U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION
12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934
POPSTAR COMMUNICATIONS, INC.
(Name of small business issuer in its charter)
NEVADA 88-0385920
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification Number)
107 EAST 3RD AVENUE
VANCOUVER, BC CANADA V5T 1C7
(Address of Principal Executive Offices) (Zip Code)
(604) 872-6608
(Registrant's Telephone Number, Including Area Code)
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
(None)
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, par value $0.001
Title of Class
<PAGE>
TABLE OF CONTENTS
PART I
Item 1 Description of Business.
Item 2 Plan of Operation.
Item 3 Description of Property.
Item 4 Security Ownership of Certain Beneficial Owners
and Management.
Item 5 Directors, Executive Officers, Promoters and
Control Persons.
Item 6 Executive Compensation.
Item 7 Certain Relationships and Related Transactions.
Item 8 Description of Securities.
PART II
Item 1 Market Price of and Dividends on the
Registrant's Common Equity and Other Shareholder
Matters.
Item 2 Legal Proceedings.
Item 3 Changes In and Disagreements With Accountants.
Item 4 Recent Sales of Unregistered Securities.
Item 5 Indemnification of Directors and Officers.
PART F/S
Financial Statements.
PART III
Item 1 Index to Exhibits.
Item 2 Description of Exhibits.
<PAGE>
PART I
This Registration Statement on Form 10-SB includes forward-looking
statements which the Registrant believes are within the meaning of
the Securities Exchange Act of 1934 (the "Exchange Act"). These
statements are based on management's current beliefs and assumptions
about the Registrant and the industry in which the Registrant
competes in, and on information currently available to management.
Forward-looking statements include, but are not limited to, the
information concerning possible or assumed future results of
operations of the Registrant set forth under the headings "Financial
Information-Management's Discussion," "Plan of Operations," and
"Business." Forward-looking statements also include statements in
which words such as "expect", "anticipate", "intend", "plan",
"believe", "estimate", "consider", or similar expressions are used.
Forward-looking statements are not guarantees of future performance.
They involve risks, uncertainties and assumptions. The Registrant's
future results and shareholder values may differ materially from
those expressed or implied in these forward-looking statements.
Readers are cautioned not to put undue reliance on any
forward-looking statements. In addition, the Registrant does not
undertake to update forward-looking statements after the
effectiveness of this Registration Statement, even if new
information, future events or other circumstances have made them
incorrect or misleading.
ITEM 1 - DESCRIPTION OF BUSINESS
POPstar Communications, Inc. (the "Company" or "POPstar"), is a
provider of Internet based facsimile transmission technology.
POPstar is currently in the process of field testing its technology
and intends to market its service to Internet Service Providers
("ISPs") around the world, thereby allowing them the ability to
provide Internet based facsimile transmission services to their
end-users. POPstar's software is provided free of charge to ISPs in
return for a share of all revenue generated from the use of its
software.
The Company was originally incorporated under the laws of the State
of Nevada on June 19, 1995 as Cherokee Leather, Inc. Between 1995
to 1999, the Company was inactive. On May 19, 1999, in
contemplation of acquiring POPstar Global Communications Inc., a
British Virgin Islands company, the Company changed its name to
POPstar Communications, Inc. On July 20, 1999, the Company acquired
all of the outstanding common and preferred stock of POPstar Global
Communications Inc., a British Virgin Islands company
("POPstar-BVI") in a business combination described as a "reverse
acquisition". For accounting purposes, the acquisition has been
treated as the acquisition of POPstar (the Registrant) by POPstar-BVI.
Immediately prior to the acquisition, POPstar had 3,400,000 shares
of Common Stock outstanding. As part of POPstar's acquisition of
POPstar-BVI, POPstar issued 12,875,000 shares of its Common Stock to
the shareholders of POPstar-BVI. The Company's common stock
currently trades on the NASD OTC Bulletin Board under the symbol
"POPS."
BUSINESS OF THE ISSUER
Product and Services
POPstar is a provider of Internet facsimile transmission technology
which allow ISPs in various parts of the world to cooperate in the
transport and delivery of documents, using the Internet instead of
conventional long distance telephone networks ("LD"). POPstar's
technology allows end-users to directly transmit documents from a
personal computer to any conventional facsimile ("FAX") machine
located throughout the world.
POPstar's FAX over Internet Protocol technology ("Internet Fax") is
provided to ISPs on a royalty-free basis. POPstar's Internet Fax
software also includes support for inter-ISP settlements, user
authentication functions, billing data generation and other
management and operation-related activities so as to allow ISPs to
manage and charge their customers for the Internet Fax service.
POPstar derives revenue by receiving a portion of the payments made
to ISPs by their customers who use the Internet Fax service. ISPs
who use the POPstar technology are charged a wholesale price for all
FAX traffic submitted by users; POPstar and the ISP delivering the
FAX to the recipient conventional FAX machine, each receive portions
of this wholesale price, according to a prearranged formula.
Distribution of respective parties' portions ("Settlements") is
consigned to an independent, specialist firm.
Management believes that a major obstacle standing in the way of
widespread use of the Internet for the transmission of commercial
traffic such as Internet Faxes, has been the inability of the ISP to
collect fees on a pay-
<PAGE>
for-use basis. While the world's traditional
telephone companies have long shared LD revenue under terms of
settlements agreements (using billing data generated by the
telephone exchange serving the originating telephone company), no
equivalent mechanism for inter-ISP settlements on Internet based
communication has existed until very recently. In most cases,
Internet Fax and Internet Voice transmissions do not even originate
through a telephone exchange, making it necessary to develop new
methods of calculating, apportioning and distributing respective
revenue shares between participants, along with corresponding
settlements agreements.
In response to the need for settlements on Internet based value
added services such as Internet Fax and Internet Voice
transmissions, the European Telecommunications Standards Institute
("ETSI"), a body governing inter-operability between telephone
companies in Europe, sponsored the development of the Open
Settlement Protocol ("OSP"), a key component of POPstar's inter-ISP
settlements strategy. POPstar is believed to be the first
commercial user of OSP for Internet Fax transmission settlements.
Management believes that settlements should be done by independent
trusted third parties, and not by POPstar or by any of the ISPs or
other carriers associated with POPstar. As a consequence, one of
the firms contributing to OSP, TransNexus, LLP. ("TransNexus") of
Atlanta, Georgia, was selected by POPstar as a qualified settlements
house, and subsequently contracted to provide settlements services
to POPstar and to the respective POPstar partnering ISP offering
origination ("onramp") and termination ("offramp") services. An
additional service rendered by TransNexus is the provision of
least-cost routing information permitting POPstar's software to
route FAX traffic to the offramp able to deliver each FAX document
for the lowest cost.
POPstar's products and services, therefore, consists of an
integrated technology comprising of Internet Fax software, least
cost routing, inter-ISP settlements and support for full accounting,
audit trail and activity monitoring.
Additionally, the Company anticipates introducing enhancements to
its technology in the form of "Unified Messaging" service support,
in which text, voice and other messages are accessible from a
single, unified mailbox, and deliverable over the Internet and other
facilities to the intended recipient(s). The Internet Engineering
Task Force ("IETF"), the International Telecommunications Union
("ITU") and a number of other bodies are developing standards and
recommendations for message exchange and conversion; POPstar's
activities are directed toward compliance with these evolving
standards, and product enhancements will be released as these
standards mature. There are no assurances, however, that the
Company will be able to introduce these enhancements as intended or
that it will not face technical and market obstacles which may
prevent the Company from introducing such enhancements.
MARKET DESCRIPTION
POPstar's immediate market consists of ISPs who provide Internet
connectivity and other services to enterprise "seats", Small
Office/Home Office ("SOHO") business users, and residential users.
POPstar's technology offers ISPs' users a value added service which
allows them to transmit documents throughout the world at a
substantial discount to traditional long distance telephone network.
FAX usage continues to rise. The FAX portion of LD traffic billed
in 2000 is estimated to be in excess of $US30 billion (approximately
30% of the world total). The number of FAX messages is expected to
be between 10 and 20 times the number of email messages sent in the
same year. An "enterprise" PC-fax user may send as many as 800
pages of FAX per year, according to some estimates, and the number
of new FAX machines purchased, especially outside Western world,
continues to grow at 20% per year or more. Additionally,
"outsourced" (third party FAX carriers) FAX traffic, largely
"broadcast" FAX, will generate in excess of $2 billion next year.
(All statistics courtesy Davidson Consulting.)
POPstar's FAX methods are "Internet ready". Both Internet Voice and
"real-time" Internet Fax transmissions suffer from the Internet's
inherent problem in that the Internet transmits data in small blocks
("packets"). These packets often get delayed or lost due to
traffic. Such delays may approach many tens of seconds or even
minutes on some international routes, and may be experienced first
hand when "surfing" web sites in Asia and other countries.
POPstar's "immediate" store and forward transport avoids these
problems while providing virtually the same speed of delivery as
conventional and real-time services.
INTERNATIONAL OPERATIONS
<PAGE>
Internet Fax services that span international boundaries are most
attractive to potential users, due to the high usage of FAX traffic
and higher LD rates to and from Asian and other non-Western
countries. The establishment of POPstar operations in key
international markets already includes a sales and support office in
Hong Kong, with other key locations to be staffed as growth dictates.
One objective of POPstar's program is the recruitment of at least
one ISP in each major FAX traffic location (originating or
terminating), the "territory" handled by a location being defined by
LD cost boundaries. It can be more costly to transmit a FAX message
from a major city to a remote town in the same country, than to
transmit the same message at discounted rates from North America.
This is due in part to high domestic LD rates in some countries.
ISPs having lines terminating in high traffic destination areas are
being recruited as POPstar partners.
POPstar is not aware of regulatory bars to the transport of FAX
traffic into or out of any country using Internet facilities, but as
a precaution, requires each participating ISP to assume
responsibility for compliance with all regulations affecting them
with respect to POPstar operations. POPstar does not operate as a
common carrier in any country and to the knowledge of POPstar
management, is not subject to rules governing common carrier
operations in any country.
A portion of revenue generated from message traffic originating in a
given jurisdiction is retained by the ISP partner in that
jurisdiction, with the balance being collected using Electronic
Funds Transfer methods, where available, by POPstar's settlement
house, TransNexus, for subsequent distribution to POPstar and to the
ISP partners through whose facilities the traffic is eventually
delivered to the destination FAX machines.
The respective ISP partners' operations are subject to rules and
regulations of their respective jurisdictions, including those
applicable to funds transfers or other currency controls. ISPs in
each jurisdiction are responsible for compliance with such rules and
regulations.
It is possible that taxation, licensing, interconnection fees or
political or regulatory barriers could limit the viability of a
given ISP's operations as part of POPstar's program, thus limiting
POPstar's revenue associated with the region in question. POPstar
is currently not aware of any major market area having such
circumstances. However, there can be no assurances that such
barriers may not develop in the future.
DEPENDENCE UPON KEY CUSTOMERS
POPstar's success will depend upon the number of destinations served
economically by POPstar affiliated ISPs, and the number of Internet
users served by POPstar partner ISPs operating Internet Fax
offramps. POPstar's ability to deliver Internet Fax services more
economically than traditional LD services is dependent on soliciting
sufficient numbers of ISP partners throughout the world. Therefore,
POPstar will focus on partnering with large, multi-city ISPs.
Failure to obtain sufficient ISP partners will limit POPstar's
ability to deliver its services at lower costs than traditional LD
services and therefore may have a materially adverse effect on the
Company's results of operations.
MAJOR SUPPLIERS
POPstar uses Internet Fax software developed by TGI Technologies
Ltd. ("TGI"), a Canadian corporation affiliated with POPstar and
with whom exclusive, long-term supply and development contracts
exist. The Internet Fax software that POPstar uses is provided by
TGI under an exclusive license pursuant to a Licensing Agreement
dated January 11, 1999 by and between the Company's wholly owned
subsidiary, POPstar-BVI and TGI. All of the officers and directors
of TGI are also officers and directors of the Company. See Item 7
Related Transactions.
Under the terms of the Licensing Agreement, POPstar-BVI is obliged
to pay TGI, until the fourth quarter, 2002, a portion of all net
sales generated from the use of TGI's software. For the year 1999,
POPstar-BVI is obliged to pay TGI 8% of net sales derived from the
use of the Internet Fax software, or a minimum of $400,000.
POPstar-BVI is obliged to pay TGI 6% of net sales or a minimum of
$600,000 for the year 2000. For the year 2001, POPstar-BVI is
obliged to pay TGI 4% of net sales of a minimum of $500,000. For
the year 2002, POPstar-BVI is obliged to pay TGI 2% of net sales or
a minimum of $500,000. POPstar-BVI is not obliged to pay any
additional licensing fees following the end of the year 2002.
In addition to the Licensing Agreement with TGI, POPstar-BVI has
also entered into a Services Agreement with TGI, whereby TGI has
agreed to provide POPstar-BVI with technical assistance, software
development, marketing,
<PAGE>
management, and other services related to
the enhancements and use of the Internet Fax technology. All fees
for services provided by TGI to POPstar-BVI under the Services
Agreement are to be billed to POPstar-BVI on the basis of TGI's
direct and indirect costs of the services provided plus 15%.
POPstar's ability to accurately bill ISPs for its Internet Fax
services is dependent on settlement services provided by TransNexus,
of Atlanta, Georgia. Although POPstar believes that its
relationship with TransNexus is strong and will remain so with
continued contract compliance, the termination of POPstar's contract
with TransNexus, the loss of TransNexus' settlement service, or a
reduction in the quality of service the Company receives from
TransNexus could have a material adverse effect on the Company's
results of operations. In addition, the accurate and prompt billing
of the Company's customers is dependent upon the timeliness and
accuracy of settlement details provided to the Company by
TransNexus.
In order to service areas without local ISP termination access,
POPstar operates a "global offramp" (a server used for delivery of
FAX traffic over traditional LD facilities to locations in the world
having no local POPstar affiliated ISP) in Los Angeles, California.
POPstar has contracted with Innosys Communications, Inc.
("Innosys"), to forward Internet Fax transmissions through
traditional LD networks to countries having no local POPstar
affiliated ISP. Terms of the service agreements with Innosys permit
POPstar to seek and employ other facilities and carriers, as
conditions may dictate. Although POPstar believes that its
relationship with Innosys is strong and will remain so with
continued contract compliance, the termination of POPstar's contract
with Innosys, the loss of Innosys' offramp service, or a reduction
in the quality of service the Company receives from Innosys could
have a material adverse effect on the Company's results of
operations. However, Management believes that its dependence upon
this global offramp will lessen with time, as more terminating
POPstar ISPs begin operations in different countries around the world.
COMPETITION
Internet Fax competitors include UUNet (Worldcom), NetCentric,
NetXchange, Net2Fax, and JFAX. Management believes that POPstar, at
the time of writing, is the only firm offering a revenue-sharing
based plan to ISPs, and the only firm using a third-party,
independent settlements house. Management believes that these
factors provide POPstar with advantages in recruiting both large and
small ISP partners.
Other types of competitors include FAX "outsourcing" providers such
as Xpedite. Such outsourcing is directed to major enterprises
having larger numbers of LAN "seats", where FAX "server"
functionality (PC document transmission, bulk broadcast
transmissions, etc.) benefits can be realized without the overhead
and complication of supporting an in-house FAX server. Such firms
generally charge premium prices for such services, and often require
the enterprise to provide significant numbers of phone lines or
other special facilities associated with the service.
Management believes that POPstar's technology provides a number of
advantages over the traditional outsourcing model, including the
joint marketing of the service by both POPstar and the ISP serving
the enterprise. The firm providing Internet connectivity to the
enterprise's LAN users becomes the natural provider of FAX
outsourcing, including such value added aspects as cost accounting
(assignment of costs to the sender and the sender's department),
authorization and control of users by the enterprise's LAN manager,
and many others.
POPstar management believes that the advantages of independent
settlements, ISP partner-driven recruitment of users, and web-page
entry of FAX traffic from the desktop will permit POPstar to
effectively compete with its competitors.
Many of the Company's existing competitors, as well as a number of
potential new competitors, have longer operating histories, greater
name recognition, larger customer bases and significantly greater
financial, technical and marketing resources than the Company. Such
competitors may be able to undertake more extensive marketing
campaigns, adopt more aggressive pricing policies and make more
attractive offers to potential employees and distribution partners.
Further, there can be no assurance that the Company's competitors
will not develop Internet Fax services that are equal or superior to
those of the Company or that achieve greater market acceptance than
the Company's offerings.
<PAGE>
REGULATION
The Company is not currently subject to direct federal, state or
local regulation, and laws or regulations applicable to access to or
commerce on the Internet, other than regulations applicable to
businesses generally. However, there can be no assurances that the
Company will not be subject to such regulation in the future.
COST OF COMPLIANCE WITH ENVIRONMENTAL REGULATIONS
The Company currently has no costs associated with compliance with
environmental regulations. However, there can be no assurances that
the Company will not incur such costs in the future.
NUMBER OF EMPLOYEES
As of July 31, 1999, the Company employed 6 people on a full time
basis.
ITEM 2 - PLAN OF OPERATION
The following discussion contains certain forward-looking statements
that are subject to business and economic risks and uncertainties,
and the Company's actual results could differ materially from those
forward-looking statements. The following discussion regarding the
financial statements of the Company should be read in conjunction
with the financial statements and notes thereto.
The Company's prior full fiscal year ending December 31, 1998 is not
indicative of the Company's current business plan and operations.
During the periods ending December 31, 1997, December 31, 1998, and
June 30, 1999, the Company had no revenues and was in its
development stage. After the Company's acquisition of POPstar-BVI,
as previously discussed, the Company's current business plan was
implemented. Therefore, this plan of operation will focus on the
Company's current business plan and operations. For information
concerning the Company's prior full fiscal years, the Company refers
the reader to the financial statements provided under Part F/S,
contained herein.
POPstar does not currently generate any revenue from its operations
and does not expect to report any revenue from operations at least
until the launch of its Internet Fax service. Additionally, after
the launch of the Company's service, there can be no assurance that
the Company will generate positive cash flow and there can be no
assurances as to the level of revenues, if any, the Company may
actually achieve from its Internet fax operations.
Implementation Plan
The Company's goal is to build a global Internet services network
using the Internet as the backbone, and independent qualified
partners in each country to manage the local customer base. The
success of the Company depends on the careful selection and active
participation of the qualified ISPs. The ISP's commitment to
POPstar will depend on the commercial viability of Internet Fax and
use of Internet Fax services by end users. Therefore, prior to the
commercial launch of the POPstar network, a series of field trials
will be undertaken. During the field trials, POPstar will work
closely with a select group of founding ISPs to further define and
resolve all outstanding technical and/or commercial issues.
POPstar will initially target high revenue routes such as those in
North America, Asia, and Europe, and establish ISPs in locations
serviced by these routes. POPstar's implementation plan is to
establish partnerships with approximately 10 to 20 ISPs in these
routes during the field trials. Currently, the Company has
established partnerships with approximately 7 ISPs throughout North
America, Asia, and Europe and is currently in the process of field
testing its technology. At present, the Company has not experienced
any significant technological difficulties and anticipates starting
commercial operations in the fourth quarter of 1999. However, there
can be no assurances that the Company will be able to initiate its
commercial service in the fourth quarter as anticipated. Failure to
launch its service as anticipated could have a material adverse
effect on the Company's financial condition and results of operations.
Locations not serviced by locally available ISPs, will initially be
serviced by traditional long distance telephone networks from the
Company's global offramp node in Los Angeles, California. The
POPstar approach is to use the
<PAGE>
lowest cost network, the Internet, to deliver traffic
wherever possible. This approach places emphasis on
the establishment of as many local ISPs to serve as "offramps" for
facsimile traffic in all major cities of the developed world. In
the interim, the Company's facilities in Los Angeles will serve as a
global off ramp for all traffic not served by local ISPs.
Liquidity
As of June 30, 1999, the Company had cash on hand amounting to
$647,985. Subsequent to June 30, 1999, the Company sold an
aggregate of 125,000 shares of its "restricted" Common Stock,
resulting in net proceeds to the Company of $125,000.
The Company, through its wholly owned subsidiary, POPstar-BVI has
also contracted, pursuant to share purchase agreements dated January
12, 1999 (as amended by supplemental agreements) to sell on October
31, 1999 an aggregate of 625,000 shares of the Company's
"restricted" stock at $0.8333 per share, for net proceeds
anticipated to be in the amount of $520,833, and to sell on or
before March 31, 2000, an additional aggregate of 3,000,000 shares
of "restricted" stock at $0.8333 per share, for net proceeds
anticipated to be in the amount of $2,500,000.
The Company believes that proceeds from the prior and anticipated
sale of the Company's Common Stock shall be sufficient to fund
operations for the remainder of the current fiscal year ending
December 31, 1999.
To the extent that the Company may require additional funds for its
operations, the Company intends to do so through additional private
offerings of its Common Stock. However, there can be no assurances
that the Company will be able to successfully complete such private
offering.
Capital Expenditures
On January 11, 1999, POPstar-BVI entered into the Licensing
Agreement with TGI under which POPstar-BVI is obliged to pay TGI,
until the fourth quarter, 2002, a portion of all net sales generated
from the use of TGI's software. For the year 1999, POPstar-BVI is
obliged to pay TGI 8% of net sales, or a minimum of $400,000.
POPstar-BVI is obliged to pay TGI 6% of net sales or a minimum of
$600,000 for the year 2000. For the year 2001, POPstar-BVI is
obliged to pay TGI 4% of net sales of a minimum of $500,000. For
the year 2002, POPstar-BVI is obliged to pay TGI 2% of net sales or
a minimum of $500,000. POPstar-BVI is not obliged to pay any
additional licensing fees following the end of the year 2002.
In addition to the Licensing Agreement with TGI, POPstar-BVI also
entered into a Services Agreement on January 11, 1999 with TGI under
which TGI has agreed to provide POPstar-BVI with technical
assistance, software development, marketing, management, and other
services related to the enhancements and use of TGI's Internet Fax
technology. All fees for services provided by TGI to POPstar-BVI
under the Services Agreement are to be billed to POPstar-BVI on the
basis of TGI's direct and indirect costs of the services provided
plus 15%.
The Company also expects to purchase approximately $600,000 of
additional equipment in connection with the expansion of its
business.
YEAR 2000 DISCLOSURE
The Company has completed a review of its computer systems and
non-information technology ("non-IT") systems to identify all
systems that could be affected by the inability of many existing
computer and microcomputer systems to process time-sensitive data
accurately beyond the year 1999, referred to as the Year 2000 or Y2K
issue. The Company is dependent on third-party computer systems and
applications. The Company also relies on its own computer and
non-IT systems (which consist of personal computers, internal
telephone systems, internal network server, Internet server and
associated software and operating systems). In conducting the
Company's review of its internal systems, the Company performed
operational tests of its systems which revealed no Y2K problems. As
a result of its review, the Company has discovered no problems with
its systems relating to the Y2K issue and believes that such systems
are Y2K compliant. The Company has not obtained written assurances
from any suppliers regarding the status of those suppliers with
respect to the Y2K issue, and the Company does not currently have any
<PAGE>
plans to obtain such assurances. Costs associated with the
Company's review were not material to its results of operations and
are not anticipated to be material in the future.
While the Company believes that its procedures have been designed to
be successful, because of the complexity of the Year 2000 issue and
the interdependence of organizations using computer systems, there
can be no assurances that the Company's efforts, or those of third
parties with whom the Company interacts, have fully resolved all
possible Y2000 issues. Failure to satisfactorily address the Y2K
issue could have a material adverse effect on the Company. The most
likely worst case Y2K scenario which management has identified to
date is that, due to unanticipated Y2K compliance problems, the
Company's software may not function as intended or that the Company
may not be able to bill its customers on a timely basis. Should
this occur, it would result in a material loss of some or all gross
revenue for an indeterminable amount of time, which could cause the
Company to cease operations. In the event of failure of one or more
of its suppliers due to Y2K issues, the Company's only recourse for
any damages suffered would be through litigation. The Company has
not yet developed a contingency plan to address this worst case Y2K
scenario, and does not intend to develop such a plan in the future.
ITEM 3 - DESCRIPTION OF PROPERTY
At present, the Company does not maintain a physical office in the
United States, The Company's current administrative facility is made
available to the Company and its wholly owned subsidiary POPstar-BVI
from TGI pursuant to an oral month to month lease for office space
located at 107 East 3rd Avenue, Vancouver, British Columbia, Canada.
The monthly rental rate is currently $4,000 per month.
ITEM 4 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of August 15, 1999, certain
information with respect to the Company's equity securities owned of
record or beneficially by (i) each Officer and Director of the
Company; (ii) each person who owns beneficially more than 5% of each
class of the Company's outstanding equity securities; and (iii) all
Directors and Executive Officers as a group.
<TABLE>
<S> <C> <C> <C>
Title Common Stock Percent of
of Class Name and Address of Beneficial Owner Outstanding Outstanding
Common Stock John McDermott1 2,000,000 12.18%
107 East 3rd Avenue
Vancouver, BC Canada
Common Stock Don Lau 0 0%
107 East 3rd Avenue
Vancouver, BC Canada
Common Stock Thompson Chu2 6,525,000 39.73%
107 East 3rd Avenue
Vancouver, BC Canada
Common Stock Yong Kiat Rickie Tang3 1,750,000 10.66%
335 Bukit Timah Road #10-02
Singapore 259718
All Directors and 10,275,000 62.57%
Officers as a Group (4
Persons in total)
</TABLE>
(1) Denotes shares beneficially owned by the John McDermott
Family Trust, but held of record by Pang Lin Choi. Mr.
McDermott is a beneficiary of the John McDermott Family Trust.
(2) Denotes shares beneficially owned by the Thompson Chu Family
Trust but held of record by Pang Lin Choi. Mr. Chu is a beneficiary
of the Thompson Chu Family Trust.
(3) Denotes shares beneficially owned by Mr. Tang but held by
Kemayan E..C. Hybrid Ltd. Mr. Tang is a principal of Kemayan E.C.
Hybrid Ltd.
<PAGE>
The Company believes that the beneficial owners of securities listed
above, based on information furnished by such owners, have sole
investment and voting power with respect to such shares, subject to
community property laws where applicable. Beneficial ownership is
determined in accordance with the rules of the Commission and
generally includes voting or investment power with respect to
securities. Shares of stock subject to options or warrants
currently exercisable, or exercisable within 60 days, are deemed
outstanding for purposes of computing the percentage of the person
holding such options or warrants, but are not deemed outstanding for
purposes of computing the percentage of any other person.
ITEM 5 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth the names and ages of the current
directors and executive officers of the Company, the principal
offices and positions with the Company held by each person and the
date such person became a director or executive officer of the
Company. The executive officers of the Company are elected annually
by the Board of Directors. The directors serve one year terms until
their successors are elected. The executive officers serve terms of
one year or until their death, resignation or removal by the Board
of Directors. There are no family relationships between any of the
directors and executive officers. In addition, there was no
arrangement or understanding between any executive officer and any
other person pursuant to which any person was selected as an
executive officer.
The directors and executive officers of the Company are as follows:
Name Age Positions
- ---- --- ----------
John McDermott 63 President
and Director
Thompson Chu 40 Chairman of the Board
of Directors
Don Lau 41 Secretary
and Treasurer
Yong Kiat Rickie Tang 40 Director
JOHN MCDERMOTT is currently the Company's President and a member of
its Board of Directors. Since August 1989, Mr. McDermott has been
President of TGI Technologies Ltd., a high technology manufacturing
and research and development company. From 1978 to 1986, Mr.
McDermott was an Executive Vice President at Glenayre Electronics in
Vancouver. Glenayre is a major player in the Radio Paging, Radio
Telephone and Voice Mail business. Prior to that, Mr. McDermott was
Vice President of Marketing at Rockwell Wescom in Chicago. Mr.
McDermott also held an engineering position with British Telecom and
Alberta Government Telecom.
THOMPSON CHU is currently the Company's Chairman of the Board of
Directors. Since 1989, Mr. Chu has been the Chief Executive Officer
of TGI Technologies Ltd., a high technology manufacturing and
research and development company. Mr. Chu has considerable
management experience in the trading and telecommunications
industries in North America, China and South East Asia. Mr. Chu has
an MBA with distinction from INSEAD in France, a MSc in
Science-Business Administration from the University of British
Columbia, a Bachelors degree in Business Administration from Acadia
University in Nova Scotia, a diploma in International Business from
the Institute of Pacific Asian Management of the University of
Hawaii and a diploma in French from the Universite Sainte-Anne in
Nova Scotia.
DON LAU is currently the Company's Secretary & Treasurer. Since
January 1999, Mr. Lau has been the Vice President, Corporate Finance
of POPstar Global Communications, Inc., the Company's wholly owned
subsidiary. Between September 1995 to January 1999, Mr. Lau was the
Vice President, Corporate Finance for Tradeglobe Consulting Ltd., an
international trade consulting and management company. Between
November 1991 to July 1995, Mr. Lau was the Managing Director,
Corporate Finance of The Nikko Securities Co. Limited in Hong Kong,
where he was responsible for the equity origination, merger, and
acquisition business of Nikko Securities in Hong Kong.
<PAGE>
Mr. Lau has over 15 years experience in senior corporate finance
positions with Bankers Trust, Nikko Securities and Schroders in Asia.
Mr. Lau holds an MBA degree from the University of British Columbia and
a Bachelors degree in Business Administration from Acadia University
in Canada.
YONG KIAT RICKIE TANG is currently a member of the Company's Board
of Directors. Since July 1992, Mr. Tang has been the President and
Chief Executive Officer of Kemayan Corporation Berhad, a
conglomerate listed on the Main Board of the Kuala Lumpur Stock
Exchange in Malaysia. Mr. Tang holds a Bachelor of Science degree
with Honors in Estate Management from the National University of
Singapore and a Graduate Diploma in Marketing from the Marketing
Institute of Singapore.
ITEM 6 - EXECUTIVE COMPENSATION
On July 20, 1999, the Company entered into a three-year Employment
Agreement with John McDermott, the Company's President, whereby the
Company will pay Mr. McDermott an annual salary of $83,333.33. The
Agreement also requires the Company to provide, at its expense,
complete health insurance coverage for Mr. McDermott and his family
and annual automobile allowance of $5,600 for business use.
On July 20, 1999, the Company entered into a two-year Employment
Agreement with Thompson Chu, the Company's Chairman of the Board,
whereby the Company will pay Mr. Chu an annual salary of $50,000.
The Agreement also requires the Company to provide, at its expense,
complete health insurance coverage for Mr. Chu and his family.
<PAGE>
On July 20, 1999, the Company entered into a two-year Employment
Agreement with Don Lau, the Company's Secretary and Treasurer,
whereby the Company will pay Mr. Lau an annual salary of $48,000.
The Agreement also requires the Company to provide, at its expense,
complete health insurance coverage for Mr. Lau and his family.
SUMMARY COMPENSATION TABLE
The Summary Compensation Table shows certain compensation
information for services rendered in all capacities for the years
ended December 31, 1998 and 1997, and the period ended June 30,
1999. Other than as set forth herein, no executive officer's salary
and bonus exceeded $100,000 in any of the applicable years. The
following information includes the dollar value of base salaries,
bonus awards, the number of stock options granted and certain other
compensation, if any, whether paid or deferred.
<TABLE>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Awards Payouts
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Securities
Other Annual Restricted Underlying LTIP All Other
Name and Principal Salary Bonus Compensation Stock Awards Options SARs($) Payouts Compensation
Position Year ($) ($) ($) ($) (#) ($) ($)
---- ------- ------ ------------ ------------ -------------- ------- -------------
John McDermott 1999 33,833 -0- 1,400(1) -0- 250,000 -0- -0-
(President) (6/30)
1998 0 -0- -0- -0- -0- -0- -0-
1997 0 -0- -0- -0- -0- -0- -0-
Thompson Chu 1999 22,500 -0- -0- -0- -0- -0- -0-
(Chairman of the (6/30)
Board)
1998 0 -0- -0- -0- -0- -0- -0-
1997 0 -0- -0- -0- -0- -0- -0-
Don Lau 1998 24,000 -0- -0- -0- 50,000 -0- -0-
(Secretary & (6/30)
Treasurer)
1998 0 -0- -0- -0- -0- -0- -0-
1997 0 -0- -0- -0- -0- -0- -0-
</TABLE>
(1) Denotes sums paid to Mr. McDermott pursuant to his employment
agreement for car allowance.
<TABLE>
<S> <C> <C> <C> <C>
OPTION/SAR GRANTS IN SIX MONTH
PERIOD ENDED JUNE 30, 1999
(INDIVIDUAL GRANTS)
NUMBER OF SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS/SAR'S
OPTIONS/SAR'S GRANTED TO EMPLOYEES EXERCISE OF BASE PRICE
NAME GRANTED(#) IN FISCAL YEAR ($/SH) EXPIRATION DATE
- ---- ----------- --------------- ------------------- ----------------
John McDermott 250,000 33% $0.01 March 31, 2002
Thompson Chu 0 0 0 0
Don Lau 50,000 6.6% $1.00 June 30, 2002
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
AGGREGATED OPTION/SAR EXERCISES IN SIX MONTH
PERIOD ENDED JUNE 30, 1999
AND JUNE 30, 1999 OPTIONS/SAR VALUES
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-
SECURITIES UNDERLYING THE-MONEY OPTION/SARS
SHARES ACQUIRED ON VALUE REALIZED OPTIONS/SARS AT JUNE 30, AT JUNE 30, 1999 ($)
NAME EXERCISE (#) ($) 1999(#) EXERCISABLE/UNEXERCISABLE
EXERCISABLE/UNEXERCISABLE
- ---- ------------------ -------------- ------------------------- -------------------------
John McDermott -0- -0- 0/250,000 205,825
Thompson Chu n/a n/a n/a n/a
Don Lau -0- -0- 0/50,000 -0-
</TABLE>
COMPENSATION OF DIRECTORS
Currently, Directors do not receive any compensation for their
services.
ITEM 7 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On January 11, 1999, the Company's wholly owned subsidiary,
POPstar-BVI, entered into a Licensing Agreement and a Services
Agreement with TGI Technologies Ltd., for the licensing and service
of the Internet Fax Technology, as previously described. Mr.
McDermott and Mr.Chu, officers of the Company are also officers of
TGI. In addition, Mr. McDermott, Mr. Chu and Mr. Tang are directors
of TGI.
On March 30, 1999, the Company's wholly owned subsidiary,
POPstar-BVI, entered into an unsecured promissory note with TGI
whereby POPstar-BVI agreed to lend TGI the sum of $1,000,000. Said
note provided interest terms of eight (8) percent per annum,
compounded annually. The principal and interest are due on either
the earlier of a demand by the Company or on March 30, 2001. Mr.
McDermott and Mr. Chu, officers of the Company are also officers of
TGI. In addition, Mr. McDermott, Mr. Chu and Mr. Tang are directors
of TGI.
As previously discussed, on July 20, 1999, the Company acquired all
of the outstanding common and preferred stock of POPstar-BVI in a
business combination described as a "reverse acquisition." For
accounting purposes, the acquisition has been treated as the
acquisition of POPstar (the Registrant) by POPstar-BVI. Such shares
include the shares owned by officers and directors of the Company as
set forth in the Section "Security Ownership of Certain Beneficial
Owners and Management" hereunder.
On December 17, 1998, the Company's wholly owned subsidiary,
POPstar-BVI entered into an oral month to month lease for the lease
of approximately 4,800 square feet of administrative space located
at 107 East 3rd Avenue, Vancouver, British Columbia, Canada to serve
as the Company temporary headquarters. The leased premises are
owned by TGI. As previously discussed, Mr. McDermott and Mr. Chu,
officers of the Company are also officers of TGI. In addition, Mr.
McDermott, Mr. Chu and Mr. Tang are directors of TGI.
ITEM 8 - DESCRIPTION OF SECURITIES
COMMON STOCK
The Company's Articles of Incorporation authorizes the issuance of
50,000,000 shares of Common Stock, $0.001 par value per share, of
which 16,422,500 were outstanding as of August 31, 1999. Holders of
shares of Common Stock are entitled to one vote for each share on
all matters to be voted on by the stockholders. Holders of Common
Stock have no cumulative voting rights. Holders of shares of Common
Stock are entitled to share ratably in dividends, if any, as may be
declared, from time to time by the Board of Directors in its
discretion, from funds legally available therefor. In the event of
a liquidation, dissolution or winding up of the Company, the holders
of shares of
<PAGE>
Common Stock are entitled to share pro rata all assets
remaining after payment in full of all liabilities. Holders of
Common Stock have no preemptive rights to purchase the Company's
common stock. There are no conversion rights or redemption or
sinking fund provisions with respect to the common stock. All of
the outstanding shares of Common Stock are fully paid and
non-assessable.
TRANSFER AGENT
The transfer agent for the Common Stock is Alpha Tech Stock
Transfer, 4505 South Wasatch Blvd., Suite 205, Salt Lake City, UT
84124.
<PAGE>
PART II
ITEM 1 - MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND OTHER SHAREHOLDER MATTERS
MARKET INFORMATION
The following table sets forth the high and low bid prices for
shares of the Company Common Stock for the periods noted, as
reported by the National Daily Quotation Service and the NASDAQ
Bulletin Board. Quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not represent actual
transactions. The Company's Common Stock was not listed on the
NASDAQ Bulletin Board during 1997. On June 11, 1998, the Company's
Common Stock began listing on the NASDAQ exchange under the trading
symbol CHRK. However, the Company's Common Stock did not begin
trading until July 22, 1999, subsequent to the Company acquisition
of POPstar-BVI on July 20, 1999. In conjunction with the
acquisition, the Company trading symbol was changed to POPS.
BID PRICES
YEAR PERIOD HIGH LOW
1999 Third Quarter (July 22, 1999 to
August 15, 1999). . . . . . . . . . . . . . 4.00 0.25
Pursuant to NASD Eligibility Rule 6530 (the "Rule") issued on
January 4, 1999, issuers who do not make current filings pursuant to
Sections 13 and 15(d) of the Securities Act of 1934 are ineligible
for listing on the NASDAQ Over- the-Counter Bulletin Board.
Pursuant to the Rule, issuers who are not current with such filings
are subject to de-listing pursuant to a phase-in schedule depending
on each issuer's trading symbol as reported on January 4, 1999. As
previously discussed, the Company's trading symbol on January 4,
1999 was CHRK. Therefore, pursuant to the phase-in schedule, the
Company is subject to de-listing on October 1, 1999. One month
prior to an issuer's de-listing date, non complying issuers will
have their trading symbol appended with an "E".
The Company is not currently in compliance with the Rule, and in the
past, has not made filings pursuant to Sections 13 and 15(d) of the
Securities Act of 1934. The Company has filed this Registration
Statement on Form 10-SB in order to become a "reporting" company and
therefore comply with the Rule. However, the Company will remain
subject to de-listing on October 1, 1999 until such time as the
Securities and Exchange Commission ("SEC") has reviewed the
Company's Form 10-SB and has stated that it has no further comments.
Should the SEC fail to clear all comments prior to October 1, 1999,
the Company will be de-listed. Once the Company has complied with
the Rule, it will once again become eligible for listing on the
NASDAQ Over-the-Counter Bulletin Board and will seek to be
reinstated on the NASDAQ Over-the-Counter Bulletin Board.
NUMBER OF SHAREHOLDERS
The number of beneficial holders of record of the Common Stock of
the Company as of the close of business on June 30, 1999 was
approximately 47. Many of the shares of the Company's Common Stock
are held in a "street name" and consequently reflect numerous
additional beneficial owners.
DIVIDEND POLICY
To date, the Company has declared no cash dividends on its Common
Stock, and does not expect to pay cash dividends in the next term.
The Company intends to retain future earnings, if any, to provide
funds for operation of its business.
ITEM 2 - LEGAL PROCEEDINGS
The Company may from time to time be involved in various claims,
lawsuits, disputes with third parties, actions involving allegations
of discrimination, or breach of contract actions incidental to the
operation of its business. The Company is not currently involved in
any such litigation which it believes could have a materially
adverse effect on its financial condition or results of operations.
<PAGE>
ITEM 3 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Prior to the acquisition of POPstar-BVI by the Company as previously
described, the Company engaged Barry L. Friedman, P.C., Certified
Public Accountants ("Mr. Friedman"), to audit the Company' s
financial statements for the fiscal years ended December 31, 1998,
and December 31, 1997.
Subsequent to the acquisition of POPstar-BVI by the Company, KPMG
LLP, was retained by the Company as their principal accountant to
audit the Company's financial statements effective August 1, 1999.
There have been no disagreements between Barry L. Friedman, KPMG LLP
and Management of the type required to be reported under this Item 3
since the date of their engagement.
ITEM 4 - RECENT SALES OF UNREGISTERED SECURITIES
On July 20, 1999, the Company acquired all of the outstanding common
stock and preferred stock of POPstar-BVI in a business combination
described as a "reverse acquisition". As part of the
reorganization, the Company issued 12,875,000 shares of its Common
Stock to the shareholders of POPstar-BVI in exchange for all of the
outstanding shares of Common and Preferred Stock of POPstar-BVI.
Such shares include the shares owned by officers and directors of
the Company as set forth in the Section "Security Ownership of
Certain Beneficial Owners and Management" hereunder. This issuance
was conducted under an exemption under Section 4(2) of the
Securities Act of 1933.
On July 20, 1999, the Company issued 10,000 shares of "restricted"
(as that term is defined under Rule 144 of the Securities Act of
1933) Common Stock to MRC Legal Services Corp., an "accredited
investor", the Company's securities counsel, in consideration for
legal services rendered. The issuance was exempt under Section 4(2)
of the Securities Act of 1933.
On July 20 1999, the Company issued an aggregate of 125,000 shares
of "restricted" (as that term is defined under Rule 144 of the
Securities Act of 1933) Common Stock to four accredited investors,
resulting in net proceeds of approximately $125,000 to the Company.
The issuance was conducted under an exemption provided by Rule 506
of Regulation D promulgated under the Securities Act of 1933 and
Section 4(2) of the Securities Act of 1933.
On August 10, 1999, the Company issued 12,500 shares of "restricted"
(as that term is defined under Rule 144 of the Securities Act of
1933) Common Stock to MRC Legal Services Corp., the Company's
securities counsel, in consideration for legal services rendered.
The issuance was exempt under Section 4(2) of the Securities Act of
1933.
ITEM 5 - INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Corporation Laws of the State of Nevada and the Company's Bylaws
provide for indemnification of the Company's Directors for
liabilities and expenses that they may incur in such capacities. In
general, Directors and Officers are indemnified with respect to
actions taken in good faith in a manner reasonably believed to be
in, or not opposed to, the best interests of the Company, and with
respect to any criminal action or proceeding, actions that the
indemnitee had no reasonable cause to believe were unlawful.
Furthermore, the personal liability of the Directors is limited as
provided in the Company's Articles of Incorporation.
<PAGE>
PART F/S
INDEX TO FINANCIAL STATEMENTS
The Financial Statements required by this Item are included at the
end of this report beginning on page F-1 as follows:
POPstar Communications, Inc., formerly known as Cherokee
Leather, Inc. Audited Financial Statements for the
Years ended December 31, 1997 and 1998 . . . . . . . . . . . F-1
Financial Statements of POPstar Communications,
Inc., formerly known as Cherokee Leather, Inc.,
for the six months ended June 30, 1999 (Unaudited) . . . . F-15
POPstar Global Communications Inc. Audited Financial
Statements for the period from incorporation on
December 17, 1998 to December 31, 1998
and Consolidated Financial Statements for the
six months ended June 30, 1999 (Unaudited) . . . . . . . . . F-23
POPstar Communications, Inc. Pro Forma Combined
Statement of Operations for the Year ended
December 31, 1998 (Unaudited). . . . . . . . . . . . . . . . F-34
POPstar Communications, Inc. Pro Forma
Financial Statements for the six months ended
June 30, 1999 (Unaudited). . . . . . . . . . . . . . . . . . F-37
<PAGE>
PART III
ITEM 1 - INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
2.1 Acquisition Agreement between
POPstar Communications, Inc. and
POPstar Global Communications Inc.,
dated July 13, 1999
3.1 Articles of Incorporation
3.2 Amended Articles of Incorporation,
filed with the Nevada Secretary of
State on May 19, 1999
3.3 Bylaws of the Company
10.1 Telecommunications Services Agreement by and
between INNOSYS COMMUNICATIONS, INC. and
POPstar Global Communications, Inc., dated
December 18, 1998
10.2 Licensing Agreement between TGI Technologies
Ltd. and POPstar Global Communications,
Inc., dated January 11, 1999
10.3 Services Agreement by and between TGI
Technologies Ltd. and POPstar Global
Communications, Inc., dated January 11, 1999
10.4 Promissory Note in the amount of U.S.
$1,000,000 between TGI Technologies Ltd. and
POPstar Global Communications, Inc., dated
March 30, 1999
10.5 Employment agreement by and between POPstar
Global Communications, Inc. and Don Lau,
dated July 20, 1999
10.6 Employment agreement by and between POPstar
Global Communications, Inc. and John
McDermott, dated July 20, 1999
10.7 Employment agreement by and between POPstar
Global Communications, Inc. and Thompson
Chu, dated July 20, 1999
10.8 Services Agreement by and between
TransNexus, LLC and POPstar Global
Communications, Inc., dated August 10, 1999
ITEM 2 - DESCRIPTION OF EXHIBITS
Not applicable
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.
POPSTAR COMMUNICATIONS, INC.
Date: September 1, 1999 By: /s/ John McDermott
John McDermott
President & Chief
Executive Officer
<PAGE>
BARRY L. FRIEDMAN, P.C.
Codified Public Accountant
1582 TULITA DRIVE OFFICE (702) 361-8414
LAS VEGAS, NEVADA 89123 FAX NO. (702) 896-0278
To Whom It May Concern: March 10, 1999
The firm of Barry L. Friedman, P.C., Certified Public Accountant consents to
the inclusion of their report of March 10, 1999, on the Financial Statements
of Cherokee Leather, Inc., as of December 31, 1998, in any filings that are
necessary now or in the near future with the U.S. Securities and Exchange
Commission.
Very truly yours,
/s/Barry L. Friedman
Certified Public Accountant
F-1
<PAGE>
Cherokee Leather, Inc.
(A Development Stage Company)
FINANCIAL STATEMENTS
December 31, 1998
December 31, 1997
December 31, 1996
F-2
<PAGE>
TABLE OF CONTENTS
PAGE #
INDEPENDENT AUDITORS REPORT 1
ASSETS 2
LIABILITIES AND STOCKHOLDERS' EQUITY 3
STATEMENT OF OPERATIONS 4
STATEMENT OF STOCKHOLDERS' EQUITY 5
STATEMENT OF CASH FLOWS 6
NOTES TO FINANCIAL STATEMENTS 7-11
F-3
<PAGE>
BARRY L. FRIEDMAN, P.C.
Certified Public Accountant
1582 TULITA DRIVE OFFICE (702) 361-8414
LAS VEGAS, NEVADA 89123 FAX NO. (702) 896-0278
INDEPENDENT AUDITORS' REPORT
Board of Directors March 10, 1999
Cherokee Leather, Inc.
Las Vegas, Nevada
I have audited the accompanying Balance Sheets of Cherokee Leather, Inc. (A
Development Stage Company), as of December 31, 1998, December 31, 1997, and
December 31, 1996, and the related statements of operations, stockholders,
equity and cash flows for the three years ended December 31, 1998, December
31, 1997, and December 31, 19.96. These financial statements are the
responsibility of the Company's management. My responsibility is to express
an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audit provides a
reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cherokee Leather, Inc. (A
Development stage Company), as of December 31, 1998, December 31, 1997, and
December 31, 1996, and the results of its operations and cash flows for the
three years ended December 311 1998, December 31, 1997, and December 31,
1996, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared. assuming the
Company will continue as a going concern. As discussed in Note #5 to the
financial statements, the Company has suffered recurring losses from
operations and has no established source of revenue. This raises
substantial doubt about its ability to continue as a going concern.
Management's plan in regard to these matters is described in Note #5. These
financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
/s/Barry L. Friedman
Certified Public Accountant
F-4
<PAGE>
Cherokee Leather,, Inc.
(A Development Stage Company)
BALANCE SHEET
ASSETS
<TABLE>
<S> <C> <C> <C>
December December December
31, 1998 31, 1997 31, 1996
CURRENT ASSETS: $ 0 $ 0 $ 0
TOTAL CURRENT ASSETS: $ 0 $ 0 $ 0
OTHER ASSETS:
Organization Costs (Net) $ 108 $ 180 $ 252
TOTAL OTHER ASSETS: 108 $ 180 $ 252
TOTAL ASSETS $ 180 $ 180 $ 252
</TABLE>
See accompanying notes to financial statements & audit report
F-5
<PAGE>
Cherokee Leather, Inc.
(A Development Stage Company)
BALANCE SHEET
LIABILITIES AND STOCKOLDERS' EQUITY
<TABLE>
<S> <C> <C> <C>
December December December
31, 1998 31, 1997 31, 1996
CURRENT LIABILITIES:
Officers' Advances (Note #5) $ 2,392 $ 320 $ 235
TOTAL CURRENT LIABILITIES: $ 2,392 $ 320 $ 235
STOCKHOLDERS' EQUITY: (Note #4)
Common stock
Par value $0.001
Authorized 50,000,000 shares
Issued and outstanding at
December 31, 1996
5,800,000 shares: $ 5,800
December 31, 1997
5,800,000 shares: $ 5,800
December 31, 1998
5,800,000 shares: $ 5,800
Additional Paid-In Capital 0 0 0
ACCUMULATED LOSS: -8,084 -5,940 -5,783
TOTAL STOCKHOLDERS' EQUITY: $-2,284 $ -140 $ +17
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY: $ 108 $ 180 $ 252
See accompanying notes to financial statements & audit report
F-6
<PAGE>
Cherokee Leather, Inc.
(A Development Stage Company)
STATEMENT OF OPERATIONS
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Year Year Year Jun.19,1995
Ended Ended Ended (Inception)
Dec. 31, Dec. 31, Dec. 31, to Dec. 31,
1998 1997 1996 1998
INCOME:
Revenue $ 0 $ 0 $ 0 $ 0
EXPENSES:
General, Selling and
Administrative: $ 2,072 $ 85 $ 235 $ 7,832
Amortization: 72 72 72 252
TOTAL EXPENSES: $ 2,144 $ 157 $ 307 $ 8,084
NET PROFIT/LOSS (-): $-2,144 $ -157 $ -307 $-8,084
Net Profit/Loss(-)
per weighted share
(Note 1): $-.0004 $ NIL $ NIL $-.0014
Weighted average
Number of common
shares outstanding: 5,800,000 5,800,000 5,800,000 5,800,000
</TABLE>
See accompanying notes to financial statements & audit report
F-7
<PAGE>
Cherokee Leather, Inc.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C> <C> <C>
Additional Accumu-
Common Stock paid-in lated
Shares Amount Capital Deficit
Balance,
December 31, 1995 $5,800,000 $ 5,800 $ 0 $-5,476
Net loss year ended
December 31, 1996 -307
Balance,
December 31, 1996 $5,800,000 $ 5,800 $ 0 $-5,783
Net loss year ended
December 31, 1997 -157
Balance,
December 31, 1997 $5,800,000 $ 5,800 $ 0 $-5,940
Net loss year ended
December 31, 1998 -2,144
Balance,
December 31, 1998 5,800,000 $ 5,800 $ 0 $-8,084
See accompanying notes to financial statements & audit report
F-8
<PAGE>
CHEROKEE Leather, Inc.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Year Year Year Jun.19,1995
Ended Ended Ended (Inception)
Dec. 31, Dec. 31, Dec. 31, to Dec. 31,
1998 1997 1996 1998
Cash Flows from
Operating Activities
Net Loss $-2,144 $ -157 $ -307 $-8,084
Adjustment to
Reconcile net loss
To net cash provided
by operating
Activities:
Amortization: +72 +72 +72 +252
Changes in assets and
Liabilities:
Organization Costs: 0 0 0 -360
Increase in current
Liabilities:
Officers' Advances: +2,072 +85 +235 +2,392
Net cash used in
Operating activities: $ 0 $ 0 $ 0 $-5,800
Cash Flows from
Investing Activities: 0 0 0 0
Cash Flows from
Financing Activities:
Issuance of Common
Stock for Cash 0 0 0 +5,800
Net Increase (decrease) $ 0 $ 0 $ 0 $ 0
Cash,
Beginning of period: 0 0 0 0
Cash, End of Period: $ 0 $ 0 $ 0 $ 0
See accompanying notes to financial statements & audit report
F-9
<PAGE>
Cherokee Leather, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1998, December 31, 1997, and December 31, 1996
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized June 19, 1995, under the laws of the State of
Nevada as Cherokee Leather, Inc. The Company currently has no operations and
in accordance with SFAS #7, is considered a development company.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Method
The Company records income and expenses on the accrual method.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported .amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and equivalents
The company maintains a cash balance in a non-interest-bearing bank that
currently does not exceed federally insured limits. For the purpose of the
statements of cash flows, all highly liquid investments with the maturity
of three months or less are considered to be cash equivalents. There are
no cash equivalents as of December 31, 1998.
F-10
<PAGE>
Cherokee Leather, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998, December 31, 1997, and December 31, 1996
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
Income taxes are provided for using the liability method of accounting in
accordance with Statement of Financial Accounting Standards No. 109 WAS
4109) "Accounting for Income Taxes". A deferred tax asset or liability is
recorded for all temporary difference between financial and tax reporting.
Deferred tax expense (benefit) results from the net change during the year
of deferred tax assets and liabilities.
Organization Costs
Costs incurred to organize. the Company are, being amortized on a
straight-line basis over a sixty-month period.
Loss Per Share
Net loss per share is provided in accordance with Statement of Financial
Accounting Standards No. 128 (SFAS #128) "Earnings Per Share". Basic loss
per share is computed by dividing losses available to common stockholders by
the weighted average number of common shares outstanding during the period.
Diluted lose per share reflects per share amounts that would have resulted
if dilative common stock equivalents had been converted to common stock. As
of December 31, 1998, the company had no dilative common stock equivalents
such as stock options.
Year End
The Company has selected December 31st as its year-end.
F-11
<PAGE>
Cherokee Leather, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS CONTINUED
December 31, 1998, December 31, 1997, and December 31, 1996
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Year 2000 Disclosure
The year 2000 issue is the result of computer programs .being written using
two digits rather than four to define the applicable year. Computer programs
that have time sensitive software may recognize a date using 11001, as the
year 1900 rather than the year 2000. This, could result in a system failure
or miscalculations causing disruption of normal business activities. Since
the Company currently has no operating business and does not use any
computers, and since it has no customers, suppliers or other constituents,
there are no material Year 2000 concerns.
NOTE 3 - INCOME TAXES
There is no provision for income taxes for the period ended December 31,
1998, due to the net lose and no state income tax in Nevada, the state of
the Company's domicile and operations. The Company's total deferred tax
asset as of December 31, 1998 is as follows:
Net operation loss carry forward $ 8,084
valuation allowance $ 8,084
Net deferred tax asset $ 0
The federal net operation loss carry forward will expire in various amounts
from 2015 to 2018.
This carry forward may be limited upon the consummation of a business
combination under IRC Section 381.
F-12
<PAGE>
Cherokee Leather, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
December 31, 1998, December 31, 1997, and December 31, 1996
NOTE 4 - STOCKHOLDERS' EQUITY
Common Stock
The authorized common stock of the corporation consists of 50,000,000 shares
with a par value of $0.001 per share.
Preferred Stock
The corporation has no preferred stock.
On June 19, 1995, the Company issued 5,800,000 shares of its $0,001 par
value common stock in consideration of $5,800 in cash.
NOTE 5 - GOING CONCERN
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. However, the Company does not have significant cash or other
material assets, nor does it have an established source of revenues
sufficient to cover its operating costs and to allow it to continue as a
going concern. It is the intent of the Company to seek a merger with an
existing, operating company. Until that time, the stockholders/officers and
or directors have committed to advancing the operating costs of the Company
interest free.
F-13
<PAGE>
CHEROKEE LEATHER, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1998, December 31, 1997; and December 31, 1996
NOTE 6 - RELATED PARTY TRANSACTIONS
The Company neither owns nor leases any real or personal property. An
officer of the corporation provides office services without charge. Such
costs are immaterial to the financial statements and accordingly, have not
been reflected therein. The officers and directors of the Company are
involved in other business activities and may, in the f future, become
involved in other business opportunities. If a specific business opportunity
becomes available,, such persons may face a conflict in selecting between
the Company and their other business interests. The Company has not
formulated a policy for the resolution of such conflicts.
NOTE 7 - WARRANTS AND OPTIONS
There are no warrants or options outstanding to acquire any additional,
shares of common stock.
F-14
<PAGE>
Financial Statements
POPSTAR COMMUNICATIONS, INC.
(Formerly Cherokee Leather, Inc.)
(A Development Stage Company)
(Expressed in U.S. Dollars)
Six months ended June 30, 1999
(Unaudited)
F-15
<PAGE>
POPSTAR COMMUNICATIONS, INC.
(Formerly Cherokee Leather, Inc.)
(A Development Stage Company)
</TABLE>
<TABLE>
<S> <C> <C>
Balance Sheet
(Expressed in U.S. Dollars)
(Unaudited)
June 30, 1999, with comparative figures for 1998
1999 1998
Assets
Other assets $ 72 $ 144
Liabilities and Shareholders' Deficiency
Officers' advances $2,517 $ 320
Shareholders' deficiency:
Capital stock (note 3) 5,800 5,800
Deficit (8,245) (5,976)
_______ _______
(2,445) (176)
Going concern (note 1)
Contingency (note 5)
Subsequent event (note 6)
$ 72 $ 144
</TABLE>
See accompanying notes to financial statements.
F-16
<PAGE>
POPSTAR COMMUNICATIONS, INC.
(Formerly Cherokee Leather, Inc.)
(A Development Stage Company)
Statement of Operations and Deficit
(Expressed in U.S. Dollars)
(Unaudited)
<TABLE>
<S> <C> <C>
Six months ended June 30, 1999, with comparative figures for 1998
1999 1998
Revenues $ - $ -
Expenses:
Amortization 36 36
Office 125 -
_______ _______
161 36
Net loss 161 36
Deficit, beginning of period 8,084 5,940
Deficit, end of period $8,245 $5,976
Basic loss per weighted share (note 2(c)) $ - $ -
Weighted average number of common shares
outstanding 5,800,000 5,800,000
</TABLE>
See accompanying notes to financial statements.
F-17
<PAGE>
POPSTAR COMMUNICATIONS, INC.
(Formerly Cherokee Leather, Inc.)
(A Development Stage Company)
Statement of Cash Flows
(Expressed in U.S. Dollars)
(Unaudited)
<TABLE>
<S> <C> <C>
Six months ended June 30, 1999, with comparative figures for 1998
1999 1998
Cash flows from operating activities:
Net loss $(161) $(36)
Amortization, an item not involving cash 36 36
Changes in non-cash operating working capital 125 -
Cash, beginning and end of period $ - $ -
</TABLE>
See accompanying notes to financial statements.
F-18
<PAGE>
POPSTAR COMMUNICATIONS, INC.
(Formerly Cherokee Leather, Inc.)
(A Development Stage Company)
Notes to Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
Six months ended June 30, 1999
The Company was incorporated on June 19, 1995 under the laws of the
State of Nevada as Cherokee Leather, Inc. On May 17, 1999 the Company
changed its name to POPstar Communications, Inc. The Company currently
has no operations and in accordance with SFAS #7, is considered a
development stage company.
In the opinion of Management, the accompanying unaudited financial
statements of the Company contain all adjustments which are of a normal
recurring nature necessary to present fairly the financial position as
of June 30, 1999, and the results of operations and cash flows for the
periods indicated. Interim financial results are not necessarily
indicative of operating results for an entire year.
1. Going concern:
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates
the realization of assets and liquidation of liabilities in the normal
course of business. However the Company has no cash or other material
assets, nor does it have an established source of revenue sufficient to
cover its operating costs and to allow it to continue as a going
concern. Subsequent to period end, the Company acquired all the issued
and outstanding common and preferred shares of POPstar Global
Communications Inc. ("POPstar") (note 6), however, there is no guarantee
that the acquisition of POPstar will result in revenues or funds loaned
to the Company sufficient to cover its operating costs.
2. Significant accounting policies:
(a) Income taxes:
Income taxes will be provided for using the liability method of
accounting in accordance with Statement of Financial Accounting
Standards No. 109 (SFAS #109) "Accounting for Income Taxes". A deferred
tax asset or liability will be recorded for all temporary differences
between financial and tax reporting.
(b) Use of estimates:
The preparation of the financial statements, in conformity with
generally accepted accounting principles, requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingencies at the date of the
consolidated financial statements and the reported amounts of revenues
and expenses during the reporting period.
Assumptions underlying these estimates are limited by the availability
of reliable data and the uncertainty of predictions concerning future
events. Consequently, the estimates and assumptions made do not
necessarily result in a precise determination of reported amounts.
Actual results could differ from those estimates.
F-19
<PAGE>
POPSTAR COMMUNICATIONS, INC.
(Formerly Cherokee Leather, Inc.)
(A Development Stage Company)
Notes to Financial Statements, page 2
(Expressed in U.S. Dollars)
(Unaudited)
Six months ended June 30, 1999
2. Significant accounting policies (continued):
(c) Loss per share:
Net loss per share is provided in accordance with Statement of Financial
Accounting Standards No. 128 "Earnings Per Share". Basic loss per share
is computed by dividing losses available to common stockholders by the
weighted average number of common shares outstanding during the period.
Diluted loss per share reflects per share amounts that would have
resulted if dilative common stock equivalents had been converted to
common stock. As of June 30, 1999, the Company had no dilative common
stock equivalents such as stock options.
3. Capital stock:
Authorized:
50,000,000 common voting shares with par value of $0.001 per share
1999 1998
Issued and outstanding:
5,800,000 common shares $ 5,800 $ 5,800
Subsequent to period end:
(a) The Company canceled 2,400,000 common shares held by its affiliates;
(b) The Company issued 22,500 common shares to the Company's securities
counsel in consideration for legal services rendered;
(c) The Company issued 12,875,000 common shares to the shareholders of
POPstar to acquired all POPstar's issued and outstanding shares (note
6); and
(d) The Company issued 125,000 common shares for total proceeds of
$125,000.
F-20
<PAGE>
POPSTAR COMMUNICATIONS, INC.
(Formerly Cherokee Leather, Inc.)
(A Development Stage Company)
Notes to Financial Statements, page 3
(Expressed in U.S. Dollars)
(Unaudited)
Six months ended June 30, 1999
4. Income taxes:
There is no 0provision for income taxes for the period ended June 30,
1999, due to the loss and no state income tax in Nevada, the state of
the Company's domicile and operations. The Company's total deferred tax
asset as of June 30, 1999 is as follows:
1999 1998
Deferred tax asset 2,886 $2,092
Valuation allowance (2,886) (2,092)
_______ ________
Net deferred tax asset $ - $ -
The federal net operating loss carry forward will expire in various
amounts from 2010 to 2019 but may be limited under IRC Section 381 upon
the consummation of a business combination.
5. Uncertainty due to the Year 2000 issue:
The Year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in errors
when information using year 2000 dates is processed. In addition,
similar problems may arise in some systems which use certain dates in
1999 to represent something other than a date. The effects of the Year
2000 Issue may be experienced before, on, or after January 1, 2000, and,
if not addressed, the impact on operations and financial reporting may
range from minor errors to significant systems failure which could
affect an entity's ability to conduct normal business operations. It is
not possible to be certain that all aspects of the Year 2000 Issue
affecting the Company, including those related to the efforts of
customers, suppliers, or other third parties, will be fully resolved.
6. Subsequent event:
On July 20, 1999, the Company acquired all the issued and outstanding
common and preferred shares of POPstar in exchange for 12,875,000 common
shares of the Company. The common shares of the Company cannot be sold
until July 20, 2000 except pursuant to an effective registration
statement under the United States Securities Act of 1933 and any
applicable State laws or upon the express written agreement of the
Company. Upon completion of the transaction, shareholders of POPstar
owned 79% of the issued and outstanding common shares of the Company.
Accordingly, the transaction will be accounted for using the purchase
method as an acquisition of the Company by POPstar for the net book
value of the net identifiable assets of the Company.
F-21
<PAGE>
POPSTAR COMMUNICATIONS, INC.
(Formerly Cherokee Leather, Inc.)
(A Development Stage Company)
Notes to Financial Statements, page 4
(Expressed in U.S. Dollars)
(Unaudited)
Six months ended June 30, 1999
6. Subsequent event (continued):
A summary of the pro forma financial information assuming the companies
had combined at the beginning of the period is as follows:
Six months
ended
June 30, 1999
Revenue $ 19,926
Net loss $1,048,366
Basic loss per share $ 0.06
F-22
<PAGE>
Consolidated Financial Statements of
POPSTAR GLOBAL COMMUNICATIONS INC.
(A Development Stage Company)
(Expressed in U.S. Dollars)
Six months ended June 30, 1999 (unaudited)
Period from incorporation on December 17, 1998 to December 31, 1998
F-23
<PAGE>
KPMG LLP
Chartered Accountants Telephone (604) 691-3000
Box 10426 777 Dunsmuir Street Telefax (604) 691-3031
Vancouver BC V7Y 1K3 www.kpmg.ca
Canada
Auditors' Report
To the Board of Directors
POPstar Global Communications Inc.
We have audited the balance sheet of POPstar Global Communications Inc. (A
Development Stage Company) as at December 31, 1998 and the statements of
operations and deficit and cash flows for the period from incorporation on
December 17, 1998 to December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan and
perform an audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 1998 and
the results of its operations and its cash flows for the period then ended
in accordance with generally accepted accounting principles in the United
States.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in note 1 to the
financial statements, the Company has suffered losses from operations and
has no established source of revenue. This raises substantial doubt about
its ability to continue as a going concern. Management's plan in regard to
these matters is described in note 1. These financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/KPMG LLP
Chartered Accountants
Vancouver, Canada
July 28, 1999
F-24
<PAGE>
POPSTAR GLOBAL COMMUNICATIONS INC.
(A Development Stage Company)
Consolidated Balance Sheet
(Expressed in U.S. Dollars)
<TABLE>
<S> <C> <C>
June 30, December 31,
1999 1998
(unaudited)
Assets
Current assets:
Cash $ 647,985 $ -
Note receivable from a common controlled company (note 3) 1,000,000 -
Prepaid expenses 393 -
___________ _____
$1,648,378 $ -
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 214,210 $ -
Payable to common controlled companies (note 4) 493,647 -
__________ ____
707,857 -
Shareholders' equity:
Capital stock (note 5) 1,988,732 -
Deficit (1,048,211) -
___________ ____
940,521 -
Going concern (note 1)
Commitment (note 8)
Contingency (note 9)
Subsequent event (note 10)
$1,648,378 $ -
</TABLE>
See accompanying notes to consolidated financial statements.
F-25
<PAGE>
POPSTAR GLOBAL COMMUNICATIONS INC.
(A Development Stage Company)
Consolidated Statement of Operations and Deficit
(Expressed in U.S. Dollars)
<TABLE>
<S> <C> <C>
Period from
incorporation
on
Six months December 17,
ended 1998 to
June 30, December 31,
1999 1998
(unaudited)
Revenues:
Interest income (note 3) $ 19,926 $ -
Expenses:
Accounting fees 9,000 -
Bank interest and charges 1,298 -
Commission 72,917 -
Foreign exchange loss 588 -
Legal and professional fees 227,064 -
License fee (note 6(a)) 189,247 -
Management fee 1,950 -
Office (note 6(b)) 147,956 -
Rent 10,781 -
Salaries and wages 29,254 -
Sales and marketing fees (note 6(b)) 24,379 -
Software development (note 6(b)) 254,878 -
Travel and entertainment (note 6(b)) 98,825 -
_____________ ______
1,068,137 -
Net loss 1,048,211 -
Deficit, beginning of period - -
Deficit, end of period $1,048,211 $ -
Basic and diluted loss per weighted share (note 2(e)) $ 0.11 $ -
Weighted average number of common shares outstanding 9,688,767 -
</TABLE>
See accompanying notes to consolidated financial statements.
F-26
<PAGE>
POPSTAR GLOBAL COMMUNICATIONS INC.
(A Development Stage Company)
Consolidated Statement of Cash Flows
(Expressed in U.S. Dollars)
<TABLE>
<S> <C> <C>
Period from
incorporation
Six months on December 17,
ended 1998 to
June 30, December 31,
1999 1998
(unaudited)
Cash flows from operating activities:
Net loss (1,048,211) $ -
Changes in non-cash operating working capital 213,817 -
____________ ______
(834,394)
Cash flows from financing activities:
Note receivable from a common controlled company (1,000,000) -
Payable to common controlled companies 493,647 -
Issuance of capital stock 1,988,732 -
_____________ ______
1,482,379 -
Increase in cash 647,985
Cash, beginning of period - -
Cash, end of period 647,985 $ -
</TABLE>
See accompanying notes to consolidated financial statements.
F-27
<PAGE>
POPSTAR GLOBAL COMMUNICATIONS INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
Six months ended June 30, 1999 (unaudited) and
Period from incorporation on December 17, 1998 to
December 31, 1998
The Company was incorporated in the British Virgin
Islands as an International Business Company on December
17, 1998. The Company is a provider of Internet based
facsimile transmission technology and is currently in the
process of field testing its services, as such, it is
considered a development stage company.
In the opinion of Management, the accompanying unaudited
financial statements of the Company contain all
adjustments which are of a normal recurring nature
necessary to present fairly the financial position as of
June 30, 1999, and the results of operations and cash
flows for the period indicated. Interim financial
results are not necessarily indicative of operating
results for an entire year.
1. Going concern:
The Company's financial statements are prepared using
generally accepted accounting principles applicable to a
going concern which contemplates the realization of
assets and liquidation of liabilities in the normal
course of business. However the Company does not have an
established source of revenue sufficient to cover its
operating costs and to allow it to continue as a going
concern. During the period, the Company issued shares
for cash (note 5) and commenced development of certain
licensed software (note 6), however there is no guarantee
that the licensed software will result in revenues
sufficient to cover its operating costs or that proceeds
received from the issuance of shares or other sources
will maintain the Company until that time.
2. Significant accounting policies:
(a) Basis of presentation:
The consolidated financial statements include the
accounts of the Company and its inactive subsidiary,
POPstar Communications Asia Pacific Ltd.
(b) Software development:
Software development costs are expensed as incurred
unless they meet generally accepted accounting criteria
for deferral and amortization. The Company assesses
whether it has met the relevant criteria for deferral and
amortization at each reporting date. No such
expenditures meet these criteria in the current period.
(c) Income taxes:
Income taxes will be provided for using the liability
method of accounting in accordance with Statement of
Financial Accounting Standards No. 109 (SFAS #109)
"Accounting for Income Taxes". A deferred tax asset or
liability will be recorded for all temporary differences
between financial and tax reporting.
F-28
<PAGE>
POPSTAR GLOBAL COMMUNICATIONS INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements, page 2
(Expressed in U.S. Dollars)
Six months ended June 30, 1999 (unaudited) and
Period from incorporation on December 17, 1998 to
December 31, 1998
2. Significant accounting policies (continued):
(d) Use of estimates:
The preparation of the consolidated financial statements,
in conformity with generally accepted accounting
principles, requires management to make estimates and
assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingencies at the
date of the consolidated financial statements and the
reported amounts of revenues and expenses during the
reporting period.
Assumptions underlying these estimates are limited by the
availability of reliable data and the uncertainty of
predictions concerning future events. Consequently, the
estimates and assumptions made do not necessarily result
in a precise determination of reported amounts. Actual
results could differ from those estimates.
(e) Loss per share:
Net loss per share is provided in accordance with
Statement of Financial Accounting Standards No. 128
"Earnings Per Share". Basic loss per share is computed
by dividing losses available to common shareholders by
the weighted average number of common shares outstanding
during the period. Diluted loss per share reflects per
share amount that would have resulted if the preferred
shares had been converted to common stock.
As at June 30, 1999, the 2,375,000 issued and
outstanding preferred shares are not included in the
computation of diluted loss per share because to do so
would have been anti-dilutive for the period presented.
3. Note receivable from a common controlled company:
The note receivable from TGI Technologies Ltd. ("TGI") is
unsecured and bears interest at 8% per annum. Both TGI
and the Company have greater than 50% of their respective
voting shares owned by the same group of shareholders.
The funds were loaned to TGI on March 30, 1999 from
monies received on the issuance of shares of the Company.
The principal and any outstanding accrued interest are
due on the earlier of demand by the Company or March 30,
2001. During the period, the Company received interest
income of $19,726 from TGI. Subsequent to year end, the
Company entered into License and Service Agreements with
TGI as described in note 6.
4. Payable to common controlled companies:
The payables to common controlled companies are
non-interest bearing, unsecured and have no specific
terms of repayment.
F-29
<PAGE>
POPSTAR GLOBAL COMMUNICATIONS INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements, page 3
(Expressed in U.S. Dollars)
Six months ended June 30, 1999 (unaudited) and
Period from incorporation on December 17, 1998 to
December 31, 1998
5. Capital stock:
Authorized:
100,000,000 common voting shares with no par value
10,000,000 preferred voting shares with no par value
<TABLE>
<S> <C> <C>
Shares Amount
Issued and outstanding:
Common share issued for cash - $ -
______ _______
Balance, December 31, 1998 - -
Common shares issued for cash at $0.000911 per share 10,500,000 9,565
Preferred shares issued for cash at $0.833333 per share 2,375,000 1,979,167
___________ __________
Balance, June 30, 1999 $1,988,732
(a) The Company was incorporated in December 1998
with an authorized share capital of 5,000,000 common
voting shares with no par value. No shares were issued
prior to December 31, 1998.
(b) On January 21, 1999, the Company increased its
authorized share capital to 100,000,000 common voting
shares without par value and 10,000,000 preferred voting
shares without par value. At the option of the
shareholder, each preferred share may be converted into
one common share.
(c) On January 1, 1999 and February 17, 1999, the
Company issued a total of 10,500,000 common shares for
total proceeds of $9,565.
(d) On March 29, 1999 and June 30, 1999, the Company
issued a total of 2,375,000 preferred shares for total
proceeds of $1,979,167.
(e) On January 12, 1999, the Company committed an
additional 625,000 and 3,000,000 preferred shares to be
issued not later than October 31, 1999 and March 31,
2000, respectively, for total cash proceeds of $3,020,833.
(f) On January 12, 1999, the Company granted an option to a
shareholder to acquire up to 1,000,000 preferred shares
at an amount equal to $0.833333 per preferred share. The
payment for the acquisition would be an exchange of the
preferred shares for an assignment of debt due to the
shareholder from a company under common control.
F-30
<PAGE>
POPSTAR GLOBAL COMMUNICATIONS INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements, page 4
(Expressed in U.S. Dollars)
Six months ended June 30, 1999 (unaudited) and
Period from incorporation on December 17, 1998 to
December 31, 1998
6. Related party transactions:
(a) On January 11, 1999, the Company entered into a
Licensing Agreement with TGI, whereby the Company has
been granted the exclusive commercial exploitation rights
to certain Internet fax server software (the "Software").
Under this license, the Company has agreed to pay a
percentage of the net sales resulting from the commercial
activities of the Software, subject to a specified
annually minimum, as follows:
</TABLE>
<TABLE>
<S> <C> <C>
Calendar Percentage Annual
year of net sales minimum
1999 8% $400,000
2000 6% 600,000
2001 4% 500,000
2002 2% 500,000
</TABLE>
During the period, the Company paid a total of $189,247
in license fees to TGI.
(b) In addition, the Company has entered into an
agreement with TGI whereby TGI will provide technical
assistance, software development, marketing, management
and other services, as required. The charge is based on
TGI's direct and indirect costs of the services provided
plus 15%.
During the period, the Company incurred service fees
under this agreement totalling $501,068.
7. Income taxes:
There is no provision for income taxes for the period
ended June 30, 1999, due to the loss and no state income
tax in Nevada. The Company's total deferred tax asset as
of June 30, 1999 is as follows:
Deferred tax asset $366,874
Valuation allowance (366,874)
__________
Net deferred tax asset $ -
The net operating loss carry forward will expire in 2019,
but may be limited under IRC Section 381 upon the
consummation of a business combination.
F-31
<PAGE>
POPSTAR GLOBAL COMMUNICATIONS INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements, page 5
(Expressed in U.S. Dollars)
Six months ended June 30, 1999 (unaudited) and
Period from incorporation on December 17, 1998 to
December 31, 1998
8. Commitment:
On August 10, 1999, the Company entered into a
non-exclusive, royalty free Service Agreement with
TransNexus, LLC, a company incorporated under the laws of
the State of Georgia. Under the terms of the Agreement,
TransNexus, LLC will provide financial transaction
settlement services and billing information to Internet
Service Providers ('ISP') using the Company's technology
in exchange for a percentage of the billings. As of
today, the charging rates are still under negotiation and
have not yet been finalized.
9. Uncertainty due to the Year 2000 issue:
The Year 2000 Issue arises because many computerized
systems use two digits rather than four to identify a
year. Date-sensitive systems may recognize the year 2000
as 1900 or some other date, resulting in errors when
information using year 2000 dates is processed. In
addition, similar problems may arise in some systems
which use certain dates in 1999 to represent something
other than a date. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000,
and, if not addressed, the impact on operations and
financial reporting may range from minor errors to
significant systems failure which could affect an
entity's ability to conduct normal business operations.
It is not possible to be certain that all aspects of the
Year 2000 Issue affecting the Company, including those
related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
10. Subsequent event:
On July 20, 1999, POPstar Communications, Inc. ("POPS")
(formerly named Cherokee Leather, Inc.) acquired all the
issued and outstanding common and preferred shares of the
Company in exchange for 12,875,000 common shares of POPS.
The common shares of POPS cannot be sold until July 20,
2000 except pursuant to an effective registration
statement under the United States Securities Act of 1933
and any applicable State laws or upon the express written
agreement of the Company. Upon completion of the
transaction, shareholders of the Company owned 79% of the
issued and outstanding common shares of POPS.
Accordingly, the transaction will be accounted for using
the purchase method as an acquisition of POPS by the
Company for the net book value of the net identifiable
assets of POPS.
F-32
<PAGE>
POPSTAR GLOBAL COMMUNICATIONS INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements, page 6
(Expressed in U.S. Dollars)
Six months ended June 30, 1999 (unaudited) and
Period from incorporation on December 17, 1998 to
December 31, 1998
10. Subsequent event (continued):
A condensed unaudited balance sheet of POPS as at July
20, 1999 is as follows:
<TABLE>
<S> <C>
Assets $ 72
_________
Current liabilities 2,517
Shareholders' equity:
Share capital 5,800
Deficit (8,245)
_________
(2,445)
_________
$ 72
A summary of the pro forma financial information assuming the companies
had combined at the beginning of the period is as follows:
Six months
ended
June 30, 1999
Revenue $ 19,926
Net loss $1,048,366
Basic loss per share $ 0.06
F-33
<PAGE>
Pro Forma Combined Statement of Operations
POPSTAR COMMUNICATIONS, INC.
(Formerly Cherokee Leather, Inc.)
(Expressed in U.S. Dollars)
Year ended December 31, 1998
(Unaudited)
F-34
<PAGE>
POPSTAR COMMUNICATIONS, INC.
(Formerly Cherokee Leather, Inc.)
Pro Forma Combined Statement of Operations
(Expressed in U.S. Dollars)
(Unaudited)
Year ended December 31, 1998
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Pro forma
POPstar POPstar Global adjustment
Communications, Inc. Communications Inc. -acquisition Total
(see note 3)
Revenue $ - $ - $ - $ -
Expenses:
General, selling
and administrative 2,072 - - 2,072
Amortization 72 - - 72
________ _____ _____ _______
2,144 - - 2,144
Loss for the year $2,144 $ - - $2,144
</TABLE>
See accompanying notes to pro forma combined statement of operations.
F-35
<PAGE>
POPSTAR COMMUNICATIONS, INC.
(Formerly Cherokee Leather, Inc.)
Notes to Pro Forma Combined Statement of Operations
(Expressed in U.S. Dollars)
(Unaudited)
Year ended December 31, 1998
1. BASIS OF PRESENTATION:
The pro forma combined statement of operations of the Company
is based upon the historical statement of operations of the
Company adjusted to give effect to the transactions described
in note 3. This pro forma combined statement of operations is
not necessarily indicative of the results of operations that
would have been attained had the transaction actually taken
place at the date indicated and do not purport to be
indicative of the effects that may be expected to occur in the
future.
The pro forma combined statement of operations has been
prepared to reflect the transactions described in note 3 from
the following financial information:
(a) the audited statement of operations of the Company for the
year ended December 31, 1998; and
(b) the audited statement of operations of POPstar Global
Communications Inc. ("POPstar") for the period from
incorporation on December 17, 1998 to December 31, 1998. A
statement of operations for the period ended December 31, 1998
is not presented as POPstar had no operations in the period.
2. SIGNIFICANT ACCOUNTING POLICIES:
The significant accounting policies followed in preparing the
pro forma combined statement of operations are consistent with
those used by the Company as described in the notes to the
audited financial statements.
3. PRO FORMA COMBINED STATEMENT OF OPERATIONS:
The pro forma combined statement of operations gives effect to
the following assumptions, as if the Company's business
combination with POPstar had occurred at the beginning of the
period presented:
On July 20, 1999, the Company acquired all the issued and
outstanding common and preferred shares of POPstar in exchange
for 12,875,000 common shares of the Company. The common
shares of the Company cannot be sold until July 20, 2000
except pursuant to an effective registration statement under
the United States Securities Act of 1933 and any applicable
State laws or upon the express written agreement of the
Company. Upon completion of the transaction, shareholders of
POPstar owned 79% of the issued and outstanding common shares
of the Company. Accordingly, the transaction has been
accounted for using the purchase method as an acquisition of
the Company by POPstar.
F-36
<PAGE>
Pro Forma Financial Statements
POPSTAR COMMUNICATIONS, INC.
(Formerly Cherokee Leather, Inc.)
(Expressed in U.S. Dollars)
Six months ended June 30, 1999
(Unaudited)
F-37
<PAGE>
POPSTAR COMMUNICATIONS, INC.
(Formerly Cherokee Leather, Inc.)
Pro Forma Consolidated Balance Sheet
(Expressed in U.S. Dollars)
(Unaudited)
June 30, 1999
<TABLE>
<S> <C> <C> <C> <C>
Pro forma
POPstar POPstar Global adjustment
Communications, Inc. Communications Inc. -acquisition Total
(see note 3)
Assets
Current assets:
Cash $ - $ 647,985 $ - $ 647,985
Note receivable from a
common controlled
company - 1,000,000 - 1,000,000
Prepaid expenses - 393 - 393
Other assets 72 - (72) -
___________ ____________ _________ ___________
$ 72 $1,648,378 $ (72) 1,648,378
Liabilities and Shareholders' Capital and Deficit
Current liabilities:
Accounts payable and
accrued liabilities $ - $ 214,210 $ - $ 214,210
Payable to common
controlled companies - 493,647 - 493,647
Officers' advances 2,517 - - 2,517
________ ___________ _______ __________
2,517 707,857 - 710,374
Shareholders' capital and deficit:
Capital stock 5,800 1,988,732 (5,800) 1,988,732
Deficit (8,245) (1,048,211) 5,728 (1,050,728)
________ ____________ _______ ___________
(2,445) 940,521 (72) 938,004
$ 72 $1,648,378 $ (72) $1,648,378
</TABLE>
See accompanying notes to pro forma financial statements.
F-38
<PAGE>
POPSTAR COMMUNICATIONS INC.
(Formerly Cherokee Leather, Inc.)
Pro Forma Combined Statement of Operations
(Expressed in U.S. Dollars)
(Unaudited)
Six months ended June 30, 1999
<TABLE>
<S> <C> <C> <C> <C>
Pro forma
POPstar POPstar Global adjustment
Communications, Inc. Communications Inc. -acquisition Total
(see note 3)
Revenues:
Interest income $ - $ 19,926 $ - $ 19,926
Expenses:
Accounting fees - 9,000 - 9,000
Amortization 36 - (36) -
Bank interest and changes - 1,298 - 1,298
Commission - 72,917 - 72,917
Foreign exchange loss - 588 - 588
Legal and professional fees - 227,064 - 227,064
License fee - 189,247 - 189,247
Management fee - 1,950 - 1,950
Office 125 10,438 - 10,563
Rent - 10,781 - 10,781
Salaries and wages - 29,254 - 29,254
Software development - 501,068 - 501,068
Travel and entertainment - 14,532 - 14,532
______ __________ ________ __________
161 1,068,137 (36) 1,068,262
Loss for the period $ 161 $1,048,211 $ (36) $1,048,336
</TABLE>
See accompanying notes to pro forma financial statements.
F-39
<PAGE>
POPSTAR COMMUNICATIONS, INC.
(Formerly Cherokee Leather, Inc.)
Notes to Pro Forma Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
Six months ended June 30, 1999
1. BASIS OF PRESENTATION:
The pro forma financial statements of the Company are
based upon the historical financial statements of the
Company adjusted to give effect to the transactions
described in note 3. These pro forma financial statements
are not necessarily indicative of the results of
operations that would have been attained had the
transaction actually taken place at the date indicated and
do not purport to be indicative of the effects that may be
expected to occur in the future.
The pro forma financial statements have been prepared to
reflect the transactions described in note 3 from the
following financial information:
(a) the unaudited financial statements of the Company for the
six months ended June 30, 1999; and
(b) the unaudited consolidated financial statements of POPstar
Global Communications Inc. ("POPstar") for the six months
ended June 30, 1999.
2. SIGNIFICANT ACCOUNTING POLICIES:
The significant accounting policies followed in preparing
the pro forma financial statements are consistent with
those used by the Company as described in the notes to the
financial statements.
3. PRO FORMA FINANCIAL STATEMENTS:
The pro forma financial statements give effect to the
following assumptions, as if the Company's business
combination with POPstar had occurred at the beginning of
the period presented:
On July 20, 1999, the Company acquired all the issued and
outstanding common and preferred shares of POPstar in
exchange for 12,875,000 common shares of the Company. The
common shares of the Company cannot be sold until July 20,
2000 except pursuant to an effective registration
statement under the United States Securities Act of 1933
and any applicable State laws or upon the express written
agreement of the Company. Upon completion of the
transaction, shareholders of POPstar owned 79% of the
issued and outstanding common shares of the Company.
Accordingly, the transaction has been accounted for using
the purchase method as an acquisition of the Company by
POPstar. The purchase price adjustment reflects the
allocation to the net identifiable assets and liabilities
of the Company.
ACQUISITION AGREEMENT
Agreement dated as of July 13, 1999 between POPstar
Communications, Inc., a Nevada corporation ("POPS"), and
POPstar Global Communications Inc., a British Virgin
Islands corporation ("POPstar").
The parties agree as follows:
1. THE ACQUISITION.
1.1 Purchase and Sale Subject to the Terms and
Conditions of this Agreement. At the
Closing to be held as provided in Section
2, POPS shall deliver the POPS Shares
(defined below) to the shareholders of
POPstar, and the shareholders of POPstar
shall accept the POPS Shares from POPS,
free and clear of all Encumbrances other
than restrictions imposed by Federal and
State securities laws.
1.2 Purchase Price. POPS will exchange
12,885,000 shares of its restricted common
stock (the "POPS Shares") for all of the
outstanding common shares and preferred
shares of POPstar (the "POPstar Shares").
The POPS Shares shall be issued and
delivered to the Shareholders of POPstar
as set forth in Exhibit "A" hereto.
2. THE CLOSING.
2.1 Place and Time. The closing of the sale
and exchange of the POPS Shares for the
POPstar Shares (the "Closing") shall take
place at the Law Offices of M. Richard
Cutler, 610 Newport Center Drive, Suite
800, Newport Beach, CA 92660 no later
than the close of business (Orange County
California time) on July 20, 1999, or at
such other place, date and time as the
parties may agree in writing.
2.2 Deliveries by POPstar. At the Closing,
POPstar shall deliver the following to POPS:
a. Certificates representing the
POPstar Shares, duly endorsed
for transfer to POPS and
accompanied by any applicable
stock transfer tax stamps;
POPstar shall immediately
change those certificates for,
and to deliver to POPS at the
Closing, a certificate
representing the POPstar Shares
registered in the name of POPS
(without any legend or other
reference to any Encumbrance).
<PAGE>
b. The documents contemplated by Section 3.
c. All other documents,
instruments and writings
required by this Agreement to
be delivered by POPstar at the
Closing and any other documents
or records relating to
POPstar's business reasonably
requested by POPS in connection
with this Agreement.
2.3 Deliveries by POPS. At the Closing, POPS
shall deliver the following to POPstar:
a.. The POPS Shares for further delivery to
the POPstar shareholders as contemplated
by section 1.
b. The documents contemplated by
Section 4.
c. All other documents,
instruments and writings
required by this Agreement to
be delivered by POPS at the
Closing.
3. CONDITIONS TO POPS' OBLIGATIONS.
The obligations of POPS to effect the Closing shall be
subject to the satisfaction at or prior to the Closing of
the following conditions, any one or more of which may be
waived by POPS:
3.1 No Injunction. There shall not be in
effect any injunction, order or decree of
a court of competent jurisdiction that
prevents the consummation of the
transactions contemplated by this
Agreement, that prohibits POPS'
acquisition of the POPstar Shares or that
will require any divestiture as a result
of POPS' acquisition of the POPstar Shares
or that will require all or any part of
the business of POPS to be held separate
and no litigation or proceedings seeking
the issuance of such an injunction, order
or decree or seeking to impose substantial
penalties on POPS or POPstar if this
Agreement is consummated shall be pending.
3.2 Representations, Warranties and
Agreements. (a) The representations and
warranties of POPstar set forth in this
Agreement shall be true and complete in
all material respects as of the Closing
Date as though made at such time, (b)
POPstar shall have performed and complied
in all material respects with the
agreements contained in this Agreement
required to be performed and complied with
by it at or prior to the Closing and (c)
POPS shall have received a certificate to
that effect signed by an authorized
representative of POPstar.
<PAGE>
3.3 Regulatory Approvals. All licenses,
authorizations, consents, orders and
regulatory approvals of Governmental
Bodies necessary for the consummation of
POPS' acquisition of the POPstar Shares
shall have been obtained and shall be in
full force and effect.
4. CONDITIONS TO POPSTAR'S OBLIGATIONS.
The obligations of POPstar to effect the Closing shall be
subject to the satisfaction at or prior to the Closing of
the following conditions, any one or more of which may be
waived by POPstar:
4.1 No Injunction. There shall not be in
effect any injunction, order or decree of
a court of competent jurisdiction that
prevents the consummation of the
transactions contemplated by this
Agreement, that prohibits POPS'
acquisition of the POPstar Shares or
POPstar's acquisition of the POPS Shares
or that will require any divestiture as a
result of POPS' acquisition of the Shares
or POPstar's acquisition of the POPS
Shares or that will require all or any
part of the business of POPS or POPstar to
be held separate and no litigation or
proceedings seeking the issuance of such
an injunction, order or decree or seeking
to impose substantial penalties on POPS or
POPstar if this Agreement is consummated
shall be pending.
4.2 Representations, Warranties and
Agreements. (a) The representations and
warranties of POPS set forth in this
Agreement shall be true and complete in
all material respects as of the Closing
Date as though made at such time, (b) POPS
shall have performed and complied in all
material respects with the agreements
contained in this Agreement required to be
performed and complied with by it at or
prior to the Closing and (c) POPstar shall
have received a certificate to that effect
signed by an authorized representative of
POPS.
4.3 Legal Opinion. POPstar shall have
received an opinion from appropriate
counsel to POPS dated the Closing Date, to
the effect that POPS is a corporation duly
organized, validly existing and in good
standing under the laws of the State of
Nevada and has the requisite power and
authority to own, lease and operate its
properties and corporate power to carry on
its business as now being conducted; all
of the outstanding shares of POPS are duly
and validly issued, fully paid and
non-assessable and the issuance of such
shares has complied with the applicable
Federal and State securities laws and the
regulations promulgated thereunder; POPS
is duly qualified and in good standing as
a domestic corporation and is authorized
to do business in all states or other
jurisdictions in which such qualification
or authorization is necessary and there
has not been any claim
<PAGE>
by any other state
of jurisdiction to the effect that POPS is
required to qualify or otherwise be
authorized to do business as a foreign
corporation therein; all persons who have
executed or will execute this Agreement on
behalf of POPS or its Shareholders have
been duly authorized to do so; to the best
knowledge of such counsel there is no
action, suit or proceeding and no
investigation by any governmental agency
pending or threatened against POPS or the
assets or business of POPS that could have
a materially adverse effect on the
financial condition of POPS or POPstar.
Such counsel shall also opine as to the
tradability of all free trade Shares of POPS.
4.4 Regulatory Approvals. All licenses,
authorizations, consents, orders and
regulatory approvals of Governmental
Bodies necessary for the consummation of
POPS' acquisition of the POPstar Shares
and POPstar's acquisition of the POPS
Shares shall have been obtained and shall
be in full force and effect.
4.5 Resignations of Director. All directors
of POPS whose resignations shall have been
requested by POPstar not less than ten
Business Days before the Closing Date
shall have submitted their resignations or
been removed effective as of the Closing
Date.
5. REPRESENTATIONS AND WARRANTIES OF POPSTAR.
POPstar represents and warrants to POPS that, to the
Knowledge of POPstar (which limitation shall not apply to
Section 5.3), and except as set forth in the POPstar
Disclosure Letter:
5.1 Organization of POPstar; Authorization.
POPstar is a corporation duly organized,
validly existing and in good standing
under the laws of the British Virgin
Islands with full corporate power and
authority to execute and deliver this
Agreement and to perform its obligations
hereunder. The execution, delivery and
performance of this Agreement have been
duly authorized by all necessary corporate
action of POPstar and this Agreement
constitutes a valid and binding obligation
of POPstar; enforceable against it in
accordance with its terms.
5.2 Capitalization. The authorized capital
stock of POPstar consists of 110,000,000
authorized shares, consisting of
100,000,000 common stock, no par value,
and 10,000,000 preferred shares, no par
value, of which 10,510,000 common shares
and 2,375,000 preferred shares are
presently issued and outstanding. No
shares have been registered under state or
federal securities laws. As of the
Closing Date, all of the issued and
<PAGE>
outstanding shares of common stock of
POPstar are validly issued, fully paid and
non-assessable. Except with respect to
(i) Employee Stock Options for an
aggregate of 757,500 common shares; (ii)
6,000,000 common shares reserved to be
issued in connection with existing stock
purchase agreements which are amended to
reflect common shares as of the date
hereof; and (iii) an obligation of POPstar
(after this reorganization) to issue an
aggregate of 10,000 restricted shares to
legal counsel in consideration for legal
services; as of the Closing Date there
will not be outstanding any warrants,
options or other agreements on the part of
POPstar obligating POPstar to issue any
additional shares of common or preferred
stock or any of its securities of any
kind. Except as otherwise set forth
herein, POPstar will not issue any shares
of capital stock from the date of this
Agreement through the Closing Date.
5.3 No Conflict as to POPstar. Neither the
execution and delivery of this Agreement
nor the consummation of the sale of the
POPstar Shares to POPS will (a) violate
any provision of the certificate of
incorporation or by-laws of POPstar or (b)
violate, be in conflict with, or
constitute a default (or an event which,
with notice or lapse of time or both,
would constitute a default) under any
agreement to which POPstar is a party or
(c) violate any statute or law or any
judgment, decree, order, regulation or
rule of any court or other Governmental
Body applicable to POPstar.
5.4 Ownership of POPstar Shares. The delivery
of certificates to POPS provided in
Section 2.2 and the payment to POPstar
provided in Section 2.3 will result in
POPS' immediate acquisition of record and
beneficial ownership of the POPstar
Shares, free and clear of all Encumbrances
subject to applicable State and Federal
securities laws. Except as set forth in
Section 5.2, there are no outstanding
options, rights, conversion rights,
agreements or commitments of any kind
relating to the issuance, sale or transfer
of any Equity Securities or other
securities of POPstar.
5.5 No Conflict as to POPstar and
Subsidiaries. Neither the execution and
delivery of this Agreement nor the
consummation of the sale of the POPstar
Shares to POPS will (a) violate any
provision of the certificate of
incorporation or by-laws (or other
governing instrument) of POPstar or any
of its Subsidiaries or (b) violate, or be
in conflict with, or constitute a default
(or an event which, with notice or lapse
of time or both, would constitute a
default) under, or result in the
termination of, or accelerate the
performance required by, or excuse
performance by any Person of any of its
obligations under, or cause the
acceleration of the maturity of any debt
or obligation pursuant to, or result in
the creation or imposition of any
Encumbrance upon any property or assets of
POPstar or any of its
<PAGE>
Subsidiaries under,
any material agreement or commitment to
which POPstar or any of its Subsidiaries
is a party or by which any of their
respective property or assets is bound, or
to which any of the property or assets of
POPstar or any of its Subsidiaries is
subject, or (c) violate any statute or law
or any judgment, decree, order, regulation
or rule of any court or other Governmental
Body applicable to POPstar or any of its
Subsidiaries except, in the case of
violations, conflicts, defaults,
terminations, accelerations or
Encumbrances described in clause (b) of
this Section 5.5, for such matters which
are not likely to have a material adverse
effect on the business or financial
condition of POPstar and its
Subsidiaries, taken as a whole.
5.6 Consents and Approvals of Governmental
Authorities. Except with respect to
applicable State and Federal securities
laws, no consent, approval or
authorization of, or declaration, filing
or registration with, any Governmental
Body is required to be made or obtained by
POPstar or POPS or any of its
Subsidiaries in connection with the
execution, delivery and performance of
this Agreement by POPstar or the
consummation of the sale of the POPstar
Shares to POPS.
5.7 Other Consents. Other than the consent of
the holders of the preferred shares of
POPstar, no consent of any Person is
required to be obtained by POPstar or POPS
to the execution, delivery and performance
of this Agreement or the consummation of
the sale of the POPstar Shares to POPS,
including, but not limited to, consents
from parties to leases or other agreements
or commitments, except for any consent
which the failure to obtain would not be
likely to have a material adverse effect
on the business and financial condition of
POPstar or POPS.
5.8 Financial Statements. POPstar has
delivered to POPS consolidated balance
sheets of POPstar and its Subsidiaries as
at May 31, 1999, and statements of income
and changes in financial position for the
period from inception to the period then
ended, together with the report thereon of
POPstar's independent accountant (the
"POPstar Financial Statements"). Such
POPstar Financial Statements are
internally prepared and unaudited but
fairly present the consolidated financial
condition and results of operations of
POPstar and its Subsidiaries as at the
respective dates thereof and for the
periods therein referred to, all in
accordance with generally accepted United
States accounting principles consistently
applied throughout the periods involved,
except as set forth in the notes thereto.
5.9 Title to Properties. Either POPstar or
one of its Subsidiaries owns all the
material properties and assets that they
purport to own (real, personal and mixed,
tangible and intangible), including,
without limitation, all the material
properties and assets reflected in the
POPstar Financial Statements (except for
property sold since the date of the
POPstar Financial Statements in the
ordinary course of business or leased
under capitalized leases), and all the
material properties and assets purchased
or otherwise acquired by POPstar or any
of its Subsidiaries since the date of the
POPstar Financial Statements. All
properties and assets reflected in the
POPstar Financial Statements are free and
clear of all material Encumbrances and are
not, in the case of real property, subject
to any material rights of way, building
use restrictions, exceptions, variances,
reservations or limitations of any nature
whatsoever except, with respect to all
such properties and assets, (a) mortgages
or security interests shown on the POPstar
Financial Statements as securing specified
liabilities or obligations, with respect
to which no default (or event which, with
notice or lapse of time or both, would
constitute a default) exists, and all of
which are listed in the POPstar Disclosure
Letter, (b) mortgages or security
interests incurred in connection with the
purchase of property or assets after the
date of the POPstar Financial Statements
(such mortgages and security interests
being limited to the property or assets so
acquired), with respect to which no
default (or event which, with notice or
lapse of time or both, would constitute a
default) exists, (c) as to real property,
(i) imperfections of title, if any, none
of which materially detracts from the
value or impairs the use of the property
subject thereto, or impairs the operations
of POPstar or any of its Subsidiaries and
(ii) zoning laws that do not impair the
present or anticipated use of the property
subject thereto, and (d) liens for current
taxes not yet due. The properties and
assets of POPstar and its Subsidiaries
include all rights, properties and other
assets necessary to permit POPstar and
its Subsidiaries to conduct POPstar's
business in all material respects in the
same manner as it is conducted on the date
of this Agreement.
5.10 Buildings, Plants and Equipment. The
buildings, plants, structures and material
items of equipment and other personal
property owned or leased by POPstar or its
Subsidiaries are, in all respects material
to the business or financial condition of
POPstar and its Subsidiaries, taken as a
whole, in good operating condition and
repair (ordinary wear and tear excepted)
and are adequate in all such respects for
the purposes for which they are being
used. POPstar has not received
notification that it or any of its
Subsidiaries is in violation of any
applicable building, zoning,
anti-pollution, health, safety or other
law, ordinance or regulation in respect of
its buildings, plants or structures or
their operations, which violation is
<PAGE>
likely to have a material adverse effect
on the business or financial condition of
POPstar and its Subsidiaries, taken as a
whole or which would require a payment by
POPstar or POPS or any of their
subsidiaries in excess of $2,000 in the
aggregate, and which has not been cured.
5.11 No Condemnation or Expropriation. Neither
the whole nor any portion of the property
or leaseholds owned or held by POPstar or
any of its Subsidiaries is subject to any
governmental decree or order to be sold or
is being condemned, expropriated or
otherwise taken by any Governmental Body
or other Person with or without payment of
compensation therefor, which action is
likely to have a material adverse effect
on the business or financial condition of
POPS and its Subsidiaries, taken as a whole.
5.12 Litigation. There is no action, suit,
inquiry, proceeding or investigation by or
before any court or Governmental Body
pending or threatened in writing against
or involving POPstar or any of its
Subsidiaries which is likely to have a
material adverse effect on the business or
financial condition of POPstar, POPS and
any of their Subsidiaries, taken as whole,
or which would require a payment by
POPstar or its subsidiaries in excess of
$2,000 in the aggregate or which questions
or challenges the validity of this
Agreement. Neither POPstar nor any or its
Subsidiaries is subject to any judgment,
order or decree that is likely to have a
material adverse effect on the business or
financial condition of POPstar, POPS or
any of their Subsidiaries, taken as a
whole, or which would require a payment by
POPstar or its subsidiaries in excess of
$2,000 in the aggregate.
5.13 Absence of Certain Changes. Except as set
forth in Section 5.13 of the POPstar
Disclosure Letter, since the date of the
POPstar Financial Statements, neither
POPstar nor any of its Subsidiaries has:
a. suffered the damage or
destruction of any of its
properties or assets (whether
or not covered by insurance)
which is materially adverse to
the business or financial
condition of POPstar and its
Subsidiaries, taken as a whole,
or made any disposition of any
of its material properties or
assets other than in the
ordinary course of business;
b. made any change or amendment in
its certificate of incorporation
or by-laws, or other governing
instruments;
<PAGE>
c. issued or sold any Equity
Securities or other securities,
acquired, directly or
indirectly, by redemption or
otherwise, any such Equity
Securities, reclassified,
split-up or otherwise changed
any such Equity Security, or
granted or entered into any
options, warrants, calls or
commitments of any kind with
respect thereto;
d. organized any new Subsidiary or
acquired any Equity Securities
of any Person or any equity or
ownership interest in any
business;
e. borrowed any funds or incurred,
or assumed or become subject to,
whether directly or by way of
guarantee or otherwise, any
obligation or liability with
respect to any such indebtedness
for borrowed money;
f. paid, discharged or satisfied
any material claim, liability or
obligation (absolute, accrued,
contingent or otherwise), other
than in the ordinary course of
business;
g. prepaid any material obligation
having a maturity of more than
90 days from the date such
obligation was issued or
incurred;
h. canceled any material debts or
waived any material claims or
rights, except in the ordinary
course of business;
i. disposed of or permitted to
lapse any rights to the use of
any material patent or
registered trademark or
copyright or other intellectual
property owned or used by it;
j. granted any general increase in
the compensation of officers or
employees (including any such
increase pursuant to any
employee benefit plan);
k. purchased or entered into any
contract or commitment to
purchase any material quantity
of raw materials or supplies, or
sold or entered into any
contract or commitment to sell
any material quantity of
property or assets, except (i)
normal contracts or commitments
for the purchase of, and normal
purchases of, raw materials or
supplies, made in the ordinary
course business, (ii) normal
contracts or commitments for the
sale of, and normal sales of,
inventory in the ordinary course
of business, and (iii) other
contracts, commitments,
purchases or sales in the
ordinary course of business;
<PAGE>
l. made any capital expenditures or
additions to property, plant or
equipment or acquired any other
property or assets (other than
raw materials and supplies) at a
cost in excess of $100,000 in
the aggregate;
m. written off or been required to
write off any notes or accounts
receivable in an aggregate
amount in excess of $2,000;
n. written down or been required to
write down any inventory in an
aggregate amount in excess of $
2,000;
o. entered into any collective
bargaining or union contract or
agreement; or
p. other than the ordinary course
of business, incurred any
liability required by generally
accepted accounting principles
to be reflected on a balance
sheet and material to the
business or financial condition
of POPstar and its subsidiaries
taken as a whole.
5.14 No Material Adverse Change. Since the date
of the POPstar Financial Statements, there
has not been any material adverse change in
the business or financial condition of
POPstar and its Subsidiaries taken as a
whole, other than changes resulting from
economic conditions prevailing in the
United States precious coins, collectibles
and metals industry.
5.15 Contracts and Commitments. Except as set
forth in Section 5.15 of the POPstar
Disclosure Letter, neither POPstar nor any
of its Subsidiaries is a party to any:
a. Contract or agreement (other than purchase
or sales orders entered into in the
ordinary course of business) involving any
liability on the part of POPstar or one of
its Subsidiaries of more than $25,000 and
not cancelable by POPstar or the relevant
Subsidiary (without liability to POPstar or
such Subsidiary) within 60 days;
b. Except with respect to the lease on its
business location, lease of personal
property involving annual rental payments
in excess of $25,000 and not cancelable by
POPstar or the relevant Subsidiary (without
liability to POPstar or such Subsidiary)
within 90 days;
c. Except with respect to the options
referenced above, Employee bonus, stock
option or stock purchase, performance unit,
profit-sharing, pension, savings,
retirement, health, deferred or incentive
<PAGE>
compensation, insurance or other material
employee benefit plan (as defined in
Section 2(3) of ERISA) or program for any
of the employees, former employees or
retired employees of POPstar or any of its
Subsidiaries;
d. Commitment, contract or agreement that is
currently expected by the management of
POPstar to result in any material loss upon
completion or performance thereof;
e. Contract, agreement or commitment that is
material to the business of POPstar and
its Subsidiaries, taken as a whole, with
any officer, employee, agent, consultant,
advisor, salesman, sales representative,
value added reseller, distributor or
dealer; or
f. Employment agreement or other similar
agreement that contains any severance or
termination pay, liabilities or
obligations.
All such contracts and agreements are in full force and
effect. Neither POPstar nor any of its Subsidiaries is in
breach of, in violation of or in default under, any
agreement, instrument, indenture, deed of trust,
commitment, contract or other obligation of any type to
which POPstar or any of its Subsidiaries is a party or is
or may be bound that relates to the business of POPstar
or any of its Subsidiaries or to which any of the assets
or properties of POPstar or any of its Subsidiaries is
subject, the effect of which breach, violation or default
is likely to materially and adversely affect the business
or financial condition of POPstar and its Subsidiaries,
taken as a whole. POPS has not guaranteed or assumed and
specifically does not guarantee or assume any obligations
of POPstar or any of its Subsidiaries.
5.16 Labor Relations. Neither POPstar nor any of
its Subsidiaries is a party to any
collective bargaining agreement. Except for
any matter which is not likely to have a
material adverse effect on the business or
financial condition of POPstar and its
Subsidiaries, taken as a whole, (a) POPstar
and each of its Subsidiaries is in
compliance with all applicable laws
respecting employment and employment
practices, terms and conditions of
employment and wages and hours, and is not
engaged in any unfair labor practice, (b)
there is no unfair labor practice complaint
against POPstar or any of its Subsidiaries
pending before the National Labor Relations
Board, (c) there is no labor strike,
dispute, slowdown or stoppage actually
pending or threatened against POPstar or
any of its Subsidiaries, (d) no
representation question exists respecting
the employees of POPstar or any of its
Subsidiaries, (e) neither POPstar nor any
of its Subsidiaries has experienced any
strike, work stoppage or other labor
difficulty, and (f) no
<PAGE>
collective
bargaining agreement relating to employees
of POPstar or any of its Subsidiaries is
currently being negotiated.
5.17 Employee Benefit Plans. No material
employee pension and welfare benefit plans
covering employees of POPstar is (1) a
multi-employer plan as defined in Section
3(37) of ERISA, or (2) a defined benefit
plan as defined in Section 3(35) of ERISA,
any listed individual account pension plan
is duly qualified as tax exempt under the
applicable sections of the Code, each
listed benefit plan and related funding
arrangement, if any, has been maintained in
all material respects in compliance with
its terms and the provisions of ERISA and
the Code.
5.18 Compliance with Law. The operations of
POPstar and its Subsidiaries have been
conducted in accordance with all applicable
laws and regulations of all Governmental
Bodies having jurisdiction over them,
except for violations thereof which are not
likely to have a material adverse effect on
the business or financial condition of
POPstar and its Subsidiaries, taken as a
whole, or which would not require a payment
by POPstar or its Subsidiaries in excess
of $2,000 in the aggregate, or which have
been cured. Neither POPstar nor any of its
Subsidiaries has received any notification
of any asserted present or past failure by
it to comply with any such applicable laws
or regulations. POPstar and its
Subsidiaries have all material licenses,
permits, orders or approvals from the
Governmental Bodies required for the
conduct of their businesses, and are not in
material violation of any such licenses,
permits, orders and approvals. All such
licenses, permits, orders and approvals are
in full force and effect, and no suspension
or cancellation of any thereof has been
threatened.
5.19 Tax Matters.
a. POPstar and each of its Subsidiaries (1)
has filed all nonconsolidated and
noncombined Tax Returns and all
consolidated or combined Tax Returns that
include only POPstar and/or its
Subsidiaries and not Seller or its other
Affiliates (for the purposes of this
Section 5.19, such tax Returns shall be
considered nonconsolidated and noncombined
Tax Returns) required to be filed through
the date hereof and has paid any Tax due
through the date hereof with respect to the
time periods covered by such
nonconsolidated and noncombined Tax Returns
and shall timely pay any such Taxes
required to be paid by it after the date
hereof with respect to such Tax Returns and
(2) shall prepare and timely file all such
nonconsolidated and noncombined Tax Returns
required to be filed after the date hereof
and through the Closing Date and pay all
<PAGE>
Taxes required to be paid by it with
respect to the periods covered by such Tax
Returns; (B) all such Tax Returns filed
pursuant to clause (A) after the date
hereof shall, in each case, be prepared and
filed in a manner consistent in all
material respects (including elections and
accounting methods and conventions) with
such Tax Return most recently filed in the
relevant jurisdiction prior to the date
hereof, except as otherwise required by law
or regulation. Any such Tax Return filed
or required to be filed after the date
hereof shall not reflect any new elections
or the adoption of any new accounting
methods or conventions or other similar
items, except to the extent such particular
reflection or adoption is required to
comply with any law or regulation.
b. All consolidated or combined Tax Returns
(except those described in subparagraph (a)
above) required to be filed by any person
through the date hereof that are required
or permitted to include the income, or
reflect the activities, operations and
transactions, of POPstar or any of its
Subsidiaries for any taxable period have
been timely filed, and the income,
activities, operations and transactions of
POPstar and Subsidiaries have been properly
included and reflected thereon. POPstar
shall prepare and file, or cause to be
prepared and filed, all such consolidated
or combined Tax Returns that are required
or permitted to include the income, or
reflect the activities, operations and
transactions, of POPstar or any
Subsidiary, with respect to any taxable
year or the portion thereof ending on or
prior to the Closing Date, including,
without limitation, POPstar's consolidated
federal income tax return for such taxable
years. POPstar will timely file a
consolidated federal income tax return for
the taxable year ended December 31, 1998
and such return shall include and reflect
the income, activities, operations and
transactions of POPstar and Subsidiaries
for the taxable period then ended, and
hereby expressly covenants and agrees to
file a consolidated federal income tax
return, and to include and reflect thereon
the income, activities, operations and
transactions of POPstar and Subsidiaries
for the taxable period through the Closing
Date. All Tax Returns filed pursuant to
this subparagraph (b) after the date hereof
shall, in each case, to the extent that
such Tax Returns specifically relate to
POPstar or any of its Subsidiaries and do
not generally relate to matters affecting
other members of POPstar's consolidated
group, be prepared and filed in a manner
consistent in all material respects
(including elections and accounting methods
and conventions) with the Tax Return most
recently filed in the relevant
jurisdictions prior to the
<PAGE>
date hereof,
except as otherwise required by law or
regulation. POPstar has paid or will pay
all Taxes that may now or hereafter be due
with respect to the taxable periods covered
by such consolidated or combined Tax Returns.
c. Neither POPstar nor any of its
Subsidiaries has agreed, or is required, to
make any adjustment (x) under Section
481(a) of the Code by reason of a change in
accounting method or otherwise or (y)
pursuant to any provision of the Tax Reform
Act of 1986, the Revenue Act of 1987 or
the Technical and Miscellaneous Revenue Act
of 1988.
d. Neither POPstar nor any of its Subsidiaries
or any predecessor or Affiliate of the
foregoing has, at any time, filed a consent
under Section 341(f)(1) of the Code, or
agreed under Section 341(f)(3) of the Code,
to have the provisions of Section 341(f)(2)
of the Code apply to any sale of its stock.
e. There is no (nor has there been any request
for an) agreement, waiver or consent
providing for an extension of time with
respect to the assessment of any Taxes
attributable to POPstar or its
Subsidiaries, or their assets or operations
and no power of attorney granted by POPstar
or any of its Subsidiaries with respect to
any Tax matter is currently in force.
f. There is no action, suit, proceeding,
investigation, audit, claim, demand,
deficiency or additional assessment in
progress, pending or threatened against or
with respect to any Tax attributable to
POPstar, its Subsidiaries or their assets
or operations.
g. All amounts required to be withheld as of
the Closing Date for Taxes or otherwise
have been withheld and paid when due to the
appropriate agency or authority.
h. No property of POPstar is "tax-exempt use
property " within the meaning of Section
168(h) of the Code nor property that
POPstar and/or its Subsidiaries will be
required to treat as being owned by another
person pursuant to Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended
and in effect immediately prior to the
enactment of the Tax Reform Act of 1986.
i. There have been delivered or made available
to POPS true and complete copies of all
income Tax Returns (or with respect to
<PAGE>
consolidated or combined returns, the
portion thereof) and any other Tax Returns
requested by POPS as may be relevant to
POPstar, its Subsidiaries, or their assets
or operations for any and all periods
ending after December 31, 1998, or for any
Tax years which are subject to audit or
investigation by any taxing authority or
entity.
j. There is no contract, agreement, plan or
arrangement, including but not limited to
the provisions of this Agreement, covering
any employee or former employee of POPstar
or its Subsidiaries that, individually or
collectively, could give rise to the
payment of any amount that would not be
deductible pursuant to Section 280G or 162
of the Code.
5.20 Environmental Matters.
a. At all times prior to the date
hereof, POPstar and its
Subsidiaries have complied in
all material respects with
applicable environmental laws,
orders, regulations, rules and
ordinances relating to the
Properties (as hereinafter
defined), the violation of which
would have a material adverse
effect on the business or
financial condition of POPstar
and its Subsidiaries, taken as a
whole, or which would require a
payment by POPstar or its
Subsidiaries in excess of
$2,000 in the aggregate, and
which have been duly adopted,
imposed or promulgated by any
legislative, executive,
administrative or judicial body
or officer of any Governmental
Body.
b. The environmental licenses,
permits and authorizations that
are material to the operations
of POPstar and its Subsidiaries,
taken as a whole, are in full
force and effect.
c. Neither POPstar nor any of its
Subsidiaries has released or
caused to be released on or
about the properties currently
owned or leased by POPstar or
any of its Subsidiaries (the
"Properties") any (i)
pollutants, (ii) contaminants,
(iii) "Hazardous Substances," as
that term is defined in Section
101(14) of the Comprehensive
Environmental Response Act, as
amended or (iv) "Regulated
Substances," as that term in
defined in Section 9001 of the
Resource Conservation and
Recovery Act, 42 U.S.C. Section
6901, et seq., as amended, which
would be required to be
remediated by any governmental
agency with jurisdiction over
the Properties under the
authority of laws, regulations
and ordinances as in effect
<PAGE>
and
currently interpreted on the
date hereof, which remediation
would have a material adverse
effect on the business or
financial condition of POPstar
and its Subsidiaries, taken as a
whole.
5.21 Brokers or Finders. POPstar has not
employed any broker or finder or incurred
any liability for any brokerage or finder's
fees or commissions or similar payments in
connection with the sale of the POPstar
Shares to POPS.
5.22 Absence of Certain Commercial Practices.
Neither POPstar nor any of its
Subsidiaries has, directly or indirectly,
paid or delivered any fee, commission or
other sum of money or item of property,
however characterized, to any finder,
agent, government official or other party,
in the United States or any other country,
which is in any manner related to the
business or operations of POPstar or its
Subsidiaries, which POPstar or one of its
Subsidiaries knows or has reason to believe
to have been illegal under any federal,
state or local laws of the United States or
any other country having jurisdiction; and
neither POPstar nor any of its Subsidiaries
has participated, directly or indirectly,
in any boycotts or other similar practices
affecting any of its actual or potential
customers in violation of any applicable
law or regulation.
5.23 Transactions with Directors and Officers.
Except as set forth in Section 5.23 of the
POPstar Disclosure Letter, POPstar and its
Subsidiaries do not engage in business with
any Person in which any of POPstar's
directors or officers has a material equity
interest. No director or officer of POPstar
owns any property, asset or right which is
material to the business of POPstar and its
Subsidiaries, taken as a whole.
5.24 Borrowing and Guarantees. Except as set
forth in Section 5.24 of the POPstar
Disclosure Letter, POPstar and its
Subsidiaries (a) do not have any
indebtedness for borrowed money, (b) are
not lending or committed to lend any money
(except for advances to employees in the
ordinary course of business), and (c) are
not guarantors or sureties with respect to
the obligations of any Person.
6. REPRESENTATIONS AND WARRANTIES OF POPS.
POPS represents and warrants to POPstar that, to the
Knowledge of POPS (which limitation shall not apply to
Section 6.3), and except as set forth in the POPS
Disclosure Letter:
<PAGE>
6.1 Organization of POPstar; Authorization.
POPS is a corporation duly organized,
validly existing and in good standing under
the laws of Nevada with full corporate
power and authority to execute and deliver
this Agreement and to perform its
obligations hereunder. The execution,
delivery and performance of this Agreement
have been duly authorized by all necessary
corporate action of POPS and this Agreement
constitutes a valid and binding obligation
of POPS; enforceable against it in
accordance with its terms.
6.2 Capitalization. The authorized capital
stock of POPS consists of 50,000,000 shares
of common stock, par value $.001 per share,
and no shares of preferred stock. As of
the date of this Agreement, POPS has
5,800,000 shares of common stock issued and
outstanding. Prior to the Closing, POPS
will cause the cancellation of 2,400,000
shares of "restricted" common stock held by
affiliates of POPS (the "Cancellation").
Upon completion of the Cancellation, an
aggregate of 3,400,000 common shares of
POPS will be issued and outstanding. No
shares have otherwise been registered under
state or federal securities laws. As of
the Closing Date, all of the issued and
outstanding shares of common stock of POPS
are validly issued, fully paid and
non-assessable and they are not and as of
the Closing Date there will not be
outstanding any other warrants, options or
other agreements on the part of POPS
obligating POPS to issue any additional
shares of common or preferred stock or any
of its securities of any kind. POPS will
not issue any shares of capital stock from
the date of this Agreement through the
Closing Date. The Common Stock of POPS is
presently listed and trading on the Nasdaq
Over-the-Counter Bulletin Board under the
symbol "POPS."
6.3 No Conflict as to POPS. Neither the
execution and delivery of this Agreement
nor the consummation of the sale of the
POPS Shares to POPstar will (a) violate any
provision of the certificate of
incorporation or by-laws of POPS, or (b)
violate, be in conflict with, or constitute
a default (or an event which, with notice
or lapse of time or both, would constitute
a default) under any agreement to which
POPS is a party or (c) violate any statute
or law or any judgment, decree, order,
regulation or rule of any court or other
Governmental Body applicable to POPS.
6.4 Ownership of POPS Shares. The delivery of
certificates to POPstar provided in Section
2.3 will result in the Shareholders' of
POPstar immediate acquisition of record and
beneficial ownership of the POPS Shares,
free and clear of all Encumbrances other
than as required by Federal and State
securities laws. There are no outstanding
options, rights, conversion rights,
agreements or commitments of any kind
relating to the
<PAGE>
issuance, sale or transfer
of any Equity Securities or other
securities of POPS.
6.5 No Conflict as to POPS and Subsidiaries.
Neither the execution and delivery of this
Agreement nor the consummation of the sale
of the POPS Shares to POPstar will (a)
violate any provision of the certificate of
incorporation or by-laws (or other
governing instrument) of POPS or any of
its Subsidiaries or (b) violate, or be in
conflict with, or constitute a default (or
an event which, with notice or lapse of
time or both, would constitute a default)
under, or result in the termination of, or
accelerate the performance required by, or
excuse performance by any Person of any of
its obligations under, or cause the
acceleration of the maturity of any debt or
obligation pursuant to, or result in the
creation or imposition of any Encumbrance
upon any property or assets of POPS or any
of its Subsidiaries under, any material
agreement or commitment to which POPS or
any of its Subsidiaries is a party or by
which any of their respective property or
assets is bound, or to which any of the
property or assets of POPS or any of its
Subsidiaries is subject, or (c) violate any
statute or law or any judgment, decree,
order, regulation or rule of any court or
other Governmental Body applicable to POPS
or any of its Subsidiaries except, in the
case of violations, conflicts, defaults,
terminations, accelerations or Encumbrances
described in clause (b) of this Section
6.5, for such matters which are not likely
to have a material adverse effect on the
business or financial condition of POPS
and its Subsidiaries, taken as a whole.
6.6 Consents and Approvals of Governmental
Authorities. No consent, approval or
authorization of, or declaration, filing or
registration with, any Governmental Body is
required to be made or obtained by POPS or
POPstar or any of either of their
Subsidiaries in connection with the
execution, delivery and performance of this
Agreement by POPS or the consummation of
the sale of the POPS Shares to POPstar.
6.7 Other Consents. No consent of any Person is
required to be obtained by POPstar or POPS
to the execution, delivery and performance
of this Agreement or the consummation of
the sale of the POPS Shares to POPstar,
including, but not limited to, consents
from parties to leases or other agreements
or commitments, except for any consent
which the failure to obtain would not be
likely to have a material adverse effect on
the business and financial condition of
POPstar or POPS.
6.8 Financial Statements. POPS has delivered to
POPstar consolidated balance sheets of
POPS and its Subsidiaries as at December
31, 1997 and December 31, 1998, and
statements of income and changes in
financial position for each of the years in
the two-year period then ended, together
<PAGE>
with the report thereon of POPS'
independent accountant (the "POPS Financial
Statements"). Such POPS Financial
Statements and notes fairly present the
consolidated financial condition and
results of operations of POPS and its
Subsidiaries as at the respective dates
thereof and for the periods therein
referred to, all in accordance with
generally accepted United States accounting
principles consistently applied throughout
the periods involved, except as set forth
in the notes thereto, and shall be
utilizable in any SEC filing in compliance
with Rule 310 of Regulation S-B promulgated
under the Securities Act.
6.9 Title to Properties. Either POPS or one of
its Subsidiaries owns all the material
properties and assets that they purport to
own (real, personal and mixed, tangible and
intangible), including, without limitation,
all the material properties and assets
reflected in the POPS Financial Statements
and all the material properties and assets
purchased or otherwise acquired by POPS or
any of its Subsidiaries since the date of
the POPS Financial Statements. All
properties and assets reflected in the POPS
Financial Statements are free and clear of
all material Encumbrances and are not, in
the case of real property, subject to any
material rights of way, building use
restrictions, exceptions, variances,
reservations or limitations of any nature
whatsoever except, with respect to all such
properties and assets, (a) mortgages or
security interests shown on the POPS
Financial Statements as securing specified
liabilities or obligations, with respect to
which no default (or event which, with
notice or lapse of time or both, would
constitute a default) exists, and all of
which are listed in the POPS Disclosure
Letter, (b) mortgages or security interests
incurred in connection with the purchase of
property or assets after the date of the
POPS Financial Statements (such mortgages
and security interests being limited to the
property or assets so acquired), with
respect to which no default (or event
which, with notice or lapse of time or
both, would constitute a default) exists,
(c) as to real property, (i) imperfections
of title, if any, none of which materially
detracts from the value or impairs the use
of the property subject thereto, or impairs
the operations of POPS or any of its
Subsidiaries and (ii) zoning laws that do
not impair the present or anticipated use
of the property subject thereto, and (d)
liens for current taxes not yet due. The
properties and assets of POPS and its
Subsidiaries include all rights, properties
and other assets necessary to permit POPS
and its Subsidiaries to conduct POPS'
business in all material respects in the
same manner as it is conducted on the date
of this Agreement.
6.10 Buildings, Plants and Equipment. The
buildings, plants, structures and material
items of equipment and other personal
property owned or leased by POPS or its
Subsidiaries are, in all respects material
to the business or
<PAGE>
financial condition of
POPS and its Subsidiaries, taken as a
whole, in good operating condition and
repair (ordinary wear and tear excepted)
and are adequate in all such respects for
the purposes for which they are being used.
POPS has not received notification that it
or any of its Subsidiaries is in violation
of any applicable building, zoning,
anti-pollution, health, safety or other
law, ordinance or regulation in respect of
its buildings, plants or structures or
their operations, which violation is likely
to have a material adverse effect on the
business or financial condition of POPS
and its Subsidiaries, taken as a whole or
which would require a payment by POPstar
or POPS or any of their subsidiaries in
excess of $2,000 in the aggregate, and
which has not been cured.
6.11 No Condemnation or Expropriation. Neither
the whole nor any portion of the property
or leaseholds owned or held by POPS or any
of its Subsidiaries is subject to any
governmental decree or order to be sold or
is being condemned, expropriated or
otherwise taken by any Governmental Body or
other Person with or without payment of
compensation therefor, which action is
likely to have a material adverse effect on
the business or financial condition of
POPstar and its Subsidiaries, taken as a
whole.
6.12 Litigation. There is no action, suit,
inquiry, proceeding or investigation by or
before any court or Governmental Body
pending or threatened in writing against or
involving POPS or any of its Subsidiaries
which is likely to have a material adverse
effect on the business or financial
condition of POPstar, POPS and any of
their Subsidiaries, taken as whole, or
which would require a payment by POPS or
its subsidiaries in excess of $2,000 in
the aggregate or which questions or
challenges the validity of this Agreement.
Neither POPS nor any or its Subsidiaries
is subject to any judgment, order or decree
that is likely to have a material adverse
effect on the business or financial
condition of POPstar, POPS or any of their
Subsidiaries, taken as a whole, or which
would require a payment by POPS or its
subsidiaries in excess of $2,000 in the
aggregate.
6.13 Absence of Certain Changes. Since the date
of the POPS Financial Statements, neither
POPS nor any of its Subsidiaries has:
a. suffered the damage or
destruction of any of its
properties or assets (whether or
not covered by insurance) which
is materially adverse to the
business or financial condition
of POPS and its Subsidiaries,
taken as a whole, or made any
disposition of any of its
material properties or assets
other than in the ordinary
course of business;
b. made any change or amendment in
its certificate of incorporation
<PAGE>
or by-laws, or other governing
instruments;
c. issued or sold any Equity
Securities or other securities,
acquired, directly or
indirectly, by redemption or
otherwise, any such Equity
Securities, reclassified,
split-up or otherwise changed
any such Equity Security, or
granted or entered into any
options, warrants, calls or
commitments of any kind with
respect thereto;
d. organized any new Subsidiary or
acquired any Equity Securities
of any Person or any equity or
ownership interest in any
business;
e. borrowed any funds or incurred,
or assumed or become subject to,
whether directly or by way of
guarantee or otherwise, any
obligation or liability with
respect to any such indebtedness
for borrowed money;
f. paid, discharged or satisfied
any material claim, liability or
obligation (absolute, accrued,
contingent or otherwise), other
than in the ordinary course of
business;
g. prepaid any material obligation
having a maturity of more than
90 days from the date such
obligation was issued or
incurred;
h. canceled any material debts or
waived any material claims or
rights, except in the ordinary
course of business;
i. disposed of or permitted to
lapse any rights to the use of
any material patent or
registered trademark or
copyright or other intellectual
property owned or used by it;
j. granted any general increase in
the compensation of officers or
employees (including any such
increase pursuant to any
employee benefit plan);
k. purchased or entered into any
contract or commitment to
purchase any material quantity
of raw materials or supplies, or
sold or entered into any
contract or commitment to sell
any material quantity of
property or assets, except (i)
normal contracts or commitments
for the purchase of, and normal
purchases of, raw materials or
supplies, made in the ordinary
course business, (ii) normal
contracts or commitments for the
sale of, and normal sales of,
inventory in the ordinary course
of business, and (iii) other
contracts, commitments,
purchases or sales in the
ordinary course of business;
l. made any capital expenditures or
additions to property, plant or
equipment or acquired any other
property or assets (other than
raw materials and supplies) at a
cost in excess of $2,000 in the
aggregate;
m. written off or been required to
write off any notes or accounts
receivable in an aggregate
amount in excess of $2,000;
n. written down or been required to
write down any inventory in an
aggregate amount in excess of $
2,000;
o. entered into any collective
bargaining or union contract or
agreement; or
p. other than the ordinary course
of business, incurred any
liability required by generally
accepted accounting principles
to be reflected on a balance
sheet and material to the
business or financial condition
of POPS and its subsidiaries
taken as a whole.
6.14 No Material Adverse Change. Since the date
of the POPS Financial Statements, there has
not been any material adverse change in the
business or financial condition of POPS
and its Subsidiaries taken as a whole,
other than changes resulting from economic
conditions prevailing in the United States
precious coins, collectibles and metals
industry.
6.15 Contracts and Commitments. Neither POPS nor
any of its Subsidiaries is a party to any:
a. Contract or agreement (other than purchase
or sales orders entered into in the
ordinary course of business) involving any
liability on the part of POPS or one of
its Subsidiaries of more than $2,000 and
not cancelable by POPS or the relevant
Subsidiary (without liability to POPS or
such Subsidiary) within 60 days;
b. Lease of personal property involving annual
rental payments in excess of $2,000 and
not cancelable by POPS or the relevant
Subsidiary (without liability to POPS or
such Subsidiary) within 90 days;
c. Employee bonus, stock option or stock
purchase, performance unit, profit-sharing,
pension, savings, retirement, health,
deferred or incentive compensation,
insurance or other material employee
<PAGE>
benefit plan (as defined in Section 2(3) of
ERISA) or program for any of the employees,
former employees or retired employees of
POPS or any of its Subsidiaries;
d. Commitment, contract or agreement that is
currently expected by the management of
POPS to result in any material loss upon
completion or performance thereof;
e. Contract, agreement or commitment that is
material to the business of POPS and its
Subsidiaries, taken as a whole, with any
officer, employee, agent, consultant,
advisor, salesman, sales representative,
value added reseller, distributor or
dealer; or
f. Employment agreement or other similar
agreement that contains any severance or
termination pay, liabilities or
obligations.
All such contracts and agreements are in full force and
effect. Neither POPS nor any of its Subsidiaries is in
breach of, in violation of or in default under, any
agreement, instrument, indenture, deed of trust,
commitment, contract or other obligation of any type to
which POPS or any of its Subsidiaries is a party or is or
may be bound that relates to the business of POPS or any
of its Subsidiaries or to which any of the assets or
properties of POPS or any of its Subsidiaries is subject,
the effect of which breach, violation or default is likely
to materially and adversely affect the business or
financial condition of POPS and its Subsidiaries, taken as
a whole.
6.16 Labor Relations. Neither POPS nor any of
its Subsidiaries is a party to any
collective bargaining agreement. Except for
any matter which is not likely to have a
material adverse effect on the business or
financial condition of POPS and its
Subsidiaries, taken as a whole, (a) POPS
and each of its Subsidiaries is in
compliance with all applicable laws
respecting employment and employment
practices, terms and conditions of
employment and wages and hours, and is not
engaged in any unfair labor practice, (b)
there is no unfair labor practice complaint
against POPS or any of its Subsidiaries
pending before the National Labor Relations
Board, (c) there is no labor strike,
dispute, slowdown or stoppage actually
pending or threatened against POPS or any
of its Subsidiaries, (d) no representation
question exists respecting the employees of
POPS or any of its Subsidiaries, (e)
neither POPS nor any of its Subsidiaries
has experienced any strike, work stoppage
or other labor difficulty, and (f) no
collective bargaining agreement relating to
employees of POPS or any of its
Subsidiaries is currently being negotiated.
<PAGE>
6.17 Employee Benefit Plans. No material
employee pension and welfare benefit plans
covering employees of POPS and its
Subsidiaries is (1) a multi-employer plan
as defined in Section 3(37) of ERISA, or
(2) a defined benefit plan as defined in
Section 3(35) of ERISA, any listed
individual account pension plan is duly
qualified as tax exempt under the
applicable sections of the Code, each
listed benefit plan and related funding
arrangement, if any, has been maintained in
all material respects in compliance with
its terms and the provisions of ERISA and
the Code.
6.18 Compliance with Law. The operations of POPS
and its Subsidiaries have been conducted in
accordance with all applicable laws and
regulations of all Governmental Bodies
having jurisdiction over them, except for
violations thereof which are not likely to
have a material adverse effect on the
business or financial condition of POPS and
its Subsidiaries, taken as a whole, or
which would not require a payment by POPS
or its Subsidiaries in excess of $2,000 in
the aggregate, or which have been cured.
Neither POPS nor any of its Subsidiaries
has received any notification of any
asserted present or past failure by it to
comply with any such applicable laws or
regulations. POPS and its Subsidiaries
have all material licenses, permits, orders
or approvals from the Governmental Bodies
required for the conduct of their
businesses, and are not in material
violation of any such licenses, permits,
orders and approvals. All such licenses,
permits, orders and approvals are in full
force and effect, and no suspension or
cancellation of any thereof has been
threatened.
6.19 Tax Matters.
a. POPS and each of its Subsidiaries (1) has
filed all nonconsolidated and noncombined
Tax Returns and all consolidated or
combined Tax Returns that include only POPS
and/or its Subsidiaries and not Seller or
its other Affiliates (for the purposes of
this Section 6.19, such tax Returns shall
be considered nonconsolidated and
noncombined Tax Returns) required to be
filed through the date hereof and has paid
any Tax due through the date hereof with
respect to the time periods covered by such
nonconsolidated and noncombined Tax Returns
and shall timely pay any such Taxes
required to be paid by it after the date
hereof with respect to such Tax Returns and
(2) shall prepare and timely file all such
nonconsolidated and noncombined Tax Returns
required to be filed after the date hereof
and through the Closing Date and pay all
Taxes required to be paid by it with
respect to the periods covered by such Tax
Returns; (B) all such Tax Returns filed
pursuant to clause (A) after the date
hereof shall, in each case, be prepared and
<PAGE>
filed in a manner consistent in all
material respects (including elections and
accounting methods and conventions) with
such Tax Return most recently filed in the
relevant jurisdiction prior to the date
hereof, except as otherwise required by law
or regulation. Any such Tax Return filed
or required to be filed after the date
hereof shall not reflect any new elections
or the adoption of any new accounting
methods or conventions or other similar
items, except to the extent such particular
reflection or adoption is required to
comply with any law or regulation.
b. All consolidated or combined Tax Returns
(except those described in subparagraph (a)
above) required to be filed by any person
through the date hereof that are required
or permitted to include the income, or
reflect the activities, operations and
transactions, of POPS or any of its
Subsidiaries for any taxable period have
been timely filed, and the income,
activities, operations and transactions of
POPS and Subsidiaries have been properly
included and reflected thereon. POPS shall
prepare and file, or cause to be prepared
and filed, all such consolidated or
combined Tax Returns that are required or
permitted to include the income, or reflect
the activities, operations and
transactions, of POPS or any Subsidiary,
with respect to any taxable year or the
portion thereof ending on or prior to the
Closing Date, including, without
limitation, POPS' consolidated federal
income tax return for such taxable years.
POPS will timely file a consolidated
federal income tax return for the taxable
year ended December 31, 1998 and such
return shall include and reflect the
income, activities, operations and
transactions of POPS and Subsidiaries for
the taxable period then ended, and hereby
expressly covenants and agrees to file a
consolidated federal income tax return, and
to include and reflect thereon the income,
activities, operations and transactions of
POPS and Subsidiaries for the taxable
period through the Closing Date. All Tax
Returns filed pursuant to this subparagraph
(b) after the date hereof shall, in each
case, to the extent that such Tax Returns
specifically relate to POPS or any of its
Subsidiaries and do not generally relate to
matters affecting other members of POPS'
consolidated group, be prepared and filed
in a manner consistent in all material
respects (including elections and
accounting methods and conventions) with
the Tax Return most recently filed in the
relevant jurisdictions prior to the date
hereof, except as otherwise required by law
or regulation. POPS has paid or will pay
all Taxes that may now or hereafter be due
with respect to the taxable periods covered
by such consolidated or combined Tax Returns.
<PAGE>
c. Neither POPS nor any of its Subsidiaries
has agreed, or is required, to make any
adjustment (x) under Section 481(a) of the
Code by reason of a change in accounting
method or otherwise or (y) pursuant to any
provision of the Tax Reform Act of 1986,
the Revenue Act of 1987 or the Technical
and Miscellaneous Revenue Act of 1988.
d. Neither POPS nor any of its Subsidiaries or
any predecessor or Affiliate of the
foregoing has, at any time, filed a consent
under Section 341(f)(1) of the Code, or
agreed under Section 341(f)(3) of the Code,
to have the provisions of Section 341(f)(2)
of the Code apply to any sale of its stock.
e. There is no (nor has there been any request
for an) agreement, waiver or consent
providing for an extension of time with
respect to the assessment of any Taxes
attributable to POPS or its Subsidiaries,
or their assets or operations and no power
of attorney granted by POPS or any of its
Subsidiaries with respect to any Tax matter
is currently in force.
f. There is no action, suit, proceeding,
investigation, audit, claim, demand,
deficiency or additional assessment in
progress, pending or threatened against or
with respect to any Tax attributable to
POPS, its Subsidiaries or their assets or
operations.
g. All amounts required to be withheld as of
the Closing Date for Taxes or otherwise
have been withheld and paid when due to the
appropriate agency or authority.
h. No property of POPS is "tax-exempt use
property " within the meaning of Section
168(h) of the Code nor property that POPS
and/or its Subsidiaries will be required to
treat as being owned by another person
pursuant to Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended
and in effect immediately prior to the
enactment of the Tax Reform Act of 1986.
i. There have been delivered or made available
to POPstar true and complete copies of all
income Tax Returns (or with respect to
consolidated or combined returns, the
portion thereof) and any other Tax Returns
requested by POPstar as may be relevant to
POPS, its Subsidiaries, or their assets or
operations for any and all periods ending
after December 31, 1998, or for any Tax
years
<PAGE>
which are subject to audit or
investigation by any taxing authority or
entity.
j. There is no contract, agreement, plan or
arrangement, including but not limited to
the provisions of this Agreement, covering
any employee or former employee of POPS or
its Subsidiaries that, individually or
collectively, could give rise to the
payment of any amount that would not be
deductible pursuant to Section 280G or 162
of the Code.
6.20 Environmental Matters.
a. At all times prior to the date
hereof, POPS and its
Subsidiaries have complied in
all material respects with
applicable environmental laws,
orders, regulations, rules and
ordinances relating to the
Properties (as hereinafter
defined), the violation of which
would have a material adverse
effect on the business or
financial condition of POPS and
its Subsidiaries, taken as a
whole, or which would require a
payment by POPS or its
Subsidiaries in excess of
$2,000 in the aggregate, and
which have been duly adopted,
imposed or promulgated by any
legislative, executive,
administrative or judicial body
or officer of any Governmental
Body.
b. The environmental licenses,
permits and authorizations that
are material to the operations
of POPS and its Subsidiaries,
taken as a whole, are in full
force and effect.
c. Neither POPS nor any of its
Subsidiaries has released or
caused to be released on or
about the properties currently
owned or leased by POPS or any
of its Subsidiaries (the
"Properties") any (i)
pollutants, (ii) contaminants,
(iii) "Hazardous Substances," as
that term is defined in Section
101(14) of the Comprehensive
Environmental Response Act, as
amended or (iv) "Regulated
Substances," as that term in
defined in Section 9001 of the
Resource Conservation and
Recovery Act, 42 U.S.C. Section
6901, et seq., as amended, which
would be required to be
remediated by any governmental
agency with jurisdiction over
the Properties under the
authority of laws, regulations
and ordinances as in effect and
currently interpreted on the
date hereof, which remediation
would have a material adverse
effect on the business or
financial condition of POPS and
its Subsidiaries, taken as a whole.
<PAGE>
6.21 Brokers or Finders. POPS has not employed
any broker or finder or incurred any
liability for any brokerage or finder's
fees or commissions or similar payments in
connection with the sale of the POPS Shares
to POPstar.
6.22 Absence of Certain Commercial Practices.
Neither POPS nor any of its Subsidiaries
has, directly or indirectly, paid or
delivered any fee, commission or other sum
of money or item of property, however
characterized, to any finder, agent,
government official or other party, in the
United States or any other country, which
is in any manner related to the business or
operations of POPS or its Subsidiaries,
which POPS or one of its Subsidiaries knows
or has reason to believe to have been
illegal under any federal, state or local
laws of the United States or any other
country having jurisdiction; and neither
POPS nor any of its Subsidiaries has
participated, directly or indirectly, in
any boycotts or other similar practices
affecting any of its actual or potential
customers in violation of any applicable
law or regulation.
6.23 Transactions with Directors and Officers.
POPS and its Subsidiaries do not engage in
business with any Person in which any of
POPS' directors or officers has a material
equity interest. No director or officer of
POPS owns any property, asset or right
which is material to the business of POPS
and its Subsidiaries, taken as a whole.
6.24 Borrowing and Guarantees. POPS and its
Subsidiaries (a) do not have any
indebtedness for borrowed money, (b) are
not lending or committed to lend any money
(except for advances to employees in the
ordinary course of business), and (c) are
not guarantors or sureties with respect to
the obligations of any Person.
6.25 Purchase for Investment. POPS is purchasing
the POPstar Shares solely for its own
account for the purpose of investment and
not with a view to, or for sale in
connection with, any distribution of any
portion thereof in violation of any
applicable securities law.
7. ACCESS AND REPORTING; FILINGS WITH
GOVERNMENTAL AUTHORITIES; OTHER COVENANTS.
7.1 Access Between the date of this Agreement
and the Closing Date. Each of POPstar and
POPS shall (a) give to the other and its
authorized representatives reasonable
access to all plants, offices, warehouse
and other facilities and properties of
POPstar or POPS, as the case may be, and to
its books and records, (b) permit the other
to make inspections thereof, and
<PAGE>
(c) cause
its officers and its advisors to furnish
the other with such financial and operating
data and other information with respect to
the business and properties of such party
and its Subsidiaries and to discuss with
such and its authorized representatives its
affairs and those of its Subsidiaries, all
as the other may from time to time
reasonably request.
7.2 Exclusivity. From the date hereof until
the earlier of the Closing or the
termination of this Agreement, POPS shall
not solicit or negotiate or enter into any
agreement with any other Person with
respect to or in furtherance of any
proposal for a merger or business
combination involving, or acquisition of
any interest in, or (except in the ordinary
course of business) sale of assets by,
POPS, except for the exchange of the POPS
Shares for the POPstar Shares from
POPstar's shareholders.
7.3 Publicity. Between the date of this
Agreement and the Closing Date, POPS and
POPstar shall discuss and coordinate with
respect to any public filing or
announcement or any internal or private
announcement (including any general
announcement to employees) concerning the
contemplated transaction.
7.4 Regulatory Matters. POPstar and POPS shall
(a) file with applicable regulatory
authorities any applications and related
documents required to be filed by them in
order to consummate the contemplated
transaction and (b) cooperate with each
other as they may reasonably request in
connection with the foregoing.
7.5 Confidentiality. Prior to the Closing Date
(or at any time if the Closing does not
occur) each of POPstar and POPS shall keep
confidential and not disclose to any Person
(other than its employees, attorneys,
accountants and advisors) or use (except in
connection with the transactions
contemplated hereby) all non-public
information obtained pursuant to Section
7.1. Following the Closing, each of POPstar
and POPS shall keep confidential and not
disclose to any Person (other than its
employees, attorneys, accountants and
advisors) or use (except in connection with
preparing Tax Returns and conducting
proceeds relating to Taxes) any nonpublic
information relating to the other. This
Section 7.6 shall not be violated by
disclosure pursuant to court order or as
otherwise required by law, on condition
that notice of the requirement for such
disclosure is given the other party prior
to making any disclosure and the party
subject to such requirement cooperates as
the other may reasonably request in
resisting it. If the Closing does not
occur, each of POPstar and POPS shall
return to the other, or destroy, all
information it shall have received from the
other in connection with this Agreement and
the transactions contemplated
<PAGE>
hereby,
together with any copies or summaries
thereof or extracts therefrom. Each of
POPstar and POPS shall use their best
efforts to cause their respective
representatives, employees, attorneys,
accountants and advisors to whom
information is disclosed pursuant to
Section 7.1 to comply with the provisions
of this Section 7.6.
7.6 Reverse Split; Antidilution. POPstar and
its officers and directors hereby agree
that for a period of 12 months from the
date hereof the merged company shall not
engage in any reverse stock splits or other
stock combinations or change any other
attributes of any of the Company's stock.
POPstar and its officers and directors
hereby agree that except with respect to
issuances of stock otherwise provided for
herein, the Company shall not issue any new
series of stock at a purchase price of less
than $1.00 per share without the consent of
a majority of the initial POPS
shareholders.
7.7 Rule 504 Sales. POPstar agrees not to make
any sales of securities in accordance with
Rule 504 promulgated under Regulation D of
the Securities Act.
8. CONDUCT OF POPS' BUSINESS PRIOR TO THE CLOSING.
8.1 Operation in Ordinary Course. Between the
date of this Agreement and the Closing
Date, POPS shall conduct its businesses in
all material respects in the ordinary course.
8.2 Business Organization. Between the date of
this Agreement and the Closing Date, POPS
shall (a) preserve substantially intact the
business organization of POPS; and (b)
preserve in all material respects the
present business relationships and good
will of POPS and each of its Subsidiaries.
8.3 Corporate Organization. Between the date of
this Agreement and the Closing Date, POPS
shall not cause or permit any amendment of
its certificate of incorporation or by-laws
(or other governing instrument) and shall not:
a. issue, sell or otherwise dispose of any of
its Equity Securities, or create, sell or
otherwise dispose of any options, rights,
conversion rights or other agreements or
commitments of any kind relating to the
issuance, sale or disposition of any of its
Equity Securities;
b. create or suffer to be created any
Encumbrance thereon, or create, sell or
otherwise dispose of any options, rights,
conversion rights or other agreements or
commitments of any kind relating to the
<PAGE>
sale or disposition of any Equity Securities;
c. reclassify, split up or otherwise change
any of its Equity Securities;
d. be party to any merger, consolidation or
other business combination;
e. sell, lease, license or otherwise dispose
of any of its properties or assets
(including, but not limited to rights with
respect to patents and registered
trademarks and copyrights or other
proprietary rights), in an amount which is
material to the business or financial
condition of POPS and its Subsidiaries,
taken as a whole, except in the ordinary
course of business; or
f. organize any new Subsidiary or acquire any
Equity Securities of any Person or any
equity or ownership interest in any
business.
8.4 Other Restrictions. Between the date of
this Agreement and the Closing Date, POPS
shall not:
a. borrow any funds or otherwise
become subject to, whether
directly or by way of guarantee
or otherwise, any indebtedness
for borrowed money;
b. create any material Encumbrance
on any of its material
properties or assets;
c. except in the ordinary course of
business, increase in any manner
the compensation of any director
or officer or increase in any
manner the compensation of any
class of employees;
d. create or materially modify any
material bonus, deferred
compensation, pension, profit
sharing, retirement, insurance,
stock purchase, stock option, or
other fringe benefit plan,
arrangement or practice or any
other employee benefit plan (as
defined in section 3(3) of ERISA);
e. make any capital expenditure or
acquire any property or assets;
f. enter into any agreement that
materially restricts POPS,
POPstar or any of their
Subsidiaries from carrying on
business;
<PAGE>
g. pay, discharge or satisfy any
material claim, liability or
obligation, absolute, accrued,
contingent or otherwise, other
than the payment, discharge or
satisfaction in the ordinary
course of business of
liabilities or obligations
reflected in the POPS Financial
Statements or incurred in the
ordinary course of business and
consistent with past practice
since the date of the POPS
Financial Statements; or
h. cancel any material debts or
waive any material claims or
rights.
9. DEFINITIONS.
As used in this Agreement, the following terms have the
meanings specified or referred to in this Section 9.
9.1 "Business Day" Any day that is not a
Saturday or Sunday or a day on which banks
located in the City of New York are
authorized or required to be closed.
9.2 "Code" The Internal Revenue Code of
1986, as amended.
9.3 "Disclosure Letter" A letter dated the
date of this Agreement, executed by either
POPstar and POPS, addressed and delivered
to the other and containing information
required by this Agreement and exceptions
to the representations and warranties under
this Agreement.
9.4 "Encumbrances" Any security interest,
mortgage, lien, charge, adverse claim or
restriction of any kind, including, but not
limited to, any restriction on the use,
voting, transfer, receipt of income or
other exercise of any attributes of
ownership, other than a restriction on
transfer arising under Federal or state
securities laws.
9.5 "Equity Securities" See Rule 3a 11 1
under the Securities Exchange Act of 1934.
9.6 "ERISA" The Employee Retirement Income
Security Act of 1974, as amended.
9.7 "Governmental Body" Any domestic or
foreign national, state or municipal or
other local government or multi-national
body (including, but not limited to, the
European Economic Community), any
subdivision, agency, commission or
authority thereof.
9.8 "Knowledge" Actual knowledge, after
reasonable investigation.
9.9 "Person" Any individual, corporation,
partnership, joint venture, trust,
association, unincorporated organization,
other entity, or Governmental Body.
9.10 "Subsidiary" With respect to any Person,
any corporation of which securities having
the power to elect a majority of that
corporation's Board
<PAGE>
of Directors (other
than securities having that power only upon
the happening of a contingency that has not
occurred) are held by such Person or one or
more of its Subsidiaries.
10. TERMINATION.
10.1 Termination. This Agreement may be
terminated before the Closing occurs only
as follows:
a. By written agreement of POPstar and POPS at
any time.
b. By POPS, by notice to POPstar at any time,
if one or more of the conditions specified
in Section 4 is not satisfied at the time
at which the Closing (as it may be deferred
pursuant to Section 2.1) would otherwise
occur or if satisfaction of such a
condition is or becomes impossible.
c. By POPstar, by notice to POPS at any time,
if one or more of the conditions specified
in Section 3 is not satisfied at the time
at which the Closing (as it may be deferred
pursuant to Section 2.1), would otherwise
occur of if satisfaction of such a
condition is or becomes impossible.
d. By POPstar to POPS, by notice to the other
at any time after July 31, 1999.
10.2 Effect of Termination. If this Agreement is
terminated pursuant to Section 10.1, this
Agreement shall terminate without any
liability or further obligation of any
party to another.
11. NOTICES. All notices, consents, assignments and other
communications under this Agreement shall be in writing
and shall be deemed to have been duly given when (a)
delivered by hand, (b) sent by telex or facsimile (with
receipt confirmed), provided that a copy is mailed by
registered mail, return receipt requested, or (c) received
by the delivery service (receipt requested), in each case
to the appropriate addresses, telex numbers and facsimile
numbers set forth below (or to such other addresses, telex
numbers and facsimile numbers as a party may designate as
to itself by notice to the other parties).
(a) If to POPS:
c/o Chapman & Flanagan, Ltd.
2080 E. Flamingo Road, Suite 112
Las Vegas, NV 89119
Facsimile No.: (702) 650-5667
Attention: Sean Flanagan
<PAGE>
(b) If to POPstar:
POPstar Global Communications Inc.
KPMG Centre
Tropic Isle Building
P.O. Box 3443, Road Town
Tortola, British Virgin Islands
Facsimile No.: (604) 872-6601
Attention: Don Lau
with a copy to:
Law Offices of M. Richard Cutler
610 Newport Center Drive, Suite 800
Newport Beach, CA 92660
Facsimile No.: (949) 719-1988
12. MISCELLANEOUS.
12.2 Expenses. Each party shall bear its own
expenses incident to the preparation,
negotiation, execution and delivery of this
Agreement and the performance of its
obligations hereunder.
12.3 Captions. The captions in this Agreement
are for convenience of reference only and
shall not be given any effect in the
interpretation of this agreement.
12.4 No Waiver. The failure of a party to insist
upon strict adherence to any term of this
Agreement on any occasion shall not be
considered a waiver or deprive that party
of the right thereafter to insist upon
strict adherence to that term or any other
term of this Agreement. Any waiver must be
in writing.
12.5 Exclusive Agreement; Amendment. This
Agreement supersedes all prior agreements
among the parties with respect to its
subject matter with respect thereto and
cannot be changed or terminated orally.
12.6 Counterparts. This Agreement may be
executed in two or more counterparts, each
of which shall be considered an original,
but all of which together shall constitute
the same instrument.
12.7 Governing Law. This Agreement and (unless
otherwise provided) all amendments hereof
and waivers and consents hereunder shall be
governed by the internal law of the State
of California, without regard to the
conflicts of law principles thereof.
<PAGE>
12.8 Binding Effect. This Agreement shall inure
to the benefit of and be binding upon the
parties hereto and their respective
successors and assigns, provided that
neither party may assign its rights
hereunder without the consent of the other,
provided that, after the Closing, no
consent of POPstar shall be needed in
connection with any merger or consolidation
of POPS with or into another entity.
IN WITNESS WHEREOF, the corporate parties hereto have
caused this Agreement to be executed by their respective
officers, hereunto duly authorized, and entered into as of
the date first above written.
ATTEST: POPSTAR COMMUNICATIONS, INC.,
A NEVADA CORPORATION
By: /s/ David L. Christensen
Secretary President
ATTEST: POPSTAR GLOBAL COMMUNICATIONS INC.,
A BRITISH VIRGIN ISLAND CORPORATION
By: /s/ Thompson Chu
Secretary President
<PAGE>
EXHIBIT A
POPstar SHAREHOLDERS
Name POPS Shares to be Issued
Pang Lin CHOI, as trustee for
Thompson Chu Family Trust 6,525,000
Pang Lin CHOI, as trustee for
John McDermott Family Trust 2,000,000
Stargate Trust 1,525,000
Yuk Lit CHAN 25,000
Irvin FRANK 25,000
Sou Won LEUNG 25,000
Thomas In-sing LEUNG 25,000
Junsoo JANG 100,000
Chris & Christine Holding Ltd. 250,000
MRC Legal Services Corporation 10,000
Kemayan E.C. Hybrid Ltd. 1,750,000
Sunfield Industries Limited 625,000
[Filed in the Office of the
Secretary of State of
State of Nevada
10034-95
June 19, 1995]
ARTICLES OF INCORPORATION of
Cherokee Leather, Inc.
Know all men by these present;
That the undersigned, have this day voluntarily associated ourselves
together for the purpose OF forming a corporation under and pursuant to the
provisions of Nevada Revised Statutes 78.010. to Nevada Revised Statues
78.090 inclusive, as amended, and certify that;
1. The name of this corporation is:
Cherokee Leather, Inc.
2. Offices for the transaction of any business of the Corporation, and
where meetings of the Board of Directors and of Stockholders may be held,
may be established and maintained in any part of the State of Nevada, or
in any other state, territory, or possession of the United States.
3. The nature of the business is to engage in any lawful activity.
4. The Capital Stock shall consist of 50,000,000 shares of common stock,
$0.001 par value.
5. The members of the governing board of the corporation shall be styled
directors, of which there shall be no less than 1. The Directors of this
corporation need not be stockholders. The first Board of Directors is:
Raymond M. Girard, whose address is 1700 E. Desert Inn Rd., Suite 100,
Las Vegas, NV 89109.
6. This corporation shall have perpetual existence.
7. The name and address of each of the incorporators signing these
Articles of Incorporation are as follows: Raymond M. Girard, whose address
is 1700 E. Desert Inn Road., Suite 100, Las Vegas, NV 89109.
<PAGE>
8. This Corporation shall have a president, a secretary, a treasurer, and
a resident agent, to be chosen by the Board of Directors, any person may
hold two or more offices.
9. The resident agent of this Corporation shall be Raymond M. Girard, 1700
E. Desert Inn Road, Suite 100, Las Vegas, NV 89109.
10. The Capital Stock of the corporation, after the fixed consideration
thereof has been paid or performed, shall not be subject to assessment,
and the individual liable for the debts and liabilities of the Corporation,
and the Articles of Incorporation shall never be amended as the aforesaid
provisions.
11. No director or officer of the corporation shall be personally liable to
the corporation of any of its stockholders for damages for breach of
fiduciary duty as a director or officer involving any act or omission of
any such director or officer provided, however, that the foregoing., provision
shall not eliminate or limit the liability of a director or officer FOR ACTS
or omissions which involve intentional misconduct, fraud or a knowing
violation of law, or the payment of dividends in violation of Section 78.300
of the Nevada Revised Statutes. Any repeal or modification of this Article
of the Stockholders of the Corporation shall be prospective only, and
shall not adversely affect any limitation on the personal liability of a
director of officer of the Corporation for acts or omissions prior to such
repeal or modification.
<PAGE>
I, the undersigned, being the incorporator herein above named for the
purpose of forming a corporation pursuant to the general corporation law of
the State of Nevada, do make and file these Articles of Incorporation,
hereby declaring and certifying that the facts within stated are true, and
accordingly have hereunto set my hand this 16 day of June, 1995.
/s/Raymond M. Girard
Raymond M. Girard
1700 E. Desert Inn Rd., Suite 100
Las Vegas, NV 89109
State of NEVADA )
)ss
County of CLARK )
On June 16, 1995, personally appeared before me, a notary public, personally
known to me to be the person whose name is subscribed to the above
instrument who acknowledged that he/she executed the instrument.
/s/E. V. Stamero
Signature
[FILED #C10034-95
May 19, 1999
IN THE OFFICE OF
SECRETARY OF STATE]
Certificate of amendment of the Articles of incorporation
Of
Cherokee Leather, Inc.
David L. Christensen and Andrew W. Berney, certify that:
1. The original articles were filed with the office of the Secretary of
State on June 19 1995.
2. As of the date of the certificate, 5,800,000
shares of stock of the corporation have been issued.
3. Pursuant to shareholders meeting at which a majority voted in favor
of the following amendment, the company hereby adopts the following
amendment to the Articles of Incorporation of this Corporation
First: Name of Corporation
The name of the Corporation is POPStar Communications, Inc.
/s/Andrew W. Berney /s/David L. Christensen
Secretary/Director President/Director
State of Nevada
County of Clark
On May 17, 1999, personally appeared befo re me, a Notary Public, David L.
Christensen and Andrew W. Berney, who acknowledged that they executed the
above instrument.
/s/Bridget E. Richards
Bridget E. Richards
Notary in and for Said State and County
[NOTARY PUBLIC
STATE OF NEVADA
County of Clark
BRIDGET E. RICHARDS
My Appointment Expires Sept. 5, 2000]
BYLAWS
OF
Cherokee Leather, Inc.
(THE "CORPORATION")
ARTICLE I
OFFICE
The Board of Directors shall designate and the Corporation shall maintain a
principal office. The location of the principal office may be changed by the
Board of Directors. The Corporation also may have offices in such other
places as the Board may from time to time designate. The location of the
initial principal office of the Corporation shall be designated by resolution.
ARTICLE II
SHAREHOLDERS MEETINGS
1. Annual Meetings
The annual meeting of the shareholders of the Corporation shall be held at
such place within or without the State of Nevada as shall be set forth in
compliance with these Bylaws. The meeting shall be held on the Third Monday
of June of each year. If such day is a legal holiday, the meeting shall be
on the next business day. This meeting shall be for the election of
Directors and for the transaction of such other business as may properly
come before it.
2. Special Meetings
Special meetings of shareholders, other than those regulated by statute, may
be called by the President upon written request of the holders of 50% or
more of the outstanding shares entitled to vote at such special meeting.
Written notice of such meeting stating the place, the date and hour of the
meeting, the purpose or purposes for which it is called, and the name of the
person by whom or at whose direction the meeting is called shall be given.
3. Notice of Shareholders Meeting
The Secretary shall give written notice stating the place, day, and hour of
the meeting, and in the case of a special meeting, the purpose or purposes
for which the meeting is called, which shall be delivered not less than ten
or more than fifty days before the date of the meeting, either personally or
by mail to each shareholder of record entitled
<PAGE>
to vote at such meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail, addressed to the
shareholder at their address as it appears on the books of the Corporation,
with postage thereon prepaid. Attendance at the meeting shall constitute a
waiver of notice thereof.
4. Place of Meeting
The Board of Directors may designate any place, either within or without the
State of Nevada, as the place of meeting for any annual meeting or for any
special meeting called by the Board of Directors. A waiver of notice signed
by all shareholders entitled to vote at a meeting may designate any place,
either within or without the State of Nevada, as the place for the holding
of such meeting. If no designation is made, or if a special meeting is
otherwise called, the place of meeting shall be the principal office of the
Corporation.
5. Record Date
The Board of Directors may fix a date not less than ten nor more than fifty
days prior to any meeting as the record date for the purpose of determining
shareholders entitled to notice of and to vote at such meetings of the
shareholders. The transfer books may be closed by the Board of Directors for
a stated period not to exceed fifty days for the purpose of determining
shareholders entitled to receive payment of and dividend, or in order to
make a determination of shareholders for any other purpose.
6. Quorum
A majority of the outstanding shares of the Corporation entitled to vote,
represented in person or by proxy, shall constitute a quorum at a meeting of
shareholders. If less than a majority of the outstanding shares are
represented at a meeting, a majority of the shares so represented may
adjourn the meeting from time to time without further notice. At a meeting
resumed after any such adjournment at which a quorum shall be present or
represented, any business may be transacted, which might have been
transacted at the meeting as originally noticed.
<PAGE>
7. Voting
A holder of outstanding shares, entitled to vote at a meeting, may vote at
such meeting in person or by proxy. Except as may otherwise be provided in
the currently filed Articles of Incorporation, every shareholder shall be
entitled to one vote for each share standing their name on the record of
shareholders. Except as herein or in the currently filed Articles of
Incorporation otherwise provided, all corporate action shall be determined
by a majority of the votes cast at a meeting of shareholders by the holders
of shares entitled to vote thereon.
8. Proxies
At all meeting of shareholders, a shareholder may vote in person or by proxy
executed in writing by the shareholder or by their duly authorized
attorney-in-fact. Such proxy shall be filed with the Secretary of the
Corporation before or at the time of the meeting. No proxy shall be valid
after six months from the date of its execution.
9. Informal Action by Shareholders
Any action required to be taken at a meeting of the shareholders, may be
taken without a meeting if a consent in writing, setting forth the action so
taken, shall be signed by a majority of the shareholders entitled to vote
with respect to the subject matter thereof.
ARTICLE III
BOARD OF DIRECTORS
1. General Powers
The business and affairs of the Corporation shall be managed by its Board of
Directors. The Board if Directors may adopt such rules and regulations for
the conduct of their meetings and the management of the Corporation as they
appropriate under the circumstances. The Board shall have authority to
authorize changes in the Corporation's capital structure.
2. Number, Tenure and Qualification
The number of Directors of the Corporation shall be a number between one and
five, as the Directors may by resolution determine from time to time. Each
of the Directors shall hold office until the next annual meeting of
shareholders and until their successor shall have been elected and qualified.
<PAGE>
3. Regular Meetings
A regular meeting of the Board of Directors shall be held without other
notice than by this Bylaw, immediately after and, at the same place as the
annual meeting of shareholders. The Board of Directors may provide, by
resolution, the time and place for the holding of additional regular
meetings without other notice than this resolution.
4. Special Meetings
Special meetings of the Board of Directors may be called by order of the
Chairman of the Board or the President. The Secretary shall give notice of
the time, place and purpose or purposes of each special meeting by mailing
the same at least two days before the meeting or by telephone, telegraphing
or telecopying the same at least one day before the meeting to each
Director. Meeting of the Board of Directors may be held by telephone
conference call.
5. Quorum
A majority of the members of the Board of Directors shall constitute a
quorum for the transaction of business, but less than a quorum may adjourn
any meeting from time to time until a quorum shall be present, whereupon the
meeting may be held, as adjourned, without further notice. At any meeting at
which every Director shall be present, even though without any formal notice
any business may be transacted
6. Manner of Acting
At all meetings of the Board of Directors, each Director shall have one
vote. The act of a majority of Directors present at a meeting shall be the
act of the full Board of Directors, provided that a quorum is present.
7. Vacancies
A vacancy in the Board of Directors shall be deemed to exist in the case of
death, resignation, or removal of any Director, or if the authorized number
of Directors is increased, or if the shareholders fail, at any meeting of
the shareholders, at which any Director is to be elected, to elect the full
authorized number of Directors to be elected at that meeting.
8. Removals
Directors may be removed, at any time, by a vote of the shareholders holding
a majority of the shares outstanding and entitled to vote. Such vacancy
shall be filled by the Directors entitled to vote. Such vacancy shall be
filled by
<PAGE>
the Directors then in office, though less than a quorum, to hold office
until the next annual meeting or until their successor is duly elected and
qualified, except that any directorship to be filled by election by the
shareholders at the meeting at which the Director is removed. No reduction
of the authorized number of Directors shall have the effect of removing any
Director prior to the expiration of their term of office.
9. Resignation
A director may resign at any time by delivering written notification thereof
to the President or Secretary of the Corporation. A resignation shall become
effective upon its acceptance by the Board of Directors; provided, however,
that if the Board of Directors has not acted thereon within ten days from
the date of its delivery, the resignation shall be deemed accepted.
1O.Presumption of Assent
A Director of the Corporation who is present at a meeting of the Board of
Directors at which action on any corporate matter is taken shall be presumed
to have assented to the action(s) taken unless their dissent shall be placed
in the minutes of the meeting or unless he or she shall file their written
dissent to such action with the person acting as the secretary of the
meeting before the adjournment thereof or shall forward such dissent by
registered mail to the secretary of the Corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a
Director who voted in favor of such action.
11. Compensation
By resolution of the Board of Directors, the Directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors or
a stated salary as Director. No such payment shall preclude any Director
from serving the Corporation in any other capacity and receiving
compensation therefor.
12. Emergency Power
When, due to a national disaster or death, a majority of the Directors are
incapacitated or otherwise unable to attend the meetings and function as
Directors, the remaining members of the Board of Directors shall have all
the powers necessary to function as a complete Board, and for the purpose of
doing business and filling vacancies shall constitute a quorum, until such
time as all Directors can attend or vacancies can be filled pursuant to
these Bylaws.
<PAGE>
13. Chairman
The Board of Directors may elect from its own number a Chairman of the
Board, who shall preside at all meetings of the Board of Directors, and
shall perform such other duties as may be prescribed from time to time by
the Board of Directors. The Chairman may by appointment fill any vacancies
on the Board of Directors.
ARTICLE IV
OFFICERS
1. Number
The officers of the Corporation shall be a President, one or more Vice
Presidents, a Secretary, and a Treasurer, each of whom shall be elected by a
majority of the Board of Directors. Such other Officers and assistant
Officers as may be deemed necessary may be elected or appointed by the Board
of Directors. In its discretion, the Board of Directors may leave unfilled
for any such period as it may determine any office except those of President
and Secretary. Any two or more offices may be held by the same person.
Officers may or may not be Directors or shareholders of the Corporation.
2. Election and Term of Office
The Officers of the Corporation to be elected by the Board of Directors
shall be elected annually by the Board of Directors at the first meeting of
the Board of Directors held after each annual meeting of the shareholders.
If the election of Officers shall not be held at such meeting, such election
shall be held as soon thereafter as convenient. Each Officer shall hold
office until their successor shall have been duly elected and shall have
qualified or until their death or until they shall resign or shall have been
removed in the manner hereinafter provided.
3. Resignations
Any Officer may resign at any time by delivering a written resignation
either to the President or to the Secretary. Unless otherwise specified
therein, such resignation shall take effect upon delivery.
4. Removal
Any Officer or agent may be removed by the Board of Directors whenever in
its judgment the best interests Corporation will be served thereby, but such
removal shall be
<PAGE>
without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not of itself create
contract rights. Any such removal shall require a majority vote of the Board
of Directors, exclusive of the officer in question if he or she is also a
Director.
5. Vacancies
A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, or is a new office shall be created, may be
filled by the Board of Directors for the un-expired portion of the term.
6. President
The president shall be the chief executive and administrative Officer of the
Corporation. He or she shall preside at all meetings of the stockholders
and, in the absence of the Chairman of the Board, at meetings of the Board
of Directors. He or she shall exercise such duties as customarily pertain to
the office of President and shall have general and active supervision over
the property, business, and affairs of the Corporation and over its several
Officers, agents, or employees other than those appointed by the Board of
Directors. He or she may sign, execute and deliver in the name of the
Corporation powers of attorney, contracts, bonds and other obligations, and
shall perform such other duties as may be prescribed from time to time by
the Board of Directors or by the Bylaws.
7. Vice President
The Vice President shall have such powers and perform such duties as may be
assigned to him by the Board of Directors or the President. In the absence
or disability of the President, the Vice President DESIGNATED BY THE BOARD
OR THE PRESIDENT SHALL perform the duties and exercise the powers of the
President. A Vice President may sign and execute contracts any other
obligations pertaining to the regular course of their duties.
8. Secretary
The Secretary shall keep the minutes of all meetings of the stockholders and
of the Board of Directors and, to the extent ordered by the Board of
Directors or the President, the minutes of meeting of all committees. He or
she shall cause notice to be given of meetings of stockholders, of the Board
of Directors, and of any committee appointed by the Board. He or she shall
have custody of the corporate seal and general charge of the records,
documents and papers of the Corporation
<PAGE>
not pertaining to the performance of the duties vested in other officers,
which shall at all reasonable times be open to the examination of any
Directors. He or she may sign or execute contracts with the President or a
Vice President thereunto authorized in the name of the Corporation and affix
the seal of the Corporation thereto. He or she shall perform such other
duties as may be prescribed from time to time by the Board of Directors or
by the Bylaws.
9. Treasurer
The Treasurer shall have general custody of the collection and disbursement
of funds of the Corporation. He or she shall endorse on behalf of the
Corporation for collection check, notes and other obligations, and shall
deposit the same to the credit of the Corporation in such bank or banks or
depositories as the Board of Directors may designate. He or she may sign,
with the President or such other persons as may be designated for the
purpose of the Board of Directors, all bills of exchange or promissory notes
of the Corporation. He or she shall enter or cause to be entered regularly
in the books of the Corporation full and accurate account of all monies
received and paid by him on account of the Corporation; shall at all
reasonable times exhibit his (or her) books and accounts to any Director of
the Corporation upon application at the office of the Corporation during
business hours; and, whenever required by the Board of Directors or the
President, shall render a statement of his (or her) accounts. The Treasurer
shall perform such other duties as may be prescribed from time to time by
the Board of Directors or by the Bylaws.
10. Other Officers
Other Officers shall perform such duties and shall have such powers as may
be assigned to them by the Board of Directors.
11. SALARIES
Salaries or other compensation of the Officers of the Corporation shall be
fixed from time to time by the Board of Directors, except that the Board of
Directors may delegate to any person or group of persons the power to fix
the salaries or other compensation of any subordinate officers or agents. No
Officer shall be prevented from receiving any such salary or compensation by
reason of the fact the he or she is also a Director of the Corporation
12. Surety Bonds
In case the Board of Directors shall so require, any officer or agent of the
Corporation shall execute to the Corporation a bond in such sums and with
such surety or sureties as the
<PAGE>
Board of Directors may direct, conditioned upon the faithful performance of
his (or her) duties to the Corporation, including responsibility for
negligence and for the accounting for all property, monies or securities of
the Corporation, which may come into his (or her) hands.
ARTICLE V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
1. Contracts
The Board of Directors may authorize any Officer or Officers, agent or
agents, to enter into any contract or execute and deliver any instrument in
the name of and on behalf of the Corporation and such authority may be
general or confined to specific instances.
2. Loans
No loan or advance shall be contracted on behalf of the Corporation, no
negotiable paper or other evidence of its obligation under any loan or
advance shall be issued in its name, and no property of the Corporation
shall be mortgaged, pledged, hypothecated or transferred as security for the
payment of any loan, advance, indebtedness or liability of the Corporation
unless and except as authorized by the Board of Directors. Any such
authorization may be general or confined to specific instances.
3. Deposits
All funds of the Corporation not otherwise employed shall be deposited from
time to time to the credit of the Corporation in such banks, trust companies
or other depositories as the Board of Directors may select, or as may be
selected by an Officer or agent of the Corporation authorized to do so by
the Board of Directors.
4. Checks and Drafts
All notes, drafts, acceptances, checks, endorsements and evidence of
indebtedness of the Corporation shall be signed by such Officer or Officers
or such agent or agents of the Corporation and in such manner as the Board
of Directors from timer to time may determine. Endorsements for deposits to
the credit of the Corporation in any of its duly authorized depositories
shall be made in such manner as the Board of Directors may from time to time
determine.
<PAGE>
5. Bonds and Debentures
Every bond or debenture issued by the Corporation shall be in the form of an
appropriate legal writing, which shall be signed by the President or Vice
President and by the Treasurer or by the Secretary, and sealed with the seal
of the Corporation. The seal may be facsimile, engraved or printed. Where
such bond or debenture is authenticated with the manual signature of an
authorized Officer of the Corporation or other trustee designated by the
indenture of trust or other agreement under which such security is issued,
the signature of any of the Corporation's Officers named thereon may be
facsimile. In case any Officer who signed, or whose facsimile signature has
been used on any such bond or debenture, shall cease to be an Officer of the
Corporation for any reason before the same has been delivered by the
Corporation, such bond or debenture may nevertheless by adopted by the
Corporation and issued and delivered as though the person who signed it or
whose facsimile signature has been used thereon had not ceased to be such
Officer.
ARTICLE VI
CAPITAL STOCK
1. Certificate of Share
The shares of the Corporation shall be represented by certificates prepared
by the Board of Directors and signed by the President. The signatures of
such officers upon a certificate may be facsimiles if the certificate is
countersigned by a transfer agent or registered by a registrar other than
the Corporation itself or one of its employees. All certificates for shares
shall be consecutively numbered or otherwise identified. The name and
address of the person to whom the shares represented thereby are issued,
with the number of shares and date of issue, shall be entered on the stock
transfer books of the Corporation. All certificates surrendered to the
Corporation for transfer shall be canceled except that in case of a lost,
destroyed or mutilated certificate, a new one may be issued therefor upon
such terms and indemnity to the Corporation as the Board of Directors may
prescribe.
2. Transfer of Shares
Transfer of shares of the Corporation shall be made only on the stock
transfer books of the Corporation by the holder of record thereof or by his
(or her) legal representative, who shall furnish proper evidence of
authority to transfer, or by his (or her) attorney thereunto authorized by
power of
<PAGE>
attorney duly executed and filed with the Secretary of the Corporation, and
on surrender for cancellation of the certificate for such shares. The person
in whose name shares stand on the books of the Corporation shall be deemed
by the Corporation to be the owner thereof for all purposes.
3. Transfer Agent and Registrar
The Board of Directors of the Corporation shall have the power to appoint
one or more transfer agents and registrars for the transfer and registration
of certificates of stock of any class, and may require that stock
certificates shall be countersigned and registered by one or more of such
transfer agents and registrars.
4. Lost or Destroyed Certificates
The Corporation may issue a new certificate to replace any certificate
theretofore issued by it alleged to have been lost or destroyed. The Board
of Directors may require the owner of such a certificate or his (or her)
legal representative to give the Corporation a bond in such sum and with
such sureties as the Board of Directors may direct to indemnify the
Corporation as transfer agents and registrars, if any, against claims that
may be made on account of the issuance of such new certificates. A new
certificate may be issued without requiring any bond.
5. Registered Shareholders
The Corporation shall be entitled to treat the holder of record of any share
or shares of stock as the holder thereof, in fact, and shall not be bound to
recognize any equitable or other claim to or on behalf of this Corporation
to any and all of the rights and powers incident to the ownership of such
stock at any such meeting, and shall have power and authority to execute and
deliver proxies and consents on behalf of this Corporation in connection
with the exercise by this Corporation of the rights and powers incident to
the ownership of such stock. The Board of Directors, from time to time, may
confer like powers upon any other person or persons.
ARTICLE VII
INDEMNIFICATION
No Officer or Director shall be personally liable for any obligations of the
Corporation or for any duties or obligations arising out of any acts or
conduct of said Officer or Director performed for or on behalf of the
Corporation. The Corporation shall and does hereby indemnify and hold
harmless each person and
<PAGE>
their heirs and administrators who shall serve at any time hereafter as a
Director or Officer of the Corporation from and against any and all claims,
judgments and liabilities to which such persons shall become subject by
reason of their having heretofore or hereafter been a Director or Officer of
the Corporation, or by reason of any action alleged to have heretofore or
hereafter taken or omitted to have been taken by him as such Director or
officer, and shall reimburse each such person for all legal and other
expenses reasonably incurred by him in connection with any such claim or
liability, including power to defend such persons from all suits or claims
as provided for under the provisions of the Nevada Revised Statutes;
provided, however, that no such persons shall be indemnified against, or be
reimbursed for, any expense incurred in connection with any claim or
liability arising out of his (or her) own negligence or willful misconduct.
The rights accruing to any person under the foregoing provisions of this
section shall not exclude any other right to which he or she may lawfully be
entitled, nor shall anything herein contained restrict the right of the
Corporation to indemnify or reimburse such person in any proper case, even
though not specifically herein provided for. The Corporation, its Directors,
Officers, employees and agents shall be fully protected in taking any action
or making any payment, or in refusing so to do in reliance upon the advice
of counsel.
ARTICLE VIII
NOTICE
Whenever any notice is required to be given to any shareholder or Director
of the Corporation under the provisions of the Articles of Incorporation, or
under the provisions of the Nevada Statutes, a waiver thereof in writing
signed by the person or persons entitled to such notice, whether before or
after the time stated therein, shall BE DEEMED EQUIVALENT TO THE GIVING OF
such notice. Attendance at any meeting shall constitute a waiver of notice
of such meetings, except where attendance is for the express purpose of
objecting to the holding of that meeting.
ARTICLE IX
AMENDMENTS
These Bylaws may be altered, amended, repealed, or new Bylaws adopted by a
majority of the entire Board of Directors at any regular or special meeting.
Any Bylaw adopted by the Board may be repealed or changed by the action of
the shareholders.
<PAGE>
ARTICLE X
FISCAL YEAR
The fiscal year of the Corporation shall be fixed and may be varied by
resolution of the Board of Directors.
ARTICLE XI
DIVIDENDS
The Board of Directors may at any regular or special meeting, as they deem
advisable, declare dividends payable out of the surplus of the Corporation.
ARTICLE XII
CORPORATE SEAL
The seal of the Corporation shall be in the form of a circle and shall bear
the name of the Corporation and the year of incorporation per sample affixed
hereto.
Dated Monday, June 19, 1995 Cherokee Leather, Inc.
/s/Andrew W. Berney
Secretary
Innosys Communications, Inc.
INNOSYS
TELECOMMUNICATIONS SERVICES AGREEMENT
This Telecommunications Services Agreement ("Agreement") is
entered into this 18th day of December, of 1998, by and
between INNOSYS COMMUNICATIONS, INC. ("INNOSYS"), an Illinois
Corporation with its principal place of business at 907 North
Elm Street, Hinsdale, IL 60521 U. S. A. and POPstar Global
Communicatons, Inc.("Company"), a British Virgin Islands
corporation with its principal place of business at 107 East 3rd
Avenue Vancouver, BC Canada V5T 1C7.
WITNESSETH:
INNOSYS agrees to provide and Company agrees to accept switched
telecommunications services and other associated services
(collectively "Service"), as described in Service Schedule(s)
identified herewith, subject to the terms of this Agreement.
1. EFFECTIVE DATE - MINIMUM SERVICE TERM
A. Effective Date This Agreement shall be effective
between the parties as of the date first written above.
B. Start of Service INNOSYS obligation to provide and
Company's obligation to accept and pay for Service shall be
binding to the extent provided for in this Agreement upon the
execution of a Service Schedule by both parties and shall
commence with respect to any Service as of the later of the
Company's designated "Requested Service Date" set forth on each
Service Schedule or the date Service becomes available ("Start
of Service"). Start of Service for particular Switched Services
shall be further described in the relevant Service Schedule(s).
C. Minimum Service Term Except as otherwise provided
herein, the parties' obligations hereunder with respect to
Switched Service shall continue from the Start of Service Date
and over the "Minimum Service Term" set forth in the relevant
Service Schedule. Upon the expiration of the Minimum Service
Term relevant to any Service, the service in question will
continue to be provided on a month-to-month basis subject to
termination by either party upon thirty (30) days prior written
notice to the other party. Company shall be liable to pay
INNOSYS for all charges associated with the Service in question
during the Minimum Service Term and any month-to-month
continuation thereof as well as any and all charges for actual
and/or minimum usage of the Service whether such usage occurred
during the Minimum Service Term or otherwise.
2. SERVICE SCHEDULES Service requested by Company
hereunder shall be requested on INNOSYS Service Schedule forms
and subscribed to by authorized representatives of Company and
INNOSYS (the "Service Schedule"). Each Service Schedule shall
reference this Agreement and shall become a part of this
Agreement to the extent that it describes the Service, Requested
Service Date, Service Interconnection, if any, relevant to the
Service in question, charges, specific Service terms and other
information necessary for Innosys to provide Service to Company.
3. SERVICE INTERCONNECTIONS
(A) Technical Requirements In order to utilize certain
Switched Service, one or more full time dedicated connections
between Company's network ("Company Location") and the INNOSYS
Network at one or more INNOSYS designated locations ("INNOSYS
POP") must be established ("Service Interconnection"). Unless
otherwise indicated in a Service Schedule, Company shall be
responsible for establishing each Service Interconnection over
facilities subject to INNOSYS's approval.
<PAGE>
(B) Interconnection Loading Company must provide an
average loading on each DS-l (or DS-l equivalent) comprising the
Service Interconnection at each INNOSYS location of not less
than the number of minutes of usage per calendar month of
100,000 minutes per month minimum average per DS-1 span.
Company's intention is to fully utilize each DS-1 and will
utilize reasonable commercial efforts to do so. Innosys may, at
its option, remove the circuit if ninety (90) percent
utilization is not achieved after the ramp up period of three
(3) months.
To the extent available as determined by INNOSYS and subject to
INNOSYS standard terms, conditions and charges, INNOSYS will
provide space at INNOSYS location for Service Interconnections.
Company will be responsible for the provision of echo
cancellation equipment at Company's end of the Service
Interconnections.
4. COMPANY RESPONSIBILITIES
(A) Company Facilities Company has sole responsibility
for the installation, testing, operation of and costs associated
with facilities, services and equipment other than that
specifically to be provided by INNOSYS as described in a Service
Schedule ("Company Facilities). In no event will the untimely
installation or non-operation of Company Facilities relieve
Company of its obligation to pay charges for Service provided by
INNOSYS. If Company is responsible for establishing a Service
Interconnection over facilities other than those controlled by
INNOSYS, INNOSYS shall not be obligated to provide Service
relevant thereto if the Service Interconnection in question is
not activated within sixty (60) days following the Requested
Service Date.
(B) Expedite Charges Should Company request
expeditious Services and/or changes to orders and INNOSYS agrees
to such request, INNOSYS will pass through the charges assessed
by any supplying parties involved at the same rate to Company.
INNOSYS may further condition its agreement with such request
upon Company's payment of additional charges to INNOSYS.
(C) Customer Service Company shall not be relieved of
any obligation under this Agreement by virtue of the fact that
Service is ultimately used by a customer of Company ("End
User"). Company shall be solely responsible for End User
solicitation, service requests, creditworthiness, customer
service, billing and collection. Company shall be solely liable
for, and shall not be relieved of any obligation hereunder on
account of, amounts it cannot collect from End Users for any
reason, and billing adjustments it grants End Users for any
reason including adjustments for fraudulent charges, directory
assistance or any other form of credit.
(D) Fraudulent Calls Company shall indemnify and hold
INNOSYS harmless from all costs, expenses, claims or actions
arising from fraudulent calls of any nature which may comprise a
portion of the Services to the extent that the party claiming
the calls(s) in question to be fraudulent is (or had been at the
time of the call) an End-User of the Services through Company or
an end-user of The Service through Company's customer
distribution channels. Company shall not be excused from paying
INNOSYS for Services provided to Company or any portion thereof
on the basis that fraudulent calls comprised a corresponding
portion of the Services. In the event INNOSYS discovers
fraudulent calls being made (or reasonably believes fraudulent
calls are being made), nothing contained herein shall prohibit
INNOSYS from taking immediate action (without notice to Company)
that is reasonably necessary to prevent such fraudulent calls
from taking place, including without limitation, denying
Services to particular ANI's or terminating Service to or from
specific locations. INNOSYS shall not, however, have any
obligation to monitor the Service or take any other action to
detect fraudulent calls.
(E) Licenses and State Certifications Company warrants
that in all jurisdictions in which it provides long distance
services that require licensing, registration or certification,
it has obtained the necessary authority from the appropriate
governmental authority. Further, if required by INNOSYS,
Company agrees to provide proof of such authority acceptable to
INNOSYS. In the event Company is prohibited, either on
temporary or permanent basis, from continuing to conduct its
telecommunications operations in any jurisdiction, Company shall
(i) immediately notify
<PAGE>
INNOSYS by facsimile, and (ii) send written notice to INNOSYS
within twenty-four (24) hours of such prohibition.
(F) Tax Exemption Company will provide INNOSYS with a
valid tax exemption form to exempt Company, under applicable
law, from taxes that would otherwise be paid by Company. INNOSYS
will invoice Company for taxes that are not covered by tax
exemption certificate properly filed with INNOSYS.
(G) Forecasts Before Company's initial order for
Service, Company shall provide INNOSYS with a forecast regarding
the number of minutes expected to be terminated or originated in
various LATAs, tandems and/or international destinations, so as
to enable INNOSYS to configure optimum network arrangements.
Company will provide INNOSYS with additional forecasts from time
to time upon INNOSYS 's request which shall not be more frequent
than once every three (3) months.
(H) PIU Certification Absent the automatic number
identification ("ANI") of the calling party, Company shall
provide INNOSYS with a written certification (the
"Certification") of the percentage of interstate (including
international) and intrastate minutes of use relevant to the
minutes of traffic to be terminated in the same state in which
the INNOSYS POP is located to which the Service Interconnection
is made. This Certification shall be provided by Company prior
to Start of Service for any Service Interconnection and may be
modified from time to time by Company and subject to
recertification upon the request of INNOSYS which requests shall
not be made unilaterally by INNOSYS more than once each calendar
quarter. Any such modification(s) of Certification(s) shall be
effective as of the first day of any calendar month and
following at least forty-five (45) days notice from Company. In
the event Company fails to make such Certification, the relevant
minutes of use will be deemed to be subject to the Intrastate
Rates provided for the pricing exhibit to Company's Service
Schedule (or, if no such rates are provided, at INNOSYS 's
tariffed intrastate rates). Company agrees to retain all
records which support Company's Certification for a period of
one (1) year or any longer period required by any applicable
regulatory requirements. In the event INNOSYS or any other
third party requires an audit of INNOSYS's interstate/intrastate
minutes of traffic, Company agrees to cooperate in such audit at
its expense and make its call detail records, billing systems
and other necessary information reasonably available to INNOSYS
or any third party solely for the purpose of verifying Company's
interstate/intrastate minutes of traffic. Company agrees to
indemnify INNOSYS for any liability INNOSYS incurs in the event
Company's Certification is different than that determined by the
audit.
5. CHARGES AND PAYMENT TERMS
(A) Taxes Company acknowledges and understands that
all charges stated in Service Schedules are computed by INNOSYS
exclusive of any applicable use, excise, gross receipts, sales
and privilege taxes, duties, fees or other taxes or similar
liabilities (other than general income or property taxes),
whether charged to or against INNOSYS or Company because of the
Service furnished to Company ("Additional Charges"). Such
Additional Charges shall be paid by Company in addition to all
other charges provided for herein.
(B) Modification of Charges INNOSYS reserves the right
to eliminate Services and/or modify charges for Services, upon
not less than seven (7) days prior notice to Company for
domestic Services and upon not less than twenty-four (24) hours
prior notice to Company for international Services, which notice
will state the effective date for the elimination or
modification. If charges are increased, Company reserves the
right to request INNOSYS to discontinue the services immediately
and Innosys is obliged to discontinue the service to Company
without penalty. The request however should be placed within
twenty-four (24) hours after the notice of the increase of charges.
<PAGE>
(C) Charges and Payment Terms INNOSYS billings for
Service are made on a weekly basis (or such other basis as may
be mutually agreed to by the parties) following Start of
Service. Service shall be billed at the rates set forth on The
Service Requests. Company will pay each INNOSYS invoice for
Service within five (5) business days of the invoice date set
forth on each INNOSYS invoice to Company ("Due Date"). All
payments due hereunder shall be made in U.S. dollars and made by
such other method(s) as may be specified by INNOSYS from time to
time. If payment is not received by INNOSYS on or before the
Due Date, Company shall also pay a late fee in the amount of the
lesser of one and one-half percent (1 1/2 %) of the unpaid
balance of the Service charges per month or the maximum lawful
rate under applicable law.
(D) Billing Disputes Notwithstanding the foregoing,
Company may deduct from INNOSYS Service billings for amounts
reasonably disputed by Company, provided Company: (i) pays all
undisputed charges on or before the Due Date, (ii) presents a
written statement of any billing discrepancies to INNOSYS in
reasonable detail on or before the Due Date of the invoice in
question, and (iii) negotiates in good faith with INNOSYS for
the purpose of resolving such dispute. In the event such
dispute is resolved in favor of INNOSYS, Company agrees to pay
INNOSYS the disputed amounts together with any applicable late
fees within five (5) business days of the resolution. INNOSYS
and Company agree to make good faith efforts to promptly resolve
any billing disputes. In the event that any dispute cannot be
resolved between the parties, then it shall be settled by
arbitration pursuant to the provisions of Paragraph 16(C)
hereof. INNOSYS shall not be obligated to consider any Company
notice of billing discrepancies which are received by INNOSYS
more than ninety (90) days from the Due Date of the invoice in
question. In the event that Company fails to pay an invoice in
full because of a billing dispute INNOSYS shall have the right,
after giving Company five (5) business days prior notice, to
suspend all or any portion of the Service to Company until such
time as the dispute is resolved.
(E) Suspension of Services In the event payment in
full is not received from Company by the Due Date, INNOSYS shall
also have the right, after giving Company five (5) business days
prior notice, to suspend all or any portion of the Service to
Company until such time as Company has paid in full all charges
then due, including any late fees. Following such payment,
INNOSYS shall be required to reinstate Service to Company only
upon the provision by Company to INNOSYS of satisfactory
assurance (such as a deposit) of Company's ability to pay for
Service and Company's advance payment of the cost of reinstating
Service. If Company fails to make such payment by a date
determined by and acceptable to INNOSYS, Company will be deemed
to have canceled the Service suspended effective the date of
such suspension. Such cancellation shall not relieve Company
for payment liability for the unexpired portion of the Minimum
Service Term relevant to the canceled Service in question.
(F) Credit Company's execution of this Agreement
signifies Company's acceptance of INNOSYS initial and continuing
credit approval procedures and policies. INNOSYS reserves the
right to withhold initiation or full implementation of Service
under this Agreement pending initial satisfactory credit review
and approval thereof which may be conditioned upon terms
specified by INNOSYS including, but not limited to, Security
for payments due hereunder in the form of a cash deposit,
guarantee, irrevocable letter of credit or other means. Upon
request by INNOSYS at any time, Company agrees to provide
financial statements or other indications of financial
circumstances. In addition, as may be determined by INNOSYS in
its sole discretion at any time, if the financial circumstances,
payment history or credit exposure of Company is or becomes
unacceptable, INNOSYS may require a new or increased deposit,
guarantee or irrevocable letter of credit, at INNOSYS option, to
secure Company payments for the term of the Agreement. Failure
of Company to provide the requested Security within five (5)
business days after demand by INNOSYS shall permit INNOSYS to
suspend service and/or terminate this Agreement without further
notice.
6. WARRANTY INNOSYS will use reasonable efforts under
the circumstances to maintain its overall network quality. The
quality of Service provided hereunder shall be consistent with
other common carrier industry standards, government regulations
and sound business practices. INNOSYS MAKES NO OTHER
<PAGE>
WARRANTIES ABOUT THE SERVICE PROVIDED HEREUNDER, EXPRESS OR IMPLIED,
INCLUDING, BUT NOT LIMITED TO, ANY WARRANTY OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE OR USE. Agreement is
contingent upon satisfactory quality testing by Company.
7. CONTINUING RELATIONSHIP AND TERMINATION This
Agreement and the relationship of the Parties may be terminated
in accordance with applicable provisions hereof and/or the
occurrence of any of the following events which shall constitute
a default:
(A) INNOSYS may terminate this Agreement in the event:
(1) Company fails to make any payment when due and
fails to cure such default within five (5) days after receipt of
notice of such default; or
(2) Company fails to furnish security within five (5)
days after demand by INNOSYS pursuant to Paragraph 5(F) hereof.
(B) A party may terminate This Agreement in the event
of:
(1) A material breach of this Agreement by the other
party (other than as specified in Paragraph 7(A) above) which is
not cured by the breaching party within fourteen (14) days after
receipt of notice of such default;
(2) The adjudication of bankruptcy of the other party
under any Federal, state or municipal bankruptcy or insolvency
act, or the appointment of a receiver or any act or action
constituting a general assignment by such other party of its
proprieties and interest for the benefit of its creditors; or
(3) The determination by any governmental entity having
jurisdiction over the Service provided under this Agreement that
the relationship of the Parties and/or Services provided
hereunder are contrary to then existing laws.
8. LIABILITY AND INDEMNITY
(A) Limited Liability IN NO EVENT WILL EITHER PARTY
HERETO BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, SPECIAL,
INCIDENTAL OR CONSEQUENTIAL LOSSES OR DAMAGES, INCLUDING WITHOUT
LIMITATION, LOSS OF REVENUE, LOSS OF CUSTOMERS OR CLIENTS, LOSS
OF GOODWILL OR LOSS OF PROFITS ARISING IN ANY MANNER FROM THIS
AGREEMENT, THE SERVICE OR THE PERFORMANCE OR NONPERFORMANCE OF
OBLIGATIONS HEREUNDER.
(b) Indemnity In the event parties other than Company
(e.g., End-Users and/or their customers) shall have use of the
Service through Company, then Company agrees to forever
indemnify and hold INNOSYS, its affiliated companies and any
third-panty provider or operator of facilities employed in
provision of the Service harmless from and against any and all
claims, demands, suits, actions, losses, damages, assessments or
payments which may be asserted by said parties arising out of or
relating to any defect in the Service.
9. FORCE MAJEURE If either party's performance of
this Agreement or any obligation hereunder is prevented,
restricted or interfered with by causes beyond its reasonable
control including, but not limited to, acts of God, fire,
explosion, vandalism, cable cut, storm or other similar
occurrence, any law, order, regulation, direction, action or
request of the United States government or state or local
governments, or of any department, agency, commission, court,
bureau, corporation or other instrumentality of any one or more
said governments, or of any civil or military authority, or by
national emergency, insurrection, riot, war, strike, lockout or
work stoppage or other labor difficulties, supplier failure,
shortage, breach or delay, then such party shall be excused from
such performance on a day-to-day basis to the extent of such
restriction or
<PAGE>
interference. Such party shall use reasonable
efforts under the circumstances to avoid or remove such causes
of nonperformance and shall proceed to perform with reasonable
dispatch whenever such causes are removed or cease.
Notwithstanding the foregoing, this provision may not be invoked
to with respect to any event listed in Paragraph 7 or to excuse
or delay performance of Paragraphs 5(C), 5(E) or (F).
10. INTERSTATE SERVICE Except with respect to Switched
Service specifically designated as intrastate Service or
international Service, the rates provided to Company in a
Service Schedule are applicable only to Switched Service if such
Service is used for carrying interstate telecommunications
(i.e., Service subject to the jurisdiction of the Federal
Communications Commission). INNOSYS shall not be obligated to
provide Switched Service with end points within a single state
or Switched Service which originates/terminates at points both
of which are situated within a single state. In those states
where INNOSYS is authorized to provide intrastate service (i.e.,
telecommunications transmission services subject to the
jurisdiction of the state regulatory authorities), INNOSYS will,
at its option, provide intrastate Service pursuant to applicable
state laws, regulations and applicable tariff, if any, filed by
INNOSYS with state regulatory authorities as required by
applicable law.
11. NETWORK PROTECTION In the event Company's Service
traffic volumes result in a lower than industry standard
completion rate or otherwise adversely affect the INNOSYS
network (including, but not limited to a looping situation where
Company's traffic is delivered by INNOSYS to another carrier for
termination and ultimately returned to INNOSYS), INNOSYS
reserves the right to block and refuse to accept such adverse
traffic at any time, without prior notice or liability.
12. NOTICES Any notice or other communication required
or permitted to be given hereunder shall be in writing and shall
be given by: (i) prepaid first class mail, (ii) facsimile or
other means of electronic communication or (iii) delivery as
hereafter provided. Any such notice or other communication, if
mailed by prepaid first-class mail at any time other than during
a general discontinuance of postal service due to strike,
lockout or otherwise shall be deemed to have been received on
the fourth business day after the post-marked date thereof; or
if sent by facsimile or other means of electronic communication,
shall be deemed to have been received on the date of
transmission, provided that a hard copy is immediately sent by
prepaid first class mail as aforesaid; or if delivered by hand,
shall be deemed to have been received at the time it is
delivered to the applicable address noted below either to the
individual designated below or to an individual at such address
having apparent authority to accept deliveries on behalf of the
addressee. Notice of change of address shall also be governed by
this section. In the event of a general discontinuance of
postal service due to strike, lock-out, or otherwise, notices or
other communications shall be delivered by hand or sent by
facsimile or other means of electronic communication and shall
be deemed to have been received in accordance with this section.
Notices and other communications shall be addressed as follows:
a) In the case of INNOSYS
INNOSYS COMPUTING, INC.
907 North Elm Street
Hinsdale, IL 60521 U. S. A.
Office: ( )
Facsimile: ( )
b) In the case of Company:
______________________________
Office: ( )
Facsimile: ( )
Attn:
c) Billing Address of Company: (If different)
<PAGE>
13. NO-WAIVER. No term or provision of this Agreement
shall be deemed waived and no breach or default shall be deemed
excused unless such waiver or consent shall be in writing and
signed by the party claimed to have waived or consented. No
consent by any party to, or waiver of, a breach or default by
the other, whether express or implied, shall constitute a
consent to, waiver of, or excuse for any different or subsequent
breach or default.
14. PARTIAL INVALIDITY: GOVERNMENT ACTION
(A) Partial Invalidity If any term or provision of
this Agreement shall be found to be illegal or unenforceable,
then, notwithstanding such illegality or unenforceability, this
Agreement shall remain in full force and effect and such term or
provision shall be deemed to be deleted.
(B) Government Action Upon thirty (30) days prior
notice, either party shall have the right, without liability to
the other, to cancel an affected portion of the Service if any
material rate or term contained herein and relevant to the
affected Service is substantially changed or found to be
unlawful or the relationship between the parties hereunder is
found to be unlawful - by order of the highest court of
competent jurisdiction to which the matter is appealed, the
Federal Communications Commission, or other local, state or
federal government authority of competent jurisdiction.
15. USE OF SERVICE Upon INNOSYS acceptance of a
Service Schedule hereunder, INNOSYS will provide the Service
specified therein to Company upon condition that the Service
shall not be used for any unlawful purpose. The provision of
Service will not create a partnership or joint venture between
the parties or result in a joint communications service offering
to third parties.
16. CHOICE OF LAW; FORUM AND ARBITRATION
(A) Law This Agreement shall be construed under the
laws of the State of Illinois without regard to choice of law
principles.
(B) Forum Any arbitration, civil action or other legal
proceeding arising out of or relating to this Agreement or any
dealings between Company, on the one hand, and INNOSYS and/or
INNOSYS officers, directors, employees, or agents on the other
hand, whether brought before or after any termination of this
Agreement, shall be brought and heard only in Illinois and the
parties hereto expressly waive any rights under any law or rule
to cause any such proceeding to be brought or heard in any other
location. Company consents to jurisdiction in any state or
federal court located in Illinois in any other legal proceeding
arising out of or relating to this Agreement.
(C) Arbitration Any claim or controversy arising out
of or relating to this Agreement or any dealings between
Company, on one hand and INNOSYS and/or INNOSYS's officers,
directors, employees or agents, on the other hand, shall be
resolved by final and binding arbitration in accordance with the
rules of the American Arbitration Association (AAA). Any
arbitration will be conducted in Chicago. The arbitrator may
not limit, expand or otherwise modify the terms of this
Agreement and shall not have authority to award punitive or
other non-compensatory damages to either party. In order to
provide an expeditious resolution of any dispute, the parties
agree that: (i) if the parties have not agreed on an arbitrator
within ten (10) days after the date of commencement of the
arbitration, the AAA shall designate a single arbitrator and
that designation shall be final and binding; and (ii) absent
extraordinary circumstances, the arbitration hearing shall begin
within ninety (90) days from the date of commencement of
arbitration, and shall continue each business day thereafter
until completed. The award in such arbitration proceeding may be
entered in any Court specified in Paragraph 16(B) of this
Agreement.
17. PROPRIETARY INFORMATION
<PAGE>
(A) Confidential Information The parties understand
and agree that the terms and conditions of this Agreement, all
documents referenced (including invoices to Company for Service
provided hereunder) herein, communications between the parties
regarding this Agreement or the Service to be provided hereunder
(including price quotes to Company for any Service proposed to
he provided or actually provided hereunder) and all information
regarding the customers of Company, as well as such information
relevant to any other agreement between the parties
(collectively "Confidential Information"), are confidential as
between Company and INNOSYS.
(B) Limited Disclosure A party shall not disclose
Confidential Information unless subject to discovery or
disclosure pursuant to legal process, or to any other party
other than the directors, officers, and employees of a party or
agent's of a party including their respective brokers, lenders,
insurance carries or prospective purchasers who have
specifically agreed in writing to nondisclosure of the terms and
conditions hereof. Any disclosure hereof required by legal
process shall only be made after providing the non-disclosing
party with notice thereof in order to permit the non-disclosing
party to seek an appropriate protective order or exemption.
(C) Press Releases The parties further agree that any
press release, advertisement or publication generated by a party
regarding this Agreement, the Service provided hereunder or in
which a party desires to mention the name of the other party or
the other party's parent or affiliated company(ies), will be
submitted to the non-publishing party for its written approval
prior to publication.
(D) Survival and Confidentiality The provisions of
this Section 17 will be effective as of the date of this
Agreement and remain in full force and effect for a period equal
to the longer of: (i) one (1) year following the effective date
of this Agreement: or (ii) one (1) year following the
termination of all Service hereunder.
18. SUCCESSORS AND ASSIGNMENT This Agreement shall be
binding upon and inure to the benefit of the parties hereto and
their respective successors or assigns, provided, however, that
Company shall not assign or transfer its rights or obligations
under this Agreement without the prior written consent of
INNOSYS, which shall not unreasonably be withheld, and further
provided that any assignment or transfer without such consent
shall be void.
19. GENERAL
(A) Survival of Terms The terms and provisions
contained in this Agreement that by their sense and context are
intended to survive the performance thereof by the parties
hereto shall so survive the completion of performance and
termination of this Agreement, including, without limitation,
provisions for arbitration, forum selection, indemnification and
the making of any and all payments due hereunder.
(B) Industry Terms Words having well-known technical
or trade meanings shall be so construed, and all listings of
items shall not be taken to be exclusive, but shall include
other items, whether similar or dissimilar to those listed, as
the context reasonably requires.
(C) Rules of Construction No rule of construction
requiring interpretation against the draftsman hereof shall
apply in the interpretation of this Agreement.
(D) Legal Fees In any arbitration, civil action or
other legal proceeding arising out of or relating to this
Agreement, the prevailing party shall be awarded its costs and
reasonable attorneys' fees.
20. ENTIRE AGREEMENT This Agreement consists of: (i)
all the terms and conditions contained herein; in executed
Service Schedules that are identified herewith; (ii) and all
documents incorporated herein specifically by reference. This
Agreement constitutes the complete and exclusive statement of
the understandings between the parties and supersedes all
proposals and prior agreements (oral or written)
<PAGE>
between the parties relating to Service provided hereunder. No
subsequent agreement between the parties concerning the Service
shall be effective or binding unless it is made in writing and
subscribed to by authorized representatives of Company and INNOSYS.
IN WITNESS WHEREOF, the parties have executed this Agreement on
the date first written above.
COMPANY: TGI Technologies, LTD Innosys Communications, Inc.
Address: 107 East 3rd Avenue 907 North Elm Street
Vancouver, BC CANADA V57 1C7 Hinsdale, IL. 61801, USA
By: /s/Thompson Chu By: /s/Younswhan "Nick" Lee
Title: Chairman Title: President
<PAGE>
SCHEDULE A: SERVICE SCHEDULE
INNOSYS COMMUNICATIONS, INC. ("INNOSYS") agrees to provide and
Company agrees to accept the Service described below, subject to
the terms and conditions set forth herein and contained in that
certain Telecommunications Services Agreement between Company
and INNOSYS dated December 18, 1998. Neither Company or INNOSYS
shall be obligated with respect to the Service described below,
until this Service Schedule is subscribed to by an authorized
representative of Company and INNOSYS.
1. INNOSYS agrees to provide the INNOSYS Termination
Service ("INNOSYS Service") described In Exhibit A hereto to the
locations described in Exhibit A for the charges set forth in
Exhibit A subject to a Minimum Service Term of Twelve(12) months.
2. Start of Service for INNOSYS Service will occur
concurrently with the activation of each Service Interconnection
relevant to the Service in question. The Minimum Monthly Usage
calculation for INNOSYS Service will commence as of Thirty
(30) days following Start of Service.
3. As of the Requested Service Date, Circuits
comprising Service Interconnections will be provided between the
INNOSYS POP and the Company Location at the locations set forth
below:
INNOSYS POP Location: LA
Company Location:
Requested Service Date:
4. Service Interconnection - Circuit Type/Quantity: 1 T1
5. Monthly Recurring Charge Per Circuit/Interconnection:
6. Minimum Monthly Usage Per Circuit/Interconnection
(Minutes*): 100,000
7. Minimum Usage Charge Per Minute: 1
* For purposes of meeting the Minimum Monthly Usage,
all INNOSYS provided switched Service products utilized by
Company at a INNOSYS POP will be aggregated.
8. U.S. Domestic (including Alaska, Hawaii, U.S.V.I.,
and Puerto Rico) calls will be billed in six (6) second
increments utilizing Hardware Answer Supervision where
available. All international calls, with the exception of
Mexico, will be billed in six (6) second increments and subject
to a thirty (30) second minimum charge. Mexico calls will be
billed in one (1) minute increments.
9. For domestic termination service, the rate charged
varies depending upon whether the call terminates in a tandem
owned and operated by a Regional Bell Operating Company ("RBOC
Rate"), or a local exchange company which is not an RBOC
operating company ("Independent Telco").
10. INNOSYS reserves the right to eliminate Services
and/or modify charges for Services, upon not less than thirty
(30) days prior notice to Company for domestic Services and upon
not less than fifteen (15) days prior notice to Company for
international Services, which notice will state the effective
date for the elimination or modification.
IN WITNESS WHEREOF, the parties have executed this
Service Schedule on 18th day of December, 1998.
<PAGE>
COMPANY: TGI Technologies, Ltd. Innosys Communications, Inc.
Address: 107 East 3rd Avenue 907 North Elm Street
Vancouver, BC CANADA V5T 1C7 Hinsdale, IL. 61801, USA
By:______________________________ By: ________________________
(Signature) (Signature)
Name: ___________________________ Name: ______________________
Title: __________________________ Title: _______________________
<PAGE>
EXHIBIT A
1.Billing Frequency: Weekly (30 seconds, 6 seconds thereafter)
2.Origination of Services: LA
3.Costs of Interconnection to Innosys Communications, Inc. to be
paid by Company.
4.Rates are specified in the next five pages.
LICENSING AGREEMENT
This Licensing Agreement made effective as of the 11th day of
January, 1999 ("Effective Date") between TGI Technologies Ltd. of
107 East 3rd Avenue, Vancouver, B.C. V5T 1C7. ("TGI"), and POPstar
Global Communications Inc. of P.O. Box 3443, KPMG Centre, Tortola,
British Virgin Islands ("POPstar ").
SCOPE:
A. TGI is the owner of certain Core Software.
B. TGI wishes to grant the exclusive commercial
exploitation rights to Core Software and all Enhancements to POPstar
(with all proprietary and intellectual property rights to such
Enhancements owned by POPstar), to exploit same on a world wide basis.
C. POPstar will undertake commercial activities worldwide
in relation to transmitting electronic information, voice, data or
faxes over the Internet and may license the Core Software either on
a stand-alone basis or as bundled in a service offering with the
Enhancements or other service offerings of POPstar. Such commercial
activities may include, without limitation, licensing the Core
Software, or embedding the Core Software in Enhancements and
licensing same to on-ramp or off-ramp Internet service providers,
revenue-sharing arrangements with settlement agencies in relation to
fax over Internet transmissions, marketing or advertising revenue,
linking agreements, co-marketing arrangement, reseller or system
integrator, or hosting arrangements.
D. POPstar expects that it will require technical
assistance, marketing, management and software development services
from TGI, in relation to POPstar's exercise of its rights under this
Licensing Agreement. POPstar wishes to retain TGI to provide
certain services in relation to Enhancements to the Core Software,
which services will be as provided on the basis set out in a
Services Agreement to be entered concurrently by and between the
parties at the same time as this Agreement.
NOW THEREFORE, IN CONSIDERATION of the promises and covenants
contained herein, and the payment of $1.00 by each of the parties to
the other (the receipt and sufficiency of which is hereby
acknowledged) the parties hereto agree as follows:
1. DEFINITIONS
1.1 "CORE SOFTWARE" means the software currently known as
the Enroute Eclipse fax server software and all technical and user
documentation in source and executable code form and other materials
as described in Schedule A to this Agreement. This software allows
a stream of fax data from a server or a fax to be directed through a
device that routes such data through an Internet gateway therefore
allowing faxes to be sent to any destination through the Internet.
1.2 "ENHANCEMENTS" means any changes, modifications,
alterations, improvements or subsequent bug-fixes or revisions to
the Core Software.
1.3 "CONFIDENTIAL INFORMATION" means any information
identified as confidential and proprietary information of either
party concerning their scientific and business interests not
generally available to third parties and which is disclosed
according to the procedures set out in this Agreement including the
Core Software, Enhancements:
(a) production processes, business plans and other
materials or information relating to the business of the parties;
and
(b) portions of computer software (in source and executable
code) and related documentation in any media including all
modifications, enhancements, versions and options.
2. GRANT OF RIGHTS AND LICENSES
<PAGE>
2.1 License of Core Software - TGI hereby grants to POPstar
the exclusive, right and license to use and exploit the Core
Software which shall include the right to use, distribute,
sub-license and sub-license with a right to sub-license same, or
market same, on a world wide basis. Without restricting the
generality of the foregoing, POPstar shall have the right to:
(a) possess and use the source code to the Core Software,
subject to express provisions of confidentiality, and under the
terms and conditions set out in this Agreement;
(b) copy, replicate, distribute and sublicense the Core Software
in any form to customers or embed same in any other product owned or
licensed by POPstar for commercial exploitation;
(c) grant sub-licenses for the use of the Core Software and
related documentation to customers and to distributors for further
sub-licensing to customers;
(d) grant run-time licenses to distributors and customers to
utilize the Core Software alone or in combination with any other
software or product;
(e) license source code of the Core Software to distributors and
customers, subject to express provisions of confidentiality to be
approved in writing by TGI, and only for the express purpose of
facilitating the customer's specific use of the Core Software;
(f) place copies of the source code of the Core Software in escrow
subject to stringent confidentiality and release conditions
equivalent to restrictions which POPstar would employ when placing
source code for its own proprietary software in escrow; and
(f) translate and reproduce all or part of the documentation
relating to the Core Software for distribution or sub-licensing as
provided for in this section.
2.2 Right to Develop Enhancements and to Commercially
Exploit Enhancements - As owner of the Enhancements, POPstar shall
have all proprietary and intellectual property rights relating to
such Enhancements. POPstar shall have sole and exclusive unfettered
discretion in commercially exploiting such Enhancements.
2.3 Assignment of certain Trademarks - TGI hereby agrees to
execute and deliver the assignment of trade-marks attached in
Schedule C.
3. DISTRIBUTION AND SUB-LICENSING
3.1 POPstar shall use all commercially reasonable efforts
to distribute and license the Core Software.
3.2 POPstar shall pay TGI the fees set out in section 5 of
this Agreement in relation to this Agreement and other activities
undertaken ancillary to the licensing of the Core Software under
this Agreement.
3.3 POPstar may use TGI's trade names, trademarks and
service marks on a non-exclusive basis solely for the display,
demonstration or advertising purposes used to assist in the
distribution and sub-licensing of the Core Software. POPstar shall
not at any time or permit any act to be done which may in any way
impair the rights of TGI to its trademarks. TGI hereby reserves the
rights to ensure that its trademarks are not being impaired in any
way by POPstar, and POPstar shall comply with all reasonable
requests made by TGI to protect its trademarks.
3.4 POPstar shall not sell, distribute or license any Core
Software unless it first causes each distributor or customer to
execute a sub-license agreement which protects the intellectual
property rights and trade secret rights, contained in the Core
Software in the forms similar to those used to license POPstar's own
software or intellectual properties and trade secrets. POPstar's
sub-license agreements shall require each distributor, dealer,
system integrator or reseller to require all downstream customers to
whom Core Software is sold and licensed to, to sign or cause to be
signed a sub-license agreement of the type specified in this section.
4. SALE AND SUB-LICENSE OF CORE SOFTWARE
4.1 Master Copy Method - POPstar shall undertake all
activities as indicated under this Agreement by duplicating master
copies of the Core Software provided to POPstar and as modified,
enhanced or otherwise used by POPstar under this Agreement. POPstar
shall notify TGI of all sales and licenses made in this manner on
the thirtieth day following the end of each calendar quarter with a
report setting out:
<PAGE>
(a) the number of copies of the Core Software sold,
licensed and delivered in the subject calendar quarter; and
(b) the date of receipt of fees received in connection with
activities as indicated under this Licensing Agreement for the Core
Software from the customer or distributor, as the case may be.
4.2 User and Technical Documentation and Source Code for
the Core Software - Forthwith after the parties execute this
Agreement, in addition to the materials set out in Schedule A, TGI
shall provide POPstar with:
(a) all user documentation, marketing and other material
that TGI generally provides to its licensees, potential customers
and value-added resellers from time to time;
(b) the source code to the Core Software with all
compilers, linkers and editors to compile the code into object code
form and link such code so that the code will be in a form which
will be executable and when executed will provide all the functions
and operate and compare exactly to the form of the Core Software
reviewed by POPstar and contemplated to be licensed by the TGI to
POPstar by this Agreement;
(c) all technical documentation sufficient to enable a
software developer normally skilled in the art of writing code in
the language in which the Core Software was written to modify,
enhance, maintain or support the Core Software including all foreign
language files and documentation.
4.3 User and Technical Documentation for the Enhancements -
TGI will be responsible for the creation of all final form user
documentation to be used with the Enhancements pursuant to the
Services Agreement between TGI and POPstar. POPstar will be
responsible for creation of all sales material to be used in
connection with this Licensing Agreement. All documentation and
sales material for the Enhancements will be proprietary to POPstar
which will retain all intellectual property rights therein.
5. ROYALTY PAYMENTS
5.1 Fees payable - The fees payable to TGI by POPstar on
account of this Licensing Agreement and all other activities
ancillary to the Core Software are as set forth in Schedule B. No
fees are payable on account of Enhancements, which are proprietary
to and the intellectual property of POPstar.
5.2 Payment Terms - The fee and other charges due to TGI
are due on the thirtieth day following the end of each calendar
quarter in which the fee or are charges are received by POPstar.
Any amounts outstanding for 30 days shall be subject to interest at
a rate of 1% per month (12% per annum).
5.3 Taxes and Duties - POPstar shall pay all applicable
sales, use and excise taxes, and any other assessments against
POPstar in the nature of taxes, duties or charges however designated
on the Core Software or its license or use, on or resulting from any
POPstar activities in connection with this Agreement, exclusive of
taxes based on the gross or net income of TGI.
5.4 Adjustment provision - The parties agree that:
(a) the fees and all other payments, including minimum fee
payments, in relation to this Agreement (collectively the "FEES")
shall be its fair market value;
(b) the Fees are intended to be the best estimate of the
fees in relation to the activities contemplated under this Licensing
Agreement and ancillary to the Core Software, with reference to
equivalent models in similar industries that is presently available
and unless and until otherwise determined as provided in this
Agreement shall be conclusively deemed to be as set out in Schedule B;
(c) if the Minister of National Revenue of Canada or any
other competent authority at any time proposes to issue or does
issue any assessment that would impose any liability for tax of any
nature or kind whatsoever on any person on the basis that the fair
market value of the fees to be paid as set out in Schedule B
provided hereunder is greater or lesser than the Fees, and if it is
determined hereafter that the fair market value of the fees which
should have been paid hereunder is a greater or lesser amount (the
"ADJUSTED AMOUNT") than the Fees, than:
<PAGE>
(i) if the Adjusted Amount is less than the Fees, TGI shall
reimburse POPstar for all amounts overpaid on account of Fees in
order to compensate for such overpayment, and;
(ii) if the Adjusted Amount is greater than the Fees,
POPstar shall pay TGI for all amounts underpaid on account of Fees
in order to compensate for such shortfall, and.
(d) the Adjusted Amount shall be the amount determined by
agreement between the parties or, failing such agreement shall be as
determined by a competent tribunal after all appeals which the
parties, upon advice of counsel, or the Minister of National Revenue
or the applicable taxing authority pursue, and the time within which
any further appeal may be filed has expired.
(e) At any time before December 31, 1999, the sums payable
on account of Fees as set out in Schedule B may be adjusted on the
basis of a transfer pricing study to be conducted by KPMG Chartered
Accountants.
6. SOFTWARE CHANGES AND SERVICES
6.1 Modifications by TGI - TGI shall be only be entitled to
modify and enhance the Core Software and Enhancements pursuant to a
Services Agreement with POPstar to be entered into concurrently with
this Licensing Agreement.
6.2 Software Support and Maintenance - POPstar may
contract with TGI, so that TGI can provide customers with all the
required software maintenance and support for the Core Software and
Enhancements. All maintenance and support agreements in effect on
the date of this Agreement shall remain with TGI, and POPstar shall
have no rights to such existing agreements.
7. WARRANTY, INDEMNITY AND LIMITATION OF LIABILITY
7.1 Intellectual Property Indemnity - TGI warrants that
this Agreement and the Core Software does not infringe any
proprietary or intellectual property right of any other party, and
TGI shall defend or settle any claim made or any suit or proceeding
brought against POPstar insofar as such claim, suit or proceeding is
based on an allegation that this Agreement or any of the Core
Software supplied to POPstar pursuant to this Agreement infringes
the proprietary and intellectual property rights of any third party
in or to any invention, patent, copyright or any other rights,
provided that POPstar shall notify TGI in writing promptly after the
claim, suit or proceeding is known, and POPstar shall give TGI
information and such assistance as is reasonable in the
circumstances. TGI shall have sole authority to defend or settle
the same at TGI's expense. TGI shall indemnify and hold POPstar
harmless from and against any and all such claims and shall pay all
damages and costs finally agreed to be paid in settlement of such
claim, suit or proceeding. This indemnity does not extend to any
claim, suit or proceeding based upon any infringement or alleged
infringement of copyright by the combination of the Core Software
with other elements not under TGI's sole control nor does it extend
to any Core Software altered by POPstar either by enhancement or by
combination with product(s) of POPstar's design or formula. The
foregoing states the entire liability of TGI for proprietary and
intellectual proprietary rights infringement related to the Core
Software. If the Core Software in any claim, suit or proceeding is
held to infringe any proprietary or intellectual property rights of
any third party and the use thereof is enjoined or, in the case of
settlement as referred to above, prohibited, TGI shall have the
option, at its own expense, to either (i) obtain for POPstar the
right to continue using the infringing item, or (ii) replace the
infringing item or modify it so that it becomes non-infringing;
provided that no such replacement or modification shall diminish the
performance of the Core Software.
7.2 Limited Warranty of Core Software - TGI warrants that
the Core Software supplied hereunder shall perform in accordance
with the functional specifications as set out in the documentation
to the Core Software provided for 90 days following delivery. TGI's
sole obligation and liability hereunder shall be to use reasonable
efforts to remedy any such functional non-conformance which is
reported to TGI in writing by POPstar within the warranty period.
All warranty service shall be performed at service locations
designated by TGI.
<PAGE>
7.3 SPECIFIC EXCLUSION OF OTHER WARRANTIES - THE WARRANTIES
SET OUT IN SECTION 7.1, 7.2 and 8.1 ARE IN LIEU OF ALL OTHER
WARRANTIES, AND THERE ARE NO OTHER WARRANTIES, REPRESENTATIONS,
CONDITIONS, OR GUARANTEES OR ANY KIND WHATSOEVER, EITHER EXPRESS OR
IMPLIED BY LAW (in contract or tort) OR CUSTOM, INCLUDING, BUT NOT
LIMITED TO THOSE REGARDING MERCHANTABILITY, FITNESS FOR PURPOSE,
CORRESPONDENCE TO SAMPLE, TITLE, DESIGN, CONDITION, OR QUALITY.
WITHOUT LIMITING THE ABOVE, TGI DOES NOT WARRANT THAT THE CORE
SOFTWARE SHALL MEET THE REQUIREMENT OF POPSTAR OR THAT THE OPERATION
OF THE CORE SOFTWARE SHALL BE FREE FROM INTERRUPTION OR ERRORS.
7.4 RESTRICTIONS ON WARRANTY - TGI SHALL HAVE NO OBLIGATION
TO REPAIR OR REPLACE CORE SOFTWARE;
(A) DAMAGED BY ACCIDENT OR OTHER EXTERNAL CAUSE; OR
(B) DAMAGED THROUGH THE FAULT OR NEGLIGENCE OF ANY OTHER
PARTY OTHER THAN TGI; OR
(C) USED IN OTHER THAN ITS NORMAL AND CUSTOMARY MANNER; OR
(D) SUBJECTED TO MISUSE; OR
(E) SUBJECTED TO MODIFICATIONS BY POPSTAR OR BY ANY OTHER
PARTY.
7.5 NO INDIRECT DAMAGES - IN NO EVENT SHALL TGI BE LIABLE
TO POPSTAR OR TO ANY OTHER PARTY FOR INDIRECT DAMAGES OR LOSSES (IN
CONTRACT OR TORT) IN CONNECTION WITH THE CORE SOFTWARE OR THIS
AGREEMENT, INCLUDING BUT NOT LIMITED TO DAMAGES FOR LOST PROFITS,
LOST SAVINGS, OR INCIDENTAL, CONSEQUENTIAL, OR SPECIAL DAMAGES, EVEN
IF CAUSED BY TGI'S NEGLIGENCE AND EVEN IF TGI HAS KNOWLEDGE OF THE
POSSIBILITY OF SUCH POTENTIAL LOSS OR DAMAGE.
7.6 LIMITS ON LIABILITY - IF FOR ANY REASON, TGI BECOMES
LIABLE TO POPSTAR OR ANY OTHER PARTY FOR DIRECT OR ANY OTHER DAMAGES
FOR ANY CAUSE WHATSOEVER, AND REGARDLESS OF THE FORM OF ACTION (IN
CONTRACT OR TORT), INCURRED IN CONNECTION WITH THIS AGREEMENT OR THE
CORE SOFTWARE, THEN:
(A) THE AGGREGATE LIABILITY OF TGI FOR ALL DAMAGES, INJURY,
AND LIABILITY INCURRED BY POPSTAR AND ALL OTHER PARTIES IN
CONNECTION WITH THE CORE SOFTWARE OR THIS AGREEMENT, SHALL BE
LIMITED TO AN AMOUNT EQUAL TO THE CHARGES AND FEES PAID TO TGI FOR
THE CORE SOFTWARE WHICH GAVE RISE TO THE CLAIM FOR DAMAGES; AND
(B) POPSTAR MAY NOT BRING OR INITIATE ANY ACT OR PROCEEDING
AGAINST TGI ARISING OUT OF THIS AGREEMENT OR RELATING TO THE CORE
SOFTWARE MORE THAN TWO YEARS AFTER THE CAUSE OF ACTION HAS ARISEN.
7.7 SEPARATE ENFORCEABILITY - SECTIONS 7.3, 7.4, 7.5, 7.6,
AND 7.7, ARE TO BE CONSTRUED AS SEPARATE PROVISIONS AND SHALL EACH
BE INDIVIDUALLY ENFORCEABLE.
8. OWNERSHIP OF THE CORE SOFTWARE AND OWNERSHIP OF THE
ENHANCEMENTS
8.1 Warranty of Title - TGI warrants that it has all rights
necessary to make the grant of license herein by having all right,
title and interest in and to the Core Software or as licensee of all
such rights from the owner thereof.
8.2 Retention of Rights by TGI and Rights of POPstar - All
proprietary and intellectual property rights, title and interest
including copyright in and to the original and all copies of the
Core Software and the documentation provided by TGI to the POPstar
and licensed hereunder shall be and remain that of TGI or its
licensor as the case may be. POPstar has no proprietary and
intellectual property rights, title or interest in or to any Core
Software or related documentation except as granted herein. POPstar
shall have and retain all proprietary and intellectual
<PAGE>
property right in any Enhancements or other work done by POPstar or
POPstar's subcontactors for use in connection with the Core Software.
8.3 Notices - POPstar shall not obliterate, alter or remove
any proprietary or intellectual property notices from the Core
Software and to the extent this Agreement permits POPstar to make
copies of the Core Software, POPstar shall reproduce such notices as
they appear on the Core Software.
9. CONFIDENTIALITY AND USE LIMITATION
9.1 Confidentiality - POPstar shall not at any time whether
before or after the termination of this Agreement disclose, furnish,
or make accessible to anyone any Confidential Information, or permit
the occurrence of any of the above, except in accordance with the
express provisions of this Agreement.
9.2 Safeguards - POPstar shall take reasonable precautions
to prevent Core Software in its care and control from being
duplicated, stolen, disclosed or used for unauthorized purposes.
9.3 Non-disclosure of Agreement - TGI and POPstar shall not
disclose the terms, content or nature of this Agreement to any third
party without the prior written consent of the other party or as a
result of a court order.
10. TERMINATION
10.1 Termination - This Agreement shall terminate in each of
the following events:
(a) at the option of either party if the other party materially
defaults in the performance or observance of any of its obligations
hereunder and fails to remedy the default within 30 days after
receiving written demand therefor; or
(b) at the option of either party if the other party becomes
insolvent or bankrupt or makes an assignment for the benefit of
creditors, or if a receiver or trustee in bankruptcy is appointed
for the other party, or if any proceeding in bankruptcy,
receivership, or liquidation is instituted against the other party
and is not dismissed within 30 days following commencement thereof; or
provided that the right of termination shall be in addition to all
other rights and remedies available to the parties for default or
wrong-doing by each other.
10.2 Suspension of Obligations - If either party should default in
the performance or observance of any of its obligations hereunder,
then, in addition to all other rights and remedies available to the
non-defaulting party, the nondefaulting party may suspend
performance and observance of any or all its obligations under this
Agreement, without liability, until the other party's default is
remedied.
10.3 Return of Software - If POPstar discontinues use of the
Core Software or in the event of termination of this Agreement by
either party, POPstar shall immediately return to TGI all Core
Software and any copies thereof and certify in writing to TGI that
POPstar has done so.
11. GENERAL
11.1 Complete Agreement
This is the complete and exclusive statement of the Agreement
between the parties with respect to the subject matter contained
herein and supersedes and merges all prior representations,
proposals, understandings and all other agreements, oral or written,
express or implied, between the parties relating to the matters
contained herein. This Agreement may not be modified or altered
except by written instrument duly executed by both parties.
<PAGE>
11.2 Force Majeure
Dates or times by which either party is required to perform under
this Agreement excepting the payment of any fees or charges due
hereunder shall be postponed automatically to the extent that any
party is prevented from meeting them by causes beyond its reasonable
control.
11.3 Notices
All notices and requests in connection with this Agreement shall be
given or made upon the respective parties in writing and shall be
deemed given as of the third day following the day the notice is
faxed, providing hard copy acknowledgment of successful faxed notice
transmission is retained. Notice may also be deposited in the
Canadian mails, postage pre-paid, certified or registered, return
receipt requested, and addressed to the other party at the address
first set out above (or in the event of no such address being
disclosed then to the last known address of the other party).
11.4 Governing Law
This Agreement and performance hereunder shall be governed by the
laws of British Columbia. The parties hereto irrevocably attorn to
the jurisdiction of the courts of British Columbia.
11.5 Enforceability
If any provision of this Agreement shall be held to be invalid,
illegal or unenforceable under any applicable statute or rule of
law, the validity, legality and enforceability of the remaining
provisions shall in no way be affected or impaired thereby.
11.6 Non-Assignment
Neither party may assign its rights and obligations under this
Agreement without the prior written consent of the other party.
11.7 Non-Waiver
The waiver or failure of either party to exercise in any respect any
right provided for herein shall not be deemed a waiver of any
further right hereunder.
11.8 No Agency
The parties acknowledge that each is an independent contractor and
nothing herein constitutes a joint venture or partnership and
neither party has the right to bind nor act for the other as agent
or in any other capacity.
11.9 Enurement
All covenants, representatives, warranties and agreements of the
parties contained herein shall be binding upon and shall enure to
the benefit of the parties and their respective successors and
permitted assigns.
<PAGE>
11.10 Survival
Sections 5 and subsections 7.3, 7.4, 7.5, 7.6, 7.7, 8.2, 9.1, and
10.3, shall survive termination and expiration of the Agreement.
IN WITNESS WHEREOF the parties thereto have executed this Agreement,
through their respective officers, duly authorized for such purpose,
as they so declare and represent, as the Effective Date.
TGI POPSTAR
per: /s/John McDermott per: /s/Thompson Chu
Authorized Signature Authorized Signature
title: Director title: Director
office of Company's representative office of Company's representative
Location and date when executed: Location and date when executed:
Singapore 11th Jan., 1999 Singapore 11th Jan., 1999
<PAGE>
SCHEDULE A
DESCRIPTION OF CORE SOFTWARE
The Core Software includes all the files in the version 2.3 tree of
the Enroute Eclipse fax server software and:
1) A description, giving an overview of how the software
works, a flow diagram indicating the input, flow, processing and
output of information, and specifications for the software,
including minimum hardware requirements.
2) Complete user documentation, including a description
of how to access and use the application, screen prints of menus and
input/output screens, data input descriptions, sample output/report
forms, error code descriptions and solutions where appropriate, and
explanation of all necessary disks and data used by the software.
3) Complete program/technical documentation, including
program source code listings with comments, technical information
about files and their locations, file names, file/database
structure, record structure and layout and data elements.
4) Description of backup and recovery procedures,
including process, medium for backup, and number of diskettes or
tapes to do a complete backup.
5) Master copy of the Core Software on magnetic media,
including all programs, on-line documentation, and any documentation
developed on a computer.
<PAGE>
SCHEDULE B
BASIS FOR FEE RATE
1.1 Fee Rate and Base
(a) For each unit of the Core Software sublicensed to
customers by POPstar or its distributors, or activities related
thereto, POPstar shall pay to TGI a fee based on a percentage amount
of Net Revenues in relation to the Core Software.
(b) For the purposes of this Agreement, "NET REVENUES"
means revenues in relation to POPstar's commercial activities
relative to the Core Software either licensed on a stand-alone basis
or as bundled in a service offering with the Enhancements or other
service offerings of POPstar in relation to fax propogation over the
Internet including, without limitation, gross receipts on account of
the license fees in relation to the Core Software, or licensing of
the Core Software as embedded in Enhancements to on-ramp or off-ramp
internet service providers, revenues derived from services provided
by settlement agencies to POPstar, marketing or advertising revenue
derived therefrom, linking agreements, co-marketing arrangement,
reseller or system integrator agreements, or hosting services less
any end user discounts thereto and less any sales, use, value-added,
excise, withholding or any other tax duties or charges collected by
any governmental authority as well as all shipping, insurance or
other charges.
The fees on account of the Core Software are based on a declining
scale over time to reflect the replacement of the Core Software (on
which fees are payable) with Enhancements (on which fees are not
payable). The fees are payable as follows:
(a) 1999 - 2000 - 8% of Net Sales of the Core Software.
(b) 2000 - 2001 - 6% of Net Sales of the Core Software.
(c) 2001 - 2002 - 4% of Net Sales of the Core Software.
(d) 2002 - 2003 - 2% of Net Sales of the Core Software.
Years are calendar years. No fees are payable after December 31,
2003.
1.2 Minimum Fee - During each calendar quarter the
Agreement is in effect, POPstar shall pay TGI fees not less the sums
set below on account of this Agreement (the "Minimum Fee"). Failure
by POPstar to pay the Minimum Fees in two consecutive calendar
quarters shall be a default of this Agreement on the part POPstar
entitling TGI upon written notice to POPstar to designate the
exclusive territory for the commercialization of the Core Software
by POPstar as non-exclusive territory, but giving rise to no other
remedies in and of itself. POPstar shall have the option, at any
time to pay the deficiency between the amount actually paid and the
Minimum Fee due in order to maintain the exclusive grant of license
in the world.
The Minimum Fees on account of the Core Software are based on a
declining scale over time to reflect the replacement of the Core
Software (on which fees are payable) with Enhancements (on which
fees are not payable). The Minimum Fees are payable as follows:
(a) 1999 - 2000 - $ 400,000
(b) 2000 - 2001 - $ 600,000
(c) 2001 - 2002 - $ 500,000
<PAGE>
(d) 2002 - 2003 - $ 500,000
All sums are in United States currency. Years are calendar years.
No fees are payable after December 31, 2003.
<PAGE>
SCHEDULE C
ASSIGNMENT OF TRADE-MARK
WHEREAS TGI Technologies Ltd. of 107 East 3rd Avenue, Vancouver,
B.C. V5T 1C7 is the recorded owner of the trade-mark POPSTAR
registered in Canada under registration No. TMA 503,556, and used in
association with computer software.
NOW THEREFORE in consideration of Ten Dollars ($10.00) and other
good and valuable consideration, the receipt and sufficiency of
which the parties acknowledge, TGI Technologies Ltd. of 107 East 3rd
Avenue, Vancouver, B.C. V5T 1C7 sells, assigns, and transfers to
POPstar Global Communications Inc. of P.O. Box 850, Tropic Isle
Building, Tortola, British Virgin Islands all right, title, and
interest in the trade-mark POPSTAR, all rights to Canadian
registration TMA 503,556 and the goodwill of the business relating
to the trade-mark.
EXECUTED at , , this
day of ,
199 .
TGI Technologies Ltd.
per:
<PAGE>
AMENDMENT TO LICENSING AGREEMENT
THIS AMENDMENT AGREEMENT is dated the 24th day of August, 1999
and is made between:
1. TGI Technologies Ltd., a British Columbia company with
its office at 107 East 3rd Avenue, Vancouver, British
Columbia V5T 1C7, Canada (hereinafter referred to as
"TGI"); and
2. POPstar Global Communications Inc., a British Virgin
Islands company with its office at KPMG Centre, Tropic
Isle Building, P.O. Box 3443, Road Town, Tortola,
British Virgin Islands (hereinafter referred to as
"POPstar").
WHEREAS:
(A) TGI and POPstar have entered into a licensing agreement
dated January 11, 1999 (the "Licensing Agreement").
(B) TGI and POPstar wish to enter into this Agreement under
which they agree to clarify certain of the provisions of
the Licensing Agreement.
IT IS HEREBY AGREED AS FOLLOWS:
1. INTERPRETATION
1.1 Except where the context otherwise requires and save as
otherwise expressly defined herein, words and
expressions defined in the Licensing Agreement shall
have the same meanings and construction when used in
this Agreement (including the Recitals hereto). All
terms defined in these Recitals shall have the same
meanings when used throughout this Agreement.
1.2 Except where the context otherwise requires, words
importing the singular include the plural and vice
versa, words importing a gender includes every gender
and references to persons include bodies corporate or
unincorporate, any state or agency thereof and any other
entity.
1.3 Headings are for ease of reference only and have no
legal effect.
1.4 Except where the context otherwise requires, references
to any person include its successors and permitted assigns.
<PAGE>
1.5 A reference to a document includes any agreement in
writing, or any certificate, notice, instrument or other
document of any kind and shall include all amendments or
supplements to, or replacements or novations of that
document.
2. AMENDMENTS TO THE LICENSING AGREEMENT
2.1 The parties hereby agree and acknowledge that the
Licensing Agreement shall be amended in the following
manner with effect from the date of the Licensing
Agreement:
Schedule B to the Licensing Agreement be deleted and the
attached Schedule B substituted therefor.
3. MISCELLANEOUS
3.1 This Agreement is supplemental to and shall be read in
conjunction with the Licensing Agreement which, save for
those provisions which are modified hereby or
inconsistent with the terms contained herein, shall
continue in full force and effect. Subject to the
foregoing, any reference to the Licensing Agreement
shall accordingly be deemed to include this Agreement.
3.2 This Agreement shall be governed by and construed in
accordance with the laws of the Province of British
Columbia, without regard to any provisions thereof
relating to conflicts of laws among different
jurisdictions. The parties hereto hereby submit to the
jurisdiction of the courts located in the Province of
British Columbia.
3.3 This Agreement may be signed in one or more
counterparts, all of which taken together shall
constitute an entire agreement.
IN WITNESS WHEREOF this Agreement has been duly executed the day
and year first above written.
TGI TECHNOLOGIES LTD. POPSTAR GLOBAL
COMMUNICATIONS INC.
Signature: /s/John McDermott Signature: /s/Thompson Chu
By: John McDermott By: Thompson Chu
Title: President Title: Chairman
<PAGE>
SCHEDULE B
BASIS FOR FEE RATE
1.1 Fee Rate and Base
(a) For each unit of the Core Software sublicensed to
customers by POPstar or its distributors, or activities related
thereto, POPstar shall pay to TGI a fee based on a percentage
amount of Net Revenues in relation to the Core Software.
(b) For the purposes of this Agreement, "NET REVENUES" means
revenues in relation to POPstar's commercial activities relative
to the Core Software either licensed on a stand-alone basis or
as bundled in a service offering with the Enhancements or other
service offerings of POPstar in relation to fax propogation over
the Internet including, without limitation, gross receipts on
account of the license fees in relation to the Core Software, or
licensing of the Core Software as embedded in Enhancements to
on-ramp or off-ramp internet service providers, revenues derived
from services provided by settlement agencies to POPstar,
marketing or advertising revenue derived therefrom, linking
agreements, co-marketing arrangement, reseller or system
integrator agreements, or hosting services less any end user
discounts thereto and less any sales, use, value-added, excise,
withholding or any other tax duties or charges collected by any
governmental authority as well as all shipping, insurance or
other charges.
The fees on account of the Core Software are based on a
declining scale over time to reflect the replacement of the Core
Software (on which fees are payable) with Enhancements (on which
fees are not payable). The fees are payable as follows:
(a) 1999 - 8% of Net Sales of the Core Software.
(b) 2000 - 6% of Net Sales of the Core Software.
(c) 2001 - 4% of Net Sales of the Core Software.
(d) 2002 - 2% of Net Sales of the Core Software.
Years are calendar years. No fees are payable after December
31, 2002.
1.2 Minimum Fee - During each calendar quarter the Agreement
is in effect, POPstar shall pay TGI fees not less the annual
sums set below on account of this
<PAGE>
Agreement (the "Minimum Fee").
Failure by POPstar to pay the Minimum Fees in two consecutive
calendar quarters shall be a default of this Agreement on the
part POPstar entitling TGI upon written notice to POPstar to
designate the exclusive territory for the commercialization of
the Core Software by POPstar as non-exclusive territory, but
giving rise to no other remedies in and of itself. POPstar
shall have the option, at any time to pay the deficiency between
the amount actually paid and the Minimum Fee due in order to
maintain the exclusive grant of license in the world.
The Minimum Fees on account of the Core Software are based on a
declining scale over time to reflect the replacement of the Core
Software (on which fees are payable) with Enhancements (on which
fees are not payable). The annual Minimum Fees are payable as
follows:
(a) 1999 - $ 400,000
(b) 2000 - $ 600,000
(c) 2001 - $ 500,000
(d) 2002 - $ 500,000 .
All sums are in United States currency. Years are calendar
years. No fees are payable after December 31, 2002.
SERVICES AGREEMENT
THIS SERVICES AGREEMENT ("SERVICES AGREEMENT") made effective the
11th day of January, 1999 ("EFFECTIVE DATE") between:
TGI Technologies Ltd., POPstar Global Communications Inc.
107 East 3rd Avenue P. O. Box 3443
Vancouver, B.C. KPMG Centre
V5T 1C7` Tortola, British Virgin Islands
"TGI" "POPSTAR"
SCOPE:
A. Concurrently with this Services Agreement, TGI and
POPstar are entering into an agreement in relation to the Core
Software and Enhancements ("LICENSING AGREEMENT"). Under this
Licensing Agreement, POPstar will have an exclusive right and
license to commercially exploit the Core Software and Enhancements
worldwide;
B. POPstar expects that it will require technical
assistance, software development, marketing, management and other
services from TGI, in the context of POPstar's exercise of its
rights under the Licensing Agreement. POPstar wishes to retain TGI
to develop, maintain, support and provide those services
("SERVICES") in relation to Enhancements to the Core Software, which
Services are as set out in signed work orders ("WORK ORDERS") and
such other Services in relation to POPstar's exploitation of the
Core Software under the Licensing Agreement as POPstar may require
from time to time to be attached to and forming part of this
Services Agreement as Schedules B.* (each subsequent Enhancement to
be described in subsequent Work Orders - for example Schedule B.1,
Schedule B.2 and so forth);
C. TGI desires to provide such Services to POPstar in
accordance with the terms and conditions of this Services Agreement;
D. The parties agree that as POPstar is paying for the
Services performed by TGI and as POPstar is bearing the risks of the
provision of these Services, all intellectual property rights that
arise with respect to the Services, including Enhancements developed
by TGI pursuant to this Services Agreement shall be solely owned by
POPstar; and
E. The parties agree that POPstar will be providing such
Services in consideration of the price and payments set out in this
Services Agreement. The parties acknowledge that such price and
payments may be subject to adjustment based on the assessment of
applicable competent taxing authorities. Therefore the parties
agree that the price and payment provisions set out in this Services
Agreement may be adjusted based on the adjustment provisions set out
in section 3.2 or .
NOW, THEREFORE, TGI and POPstar hereby agree as follows:
1. DEFINITIONS
1.1 "CORE SOFTWARE"means the software currently known as
the Enroute Eclipse fax server software and all technical and user
documentation in source and executable code form and other materials
as described in Schedule A to this Services Agreement. This
software allows a stream of fax data from a server or a fax to be
directed through a device that routes such data through an Internet
gateway therefore allowing faxes to be sent to any destination
through the Internet.
1.2 "ENHANCEMENTS" means any changes, modifications,
alterations, improvements or subsequent bug-fixes or
<PAGE>
revisions to the Core Software.
1.3 "CONFIDENTIAL INFORMATION" means any information
identified as confidential and proprietary information of either
party concerning their scientific and business interests not
generally available to third parties and which is disclosed
according to the procedures set out in this Services Agreement
including the Core Software, Enhancements:
(a) production processes, business plans and other
materials or information relating to the business of the parties;
and
(b) portions of computer software (in source and executable
code) and related documentation in any media including all
modifications, enhancements, versions and options.
1.4 "ACCEPTANCE" means acceptance of various Enhancements
under the procedures set out in the Work Order.
1.5 "CHANGE ORDER" means the procedure for change to any
work performed by TGI or changes to milestones, development
schedules or Enhancements as set out in subsection 2.2 of this
Services Agreement.
2. Services Retained
2.1 POPstar retains TGI to provide the services and
complete those tasks as expressly set out in attached Work Orders
which will describe services to be provided in relation to
Enhancements. All additional Services which are not in relation to
Enhancements shall be pre-authorized by an officer of POPstar and
invoices in respect thereof shall set out in detail the services
provided (e.g. management, consulting or marketing services, for
example). All additional Work Orders attached to this Services
Agreement after the effective date hereof in relation to
Enhancements shall be signed by the parties and shall set out the
following:
(a) the Enhancements to be provided by TGI to
POPstar;
(b) the milestones and times for provision of
the Enhancements by TGI to POPstar;
(c) the respective responsibilities of the
parties relative to the Enhancements;
(d) the Acceptance Test Procedure for the
Enhancements; and
(e) the fees payable to TGI for the applicable
Work Order.
2.2 Any modifications to the Services or requests by
POPstar for any such additional services which alter, amend,
enhance, add to, or delete from the Services and/or time and/or
place of performance in relation to any Enhancement will be made by
way of a Change Order setting out a description of the work, the
time for performance and the cost representing any amount in
addition to the initial retained amount. Any such Change Order must
be in writing and signed by both POPstar and TGI which change order
will then be incorporated by reference into this Services Agreement.
Specifically, POPstar and TGI shall comply with the following:
(a) POPstar shall submit to TGI in writing all Change Order
requests;
(b) TGI will evaluate each such Change Order request at no
additional cost to POPstar and return a copy of the same Change
Order request to POPstar as soon as possible but not later than ten
(10) working days following TGI's receipt of the Change Order
request. TGI's written response shall include a statement of the
availability of TGI's personnel and resources, the impact, if any,
on the completion date and changes in costs, if any. TGI in its
sole discretion may refuse to accept the Change Order request;
(c) For the purposes of this Services Agreement, only a
Change Order request mutually agreed to in writing by the parties
shall be a Change Order which then shall be deemed incorporated into
and part of this Services Agreement and each such Change Order shall
constitute a formal change to this Services Agreement adjusting fees
and completion date as finally agreed upon for each authorized
Change
<PAGE>
Order. In no event shall the Services be deemed altered,
amended, enhanced or otherwise modified except through a duly
authorized Modification/Change Request, all in accordance with this
subsection.
2.3 If TGI is prevented or delayed from performing the
contracted tasks and services in the manner and at the time set out
in a Work Order by reason of any act or omission attributable to
POPstar, applicable milestones, schedules or time of provision of
Enhancements shall be amended forthwith, and after a 30 day period,
POPstar will pay to TGI all reasonable costs and charges sustained
or incurred by TGI (at TGI's rates specified in the Work Order and
all reasonable expenses) for additional time and materials expended
by TGI as a result of such delay.
3. PRICE AND PAYMENT
3.1 The duties of TGI and of POPstar with respect to the
Services necessary to create the Enhancements are contained in this
Services Agreement and the fees payable to TGI, and the manner of
payment, will be as set out in the Work Orders. The payments
therefor will be as set out in each Work Order. The fee for TGI's
Services which Services are not provided in respect of Enhancements,
shall be its direct and indirect costs determined in accordance with
generally accepted accounting principles, plus the percentage set
out in Schedule C, plus appropriate taxes. The provisions of the
Work Orders supplement this Services Agreement. To the extent that
there is any inconsistency between this Services Agreement and the
Work Order, the Work Order will prevail to the extent necessary to
resolve such inconsistency.
3.2 The parties agree that:
(a) the Payments shall be fair market value consideration for the
Services;
(b) the Payments as set out in the Work Order are intended to be
the best estimate of the fair market value of the Services in
relation to the Enhancements, that is presently available and unless
and until otherwise determined as provided in this Services
Agreement shall be conclusively deemed to be as set out in each Work
Order;
(c) if the Minister of National Revenue of Canada or any other
competent authority at any time proposes to issue or does issue any
assessment that would impose any liability for tax of any nature or
kind whatsoever on any person on the basis that the fair market
value of the Services provided hereunder is greater or lesser than
the Payments, and if it is determined hereafter that the fair market
value of the interests transferred hereunder is a greater or lesser
amount (the "ADJUSTED AMOUNT") than the Services, then:
(i) if the Adjusted Amount is less than the Payment, TGI shall
reimburse POPstar for all amounts overpaid on account of Services in
order to compensate for such overpayment, and;
(ii) if the Adjusted Amount is greater than the Payment, POPstar
shall pay TGI for all amounts underpaid on account of Services in
order to compensate for such shortfall, and.
(d) the Adjusted Amount shall either be the amount determined by
agreement between the parties or, failing such agreement shall be as
determined by a competent tribunal after all appeals which the
parties, upon advice of counsel, or the Minister of National Revenue
or the applicable taxing authority pursue, and the time within which
any further appeal may be filed has expired.
(e) At any time before December 31, 1999, the Payments as set out
in Work Orders and the percentage mark-up as set out in Schedule C
may be adjusted on the basis of a transfer pricing study to be
conducted by KPMG Chartered Accountants.
<PAGE>
4. Personnel
4.1 For the purposes of this Services Agreement, TGI shall stand
in the relationship of an independent contractor to POPstar and
nothing herein contained or in the services to be performed
hereunder shall constitute TGI or any employee of TGI, an employee,
partner, principal or legal representative of POPstar, and no
employer-employee relationship is to be created as between POPstar
and any person provided by TGI for the purpose of performing the
services under this Services Agreement, and TGI shall pay all wages,
and contributions and make all deductions required by law to be paid
or made by an employer in respect of any such persons.
4.2 TGI shall be permitted to substitute the services of
individuals as required subject to the approval of the substitute
individuals by POPstar.
4.3 TGI shall, upon notice being received from POPstar, remove
from service any person who is for any reason unsatisfactory to
POPstar.
5. Professional Responsibility
5.1 TGI hereby warrants to POPstar as follows:
(a) TGI's tasks and services to be performed under this
Services Agreement and all applicable Work Orders will be performed
in a professional and workmanlike manner in accordance with industry
standards;
(b) TGI has the right to use all software, development
tools, resources or other materials used to provide and develop all
Enhancements delivered to POPstar under this Services Agreement;
(c) the Enhancements will conform substantially in
accordance with the specifications set forth in the applicable Work
Orders for 90 days following Acceptance in accordance with the
provisions of the Work Order. TGI's sole obligation and liability
hereunder shall be to use reasonable efforts to remedy any such
functional non-conformance which is reported to TGI in writing by
POPstar within the warranty period. All warranty service shall be
performed at service locations designated by TGI;
(d) upon delivery and payment therefor by POPstar, the
Enhancements will be free and clear of any lien, claim, charge,
security interest or other encumbrance;
(e) TGI will not embed within the Enhancements any virus,
device or timer which may lock, disable or erase or limit the use
thereof or the systems on which the Enhancements are run or any data
on such systems; and
(f) the Enhancements to the extent of containing or calling
on calendar functions (including any function indexed to the CPU
clock, and any function providing specific dates or days, or
calculating spans of dates or days) shall record, store, process,
provide and where appropriate, insert true and accurate dates and
calculations for dates and spans, including and following January 1,
2000, including leap years, and shall have no lesser functionality
with respect to records containing dates both or either before or
after January 1, 2000 than with respect to dates before January 1,
2000.
EXCEPT AS SET FORTH IN THIS SERVICES AGREEMENT OR IN ANY WORK ORDER,
POPSTAR UNDERSTANDS THAT IT IS SOLELY RESPONSIBLE FOR DETERMINING
THAT THE SERVICES AND THE DELIVERABLES ARE APPROPRIATE FOR POPSTAR'S
PURPOSES. EXCEPT AS SET FORTH IN THIS SERVICES AGREEMENT OR IN ANY
WORK ORDER, TGI DOES NOT WARRANT
<PAGE>
THAT THE SERVICES OR ENHANCEMENTS ARE FIT FOR THE PURPOSES OF POPSTAR OR
THAT THE PERFORMANCE OF THE ENHANCEMENTS WILL BE UNINTERRUPTED OR ERROR FREE.
EXCEPT AS SET FORTH IN THIS SERVICES AGREEMENT OR IN ANY WORK
ORDER, THERE ARE NO OTHER WARRANTIES, REPRESENTATIONS, CONDITIONS,
OR GUARANTEES OF ANY KIND WHATSOEVER, EITHER EXPRESS OR IMPLIED BY
LAW (IN CONTRACT OR TORT) OR CUSTOM, INCLUDING, BUT NOT LIMITED TO
THOSE REGARDING MERCHANTABILITY, FITNESS FOR PURPOSE, CORRESPONDENCE
TO SAMPLE, TITLE, DESIGN, CONDITION, OR QUALITY. WITHOUT LIMITING
THE ABOVE, TGI DOES NOT WARRANT THAT THE OPERATION OF ANY OF THE
ENHANCEMENTS SHALL BE FREE FROM INTERRUPTION OR ERRORS
5.2 The parties hereto agree that the liability of TGI hereunder
shall be limited to direct and actual money damages effectively
incurred by POPstar and shall not, in the aggregate, exceed the
total fees paid to TGI for Services rendered under this Services
Agreement, regardless of the number of claims.
5.3 IN NO EVENT SHALL TGI BE LIABLE FOR SPECIAL, INDIRECT AND/OR
CONSEQUENTIAL DAMAGES, EVEN IF TGI HAS BEEN NOTIFIED OF THE
POSSIBILITY OF SUCH DAMAGES BEING INCURRED. POPSTAR FURTHER AGREES
THAT TGI WILL NOT BE LIABLE FOR ANY LOSS OF PROFITS NOR FOR ANY
CLAIM AGAINST POPSTAR MADE BY ANY THIRD PARTY.
6. Intellectual Property
6.1 Any Enhancements created by TGI under this Services Agreement,
either developed solely or jointly with any other party, is the sole
and exclusive property of POPstar. POPstar is the sole owner of all
copyrights, patents and other intellectual property rights in the
Enhancements. TGI hereby assigns to POPstar any rights TGI may have
in the Enhancements and waives all claims with respect to the
Enhancements including any moral rights in the Enhancements or to
its use including the right to restrain or claim damages for any
distortion, mutilation or other modification of the Enhancements and
to restrain use or reproduction of the Enhancements. TGI agrees to
do all things and execute all documents necessary to reflect this
assignment of intellectual property in the Enhancements in POPstar
at any time during or after the term of this Services Agreement.
6.2 TGI warrants that none of the Enhancements nor the
implementation and use by POPstar of any system names, systems and
programs designed pursuant to the Enhancements and provided by TGI
infringe upon or violate any patent, copyright, trade-mark, license,
or other property or contractual right of any third party and TGI
agrees to indemnify and hold harmless POPstar from and against any
losses, costs, damages, claims, actions, suits, liabilities, fees or
expenses arising out of any breach of this warranty. TGI warrants
that this Services Agreement and the Enhancements do not infringe
any proprietary or intellectual property right of any other party,
and TGI shall defend or settle any claim made or any suit or
proceeding brought against POPstar insofar as such claim, suit or
proceeding is based on an allegation that this Services Agreement or
any of the Enhancements supplied to POPstar pursuant to this
Services Agreement infringes the proprietary and intellectual
property rights of any third party in or to any invention, patent,
copyright or any other rights, provided that POPstar shall notify
TGI in writing promptly after the claim, suit or proceeding is
known, and POPstar shall give TGI information and such assistance as
is reasonable in the circumstances. TGI shall have sole authority
to defend or settle the same at TGI's expense. TGI shall indemnify
and hold POPstar harmless from and against any and all such claims
and shall pay all damages and costs finally agreed to be paid in
settlement of such claim, suit or proceeding. This indemnity does
not extend to any claim, suit or proceeding based upon any
infringement or alleged infringement of copyright by the combination
of the Enhancements with other elements not under TGI's sole control
nor does it extend to any Enhancements altered by POPstar either by
enhancement or by combination with product(s) of POPstar's design or
formula. The foregoing states the entire liability of TGI for
proprietary and intellectual proprietary rights infringement related
to the Enhancements. If the Enhancements in any claim, suit or
proceeding is held to infringe any proprietary or intellectual
property rights of any third party and the use thereof is enjoined
or, in the case of settlement as referred to above, prohibited, TGI
shall have the option, at its own expense, to either (i) obtain for
POPstar the right to continue using the infringing item, or (ii)
replace the infringing item or modify it so that it becomes
non-infringing; provided that no such replacement or modification
shall diminish the performance of the Enhancements.
<PAGE>
6.3 General knowledge and experience gained by TGI prior to or
during TGI's retainer by POPstar, (including general techniques and
methods not protected by intellectual property rights and developed
by TGI and in the creation of which no confidential information of
POPstar was used) may be used by TGI at any time prior to, during or
subsequent to its retainer. POPstar acknowledges that TGI may be
and could be performing services for businesses other than POPstar.
This Services Agreement shall not prohibit TGI from representing or
performing programming services for such other businesses.
7. Confidentiality
7.1 All data or other information concerning the business,
financial or other affairs of POPstar, including data and
information of third parties which POPstar received pursuant to a
confidentiality or non-disclosure agreement, which is received or to
which access is obtained by TGI or its personnel during the
performance of its obligations under this Services Agreement, shall
be treated as confidential and shall not, either during the term of
this Services Agreement, or at any time thereafter, be divulged or
disclosed or otherwise made known to any other person without the
express written consent of POPstar. TGI agrees to indemnify and
hold harmless POPstar from and against any losses, costs, damages,
claims, actions, suits, liabilities, fees or expenses arising out of
any breach of this Section 7.1.
7.2 TGI agrees that prior to the commencement of or during the
execution of the provisions of the services at POPstar's sole
option, TGI may be required to sign a non-disclosure agreement with
POPstar or its vendors to ensure proprietary information is properly
protected.
8. Termination
8.1 Either party hereto may, at its option, terminate this
Services Agreement by written notice to the other if such other
party defaults in the observance or performance of any obligation on
its part under this Services Agreement and such default in not
remedied within thirty (30) days following which if such default or
if such other party is adjudged bankrupt or insolvent, or a
receiver, receiver-manager, liquidator or trustee in bankruptcy is
appointed in respect of all or substantially all of its business and
undertaking, or it makes any assignments for the benefit of its
creditors or admits in writing its inability to pay its debts
generally as they become due.
8.2 Upon termination of this Services Agreement for any reason:
(a) POPstar shall pay TGI only the actual cost of work
carried out, services performed and materials supplied hereunder up
to the date of termination not previously paid for;
(b) TGI shall deliver to POPstar only the actual work
carried out and materials created up to the date of termination and
paid for; and
(c) each party hereto shall, notwithstanding the
termination of this Services Agreement, continue to observe the
obligations of confidentiality on its part hereunder, and shall not
use nor disclose to any third person any information which is
subject to such obligations without the prior consent of the other
party hereto.
8.3 Termination of this Services Agreement shall not affect,
prejudice or impair any other right or remedy available to the party
effecting such termination, and none of such rights or remedies
shall be exclusive in respect of this Services Agreement, but shall
be in addition to all other rights and remedies available to such
party at law or in equity.
<PAGE>
8.4 This Services Agreement will terminate upon termination of the
Licensing Agreement.
9. General
9.1 This Services Agreement shall be construed and shall take
effect in accordance with the laws of the province of British
Columbia and the parties hereto irrevocably attorn to the
jurisdiction of the courts of British Columbia.
9.2 The invalidity of unenforceability for any reason of any term
or condition of this Services Agreement shall not prejudice or
affect the validity or enforceability of the other terms or
conditions hereof.
9.3 This Services Agreement and the Work Orders attached hereto
contain the entire agreement between the parties and to the subject
matter hereof and no amendments shall be effective unless in writing
and signed by both parties.
9.4 Notices hereunder shall be in writing and may be delivered by
hand or sent by registered mail or by fax addressed to the address
for each party respectively set out below or to such other address
as may be substituted in writing:
To TGI: To POPstar:
TGI Technologies Ltd., POPstar Global Communications Inc.
107 East 3rd Avenue P.O. Box 3443
Vancouver, B.C. KPMG Centre
V5T 1C7. Tortola, British Virgin Islands
Any such notice shall be deemed to have been received by the
party to whom it is addressed, if delivered by hand, when delivered
or, if sent by registered mail, within 48 hours after the posting of
such notice in any government post office or, if sent by fax, on the
date of faxing; provided if such notice is mailed and between the
time of mailing and the actual receipt a mail strike, slowdown or
other labor dispute which might affect delivery occurs, then such
notice shall be effective when actually delivered.
9.5 TGI shall not assign this Services Agreement or any part
thereof without the prior written consent of POPstar.
Notwithstanding any assignment or sub-contracting by TGI of any of
its obligations under this Services Agreement or any Work Order, TGI
shall remain fully responsible for the performance of all of its
obligations under this Services Agreement and all applicable Work
Orders.
9.6 Neither TGI nor POPstar shall disclose to a third party or
parties the terms and conditions of this Services Agreement without
the express written permission of the other. However, TGI may
generally reference the work performed by TGI for POPstar in its
marketing efforts and may use POPstar's name as a reference. TGI
shall not use any service marks or trade-marks used by POPstar or
any of its subsidiaries in the conduct of their respective
businesses without the prior written permission of POPstar.
9.7 Subject to anything to the contrary contained herein, this
Services Agreement shall ensure to the benefit and be binding upon
the respective successor and permitted assigns of the parties hereto.
<PAGE>
9.8 If there is any conflict with or inconsistency between the
terms of this Services Agreement and the terms of any Work Order,
then the terms of the Work Order shall govern.
IN WITNESS THEREOF the parties hereto have executed this
Services Agreement effective the 11th day of January, 1999.
.
TGI TECHNOLOGIES LTD.
Per: /s/John McDermott
Title: Director
Location and date when executed:
Singapore Jan. 11, 1999
POPSTAR GLOBAL COMMUNICATIONS INC.
Per: /s/Thompson Chu
Title: Director
Location and date when executed:
Singapore Jan. 11, 1999
<PAGE>
SCHEDULE A - CORE SOFTWARE
The Core Software includes the files in the version 2.3 tree of the
Enroute Eclipse fax server software and
1) A description, giving an overview of how the software works, a
flow diagram indicating the input, flow, processing and output of
information, and specifications for the software, including minimum
hardware requirements.
2) Complete user documentation, including a description of how to
access and use the application, screen prints of menus and
input/output screens, data input descriptions, sample output/report
forms, error code descriptions and solutions where appropriate, and
explanation of all necessary disks and data used by the software.
3) Complete program/technical documentation, including program
source code listings with comments, technical information about
files and their locations, file names, file/database structure,
record structure and layout and data elements.
4) Description of backup and recovery procedures, including
process, medium for backup, and number of diskettes or tapes to do a
complete backup.
5) Master copy of the Core Software on magnetic media, including
all programs, on-line documentation, and any documentation developed
on a computer.
<PAGE>
SCHEDULE B.*
WORK ORDER - ENHANCEMENT
BRIEF DESCRIPTION: {brief description of Enhancement}
DETAILED DESCRIPTION: {detailed description of Enhancement}
{specify dollar amount of work order and whether time & materials
(and, if so, hourly rate), fixed price, or 'not to exceed'}
MILESTONES:
RESPONSIBILITIES OF TGI:
RESPONSIBILITIES OF POPSTAR:
ACCEPTANCE TEST PROCEDURE:
(a) POPSTAR AND TGI SHALL JOINTLY VERIFY THAT EACH ENHANCEMENT CONFORMS
TO THE SPECIFICATIONS ESTABLISHED BY POPSTAR AND TGI SHALL ASSIST
POPSTAR IN THE PERFORMANCE OF CONFORMANCE TESTING. IF THE
ENHANCEMENTS FUNCTION TO THE SATISFACTION OF POPSTAR, POPSTAR SHALL
CONFIRM SAME BY DELIVERING A SIGNED CERTIFICATE OF ACCEPTANCE TO
TGI. IF POPSTAR DOES NOT DELIVER A SIGNED NOTICE OF ACCEPTANCE TO
TGI OR IF POPSTAR USES ANY OF THE ENHANCEMENTS IN A LIVE PRODUCTION
ENVIRONMENT, THE ENHANCEMENTS SHALL BE DEEMED TO BE ACCEPTED.
(b) IF THE ENHANCEMENTS DO NOT FUNCTION TO THE SATISFACTION OF
POPSTAR, WITHIN FOURTEEN (14) DAYS OF TESTING, POPSTAR SHALL
IDENTIFY IN WRITING ANY DEFICIENCIES IN THE ENHANCEMENTS AND GIVE
NOTICE THEREFOR TO TGI.
(c) TGI SHALL USE BEST EFFORTS TO CORRECT ANY DEFICIENCIES
IDENTIFIED BY POPSTAR IMMEDIATELY UPON RECEIPT OF NOTICE OF SUCH
DEFICIENCIES AND PRESENT POPSTAR WITH THE CORRECTED VERSION OF THE
ENHANCEMENTS FOR TESTING BY POPSTAR.
(d) THIS PROCEDURE SHALL BE REPEATED UNTIL POPSTAR ACCEPTS THE
ENHANCEMENTS BY CONFIRMING THEIR CONFORMANCE TO THE SPECIFICATIONS
PROVIDED BY POPSTAR.
FEES: DIRECT AND INDIRECT COSTS PLUS THE PERCENTAGE SET OUT IN
SCHEDULE C TO THE SERVICES AGREEMENT. FEES SHALL BE TGI'S STANDARD
FEES CHARGED TO ITS CUSTOMERS GENERALLY AND SUBJECT TO INCREASE
ANNUALLY PROVIDED ONLY THAT SUCH INCREASE WILL NOT BE GREATER THAN
10% ANNUALLY.
PAYMENT: PAYMENT FOR THE SERVICES PROVIDED HEREIN IS AS FOLLOW:
TGI WILL INVOICE POPSTAR MONTHLY. THIS INVOICE IS PAYABLE UPON
RECEIPT. ALL EXPENSES WILL BE INVOICED.
WORK ORDER SIGNING OF THIS WORK ORDER INDICATES AGREEMENT FOR TGI TO
SIGN-OFF: PERFORM THE WORK OUTLINED IN THE TASK LIST AND TO THE
TERMS OUTLINED ABOVE.
APPROVED BY POPSTAR GLOBAL COMMUNICATIONS, INC.
PER: ___________________ DATE: _________________
APPROVED BY TGI TECHNOLOGIES LTD.
PER: ___________________ DATE: _________________
<PAGE>
SCHEDULE C - PERCENTAGE MARK-UP ON COSTS
FIFTEEN (15) PERCENT.
<PAGE>
ASSIGNMENT OF TRADE-MARK
WHEREAS TGI Technologies Ltd. of 107 East 3rd Avenue, Vancouver, B.C. V5T I
C7 is the recorded owner of the trade-mark POPSTAR registered in Canada
under registration No. TMA 503,556, and used in association with computer
software.
NOW THEREFORE in consideration of Ten Dollars ($10.00) and other good and
valuable consideration, the receipt and sufficiency of which the parties
acknowledge, TGI Technologies Ltd. of 107 East 3rd Avenue, Vancouver, B.C.
V5T IC7 sells, assigns, and transfers to POPstar Global Communications Inc.
of P.O. Box 3443, KPMG Centre, Tortola, British Virgin Islands all right,
title, and interest in the trade-mark POPSTAR, all rights to Canadian
registration TMA 503.556 and the goodwill of the business relating to the
trade-mark.
EXECUTED at Level 19, UIC Bldg., Singapore, this 12th day of January, 1999.
TGI Technologies Ltd.
per: /s/John McDermott
<PAGE>
AMENDMENT TO SERVICES AGREEMENT
THIS AMENDMENT AGREEMENT is dated the 24th day of August, 1999
and is made between:
1. TGI Technologies Ltd., a British Columbia company with
its office at 107 East 3rd Avenue, Vancouver, British
Columbia V5T 1C7, Canada (hereinafter referred to as
"TGI"); and
2. POPstar Global Communications Inc., a British Virgin
Islands company with its office at KPMG Centre, Tropic
Isle Building, P.O. Box 3443, Road Town, Tortola,
British Virgin Islands (hereinafter referred to as
"POPstar").
WHEREAS:
(A) TGI and POPstar have entered into a services agreement
dated January 11, 1999 (the "Services Agreement").
(B) TGI and POPstar wish to enter into this Agreement under
which they agree to clarify certain of the provisions of
the Services Agreement.
IT IS HEREBY AGREED AS FOLLOWS:
1. INTERPRETATION
1.1 Except where the context otherwise requires and save as
otherwise expressly defined herein, words and
expressions defined in the Services Agreement shall have
the same meanings and construction when used in this
Agreement (including the Recitals hereto). All terms
defined in these Recitals shall have the same meanings
when used throughout this Agreement.
1.2 Except where the context otherwise requires, words
importing the singular include the plural and vice
versa, words importing a gender includes every gender
and references to persons include bodies corporate or
unincorporate, any state or agency thereof and any other
entity.
1.3 Headings are for ease of reference only and have no
legal effect.
1.4 Except where the context otherwise requires, references
to any person include its successors and permitted assigns.
<PAGE>
1.5 A reference to a document includes any agreement in
writing, or any certificate, notice, instrument or other
document of any kind and shall include all amendments or
supplements to, or replacements or novations of that
document.
2. AMENDMENTS TO THE SERVICES AGREEMENT
2.1 The parties hereby agree and acknowledge that the
Services Agreement shall be amended in the following
manner with effect from the date of the Services Agreement.
Section 9.8 of the Services Agreement be deleted and the
following substituted therefor:
"9.8 If there is any conflict with or inconsistency between
the terms of this Services Agreement and the terms of any Work
Order, then the terms of the Work Order shall govern."
3. MISCELLANEOUS
3.1 This Agreement is supplemental to and shall be read in
conjunction with the Services Agreement which, save for
those provisions which are modified hereby or
inconsistent with the terms contained herein, shall
continue in full force and effect. Subject to the
foregoing, any reference to the Services Agreement shall
accordingly be deemed to include this Agreement.
3.2 This Agreement shall be governed by and construed in
accordance with the laws of the Province of British
Columbia, without regard to any provisions thereof
relating to conflicts of laws among different
jurisdictions. The parties hereto hereby submit to the
jurisdiction of the courts located in the Province of
British Columbia.
3.3 This Agreement may be signed in one or more
counterparts, all of which taken together shall
constitute an entire agreement.
<PAGE>
IN WITNESS WHEREOF this Agreement has been duly executed the day
and year first above written.
TGI TECHNOLOGIES LTD. POPSTAR GLOBAL
COMMUNICATIONS INC.
Signature: /s/John McDermott Signature: /s/Thompson Chu
By: John McDermott By: Thompson Chu
Title: President Title: Chairman
PROMISORY NOTE
U.S. $1,000,000 March 30, 1999
FOR VALUE RECEIVED, TGI TECHNOLOGIES LTD., a British Columbia
company (the "Maker"), hereby promises to pay to or to the order of
POPstar Global Communications Inc.. a British Virgin Islands company
(the "Holder"), on the earlier of (i) Demand on the Maker by the
Holder and (ii) March 30, , 2001 the principal amount of $ 1,000,000
in lawful currency of the United States of America together with
interest on such principal amount from the date hereof until payment
in full at the rate of eight (8%) percent per annum, calculated
daily On the basis of the number of days elapsed in a year of 365 or
366 days, as the case may be, compounded annually in arrears, and
payable as well as before maturity, default and judgment.
Time shall be of the essence of this Note. All payments of principal
and interest shall be made in lawful currency of the United States
of America at the office of the Holder at KPMG Centre, Tropic Isle
Building, Road Town, Tortola, British Virgin Islands or at such
other place as the Holder may from time to time direct in
immediately available funds for value on the day such amount is due.
If, for the purpose of obtaining judgment in any court, it is
necessary to convert a sum due hereunder in United States Dollars
into any other currency (the "Other Currency") the rate of exchange
used shall be that at which in accordance with its normal banking
procedures the Holder could purchase such sum due hereunder in
United States Dollars with the Other Currency on the Banking Day
preceding that on which final judgment is given. The obligation of
the Maker hereunder in respect of any such sum due from it to the
Holder hereunder shall, notwithstanding any judgment in the Other
Currency, be discharged only to the extent that on the Banking Day
following receipt by the Holder of any sum adjudged to be so due in
the Other Currency the Holder may in accordance with its normal
banking procedures purchase United States Dollars with the Other
Currency; if the United States Dollars so purchased are less than
the sum originally due to the Holder in United States Dollars the
Maker agrees, as a separate obligation and notwithstanding such
judgment, to indemnify the Holder against such loss and if the
United States Dollars so purchased exceed the sum originally due to
the Holder in United States Dollars the Holder agrees to remit to
the Maker such excess. For purposes hereof, "Banking Day" means any
other day other than a Saturday, Sunday or any other day which is a
legal holiday in the Province of British Columbia or in the British
Virgin Islands.
<PAGE>
The Maker hereby waives demand and presentment for payment, notice
of nonpayment, protest and notice of protest of this Note.
This Note shall be binding, upon the Maker and its successors and
assigns and shall enure to the benefit of, and be enforceable by,
the Holder and its successors and assigns.
This Note shall be governed by and construed according to the laws
of the Province of British Columbia.
TGI TECHNOLOGIES LTD.
By: /s/Thompson Chu
Title: Chairman of the Board and Chief
Executive Officer
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of July 20, 1999 between POPSTAR
COMMUNICATIONS, INC. (the "Company") and DON LAU ("Lau").
WHEREAS:
A. The Company intends to employ Lau as the Secretary
and Treasurer of the Company.
B. The parties consider it desirable to confirm in
writing the terms of Lau's employment by the Company.
NOW THEREFORE in consideration of the mutual covenants herein
contained the parties agree as follows:
ARTICLE 1
POSITION AND TERM
1.1 POSITION. This Agreement only governs the Company's
employment of Lau in his capacity of Secretary and Treasurer of
the Company.
1.2 ENGAGEMENT. The Company and Lau hereby confirm and
agree that Lau is employed by the Company in the capacity of
Secretary and Treasurer on the terms and conditions set out in
this Agreement.
1.3 DUTIES. Lau, in his capacity as Secretary and
Treasurer of the Company, will be responsible generally for the
company secretarial and treasury affairs of the Company and will
report to the Chairman and the Board of Directors of the
Company. Lau will serve the Company and its subsidiaries and
affiliates, faithfully and to the best of his skill in acting as
Secretary and Treasurer of the Company, including as necessary
under any service or technology agreements entered into by the
Company.
1.4 TERM. The Company's employment of Lau as Secretary
and Treasurer will be for a period of two years and will
continue until terminated in the manner set out in this Agreement.
1.5 TIME. Lau will devote substantially all of his
business time and attention to the business and affairs of the
Company and its affiliates and subsidiaries and will conform to
such hours of work as may from time to time reasonably be
required of him by the Company.
<PAGE>
1.6 BOARD OF DIRECTORS. Lau will fulfill and obey all
lawful directions of the Board of Directors of the Company from
time to time and generally discharge his duties in accordance
with the reasonable directions of the Board of Directors.
1.7 OTHER BUSINESS. Lau will not engage in any activity
which competes with or is adverse to the business of the
Company, whether alone, as a partner, as a shareholder, employee
or officer or director of any other person, firm or corporation
during the term of this Agreement and two years afterwards
without the prior written consent of the Board of Directors of
the Company.
1.8 BUSINESS OPPORTUNITIES. Any business opportunity
similar to the business of the Company which becomes available
to Lau shall be presented by Lau to the Board of Directors of
the Company for their consideration.
ARTICLE 2
SALARY AND BENEFITS
1.1 SALARY. Lau will be paid a base salary of US$48,000
per year, which base salary will be payable in
twenty-four semi-monthly installments on the 15th and
the last day of each month. Such base salary will be
reviewed annually, not later than the 31st day of
March in each year by the Board of Directors of the
Company. Any adjustment in such base salary will be
effective and retroactive to January 1st in such year.
1.2 Bonus. In addition to the base salary referred to in
clause 2.1, the Company may pay to Lau a bonus (the
"Bonus") in respect of each calendar year during the
term of this Agreement, the amount and time and
manner of payment of which will be determined by
unanimous agreement of the Board of Directors of the
Company in their absolute discretion based on their
evaluation of Lau's performance during the prior year.
2.3 VACATION. Lau will be entitled to 15 days of paid
vacation in each calendar year of his employment during the term
of this Agreement. Unused vacation time in a calendar year may
not be carried forward to subsequent years except with the
approval of the Board of Directors.
<PAGE>
2.4 EMPLOYMENT BENEFITS. Lau will be entitled to such
benefits hereunder as he and the Company may agree upon from
time to time including, without limitation, reimbursement for
membership dues as may be agreed, non-accountable car allowance
in such amount, if any, as may be agreed, and such long term
disability insurance, life insurance or health insurance or
other similar plans or policies as the Company may agree upon
with Lau.
2.5 REIMBURSEMENT. The Company will reimburse Lau for
all reasonable and necessary expenses, including travel and
promotion, incurred in carrying out his duties hereunder.
2.6 RECEIPTS. Lau will, when requested by the Company,
support any claim by him for reimbursement with receipts.
ARTICLE 3
TERMINATION
3.1 TERMINATION. The employment of Lau pursuant to this
Agreement will be terminated on the earliest of the following
dates (the "Termination Date"):
(a) The date upon which the Company delivers to Lau a
notice, in writing, of termination by reason of just cause. Any
such notice will state the reason for termination. Without
limiting the generality of the foregoing, just cause will
include the commission of any criminal offence against the
Company by Lau, the commission of any act of fraud, gross
negligence or similar act or omission on the part of Lau in
fulfilling his obligations under the terms of this Agreement
where such act or omission materially adversely affects the
interests or reputation of the Company.
(b) The date upon which the Company delivers to Lau a
written notice of termination (which notice of termination may
be given without cause or reason) provided that the Company,
upon such termination:
(i) will pay to Lau an amount equal to One (1) times the
annual remuneration, including Bonuses in respect of, and
benefits paid by the Company to Lau during, the year immediately
preceding such termination; if the parties cannot agree, then
the Company will engage, at its cost, an expert in employment
benefits for the purpose of quantifying the value of the
employment benefits received by Lau in the preceding year
required by this paragraph;
<PAGE>
(ii) will allow Lau to participate, to the extent
possible, at his cost, in the Company's benefit plans, if any,
for up to Twelve (12) months after such termination;
(iii) will allow Lau to assume any life insurance that the
Company then has in place on his life, upon payment to the
Company by Lau of any cash surrender value; and
(iv) will fund for such termination any unfunded payment
to any pension plan of the Company in respect of Lau.
(c) The date of death or legal incapacity of Lau.
(d) The date mutually agreed upon by Lau and the Company.
3.2 CHANGE IN POSITION. In the event the Company changes
the position of Lau to any position which has materially less
responsibility than that of Secretary and Treasurer or
materially reduces the salary or benefits payable to Lau to the
extent that such salary and benefits are not commensurate with
the salary and benefits which might reasonably be paid to a
Secretary and Treasurer of the Company, then Lau will have the
right to give notice to the Company not later than One Hundred
Eighty (180) days after such change stating that he objects to
such change and considers that his employment under this
Agreement has been functionally terminated, and thereupon his
employment under this Agreement will be deemed to have been
terminated pursuant to the provisions of clause 3.1(b) hereof,
and, without limiting the generality of the foregoing, Lau will
be entitled to the benefit of all provisions of clause 3.1(b)
hereof.
3.3 PAYMENT. All amounts payable as a consequence of
termination hereunder, as set out in this Agreement, will be due
and payable to Lau forthwith upon termination and Lau will have
no obligation to mitigate or otherwise seek alternate
employment.
3.4 PAYMENT TO RRSP. Lau will have the right to direct
the Company to pay any amount payable pursuant to clause 3.1(b)
hereof directly to a registered retirement savings plan to the
extent permissible by law.
3.5 TAX. Lau acknowledges that the Company will be
entitled to deduct, withhold and remit from all remuneration and
other payments to be made hereunder such amounts as may be
required by law including, without limitation, all required
federal and state income tax, employment insurance and Pension
Plan contributions.
<PAGE>
ARTICLE 4
CONFIDENTIALITY
4.1 CONFIDENTIALITY. Lau will not, either during the
term of this Agreement or at any time thereafter, disclose to
any person, firm or corporation any confidential information
concerning the business or affairs of the Company which Lau may
have acquired during the course of or incidental to performance
of his services hereunder or otherwise. For the purposes of this
clause, confidential information does not include information
which is, has been, or becomes, part of the public domain
through no violation of this Agreement or through any breach of
confidence by Lau or any other employee, officer or director of
the Company.
ARTICLE 5
MISCELLANEOUS
5.1 TIME. Time will be of the essence of this Agreement
and of every part hereof.
5.2 NOTICES. All notices, requests, demands or other
communications by the terms hereof required or permitted to be
given by one party to another will, unless specifically agreed,
be given in writing and delivered to such party, in the case of
the Company, at the registered office of the Company and, in the
case of Lau, at his address filed with the Company from time to
time. Any such notice, request, demand or other communication
so delivered will be deemed to be given upon delivery to such
address.
5.3 FURTHER ACTS. The parties covenant and agree to do
such things, to issue such instructions, to attend such
meetings, and to execute such further documents, agreements and
assurances, as may be necessary or advisable from time to time
in order to carry out the terms and conditions of this Agreement
in accordance with its true intent.
5.4 NO WAIVER. No condonation, forgiveness, waiver or
forbearance by any party of any non-observance or
non-performance by any other party of any of the provisions
hereunder will operate as a waiver or forbearance in respect of
any such provision or any subsequent non-observance or
non-performance by any other party of any of the provisions
hereunder.
5.5 APPLICATION OF TERMS. If any term, covenant or
condition of this Agreement or the application thereof to any
party or circumstances will to any extent be invalid
<PAGE>
or unenforceable, the remainder of this Agreement or application of
such term, covenant or condition to a party or circumstance
other than those to which it is held invalid or unenforceable
will not be affected thereby and each term, covenant or
condition of this Agreement will be valid and will be enforced
to the fullest extent permitted by law.
5.6 FULL AGREEMENT. The parties acknowledge and agree
that this is the entire Agreement between the parties as to the
subject matter hereof, and will supercede and replace any
discussion, letter or form of agreement, oral or written, which
may exist as of the date of this Agreement.
5.7 NON-ASSIGNMENT. This Agreement will be
non-assignable by either party without the prior written consent
of the other party hereto.
5.8 GOVERNING LAW. This Agreement will be construed and
enforced in accordance with and the rights of the parties will
be governed by the laws of the State of Nevada. Each of the
parties hereby irrevocably attorns to the jurisdiction of the
courts of the State of Nevada.
5.9 HOLIDAY. In any case where time limited by this
Agreement expires on a Saturday, Sunday or legal holiday, the
time will be extended to and will include the next succeeding
day on which banks are open for business in the City of Las
Vegas, Nevada.
5.10 CONTINUANCE OF AGREEMENT. Notwithstanding the
termination of Lau's employment hereunder, the provisions of
this Agreement will continue in effect until the final
performance of all the respective obligations set forth herein.
5.11 REFERENCE TO DIRECTORS. Every reference in this
Agreement to the Board of Directors of the Company will be read
and construed as meaning the Board of Directors of the Company
from time to time excluding Lau, with the intent that if and for
so long as Lau is a director of the Company, in order to avoid a
conflict of interest, all matters requiring the agreement,
instruction or other action by the Board of Directors of the
Company hereunder will only require the agreement, instruction
or other action of the directors of the Company other than Lau.
<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this
Agreement as of the day and year first above written.
POPSTAR COMMUNICATIONS, INC.
Per: /s/Thompson Chu
/s/Susan Tong /s/Don Lau
Witness DON LAU
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of July 20, 1999 between POPSTAR
COMMUNICATIONS, INC. (the "Company") and JOHN McDERMOTT
("McDermott").
WHEREAS:
A. The Company intends to employ McDermott as the
President of the Company.
B. The parties consider it desirable to confirm in
writing the terms of McDermott's employment by the Company.
NOW THEREFORE in consideration of the mutual covenants herein
contained the parties agree as follows:
ARTICLE 1
POSITION AND TERM
1.1 POSITION. This Agreement only governs the Company's
employment of McDermott in his capacity of President of the
Company.
1.2 ENGAGEMENT. The Company and McDermott hereby confirm
and agree that McDermott is employed by the Company in the
capacity of President on the terms and conditions set out in
this Agreement.
1.3 DUTIES. McDermott, in his capacity as President of
the Company, will be responsible generally for the main
direction and administration of the business and affairs of the
Company and will report to the Chairman of the Company and the
Board of Directors of the Company. McDermott will serve the
Company and its subsidiaries and affiliates, faithfully and to
the best of his skill in acting as President of the Company,
including as necessary under any service or technology
agreements entered into by the Company.
1.4 TERM. The Company's employment of McDermott as
President will be for a period of three years and will continue
until terminated in the manner set out in this Agreement.
1.5 TIME. McDermott will devote substantially all of his
business time and attention to the business and affairs of the
Company and its affiliates and subsidiaries and will conform to
such hours of work as may from time to time reasonably be
required of him by the Company.
<PAGE>
1.6 BOARD OF DIRECTORS. McDermott will fulfill and obey
all lawful directions of the Board of Directors of the Company
from time to time and generally discharge his duties in
accordance with the reasonable directions of the Board of
Directors.
1.7 OTHER BUSINESS. McDermott will not engage in any
activity which competes with or is adverse to the business of
the Company, whether alone, as a partner, as a shareholder,
employee or officer or director of any other person, firm or
corporation during the term of this Agreement and two years
afterwards without the prior written consent of the Board of
Directors of the Company.
1.8 BUSINESS OPPORTUNITIES. Any business opportunity
similar to the business of the Company which becomes available
to McDermott shall be presented by McDermott to the Board of
Directors of the Company for their consideration.
ARTICLE 2
SALARY AND BENEFITS
2.1 SALARY. McDermott will be paid a base salary of
US$83,333.33 per year, which base salary will be payable in
twenty-four semi-monthly installments on the 15th and the last
day of each month. Such base salary will be reviewed annually,
not later than the 31st day of March in each year by the Board
of Directors of the Company. Any adjustment in such base salary
will be effective and retroactive to January 1st in such year.
2.2 BONUS. In addition to the base salary referred to in
clause 2.1, the Company may pay to McDermott a bonus (the
"Bonus") in respect of each calendar year during the term of
this Agreement, the amount and time and manner of payment of
which will be determined by unanimous agreement of the Board of
Directors of the Company in their absolute discretion based on
their evaluation of McDermott's performance during the prior year.
2.3 Vacation. McDermott will be entitled to 24 days of
paid vacation in each calendar year of his employment during the
term of this Agreement. Unused vacation time in a calendar year
may not be carried forward to subsequent years except with the
approval of the Board of Directors.
<PAGE>
2.4 EMPLOYMENT BENEFITS. McDermott will be entitled to
such benefits hereunder as he and the Company may agree upon
from time to time including, without limitation, reimbursement
for membership dues as may be agreed, non-accountable car
allowance in such amount, if any, as may be agreed, and such
long term disability insurance, life insurance or health
insurance or other similar plans or policies as the Company may
agree upon with McDermott. Without limitation, McDermott is
presently entitled to a non-accountable car allowance of US$467
per month, which allowance will be reviewed annually.
2.5 REIMBURSEMENT. The Company will reimburse McDermott
for all reasonable and necessary expenses, including travel and
promotion, incurred in carrying out his duties hereunder.
2.6 Office in Residence. McDermott will maintain at his
sole cost and expense an office in his personal residence for
his use in Company business after normal business operating hours.
2.7 Receipts. McDermott will, when requested by the
Company, support any claim by him for reimbursement with receipts.
ARTICLE 3
TERMINATION
3.1 Termination. The employment of McDermott pursuant to
this Agreement will be terminated on the earliest of the
following dates (the "Termination Date"):
(a) The date upon which the Company delivers to McDermott
a notice, in writing, of termination by reason of just cause.
Any such notice will state the reason for termination. Without
limiting the generality of the foregoing, just cause will
include the commission of any criminal offence against the
Company by McDermott, the commission of any act of fraud, gross
negligence or similar act or omission on the part of McDermott
in fulfilling his obligations under the terms of this Agreement
where such act or omission materially adversely affects the
interests or reputation of the Company.
(b) The date upon which the Company delivers to McDermott
a written notice of termination (which notice of termination may
be given without cause or reason) provided that the Company,
upon such termination:
<PAGE>
(i) will pay to McDermott an amount equal to One (1)
times the annual remuneration, including Bonuses in
respect of, and benefits paid by the Company to
McDermott during, the year immediately preceding such
termination; if the parties cannot agree, then the
Company will engage, at its cost, an expert in
employment benefits for the purpose of quantifying
the value of the employment benefits received by
McDermott in the preceding year required by this
paragraph;
(ii) will allow McDermott to participate, to the extent
possible, at his cost, in the Company's benefit
plans, if any, for up to Twelve (12) months after
such termination;
(iii) will allow McDermott to assume any life insurance
that the Company then has in place on his life, upon
payment to the Company by McDermott of any cash
surrender value; and
(iv) will fund for such termination any unfunded payment
to any pension plan of the Company in respect of
McDermott.
(C) The date of death or legal incapacity of McDermott.
(d) The date mutually agreed upon by McDermott and the Company.
3.2 CHANGE IN POSITION. In the event the Company changes
the position of McDermott to any position which has materially
less responsibility than that of President or materially reduces
the salary or benefits payable to McDermott to the extent that
such salary and benefits are not commensurate with the salary
and benefits which might reasonably be paid to a President of
the Company, then McDermott will have the right to give notice
to the Company not later than One Hundred Eighty (180) days
after such change stating that he objects to such change and
considers that his employment under this Agreement has been
functionally terminated, and thereupon his employment under this
Agreement will be deemed to have been terminated pursuant to the
provisions of clause 3.1(b) hereof, and, without limiting the
generality of the foregoing, McDermott will be entitled to the
benefit of all provisions of clause 3.1(b) hereof.
3.3 PAYMENT. All amounts payable as a consequence of
termination hereunder, as set out in this Agreement, will be due
and payable to McDermott forthwith upon termination and
McDermott will have no obligation to mitigate or otherwise seek
alternate employment.
<PAGE>
3.4 PAYMENT TO RRSP. McDermott will have the right to
direct the Company to pay any amount payable pursuant to clause
3.1(b ) hereof directly to a registered retirement savings plan
to the extent permissible by law.
3.5 TAX. McDermott acknowledges that the Company will be
entitled to deduct, withhold and remit from all remuneration and
other payments to be made hereunder such amounts as may be
required by law including, without limitation, all required
federal and state income tax, employment insurance and Pension
Plan contributions.
ARTICLE 4
CONFIDENTIALITY
4.1 CONFIDENTIALITY. McDermott will not, either during
the term of this Agreement or at any time thereafter, disclose
to any person, firm or corporation any confidential information
concerning the business or affairs of the Company which
McDermott may have acquired during the course of or incidental
to performance of his services hereunder or otherwise. For the
purposes of this clause, confidential information does not
include information which is, has been, or becomes, part of the
public domain through no violation of this Agreement or through
any breach of confidence by McDermott or any other employee,
officer or director of the Company.
ARTICLE 5
MISCELLANEOUS
5.1 TIME. Time will be of the essence of this Agreement
and of every part hereof.
5.2 NOTICES. All notices, requests, demands or other
communications by the terms hereof required or permitted to be
given by one party to another will, unless specifically agreed,
be given in writing and delivered to such party, in the case of
the Company, at the registered office of the Company and, in the
case of McDermott, at his address filed with the Company from
time to time. Any such notice, request, demand or other
communication so delivered will be deemed to be given upon
delivery to such address.
5.3 FURTHER ACTS. The parties covenant and agree to do
such things, to issue such instructions, to attend such
meetings, and to execute such further documents, agreements and
assurances, as may be necessary or advisable from time to time
in order to carry out the terms and conditions of this Agreement
in accordance with
<PAGE>
its true intent.
5.4 NO WAIVER. No condonation, forgiveness, waiver or
forbearance by any party of any non-observance or
non-performance by any other party of any of the provisions
hereunder will operate as a waiver or forbearance in respect of
any such provision or any subsequent non-observance or
non-performance by any other party of any of the provisions
hereunder.
5.5 APPLICATION OF TERMS. If any term, covenant or
condition of this Agreement or the application thereof to any
party or circumstances will to any extent be invalid or
unenforceable, the remainder of this Agreement or application of
such term, covenant or condition to a party or circumstance
other than those to which it is held invalid or unenforceable
will not be affected thereby and each term, covenant or
condition of this Agreement will be valid and will be enforced
to the fullest extent permitted by law.
5.6 FULL AGREEMENT. The parties acknowledge and agree
that this is the entire Agreement between the parties as to the
subject matter hereof, and will supercede and replace any
discussion, letter or form of agreement, oral or written, which
may exist as of the date of this Agreement.
5.7 NON-ASSIGNMENT. This Agreement will be
non-assignable by either party without the prior written consent
of the other party hereto.
5.8 GOVERNING LAW. This Agreement will be construed and
enforced in accordance with and the rights of the parties will
be governed by the laws of the State of Nevada. Each of the
parties hereby irrevocably attorns to the jurisdiction of the
courts of the State of Nevada.
5.9 HOLIDAY. In any case where time limited by this
Agreement expires on a Saturday, Sunday or legal holiday, the
time will be extended to and will include the next succeeding
day on which banks are open for business in the City of Las
Vegas, Nevada.
5.10 CONTINUANCE OF AGREEMENT. Notwithstanding the
termination of McDermott's employment hereunder, the provisions
of this Agreement will continue in effect until the final
performance of all the respective obligations set forth herein.
5.11 REFERENCE TO DIRECTORS. Every reference in this
Agreement to the Board of Directors of the Company will be read
and construed as meaning the Board of Directors of the Company
from time to time excluding McDermott, with the intent that if
and for so long as McDermott is a director of the Company, in
order to avoid a conflict of interest, all matters requiring the
agreement, instruction or other action by the Board of Directors
of the Company hereunder will only
<PAGE>
require the agreement, instruction or other action of the directors
of the Company other than McDermott.
IN WITNESS WHEREOF the parties hereto have executed this
Agreement as of the day and year first above written.
POPSTAR COMMUNICATIONS, INC.
Per: /s/Thompson Chu
/s/Susan Tong /s/John McDermott
Witness JOHN McDERMOTT
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of July 20, 1999 between POPSTAR
COMMUNICATIONS, INC. (the "Company") and THOMPSON CHU ("Chu").
WHEREAS:
A. The Company intends to employ Chu as the Chairman of
the Company.
B. The parties consider it desirable to confirm in
writing the terms of Chu's employment by the Company.
NOW THEREFORE in consideration of the mutual covenants herein
contained the parties agree as follows:
ARTICLE 1
POSITION AND TERM
1.1 POSITION. This Agreement only governs the Company's
employment of Chu in his capacity of Chairman of the Company.
1.2 ENGAGEMENT. The Company and Chu hereby confirm and
agree that Chu is employed by the Company in the capacity of
Chairman on the terms and conditions set out in this Agreement.
1.3 DUTIES. Chu, in his capacity as Chairman of the
Company, will be responsible generally for the main direction
and administration of the business and affairs of the Company
and will report to the Board of Directors of the Company. Chu
will serve the Company and its subsidiaries and affiliates,
faithfully and to the best of his skill in acting as Chairman of
the Company, including as necessary under any service or
technology agreements entered into by the Company.
1.4 TERM. The Company's employment of Chu as Chairman
will be for a period of two years and will continue until
terminated in the manner set out in this Agreement.
1.5 BOARD OF DIRECTORS. Chu will fulfill and obey all
lawful directions of the Board of Directors of the Company from
time to time and generally discharge his duties in accordance
with the reasonable directions of the Board of Directors.
<PAGE>
1.6 OTHER BUSINESS. Chu will not engage in any activity
which competes with or is adverse to the business of the
Company, whether alone, as a partner, as a shareholder, employee
or officer or director of any other person, firm or corporation
during the term of this Agreement and two years afterwards
without the prior written consent of the Board of Directors of
the Company.
1.7 BUSINESS OPPORTUNITIES. Any business opportunity
similar to the business of the Company which becomes available
to Chu shall be presented by Chu to the Board of Directors of
the Company for their consideration.
ARTICLE 2
SALARY AND BENEFITS
2.1 SALARY. Chu will be paid a base salary of
US$50,000.00 per year, which base salary will be payable in
twenty-four semi-monthly installments on the 15th and the last
day of each month. Such base salary will be reviewed annually,
not later than the 31st day of March in each year by the Board
of Directors of the Company. Any adjustment in such base salary
will be effective and retroactive to January 1st in such year.
2.2 Bonus. In addition to the base salary referred to in
clause 2.1, the Company may pay to Chu a bonus (the "Bonus") in
respect of each calendar year during the term of this Agreement,
the amount and time and manner of payment of which will be
determined by unanimous agreement of the Board of Directors of
the Company in their absolute discretion based on their
evaluation of Chu's performance during the prior year.
2.3 VACATION. Chu will be entitled to 24 days of paid
vacation in each calendar year of his employment during the term
of this Agreement. Unused vacation time in a calendar year may
not be carried forward to subsequent years except with the
approval of the Board of Directors.
2.4 EMPLOYMENT BENEFITS. Chu will be entitled to such
benefits hereunder as he and the Company may agree upon from
time to time including, without limitation, reimbursement for
membership dues as may be agreed, non-accountable car allowance
in such amount, if any, as may be agreed, and such long term
disability insurance, life insurance or health insurance or
other similar plans or policies as the Company may agree upon
with Chu.
<PAGE>
2.5 REIMBURSEMENT. The Company will reimburse Chu for
all reasonable and necessary expenses, including travel and
promotion, incurred in carrying out his duties hereunder.
2.6 OFFICE IN RESIDENCE. Chu will maintain at his sole
cost and expense an office in his personal residence for his use
in Company business after normal business operating hours.
2.7 RECEIPTS. Chu will, when requested by the Company,
support any claim by him for reimbursement with receipts.
ARTICLE 3
TERMINATION
3.1 TERMINATION. The employment of Chu pursuant to this
Agreement will be terminated on the earliest of the following
dates (the "Termination Date"):
(a) The date upon which the Company delivers
to Chu a notice, in writing, of termination by reason of just
cause. Any such notice will state the reason for termination.
Without limiting the generality of the foregoing, just cause
will include the commission of any criminal offence against the
Company by Chu, the commission of any act of fraud, gross
negligence or similar act or omission on the part of Chu in
fulfilling his obligations under the terms of this Agreement
where such act or omission materially adversely affects the
interests or reputation of the Company.
(b) The date upon which the Company delivers
to Chu a written notice of termination (which notice of
termination may be given without cause or reason) provided that
the Company, upon such termination:
(i) will pay to Chu an amount equal to One (1)
times the annual remuneration, including Bonuses in respect of,
and benefits paid by the Company to Chu during, the year
immediately preceding such termination; if the parties cannot
agree, then the Company will engage, at its cost, an expert in
employment benefits for the purpose of quantifying the value of
the employment benefits received by Chu in the preceding year
required by this paragraph;
(ii) will allow Chu to participate, to the
extent possible, at his cost, in the Company's benefit plans, if
any, for up to Twelve (12) months after such termination;
<PAGE>
(iii) will allow Chu to assume any life
insurance that the Company then has in place on his life, upon
payment to the Company by Chu of any cash surrender value; and
(iv) will fund for such termination any
unfunded payment to any pension plan of the Company in respect
of Chu.
(c) The date of death or legal incapacity of Chu.
(d) The date mutually agreed upon by Chu and
the Company.
3.2 CHANGE IN POSITION. In the event the Company changes
the position of Chu to any position which has materially less
responsibility than that of Chairman or materially reduces the
salary or benefits payable to Chu to the extent that such salary
and benefits are not commensurate with the salary and benefits
which might reasonably be paid to a Chairman of the Company,
then Chu will have the right to give notice to the Company not
later than One Hundred Eighty (180) days after such change
stating that he objects to such change and considers that his
employment under this Agreement has been functionally
terminated, and thereupon his employment under this Agreement
will be deemed to have been terminated pursuant to the
provisions of clause 3.1(b) hereof, and, without limiting the
generality of the foregoing, Chu will be entitled to the benefit
of all provisions of clause 3.1(b) hereof.
3.3 PAYMENT. All amounts payable as a consequence of
termination hereunder, as set out in this Agreement, will be due
and payable to Chu forthwith upon termination and Chu will have
no obligation to mitigate or otherwise seek alternate
employment.
3.4 PAYMENT TO RRSP. Chu will have the right to direct
the Company to pay any amount payable pursuant to clause 3.1(b )
hereof directly to a registered retirement savings plan to the
extent permissible by law.
3.5 TAX. Chu acknowledges that the Company will be
entitled to deduct, withhold and remit from all remuneration and
other payments to be made hereunder such amounts as may be
required by law including, without limitation, all required
federal and state income tax, employment insurance and Pension
Plan contributions.
<PAGE>
ARTICLE 4
CONFIDENTIALITY
4.1 CONFIDENTIALITY. Chu will not, either during the
term of this Agreement or at any time thereafter, disclose to
any person, firm or corporation any confidential information
concerning the business or affairs of the Company which Chu may
have acquired during the course of or incidental to performance
of his services hereunder or otherwise. For the purposes of this
clause, confidential information does not include information
which is, has been, or becomes, part of the public domain
through no violation of this Agreement or through any breach of
confidence by Chu or any other employee, officer or director of
the Company.
ARTICLE 5
MISCELLANEOUS
5.1 TIME. Time will be of the essence of this Agreement
and of every part hereof.
5.2 NOTICES. All notices, requests, demands or other
communications by the terms hereof required or permitted to be
given by one party to another will, unless specifically agreed,
be given in writing and delivered to such party, in the case of
the Company, at the registered office of the Company and, in the
case of Chu, at his address filed with the Company from time to
time. Any such notice, request, demand or other communication
so delivered will be deemed to be given upon delivery to such
address.
5.3 FURTHER ACTS. The parties covenant and agree to do
such things, to issue such instructions, to attend such
meetings, and to execute such further documents, agreements and
assurances, as may be necessary or advisable from time to time
in order to carry out the terms and conditions of this Agreement
in accordance with its true intent.
5.4 NO WAIVER. No condonation, forgiveness, waiver or
forbearance by any party of any non-observance or
non-performance by any other party of any of the provisions
hereunder will operate as a waiver or forbearance in respect of
any such provision or any subsequent non-observance or
non-performance by any other party of any of the provisions
hereunder.
5.5 APPLICATION OF TERMS. If any term, covenant or
condition of this Agreement or the application thereof to any
party or circumstances will to any extent be invalid
<PAGE>
or unenforceable, the remainder of this Agreement or application of
such term, covenant or condition to a party or circumstance
other than those to which it is held invalid or unenforceable
will not be affected thereby and each term, covenant or
condition of this Agreement will be valid and will be enforced
to the fullest extent permitted by law.
5.6 FULL AGREEMENT. The parties acknowledge and agree
that this is the entire Agreement between the parties as to the
subject matter hereof, and will supercede and replace any
discussion, letter or form of agreement, oral or written, which
may exist as of the date of this Agreement.
5.7 NON-ASSIGNMENT. This Agreement will be
non-assignable by either party without the prior written consent
of the other party hereto.
5.8 GOVERNING LAW. This Agreement will be construed and
enforced in accordance with and the rights of the parties will
be governed by the laws of the State of Nevada. Each of the
parties hereby irrevocably attorns to the jurisdiction of the
courts of the State of Nevada.
5.9 HOLIDAY. In any case where time limited by this
Agreement expires on a Saturday, Sunday or legal holiday, the
time will be extended to and will include the next succeeding
day on which banks are open for business in the City of Las
Vegas, Nevada.
5.10 CONTINUANCE OF AGREEMENT. Notwithstanding the
termination of Chu's employment hereunder, the provisions of
this Agreement will continue in effect until the final
performance of all the respective obligations set forth herein.
5.11 REFERENCE TO DIRECTORS. Every reference in this
Agreement to the Board of Directors of the Company will be read
and construed as meaning the Board of Directors of the Company
from time to time excluding Chu, with the intent that if and for
so long as Chu is a director of the Company, in order to avoid a
conflict of interest, all matters requiring the agreement,
instruction or other action by the Board of Directors of the
Company hereunder will only require the agreement, instruction
or other action of the directors of the Company other than Chu.
IN WITNESS WHEREOF the parties hereto have executed this
Agreement as of the day and year first above written.
<PAGE>
POPSTAR COMMUNICATIONS, INC.
Per: /s/John McDermott
/s/Susan Tong /s/Thompson Chu
Witness THOMPSON CHU
SERVICE AGREEMENT
This SERVICE AGREEMENT ("Agreement"), dated as of
August 10, 1999, is by and between POPstar Global
Communications, Inc., a business entity organized as a
corporation under the laws of British Virgin Islands ("POPstar")
and TransNexus, LLC, a business entity organized as a limited
liability company under the laws of the state of Georgia
("TransNexus").
1. This Agreement replaces the Memorandum of
Understanding signed by a related party of POPstar dated August
21, 1998.
2. The parties have previously entered into
non-disclosure agreements with one another in which each party
agrees to maintain in confidence certain proprietary information
that may be shared between the parties during the course of
their dealings.
3. TransNexus has provided to POPstar a
non-exclusive, royalty free license to TransNexus' Open
Settlement Protocol Software Development Kit and has provided
POPstar with access to TransNexus routing servers for testing.
4. The clearinghouse developed by the parties
shall be known as the TransNexus POPstar Clearinghouse Service
(the "Clearinghouse"), for the purpose of providing transaction
settlement services to POPstar nominees, "the customers".
5. TransNexus and POPstar will both enter
into separate agreements with each customer of the Clearinghouse
that will set forth the terms and conditions of the
Clearinghouse (the "Clearinghouse Service Agreement"). The
Clearinghouse Service Agreement sets forth certain terms,
conditions and obligations of TransNexus and POPstar with
respect to the Clearinghouse.
6. This Agreement sets forth obligations of the parties
that are in addition to those described in the Clearinghouse
Service Agreement. The terms and conditions of the
Clearinghouse Service Agreement are incorporated into this
Agreement by reference.
7. POPstar will provide its customers with Internet fax
software from POPstar which will allow the customers to
originate and terminate IP fax traffic over the public Internet.
Installation and testing of this software will be the
responsibility of POPstar.
8. POPstar will instruct the customer to access the
Clearinghouse, which will be operated by TransNexus. The
customer will complete a TransNexus Nondisclosure Agreement
("NDA) and mail, fax or send by other electronic means to
TransNexus for execution. TransNexus will provide an executed
copy of the NDA to POPstar as notification of NDA completion.
<PAGE>
9. TransNexus will enroll the customer in the
Clearinghouse upon completion of an executed and performed
Clearinghouse Service Agreement between the customer, POPstar
and TransNexus. Enrollment will be complete when the Customer
has paid all amounts of service charges and fees to TransNexus
as indicated in the specific Service Agreement, TransNexus has
securely enrolled the Customer's IP telephony devices in the
Clearinghouse, and established a clearinghouse account for the
customer. TransNexus will be responsible for the testing,
enrollment and installation of this phase.
10. TransNexus will postpone and delay for a period not
to exceed 60 days from creation of the customer's clearinghouse
account all device enrollment fees for POPstar customers. At
the end of the 60-day period, TransNexus will invoice the
customer for device enrollment fees, which have been postponed
and delayed. TransNexus will also reduce the security deposit
required by POPstar customers to an amount not to exceed $500.
At the end of the 60-day period, the POPstar customer must make
a full security deposit with TransNexus as per the terms of the
Clearinghouse Service Agreement. POPstar hereby agrees to
financially guarantee to TransNexus any amounts for services
provided to POPstar customers, but not collected by TransNexus
for any deposit fees, enrollment fees or other fees that are
waived by TransNexus.
11. TransNexus and POPstar will co-market and promote the
Clearinghouse. POPstar will market and sell the Clearinghouse
service to its customers.
12. TransNexus will routinely test quality of service
standards, routes and the telecommunication addresses of
customers of POPstar. In the event TransNexus discovers
incongruities, TransNexus has the right to suspend participation
in the Clearinghouse immediately without notice to the customer.
13. POPstar will establish retail rates to be paid by
customers of the Clearinghouse and will be responsible for the
pricing of all fax exchanges between customers in the
Clearinghouse. POPstar will provide these rates to TransNexus
via electronic communication, not more than once per calendar
week, with an effective date no earlier than 24 hours from
receipt by TransNexus.
14. TransNexus will guarantee payment to customers who
terminate traffic for all calls not to exceed one hour in length
and calls for which no fraud was detected by TransNexus.
15. It shall be the responsibility of POPstar
to provide public Internet or other access from IP telephony
devices to the Clearinghouse service point. POPstar
acknowledges and reaffirms the representations and warranties,
the disclaimer of warranty and the limitation of liability
provisions as set forth in the Clearinghouse Service Agreement.
This AGREEMENT is signed by an authorized person for
each of TransNexus and POPstar indicating their respective
organization's agreement to be bound by the
<PAGE>
provisions hereof, by the Service Agreement and by the other agreements
among the parties.
TRANSNEXUS, LLC POPSTAR GLOBAL COMMUNICATIONS, INC.
By:/s/Jim Dalton By:/s/Thompson Chu
Name: Jim Dalton Name: Thompson Chu
Title: President & CEO Title: Chairman
