Corporation Law, may be taken at any annual or special
meeting of shareholders, may be taken without a meeting and without prior
notice if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding shares having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
SECTION 11. PROXIES. Every person entitled to vote shares shall have
the right to do so either in person or by one or more persons authorized by a
valid written proxy signed by such person or such person's attorney in fact
and filed with the Secretary. Subject to the provisions of this bylaw and
applicable law, any duly executed proxy continues in full force and effect
until revoked by the person executing it prior to the vote pursuant thereto.
SECTION 12. INSPECTORS OF ELECTION. Prior to any meeting of
shareholders, the Board may appoint inspectors of election to act at the
meeting or any adjournment thereof. If inspectors of election are not so
appointed, or if any persons so appointed fail to appear or refuse to act,
the chairman of the meeting may, and on the request of any shareholder or
his proxy shall, appoint inspectors of election or persons to replace those
who fail to appear or refuse to act at the meeting. The number of inspectors
shall be either one or three. If appointed at a meeting on the request of one
or more shareholders or proxies, the holders of a majority of shares or their
proxies present at the meeting shall determine whether one or three
inspectors are to be appointed. The inspectors of election shall (i)
determine the number of shares outstanding and the voting power of each, the
shares represented at the meeting, the existence of a quorum and the
authenticity, validity and effect of proxies, (ii) receive votes, ballots or
consents, (iii) hear and determine all challenges and questions in any way
arising in connection with the right to vote, (iv) count and tabulate all
votes or consents, (v) determine when the poll shall close and the election
result and (vi) do any other acts that may be proper to conduct the election
or vote with fairness to all shareholders.
The inspectors of election shall perform their duties impartially, in
good faith, to the best of their ability and as expeditiously as it is
practicable. If there are three inspectors of election, the decision, act or
certificate of majority is effective in all respects as the decision, act or
certificate of all.
ARTICLE III. DIRECTORS.
SECTION 1. POWERS. Subject to limitations of the Articles of
Incorporation, these Bylaws and the Nevada General Corporation Law relating
to actions required to be approved by the shareholders or by the outstanding
shares, the business and affairs of the Corporation shall be managed and all
corporate powers shall be exercised by or under the direction of the Board.
SECTION 2. COMMITTEES. The Board may, by resolution adopted by a
majority of the authorized number of directors, designate one or more
committees, each consisting of two or more directors, to serve at the
pleasure of the Board. The Board may designate one or more directors as
alternate members of any committee, who may replace any absent member of the
committee. The appointment of members or alternate members of a committee
requires the vote of a majority of the authorized number of directors. Any
such committee, to the extent provided in the resolution of the Board, shall
have all the authority of the Board, except with respect to (i) the approval
of any action required to be approved by the shareholders or by the
outstanding shares under the Nevada General Corporation Law, (ii) the filling
of vacancies on the Board or in any committee, (iii) the fixing of
compensation of the directors for serving on the Board or on any
<PAGE>
committee, (iv) the adoption, amendment or repeal of Bylaws, (v) the
amendment or repeal of any resolution of the Board which by its express terms
is not so amendable or repealable, (vi) a distribution to the shareholders,
except at a rate or in a periodic amount or within a price range determined
by the Board and (vii) the appointment of other committees of the Board or
the members thereof.
SECTION 3. NUMBER OF DIRECTORS. The authorized number of directors
shall be no less than two (2) nor more than nine (9) until changed by an
amendment of the Articles of Incorporation or this Section 3 duly approved by
the shareholders, subject to the Nevada General Corporation Law. However,
any reduction of the authorized number of directors does not remove any
director prior to the expiration of such director's term of office.
SECTION 4. ELECTION AND TERM OF OFFICE. The directors shall be elected
at each annual meeting of the shareholders, but if any such annual meeting is
not held or the directors are not elected thereat, the directors may be
elected at any special meeting of shareholders held for that purpose.
Subject to Section 5 of this Article, each director shall hold office until
the next annual meeting and until a successor has been elected and qualified.
SECTION 5. VACANCIES. A vacancy or vacancies in the Board shall be
deemed to exist in case of the death, resignation or removal of any director,
if the authorized number of directors be increased or if the shareholders
fail at any annual or special meeting of shareholders at which any directors
are elected, to elect the full authorized number of directors to be voted at
that meeting.
Vacancies in the Board, except those existing as a result of a removal
of a director, may be filled by a majority of the remaining directors, or, if
the number of remaining directors is less than a quorum, by (i)_the unanimous
written consent of the remaining directors, (ii)_the affirmative vote of a
majority of the remaining directors at a meeting held pursuant to notice or
waivers of notice complying with the applicable section of the Nevada General
Corporation Law, or (iii)_by a sole remaining director, and each director so
elected shall hold office until the next annual meeting and until such
director's successor has been elected and qualified.
Vacancies in the Board created by the removal of a director may be
filled only by the affirmative vote of a majority of the shares represented
and voting at a duly held meeting at which a quorum is present (which shares
voting affirmatively also constitute at least a majority of the required
quorum) or by the unanimous written consent of all shares entitled to vote
for the election of directors.
The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors. Any such election by
written consent other than to fill a vacancy created by removal requires the
consent of a majority of the outstanding shares entitled to vote.
SECTION 6. RESIGNATION. Any director may resign effective upon giving
written notice to the President, the Secretary or the Board, unless the
notice specifies a later time for the effectiveness of such resignation. If
the resignation is effective at a future time, a successor may be elected to
take office when the resignation becomes effective.
SECTION 7. PLACE OF MEETINGS. Regular or special meetings of the Board
shall be held at any place within or without the State of Nevada which has
been designated in the notice of the meeting or, if not stated therein, as
designated by resolution of the Board. In the absence of such designation,
meetings shall be held at the principal executive office of the Corporation.
SECTION 8. ANNUAL MEETINGS. Immediately following each annual meeting
of shareholders, the Board may, but shall not be required to, hold an annual
meeting at the same place, or at any other place that has been designated by
the Board, for the purpose of organization, election of officers or
transaction of other business as the Board may determine. Call and notice of
this meeting of the Board shall be in the manner
<PAGE>
for the conduct of special meetings as provided in Section 9 unless the Board
has determined by resolution to conduct a regular meeting at such time and
place, in which event call and notice of this meeting of the Board shall not
be required unless some place other than the place of the annual
shareholders' meeting has been designated.
SECTION 9. SPECIAL MEETINGS. Special meetings of the Board for any
purpose or purposes may be called at any time by the Chairman of the Board,
the President, the Secretary or by any two directors upon four days' notice
by mail or 48 hours' notice given personally or by telephone, telegraph,
telex or other similar means of communication. Any such notice shall be
addressed or delivered to each director at such director's address as it is
shown upon the records of the Corporation or as may have been given to the
Corporation by the director for purposes of notice.
SECTION 10. QUORUM. A majority of the authorized number of directors
constitutes a quorum of the Board for the transaction of business, except to
adjourn as hereinafter provided. Every act or decision done or made by a
majority of the directors present at a meeting duly held at which a quorum is
present shall be regarded as the act of the Board, unless a greater number be
required by law or by the Articles. A meeting at which a quorum is initially
present may continue to transact business notwithstanding the withdrawal of
directors, if any action taken is approved by at least a majority of the
required quorum for such meeting.
SECTION 11. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE. Members
of the Board may participate in a meeting through use of conference telephone
or similar communications equipment, so long as all members participating in
such meeting can hear one another.
SECTION 12. WAIVER OF NOTICE. Notice of a meeting need not be given to
any director who signs a waiver of notice or a consent to holding the meeting
or an approval of the minutes thereof, whether before or after the meeting,
or who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to such director. All such waivers,
consents or approvals shall be filed with the corporate records or made a
part of the minutes of the meeting.
SECTION 13. ADJOURNMENT. A majority of the directors present, whether
or not a quorum is present, may adjourn any directors' meeting to another
time and place. If a meeting is adjourned for more than 24 hours, notice of
any adjournment to another time or place shall be given prior to the time of
the adjourned meeting to the directors that were not present at the time of
adjournment.
SECTION 14. FEES AND COMPENSATION. Directors and members of committees
may receive such compensation, if any, for their services, and such
reimbursement for expenses, as may be fixed or determined by the Board.
SECTION 15. ACTION WITHOUT MEETING. Any action required or permitted
to be taken by the Board may be taken without a meeting if all members of the
Board shall individually or collectively consent in writing to such action.
Such written consent or consents shall be filed with the minutes of the
proceedings of the Board. Such action by written consent shall have the same
effect as a unanimous vote of the members of the Board.
ARTICLE IV. OFFICERS.
SECTION 1. OFFICERS. The officers of the Corporation shall be a
President, a Secretary and a Chief Financial Officer. The Corporation may
also have, at the discretion of the Board, a Chairman, one or more Vice
Presidents, one or more Assistant Secretaries, one or more Assistant
Financial Officers and such other officers as may be elected or appointed in
accordance with the provisions of Section 3 of this Article.
<PAGE>
SECTION 2. ELECTION. The officers of the Corporation, except such
officers as may be elected or appointed in accordance with the provisions of
Section 3 or Section 5 of this Article, shall be chosen by, and shall serve
at the pleasure of, the Board, and shall hold their respective offices until
their resignation, removal or other disqualification from service, or until
their respective successors shall be elected and qualified.
SECTION 3. SUBORDINATE OFFICERS. The Board may elect, and may empower
the President to appoint, such other officers as the business of the
Corporation may require, each of whom shall hold office for such period, have
such authority and perform such duties as are provided in these Bylaws or as
the Board may from time to time determine.
SECTION 4. REMOVAL AND RESIGNATION. Any officer may be removed, either
with or without cause, by the Board at any time. Any officer may resign at
any time upon written notice to the Corporation without prejudice to the
rights, if any, of the Corporation under any contract to which the officer is
a party.
SECTION 5. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in
the manner prescribed in these Bylaws for regular election or appointment to
such office.
SECTION 6. PRESIDENT. The President is the general manager and chief
executive officer of the Corporation and has, subject to the control of the
Board, general supervision, direction and control of the business and
officers of the Corporation. The President shall preside at all meetings of
the shareholders and at all meetings of the Board. The President has the
general powers and duties of management usually vested in the office of
president and general manager of a corporation and such other powers and
duties as may be prescribed by the Board.
SECTION 7. VICE PRESIDENTS. In the absence or disability of the
President, unless a Chairman has been elected, the Vice Presidents in order
of their rank as fixed by the Board or, if not ranked, the Vice President
designated by the Board, shall perform all the duties of the President and,
when so acting, shall have all the powers of and be subject to all the
restrictions upon the President. The Vice Presidents shall have such other
powers and perform such other duties as from time to time may be prescribed
for them respectively by the Board.
SECTION 8. SECRETARY. The Secretary shall keep or cause to be kept, at
the principal executive office and such other place as the Board may order, a
book of minutes of all meetings of shareholders and the Board, with the time
and place of holding, whether regular or special, and if special, how
authorized, the notice thereof given, the names of those present or
represented at meetings of shareholders, and the proceedings thereof. The
Secretary shall keep, or cause to be kept, a copy of the Bylaws of the
Corporation at the principal executive office or business office in
accordance with the applicable section_of the Nevada General Corporation Law.
The Secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the Corporation's transfer agent or
registrar, if one be appointed, a share register, or a duplicate share
register, showing the names of the shareholders and their addresses, the
number and classes of shares held by each, the number and date of
certificates issued for the same, and the number and date of cancellation of
every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all meetings
of the shareholders and of the Board required by these Bylaws or by law to be
given, shall keep the seal of the Corporation in safe custody, and shall have
such other powers and perform such other duties as may be prescribed by the
Board.
SECTION 9. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall
keep and maintain, or cause to be kept and maintained, adequate and correct
accounts of the properties and business transactions
<PAGE>
of the Corporation, and shall send or cause to be sent to the shareholders of
the Corporation such financial statements and reports as are by law or these
Bylaws required to be sent to them. The books of account shall at all times
be open to inspection by any director.
The Chief Financial Officer shall deposit all moneys and other valuables
in the name and to the credit of the Corporation with such depositories as
may be designated by the Board. The Chief Financial Officer shall disburse
the funds of the Corporation as may be ordered by the Board, shall render to
the President and directors, upon their request, an account of all
transactions as Chief Financial Officer and of the financial condition of the
Corporation, and shall have such other powers and perform such other duties
as may be prescribed by the Board.
SECTION 10. CHAIRMAN OF THE BOARD. If such an officer be elected, the
Chairman of the Board shall preside at meetings of the board of directors
and exercise and perform such other powers and duties as may be from time to
time assigned to him by the board of directors or prescribed by the Bylaws.
In the absence of the President, or if there is no President, the Chairman of
the Board shall, in addition, be the chief executive officer of the
Corporation and shall have the powers and duties described in Section 6 above.
<PAGE>
ARTICLE V. OTHER PROVISIONS.
SECTION 1. INSPECTION OF CORPORATE RECORDS. The record of shareholders
shall be open to inspection and copying, and the accounting books and records
and minutes of proceedings of the shareholders and the Board and committees
of the Board, if any, shall be open to inspection, upon written demand on the
Corporation of any shareholder at any reasonable time during usual business
hours, for a purpose reasonably related to such holder's interests as a
shareholder.
SECTION 2. INSPECTION OF BYLAWS. The Corporation shall keep at its
principal executive office in the State of Nevada, or if its principal
executive office is not in Nevada, at its principal business office in
Nevada, the original or a copy of these Bylaws as amended to date, which
shall be open to inspection by the shareholders at all reasonable times
during office hours. If the principal executive office of the Corporation is
outside Nevada and the Corporation has no principal business office in
Nevada, it shall upon the written request of any shareholder furnish to such
shareholder a copy of these Bylaws as amended to date.
SECTION 3. ENDORSEMENT OF DOCUMENTS; CONTRACTS. Subject to the
provisions of applicable law, any note, mortgage, evidence of indebtedness,
contract, share certificate, initial transaction statement or written
statement, conveyance or other instrument in writing and any assignment or
endorsement thereof executed or entered into between the Corporation and any
other person shall be valid and binding on the Corporation, when signed by
the Chairman, the President or any Vice President and the Secretary, any
Assistant Secretary, the Chief Financial Officer or any Assistant Financial
Officer of the Corporation unless the other party knew that the signing
officers had no authority to execute the same. Any such instruments may be
signed by any other person or persons and in such manner as from time to time
shall be determined by the Board, and, unless so authorized by the Board, no
officer, agent or employee shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its credit or to
render it liable for any purpose or amount.
SECTION 4. CERTIFICATES OF STOCK. Every holder of shares of the
Corporation shall be entitled to have a certificate signed in the name of the
Corporation by the President or a Vice President and by the Chief Financial
Officer or an Assistant Financial Officer or the Secretary or an Assistant
Secretary, certifying the number of shares and the class or series of shares
owned by the shareholder. Any or all of the signatures on the certificate
may be facsimile.
Except as provided in this Section, no new certificate for shares shall
be issued in lieu of an old one unless the latter is surrendered and
cancelled at the same time. The Board may, however, if any certificate for
shares is alleged to have been lost, stolen or destroyed, authorize the
issuance of a new certificate in lieu thereof, and the Corporation may
require that the Corporation be given a bond or other adequate security
sufficient to indemnify it against any claim that may be made against it
(including expense or liability) on account of the alleged loss, theft or
destruction of such certificate or the issuance of such new certificate.
SECTION 5. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The
President or any other officer or officers authorized by the Board or by the
President are each authorized to vote, represent and exercise on behalf of
the Corporation all rights incident to any and all shares of any other
corporation or corporations standing in the name of the Corporation. The
authority herein granted may be exercised either by any such officer in
person or by any other person authorized so to do by proxy or power of
attorney duly executed by said officer.
SECTION 6. ANNUAL REPORT TO SHAREHOLDERS. The requirement of sending
an annual report to shareholders which is set forth in the Nevada General
Corporation Law is expressly waived, but nothing herein shall be interpreted
as prohibiting the Board from issuing annual or other periodic reports to
shareholders.
<PAGE>
Notwithstanding the immediately preceding paragraph, if the Corporation
has 100 or more holders of record of its shares (determined as provided in
the Nevada General Corporation Law), the Board shall cause an annual report
to be sent to the shareholders not later than 120 days after the close of the
fiscal year. Such report, in addition to such information as may be required
by the Nevada General Corporation Law, shall contain a balance sheet as of
the end of that fiscal year and an income statement and statement of changes
in financial position for that fiscal year, accompanied by any report thereon
of independent accountants or, if there is no such report, the certificate of
an authorized officer of the Corporation that the statements were prepared
without audit from the books and records of the Corporation. The requirement
of sending such report to the shareholders at least 15 (or, if sent by
thirdclass mail, 35) days prior to the annual meeting of shareholders to be
held during the next fiscal year is expressly waived.
SECTION 7. CONSTRUCTION AND DEFINITIONS. Unless the context otherwise
requires, the general provisions, rules of construction and definitions
contained in the General Provisions of the Nevada Corporations Code and in
the Nevada General Corporation Law shall govern the construction of these
Bylaws.
SECTION 8. COMPENSATION. The salaries of all officers and agents of
the Corporation shall be fixed by the Board.
SECTION 9. INDEMNIFICATION OF AGENTS OF THE CORPORATION; PURCHASE OF
LIABILITY INSURANCE. For purposes of this Section 9, "agent" means any
person who is or was a director, officer, employee or other agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust or other enterprise, or was a
director, officer, employee or agent of a foreign or domestic corporation
which was a predecessor corporation of the Corporation or of another
enterprise at the request of such predecessor corporation; "proceeding" means
any threatened, pending or completed action or proceeding, whether civil,
criminal, administrative or investigative; and "expenses" includes without
limitation, attorneys' fees and any expenses of establishing a right to
indemnification under this Section 9.
The Corporation shall have the power to indemnify any person who was or
is a party or is threatened to be made a party to any proceeding (other than
an action by or in the right of the Corporation to procure a judgment in its
favor) by reason of the fact that such person is or was an agent of the
Corporation, against expenses, judgments, fines, settlements and other
amounts actually and reasonably incurred in connection with such proceeding
to the fullest extent permitted under the General Corporation Law of the
State of Nevada, as amended from time to time.
SECTION 10. CORPORATE LOANS AND GUARANTEES TO DIRECTORS AND OFFICERS.
The Corporation shall not make any loan of money or property to, or guarantee
the obligation of, any director or officer of the Corporation or of its
parent, if any, unless the transaction, or an employee benefit plan
authorizing the loans or guarantees after disclosure of the right under such
a plan to include officers or directors, is approved by a majority of the
shareholders entitled to act thereon.
The Corporation shall not make any loan of money or property to, or
guarantee the obligation of, any person upon the security of shares of the
Corporation or of its parent, if any, if the Corporation's recourse in the
event of default is limited to the security for the loan or guaranty, unless
the loan or guaranty is adequately secured without considering these shares,
or the loan or guaranty is approved by a majority of the shareholders
entitled to act thereon.
Notwithstanding the first paragraph of this Section 10, the Corporation
may advance money to a director or officer of the Corporation or of its
parent, if any, for any expenses reasonably anticipated to be incurred in the
performance of the duties of the director or officer, provided that in the
absence of the advance
<PAGE>
the director or officer would be entitled to be reimbursed for the expenses
by the Corporation, its parent, or subsidiary, if any.
The provisions of the first paragraph of this Section 10 do not apply to
the payment of premiums in whole or in part by the Corporation on a life
insurance policy on the life of a director or officer so long as repayment to
the Corporation of the amount paid by it is secured by the proceeds of the
policy and its cash surrender value.
The provisions of this Section 10 do not apply to any transaction, plan
or agreement permitted under the applicable section of the Nevada General
Corporation Law relating to employee stock purchase plans.
For the purposes of this Section, "approval by a majority of the
shareholders entitled to act" means either (1) written consent of a majority
of the outstanding shares without counting as outstanding or as consenting
any shares owned by any officer or director eligible to participate in the
plan or transaction that is subject to this approval, (2) the affirmative
vote of a majority of the shares present and voting at a duly held meeting at
which a quorum is otherwise present, without counting for purposes of the
vote as either present or voting any shares owned by any officer or director
eligible to participate in the plan or transaction that is subject to the
approval, or (3) the unanimous vote or written consent of the shareholders.
If the Corporation has more than one class or series of shares outstanding,
the "shareholders entitled to act" within the meaning of this Section
includes only holders of those classes or series entitled under the articles
to vote on all matters before the shareholders or to vote on the subject
matter of this Section, and includes a requirement for separate class or
series voting, or for more or less than one vote per share, only to the
extent required by the Articles.
ARTICLE VI. AMENDMENTS.
These Bylaws may be amended or repealed either by approval of the
outstanding shares or by the approval of the Board; provided, however, that
after the issuance of shares, a Bylaw specifying or changing a fixed number
of directors or the maximum or minimum number or changing from a fixed to a
variable number of directors or vice versa may be adopted only by approval of
the outstanding shares.
CERTIFICATE OF SECRETARY
OF
ZSTAR ENTERPRISES, INC.
(A NEVADA CORPORATION)
I hereby certify that I am the duly elected and acting Secretary of
ZSTAR ENTERPRISES, INC., a Nevada corporation (the "Corporation"), and that
the foregoing Bylaws constitute the Bylaws of the Corporation as duly adopted
by the Board of Directors thereof by action taken without a meeting.
DATED: June 17, 1998
/s/ Roberto Chu
-----------------------------
Roberto Chu, Secretary
<PAGE>
EXHIBIT 4.1
FORM OF STOCK CERTIFICATE
ZSTAR ENTERPRISES, INC.
AUTHORIZED COMMON STOCK: 30,000,000 SHARES - PAR VALUE: $.001
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
Shares of ZSTAR ENTERPRISES, INC. Common Stock transferable on the books of the
Corporation in person or by duly authorized attorney upon surrender of this
Certificate properly endorsed. This Certificate is not valid until
countersigned by the Transfer Agent and registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated: ___________________
Secretary President
<PAGE>
NOTICE: Signature must be guaranteed by a firm which is a member of a
registered national stock exchange, or by a bank (other than a saving
bank), or a trust company. The following abbreviations, when used in
the inscription on the face of this certificate, shall be construed as
though they were written out in full according to applicable laws or
regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - ............... Custodian ...............
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act ..........................................
in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For Value Received, __________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
--------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________Shares of the capital
stock represented by the within certificate, and do hereby irrevocably
constitute and appoint
_________________________________________________Attorney to transfer the said
stock on the books of the within named Corporation with full power of
substitution in the premises.
Dated
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER
<PAGE>
EXHIBIT 4.2
FORM OF SUBSCRIPTION AGREEMENT
ZSTAR ENTERPRISES, INC.
SUBSCRIPTION AGREEMENT
THE OFFER AND SALE OF THE SHARES OF COMMON STOCK REFERRED TO IN THIS
SUBSCRIPTION AGREEMENT (THE "OFFERING") HAVE NOT BEEN REGISTERED OR QUALIFIED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM
THE SECURITIES REGISTRATION AND QUALIFICATION REQUIREMENTS OF THE ACT AND SUCH
LAWS. ACCORDINGLY, THE SHARES OF COMMON STOCK MAY NOT BE TRANSFERRED OR RESOLD
WITHOUT REGISTRATION AND QUALIFICATION UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS, UNLESS AN EXEMPTION FROM SUCH REGISTRATION AND QUALIFICATION
UNDER THE ACT AND SUCH LAWS IS THEN AVAILABLE. THE SHARES OF COMMON STOCK HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY
STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE
FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THE OFFERING OR THE
ADEQUACY OF THE INFORMATION SET FORTH IN THE OFFERING CIRCULAR DATED __________
WHICH RELATES TO THIS OFFERING.
I. SUBSCRIPTION.
A. THE SECURITIES. This Subscription Agreement relates to shares of the
Common Stock, par value U.S.$0.001 (the "Shares"), of Zstar Enterprises, Inc., a
Nevada corporation (the "Company"), which the Company is offering to sell, at
U.S.$_______ per Share, up to an aggregate maximum of _________ of such Shares
(the "Offering").
B. SUBSCRIPTION AND METHOD OF PAYMENT. The undersigned subscriber (the
"Subscriber") hereby subscribes, on the terms and conditions set forth in this
Subscription Agreement, to purchase Shares (the "Subscribed
Shares") at an aggregate purchase price (the number of Subscribed Shares times
U.S.$______) of U.S. $ (the "Purchase Price"). The Subscriber
acknowledges that by executing this Subscription Agreement he is making an
irrevocable offer to purchase the Subscribed Shares from the Company against
payment by him of the Purchase Price. This subscription may be rejected by the
Company in its sole discretion. The Subscriber hereby agrees, on the day upon
which he receives notification from the Company that this Subscription Agreement
has been unconditionally accepted by the Company, to deliver to the Company cash
or a personal or company check backed by immediately available funds in the
amount of the Purchase Price. Upon the receipt by the Company of the amount of
the Purchase Price in the specified manner, the Company shall deliver to the
Subscriber a share certificate(s) of the Company in the name of the Subscriber
evidencing the Subscribed Shares and the Subscriber's ownership thereof.
II. ACKNOWLEDGMENTS OF THE SUBSCRIBER
THE SUBSCRIBER ACKNOWLEDGES TO THE COMPANY THAT:
HE/SHE HAS RECEIVED A COPY OF THE OFFERING CIRCULAR DATED ____________
(THE "OFFERING CIRCULAR"), SETTING FORTH INFORMATION PERTINENT TO A PURCHASE OF
THE SUBSCRIBED SHARES (THE
<PAGE>
"INVESTMENT"). THE SUBSCRIBER HAS CAREFULLY READ THE
OFFERING CIRCULAR. THE COMPANY HAS MADE AVAILABLE TO HIM AND/OR HIS ADVISORS
THE OPPORTUNITY TO OBTAIN ADDITIONAL WRITTEN INFORMATION, IF ANY, REQUESTED BY
HIM AND/OR HIS ADVISORS TO VERIFY THE ACCURACY OF THE INFORMATION CONTAINED IN
THE OFFERING CIRCULAR OR TO EVALUATE THE MERITS AND RISKS OF THE INVESTMENT. IN
REACHING THE CONCLUSION THAT HE DESIRES TO ACQUIRE THE SUBSCRIBED SHARES, THE
SUBSCRIBER HAS CAREFULLY EVALUATED HIS FINANCIAL RESOURCES AND INVESTMENT
POSITION, AS WELL AS THE RISKS ASSOCIATED WITH THE INVESTMENT, INCLUDING,
WITHOUT LIMITATION, THOSE DELINEATED IN THE RESPONSE TO QUESTION 2 OF THE
OFFERING CIRCULAR. THE SUBSCRIBER HAS NOT RELIED ON ANY ORAL REPRESENTATIONS OR
ORAL INFORMATION FURNISHED TO THE SUBSCRIBER OR HIS ADVISORS BY THE COMPANY OR
ITS OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES, ATTORNEYS, ACCOUNTANTS, AGENTS
OR REPRESENTATIVES (COLLECTIVELY, THE "COMPANY REPRESENTATIVES"), IN CONNECTION
WITH THE OFFERING. THE SUBSCRIBER HAS RELIED IN DETERMINING TO MAKE THE
INVESTMENT SOLELY ON THE INFORMATION CONTAINED IN THE OFFERING CIRCULAR AND
INFORMATION OTHERWISE PROVIDED TO THE SUBSCRIBER IN WRITING BY OFFICERS AND
DIRECTORS OF THE COMPANY. EXCEPT FOR THE INFORMATION CONTAINED IN THE OFFERING
CIRCULAR AND ANY WRITTEN INFORMATION REQUESTED BY AND FURNISHED TO THE
SUBSCRIBER OR THE SUBSCRIBER'S ADVISORS, AS DESCRIBED IN THIS SUBPARAGRAPH (A),
NEITHER THE SUBSCRIBER NOR ANY OF HIS ADVISORS HAS BEEN FURNISHED BY THE COMPANY
OR ANY COMPANY REPRESENTATIVE WITH ANY OTHER WRITTEN MATERIAL OR LITERATURE
RELATING TO THE OFFERING OR THE INVESTMENT. NEITHER THE COMPANY NOR ANY OF THE
COMPANY REPRESENTATIVES, NOR ANYONE PURPORTING TO ACT ON THEIR BEHALF, HAS MADE
ANY ORAL REPRESENTATION TO THE SUBSCRIBER WITH RESPECT TO ANY TAX, FINANCIAL OR
ECONOMIC BENEFITS TO BE DERIVED FROM THE INVESTMENT. THE SUBSCRIBER IS RELYING
SOLELY UPON THE SUBSCRIBER'S OWN KNOWLEDGE AND UPON THE ADVICE OF HIS PERSONAL
ADVISORS WITH RESPECT TO THE TAX, FINANCIAL, ECONOMIC AND OTHER PERTINENT
ASPECTS OF THE INVESTMENT.
The subscriber has carefully reviewed and analyzed the risks of, and other
pertinent considerations relating to, the Investment, based solely on the
information contained in the Offering Circular and the other written information
referenced in subparagraph (a) above.
THE COMPANY WAS INCORPORATED ON _________, AND HAS NO OPERATING HISTORY;
FOR THIS AND OTHER REASONS, THE INVESTMENT INVOLVES SIGNIFICANT FINANCIAL RISKS,
INCLUDING THE RISK OF LOSS TO THE SUBSCRIBER OF THE ENTIRE PURCHASE PRICE.
The Subscriber is aware that (i) the Company's founding shareholders
purchased ________ Shares at U.S.$0.001 per share for a total consideration of
u.s.$_____; and (ii) pursuant to an Offering Circular dated ________, the
Company sold _________ Shares at a price of U.S.$_____ per share for a total
consideration of U.S.$_______. These recent share issues have the effect of
substantially diluting the Subscriber's equity interest in the Company.
THE SUBSCRIBER IS NOT TO CONSTRUE THE PROVISION OF THE OFFERING CIRCULAR OR
THE FURNISHING OF THE OTHER WRITTEN INFORMATION REFERENCED IN SUBPARAGRAPH (a)
ABOVE TO THE SUBSCRIBER AS CONSTITUTING LEGAL, TAX OR INVESTMENT ADVICE, AND THE
SUBSCRIBER SHOULD CONSULT THE SUBSCRIBER'S OWN LEGAL COUNSEL, ACCOUNTANT AND/OR
OTHER PROFESSIONAL ADVISORS AS TO LEGAL, TAX AND RELATED MATTERS CONCERNING THE
INVESTMENT.
No assurance can be made that the Company will commence operations, or if
it does commence operations, that it will ever operate at a profit or, if it
does operate at a profit, that dividends will be declared and paid on the
Subscribed Shares.
THE SUBSCRIBER MAY NOT BE ABLE TO SELL OR DISPOSE OF THE SUBSCRIBED SHARES,
AS THERE IS NO, AND MAY NEVER BE ANY, PUBLIC MARKET FOR SUCH SECURITIES. THE
SUBSCRIBER'S COMMITMENT TO INVESTMENTS WHICH ARE NOT READILY MARKETABLE IS NOT
DISPROPORTIONATE TO THE SUBSCRIBER'S NET WORTH AND MAKING THE INVESTMENT WILL
NOT CAUSE THE SUBSCRIBER'S OVERALL COMMITMENT THERETO TO BECOME EXCESSIVE.
The Subscriber is aware that the offer and sale to him of the Subscribed
Shares have not been registered under the Securities Act of 1933, as amended
(the "act"), or registered or qualified under applicable state securities or
"Blue Sky" laws, and, therefore, the Subscribed Shares cannot be reoffered and
resold unless either the reoffer and resale thereof are subsequently registered
and qualified under the Act and said Blue Sky laws or an exemption from such
registration and qualification is available; the Company has no intention of
registering or qualifying under the Act or any such Blue Sky laws the
Subscriber's
<PAGE>
reoffer and resale of any of the Subscribed Shares and no exemption
from registration or qualification may be available under the Act or such Blue
Sky laws to the Subscriber at the time he wishes to dispose of such Shares.
NO FEDERAL OR STATE AGENCY HAS PASSED UPON THE SUBSCRIBED SHARES, MADE ANY
FINDING OR DETERMINATION AS TO THE FAIRNESS OF THE INVESTMENT, OR PASSED ON THE
ADEQUACY OF THE INFORMATION SET FORTH IN THE OFFERING CIRCULAR.
Neither the Company nor any Company Representative offered to sell the
Subscriber any Shares by means of any form of general advertising or general
solicitation, such as media advertising or seminars.
III. CERTIFICATION OF SUBSCRIBER STATUS.
If the Subscriber is a "U.S. person", the Subscriber hereby certifies to the
Company that the Subscriber is, as reflected by checking the appropriate box (or
boxes) below and initialing in the margin directly across from such checked box
(or boxes):
i. [ ] ________ (INITIAL) a natural person whose individual net worth,
or joint net worth with that person's spouse (including the value of his or her
principal residence valued at either (A) cost, including cost of improvements,
net of current encumbrances on the property, or (B) the appraised value of the
property as determined by a written appraisal used by an institutional lender
making a loan to him or her secured by the property, including subsequent
improvements, net of current encumbrances on the property), at the time of his
or her purchase of the Subscribed Shares exceeds U.S. $1,000,000; or
ii. [ ] ________ (INITIAL) a natural person who had individual annual
income in excess of U.S. $200,000 in each of 1996 and 1997 and who reasonably
expects that his or her individual annual income will exceed U.S. $200,000 in
1998; or
iii. [ ] ________ (INITIAL) a natural person who had joint annual
income with that person's spouse in excess of $300,000 in each of 1996 and 1997
and who reasonably expects to have joint annual income in excess of U.S.
$300,000 in 1998; or
iv. [ ] ________ (INITIAL)
a. [ ] ________ (INITIAL) a bank as defined in Section 3(a)(2) of the
Act or a savings and loan association or other institution as defined in
Section 3(a)(5)(A) of the Act, whether acting in its individual or
fiduciary capacity;
b. [ ] ________ (INITIAL) a broker or dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934, as amended;
c. [ ] ________ (INITIAL) an insurance company as defined in Section
2(13) of the Act;
d. [ ] _______ (INITIAL) an investment company registered under the
Investment Company Act of 1940, as amended (the "Investment Company Act");
e. [ ] ________ (INITIAL) a business development company as defined in
Section 2(a) (48) of the Investment Company Act;
f. [ ] __________ (INITIAL) a Small Business Investment Company
licensed by the U.S. Small Business Administration under Section 301(c) or
(d) of the Small Business Investment Act of 1958;
g. [ ] __________ (INITIAL) a plan established and maintained by a
state, its political subdivisions, or any agency or instrumentality of a
state or its political subdivisions, for the benefit of its employees, if
the plan has total assets in excess of U.S. $5,000,000;
h. [ ] _______ (INITIAL) an employee benefit plan within the meaning
of the Employee Retirement Income Security Act of 1974, if the investment
decision is made by a plan fiduciary, as defined in Section 3(21) of such
act, that is a bank, a savings and loan association, an insurance company
or a registered investment adviser, or if the employee benefit plan has
total assets in excess of U.S. $5,000,000, or, if a self-directed plan,
with investment decisions made solely by persons that meet any one or more
of the tests set forth in Section III. (i) through (v) hereof;
i. [ ] ________ (INITIAL) a private business development company as
defined in Section 202(a)(22) of the Investment Advisers Act of 1940, as
amended;
<PAGE>
j. [ ] ________ (INITIAL) an organization described in Section 501(c)(3)
of the Internal Revenue Code, a corporation, Massachusetts or similar
business trust, or partnership, not formed for the specific purpose of
making the Investment, with total assets in excess of U.S. $5,000,000
k. [ ] ________ (INITIAL) a trust, with total assets in excess of U.S.
$5,000,000, not formed for the specific purpose of making the Investment,
whose purchase is directed by a sophisticated person as described in Rule
506(b)(2)(ii) of Regulation D promulgated under the Act; or
i. [ ] ________ (INITIAL) an entity in which all of the equity owners meet
any one or more of the tests set forth in Section III.(i) through (iv); or
ii. [ ] ________ (INITIAL) none of the above.
IV. REPRESENTATIONS AND WARRANTIES OF NATURAL PERSON SUBSCRIBER.
The Subscriber, if a natural person, represents and warrants to the Company
that:
THE SUBSCRIBER IS 21 YEARS OF AGE OR OLDER, HAS ADEQUATE MEANS OF
PROVIDING FOR HIS OR HER CURRENT NEEDS AND PERSONAL CONTINGENCIES AND HAS NO
NEED FOR LIQUIDITY IN THE INVESTMENT.
The Subscriber is able to bear the economic risks attendant on the
Investment.
THE SUBSCRIBER IS A BONA FIDE RESIDENT AND DOMICILIARY (NOT A TEMPORARY OR
TRANSIENT RESIDENT) OF THE STATE OR COUNTRY SET FORTH BELOW HIS SIGNATURE ON THE
SIGNATURE PAGE HEREOF.
The Subscriber understands, or has relied upon the advice of his or her own
personal tax and legal counsel, accountants, and/or other professional advisors
with regard to, the financial, tax and other pertinent considerations in making
the Investment.
THE SUBSCRIBER IS ACQUIRING THE SUBSCRIBED SHARES FOR THE SUBSCRIBER'S OWN
ACCOUNT, AS PRINCIPAL, FOR INVESTMENT AND NOT WITH A VIEW TO THE RESALE OR
DISTRIBUTION OF ANY INTEREST THEREIN.
[ ] ________ (INITIAL) the total purchase price of securities at time of
sale of the securities will not exceed 10% of subscriber's net worth
(Individuals: either independently or jointly with your spouse).
V. REPRESENTATIONS AND WARRANTIES OF ENTITY SUBSCRIBER.
The Subscriber, if a corporation, partnership or other entity, represents and
warrants to the Company that:
IT IS DULY FORMED AND IS VALIDLY EXISTING IN GOOD STANDING UNDER THE
LAWS OF THE JURISDICTION OF ITS FORMATION, WITH FULL POWER AND AUTHORITY TO
ENTER INTO THE TRANSACTIONS CONTEMPLATED BY THIS SUBSCRIPTION AGREEMENT.
It has not been formed for the purpose of making the Investment.
ITS REPRESENTATIVE WHO, ON ITS BEHALF, HAS CONSIDERED THE MAKING OF THE
INVESTMENT (THE "AUTHORIZED REPRESENTATIVE"), IS THE PERSON WHO EXECUTED THIS
SUBSCRIPTION AGREEMENT ON ITS BEHALF, AND THE AUTHORIZED REPRESENTATIVE WAS
DULY AUTHORIZED TO ACT FOR IT IN REVIEWING THE INVESTMENT.
This Subscription Agreement has been duly and validly authorized,
executed and delivered by the Subscriber, and when executed and delivered by
the other parties hereto, will constitute the valid, binding and enforceable
obligation of the Subscriber.
THE SUBSCRIBER IS ACQUIRING THE SUBSCRIBED SHARES FOR ITS OWN ACCOUNT, AS
PRINCIPAL, FOR INVESTMENT AND NOT WITH A VIEW TO THE RESALE OR DISTRIBUTION OF
ANY INTEREST THEREIN.
VI. CORRECTNESS AND COMPLETENESS OF INFORMATION RELATING TO SUBSCRIBER;
ACKNOWLEDGMENT RE SECURITIES LAW MATTERS.
All the information which the Subscriber has heretofore furnished to the
Company, or which is set forth herein or in any document delivered by the
Subscriber pursuant hereto or in connection herewith, with respect to the
Subscriber's status, financial condition and knowledge and experience is
correct and complete as of the date hereof, and if there should be any
material change in such information prior to the sale of the Subscribed
<PAGE>
Shares to the Subscriber, the Subscriber will immediately furnish such
revised or corrected information to the Company. In furnishing the
information, representations and warranties set forth herein, the Subscriber
acknowledges that the Company will be relying thereon in determining, INTER
ALIA, whether the offer and sale of the Subscribed Shares to the Subscriber
is exempt from the requirement to register or qualify said offer and sale
under applicable state securities or "Blue Sky" laws.
<PAGE>
VII. COVENANT OF SUBSCRIBER TO COMPLY WITH BLUE SKY LAWS.
The Subscriber agrees that if the Subscriber is a resident of any state whose
"Blue Sky" laws or other local securities laws require a restriction on
transferability of any of the securities referred to in this Subscription
Agreement, the Subscriber will specifically and fully comply with such
restrictions.
VIII. INDEMNIFICATION.
The Subscriber hereby agrees to indemnify, defend and hold harmless the
Company and its subsidiaries, and any and all of the employees, directors,
officers, attorneys, accountants, agents, affiliates or control persons of
any such entity, who were or are a party or are threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, from and against any and
all damage, loss, cost, expense (including judgments, fines and amounts paid
in settlement), obligation, claim, cause of action or liability (including
attorneys' fees, expert witness fees, investigative fees, accountants' fees,
and the costs incurred by such individuals, concerns or entities) any of them
may incur by reason of any breach by the Subscriber of the representations,
warranties, covenants and agreements made by the Subscriber in this
Subscription Agreement or any false statement contained in any document
delivered by the Subscriber pursuant hereto or in connection herewith.
IX. OBLIGATIONS OF SUBSCRIBER.
The Subscriber hereby acknowledges and agrees that the subscription hereunder
is irrevocable, that the Subscriber is not entitled to cancel, terminate or
revoke this Subscription Agreement or any agreements of the Subscriber
hereunder and that this Subscription Agreement and such other agreements
shall survive the death or disability of the Subscriber and shall be binding
upon and inure to the benefit of the parties and their respective heirs,
executors, administrators, successors, legal representatives and permitted
assigns. If the Subscriber is more than one person, the obligations of such
persons hereunder shall be joint and several and the representations,
warranties, covenants, agreements and acknowledgments of the Subscriber
herein contained shall be deemed to be made by and be binding upon each such
person and his or her respective heirs, executors, administrators,
successors, legal representatives and permitted assigns.
X. GOVERNING LAW.
This Subscription Agreement shall be governed by and
interpreted and enforced in accordance with the internal substantive laws of
the State of Nevada without regard to choice of law or conflicts of law
principles.
XI. COUNTERPARTS.
This Subscription Agreement may be executed through the
use of separate signature pages or in any number of counterparts, and each of
such counterparts shall, for all purposes, constitute one agreement binding
on all parties, notwithstanding that all parties are not signatories to the
same physical counterpart.
XII. ENTIRE AGREEMENT.
This Subscription Agreement contains the entire
agreement of the parties with respect to the subject matter hereof and there
are no representations, warranties, covenants or other agreements or
understandings between such parties except as stated or referred to herein.
<PAGE>
XIII. SEVERABILITY.
Any provision of this Subscription Agreement which is invalid or unenforceable
in any jurisdiction shall be ineffective to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable the remaining
provisions hereof, and any such invalidity or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
XIV. BACK-UP WITHHOLDING.
The Subscriber verifies under penalty of perjury that the Taxpayer
Identification Number or Social Security Number shown on the signature page of
this Subscription Agreement is true, correct and complete and that the
Subscriber is not subject to backup withholding either (a) because the
Subscriber has not been notified that it is subject to backup withholding as a
result of a failure to report all interest or dividends or (b) because the U.S.
Internal Revenue Service has notified the Subscriber that the Subscriber is no
longer subject to backup withholding.
XV. ASSIGNABILITY.
This Subscription Agreement shall not be assignable by the Subscriber without
the prior written consent of the Company.
XVI. GENDER, NUMBER AND HEADINGS.
As used in this Subscription Agreement, the masculine gender will include the
feminine and neuter, and vice versa, as the context so requires; and the
singular number will include the plural, and vice versa, as the context so
requires. As used in this Subscription Agreement, section and subsection
headings are for convenience of reference only and shall not be used to modify,
interpret, limit, expand or construe the terms of this Subscription Agreement.
THERE IS NO ESTABLISHED MARKET FOR THESE SECURITIES AND THERE MAY NOT BE ANY
MARKET FOR THESE SECURITIES IN THE FUTURE. THE SUBSCRIPTION PRICE OF THESE
SECURITIES HAS BEEN ARBITRARILY DETERMINED BY THE COMPANY AND IS NOT AN
INDICATION OF THE ACTUAL VALUE OF THESE SECURITIES.
IN WITNESS WHEREOF, the parties have executed this Subscription Agreement this
____ day of _________________, _____.
INDIVIDUAL SUBSCRIBER(S)
_____ Individual Ownership
_____ Joint Tenants with Right of survivorship (both Tenants must sign)
_____ Husband and Wife as Community Property (both Spouses must sign)
_____ Tenants-in-Common (all Tenants must sign)
<PAGE>
_____ A Married (Man) (Woman) as (His) (Her) Separate Property
ENTITY SUBSCRIBER
_____ Corporation (Please affix corporate seal on signature page)
_____ Partnership
_____ Trust: Name of Trustee: ____________________________________
Name of Trust: ____________________________________
Date of Trust Instrument: ____________________________
_______ Other (Explain):________________________________
State of Formation of Entity: _____________________________
A. Number of Subscribed Shares for which Subscriber is subscribing:
A. Purchase Price (the number filled in A.
multiplied by U.S.$___): U.S. $
FOR INDIVIDUAL SUBSCRIBER(S)
___________________________ ___________________________
Signature Name(s) Typed or Printed
___________________________ ___________________________
Social Security No/Government ID Resident Address
___________________________ ___________________________
Mailing Address, if different City, State and Zip Code
___________________________ ___________________________
<PAGE>
Mailing Address, if different Country
FOR ENTITY SUBSCRIBER
___________________________ ___________________________
Signature Of Capacity Signature of Capacity
___________________________ ____________________________
Name(s) Typed or Printed Name(s) Typed or Printed
__________________________ ____________________________
Tax Identification No Social Security No.
__________________________ ____________________________
Address City, State and Zip Code
__________________________ ___________________________
Mailing Address, if different City, State and Zip Code
ACCEPTED AS OF THIS ___________DAY OF _______________, _____:
ZSTAR ENTERPRISES, INC., a Nevada corporation
By: ______________________ Its: PRESIDENT
____________________
<PAGE>
EXHIBIT 10
MANAGEMENT AGREEMENT
THIS AGREEMENT made effective June 20, 1998.
BETWEEN:
ZSTAR ENTERPRISES, INC.. a body corporate, duly
incorporated under the business corporation act of
the State of Nevada, having its head office
situated at 4323 West 12th Avenue, Vancouver,
B.C., Canada
(hereinafter called the "Corporation")
OF THE FIRST PART
AND:
JOIST MANAGEMENT LTD. a body corporate, having its
head office situated at 1304 Pik Hoi House, Choi
Hung Estate, Kowloon, Hong Kong
(hereinafter called the "Manager")
OF THE SECOND PART
WHEREAS:
A. The Corporation requires the services of an administrator/manager to
fulfill the day-to-day responsibilities imposed on the Corporation; and
B. The Manager has agreed to act as administrator/manager of the
Corporation;
NOW THEREFORE THIS AGREEMENT WITNESSETH that for and in consideration of the
premises, the mutual covenants and agreements herein contained the parties
hereto hereby agree as follows:
1. The Corporation hereby agrees to retain the services of the Manager.
2. The retention of the Manager shall be for a period of one (1) year
commencing June 1, 1998, and continuing thereafter from year to year unless
and until terminated as hereinafter provided.
3. The Manager shall serve the Corporation and any subsidiaries from time
to time owned by the Corporation in such capacity or capacities and shall
perform such duties and exercise such powers as may from time to time be
determined by Resolution of the Board of Directors of Corporation.
4. Notwithstanding the control vested in the Board of Directors with respect
to the activities of the Manager, the Manager shall have from the date of
commencement of this Agreement, the authority and responsibility to deal with
the following subject matters:
<PAGE>
a. maintaining the services of professionals for the purpose of reviewing all
prospects introduced to the Corporation for investment or participation;
b. selecting on the basis of evaluations provided by professionals after
consideration of the risk factors involved, suitable properties for
acquisition and participation;
c. negotiating for and obtaining the services of operators for the
Corporation's prospects, or if the Corporation is the operator,
negotiating for and obtaining the services of professionals;
d. conducting on-site inspections of all projects undertaken by the
Corporation;
e. arranging for and securing financing for the Corporation as may be
permitted by regulatory bodies;
f. arranging for timely disclosure of all material facts in the affairs of
the Corporation;
g. arranging for the collection of all receivables and revenue to be obtained
by the Corporation;
h. establishing and maintaining suitable banking relations;
I. ENSURING THE MAINTENANCE OF PROPER ACCOUNTING RECORDS AND COMPILING
MONTHLY STATEMENTS OF THE SOURCE AND APPLICATION OF FUNDS;
j. arranging for payment of all payables of the Corporation and/or any
subsidiaries;
k. perusing and replying to all corporate inquiries and correspondence;
l. securing and obtaining for the benefit of the Corporation competent tax
advice, legal advice and services and accounting services; and
m. all such other duties as may be imposed upon the Manager from time to time
due to the nature of the Corporation's business.
5. The remuneration of the Manager for its services hereunder shall be at
the rate of USD$10,000.00 per month (together with any such increments
thereto as the Board of Directors of the Corporation may from time to time)
inclusive of all administrative, office, traveling and out-of-pocket expenses
actually and properly incurred by it in connection with its duties hereunder.
6. Any notice required or permitted to be given hereunder to the Manager or
to the Corporation shall be given by registered mail, postage prepaid,
addressed to the Manager or the Corporation at their respective registered
offices from time to time in existence. Any notice mailed as aforesaid
shall be deemed to have been received by the Addressee on the second business
day following the date of mailing.
7. This Agreement may be terminated:
a. by the Manager on five (5) days written notice to the Corporation; or
b. by the Corporation on five (5) days written notice to the Manager.
8. The provisions of this Agreement shall be governed by and interpreted in
accordance with the laws of Hong Kong.
IN WITNESS WHEREOF, the parties hereto have hereto caused these presents to be
executed, as of the day and year first above written.
S/ Fred Tham s/ Chui Keung Ho
- ----------------------------- -----------------------------
Joist Management Ltd. Zstar Enterprises, Inc.
<PAGE>
[LETTERHEAD]
LYNX
INTERNET AND MARKETING
Page 1 of 2
WEB DEVELOPMENT AND HOSTING AGREEMENT
Oct 15, 1998
Zstar Enterprises Inc.
4323 West 12th Avenue
Vancouver, BC V6R 2P9
TERMS & CONDITIONS OF PROPOSED PROJECT - APEX HOLIDAYS
1. Applicable taxes upon invoicing. All prices are subject to change.
2. 50% of total project sum as deposit is required for the job to proceed.
Remaining balance is required prior to job completion. Please make cheque
payable to "LYNX INTERNET.
3. All deposits are non-refundable.
4. Client is responsible for payments charge by the InterNIC. (InterNIC, the
US Domain Authority, will invoice your organization separately for the
annual fee for domain name maintenance of US$35 per year (ongoing). They
collect the first two years payment, US$70, in advance. There are no other
costs or charges to reserve your domain.)
5. Under no circumstances, shall LYNX INTERNET be liable for any direct,
indirect lost or damages from any interruptions, lost of contents, email or
files deletion, errors, viruses or lost of data, whether or not limited to
acts of God, communications/hardware/equipment failure, theft, destruction
or unauthorized access to LYNX INTERNET's facilities.
6. All custom programs that Lynx developed are owned by Lynx Internet. No
alternation or modification is allowed without Lynx's permission.
7. Lynx reserved the right to terminate the right to use our programs. Such
circumstances may include termination of contract, network abuse.
8. All prices quoted in this proposal valid for 30 days since the proposal
preparation date.
9. By signing the contract, the client agrees to the terms and conditions
mentioned above and the "Policy Agreement for Internet Users" below.
POLICY AGREEMENT FOR INTERNET USERS
I. User Accounts
1. User accounts on LYNX INTERNET arc to be used by the person in whose name
the account created. Business accounts are to be used only by the members
of the group or organization named by the account Exceptions will only be
accepted with the authorization by LYNX INTERNET.
2. All accounts are granted subject to compliance with this policy statement.
<PAGE>
3. The Administration of LYNX INTERNET reserves the right to remove any
account from this system without giving notice of intention to do so. Any
account balance will be refunded according to the guidelines m item 4
below.
4. Full or partial refunds may be requested subjected to the following
circumstances: "account holder has not successfully make use of the LYNX
INTERNET account within a period of five (5) working days (must be verified
by our technical staff).
5. No refunds are given with reasons other then the above circumstances
mentioned at section 4.
6. All account termination must be confirmed with a written confirmation from
the account holder, with full account information including login name,
password, and account holder's address. Confirmation letter must be
received by LYNX INTERNET before the due date of the account via fax, mail,
or email format.
7. Any bank charges incurred by LYNX INTERNET because of NSF cheques or
similar circumstances will be charged back to the member's account along
with a service charge of $25.
II. Unauthorized Use of Facilities
1. LYNX network system may not be used to harass any member, non-member, or
system operator.
2. No member of this system shall use the system to encourage facilitate, or
engage illegal activities.
3. Members shall make use of LYNX INTERNET services in a manner which will not
interfere with reasonable use by other members.
4. Line Camping - When a user has established a dialup connection to our
network but is not performing any meaningful activity, they are classified
as `camping out" and is not permitted. This applies to all business and
personal accounts. Every user is expected to make very effort to read
messages offline, LYNX INTERNET has the right to determine on it's own
whether a user is camping out on the lines. Accounts found guilty of line
camping out will be immediately suspended without notice, and without
refund.
5. Account Sharing and Multiple Logins Account sharing is when two or more
users share either a personal or business account. Multiple logins are when
two or more users arc logged into an account simultaneously. Users are
responsible for maintaining the secrecy of their passwords. If a user
suspects that someone may know his/her password, he/she should change the
password immediately and notify.
6. LYNX INTERNET. Once LYNX INTERNET detects there arc users sharing their
account or multiple logins, these accounts will be suspended without notice
and without refund.
WITHOUT LIMITING THE GENERALITY OF THE ABOVE, THE FOLLOWING ARE SAME EXAMPLES OF
THE UNAUTHORIZED USE OF FACILITIES
1. Attempting to circumvent security systems on any facility, or the use of a
computer account without authorization;
2. Developing or using programs that harass other users of the Facilities or
that damage the software or hardware components of the Facility and placing
any destructive or nuisance programs such as a virus in the Facilities;
3 Using the Facilities, particularly electronic mail and bulletin boards to
send fraudulent, harassing or obscene messages;
4. Transmitting commercial or personal advertisements, solicitations or
promotions using the Facilities:
<PAGE>
5. Unless authorized by the Administration, reading, obtaining copies of or
modifying data files, programs or passwords belonging to other computer
users without the permission of those other computer users;
6. Breaching the terms and conditions of a software licensing agreement to
which LYNX INTERNET is a party.
III. Penalties
1. Persons found to have used the Facilities for unauthorized use or who have
misused the Facilities are subject to legal action in accordance with
applicable policies and collective agreements.
2. Failure to comply with these guidelines may result in account termination.
IV. Changes In This Policy
This policy statement is subject to change without notice.
/s/ Elaine Hsu
Project Manager
Lynx Internet & Marketing
/s/ Chui Keung Ho
President
Zstar Enterprises Inc.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-17-1998
<PERIOD-END> OCT-23-1998
<CASH> 185,125
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 187,705
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 189,705
<CURRENT-LIABILITIES> 12,000
<BONDS> 0
0
0
<COMMON> 233,500
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 189,705
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 55,795
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (55,795)
<EPS-PRIMARY> (0.005)
<EPS-DILUTED> (0.005)
</TABLE>
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made as of
February 28, 1999 (the "Effective Date"), by and between Zstar Enterprises,
Inc., a Nevada Corporation (the Purchaser") and Apex Travel Ltd., a British
Columbia, Canadian Corporation (the "Company").
WHEREAS, Apex Canadian Holidays Ltd. (the "Company") carries on a
travel agency business (hereinafter called the "Business") in and from the
premises at 946 West 7th Avenue, Vancouver, B.C., Canada (hereinafter called
the "Premises") and in connection therewith owns certain assets and equipment
and machinery, inventory and stock, clientele, leasehold improvements and
assets, all liabilities and rents the Premises.
WHEREAS, the Company requires capital to fund its activities and is
desirous of accessing the United States capital markets; and
WHEREAS, the Seller is unable to provide the necessary capital
required to fund the Company's ongoing business activities;
WHEREAS, the Purchaser has agreed to make a good faith attempt to
raise the Capital (as hereinafter defined) through which it shall fund the
Company's future activities; and
WHEREAS, based upon the above premises, the Seller desires to sell
to the Purchaser, and the Purchaser desires to acquire, all of the issued and
outstanding shares of the Company's common stock, all as hereinafter set
forth;
NOW, THEREFORE, in consideration of the premises and the mutual and
independent agreements and covenants hereinafter set forth, the parties hereto
hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF STOCK
1.1 PURCHASE AND SALE
Subject to the terms and conditions hereof, the Purchaser hereby
agrees to purchase and acquire from the Seller, and the Seller hereby agrees
to issue and sell to the Purchaser, at the Closing (as such term is
hereinafter defined), one hundred (100) shares of the Company's Common Stock
(the "Shares"), being all of the issued and outstanding shares of the
Company's stock.
1.2 CONSIDERATION
The purchase price to be paid by the Purchaser to the Seller for the
Shares shall be U.S.$50,000 (the "Purchase Price") to be paid pursuant to the
terms of promissory note (the "Note") attached hereto as Exhibit "A".
1
<PAGE>
1.3 CLOSING
The closing of the issuance and sale to the Purchaser of the Shares,
at which certificate(s) duly evidencing the Shares shall be delivered by the
Seller to the Purchaser and the Note shall be delivered by the Purchaser to
the Seller in the form attached hereto as Exhibit "A" (the "Closing"), shall
take place at 11:59 p.m. on such date and at such time as the parties hereto
may so decide (the "Closing Date"). The Closing shall take place at such
location as is mutually agreed to by the parties.
1.4 CONDITIONS PRECEDENT TO CLOSING BY THE PURCHASER
The obligations hereunder of the Purchaser to purchase and acquire the
Shares are subject to the satisfaction of each of the following conditions at or
prior to the Closing unless waived by the Purchaser in writing:
1.4.1 The representations and warranties of the Seller and the
Company contained in this Agreement shall be true in all material respects,
on the Closing Date, as if originally made on such date.
1.4.2 The Seller and the Company shall have performed and complied
in all material respects with the agreements and covenants required by this
Agreement to be performed or complied with by it prior to or at the Closing.
1.4.3 (a) No statute, rule or regulation shall have been enacted or
promulgated, and no order, decree, writ or injunction shall have been issued and
shall remain in effect, by any court or governmental or regulatory body, agency
or authority which restrains, enjoins or otherwise prohibits the consummation of
the transactions contemplated hereby, and (b) no action, suit or proceeding
before any court or governmental or regulatory body, agency or authority shall
have been instituted or threatened by any governmental or regulatory body,
agency or authority, and no investigation by any governmental or regulatory
body, agency or authority shall have been commenced, with respect to the
transactions contemplated hereby or with respect to the Company which would have
a material adverse effect on the transactions contemplated hereby or on the
business of the Company.
1.4.4 One or more certificates duly issued by the Company in the
name of the Purchaser, evidencing ownership of the Shares by the Purchaser,
shall have been dated as of the Closing Date and delivered to the Purchaser
at the Closing.
1.4.5 The Purchaser shall have received the following documents from
the Company, in form and content satisfactory to the Purchaser:
(a) Certified copies of the Resolutions of the Board of
Directors of the Company unanimously authorizing the execution and performance
by the Company of this Agreement and the agreements referred to elsewhere in
this Agreement, the issuance of the Shares to the Purchaser and the other
transactions contemplated hereby.
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(b) A certificate of the Secretary or an Assistant Secretary
of the Company, dated the Closing Date, certifying that the Articles of
Incorporation and the By-Laws of the Company, as respectively amended, have not
been amended, modified or repealed from the forms of such documents in effect on
the date hereof which previously have been provided to the Purchaser.
(c) Long-form certificates dated as of a date proximate to
the Closing Date confirming the good standing of the Company in Canada and in
each state and/or province in which the Company is then required to be qualified
to do business.
1.4.6 The Company shall not have filed or had filed against it a
petition under any Bankruptcy code, or any other similar law or laws, and the
Company shall not be the subject of or be engaged in the appointment of any
receiver, trustee or assignee for the benefit of its creditors or (other than as
contemplated by this Agreement) any reorganization, moratorium, workout,
recapitalization or restructuring.
1.4.7 The Company shall have delivered to the Purchaser executed
written consents of third parties, including, without limitation, governmental
agencies, to the execution, delivery and performance by the Company of this
Agreement and the consummation by the Company of the transactions contemplated
hereby, required pursuant to any agreement to which the Company is a party or by
which it is bound or by any law, regulation, judgment, order, writ, injunction,
decree, permit, license or authorization of any court or governmental or
regulatory body of any jurisdiction applicable to the Company or any of its
properties, except to the extent that the failure to obtain any such consents,
individually or in the aggregate, could not reasonably be expected to have a
material adverse effect on the business of the Company.
1.5 CONDITIONS PRECEDENT TO CLOSING BY THE SELLER
The obligations hereunder of the Seller to sell the Shares to the
Purchaser are subject to the satisfaction of each of the following conditions at
or prior to the Closing unless waived by the Company in writing:
1.5.1 The representations and warranties of the Purchaser
contained in this Agreement shall be true in all material respects on the
Closing Date, as if originally made on such date.
1.5.2 The Purchaser shall have performed and complied in all
material respects with the agreements and covenants required by this
Agreement to be performed or complied with by it prior to or at the Closing.
1.5.3 No statute, rule or regulation shall have been enacted or
promulgated, and no other, decree, writ or injunction shall have been issued and
shall remain in effect, by any court or governmental or regulatory body, agency
or authority which restrains, enjoins or otherwise prohibits the consummation of
the transactions contemplated hereby, and (b) no action, suit or proceeding
before any court or governmental or regulatory body, agency or authority shall
have been instituted or threatened by any governmental or regulatory body,
agency or authority, and no investigation by any governmental or regulatory
body, agency or authority shall have been commenced with respect to the
transactions contemplated hereby or with respect to the Purchaser which would
have
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a material adverse effect on the transactions contemplated hereby or on the
business of the Purchaser.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE COMPANY
The Seller and the Company hereby represent and warrant to the
Purchaser that:
2.1.1 (a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of British Columbia, Canada,
without limit as to the duration of its existence, and has the full corporate
power and authority to enter into and carry out this Agreement and the
agreements herein contemplated and to issue the Shares as herein provided. The
Company has the corporate power and authority to own, lease and operate its
properties and to carry on the business currently conducted by it. The Company
has previously made available to the Purchaser complete and correct copies of
its Articles of Incorporation and its By-Laws as in effect on the date hereof.
The Company has not taken any action for the purpose of effecting any amendment
of its Articles of Incorporation or By-Laws from the form in which such
instruments were previously provided to the Purchaser.
(b) The Company is duly qualified as a foreign corporation
authorized to do business and is in good standing in each jurisdiction in which
such qualification and good standing may be required, except to the extent that
the failure to so qualify, individually or in the aggregate, could not
reasonably be expected to have a material adverse effect on the business of the
Company.
2.1.2 The execution, delivery and performance by the Company of this
Agreement and the documents herein contemplated, and the consummation by the
Company of the transactions contemplated hereby and thereby, have been duly
authorized by all requisite corporate and shareholder action of the Company,
which has not been revoked, and no other corporate or shareholder action on the
part of the Company is necessary. This Agreement is, and the other agreements
contemplated to be delivered by the Company hereby when executed will be, the
valid and binding obligations of the Company legally enforceable against it in
accordance with their respective terms, subject to the effects of bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally and of general equitable principles
(whether considered in a proceeding in equity or at law).
2.1.3 The Company does not own, directly or indirectly, any equity
Stock, or options, warrants or other rights to acquire equity Stock, or Stock
convertible into or exchangeable for equity Stock, of any other corporation
(limited liability or otherwise), or any partnership interest in any general or
limited partnership or limited liability partnership or unincorporated joint
venture. There are no agreements, arrangements, undertakings or understandings
governing the rights and duties of the Company as a shareholder of any other
corporation, including, without limitation, any agreement, arrangement or
understanding under which the Company is or may become obligated, directly or
indirectly, to acquire or dispose of any equity interest in, make any capital
contribution
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or extend credit to, or act as guarantor, surety or indemnitor for any
obligation or liability of, any such corporation.
2.1.4 The issued capital stock of the Company, at the Closing of the
transaction contemplated hereby, consists of 100 shares of Common Stock. There
are no existing options, warrants, calls or agreements requiring or entitling
the holder thereof to the issuance of additional shares of capital stock of the
Company, or Stock convertible into capital stock of the Company, and there are
no arrangements or understandings to which the Company is a party or by which it
is bound pursuant to which the Company is or may be required to issue additional
shares of its capital stock. All of the issued and outstanding shares of
capital stock of the Company were duly authorized and validly issued and are
fully paid and non-assessable, and were not issued in violation of any
preemptive rights or Federal or provincial Stock laws.
2.1.5 The Shares are not subject to preemptive rights and, when
issued in accordance with this Agreement, and the terms and conditions of the
Warrant will be duly authorized, validly issued, fully paid and
non-assessable, and free of any and all encumbrances, claims, security
interests or any other rights or interests of third parties whatsoever (other
than rights or interests in favor of the Purchaser hereunder and the rights
and interests granted to third parties by or through the Purchaser).
2.1.6 The execution, delivery and performance by the Company of this
Agreement and the documents herein contemplated, and the consummation by the
Company of the transactions contemplated hereby and thereby will not: (i)
result in a breach of, or a default under (or an event which, with the lapse of
time or the giving of notice or both, would constitute an event of default), or
give any third party the right to terminate, cancel, modify or accelerate, or
require any consent or the giving of any notice under, any contract, mortgage,
loan, note, lease, bond, indenture, security agreement, undertaking or other
agreement, instrument or obligation to which the Company is a party or by which
it, or any of its property, may be bound or affected, or cause any security
interest, lien, claim or other encumbrance to be created or imposed upon any
such property by reason thereof, (ii) be in conflict with or contravention of
any terms or provisions of the Articles of Incorporation or By-Laws of the
Company, (iii) violate or conflict with any law, statute, ordinance, code, rule,
regulation, judgment, order, writ, injunction, decree or other instrument of any
Federal, state/provincial, local or foreign court or governmental or regulatory
body, agency or authority applicable to the Company or by which any of its
respective properties or assets may be bound or (iv) those which shall have been
made or obtained on or prior to the Closing Date and except, in the case of each
of the preceding subclauses (i) and (iii), those, the failure of the Company to
make or obtain which, or the occurrence of which, could not reasonably be
expected, individually or in the aggregate, to have a material adverse effect on
the business of the Company.
2.1.7 (a) The Company has delivered to the Purchaser true,
complete and accurate copies of the Company's unaudited financial statements
(including balance sheets, statements of operations and statements of cash
flows) at and for the financial year ended February 28, 1999 (the "1999
Financial Statements"). Except as otherwise described therein (including any
notes thereto), the 1999 Financial Statements have been prepared in conformity
with generally accepted accounting principles consistently applied during the
periods covered thereby, and present fairly in all material respects the
financial condition, results of operations and cash flows of the Company as at
the dates, and for the periods, stated therein
2.1.8 Except for any of the following that are not expected to have
a materially adverse effect on the business or financial condition of the
Company: (a) there are no actions,
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suits, investigations, hearings, workers compensation claims or proceedings
(including, without limitation, arbitral or administrative proceedings)
pending or, to the best knowledge of the Company, threatened, against or
affecting the Company or its properties, assets or business (or to the best
knowledge of the Company, pending or threatened against, relating to or
involving any of the officers, directors, employees, agents or consultants of
the Company in connection with the business of the Company); and (b) the
Company is not in default with respect to, there does not remain unsatisfied,
and continuing compliance is not required under, any judgment, order, writ,
injunction, decree, rule or award of any court, arbitrator or federal,
state/provincial, municipal or other governmental or regulatory body,
department, commission, board, bureau, agency, authority or instrumentality,
domestic or foreign.
2.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company that:
2.2.1 The Purchaser is duly formed and validly subsisting under the
laws of its jurisdiction of formation and has the full power and authority to
enter into and carry out this Agreement and the agreements herein contemplated.
2.2.2 (a) The execution, delivery and performance of this
Agreement and the agreements herein contemplated, and the consummation of the
transactions contemplated hereby, have been duly authorized by all requisite
action of the Purchaser, which has not been revoked, and no other action on the
part of the Purchaser is necessary.
(b) The execution, delivery and performance of this
Agreement and the documents herein contemplated, and the consummation by the
Purchaser of the transactions contemplated hereby and thereby, will not: (i)
result in a breach of, or a default under (or an event which, with the lapse of
time or the giving of notice or both, would constitute an event of default), or
give any third party the right to terminate, cancel, modify or accelerate, or
require any consent or the giving of any notice under, any contract, mortgage,
note, lease, bond, indenture, security agreement, undertaking or other
agreement, instrument or obligation to which the Purchaser is a party or by
which it or its property may be bound or affected, or cause any security
interest, lien, claim or encumbrance to be created or imposed upon any such
property by reason thereof, (ii) be in conflict with or contravention of any
term or provision of the charter documents of the Purchaser, (iii) violate or
conflict with any law, statue, ordinance, code, rule, regulation, judgment,
order, writ, injunction, decree or other instrument or any Federal,
state/provincial, local or foreign court or governmental or regulatory body,
agency or authority applicable to the Purchaser or by which it or its properties
or assets may be bound or (iv) require, on the part of the Purchaser, any filing
or registration with, or permit, license, exemption, consent, authorization or
approval of, or the giving of any notice to, any governmental or regulatory
body, agency or authority, except, in the case of the preceding subclause (iv),
those which shall have been made or obtained on or prior to the Closing Date.
(c) This Agreement is, and the other agreements contemplated
to be delivered by the Purchaser hereby when executed will be, the valid and
binding obligations of the Purchaser legally enforceable against it in
accordance with their respective terms, subject to the effects of bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally and of general equitable principles
(whether considered in a proceeding in equity or at law).
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ARTICLE III
COVENANTS
3.1 COVENANTS OF THE COMPANY
3.1.1 As soon as reasonably practicable after the date hereof, the
Company will use all reasonable efforts to obtain the consents of all necessary
governmental entities and other persons to the transactions contemplated hereby.
3.1.2 From and after the Closing Date, the Company will promptly
furnish the Purchaser with the following:
(a) Copies of all financial statements, reports and
documents that the Company shall send to its stockholders generally; and
(b) Such other information relating to the financial
condition of the Company as the Purchaser may reasonably request from time to
time.
3.1.3 The Company covenants and agrees that until the full and
final payments of all amounts due under the Note, the Company shall treat as
confidential all information obtained by it in connection with the
transactions contemplated hereby concerning the Purchaser except any
information (i) which was available to the Company on a non-confidential
basis prior to its disclosure by the Purchaser, or was rightfully obtained by
the Company from a source other than the Purchaser, (ii) appearing in public
literature or otherwise in the public domain (through no fault of the
Company), whether at the date hereof or at any time hereafter or (iii) which
the Company is legally compelled (by depositions, interrogatories or requests
for information through documents, subpoena, civil investigative demand or
similar process) to disclose, provided that the Company shall have used its
best efforts to obtain, and shall have afforded the Purchaser an opportunity
to obtain, a protective order or other satisfactory assurance of confidential
treatment for the information required to be disclosed, and provided further
that if such protective order or other remedy is not obtained and the Company
is nonetheless, in the opinion of its counsel, compelled to disclose the
information to any tribunal, the Company shall disclose only that information
which the Company is advised by opinion of its counsel is legally required to
be disclosed. The Company shall not disclose any such information to any
third person other than to employees and advisers of the Company, and shall
preserve and maintain and prevent the disclosure or publication of any
proprietary information and trade secrets.
3.2 COVENANTS OF THE PURCHASER
3.2.1 The Purchaser covenants and agrees that until the full and final
payments of all amounts under the Note, the Purchaser shall treat as
confidential all information obtained by it in connection with the transactions
contemplated hereby concerning the Company except any information (i) which was
available to the Purchaser on a non-confidential basis prior to its disclosure
by the Company, or was rightfully obtained by the Purchaser from a source other
than the Company, (ii) appearing in public literature or otherwise in the public
domain (through no fault of the Purchaser), whether at the date hereof or at any
time hereafter or (iii) which the Purchaser is legally compelled (by deposition,
interrogatories or requests for information through documents, subpoena, civil
investigative demand or similar process) to disclose, provided that the
Purchaser shall have used its best efforts to obtain, and shall have afforded
the Company an opportunity to obtain, a protective
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order or other satisfactory assurance of confidential treatment for the
information required to be disclosed, and provided further that if such
protective order or other remedy is not obtained and the Purchaser is
nonetheless, in the opinion of its counsel, compelled to disclose the
information to any tribunal, the Purchase shall disclose only that
information which the Purchaser is advised by opinion of its counsel is
legally required to be disclosed. The Purchaser shall not disclose any such
information to any third party other than to employees and advisers of the
Purchaser, and shall preserve and maintain and prevent the disclosure or
publication of any proprietary information and trade secrets.
3.2.2 The Purchaser hereby agrees that the existing shareholders
shall collectively have the right to appoint one additional director to the
Company's Board.
3.2.3 The Purchaser covenants and agrees that it shall use
commercially reasonable efforts to raise a sum of five hundred thousand United
States dollars (U.S.$500,000) (the "Capital") which shall be applied towards the
Business and towards developing the Purchaser's website and related internet
technology.
3.2.4 In the event that the Purchaser is not able to raise all of
the Capital on or before June 30, 1999, the Company shall thereafter at any
time, and from time to time, have the right to purchase all of the Shares
from the Purchaser for a consideration in the amount of ten thousand United
States Dollars (U.S. $10,000) and the Purchaser hereby covenants and agrees
to sell the Shares to the Company for such consideration.
ARTICLE IV
SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; INDEMNIFICATION
4.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES
All other representations and warranties made or contained herein
shall terminate as of the Closing and be of no further force and effect.
4.2 INDEMNITY OBLIGATIONS OF THE COMPANY.
Seller hereby agrees to indemnify, defend and hold the Purchaser
and its affiliates and any director, officer, employee, agent or
representative of the Purchaser or any of its affiliates (the "Purchaser
Indemnified Parties") harmless from, and to reimburse the Purchaser
Indemnified Parties for any and all losses, damages, deficiencies,
liabilities, obligations, actions, claims, suits, proceedings, demands,
assessments, judgments, recoveries, fees, penalties, interest, costs and
expenses (including, without limitation, out-of-pocket expenses, reasonable
investigation expenses and reasonable fees and disbursements of accountants
and counsel) of any nature whatsoever arising out of, based upon or resulting
from (i) any breach of any representation and warranty of the Seller and/or
Company which is contained in this Agreement or any Schedule or certificate
delivered by the Seller and/or Company pursuant thereto; or (ii) any breach
or nonfulfillment of, or any failure to perform, any of the covenants,
agreements or undertaking of the Seller and/or Company which are contained in
or made pursuant to the terms and conditions of this Agreement or contained
in any documents required to be delivered pursuant hereto.
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4.3 INDEMNITY OBLIGATIONS OF THE PURCHASER.
The Purchaser hereby agrees to indemnify, defend and hold the
Seller and any director, officer, employee, agent or representative of the
Seller (the "Seller Indemnified Parties") harmless from, and to reimburse the
Seller Indemnified Parties for any and all losses, damages, deficiencies,
liabilities, obligations, actions, claims, suits, proceedings, demands,
assessments, judgments, recoveries, fees, penalties, interest, costs and
expenses (including, without limitation, out-of-pocket expenses, reasonable
investigation expenses and reasonable fees and disbursements of accountants
and counsel) of any nature whatsoever arising out of, based upon or resulting
from (i) any breach of any representation and warranty of the Purchaser which
is contained in this Agreement; or (ii) any breach or nonfulfillment of, or
any failure to perform, any of the covenants, agreements or undertaking of
the Purchaser which are contained in or made pursuant to the terms and
conditions of this Agreement.
ARTICLE V
MISCELLANEOUS
5.1 NO WAIVER OF RIGHTS.
No failure or delay on the part of either party in the exercise of any
power, right or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or privilege.
All rights and remedies existing under this Agreement are cumulative to, and
not exclusive of, any rights or remedies otherwise available.
5.2 NOTICE
Any notice or communication herein required or permitted to be given
shall be in writing and may be sent by hand, by registered or certified mail,
return receipt requested, or by facsimile transmission. All such notices and
communications hereunder shall be deemed given when received, as evidenced by
the date indicated as the date of delivery (or attempted delivery if refused) on
the return receipt, or confirmed facsimile transmission, as applicable. For
purposes hereof, the addresses of the parties hereto (until notice of change
thereof is given in accordance with this Section 5.2) shall be as follows:
To the Seller: Apex Travel Ltd.
946 West 7th Avenue
Vancouver; B.C. V5Z 1C3
Canada
Attention: David Ho, President
Telephone: (604) 739-9772
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To Purchaser: Zstar Enterprises, Inc.
4323 West 12th Avenue
Vancouver; B.C. V6R 2P9
Canada
Attention: Shelley James, Secretary, Director
Telephone: (604) 224-5851
5.3 GOVERNING LAW
This Agreement, and the respective rights, duties and obligations of
the parties hereunder, shall be governed by and construed in accordance with
the internal substantive laws of the State of Nevada, without regard to the
conflicts of laws or choice of laws principles thereof.
5.4 FACSIMILE SIGNATURES
In the event that any party hereto utilizes a facsimile device or
telecopier to transmit executed documents hereunder, including this Agreement
but excluding any stock certificates, powers or assignments, the other party
hereto shall accept and shall have the right to rely on such executed documents
as so transmitted as if they bore the original signatures.
5.5 INDEPENDENT COUNSEL
Each of the parties hereto has had an adequate opportunity to consult
with legal counsel of its choice regarding the transactions contemplated herein,
and has executed this Agreement with a full understanding of its rights and
obligations as created hereby.
5.6 COUNTERPART ORIGINALS
This Agreement may be executed simultaneously in counterparts each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.
5.7 EXPENSES
Each party shall bear and pay its own expenses in connection with this
Agreement, including, without limitation, expenses of its legal counsel.
5.8 ASSIGNMENT; SUCCESSORS
This Agreement shall inure to the benefit of and be binding upon the
successors and permitted assigns of the parties hereto. The Company may not
assign or transfer any of its interests, rights or obligations under this
Agreement without the prior written consent of the Purchaser, and any attempted
assignment or transfer without such prior written consent shall be void.
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5.9 FURTHER ASSURANCES
The parties hereto agree that, from time to time hereafter, and upon
request of the other, each of them will execute, acknowledge and deliver such
other documents and instruments as may be reasonably required more effectively
to carry out the terms and conditions of this Agreement.
5.10 THIRD PARTY BENEFICIARIES
This Agreement shall not confer upon any person or entity, other than
the Company and the Purchaser and their respective permitted assigns and
successors, any rights or remedies of any kind or nature.
5.11 ENTIRE AGREEMENT
This Agreement together with the other agreements between the parties
referred to herein, constitute the entire agreement between the parties
pertaining to the subject matter hereof and supersede all prior and
contemporaneous, oral and written, agreements, representations and
understandings of the parties with respect thereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
"Seller"
APEX TRAVEL LTD.
By:
--------------------------------
Name: David Ho
Title: President
"Purchaser"
ZSTAR ENTERPRISES, INC.
By:
--------------------------------
Name: Shelley James
Title: Secretary
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PROMISSORY NOTE
$50,000.00 Dated: February 28, 1999
1. PRINCIPAL.
FOR VALUE RECEIVED, the undersigned, ZSTAR ENTERPRISES, INC., a Nevada
corporation ("Borrower"), hereby promises to pay to the order of APEX CANADIAN
HOLIDAYS LTD., a British Columbia, Canada corporation ("Lender"), the principal
sum of Fifty Thousand United States Dollars (U.S.$50,000.00) (the "Loan") with
interest from July 1, 1999, on the unpaid principal at the rate of ten percent
(10%) per annum.
2. PAYMENT OF PRINCIPAL AND INTEREST.
Unless accelerated pursuant to the terms of this Note, the unpaid
balance of this Note, together with all then unpaid interest accrued on the
unpaid principal balance, shall be due and payable on demand (the "Maturity
Date"), PROVIDED, HOWEVER, that Borrower shall use its best efforts to pay the
Loan in full on or before June 30, 1999. No amount paid under this Note may be
reborrowed.
All interest due hereunder shall be computed on the basis of a year of
365 days for the actual number of days elapsed.
Except as provided in the immediately following paragraph, all
payments received by Lender under this Note shall be credited first to any
charges or other expenses for which Lender is entitled to payment hereunder,
next to accrued but unpaid interest, and third to unpaid principal.
Notwithstanding anything to the contrary set forth in this Note, if at
any time until payment in full of all amounts due Lender hereunder, the rate of
interest payable by Borrower pursuant to this Note (the "Stated Rate") exceeds
the amount payable under the highest rate of interest permissible under any law
which a court of competent jurisdiction shall, in a final determination, deem
applicable hereto (the "Maximum Lawful Rate"), then in such event and so long as
the Maximum Lawful Rate would be so exceeded, the rate of interest payable
hereunder shall be equal to the amount payable under the Maximum Lawful Rate;
PROVIDED, HOWEVER, that if at any time thereafter the Stated Rate is less than
the Maximum Lawful Rate, Borrower shall continue to pay interest hereunder at
the Maximum Lawful Rate until such time as the total interest received by Lender
hereunder is equal to the total interest which Lender would have received had
the Stated Rate been (but for the operation of this paragraph) the interest rate
payable since the date hereof. Thereafter, the interest rate payable
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hereunder shall be the Stated Rate unless and until the Stated Rate again
exceeds the Maximum Lawful Rate, in which event this paragraph shall again
apply. In no event shall the total interest payable by Borrower hereunder
exceed the amount payable under the Maximum Lawful Rate. In the event that a
court of competent jurisdiction shall make a final determination that Lender
has received interest hereunder in excess of the amount payable under the
Maximum Lawful Rate, Lender shall, to the extent permitted by applicable law,
promptly apply such excess in the following order: (i) then due and payable
fees and expenses; (ii) then due and payable interest payments; (iii) then
due and payable principal payments on the Loan; (iv) then to any other unpaid
obligations of Borrower to Lender under this Note; and (v) thereafter as a
refund to Borrower or as a court of competent jurisdiction may otherwise
order.
3. MANNER OF PAYMENT.
Principal and interest on the Loan, and all other amounts payable
hereunder, are payable in lawful currency of the United States of America in
immediately available funds at such address and in such form as may be required
by Lender.
4. EVENTS OF DEFAULT/REMEDIES.
a. EVENTS OF DEFAULT. Any of the following events shall constitute
an Event of Default:
(1) breach by Borrower of any of Borrower's obligations or
covenants under this Note; or
(2) Borrower (A) becomes insolvent or admits in writing
Borrower's inability to pay Borrower's debts as they mature, (B) makes any
assignment for the benefit of creditors, or (C) applies for or consents to the
appointment of a receiver or trustee for Borrower or for a substantial part of
Borrower's property or business, or a receiver or trustee otherwise is appointed
and is not discharged within thirty (30) days after such appointment; or
(3) any of Borrower's representations or warranties made herein
or in any statement or certificate at any time given by Borrower pursuant hereto
or in connection herewith is false or misleading in any material respect; or
(4) any bankruptcy, insolvency, reorganization or liquidation
proceeding or other proceeding for relief under any bankruptcy law or any law
for the relief of debtors is instituted by or against Borrower; or
(5) any money judgment, writ or warrant of attachment, or
similar process (singly or, if more than one, cumulatively in excess of
$100,000) is entered or filed against Borrower or any of the assets of Borrower
and (A) remains unvacated, unbonded, unstayed, undismissed or undischarged for a
period of thirty (30) days or in any event later
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than five (5) days before the date of any proposed sale thereunder, or (B)
Borrower has not appealed the same in good faith to Lender's satisfaction; or
(6) the condition, financial or otherwise, of Borrower suffers
any material adverse change, in the reasonable opinion of Lender; or
b. REMEDIES. Upon demand or upon the occurrence and during the
continuance of an Event of Default described in Subsections 4(a)(2) or 4(a)(4)
above, all indebtedness under this Note shall automatically be immediately due
and payable. In addition, Lender, at its option, and without notice to
Borrower, may take one or more of the actions described below. Upon the
occurrence and during the continuance of any other Event of Default, Lender at
its option and, unless otherwise specified below, without notice to Borrower,
may do any one or more of the following:
(1) declare all indebtedness under this Note immediately due and
payable and credit any sums received thereafter in such manner as it elects upon
such indebtedness; provided, however, that such application of sums so received
shall not serve to waive or cure any default existing under this Note nor to
invalidate any notice of default or any act done pursuant to such notice and
shall not prejudice any rights of Lender; and
(2) exercise any or all rights provided or permitted by law or
granted pursuant to this Note in such order and in such manner as Lender may, in
its sole judgment, determine.
c. NO WAIVER OF REMEDIES. No waiver of any breach of or default
under any provision of this Note shall constitute or be construed as a waiver by
Lender of any subsequent breach of or default under that or any other provision
of this Note.
d. REMEDIES NOT EXCLUSIVE. No remedy herein conferred upon Lender
is intended to be exclusive of any other remedy herein or in any other agreement
between the parties hereto or by law provided or permitted, but each shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law, in equity or by statute.
5. COVENANTS AND AGREEMENTS.
Borrower hereby makes the following covenants, which shall be deemed
to be continuing covenants until payment in full of all indebtedness of Borrower
to Lender arising under this Note:
a. Borrower shall promptly notify Lender in writing of the
occurrence of any act or event including, without limitation, the commencement
or threat of any action, suit, claim or proceeding against or investigation of
Borrower, which could materially and adversely affect Borrower or which could
impair the validity, effectiveness or enforceability of, or impair Borrower's
ability to perform its obligations under, this Note, and of the occurrence of
any Event of Default or any event which with the giving of notice, the lapse of
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time, or both, would become an Event of Default and the action Borrower proposes
to take with respect thereto.
b. Borrower shall, at any time and from time to time, upon the
written request of Lender, execute and deliver to Lender such further documents
and instruments and do such other acts and things as Lender may reasonably
request in order to effectuate fully the purpose and intent of this Note.
6. REPRESENTATIONS AND WARRANTIES OF BORROWER.
Borrower hereby makes the following representations and warranties,
which shall be deemed to be continuing representations and warranties until
payment in full of all indebtedness of Borrower to Lender arising pursuant to
this Note:
a. NO CONFLICT. The execution, delivery and performance of this
Note are not in contravention of or in conflict with any agreement, indenture or
undertaking to which Borrower is a party or by which Borrower or any of
Borrower's assets or property may be bound or affected and do not cause any
security interest, lien or other encumbrance to be created or imposed upon any
such property by reason thereof.
b. LITIGATION. There is no action, suit or proceeding pending or,
to the best of Borrower's knowledge and belief, threatened against or affecting
Borrower which could impair the validity, effectiveness or enforceability of, or
impair Borrower's ability to perform its obligations under, this Note, whether
said actions, suits or proceedings are at law or in equity or before or by any
governmental authority.
7. LEGAL FEES.
Borrower agrees to pay all costs and expenses, including without
limitation reasonable attorneys' fees, incurred by Lender in connection with the
enforcement of any obligation of Borrower under this Note.
8. SEVERABILITY.
In case any term or any provision of this Note shall be invalid,
illegal or unenforceable, such provision shall be severable from the rest of
this Note and the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
9. HEADINGS.
Headings used in this Note are inserted for convenience only and shall
not be deemed to constitute a part hereof.
10. GOVERNING LAW.
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This Note shall be governed by and construed in accordance with the
laws of the State of Nevada.
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Borrower:
ZSTAR ENTERPRISES, INC.
a Nevada corporation
By:_______________________
Name:_____________________
Title:____________________
By:_______________________
Name:_____________________
Title:____________________
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