STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made as of
February 28, 1999 (the "Effective Date"), by and between Zstar Enterprises,
Inc., a Nevada Corporation (the Purchaser") and Apex Travel Ltd., a British
Columbia, Canadian Corporation (the "Company").
WHEREAS, Apex Canadian Holidays Ltd. (the "Company") carries on a
travel agency business (hereinafter called the "Business") in and from the
premises at 000 Xxxx 0xx Xxxxxx, Xxxxxxxxx, X.X., Xxxxxx (hereinafter called
the "Premises") and in connection therewith owns certain assets and equipment
and machinery, inventory and stock, clientele, leasehold improvements and
assets, all liabilities and rents the Premises.
WHEREAS, the Company requires capital to fund its activities and is
desirous of accessing the United States capital markets; and
WHEREAS, the Seller is unable to provide the necessary capital
required to fund the Company's ongoing business activities;
WHEREAS, the Purchaser has agreed to make a good faith attempt to
raise the Capital (as hereinafter defined) through which it shall fund the
Company's future activities; and
WHEREAS, based upon the above premises, the Seller desires to sell
to the Purchaser, and the Purchaser desires to acquire, all of the issued and
outstanding shares of the Company's common stock, all as hereinafter set
forth;
NOW, THEREFORE, in consideration of the premises and the mutual and
independent agreements and covenants hereinafter set forth, the parties
hereto hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF STOCK
1.1 PURCHASE AND SALE
Subject to the terms and conditions hereof, the Purchaser hereby
agrees to purchase and acquire from the Seller, and the Seller hereby agrees
to issue and sell to the Purchaser, at the Closing (as such term is
hereinafter defined), one hundred (100) shares of the Company's Common Stock
(the "Shares"), being all of the issued and outstanding shares of the
Company's stock.
1.2 CONSIDERATION
The purchase price to be paid by the Purchaser to the Seller for the
Shares shall be U.S.$50,000 (the "Purchase Price") to be paid pursuant to the
terms of promissory note (the "Note") attached hereto as Exhibit "A".
1.3 CLOSING
The closing of the issuance and sale to the Purchaser of the Shares,
at which certificate(s) duly evidencing the Shares shall be delivered by the
Seller to the Purchaser and the Note shall be delivered by the Purchaser to
the Seller in the form attached hereto as Exhibit "A" (the "Closing"), shall
take place at 11:59 p.m. on such date and at such time as the parties hereto
may so decide (the "Closing Date"). The Closing shall take place at such
location as is mutually agreed to by the parties.
1.4 CONDITIONS PRECEDENT TO CLOSING BY THE PURCHASER
The obligations hereunder of the Purchaser to purchase and acquire
the Shares are subject to the satisfaction of each of the following
conditions at or prior to the Closing unless waived by the Purchaser in
writing:
1.4.1 The representations and warranties of the Seller and the
Company contained in this Agreement shall be true in all material respects,
on the Closing Date, as if originally made on such date.
1.4.2 The Seller and the Company shall have performed and complied
in all material respects with the agreements and covenants required by this
Agreement to be performed or complied with by it prior to or at the Closing.
1.4.3 (a) No statute, rule or regulation shall have been
enacted or promulgated, and no order, decree, writ or injunction shall have
been issued and shall remain in effect, by any court or governmental or
regulatory body, agency or authority which restrains, enjoins or otherwise
prohibits the consummation of the transactions contemplated hereby, and (b)
no action, suit or proceeding before any court or governmental or regulatory
body, agency or authority shall have been instituted or threatened by any
governmental or regulatory body, agency or authority, and no investigation by
any governmental or regulatory body, agency or authority shall have been
commenced, with respect to the transactions contemplated hereby or with
respect to the Company which would have a material adverse effect on the
transactions contemplated hereby or on the business of the Company.
1.4.4 One or more certificates duly issued by the Company in the
name of the Purchaser, evidencing ownership of the Shares by the Purchaser,
shall have been dated as of the Closing Date and delivered to the Purchaser
at the Closing.
1.4.5 The Purchaser shall have received the following documents from
the Company, in form and content satisfactory to the Purchaser:
(a) Certified copies of the Resolutions of the Board
of Directors of the Company unanimously authorizing the execution and
performance by the Company of this Agreement and the agreements referred to
elsewhere in this Agreement, the issuance of the Shares to the Purchaser and
the other transactions contemplated hereby.
(b) A certificate of the Secretary or an Assistant
Secretary of the Company, dated the Closing Date, certifying that the
Articles of Incorporation and the By-Laws of the Company, as respectively
amended, have not been amended, modified or repealed from the forms of such
documents in effect on the date hereof which previously have been provided to
the Purchaser.
(c) Long-form certificates dated as of a date
proximate to the Closing Date confirming the good standing of the Company in
Canada and in each state and/or province in which the Company is then
required to be qualified to do business.
1.4.6 The Company shall not have filed or had filed against it a
petition under any Bankruptcy code, or any other similar law or laws, and the
Company shall not be the subject of or be engaged in the appointment of any
receiver, trustee or assignee for the benefit of its creditors or (other than
as contemplated by this Agreement) any reorganization, moratorium, workout,
recapitalization or restructuring.
1.4.7 The Company shall have delivered to the Purchaser executed
written consents of third parties, including, without limitation,
governmental agencies, to the execution, delivery and performance by the
Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby, required pursuant to any agreement to which
the Company is a party or by which it is bound or by any law, regulation,
judgment, order, writ, injunction, decree, permit, license or authorization
of any court or governmental or regulatory body of any jurisdiction
applicable to the Company or any of its properties, except to the extent that
the failure to obtain any such consents, individually or in the aggregate,
could not reasonably be expected to have a material adverse effect on the
business of the Company.
1.5 CONDITIONS PRECEDENT TO CLOSING BY THE SELLER
The obligations hereunder of the Seller to sell the Shares to the
Purchaser are subject to the satisfaction of each of the following conditions
at or prior to the Closing unless waived by the Company in writing:
1.5.1 The representations and warranties of the Purchaser contained
in this Agreement shall be true in all material respects on the Closing Date,
as if originally made on such date.
1.5.2 The Purchaser shall have performed and complied in all
material respects with the agreements and covenants required by this
Agreement to be performed or complied with by it prior to or at the Closing.
1.5.3 No statute, rule or regulation shall have been enacted or
promulgated, and no other, decree, writ or injunction shall have been issued
and shall remain in effect, by any court or governmental or regulatory body,
agency or authority which restrains, enjoins or otherwise prohibits the
consummation of the transactions contemplated hereby, and (b) no action, suit
or proceeding before any court or governmental or regulatory body, agency or
authority shall have been instituted or threatened by any governmental or
regulatory body, agency or authority, and no investigation by any
governmental or regulatory body, agency or authority shall have been
commenced with respect to the transactions contemplated hereby or with
respect to the Purchaser which would have a material adverse effect on the
transactions contemplated hereby or on the business of the Purchaser.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE COMPANY
The Seller and the Company hereby represent and
warrant to the Purchaser that:
2.1.1 (a) The Company is a corporation duly organized,
validly existing and in good standing under the laws of British Columbia,
Canada, without limit as to the duration of its existence, and has the full
corporate power and authority to enter into and carry out this Agreement and
the agreements herein contemplated and to issue the Shares as herein
provided.
The Company has the corporate power and authority to own, lease and operate
its properties and to carry on the business currently conducted by it. The
Company has previously made available to the Purchaser complete and correct
copies of its Articles of Incorporation and its By-Laws as in effect on the
date hereof. The Company has not taken any action for the purpose of
effecting any amendment of its Articles of Incorporation or By-Laws from the
form in which such instruments were previously provided to the Purchaser.
(b) The Company is duly qualified as a foreign
corporation authorized to do business and is in good standing in each
jurisdiction in which such qualification and good standing may be required,
except to the extent that the failure to so qualify, individually or in the
aggregate, could not reasonably be expected to have a material adverse effect
on the business of the Company.
2.1.2 The execution, delivery and performance by the Company of this
Agreement and the documents herein contemplated, and the consummation by the
Company of the transactions contemplated hereby and thereby, have been duly
authorized by all requisite corporate and shareholder action of the Company,
which has not been revoked, and no other corporate or shareholder action on
the part of the Company is necessary. This Agreement is, and the other
agreements contemplated to be delivered by the Company hereby when executed
will be, the valid and binding obligations of the Company legally enforceable
against it in accordance with their respective terms, subject to the effects
of bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally and of general equitable
principles (whether considered in a proceeding in equity or at law).
2.1.3 The Company does not own, directly or indirectly, any equity
Stock, or options, warrants or other rights to acquire equity Stock, or Stock
convertible into or exchangeable for equity Stock, of any other corporation
(limited liability or otherwise), or any partnership interest in any general
or limited partnership or limited liability partnership or unincorporated
joint venture. There are no agreements, arrangements, undertakings or
understandings governing the rights and duties of the Company as a
shareholder of any other corporation, including, without limitation, any
agreement, arrangement or understanding under which the Company is or may
become obligated, directly or indirectly, to acquire or dispose of any equity
interest in, make any capital contribution or extend credit to, or act as
guarantor, surety or indemnitor for any obligation or liability of, any such
corporation.
2.1.4 The issued capital stock of the Company, at the Closing of the
transaction contemplated hereby, consists of 100 shares of Common Stock.
There are no existing options, warrants, calls or agreements requiring or
entitling the holder thereof to the issuance of additional shares of capital
stock of the Company, or Stock convertible into capital stock of the Company,
and there are no arrangements or understandings to which the Company is a
party or by which it is bound pursuant to which the Company is or may be
required to issue additional shares of its capital stock. All of the issued
and outstanding shares of capital stock of the Company were duly authorized
and validly issued and are fully paid and non-assessable, and were not issued
in violation of any preemptive rights or Federal or provincial Stock laws.
2.1.5 The Shares are not subject to preemptive rights and, when
issued in accordance with this Agreement, and the terms and conditions of the
Warrant will be duly authorized, validly issued, fully paid and
non-assessable, and free of any and all encumbrances, claims, security
interests or any other rights or interests of third parties whatsoever (other
than rights or interests in favor of the Purchaser hereunder and the rights
and interests granted to third parties by or through the Purchaser).
2.1.6 The execution, delivery and performance by the Company of this
Agreement and the documents herein contemplated, and the consummation by the
Company of the transactions contemplated hereby and thereby will not: (i)
result in a breach of, or a default under (or an event which, with the lapse
of time or the giving of notice or both, would constitute an event of
default), or give any third party the right to terminate, cancel, modify or
accelerate, or require any consent or the giving of any notice under, any
contract, mortgage, loan, note, lease, bond, indenture, security agreement,
undertaking or other agreement, instrument or obligation to which the Company
is a party or by which it, or any of its property, may be bound or affected,
or cause any security interest, lien, claim or other encumbrance to be
created or imposed upon any such property by reason thereof, (ii) be in
conflict with or contravention of any terms or provisions of the Articles of
Incorporation or By-Laws of the Company, (iii) violate or conflict with any
law, statute, ordinance, code, rule, regulation, judgment, order, writ,
injunction, decree or other instrument of any Federal, state/provincial,
local or foreign court or governmental or regulatory body, agency or
authority applicable to the Company or by which any of its respective
properties or assets may be bound or (iv) those which shall have been made or
obtained on or prior to the Closing Date and except, in the case of each of
the preceding subclauses (i) and (iii), those, the failure of the Company to
make or obtain which, or the occurrence of which, could not reasonably be
expected, individually or in the aggregate, to have a material adverse effect
on the business of the Company.
2.1.7 (a) The Company has delivered to the Purchaser true,
complete and accurate copies of the Company's unaudited financial statements
(including balance sheets, statements of operations and statements of cash
flows) at and for the financial year ended February 28, 1999 (the "1999
Financial Statements"). Except as otherwise described therein (including any
notes thereto), the 1999 Financial Statements have been prepared in
conformity with generally accepted accounting principles consistently applied
during the periods covered thereby, and present fairly in all material
respects the financial condition, results of operations and cash flows of the
Company as at the dates, and for the periods, stated therein
2.1.8 Except for any of the following that are not expected to have
a materially adverse effect on the business or financial condition of the
Company: (a) there are no actions, suits, investigations, hearings, workers
compensation claims or proceedings (including, without limitation, arbitral
or administrative proceedings) pending or, to the best knowledge of the
Company, threatened, against or affecting the Company or its properties,
assets or business (or to the best knowledge of the Company, pending or
threatened against, relating to or involving any of the officers, directors,
employees, agents or consultants of the Company in connection with the
business of the Company); and (b) the Company is not in default with respect
to, there does not remain unsatisfied, and continuing compliance is not
required under, any judgment, order, writ, injunction, decree, rule or award
of any court, arbitrator or federal, state/provincial, municipal or other
governmental or regulatory body, department, commission, board, bureau,
agency, authority or instrumentality, domestic or foreign.
2.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company that:
2.2.1 The Purchaser is duly formed and validly subsisting under the
laws of its jurisdiction of formation and has the full power and authority to
enter into and carry out this Agreement and the agreements herein
contemplated.
2.2.2 (a) The execution, delivery and performance of this
Agreement and the agreements herein contemplated, and the consummation of the
transactions contemplated hereby, have been duly authorized by all requisite
action of the Purchaser, which has not been revoked, and no other action on
the part of the Purchaser is necessary.
(b) The execution, delivery and performance of this
Agreement and the documents herein contemplated, and the consummation by the
Purchaser of the transactions contemplated hereby and thereby, will not: (i)
result in a breach of, or a default under (or an event which, with the lapse
of time or the giving of notice or both, would constitute an event of
default), or give any third party the right to terminate, cancel, modify or
accelerate, or require any consent or the giving of any notice under, any
contract, mortgage, note, lease, bond, indenture, security agreement,
undertaking or other agreement, instrument or obligation to which the
Purchaser is a party or by which it or its property may be bound or affected,
or cause any security interest, lien, claim or encumbrance to be created or
imposed upon any such property by reason thereof, (ii) be in conflict with or
contravention of any term or provision of the charter documents of the
Purchaser, (iii) violate or conflict with any law, statue, ordinance, code,
rule, regulation, judgment, order, writ, injunction, decree or other
instrument or any Federal, state/provincial, local or foreign court or
governmental or regulatory body, agency or authority applicable to the
Purchaser or by which it or its properties or assets may be bound or (iv)
require, on the part of the Purchaser, any filing or registration with, or
permit, license, exemption, consent, authorization or approval of, or the
giving of any notice to, any governmental or regulatory body, agency or
authority, except, in the case of the preceding subclause (iv), those which
shall have been made or obtained on or prior to the Closing Date.
(c) This Agreement is, and the other agreements
contemplated to be delivered by the Purchaser hereby when executed will be,
the valid and binding obligations of the Purchaser legally enforceable
against it in accordance with their respective terms, subject to the effects
of bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally and of general equitable
principles (whether considered in a proceeding in equity or at law).
ARTICLE III
COVENANTS
3.1 COVENANTS OF THE COMPANY
3.1.1 As soon as reasonably practicable after the date hereof, the
Company will use all reasonable efforts to obtain the consents of all
necessary governmental entities and other persons to the transactions
contemplated hereby.
3.1.2 From and after the Closing Date, the Company will promptly
furnish the Purchaser with the following:
(a) Copies of all financial statements, reports and
documents that the Company shall send to its stockholders generally; and
(b) Such other information relating to the financial
condition of the Company as the Purchaser may reasonably request from time to
time.
3.1.3 The Company covenants and agrees that until the full and final
payments of all amounts due under the Note, the Company shall treat as
confidential all information obtained by it in connection with the
transactions contemplated hereby concerning the Purchaser except any
information (i) which was available to the Company on a non-confidential
basis prior to its disclosure by the Purchaser, or was rightfully obtained by
the Company from a source other than the Purchaser, (ii) appearing in public
literature or otherwise in the public domain (through no fault of the
Company), whether at the date hereof or at any time hereafter or (iii) which
the Company is legally compelled (by depositions, interrogatories or requests
for information through documents, subpoena, civil investigative demand or
similar process) to disclose, provided that the Company shall have used its
best efforts to obtain, and shall have afforded the Purchaser an opportunity
to obtain, a protective order or other satisfactory assurance of confidential
treatment for the information required to be disclosed, and provided further
that if such protective order or other remedy is not obtained and the Company
is nonetheless, in the opinion of its counsel, compelled to disclose the
information to any tribunal, the Company shall disclose only that information
which the Company is advised by opinion of its counsel is legally required to
be disclosed. The Company shall not disclose any such information to any
third person other than to employees and advisers of the Company, and shall
preserve and maintain and prevent the disclosure or publication of any
proprietary information and trade secrets.
3.2 COVENANTS OF THE PURCHASER
3.2.1 The Purchaser covenants and agrees that until the full and
final payments of all amounts under the Note, the Purchaser shall treat as
confidential all information obtained by it in connection with the
transactions contemplated hereby concerning the Company except any
information (i) which was available to the Purchaser on a non-confidential
basis prior to its disclosure by the Company, or was rightfully obtained by
the Purchaser from a source other than the Company, (ii) appearing in public
literature or otherwise in the public domain (through no fault of the
Purchaser), whether at the date hereof or at any time hereafter or (iii)
which the Purchaser is legally compelled (by deposition, interrogatories or
requests for information through documents, subpoena, civil investigative
demand or similar process) to disclose, provided that the Purchaser shall
have used its best efforts to obtain, and shall have afforded the Company an
opportunity to obtain, a protective order or other satisfactory assurance of
confidential treatment for the information required to be disclosed, and
provided further that if such protective order or other remedy is not
obtained and the Purchaser is nonetheless, in the opinion of its counsel,
compelled to disclose the information to any tribunal, the Purchase shall
disclose only that information which the Purchaser is advised by opinion of
its counsel is legally required to be disclosed. The Purchaser shall not
disclose any such information to any third party other than to employees and
advisers of the Purchaser, and shall preserve and maintain and prevent the
disclosure or publication of any proprietary information and trade secrets.
3.2.2 The Purchaser hereby agrees that the existing shareholders
shall collectively have the right to appoint one additional director to the
Company's Board.
3.2.3 The Purchaser covenants and agrees that it shall use
commercially reasonable efforts to raise a sum of five hundred thousand
United States dollars (U.S.$500,000) (the "Capital") which shall be applied
towards the Business and towards developing the Purchaser's website and
related internet technology.
3.2.4 In the event that the Purchaser is not able to raise all of
the Capital on or before June 30, 1999, the Company shall thereafter at any
time, and from time to time, have the right to purchase all of the Shares
from the Purchaser for a consideration in the amount of ten thousand United
States Dollars (U.S. $10,000) and the Purchaser hereby covenants and agrees
to sell the Shares to the Company for such consideration.
ARTICLE IV
SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; INDEMNIFICATION
4.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES
All other representations and warranties made or contained herein
shall terminate as of the Closing and be of no further force and effect.
4.2 INDEMNITY OBLIGATIONS OF THE COMPANY.
Seller hereby agrees to indemnify, defend and hold the Purchaser and
its affiliates and any director, officer, employee, agent or representative
of the Purchaser or any of its affiliates (the "Purchaser Indemnified
Parties") harmless from, and to reimburse the Purchaser Indemnified Parties
for any and all losses, damages, deficiencies, liabilities, obligations,
actions, claims, suits, proceedings, demands, assessments, judgments,
recoveries, fees, penalties, interest, costs and expenses (including, without
limitation, out-of-pocket expenses, reasonable investigation expenses and
reasonable fees and disbursements of accountants and counsel) of any nature
whatsoever arising out of, based upon or resulting from (i) any breach of any
representation and warranty of the Seller and/or Company which is contained
in this Agreement or any Schedule or certificate delivered by the Seller
and/or Company pursuant thereto; or (ii) any breach or nonfulfillment of, or
any failure to perform, any of the covenants, agreements or undertaking of
the Seller and/or Company which are contained in or made pursuant to the
terms and conditions of this Agreement or contained in any documents required
to be delivered pursuant hereto.
4.3 INDEMNITY OBLIGATIONS OF THE PURCHASER.
The Purchaser hereby agrees to indemnify, defend and hold the Seller
and any director, officer, employee, agent or representative of the Seller
(the "Seller Indemnified Parties") harmless from, and to reimburse the Seller
Indemnified Parties for any and all losses, damages, deficiencies,
liabilities, obligations, actions, claims, suits, proceedings, demands,
assessments, judgments, recoveries, fees, penalties, interest, costs and
expenses (including, without limitation, out-of-pocket expenses, reasonable
investigation expenses and reasonable fees and disbursements of accountants
and counsel) of any nature whatsoever arising out of, based upon or resulting
from (i) any breach of any representation and warranty of the Purchaser which
is contained in this Agreement; or (ii) any breach or nonfulfillment of, or
any failure to perform, any of the covenants, agreements or undertaking of
the Purchaser which are contained in or made pursuant to the terms and
conditions of this Agreement.
ARTICLE V
MISCELLANEOUS
5.1 NO WAIVER OF RIGHTS.
No failure or delay on the part of either party in the exercise of
any power, right or privilege hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege. All rights and remedies existing under this Agreement are
cumulative to, and not exclusive of, any rights or remedies otherwise
available.
5.2 NOTICE
Any notice or communication herein required or permitted to be given
shall be in writing and may be sent by hand, by registered or certified mail,
return receipt requested, or by facsimile transmission. All such notices and
communications hereunder shall be deemed given when received, as evidenced by
the date indicated as the date of delivery (or attempted delivery if refused)
on the return receipt, or confirmed facsimile transmission, as applicable.
For purposes hereof, the addresses of the parties hereto (until notice of
change thereof is given in accordance with this Section 5.2) shall be as
follows:
To the Seller: Apex Travel Ltd.
000 Xxxx 0xx Xxxxxx
Xxxxxxxxx; X.X. X0X 0X0
Xxxxxx
Attention: Xxxxx Xx, President
Telephone: (000) 000-0000
To Purchaser: Zstar Enterprises, Inc.
0000 Xxxx 00xx Xxxxxx
Xxxxxxxxx; X.X. X0X 0X0
Xxxxxx
Attention: Xxxxxxx Xxxxx, Secretary, Director
Telephone: (000) 000-0000
5.3 GOVERNING LAW
This Agreement, and the respective rights, duties and obligations of
the parties hereunder, shall be governed by and construed in accordance with
the internal substantive laws of the State of Nevada, without regard to the
conflicts of laws or choice of laws principles thereof.
5.4 FACSIMILE SIGNATURES
In the event that any party hereto utilizes a facsimile device or
telecopier to transmit executed documents hereunder, including this Agreement
but excluding any stock certificates, powers or assignments, the other party
hereto shall accept and shall have the right to rely on such executed
documents as so transmitted as if they bore the original signatures.
5.5 INDEPENDENT COUNSEL
Each of the parties hereto has had an adequate opportunity to
consult with legal counsel of its choice regarding the transactions
contemplated herein, and has executed this Agreement with a full
understanding of its rights and obligations as created hereby.
5.6 COUNTERPART ORIGINALS
This Agreement may be executed simultaneously in counterparts each
of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
5.7 EXPENSES
Each party shall bear and pay its own expenses in connection with
this Agreement, including, without limitation, expenses of its legal counsel.
5.8 ASSIGNMENT; SUCCESSORS
This Agreement shall inure to the benefit of and be binding upon the
successors and permitted assigns of the parties hereto. The Company may not
assign or transfer any of its interests, rights or obligations under this
Agreement without the prior written consent of the Purchaser, and any
attempted assignment or transfer without such prior written consent shall be
void.
5.9 FURTHER ASSURANCES
The parties hereto agree that, from time to time hereafter, and upon
request of the other, each of them will execute, acknowledge and deliver such
other documents and instruments as may be reasonably required more
effectively to carry out the terms and conditions of this Agreement.
5.10 THIRD PARTY BENEFICIARIES
This Agreement shall not confer upon any person or entity, other
than the Company and the Purchaser and their respective permitted assigns and
successors, any rights or remedies of any kind or nature.
5.11 ENTIRE AGREEMENT
This Agreement together with the other agreements between the
parties referred to herein, constitute the entire agreement between the
parties pertaining to the subject matter hereof and supersede all prior and
contemporaneous, oral and written, agreements, representations and
understandings of the parties with respect thereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the Effective Date.
"Seller"
APEX TRAVEL LTD.
By: /s/ Xxxxx Xx
--------------------------
Name: Xxxxx Xx
Title: President
"Purchaser"
ZSTAR ENTERPRISES, INC.
By: /s/ Xxxxxxx Xxxxx
--------------------------
Name: Xxxxxxx Xxxxx
Title: Secretary
APEX CANADIAN HOLIDAYS LTD.
FINANCIAL STATEMENTS
FOR THE YEAR ENDED FEBRUARY 28, 1999
(In Canadian Dollars)
AUDITORS' REPORT
To the Directors of APEX CANADIAN HOLIDAYS LTD.:
We have audited the balance sheet of Apex Canadian Holdings Ltd. as at February
28, 1999 and the statements of loss, deficit and changes in financial position
for the year then ended. These financial statements are the responsibility of
the company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance 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.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at February 28, 1999 and the
results of its operations and the changes in its financial position for the year
then ended in accordance with generally accepted accounting principles. As
required by the Company Act of the Province of British Columbia, we report that,
in our opinion, these principles have been applied on a consistent basis.
June 1, 1999 /s/ Xxxxx X. Xxxx
Vancouver, British Columbia Chartered Accountants
APEX CANADIAN HOLIDAYS LTD.
BALANCE SHEET
FEBRUARY 28, 1999
RESTATED
1998
1999 (UNAUDITED)
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ASSETS
CURRENT
Cash $ 34,560 45,241
Accounts Receivable 48,058 55,602
Prepaids & Security Deposits 9,760 9,320
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92,378 110,163
CAPITAL ASSETS (note 2 & 4) 2,396 3,317
GOODWILL (note 2) 12,871 12,871
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$ 107,645 $ 126,351
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LIABILITIES
CURRENT
Accounts Payable $ 57,409 $ 119,815
Due to Apex Travel Ltd. (note 5 ) 73,356 26,549
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130,765 146,364
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SHAREHOLDER'S DEFICIT
SHARE CAPITAL (note 6) 1 1
DEFICIT (23,121) (20,014)
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(23,120)5 (20,013)
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$ 107,645 $ 126,351
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On behalf of the Board:
/s/ Xxxxx Xx Director
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APEX CANADIAN HOLIDAYS LTD.
STATEMENT OF LOSS AND DEFICIT
FOR THE YEAR ENDED FEBRUARY 28, 1999
RESTATED
1998
1999 (UNAUDITED)
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REVENUES
Sales $ 712,191 $ 829,128
Less : Cost of Sales 628,900 733,383
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83,291 95,745
OTHER INCOME 3,059 1,859
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86,350 97,604
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EXPENSES
Accounting 5,384 7,593
Advertising & Promotion - 320
Amortization 921 647
Bad Debts - 3,278
Bank charges & interest 923 1,572
Car Rental 1,863 5,950
Consulting Fee - 5,000
Delivery & Postage 928 1,346
Dues & Subscriptions 400 110
Entertainment 504 1,166
Foreign Exchange 4,093 3,245
Miscellaneous 3,230 2,219
Office Supplies & Printing 1,454 5,981
Rent 7,200 10,500
Salaries & Related Costs 52,584 54,070
Telephone & Utility 7,867 9,786
Travel & Education 2,106 4,447
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89,457 117,230
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NET (LOSS) (3,107) (19,626)
NET (LOSS) AND (DEFICIT),
BEGINNING OF YEAR (20,014) (388)
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NET (LOSS) AND (DEFICIT),
END OF YEAR $ (23,121) $ (20,014)
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APEX CANADIAN HOLIDAYS LTD.
STATEMENT OF CHANGES IN FINANCIAL POSITION
FOR THE YEAR ENDED FEBRUARY 28, 1999
RESTATED
1998
1999 (UNAUDITED)
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CASH PROVIDED BY (APPLIED FOR):
OPERATING ACTIVITIES
Net (Loss) $ (3,107) $(19,626)
Add : Items Not Affecting Cash
Depreciation 921 647
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(2,186) (18,979)
Net Changes in Non-Cash Items
Accounts receivable 7,544 (14,005)
Prepaids Expenses and Deposits (440) 9,400
Accounts Payable &
& Accrued Liabilities (62,406) 16,247
Due to Parent 46,807 34,269
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(10,681) 26,932
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NET INCREASE (DECREASE) IN CASH (10,681) 26,932
CASH, BEGINNING OF YEAR 45,241 18,309
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CASH, END OF YEAR $ 34,560 $ 45,241
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APEX CANADIAN HOLIDAYS LTD.
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1999
1. OPERATION
The company was incorporated on October 24, 1996, and its existence has
depended and will continue to depend on the support from its
shareholders until the company becomes profitable.
2. SIGNIFICANT ACCOUNTING POLICIES
These financial statements reflect the following accounting policies:
CAPITAL ASSETS
They are recorded at cost and depreciated as following:
Computer 30% declining balance
Furniture & Equipment 20% declining balance
GOODWILL
It is recorded at cost with no amortization.
FOREIGN CURRENCY TRANSLATION
Income and expenses in foreign currencies are translated into Canadian
dollars at the rate of exchange prevailing on the dates of such
transactions. All monetary assets and liabilities in foreign
currencies are translated into Canadian dollars at the closing exchange
rates in effect at the balance sheet date. Realized and unrealized
gains and losses are included in income for the period.
3. PRIOR PERIOD RESTATMENT
The company's unaudited financial statements for fiscal year 1998 was
restated to give effect to the following:
(i) Goodwill revised from $8,000 to $12,871
(ii) Additional operational loss of $1,966 was recorded due to
cut-off errors of which $388 was for prior periods
APEX CANADIAN HOLIDAYS LTD.
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1999
4. CAPITAL ASSETS
Net Book Value
Accumulated 1998
Cost Depreciation 1999 (Unaudited)
---------------------------------------------------------------------------------
Computer $ 3,028 $ 1,226 $ 1,802 $ 2,574
Equipment 263 74 189 237
Furniture &
Fixture 562 157 405 506
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$ 3,853 $ 1,457 $ 2,396 $ 3,317
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5. DUE TO APEX TRAVAL LTD. & RELATED TRANSACTIONS
Apex Travel LTD. ("Apex") was the owner of the company until February
28, 1999.
Apex provided funds for the operations of the company. The company
reimbursed Apex periodically throughout the year. The balance
represents unreimbursed advances which is due on demand and
non-interest bearing.
Apex also provided accounting and management services to the company
free of charge for the year.
The company rented the existing business premise from an individual
related to Apex at the exchange amount of $600 a month.
6. SHARE CAPITAL
Authorized = 100,000 common shares with no par value
Issued and Fully Paid = 100 common share with no par value $ 1
---
---
APEX CANADIAN HOLIDAYS LTD.
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1999
7. FINANCIAL INSTRUMNETS
Financial instruments included in the balance sheet are comprise of
cash, accounts receivable, security deposits, accounts payable and due
to Apex Travel Ltd.
CREDIT RISK
Credit risk arises from the potential that debtors will fail to perform
its obligations. The ability of such debtors to meet contractual
obligations would be affected by changing economic or other conditions.
The company conducts a careful review prior to giving out credit and
thereby mitigating this risk.
INTEREST RATE RISK
Interest rate risk reflects the risk that the company's earnings will
decline due to fluctuations in interest rates. The company at the
moment has no interest bearing borrowings.
LIQUIDITY RISK
Liquidity risk is the risk that the company will encounter difficulty
in liquidating its receivables at an amount close to fair value at the
time it required to repay its loans and payable. The company monitors
its receivables closely to mitigate this risk.
FAIR VALUE
The accounts receivables, security deposits and accounts payable
approximate fair value.
However, it is not practicable to determine the fair value with
sufficient reliability for the amount due to Apex Travel Ltd. because
there is no active secondary market, and the uncertainty and
potentially broad range of outcomes pertaining to the future cash flows
from this instrument renders the calculation of a fair value with
appropriate reliability impractical.
8. INCOME TAXES
At February 28, 1999, the company has approximately $23,000 of losses
available for application against future taxable income which if
unused, $388 will expire in 2004, $19,966 in 2005 and the balance in
2006.
APEX CANADIAN HOLIDAYS LTD.
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1999
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 entity, including those related to the efforts of
customers, suppliers, or other third parties, will fully resolved.
EXHIBIT 99
PROMISSORY NOTE
$100,000.00 Dated: August 17, 1999
1. PRINCIPAL.
FOR VALUE RECEIVED, the undersigned, ZSTAR ENTERPRISES, INC., a Nevada
corporation ("Borrower"), hereby promises to pay to the order of HALIUN
HONGORZUL, of Ulaanbaatar, Mongolia ("Lender"), the principal sum of Xxx
Xxxxxxx Xxxxxxxx Xxxxxx Xxxxxx Dollars (U.S.$100,000.00) (the "Loan") with
interest from August 15, 1999, on the unpaid principal at the rate of eight
percent (8%) per annum.
2. PAYMENT OF PRINCIPAL AND INTEREST.
Unless accelerated pursuant to the terms of this Note, the unpaid balance of
this Note, together with all then unpaid interest accrued on the unpaid
principal balance, shall be due and payable on demand (the "Maturity Date"),
PROVIDED, HOWEVER, that Borrower shall use its best efforts to pay the Loan
in full on or before December 31, 1999. No amount paid under this Note may be
reborrowed.
All interest due hereunder shall be computed on the basis of a year of 365
days for the actual number of days elapsed.
Except as provided in the immediately following paragraph, all payments
received by Lender under this Note shall be credited first to any charges or
other expenses for which Lender is entitled to payment hereunder, next to
accrued but unpaid interest, and third to unpaid principal.
Notwithstanding anything to the contrary set forth in this Note, if at any
time until payment in full of all amounts due Lender hereunder, the rate of
interest payable by Borrower pursuant to this Note (the "Stated Rate")
exceeds the amount payable under the highest rate of interest permissible
under any law which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto (the "Maximum Lawful Rate"), then in
such event and so long as the Maximum Lawful Rate would be so exceeded, the
rate of interest payable hereunder shall be equal to the amount payable under
the Maximum Lawful Rate; PROVIDED, HOWEVER, that if at any time thereafter
the Stated Rate is less than the Maximum Lawful Rate, Borrower shall continue
to pay interest hereunder at the Maximum Lawful Rate until such time as the
total interest received by Lender hereunder is equal to the total interest
which Lender would have received had the Stated Rate been (but for the
operation of this paragraph) the interest rate payable since the date hereof.
Thereafter, the interest rate payable hereunder shall be the Stated Rate
unless and until the Stated Rate again exceeds the Maximum Lawful Rate, in
which event this paragraph shall again apply. In no event shall the total
interest payable by Borrower hereunder exceed the amount payable under the
Maximum Lawful Rate. In the event that a court of competent jurisdiction
shall make a final determination that Lender has received interest hereunder
in excess of the amount payable under the Maximum Lawful Rate, Lender shall,
to the extent permitted by applicable law, promptly apply such excess in the
following order: (i) then due and payable fees and expenses; (ii) then due
and payable interest payments; (iii) then due and payable principal payments
on the Loan; (iv) then to any other unpaid obligations of Borrower to Lender
under this Note; and (v) thereafter as a refund to Borrower or as a court of
competent jurisdiction may otherwise order.
3. MANNER OF PAYMENT.
Principal and interest on the Loan, and all other amounts payable hereunder,
are payable in lawful currency of the United States of America in immediately
available funds at such address and in such form as may be required by Lender.
4. EVENTS OF DEFAULT/REMEDIES.
A. EVENTS OF DEFAULT. Any of the following events shall constitute
an Event of Default:
(1) breach by Borrower of any of Borrower's obligations or
covenants under this Note; or
(2) Borrower (A) becomes insolvent or admits in writing Borrower's
inability to pay Borrower's debts as they mature, (B) makes
any assignment for the benefit of creditors, or (C) applies
for or consents to the appointment of a receiver or trustee
for Borrower or for a substantial part of Borrower's property
or business, or a receiver or trustee otherwise is appointed
and is not discharged within thirty (30) days after such
appointment; or
(3) any of Borrower's representations or warranties made herein or
in any statement or certificate at any time given by Borrower
pursuant hereto or in connection herewith is false or
misleading in any material respect; or
(4) any bankruptcy, insolvency, reorganization or liquidation
proceeding or other proceeding for relief under any bankruptcy
law or any law for the relief of debtors is instituted by or
against Borrower; or
(5) any money judgment, writ or warrant of attachment, or similar
process (singly or, if more than one, cumulatively in excess
of $100,000) is entered or filed against Borrower or any of
the assets of Borrower and (A) remains unvacated, unbonded,
unstayed, undismissed or undischarged for a period of thirty
(30) days or in any event later than five (5) days before the
date of any proposed sale thereunder, or (B) Borrower has not
appealed the same in good faith to Lender's satisfaction; or
(6) the condition, financial or otherwise, of Borrower suffers any
material adverse change, in the reasonable opinion of Lender;
or
B. REMEDIES. Upon demand or upon the occurrence and during the
continuance of an Event of Default described in Subsections 4(a)(2) or
4(a)(4) above, all indebtedness under this Note shall automatically be
immediately due and payable. In addition, Lender, at its option, and without
notice to Borrower, may take one or more of the actions described below. Upon
the occurrence and during the continuance of any other Event of Default,
Lender at its option and, unless otherwise specified below, without notice to
Borrower, may do any one or more of the following:
(1) declare all indebtedness under this Note immediately due and
payable and credit any sums received thereafter in such manner
as it elects upon such indebtedness; provided, however, that
such application of sums so received shall not serve to waive
or cure
any default existing under this Note nor to invalidate
any notice of default or any act done pursuant to such
notice and shall not prejudice any rights of Lender; and
(2) exercise any or all rights provided or permitted by law or
granted pursuant to this Note in such order and in such manner
as Lender may, in its sole judgment, determine.
C. NO WAIVER OF REMEDIES. No waiver of any breach of or default
under any provision of this Note shall constitute or be construed as a waiver
by Lender of any subsequent breach of or default under that or any other
provision of this Note.
D. REMEDIES NOT EXCLUSIVE. No remedy herein conferred upon Lender is
intended to be exclusive of any other remedy herein or in any other agreement
between the parties hereto or by law provided or permitted, but each shall be
cumulative and shall be in addition to every other remedy given hereunder or
now or hereafter existing at law, in equity or by statute.
5. COVENANTS AND AGREEMENTS.
Borrower hereby makes the following covenants, which shall be deemed to be
continuing covenants until payment in full of all indebtedness of Borrower to
Lender arising under this Note:
A. Borrower shall promptly notify Lender in writing of the
occurrence of any act or event including, without limitation,
the commencement or threat of any action, suit, claim or
proceeding against or investigation of Borrower, which could
materially and adversely affect Borrower or which could impair
the validity, effectiveness or enforceability of, or impair
Borrower's ability to perform its obligations under, this
Note, and of the occurrence of any Event of Default or any
event which with the giving of notice, the lapse of time, or
both, would become an Event of Default and the action Borrower
proposes to take with respect thereto.
B. Borrower shall, at any time and from time to time, upon the
written request of Lender, execute and deliver to Lender such
further documents and instruments and do such other acts and
things as Lender may reasonably request in order to effectuate
fully the purpose and intent of this Note.
6. REPRESENTATIONS AND WARRANTIES OF BORROWER.
Borrower hereby makes the following representations and warranties, which
shall be deemed to be continuing representations and warranties until payment
in full of all indebtedness of Borrower to Lender arising pursuant to this
Note:
A. NO CONFLICT. The execution, delivery and performance of this
Note are not in contravention of or in conflict with any
agreement, indenture or undertaking to which Borrower is a
party or by which Borrower or any of Borrower's assets or
property may be bound or affected and do not cause any
security interest, lien or other encumbrance to be created or
imposed upon any such property by reason thereof.
B. LITIGATION. There is no action, suit or proceeding pending or,
to the best of Borrower's knowledge and belief, threatened
against or affecting Borrower which could impair the validity,
effectiveness or enforceability of, or impair Borrower's
ability to perform its obligations under, this Note, whether
said actions, suits or proceedings are at law or in equity or
before or by any governmental authority.
7. LEGAL FEES.
Borrower agrees to pay all costs and expenses, including without limitation
reasonable attorneys' fees, incurred by Lender in connection with the
enforcement of any obligation of Borrower under this Note.
8. SEVERABILITY.
In case any term or any provision of this Note shall be invalid, illegal or
unenforceable, such provision shall be severable from the rest of this Note
and the validity, legality and enforceability of the remaining provisions
shall not in any way be affected or impaired thereby.
9. HEADINGS.
Headings used in this Note are inserted for convenience only and shall not be
deemed to constitute a part hereof.
10. GOVERNING LAW.
This Note shall be governed by and construed in accordance with the laws of
the State of Nevada.
Borrower:
ZSTAR ENTERPRISES, INC.
a Nevada corporation
By: /s/ Xxxx Xxxxx Ho
----------------------------
Name: Xxxx Xxxxx Ho
Title: President
