UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Amendment No.
TMEX USA, Inc.
(Name of small business issuer in its charter)
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Nevada 4812 33-0248339
(State or incorporation of (Primary Standard Industrial (I.R.S. Employer Identification No.
incorporation or organization) Classification Code Number)
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5031 Birch Street, Suite G, Newport Beach, CA 92660 (949) 863-9872
(Address and telephone number of principal executive offices)
Thomas E. Stepp, Jr., Esq.
Stepp & Beauchamp LLP
1301 Dove Street, Suite 460
Newport Beach, California 92660
Telephone: 949.660.9700
Facsimile: 949.660.9010
(Name, Address and Telephone Number of Agent for Service)
Approximate date of proposed sale to the public:
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
CALCULATION OF REGISTRATION FEE
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Title of Each Class of Amount to be Proposed Maximum Offering Proposed Maximum Aggregate Amount of
Securities to be Registered Registered Price Per Unit(1) Offering Price(1) Registration Fee
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Common Stock,
$.001 par value 4,347,826 $1.15 $4,999,999.90 $1,320.00
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(1) Calculated pursuant to Rule 457(c) of Regulation C using the average of the
bid and ask prices per share of the Registrant's common stock, as reported on
the National Quotation Bureau's Electronic Pink Sheets as of April 26, 2000.
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until this Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
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Inside Front and Outside Back Cover Pages of Prospectus.
Preliminary Prospectus
TMEX USA, Inc.
a Nevada corporation
4,347,826 shares of $.001 Par Value Common Stock
This prospectus relates to 4,347,826 shares of our $.001 par value common stock
of TMEX USA, Inc., a Nevada corporation. We are offering for sale 4,347,826
shares of our $.001 par value common stock on a "best efforts" basis pursuant to
this Registration Statement on Form SB-1.
We will realize $4,999,999.90 from the sale of 4,347,826 shares of our $.001 par
value common stock, and will use those funds to pay for the costs of the
offering, for working capital, sales and marketing of our products and to fund
the expansion of our telecommunications network infrastructure. All expenses of
registration incurred in connection with this offering will be paid by us.
Any broker-dealers participating in the distribution of the shares of our $.001
par value common stock may be deemed to be "underwriters" within the meaning of
the 1933 Act, and any commissions or discounts given to any such broker-dealer
may be regarded as underwriting commissions or discounts under the 1933 Act.
The shares of our $.001 par value common stock being offered pursuant to this
Registration Statement on Form SB-1 have not been registered for sale by us
pursuant to the securities laws of any state as of the date of this prospectus.
Brokers or dealers effecting transactions in the shares of our $.001 par value
common stock should confirm the registration thereof under the securities laws
of the states in which transactions occur or the existence of any exemption from
registration.
See "Risk Factors" on pages 7 to 11 for factors to be considered before
investing in the shares of our $.001 par value common stock.
These securities have not been approved or disapproved by the securities and
exchange commission or any state securities commission nor has the securities
and exchange commission or any state securities commission passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is May 1, 2000.
Subject to Completion.
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PART I - INFORMATION REQUIRED IN PROSPECTUS
TABLE OF CONTENTS
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Caption Page
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Summary Information and Risk Factor............................................................................5
Risk Factors...................................................................................................6
We Have a Limited Operating History.................................................6
We Are in a Very Competitive Industry...............................................6
Risks of International Sales and Operations.........................................7
Political Instability of Mexican Government.........................................7
Mexican Currency Fluctuations.......................................................7
Telecommunications Industry.........................................................8
Government Regulation...............................................................8
We Depend on Third-Party Transmission Providers.....................................8
Product Obsolescence................................................................8
Future Capital Needs and Uncertainty of Additional Funding..........................8
Limited Protection of Proprietary Technology........................................8
We Must Adapt to Rapid Technological Change.........................................9
We Rely on Key Personnel............................................................9
Growth of Business..................................................................9
Conflicts of Interest...............................................................9
Limitation of Liability of Officers and Directors of the Company....................9
Penny Stock Regulation.............................................................10
Control by Existing Shareholders...................................................10
Securities Market Factors..........................................................10
No Foreseeable Dividends...........................................................10
No Assurances of Revenue or Operating Profits......................................10
Impact of the Year 2000............................................................10
Business and Properties...................................................................................10
Our Background and Development.....................................................10
Our Business and Communications Network............................................10
Products and Services..............................................................11
Voice Services.....................................................................11
Debit Card Services................................................................11
Network Services...................................................................11
Internet Services..................................................................11
Consulting Services................................................................11
Networking Switches................................................................11
Our Target Markets and Channels of Distribution....................................11
Our Major Customer.................................................................11
Our Suppliers......................................................................12
Our Competition....................................................................12
Our Intellectual Property..........................................................12
Our Research and Development.......................................................12
Our Mexican Subsidiaries...........................................................12
Government Regulation..............................................................13
Hazardous Materials; Environmental Matters.........................................13
Employees..........................................................................13
Our Property.......................................................................13
Our Facilities.....................................................................14
Offering Price Factors....................................................................................14
Reports to Securities Exchange Commission ("SEC")..................................14
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Price Range of Common Stock........................................................14
Use of Proceeds...........................................................................................15
Capitalization16..........................................................................................12
Description of Securities.................................................................................16
Plan of Distribution......................................................................................16
Dividends, Distributions and Redemptions..................................................................17
Officers, Directors and Key Personnel of the Company......................................................17
Principal Stockholders....................................................................................18
Beneficial Ownership...............................................................19
Changes in Control.................................................................19
Management Relationships, Transaction and Remuneration....................................................19
Summary Compensation Table.........................................................19
Compensation of Directors..........................................................20
Employment Contracts...............................................................20
Consulting Agreements..............................................................20
Shares Issued as Compensation for Services.........................................20
Related Party Transactions.........................................................21
Litigation ............................................................................................21
Federal Tax Aspects.......................................................................................22
Miscellaneous Factors.....................................................................................22
Financial Statements......................................................................................23
Management's Discussion and Analysis of Certain Relevant Factors .........................................23
Significant Parties.......................................................................................26
Relationship with Issuer of Experts Named in Registration Statement.......................................26
Selling Security Holders..................................................................................26
Changes in and Disagreements with Accountants.............................................................26
Disclosure of Commission Position on Indemnification for Securities Act Liabilities.......................29
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS..........................................................29
Indemnification of Directors and Officer..................................................................29
Other Expenses of Issuance and Distribution...............................................................29
Undertakings 29
Unregistered Securities Issued or Sold Within One Year....................................................30
Index to Exhibits.........................................................................................30
Description of Exhibits...................................................................................23
Signatures ............................................................................................32
Consent of Independent Auditors...........................................................................33
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Prospectus Summary
The Company: Our principal business address is 5031 Birch
Street, Suite G, Newport Beach, California 92660;
telephone number (949) 863-9872.
Business of the We are an international telecommunications
Company: provider of wholesale and retail voice, video,
data, private network, and Internet services via
our computer network and laser communication
connection from the United States to Mexico. We
utilize communications technology, tested and
approved by telecommunications carriers, to niche
markets and deliver a full range of services
through our network. We are committed to
evaluating new technologies and continuing to
improve our network services, locations, and
savings to our customers.
In September 1998, we installed the first cross
border laser communications system designed to
connect Laredo, Texas to Nuevo Laredo, Mexico. The
combination of wireless and fiber technology which
is utilized at the border crossing was originally
designed for expansion of our Asynchronous
Transfer Mode (ATM) Network and allows us to cross
the terrain barrier of the Rio Grande River. We
began offering Mexican voice and data
communications services to U.S. Telecom
Corporation through this laser connection by
establishing a contractual relationship through
our Mexican subsidiary with Alestra (AT&T), a
major licensed Mexican phone carrier.
State of organization of Swiss Cellular Laboratories, Inc. was incorporated
the Company: pursuant to the laws of the State of Nevada on
July 29, 1987. On June 30, 1995, we changed our
name to TMEX USA, Inc.
Risk Factors: A purchase of shares of our $.001 par value common
stock involves various risks that must be
considered carefully by any potential purchaser.
Those risks include, but are not necessarily
limited to, (i) there can be no assurance that our
products and services will achieve significant
market acceptance, and that acceptance, if
achieved, will be sustained for any significant
period or that product and service life cycles
will be sufficient (or substitute products and
services developed) to permit us to recover
associated costs; (ii) we have a limited operating
history upon which an evaluation of our prospects
can be made; (iii) our officers and directors may
be subject to various conflicts of interest; (iv)
substantially all of our products and services are
subject to significant regulation, and, therefore,
our ability to generate significant revenues will
depend upon, among other things, our ability to
comply with all such regulations, laws and
statutes, both in the United States and in other
countries; (v) we may be required to raise
substantial funds in order to implement our
business plans and objectives; (vi) we have
significant competition from other
telecommunications providers, suppliers, and
distributors; (vii) our results of operations may
vary from period to period as a result of a
variety of factors; (viii) the market for our
products and services is characterized by
continuous development and introduction of new
products and services; (ix) changing political,
economic and regulatory influences may affect our
business practices and operations; (x) we are
dependent on our key personnel and management;
(xi) we do not anticipate paying dividends on
shares of our $.001 par value common stock in the
foreseeable future; and (xii) there can be no
assurance that our operations will become
profitable.
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The Shares: We are offering for sale 4,347,826 shares of our
$.001 par value common stock on a "best efforts"
basis pursuant to this Registration Statement on
Form SB-1.
Estimated use of We will realize $4,999,999.90 from the sale of
proceeds: 4,347,826 shares of our $.001 par value common
stock, and will use those funds to pay for the
costs of the offering, for working capital, sales
and marketing of our products and to expand our
telecommunications and networking infrastructure.
RISK FACTORS
In addition to the other information specified in this prospectus, the following
risk factors should be considered carefully in evaluating our business and us
before purchasing any of the shares of our $.001 par value common stock offered
hereby. A purchase of the shares of our $.001 par value common stock offered
hereby is speculative in nature and involves a high degree of risk. No purchase
of the shares of our $.001 par value common stock should be made by any person
who is not in a position to lose the entire amount of such investment.
THIS PROSPECTUS SPECIFIES FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. OUR ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE RESULTS
DISCUSSED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS,
INCLUDING THOSE SPECIFIED IN THE FOLLOWING RISK FACTORS AND ELSEWHERE IN THIS
PROSPECTUS. PROSPECTIVE PURCHASERS OF SHARES MUST BE PREPARED FOR THE POSSIBLE
LOSS OF THEIR ENTIRE INVESTMENTS IN THE COMPANY. THE ORDER IN WHICH THE
FOLLOWING RISK FACTORS ARE PRESENTED IS ARBITRARY, AND PROSPECTIVE PURCHASERS OF
SHARES SHOULD NOT CONCLUDE, BECAUSE OF THE ORDER OF PRESENTATION OF THE
FOLLOWING RISK FACTORS, THAT ONE RISK FACTOR IS MORE SIGNIFICANT THAN THE OTHER
RISK FACTORS.
Information specified in this Prospectus contains "forward looking statements"
which can be identified by the use of forward-looking terminology such as
"believes", "could", "possibly", "probably", "anticipates", "estimates",
"projects", "expects", "may", "will", or "should" or the negative thereof or
other variations thereon or comparable terminology. Such statements are subject
to certain risks, uncertainties and assumptions. No assurances can be given that
the future results anticipated by the forward looking statements will be
achieved. The following matters constitute cautionary statements identifying
important factors with respect to such forward-looking statements, including
certain risks and uncertainties that could cause actual results to vary
materially from the future results covered in such forward-looking statements.
Among the key factors that have a direct bearing on the Company's results of
operations are the effects of various governmental regulations, the fluctuation
of the Company's direct costs and the costs and effectiveness of the Company's
operating strategy. Other factors could also cause actual results to vary
materially from the future results covered in such forward-looking statements.
We Have a Limited Operating History. We have a limited operating history upon
which an evaluation of our prospects can be made. Our prospects must be
considered speculative, considering the risks, expenses, and difficulties
frequently encountered in the establishment of a new business, specifically the
risks inherent in the development of our telecommunications and computer
networking infrastructure. There can be no assurance that unanticipated
technical or other problems will not occur which would result in material delays
in future product and service commercialization or that our efforts will result
in successful product and service commercialization. There can be no assurance
that we will be able to achieve profitable operations.
We Are in a Very Competitive Industry. Competition in the telecommunications
industry, generally, is intense. We compete directly with other companies and
businesses that have developed and are in the process of developing technologies
and products which will be competitive with our products. There can be no
assurance that other technologies or products which are functionally equivalent
or similar to our technologies and products have not been
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developed or are not in development. We expect that companies or businesses
which may have developed or are developing such technologies and products as
well as other companies and businesses which have the expertise which would
encourage them to develop and market products directly competitive with those
developed and marketed by us. Many of these competitors have greater financial
and other resources, and more experience in research and development, than us.
There can be no assurance that competitors have not or will not succeed in
developing technologies and products that are more effective than any which have
been or are being developed by us or which would render our products obsolete
and noncompetitive. Most of our competitors have substantially greater
experience, financial and technical resources and production, marketing and
development capabilities than we do. We will also compete with respect to the
efficiency of our telecommunications infrastructure and sales and marketing
capabilities. To the extent that customers exhibit loyalty to the supplier that
first supplies them with a particular service or technology, our competitors may
have an advantage over us with respect to services and technologies first
developed by such competitors. As a result of their size and breadth of their
service offerings, certain of these competitors have been and will be able to
establish managed accounts by which they seek to gain a disproportionate share
of users for their services and technologies. Such managed accounts present
significant competitive barriers to us. There can be no assurance that
competitors have not or will not succeed in developing technologies and services
that are more effective than any which have been or are being developed by us or
which would render our products obsolete and noncompetitive.
Risks of International Sales and Operations. Revenue from the sale of our
products and services are derived from customers located outside the United
States. Because some of our customers may be located in other countries,
international sales account for a notable portion of our revenues. There can be
no assurance that we will be able to manage these operations effectively or that
our activities will enable us to compete successfully in international markets
or to satisfy the service and support requirements of our customers.
Additionally, a significant portion of our sales and operations could be subject
to certain risks, including tariffs, and other barriers, difficulties in
staffing and managing foreign subsidiary and branch operations, currency
exchange risks and exchange controls, potentially adverse tax consequences and
the possibly of difficulty in accounts receivable collection. Further, while we
have experienced no difficulty to date in complying with applicable export
controls, these rules could change in the future and make it more difficult or
impossible for us to export our products to various countries. There can be no
assurance that any of these factors will not have a material adverse effect on
our business, financial condition and results of operations.
Our products and services are subject to numerous foreign government standards
and regulations that are continually being amended. Although we will endeavor to
satisfy foreign technical and regulatory standards, there can be no assurance
that our products and services will comply with foreign government standards and
regulations, or changes thereto, or that it will be cost effective to redesign
our products or services to comply with such standards or regulations. Our
inability to design or redesign products or services to comply with foreign
standards could have a material adverse effect on our business, financial
condition and results of operations.
Political Instability of Mexican Government. Mexico is subject to changing
political, economic and regulatory influences that may affect our business
practices and operations. The North American Free Trade Agreement has fostered
ties between Mexico, the United States and Canada by removing trade
restrictions. However, broad political and economic reforms that are supported
by Mexican President Ernesto Zedillo and designed to guarantee free and fair
elections may significantly influence the political stability of Mexico. Any of
these influences could have a material adverse effect on our business, financial
condition and results of operations. We cannot predict what impact, if any, such
factors might have on our business, financial condition and results of
operations.
Mexican Currency Fluctuations. Currency risks and fluctuations in exchange rates
are an important consideration for lenders and investors. We currently have
operations in Mexico and therefore anticipate that some of our transactions may
involve the use of the Mexican Peso, the official currency of Mexico. Throughout
the 1990s, the Mexican Peso was extremely volatile and we anticipate that the
Mexican Peso will continue to display such volatility. Although management will
monitor our exposure to currency fluctuations, there can be no assurance that
exchange rate fluctuations will not have a material adverse effect on our
results of operations or financial condition.
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Telecommunications Industry. A significant portion of our assets consist
principally of intangible assets in a form of relationships with customers and
telecommunications services suppliers and licensees. The future value of our
telecommunications interests depends significantly on the success of our
operations and the growth of the telecommunications industry in general. The
telecommunications industry may be affected by, among other things, (a) changes
in governmental regulation, (b) changes in the competitive environment, and (c)
changes in technology. As a consequence, our profitability in the future may be
significantly greater or less than present.
Government Regulation. The licensing, operation, sale, and acquisition of
telecommunications services are regulated by the Federal Communications
Commission ("FCC"). Telecommunications licenses may be revoked for cause and
license renewal applications may be denied if the FCC determines that renewal
would not serve the public interest. In addition, certain aspects of
telecommunications, including, but not limited to, rates and resale of
telecommunication services, may be subject to public utility regulation in the
states in which such service is provided. Changes in regulation of
telecommunications activities may be proposed by the FCC and legislation may be
introduced in Congress or state legislatures from time to time that, if enacted,
could have a material adverse affect on the telecommunications industry and,
therefore, on the business of the Company.
We Depend on Third-Party Transmission Providers. We depend upon various third
parties for the transmission of telecommunications signals and other data, which
services will be provided to us pursuant to agreements with such providers.
Inasmuch as the capacity for transmission by certain third parties is limited,
our inability, for economic or other reasons, to continue to transmit data by
way of existing providers or to obtain telecommunications services from
additional providers could have a material adverse effect on our business,
financial condition and results of operation.
Product Obsolescence. The market for consumer telecommunications products is
characterized by rapidly changing technology which could result in product
obsolescence or short product life cycles. Similarly, consumer interest in such
products tends to be short, and the industry is characterized by continuous
development and introduction of new products and services to replace outdated
products. Accordingly, our ability to compete will be dependent upon our ability
to continually enhance and improve its products and services and provide new and
innovative products and services. There can be no assurance that competitors
will not develop technologies or products that render our products and services
obsolete or less marketable. We also will be required to adapt to technological
changes in the industry and develop products and services to satisfy evolving
industry or customer requirements, any of which could require the expenditure of
significant funds and resources.
Future Capital Needs and Uncertainty of Additional Funding. The
telecommunications industry is rapidly changing through the continuous
development and introduction of new products and services. Our strategy for
growth is substantially dependent upon our ability to successfully develop our
telecommunications infrastructure. Accordingly, our ability to compete may be
dependent upon our ability to enhance our products continually. There can be no
assurance that competitors will not develop technologies or products that render
our products obsolete or less marketable. We may be required to adapt to
technological changes in the industry and develop products to satisfy evolving
industry or customer requirements, any of which could require the expenditure of
significant funds. At this time, we do not have a source of commitment for such
funds. Continued refinement and improvement costs are risks inherent in
infrastructure development, including unanticipated technical or other problems
which could result in material delays in product commercialization.
Limited Protection of Proprietary Technology. We will attempt to protect our
proprietary technology through the enforcement of our patent and by applying for
additional patent protection when appropriate. We exclusively own any and all
software and other technology that we develop and we regard such technology as
proprietary. We may rely on a combination of patent, trademark and trade secret
laws, as well as contractual restrictions on disclosure, copying and
distribution (including but not limited to confidentiality agreements with our
employees and subcontractors), to attempt to protect our intellectual property
rights in our products and services. There is a possibility that such patent,
trademark and trade secret laws, as well as such confidentiality agreements, may
not be enforceable in certain jurisdictions. It may be possible for unauthorized
third parties to copy our products or to reverse engineer or obtain and use
information that we regard as proprietary. There can be no assurance that our
competitors will not independently develop technologies that are substantially
equivalent or superior to our technologies. In addition, because we anticipate
selling
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our products and services internationally, the laws of certain countries in
which our products and services are or may be distributed or utilized may not
protect our products and intellectual rights to the same extent as the laws of
the United States. There can be no assurance that third parties will not assert
infringement claims against us in the future or that any such assertion will not
result in costly litigation or require us to obtain a license to intellectual
property rights of third parties. If we are required to obtain such licenses,
there can be no assurance that such licenses will be available on reasonable
terms, or at all. Moreover, in the event we were forced to sue third parties for
patent infringement or unfair competition, such litigation can be extremely
costly and time consuming, and may have a significant adverse affect on our
business and operations, even if we prevail in such lawsuit.
We Must Adapt to Rapid Technological Change. The telecommunications and computer
networking industry is characterized by rapidly changing technology, resulting
in short product life cycles and rapid price declines. We must continuously
update our existing and planned products and services to keep them current with
changing technologies and must develop new products and services, to take
advantage of new technologies that could render our existing products and
services obsolete. Our future prospects are highly dependent on our ability to
increase the functionality of our products and services in a timely manner and
to develop new products that address new technologies and achieve market
acceptance. There can be no assurance that we will be successful in these
efforts. If we were unable to develop and introduce such products and services
in a timely manner, due to resource constraints or technological or other
reasons, this inability could have a material adverse effect on our results of
operations. In particular, the introduction of new products and services are
subject to the inherent risk of development delays and delays in obtaining
regulatory approvals, all of which are beyond our control.
We Rely on Our Key Personnel. Our future success will depend on the service of
our key personnel and, additionally, our ability to identify, hire and retain
additional qualified personnel. There is intense competition for qualified
personnel in the telecommunications and computer networking field, and there can
be no assurance that we will be able to continue to attract and retain such
personnel necessary for the development of our business. Because of the intense
competition, there can be no assurance that we will be successful in adding
personnel as needed to satisfy our staffing requirements. Failure to attract and
retain key personnel could have a material adverse effect on the Company.
Growth of Business. We expect to experience growth and expect such growth to
continue for the foreseeable future. Our growth may place a significant strain
on our management, financial, operating and technical resources. Our ability to
manage future growth will depend upon a significant expansion of our accounting
and other internal management systems and the implementation and subsequent
improvement of a variety of systems, procedures, and controls. Moreover, we will
need to continue to train, motivate, and manage our employees and attract and
retain qualified senior managers and technical professionals. If our management
is unable to manage growth effectively, there could be a material adverse effect
on our business, financial condition, and operating results.
Conflicts of Interest. The persons serving as our officers and directors may
have existing responsibilities and, in the future, may have additional
responsibilities, to provide management and services to other entities in
addition to the Company. As a result, conflicts of interest between the Company
and the other activities of those persons may occur from time to time, in that
those persons shall have conflicts of interest in allocating time, services, and
functions between the other business ventures in which those persons may be or
become involved and, also, the affairs of the Company .
Limitation on Liability of Officers and Directors of the Company. Our Articles
of Incorporation includes a provision eliminating or limiting the personal
liability of the officers and directors of the Company to the Company and its
shareholders for damages for breach of fiduciary duty as a director or officer.
Accordingly, the officers and directors of the Company may have no liability to
the shareholders of the Company for any mistakes or errors of judgment or for
any act of omission, unless such act or omission involves intentional
misconduct, fraud, or a knowing violation of law or results in unlawful
distributions to the shareholders of the Company.
DISCLOSURE OF OPINION OF COMMISSION REGARDING INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES:
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INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING PURSUANT TO THE SECURITIES
ACT OF 1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING THE
COMPANY PURSUANT TO THE FOREGOING PROVISIONS, THE COMPANY HAS BEEN INFORMED THAT
IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION THAT SUCH
INDEMNIFICATION IS AGAINST PUBLIC POLICY AS EXPRESSED IN THE SECURITIES ACT OF
1933 AND IS, THEREFORE, UNENFORCEABLE.
Penny Stock Regulation. The Commission has adopted rules that regulate
broker-dealer practices in connection with transactions in "penny stocks". Penny
stocks generally are equity securities with a price of less than $5.00 (other
than securities registered on certain national securities exchanges or quoted on
the Nasdaq system, provided that current price and volume information with
respect to transactions in such securities is provided by the exchange or
system). The penny stock rules require a broker-dealer, prior to a transaction
in a penny stock not otherwise exempt from those rules, deliver a standardized
risk disclosure document prepared by the Commission, which specifies information
about penny stocks and the nature and significance of risks of the penny stock
market. The broker-dealer also must provide the customer with bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction, and monthly account statements showing the
market value of each penny stock held in the customer's account. In addition,
the penny stock rules require that prior to a transaction in a penny stock not
otherwise exempt from those rules the broker-dealer must make a special written
determination that the penny stock is a suitable investment for the purchaser
and receive the purchaser's written agreement to the transaction. These
disclosure requirements may have the effect of reducing the trading activity in
the secondary market for a stock that becomes subject to the penny stock rules.
If our common stock becomes subject to the penny stock rules, purchasers of
Shares may find it more difficult to sell their Shares.
Control by Existing Security Holders. Our directors, officers and principal
(greater than 5%) Security Holders, taken as a group, together with their
affiliates, beneficially own, in the aggregate, approximately 37.64% of our
issued and outstanding shares of $.001 par value common stock. Certain principal
security holders are directors or executive officers of the Company. As a result
of such ownership, these security holders may be able to exert significant
influence, or even control, matters requiring approval by the security holders
of the Company, including the election of directors.
Business and Properties.
Our Background and Development. TMEX USA, Inc., a Nevada corporation, formerly
Swiss Cellular Laboratories, Inc. ("Company"), was incorporated pursuant to the
laws of the State of Nevada on July 29, 1987, as a wholly owned subsidiary of
NuTek, Inc., a Nevada corporation, formerly Swiss Technique, Inc. ("NuTek"). On
June 30, 1995, NuTek distributed 270,042 of the 300,000 outstanding shares of
the Company's $.001 par value common stock which NuTek then held as a dividend
to the shareholders of record of NuTek on a pro rata basis. The distribution of
those shares of the Company's $.001 par value common stock to the shareholders
of NuTek was effected for the purpose of facilitating the Company's ability to
expand and diversify its business. On June 30, 1995, the Company changed its
name to TMEX USA, Inc.
On April 30, 1996, the Company and TMEX USA, Inc. a Missouri corporation ("TMEX
Missouri") entered into a Plan of Reorganization and Agreement whereby the
Company issued 1,300,000 shares of common stock in exchange for the assets of
TMEX Missouri, valued at $488,220. Subsequent to that reorganization, TMEX
Missouri was wound up and dissolved.
Our Business and Communications Network. We are an international
telecommunications provider of wholesale and retail voice, video, data, private
network, and Internet services via our computer network and laser communication
connection from the United States to Mexico. We utilize communications
technology, tested and approved by telecommunications carriers, to niche markets
and deliver a full range of services through our network. We are committed to
evaluating new technologies and continuing to improve our network services,
locations, and savings to our customers.
10
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In September 1998, we installed the first cross border laser communications
system designed to connect Laredo, Texas to Nuevo Laredo, Mexico. The
combination of wireless and fiber technology which is utilized at the border
crossing was originally designed for expansion of our Asynchronous Transfer Mode
(ATM) Network and allows us to cross the terrain barrier of the Rio Grande
River. We began offering Mexican voice and data communications services to U.S.
Telecom Corporation through this laser connection by establishing a contractual
relationship through our Mexican subsidiary with Alestra (AT&T), a major
licensed Mexican phone carrier.
Products and Services.
Our service capabilities include voice, debit access, video and
e-commerce/internet, although we concentrate our marketing efforts on voice and
debit calling card access.
Voice Services. In the telecommunications market, we provide standard voice
telephone services to support international telephone traffic to Mexico. We
anticipate that we will contract with various United States carriers for initial
system usage of approximately 20.4 million minutes per month. We anticipate an
average margin of 1.83 cents per minute for telephone calls utilizing our
network into Mexico. By servicing these contracts, we anticipate that we can
generate gross profits of approximately $360,000 per month.
Debit Card Services. We provide telephone services to Mexico via debit card
access. Calls originate within the United States, are routed within the United
States (domestically) as well as to Mexico (internationally). We are currently
negotiating with United States carriers and distributors to provide
international debit calls from the United States to other markets, such as
Central and South America, Europe and Asia. We believe that our pricing is
competitive with the pricing of other wholesale carriers for the international
calls to Mexico. Our current debit card program targets Hispanic groups living
within the United States who make long distance international calls.
Network Services. Our high speed ATM network supports all of a business'
international data, voice, or video requirements for service by one carrier. We
can provide secure private computer networks, telecommunication switch networks
and private voice communication networks within a fully integrated ATM system.
Internet Services. We provide standard Internet Service Provider (ISP) services
to the general public. These services include internet access, web hosting, web
page design, name registration, mail services and off-site data storage.
Consulting Services. We can assist small to medium size businesses with all of
their communication requirements. We provide full "turn key" services to update
existing network infrastructure, integrate Mexico calling services and provide
computer network consultations and recommendations.
Networking Switches. Our networking switches are supported by a fault tolerant
ATM system, which insures services are delivered over our network. Our switches
utilize Cabletron Systems as the primary switching source.
Our Target Markets and Channels of Distribution. Our customers consist of
wholesalers who purchase minutes of international telephone time to Mexico.
Communication quality, bandwidth and cost are priorities of these customers.
Utilizing our technologies, these customers receive high quality service and
benefit from reduced costs.
We expect that we can substantially increase our revenue with these customers
and other carriers to the Mexican market. We also expect to expand our network
to other markets.
Our Major Customer. Our major customer is Clifton Digital, Inc., one of the
largest marketers of debit calling cards in the United States. We recently
executed an addendum to our existing agreement with Clifton Digital, Inc., for
us to provide international service on telephone calls placed using the Clifton
calling cards. These calling cards are targeted to specific retailers throughout
the United States, such as 7-11 and Circle K stores, for their customers. The
contract with Clifton Digital, Inc. provides that we will sell $5 million of
debit calling card minutes each month for a twelve-month period after an
adequate introductory period. We are currently negotiating with other companies
in order to reduce our reliance on the contract with Clifton Digital, Inc.
11
<PAGE>
Our Suppliers. Our network has been developed using products supplied by the
following three primary vendors: (i) Cabletron Systems, Inc., a Delaware
corporation ("Cabletron"); (ii) AstroTerra Corporation, a California
corporation; and (iii) FORE Systems, Inc., a Delaware corporation ("FORE
Systems"). Cabletron provides the ATM system and data access products, as well
as the switch routers and Internet switches and routers utilized for our
telecommunications network. FORE Systems provides the ATM access network which
interconnects our clients with our network and destination services. AstroTerra
provides a laser communications system which transmits communications via a
wireless optical communications system across the border of the United States
and Mexico which is separated by the Rio Grande River.
Our Competition. Our competitors for our debit calling card business include
companies which provide low cost telecommunications service to Mexico, such as
Blackstone, Inc.; U.S. South Communications, Inc.; and RSL Communications Ltd.
Our competitors for our wholesale minutes business include companies such as
Bordercom International, RSL Communications Ltd., Qwest Communications, Sprint
and AT&T. We believe our competitive advantages include low cost service, the
ability to supply niche markets with increased bandwidth, and our history of
established business in Mexico.
However, competition in the telecommunications industry, generally, is
significant. We compete directly with other companies and businesses that have
developed and are in the process of developing technologies and products which
will be competitive with the products developed and offered by us. There can be
no assurance that other technologies or products which are functionally
equivalent or similar to our technologies and products have not been developed
or are not in development. We expect that there will be companies or businesses
which may have developed or are developing such technologies and products as
well as other companies and businesses which have the expertise which would
encourage them to develop and market products directly competitive with those
developed and marketed by us. Many of these competitors have greater financial
and other resources, and more experience in research and development, than us.
Our Intellectual Property. Our success depends in part upon our ability to
preserve our trade secrets, obtain and maintain patent protection for our
technologies, products and processes, and operate without infringing the
proprietary rights of other parties. However, we rely on certain proprietary
technologies, trade secrets, and know-how that are not patentable. Although we
may take action to protect our unpatented trade secrets, our technology and our
proprietary information, in part, by the use of confidentiality agreements with
our employees, consultants and certain of our contractors, there can be no
assurance that (i) these agreements will not be breached, (ii) we would have
adequate remedies for any breach; or (iii) our proprietary trade secrets and
know-how will not otherwise become known or be independently developed or
discovered by competitors. There is also no assurance that our actions will be
sufficient to prevent imitation or duplication of either our products and
services by others or prevent others from claiming violations of their trade
secrets and proprietary rights.
The utilization or other exploitation of the products and services developed by
us may require us to obtain licenses or consents from government regulatory
agencies or from the producers or other holders of patents, copyrights or other
similar rights relating to our products and services. In the event we are
unable, if so required, to obtain any necessary license or consent on terms and
conditions which we consider to be reasonable, we may be required to stop
developing, utilizing, or exploiting products and services affected by
government regulation or by patents, copyrights or similar rights. In the event
we are challenged by a government regulatory agency, or by the holders of
patents, copyrights or other similar rights, there can be no assurance that we
will have the financial or other resources to defend any resulting legal action,
which could be significant.
Our Research and Development. We believe that we will expand the types of
products we offer by introducing new products and technologies. New product
ideas are derived from a number of sources, including in-house research and
development, our executives, staff, and consultants and outside parties. In
advance of introducing new products and technologies, local counsel and other
representatives retained by us investigate product design matters as they relate
to regulatory compliance and other issues. Our products are then redesigned to
accommodate both the regulatory and marketing requirements of the particular
market. There can be no assurance as to the final form of any new regulations
12
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or that an appropriate regulatory authority will not seek to impose additional
regulations, possibly prohibiting, or placing other restrictions on, the sale of
such products, or the impact, if any, of any such regulations.
Our Mexican Subsidiaries. In May 1995, we incorporated TMEX S.A. de C.V., a
Mexico corporation ("TMEX Mexico") for the purpose of supporting our
telecommunication services in Mexico. We own 9,999 shares of TMEX Mexico's
common stock (approximately 99.99% of the issued and outstanding shares of TMEX
Mexico's common stock). Our President, Cooper Lee, as Director General of the
subsidiary, owns 1 share of TMEX Mexico's common stock (the remaining .01% of
the outstanding stock of TMEX Mexico), as required by Mexican law.
In December 1996, we acquired approximately 24,500 shares of common stock
(approximately 49%) of Network Technologies S.A. de C.V., a Mexican corporation
("NetTech") valued at $15,000. NetTech is headquartered in Loma de Chapultepec,
Mexico City and received a concession for Internet services from the Mexican
Federal Commission of Telecommunications, which will allow NetTech to transmit
Internet and data traffic from the United States throughout Mexico.
Government Regulation. Our business is subject to regulation by the Federal
Communications Commission ("FCC") and other federal and state regulatory
agencies. These regulatory authorities impose regulations governing the rates,
terms and conditions for interstate and intrastate telecommunications services.
Changes in existing laws and regulations, including the Telecommunications Act
of 1996, which provides for greater competition among providers of
telecommunications services, may have a material impact on our activities and
operating results. We have a C-214 Facilities Bases Services permit by the FCC
to operate as a provisioned bearer circuit network.
We may also be subject to Federal Trade Commission regulation and other federal
and state laws relating to the promotion, advertising, labeling and packaging of
our products. We believe that we are in compliance with all laws, rules and
regulations material to our operations and have obtained, or are in the process
of obtaining, all licenses, tariffs and approvals necessary for the conduct of
our business. There can be no assurance, however, that we will be able to obtain
required licenses or approvals in the future or that the FCC or state regulatory
authorities will not require us to comply with more stringent regulatory
requirements. Conformance of our operations with new statutes and regulations
could require us to alter methods of operation, at costs which could be
material, or otherwise limit the types of services offered by us.
Hazardous Materials; Environmental Matters. We may be subject to various laws
and regulations governing the use, manufacture, storage, handling, and disposal
of hazardous materials and certain waste products. The risk of accidental
contamination or injury from hazardous materials cannot be completely
eliminated. In the event of such an accident, we could be held liable for any
damages that result and any such liability could exceed our financial resources.
In addition, there can be no assurance that, in the future, we will not be
required to incur significant costs to comply with environmental laws and
regulations relating to hazardous materials. We may be subject to various laws
and regulations governing the use, storage, handling and disposal of such
materials and certain waste products. Although we believe that our safety
procedures for handling and disposing of such materials comply with the
standards prescribed by such laws and regulations, the risk of accidental
contamination or injury from these materials cannot be completely eliminated. In
the event of such an accident, we could be held liable for any damages that
result, and any such liability could exceed our resources. There can be no
assurance that we will not be required to incur significant costs to comply with
current or future environmental laws and regulations nor that our operations,
business or assets will not be materially or adversely affected by current or
future environmental laws or regulations.
Employees. As of March 31, 2000, we had 12 full time employees and 6 part-time
employees. The employees provide services such as technical support and
marketing. From time-to-time we use the services of independent contractors and
consultants to support product research and development, marketing and sales and
business development.
Our Property. The consolidated financial statements filed as exhibits to this
Form SB-1 include our accounts and those of our subsidiary, TMEX S.A. de C.V., a
Mexico corporation. All significant intercompany transactions have been
eliminated. As of the dates specified in the following table, we held the
following property:
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================================================================================
Property December 31, 1999 December 31, 1998
- --------------------------------------------------------------------------------
Cash and equivalents $375,387 $248,515
- --------------------------------------------------------------------------------
Property & Equipment less $823,190 $539,566
Depreciation
================================================================================
We define cash equivalents as all highly liquid investments with a maturity of 3
months or less when purchased. We do not presently own any interests in real
estate.
Our Facilities. The following table specifies the descriptions of our
properties.
================================================================================
Property Description
- -------------------------------------------------------------------------------
Newport Beach, California Our main corporate office and a switching
5031 Birch Street, Suite G facility.
Newport Beach, CA 92660 Lease expires: September 8, 2000
$2,400.00 / month
- --------------------------------------------------------------------------------
Laredo, Texas Our United States communications laser
Howard Johnson's Hotel Rooftop site and a switching facility.
1 South Main Avenue Lease expires: August, 2001
Laredo, TX 78040 $1,750.00 / month
- --------------------------------------------------------------------------------
Tijuana, Baja California The corporate office of our subsidiary,
Av. Rio Suchiate No. 10065-3 TMEX S.A. de C.V.
Col. Revolucion Lease term: month to month
P.O. Box 432627 $220.00 / month
Tijuana, B.C. 22400
- --------------------------------------------------------------------------------
Nuevo Laredo, Mexico Our Mexican communications laser site.
Ave Josefa O. De Dominguez No 2853 Lease expires: August, 2000
Nuevo Laredo, Tamaulipas $200.00 / month
================================================================================
Offering Price Factors
Reports to Securities Exchange Commission ("SEC"). From January 1997 until March
20, 2000, our common stock traded on the OTC Bulletin Board (OTCBB) under the
symbol "TMXU". On or about March 20, 2000, an "E" was affixed to our OTCBB
trading symbol and our common stock began trading under the symbol TMXUE, which
indicates that we had not completed the SEC registration process and that our
stock is subject to removal from the OTCBB, within 30 days of such date, if we
do not complete that process. About the same time, we also became required to
register pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Accordingly, we concurrently filed a Registration Statement with the SEC on Form
8-A together with an Annual Report on Form 10-KSB. On or about March 20, 2000,
an "E" was affixed to our trading symbol and our common stock began trading
under the symbol TMXUE, which indicates that we have failed to comply with
eligibility requirements specified in Rule 6530 of the National Association of
Securities Dealers, Inc. ("Rule 6530"). On April 20, 2000 we were delisted from
the OTCBB for failing to comply with Rule 6530 and we now participate on the
National Quotation Bureau's Electronic Pink Sheets.
The public may read and copy any materials filed with the SEC at the SEC's
Public Reference Room at 450 Fifth Street N.W., Washington, D.C. 20549. The
public may also obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that
contains reports, proxy and
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information statements, and other information regarding issuers that file
electronically with the SEC. The address of that site is http://www.sec.gov. We
currently maintain our own Internet address at www.tmex.com.
Price Range of Common Stock. Prior to our participation on the OTCBB and
National Quotation Bureau's Electronic Pink Sheets, there was no public market
for our common stock. Our common stock has closed at a low of $0.75 and a high
of $4.125 for the 52-week period ended April 26, 2000. This market is extremely
limited and the prices for our common stock quoted by brokers are not
necessarily a reliable indication of the value of our common stock.
The following table specifies the reported high and low sales or closing prices
of the Company's common stock on the OTCBB for the periods indicated.
===============================================================================
Period High Low
- -------------------------------------------------------------------------------
October 1, 1999 - December 31, 1999 $2.375 $1.156
- -------------------------------------------------------------------------------
July 1, 1999 - September 30, 1999 $3.125 $1.250
- -------------------------------------------------------------------------------
April 1, 1999 - June 30, 1999 $4.125 $2.000
- -------------------------------------------------------------------------------
January 1, 1999 - March 31, 1999 $3.187 $0.625
===============================================================================
The offering price of the shares of our $.001 par value common stock offered
pursuant to the Registration Statement on Form SB-1 was calculated pursuant to
Rule 457(c) of Regulation C using the average of the bid and asked price of our
common stock, as reported on the National Quotation Bureau's Electronic Pink
Sheets as of a specified date within 5 business days prior to the date of the
filing of this Registration Statement, specifically, as of April 26, 2000. On
April 26, 2000, the closing bid and asked prices of our common stock as reported
on the National Quotation Bureau's Electronic Pink Sheets were $1.15 and $1.15,
respectively.
Use of Proceeds
We will receive up to $4,999,999.90 if all of the shares of our $.001 par value
common stock offered by us on a "best efforts" basis at $1.15 per share are
purchased, and we intend to use any proceeds from such sale for working capital
and to fund our continued development of our telecommunications and networking
infrastructure.
The following table outlines the anticipated use of proceeds:
================================================================================
Estimated Use Amount(1) Percentage of
Proceeds(1)
- --------------------------------------------------------------------------------
Purchase of Networking Switches $1,888,295.00 37.77%
- --------------------------------------------------------------------------------
Installation of Equipment $300,000.00 6.00%
- --------------------------------------------------------------------------------
Bandwidth Prepayment with Alestra $440,000.00 8.80%
- --------------------------------------------------------------------------------
Letters of Credit with Debit Carriers $1,000,000.00 20.00%
- --------------------------------------------------------------------------------
Fiber Installation with Alestra $300,000.00 6.00%
- --------------------------------------------------------------------------------
General Corporate Purposes(2) $996,704.90 19.93%
- --------------------------------------------------------------------------------
Legal and Accounting $50,000.00 1.00%
- --------------------------------------------------------------------------------
Offering Expenses (3) $25,000.00 0.50%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total $4,999,999.90 100%
================================================================================
(1) Assumes the Company sells the maximum offering amount of $4,999,999.90.
(2) Working capital, general corporate purposes, and legal and accounting
reflect funds allocated to pay for daily expenditures incurred in our business,
operations and general and administrative overhead for the twelve-month period
following the closing of this offering.
(3) We believe that Offering Expenses, which include legal, accounting,
miscellaneous, compliance and offering expenses and printing costs will be in an
amount equal to approximately 1.5% of the gross proceeds received from the offer
and sale of the Shares.
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<PAGE>
Capitalization.
The following table sets forth (i) the capitalization of the Company as
specified on the Company's balance sheet for the period ended December 31, 1999,
and (ii) the pro forma capitalization of the Company as adjusted after giving
effect to the issuance of 50,000 committed shares, 4,347,826 shares of common
stock offered pursuant to this Form SB-1:
Stockholders' Equity Actual Proforma
------ --------
As Adjusted
-----------
Common stock, $0.001 par value
50,000,000 shares authorized
12,688,320 and 17,086,146, respectively, shares 12,688 17,086
issued and outstanding
Common stock committed 50,000 --
Additional paid-in capital 3,205,845 8,226,447
Accumulated deficit after December 31, 1998 (2,714,443) (2,714,443)
------------------------
Total stockholders' equity 554,090 5,529,090
------------------------
Description of Securities
We are authorized to issue 50,000,000 shares of common stock, $.001 par value,
each share of common stock having equal rights and preferences, including voting
privileges. We are not authorized to issue shares of preferred stock. As of
March 31, 2000, 13,896,981 shares of our $.001 par value common stock were
issued and outstanding.
Our shares of $.001 par value common stock constitute equity interests entitling
each shareholder to a pro rata share of cash distributions made to shareholders,
including dividend payments. The holders of our common stock are entitled to one
vote for each share of record on all matters to be voted on by shareholders.
There is no cumulative voting with respect to the election of our directors or
any other matter, with the result that the holders of more than 50% of the
shares voted for the election of those directors can elect all of the Directors.
The holders of our common stock are entitled to receive dividends when, as and
if declared by our Board of Directors from funds legally available therefor;
provided, however, that cash dividends are at the sole discretion of our Board
of Directors. In the event of our liquidation, dissolution or winding up, the
holders of common stock are entitled to share ratably in all assets remaining
available for distribution to them after payment of our liabilities and after
provision has been made for each class of stock, if any, having preference in
relation to our common stock. Holders of the shares of our common stock have no
conversion, preemptive or other subscription rights, and there are no redemption
provisions applicable to our common stock.
Warrants. As of March 31, 2000, there were no outstanding warrants to purchase
shares of our $.001 par value common stock.
Stock Option Plan. On April 12, 2000, our Board of Directors approved and
adopted a stock option plan, pursuant to which 5,000,000 shares of our $.001 par
value common stock will be reserved for issuance to satisfy the exercise of
options. The stock option plan will be designed to retain qualified and
competent officers, employees, and directors. Our Board of Directors, or a
committee thereof, shall administer the stock option plan and will be
authorized, in its sole and absolute discretion, to grant options thereunder to
all of our eligible employees, including officers, and to our directors, whether
or not those directors are also our employees. Options will be granted pursuant
to the provisions of the stock option plan on such terms, subject to such
conditions and at such exercise prices as shall be determined by our Board of
Directors. Options granted pursuant to the stock option plan shall not be
exercisable after the expiration of ten years from the date of grant.
Plan of Distribution
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<PAGE>
We are offering for sale 4,347,826 shares of our $.001 par value common stock on
a "best efforts" basis pursuant to this Registration Statement on Form SB-1. We
may from time to time sell all or a portion of the shares of our $.001 par value
common stock in the over-the-counter market, or on any other national securities
exchange on which shares of our $.001 par value common stock is or becomes
listed or traded, in negotiated transactions or otherwise, at prices then
prevailing or related to the then current market price or at negotiated prices.
The shares of our $.001 par value common stock offered pursuant to this
Registration Statement on Form SB-1 will not be sold in an underwritten public
offering.
The methods by which the shares of our $.001 par value common stock may be sold
include: (a) a block trade (which may involve crosses) in which the broker or
dealer so engaged will attempt to sell the securities as agent but may position
and resell a portion of the block as principal to facilitate the transaction;
(b) purchases by a broker or dealer as principal and resale by such broker or
dealer for its account pursuant to this prospectus; (c) ordinary brokerage
transactions and transactions in which the broker solicits purchasers; and (d)
privately negotiated transactions. In effecting sales, brokers and dealers
engaged by us may arrange for other brokers or dealers to participate. Brokers
or dealers may receive commissions or discounts from us (or, if any such
broker-dealer acts as agent for the purchaser of such shares, from such
purchaser) in amounts to be negotiated which are not expected to exceed those
customary in the types of transactions involved. Broker-dealers may agree with
the Company to sell a specified number of such shares at a stipulated price per
share, and, to the extent such broker-dealer is unable to do so acting as agent
for the Company, to purchase as principal any unsold shares at the price
required to fulfill the broker-dealer commitment to the Company. Broker-dealers
who acquire shares as principal may thereafter resell such shares from time to
time in transactions (which may involve crosses and block transactions and sales
to and through other broker-dealers, including transactions of the nature
described above) in the over-the-counter market or otherwise at prices and on
terms then prevailing at the time of sale, at prices then related to the
then-current market price or in negotiated transactions and, in connection with
such resales, may pay to or receive from the purchasers of such shares
commissions as described above.
We have filed this Registration Statement on Form SB-1, of which this prospectus
forms a part, with respect to the sale of the shares of our $.001 par value
common stock. There can be no assurance that we will sell any or all of the
shares of our $.001 par value common stock that we desire to sell.
Under the Securities Exchange Act of 1934 ("Exchange Act") and the regulations
thereunder, any person engaged in a distribution of the shares of our $.001 par
value common stock offered by this prospectus may not simultaneously engage in
market making activities with respect to our common stock during the applicable
"cooling off" periods prior to the commencement of such distribution. We will
pay all expenses incident to the offering and sale of the shares of our $.001
par value common stock.
Dividends, Distributions and Redemptions.
We have never declared or paid a cash dividend on our capital stock and does not
expect to pay cash dividends on our common stock in the foreseeable future. We
currently intend to retain our earnings, if any, for use in our business. Any
dividends declared in the future will be at the discretion of the Board of
Directors and subject to any restrictions that may be imposed by our lenders.
Officers, Directors and Key Personnel of the Company.
Executive Officers and Directors. We are dependent on the efforts and abilities
of certain of our senior management. The interruption of the services of key
management could have a material adverse effect on our operations, profits and
future development, if suitable replacements are not promptly obtained. We have
entered into employment agreements with our key executives; however, no
assurance can be given that each executive will remain with us during or after
the term of his or her employment agreement. In addition, our success depends,
in part, upon our ability to attract and retain other talented personnel.
Although we believe that our relations with our personnel are good and that we
will continue to be successful in attracting and retaining qualified personnel,
there can be no assurance that we will be able to continue to do so. All of our
officers and directors will hold office until their resignation or removal.
17
<PAGE>
Our principal executive officers and the directors are specified in the
following table:
================================================================================
Name Age Position
- --------------------------------------------------------------------------------
Cooper Lee 23 President, Director
- --------------------------------------------------------------------------------
Crofton Cooper 74 Chief Executive Officer,
Secretary, Treasurer, Director
- --------------------------------------------------------------------------------
Cecil Zeringue 33 Vice President, Director
- --------------------------------------------------------------------------------
Ray Taylor 64 Vice President
- --------------------------------------------------------------------------------
David Shomaker 43 Acting Chief Financial Officer
================================================================================
Cooper Lee. Mr. Lee is the President and a director of the Company since 1995.
Mr. Lee is primarily responsible for our technology development as well as our
computer networking infrastructure. Mr. Lee, whose specialty is computer code
programming, has developed an advanced computer network infrastructure, which
was designed to minimize the human involvement necessary to manage the system
and, therefore, allows us to offer communication-networking services at
significant lower rates. In 1994 while attending Nicholls State University as a
student, Mr. Lee began teaching computer classes and was responsible for
maintaining 600 of the school's 1,400 computers.
Crofton Cooper. Mr. Cooper is the Chief Executive Officer, Secretary, Treasurer
and a director of the Company since 1995. Mr. Cooper has extensive background
and experience in corporate finance, including both private and public equity
financing and has financed our operations since our inception. Prior to joining
the Company in 1995, Mr. Cooper concentrated his business activities as a real
estate developer in Orange, Los Angeles, and Riverside counties.
Cecil Zeringue. Cecil Zeringue is the Vice President of Operations and a
director of the Company since 1995. Mr. Zeringue is responsible for our
operations. Prior to joining the Company in 1995, Mr. Zeringue managed the
day-to-day operations of Valley Electric, an electrical supply house in Houma,
Louisiana. Mr. Zeringue graduated with a Masters of Business Administration from
Nicholls State University in 1993 and a Bachelor of Science in Computer Science
in 1989.
Ray Taylor. Mr. Taylor is the Executive Vice President of Marketing of the
Company. From 1997 to the present, Mr. Taylor has been responsible for the real
estate acquisitions of our network POPs. Mr. Taylor is responsible for contract
negotiations, both in the United States and Mexico. Mr. Taylor has also been
responsible for pricing and rate structures for the wholesale voice traffic.
Prior to joining the Company in 1997, Mr. Taylor was a real estate developer,
specializing in locating properties and performing market analysis.
David T. Shomaker. Mr. Shomaker has served as our acting Chief Financial Officer
since March of 2000. He has been a partner of Haynie & Company, Certified Public
Accountants, based in Orange County, California and Salt Lake City, Utah since
1990. Mr. Shomaker holds a Bachelor of Science degree in Accounting from Brigham
Young University, Provo, Utah, and in addition is a Certified Fraud Examiner and
a Certified Valuation Analyst.
Crofton Cooper, the Chief Executive Officer, Secretary, Treasurer and a director
of the Company, is the grandfather of Cooper Lee, the President and a director
of the Company. There are no orders, judgments, or decrees of any governmental
agency or administrator, or of any court of competent jurisdiction, revoking or
suspending for cause any license, permit or other authority to engage in the
securities business or in the sale of a particular security or temporarily or
permanently restraining any officer or director of the Company from engaging in
or continuing any conduct, practice or employment in connection with the
purchase or sale of securities, or convicting such person of any felony or
misdemeanor involving a security, or any aspect of the securities business or of
theft or of any felony, nor are any of the officers or directors of any
corporation or entity affiliated with the Company so enjoined.
Principal Stockholders.
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of March 31, 2000, by (i) each person or entity
known by us to be the beneficial owner of more than 5% of the outstanding
18
<PAGE>
shares of our common stock, (ii) each of our directors and named executive
officers, and (iii) all of our directors and executive officers as a group.
<TABLE>
<CAPTION>
====================================================================================================================================
Title of Class Name and Address of Beneficial Amount and Nature of Beneficial Percent of Class
Owner Owner
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$.001 Par Value David Lohrey 850,000 shares, Shareholder 6.12%
Common Stock 6 Leeward Rd
Belvedere, CA 94920
- ------------------------------------------------------------------------------------------------------------------------------------
$.001 Par Value Cooper Lee, 5031 Birch Street, 1,451,500 shares, President, 10.44%
Common Stock Suite G, Newport Beach, Director
California 92660
- ------------------------------------------------------------------------------------------------------------------------------------
$.001 Par Value Crofton Cooper, 5031 Birch 2,093,073 shares, Chief Executive 15.06%
Common Stock Street, Suite G, Newport Beach, Officer, Secretary, Treasurer,
California 92660 Director
- ------------------------------------------------------------------------------------------------------------------------------------
$.001 Par Value Cecil Zeringue, 5031 Birch 436,749 shares, Vice President, 3.14%
Common Stock Street, Suite G, Newport Beach, Director
California 92660
- ------------------------------------------------------------------------------------------------------------------------------------
$.001 Par Value Ray Taylor, 5031 Birch Street, 400,000 shares, Vice President 2.88%
Common Stock Suite G, Newport Beach,
California 92660
- ------------------------------------------------------------------------------------------------------------------------------------
$.001 Par Value All directors and named executive 31.52%
Common Stock officers as a group
====================================================================================================================================
</TABLE>
Beneficial Ownership. Beneficial ownership is determined in accordance with the
rules of the Commission and generally includes voting or investment power with
respect to securities. In accordance with Commission rules, shares of the
Company's common stock which may be acquired upon exercise of stock options or
warrants which are currently exercisable or which become exercisable within 60
days of the date of the table are deemed beneficially owned by the optionees.
Subject to community property laws, where applicable, the persons or entities
named in the table above have sole voting and investment power with respect to
all shares of the Company's common stock indicated as beneficially owned by
them.
Changes in Control. Management of the Company is not aware of any arrangements
which may result in "changes in control" as that term is defined by the
provisions of Item 403(c) of Regulation S-B.
Management Relationships, Transaction and Remuneration.
Any compensation received by our officers, directors, and management personnel
will be determined from time to time by our Board of Directors. Our officers,
directors, and management personnel will be reimbursed for any out-of-pocket
expenses incurred on our behalf.
Summary Compensation Table. The table set forth below summarizes the annual and
long-term compensation for services in all capacities to the Company payable to
our Chief Executive Officer and our other whose total annual salary and bonus is
anticipated to exceed $50,000 during the year ending December 31, 2000. We have
adopted an incentive stock option plan for our executive officers which would
result in additional compensation.
19
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================================================
Name and Principal Position Year Annual Salary ($) Bonus ($) Other Annual All Other Compensation
Compensation ($)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cooper Lee, President 2000 $120,000 2% of net profit None None
- ---------------------------------------------------------------------------------------------------------------------------------
Crofton Cooper, Chief Executive
Officer, Secretary, Treasurer 2000 $120,000 2% of net profit None None
- ---------------------------------------------------------------------------------------------------------------------------------
Cecil Zeringue, Vice-President 2000 $100,000 2% of net profit None None
- ---------------------------------------------------------------------------------------------------------------------------------
Ray Taylor, Vice-President 2000 $13,000 None None None
- ---------------------------------------------------------------------------------------------------------------------------------
David Shomaker, Chief Financial 2000 $0 None None None
Officer
=================================================================================================================================
</TABLE>
Compensation of Directors. Directors who are also employees of the Company
receive no extra compensation for their service on our Board of Directors.
Employment Contracts. On April 12, 2000, we entered into employment contracts
with Cooper Lee, Crofton Cooper and Cecil Zeringue. For successive one-year
terms, Cooper Lee will receive an aggregate annual base salary totaling $120,000
and will be entitled to cash bonuses equal to 2% of net profits, as specified in
the employment agreements. For successive one-year terms, Crofton Cooper will
receive an aggregate annual base salary totaling $120,000 and will be entitled
to cash bonuses equal to 2% of net profits, as specified in the employment
agreements. For successive one-year terms, Cecil Zeringue will receive an
aggregate annual base salary totaling $100,000 and will be entitled to cash
bonuses equal to 2% of net profits, as specified in the employment agreements.
In October 1999, we entered into a three-year employment contract with Michael
Garone, which provides for successive automatic one-year renewals unless
terminated. We are obligated to pay a base salary of $5,000 per month through
December 1999, $10,000 per month from January 2000 through October 2000 and 10%
annual increases thereafter. Mr. Garone is also entitled to a sales commission
of 1.5% on all sales of debit calling cards. We are also obligated to issue
50,000 shares of our $.001 par value common stock upon execution of the
agreement. Mr. Garone may also be entitled to 960,000 shares of our $.001 par
value common stock during a period of three years to be issued in equal
quarterly installments of 80,000 shares, provided that Mr. Garone satisfies
minimum profit targets, specified in the employment contract.
Consulting Agreements. We entered into a consulting agreement with Haynie and
Company, a California corporation, which provides that Haynie and Company will
provide financial management services for a fee of $2,000 per month and 50,000
shares of our $.001 par value common stock.
Shares Issued as Compensation for Services. In 1999, our officers, director and
other employees, were issued 1,922,500 shares of our $.001 par value common
stock as compensation for their services to us; specifically, their continuing
efforts related to the development of certain technology which will be utilized
by us in our business operations. Those shares were valued at what we believe
was the fair market value at the time of issuance, which ranged from $0.60 to
$1.90 per share.
We believe that we will issue an indeterminable amount of shares of our $.001
par value common stock as compensation for the services of officers, director
and other employees in the year 2000.
DISCLOSURE OF POSITION OF COMMISSION REGARDING INDEMNIFICATION FOR SECURITIES
ACT LIABILITIES:
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT OF
1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING THE COMPANY
PURSUANT TO THE FOREGOING PROVISIONS, THE COMPANY HAS BEEN INFORMED THAT IN THE
OPINION OF THE SECURITIES AND EXCHANGE COMMISSION, SUCH INDEMNIFICATION IS
20
<PAGE>
AGAINST PUBLIC POLICY AS EXPRESSED IN THE SECURITIES ACT OF 1933 AND IS,
THEREFORE, UNENFORCEABLE.
Specified below, in tabular form, is the aggregate annual remuneration of our
Chief Executive Officer and the three (3) most highly compensated executive
officers other than the Chief Executive Officer who were serving as executive
officers at the end of our last completed fiscal year.
<TABLE>
<CAPTION>
=============================================================================================================================
Name of individual or Identity of Capacities in which remuneration was Aggregate remuneration
Group received
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cooper Lee President $52,000
- -----------------------------------------------------------------------------------------------------------------------------
Crofton Cooper, Chief Executive Officer, Secretary,
Treasurer $52,000
- -----------------------------------------------------------------------------------------------------------------------------
Cecil Zeringue, Vice-President $52,000
- -----------------------------------------------------------------------------------------------------------------------------
Ray Taylor, Vice-President Vice-President $13,000
- -----------------------------------------------------------------------------------------------------------------------------
All Executive Officers as a Group $169,000
=============================================================================================================================
</TABLE>
Related Party Transactions. There have been no related party transactions which
would be required to be disclosed pursuant to Item 404 of Regulation S-B, except
for the following:
As of December 31, 1999, a trade payable of $59,798 for cash used for operations
was due to Myles Reid Services, a Delaware corporation owned by Crofton Cooper,
who is the Chief Executive Officer, a director and a major stockholder of the
Company.
On December 21, 1999, we issued a promissory note for $125,000 payable to Jeryl
Rochelle, a shareholder of the Company, for cash used for operations. The
promissory note is unsecured, non-interest bearing and is convertible into
restricted shares of our $.001 par value common stock at a conversion rate of
$1.25 per share. The promissory note is payable or convertible on demand any
time after March 15, 2000.
Litigation.
Specified below is our pending litigation.
Fore Systems. On or about September 7, 1999, we filed a complaint in Orange
County Superior Court against Fore Systems, a business organization, form
unknown, and Doe Defendants 1 through 100, alleging breach of warranty of
fitness for intended purposes and negligent misrepresentation. That complaint
relates to our purchase, from Fore Systems, of certain equipment designed to
transmit electrical signals between the United States and Mexico, and the
malfunctioning of that equipment, resulting in monetary damages to us in lost
transmission time and software solution costs.
On October 6, 1999, Defendant Fore Systems filed a Notice of Removal of the
complaint to federal court; specifically, the United States District Court,
Central District of California, Southern Division. On October 12, 1999, the
complaint was ordered removed to that federal court. On or about October 27,
1999, we filed a First Amended Complaint for breach of warranty, strict
liability on defective product, negligence, and fraud, and correctly identified
Defendant Fore Systems, as a Delaware corporation.
We are seeking monetary damages of approximately $250,000. On or about January
10, 2000, Fore Systems filed a Motion to Dismiss the complaint. We opposed that
Motion to Dismiss and, on January 26, 2000, the Court denied Fore System's
Motion to Dismiss but granted permission for Fore Systems to refile that motion.
On February 9, 2000, Fore Systems refiled that Motion. We again opposed that
Motion and that Motion is currently being considered by the judge.
21
<PAGE>
We are currently engaged in settlement discussions with Fore Systems and may
entertain a settlement offer which includes discounts on the purchase of
additional components and other products from Fore Systems.
Phillips, Nagel and Nagel. On or about March 8, 2000, Silas Phillips, Conrad
Nagel and Kathrina B. Nagel (collectively, "Plaintiffs") filed a complaint in
Orange County Superior Court against us for damages for conversion and fraud.
The Plaintiffs alleged, among other things, that we acquired a controlling
interest in Cellular 2000, a Nevada corporation, in 1997. Plaintiffs further
alleged that we, as compensation for services and as a bonus, had issued certain
shares of our common stock to Plaintiffs, two of whom were officers of Cellular
2000 and one of whom was the spouse of an officer of Cellular 2000. Plaintiffs
further allege that, on or about October 28, 1998, we improperly canceled that
common stock.
We believe that Plaintiffs' allegations are without merit, in that, the issuance
and delivery of our common stock to Plaintiffs was conditioned upon the
performance, by Plaintiffs, of certain promises, covenants and agreements, which
Plaintiffs failed to perform. We intend to oppose this complaint zealously and
have filed a cross-complaint for breach of contract against Plaintiffs.
AstroTerra Corporation. We have been negotiating with AstroTerra Corporation
("AstroTerra"), regarding certain disputes which arose in or about June, 1999,
between AstroTerra, on the one hand, and us, on the other hand. We desire to
effect a settlement and resolution of the issues in dispute in order to promote
a long-term business relationship with AstroTerra. The disputes are not
presently being litigated; however, we anticipate that these disputes will be
litigated if no settlement is reached.
We encountered a problem with our daytime communications from our laser
transmission system located in Laredo, Texas. We considered the possibility that
the problem arose from either (1) a switching problem, or (2) a problem with the
AstroTerra laser equipment. We contacted AstroTerra and requested that
AstroTerra provide a technical support crew to investigate and suggest possible
solutions to this problem. AstroTerra requested that we perform certain tests,
which we performed. We then requested AstroTerra's presence on site and fiber
testing was performed. An AstroTerra engineer returned again to the site and,
after we performed additional tests on the fiber optic cable, we requested
AstroTerra to return to the site a third time. We expended significant time and
money removing and reconfiguring switches, testing fiber cables, installing a
new power conditioner, isolating and labeling fiber interconnections, and
testing the various systems before the transmission problem was located. The
ultimate conclusion was that a defective laser lens provided by AstroTerra was
the cause of the transmission problem.
Due to the failure of the laser system, we incurred charges from AstroTerra
totaling $52,000, which included the purchase of ZT3000 lasers at an aggregate
price of $44,631. We have refused to pay a significant portion of those charges
because of the failure of the laser system, and AstroTerra has threatened to
litigate this matter if a settlement is not reached. We are presently
negotiating with AstroTerra to purchase certain equipment, and to license or
distribute certain equipment and technology, as part of global settlement
negotiations. In the event we are unable to resolve this matter, we are prepared
to litigate this matter zealously.
Federal Tax Aspects.
We have obtained no ruling from the Internal Revenue Service and no opinion of
counsel with respect to the federal income tax consequences of the purchase or
sale of shares of our $.001 par value common stock. Consequently, investors must
evaluate for themselves the income tax implications which attach to their
purchase, and any subsequent sale, of the shares of our $.001 par value common
stock. We are not an S corporation under the Internal Revenue Code of 1986.
Miscellaneous Factors.
We are not aware of any other material factors, either adverse or favorable,
that will or could affect us or our business or which are necessary to make any
other information in this offering circular not misleading or incomplete.
22
<PAGE>
Financial Statements.
Copies of the financial statements specified in Regulation 228.310 (Item 310)
are filed with this Registration Statement on Form SB-1.
<PAGE>
TMEX USA, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1999 AND 1998
<PAGE>
TMEX USA, INC. AND SUBSIDIARY
CONTENTS
December 31, 1999
- --------------------------------------------------------------------------------
Page
REPORTS OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-1 - F-2
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheet F-3
Consolidated Statements of Operations F-4
Consolidated Statements of Stockholders' Equity F-5 - F-6
Consolidated Statements of Cash Flows F-7 - F-8
Consolidated Notes to Financial Statements F-9 - F-24
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders of
TMEX USA, Inc.
Newport Beach, California
We have audited the accompanying consolidated balance sheet of TMEX USA, Inc.
and subsidiary as of December 31, 1999, and the related consolidated statements
of operations, stockholders' equity, and cash flows for the year then ended.
These consolidated 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 the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of TMEX USA, Inc. and
subsidiary as of December 31, 1999, and the results of their operations and
their cash flows for the year then ended in conformity with generally accepted
accounting principles.
SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
Santa Ana, California
March 27, 2000, except
for Notes 7 and 9, as
to which the date is
April 12, 2000
F-1
<PAGE>
TMEX USA, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
December 31, 1999
- --------------------------------------------------------------------------------
ASSETS
Current assets
Cash $ 375,387
Accounts receivable 291,350
Prepaid expenses and other current assets 38,708
-----------
Total current assets 705,445
Property and equipment, net 823,190
Investment in affiliate, at cost 15,000
-----------
Total assets $ 1,543,635
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of note payable $ 78,160
Accounts payable and accrued expenses 279,341
Accrued compensation and related benefits 11,437
Deferred revenue 264,943
Due to related party 59,798
Income taxes payable 800
Convertible note payable to stockholder 125,000
-----------
Total current liabilities 819,479
Note payable, net of current portion 170,066
-----------
Total liabilities 989,545
-----------
Commitments and contingencies
Stockholders' equity
Common stock, $0.001 par value
50,000,000 shares authorized
12,688,320 shares issued and outstanding 12,688
Common stock committed 50,000
Additional paid-in capital 3,205,845
Accumulated deficit after December 31, 1998 (2,714,443)
-----------
Total stockholders' equity 554,090
-----------
Total liabilities and stockholders' equity $ 1,543,635
===========
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
TMEX USA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31,
- --------------------------------------------------------------------------------
1999 1998
------------ ------------
(as restated)
Revenues $ 413,999 $ 80,145
Cost of sales 542,566 10,259
------------ ------------
Gross profit (loss) (128,567) 69,886
------------ ------------
Operating expenses
Compensation and related benefits 1,714,641 183,953
Selling, marketing, and advertising 19,191 26,179
General and administrative 852,363 681,907
------------ ------------
Total operating expenses 2,586,195 892,039
------------ ------------
Loss from operations (2,714,762) (822,153)
------------ ------------
Other income (expense)
Interest income 3,128 --
Interest expense (4,436) (222,760)
Realized loss on available-for-sale securities -- (62,250)
Gain on sale of property and equipment 2,427 --
------------ ------------
Total other income (expense) 1,119 (285,010)
------------ ------------
Loss before provision for income taxes (2,713,643) (1,107,163)
Provision for income taxes 800 800
------------ ------------
Net loss $ (2,714,443) $ (1,107,963)
============ ============
Basic and diluted loss per share $ (0.25) $ (0.15)
============ ============
Weighted-average shares outstanding 10,848,741 7,531,816
============ ============
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
TMEX USA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended December 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock
Common Stock Committed Additional
--------------------- ---------------- Paid-In Subscription Accumulated
Shares Amount Shares Amount Capital Receivable Deficit Total
---------- ------- ------ ------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997,
as previously reported 5,578,886 $ 5,579 -- $ -- $ 2,417,872 $ -- $(1,161,909) $ 1,261,542
Prior period adjustment 87,700 87 208,886 (22,500) (1,271,473) (1,085,000)
---------- ------- ------ ------- ----------- -------- ----------- -----------
Balance, December 31, 1997,
as restated 5,666,586 5,666 -- -- 2,626,758 (22,500) (2,433,382) 176,542
Common stock issued for
cash, pursuant to an
offering under Regulation D 495,943 496 203,854 204,350
Common stock issued for
cash 1,039,959 1,040 358,642 359,682
Common stock issued in
connection with the
conversion of a note
payable 1,000,000 1,000 399,000 400,000
Common stock issued to
officers and employees
for services 308,250 308 77,917 78,225
Common stock issued to
third parties for services 715,600 716 249,699 250,415
Interest and compensation
expense related to the
issuance of stock options 25,340 25,340
Payment received for common
stock subscribed 22,500 22,500
Net loss (1,107,963) (1,107,963)
Quasi reorganization,
restated (3,541,345) 3,541,345
---------- ------- ------ ------- ----------- -------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
Common Stock
Common Stock Committed Additional
--------------------- ---------------- Paid-In Subscription Accumulated
Shares Amount Shares Amount Capital Receivable Deficit Total
---------- ------- ------ ------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998,
as restated 9,226,338 $ 9,226 -- $ -- $ 399,865 $ -- $ -- $ 409,091
Common stock issued for
cash, pursuant to an
offering under Regulation D 44,947 45 28,455 28,500
Common stock issued for
services, pursuant to an
offering under Regulation D 30,000 30 29,970 30,000
Common stock issued for
cash 966,386 966 866,810 867,776
Common stock issued to
officers and employees
for services 1,922,500 1,923 1,396,077 1,398,000
Common stock issued to
third parties for services 182,360 182 184,984 185,166
Common stock issued in
connection with the
conversion of a note payable,
pursuant to an offering under
Regulation D 315,789 316 299,684 300,000
Common stock committed for
services 50,000 50,000 50,000
Net loss (2,714,443) (2,714,443)
---------- ------- ------ ------- ----------- -------- ----------- -----------
Balance, December 31, 1999 12,688,320 $12,688 50,000 $50,000 $ 3,205,845 $ -- $(2,714,443) $ 554,090
========== ======= ====== ======= =========== ======== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
TMEX USA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
----------- ------------
(as restated)
<S> <C> <C>
Cash flows from operating activities
Net loss $(2,714,443) $(1,107,963)
Adjustments to reconcile net loss to net cash
used in operating activities
Accounts receivable - bad debt 20,943 --
Due from related parties - bad debt 6,761 --
Depreciation and amortization 184,748 86,655
Gain on sale of property and equipment (2,427) --
Realized loss on available-for-sale securities -- 62,250
Issuance of common stock for services 1,663,166 328,640
Interest expense recorded in connection with
conversion of a note payable into common stock -- 200,000
Interest and compensation expense related to the
issuance of stock options -- 25,340
(Increase) decrease in
Accounts receivable (291,189) 14,026
Due from related parties -- 4,151
Prepaid expenses and other current assets (47,052) 22,050
Increase (decrease) in
Accounts payable and accrued expenses 196,099 (27,942)
Accrued compensation and related benefits 9,450 1,987
Due to related party 20 (10,573)
Income taxes payable -- 800
Deferred revenue 264,943 --
----------- -----------
Net cash used in operating activities (708,981) (400,579)
----------- -----------
Cash flows from investing activities
Purchase of property and equipment (198,955) (309,064)
Proceeds from sale of available-for-sale securities 22,000 --
Proceeds from sale of property and equipment 4,000 --
----------- -----------
Net cash used in investing activities (172,955) (309,064)
----------- -----------
Cash flows from financing activities
Borrowings on note payable -- 300,000
Borrowings on convertible note payable to stockholder 125,000 --
Principal payments on note payable (12,468) (2,254)
Stock subscription collected -- 22,500
Proceeds from issuance of common stock 896,276 564,032
----------- -----------
Net cash provided by financing activities 1,008,808 884,278
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
TMEX USA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
----------- ------------
(as restated)
<S> <C> <C>
Net increase in cash $ 126,872 $ 174,635
Cash, beginning of year 248,515 73,880
----------- -----------
Cash, end of year $ 375,387 $ 248,515
=========== ===========
Supplemental disclosures of cash flow information
Interest paid $ 4,436 $ 360
=========== ===========
Income taxes paid $ 800 $ 800
=========== ===========
</TABLE>
Supplemental schedule for non-cash investing and financing activities
During the year ended December 31, 1999, the Company entered into the following
non-cash transactions:
o Purchased equipment through long-term debt financing totaling $260,694
o Issued common stock in connection with the conversion of a note payable
totaling $300,000
o Received an equity investment as payment on a related party receivable
totaling $15,500
During the year ended December 31, 1998, the Company entered into the following
non-cash transaction:
o Issued common stock valued at $400,000 in connection with the conversion of
a note payable totaling $200,000 plus accrued interest of $200,000
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
TMEX USA, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
December 31, 1999
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND BUSINESS
Business Activities
TMEX USA, Inc. ("TMEX"), previously Swiss Cellular Laboratories, Inc.
("SCL"), is a Nevada corporation organized in July 1987 for the purpose of
providing wholesale and retail telecommunication service. TMEX provides
telephone, video, data, private network, and Internet services via laser
communication links to wholesalers and retailers throughout the United
States and Mexico and through its own switching stations and the purchase
of wholesale telephone service with major carriers.
TMEX S.A. de C.V. ("TMEX Mexico") is a majority owned subsidiary of TMEX
established for the purpose of supporting telecommunication services in
Mexico.
Organization
Effective June 30, 1995, the Board of Directors of NuTek, Inc., previously
Swiss Technique, Inc., approved the pro rata distribution of approximately
90% (270,000 shares) of the 300,000 outstanding shares of TMEX as a tax
free dividend to the holders of record of NuTek, Inc. stock. Such was
effected for the purpose of facilitating the ability of TMEX to expand and
diversify its business.
Effective April 30, 1996, TMEX and TMEX USA, Inc. a Missouri corporation
("TMEX Missouri") entered into a Plan of Reorganization and Agreement,
whereby TMEX issued 1,300,000 shares of common stock in exchange for the
net assets of TMEX Missouri valued at $488,220. In connection with this
agreement, TMEX Missouri was dissolved as a corporation.
SCL was a public company listed on NASDAQ's over-the-counter market with
dormant operations and no assets or liabilities.
Quasi Reorganization
Effective December 31, 1998, the Board of Directors of TMEX elected to
reduce additional paid-in capital by the amount of the accumulated deficit
as of December 31, 1998 totaling $3,541,345 as part of a quasi
reorganization. The balance sheet accounts were not restated as no assets
or liabilities were deemed by management to be impaired.
F-9
<PAGE>
TMEX USA, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
December 31, 1999
- --------------------------------------------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The accompanying consolidated financial statements include the accounts of
TMEX and its wholly owned subsidiary, TMEX Mexico (collectively, the
"Company"). All intercompany accounts and transactions have been eliminated
in the consolidation.
Basis of Presentation
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles which contemplate continuation of
the Company as a going concern. However, since the Company's inception, it
has incurred net losses of $6,255,788, and as of December 31, 1999, its
total current liabilities exceeded its current assets by $113,034. In
addition, cash used in operating activities totaled $708,981 for the year
ended December 31, 1999. Recovery of the Company's assets is dependent upon
future events, the outcome of which is indeterminable. The successful
transition to the attainment of profitable operations is dependent upon
obtaining adequate financing or capital and achieving a level of sales
adequate to support the Company's cost structure. In view of these matters,
realization of a major portion of the assets in the accompanying balance
sheet is dependent upon the Company's ability to meet its financing
requirements and the success of its plans to generate sufficient revenues.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or amounts and
classification of liabilities that might be necessary should the Company be
unable to continue in existence.
Management of the Company plans to raise additional equity capital and to
continue to develop its business to achieve sufficient revenues to cover
its cost structure.
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
the disclosures of contingent assets and liabilities at the date of the
financial statements, as well as the reported amounts of revenues and
expenses during the reporting period. Actual results could materially
differ from those estimates.
Fair Value of Financial Instruments
The Company measures its financial assets and liabilities in accordance
with generally accepted accounting principles. The carrying amounts of the
Company's financial instruments, including cash, accounts receivable,
accounts payable and accrued expenses. The amounts shown for notes payable
also approximate fair value because current interest rates offered to the
Company for debt of similar maturities are substantially the same.
F-10
<PAGE>
TMEX USA, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
December 31, 1999
- --------------------------------------------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property and Equipment
Property and equipment are recorded at cost. Depreciation and amortization
are provided using the Modified Accelerated Cost Recovery System ("MACRS")
method, which approximates the double-declining method over the assets
estimated useful lives as follows:
Equipment 5 years
Office furniture 7 years
Leasehold improvements shorter of lease term or useful life
Maintenance and minor replacements are charged to expense as incurred.
Accounting for the Impairment of Long-Lived Assets
The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of." SFAS No. 121 requires impairment
losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the assets'
carrying amount. Management determined that there was no impairment of
long-lived assets for all periods presented.
Investments in Available-for-Sale Securities
The Company accounts for its investments under the provisions of SFAS No.
115, "Accounting for Certain Investments in Debt and Equity Securities."
Available-for-sale securities, representing an investment in the Company's
prior parent, were reported at fair market value with unrealized holding
gains and losses included as a separate component of stockholders' equity
until realized. During the year ended December 31, 1998, management of the
Company determined that the decline in the fair market was not temporary.
Accordingly, during the year ended December 31, 1998, the Company
recognized a realized loss totaling $62,250. During the year ended December
31, 1999, all available-for-sale securities were sold, resulting in an
insignificant realized loss.
F-11
<PAGE>
TMEX USA, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
December 31, 1999
- --------------------------------------------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Stock-Based Compensation
SFAS No. 123, "Accounting for Stock-Based Compensation," establishes and
encourages the use of the fair value based method of accounting for
stock-based compensation arrangements under which compensation cost is
determined using the fair value of stock-based compensation determined as
of the date of grant and is recognized over the periods in which the
related services are rendered. The statement also permits companies to
elect to continue using the current implicit value accounting method
specified in Accounting Principles Bulletin ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," to account for stock-based
compensation issued to employees. The Company has elected to use the fair
value based method. For stock-based compensation issued to non-employees,
the Company uses the fair value method of accounting under the provisions
of SFAS No. 123.
Loss per Share
The Company calculates loss per share in accordance with SFAS No. 128,
"Earnings Per Share." SFAS No. 128 replaced the presentation of primary and
fully diluted loss per share with the presentation of basic and diluted
loss per share. Basic loss per share excludes dilution and is calculated by
dividing loss available to common stockholders by the weighted-average
number of common shares outstanding for the period. Diluted loss per share
includes the potential dilutive effects that could occur if securities or
other contracts to issue common stock were exercised or converted into
common stock ("potential common stock") that would then share in the loss
of the Company.
As of December 31, 1999 and 1998, the Company had potential common stock,
including options and warrants. The effects of such potential common stock
were not included in diluted loss per share as their effects would have
been anti-dilutive.
Income Taxes
Deferred income taxes are recognized for the tax consequences in future
years of differences between the tax basis of assets and liabilities and
their financial reporting amounts at each period end, based on enacted tax
laws and statutory tax rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized. The provision for income taxes represents the tax
payable for the period, if any, and the change during the period in
deferred tax assets and liabilities.
F-12
<PAGE>
TMEX USA, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
December 31, 1999
- --------------------------------------------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Comprehensive Income
For the year ended December 31, 1999, the Company adopted SFAS No. 130,
"Reporting Comprehensive Income." This statement establishes standards for
reporting comprehensive income and its components in a financial statement.
Comprehensive income as defined includes all changes in equity (net assets)
during a period from non-owner sources. Examples of items to be included in
comprehensive income, which are excluded from net income, include foreign
currency translation adjustments and unrealized gains and losses on
available-for-sale securities. Comprehensive income is not presented in the
Company's financials statements since the Company did not have any of the
items of comprehensive income in any period presented.
Revenue Recognition
The Company recognizes revenues for contracted one-time services upon
completion of the services. The Company recognizes revenues for sales of
equipment and supplies upon shipment of the goods.
The Company recognizes revenues associated with phone debit cards based
upon actual usage. Amounts collected by the Company for the sale of such
cards are deferred, net of related commissions, until such time amounts are
used by the cardholder. As of December 31, 1999, the Company had deferred
revenues totaling $264,943 related to unused phone debit cards.
Recently Issued Accounting Pronouncements
In June 1999, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 136, "Transfer of Assets to a Not-for-Profit Organization or Charitable
Trust that Raises or Holds Contributions for Others." This statement is not
applicable to the Company.
In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities." This statement is not applicable to
the Company.
Reclassifications
Certain amounts have been reclassified in the prior year balances to
conform to the current year presentation.
NOTE 3 - RISKS AND UNCERTAINTIES
Technological Obsolescence
The telecommunications industry is characterized by rapid technological
advancement and change. Should demand for the Company's products prove to
be significantly less than anticipated, the ultimate realizable value of
such products could be substantially less than the amounts reflected in the
accompanying balance sheet.
F-13
<PAGE>
TMEX USA, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
December 31, 1999
- --------------------------------------------------------------------------------
NOTE 3 - RISKS AND UNCERTAINTIES (Continued)
Reliance on Independent Service Providers
The Company is party to various contracts with service providers to obtain
"direct access links" that provide telecommunications connections. The
agreements specify minimum usage and payment amounts and require the
Company to prepay estimated monthly usage and pay certain one-time costs
for initial installation costs, as defined. The Company has the option to
terminate these agreements, subject to early termination charges, to
reimburse the service provider for installation costs related to
connections provided.
The Company is also party to a contract with a reseller to provide the
manufacturing and distribution of prepaid debit phone cards, whereby the
reseller is obligated to sell minimum amounts, as defined, and the Company
is obligated to provide the underlying service for cards sold at specified
rates. Fraudulent calls are at the expense of the reseller. The agreement
can be terminated, as defined, and renews automatically on a year-to-year
basis, as defined.
The Company relies on these carriers to provide service in the United
States and Mexico. Should the Company be unable to maintain these
contracts, use specified minimums, or to obtain service to support its
current or future operations, the Company could experience difficulties in
supplying telecommunications service to its customers or could experience
excessive costs in relation to revenues, which would have a material
adverse effect on the financial position and operations of the Company.
Government Regulation
The telecommunication industry is subject to regulation by various
governmental authorities in the United States and other countries. The
Company's services currently are required to obtain regulatory approval
from the Federal Communications Commission ("FCC"). Management of the
Company believes appropriate approvals by the FCC have been granted. There
can be no assurance that regulatory renewal, approvals, or clearances will
be granted by the FCC on a timely basis, or at all. Not obtaining necessary
regulatory approvals in the United States or in other countries would have
an adverse effect on the Company's business, financial condition, and
results of operations.
Listing and Maintenance Criteria for Over-the-Counter
The Company has been notified by the Securities and Exchange Commission
that the Company is required to file as a reporting company by April 19,
2000. There is no assurance that the Company will be able to obtain or
maintain the standards of a reporting company on the over-the-counter.
F-14
<PAGE>
TMEX USA, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
December 31, 1999
- --------------------------------------------------------------------------------
NOTE 4 - CONCENTRATIONS OF RISK
Cash
As of December 31, 1999, the Company maintained cash balances with
financial institutions totaling $174,322 in excess of federally insured
amounts of $100,000.
Major Customers and Suppliers
During the year ended December 31, 1999, the Company had one customer that
represented 85% of net sales and had one customer that represented 96%
accounts receivable. During the year ended December 31, 1998, the Company
had one customer that represented 66% of net revenues.
During the year ended December 31, 1999, the Company had two service
providers that represented 81% and 12% of purchases. As of December 31,
1999, such service suppliers represented 56% and 21%, respectively, of
accounts payable.
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 1999 consisted of the following:
Equipment $1,142,551
Furniture and fixtures 22,376
Leasehold improvements 29,776
----------
1,194,703
Less accumulated depreciation and amortization 371,513
----------
Total property and equipment $ 823,190
==========
NOTE 6 - NOTE PAYABLE
As of December 31, 1999, note payable consisted of a note payable to a
financial institution bearing interest at 12.23% per annum, secured by
certain equipment, payable monthly at $8,690, including principal and
interest, and maturing in October 2002.
F-15
<PAGE>
TMEX USA, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
December 31, 1999
- --------------------------------------------------------------------------------
NOTE 6 - NOTE PAYABLE (Continued)
As of December 31, 1999, scheduled future maturities of the note payable
were as follows:
Year Ending
December 31,
------------
2000 $ 78,160
2001 88,271
2002 81,795
--------
248,226
Less current portion 78,160
--------
Long term portion $170,066
========
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Leases
The Company leases its facilities and certain equipment under
non-cancelable, operating lease agreements, expiring through August 2001.
The Company also leases certain facilities on a month-to-month basis.
As of December 31, 1999, future aggregate minimum annual lease payments
under operating lease arrangements for the years ending December 31, 2000
and 2001, total $40,200 and $14,000, respectively.
For the years ended December 31, 1999 and 1998, rent expense totaled
$44,734 and $32,128, respectively. Rent expense is included in general and
administrative expenses in the accompanying statements of operations.
Internet Service Agreement
The Company has an Internet service agreement with a provider that expires
in May 2001, whereby for monthly service, the Company is obligated to pay
$1,136 per month. As of December 31, 1999, future aggregate minimum
payments under this agreement for the years ending December 31, 2000 and
2001, total $13,632 and $4,885, respectively.
F-16
<PAGE>
TMEX USA, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
December 31, 1999
- --------------------------------------------------------------------------------
NOTE 7 - COMMITMENTS AND CONTINGENCIES (Continued)
Employment Contracts
On April 12, 2000, the Company entered into contracts with three officers,
whereby for successive one-year terms, the employees will receive an
aggregate annual base salary totaling $340,000 and will be entitled to cash
bonuses equal to 2% of net profits, as defined.
In October 1999, the Company entered into a three-year contract with an
employee, which provides for successive automatic one-year renewals unless
terminated, as defined. The Company is obligated to pay a base salary of
$5,000 per month through December 1999, $10,000 per month from January 2000
through October 2000, and 10% annual increases thereafter, plus a 1.5%
commission on all sales of debit cards. The Company also committed to issue
50,000 shares of common stock upon signing the agreement, and contingent
bonus compensation is to be paid totaling up to 960,000 shares of the
Company's common stock over a period of three years in equal quarterly
installments of 80,000 shares, provided the employee meets minimum profit
targets, as defined. For the year ended December 31, 1999, included in the
accompanying statement of operations is compensation expense totaling
$50,000, representing the fair market value (based on recent cash
transactions) of the 50,000 committed shares of common stock.
Litigation
The Company is party to various matters of litigation that arise in the
normal course of business. Management believes there will not be any
significant impact to the Company's financial position or operations as a
result of these matters.
NOTE 8 - RELATED PARTY TRANSACTIONS
Due to Related Party
As of December 31, 1999, due to related party consists of amounts due to an
entity owned by the President and major stockholder of the Company for
operating services provided.
Convertible Note Payable to Stockholder
Effective December 21, 1999, the Company issued a note payable to a
stockholder for cash used for operations. The note is unsecured,
non-interest bearing, and is convertible into restricted shares of the
Company's common stock at a conversion rate of $1.25 per share. The note is
payable or convertible on demand any time after March 15, 2000.
F-17
<PAGE>
TMEX USA, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
December 31, 1999
- --------------------------------------------------------------------------------
NOTE 9 - CAPITAL TRANSACTIONS
Common Stock Offerings
Commencing in June 1998, the Company began selling shares of common stock
under Regulation D, Rule 504 of the Securities Exchange Act of 1934,
permitting the sale of stock with an aggregate cash offering price of
$1,000,000 or less. Under Rule 504, the Company was exempt from filing
complete registration statements for this offering. Free trading common
stock was issued for cash under this offering. During 1998, the Company
issued 495,943 shares for cash totaling $204,350, or ranging from $0.20 to
$0.64 per share, pursuant to this offering. During 1999, the Company issued
44,947 shares for cash totaling $28,500, or ranging from $0.50 to $1 per
share, and issued 30,000 shares for services valued at $1 per share
pursuant to this offering. Insignificant costs were incurred in association
with issuance of these shares.
In March 1999, the Company issued 315,789 shares of common stock under the
Regulation D offering, discussed below, in connection with the conversion
of a $300,000 convertible note payable, or at a conversion rate of $0.95
per share. In connection with the conversion, the parties agreed to modify
an option to purchase common stock of the Company. The original option was
granted in October 1998, whereby the note holder had the option to purchase
280,000 shares of the Company's restricted common stock for cash at $1.25
per share at the time of conversion of the note payable into shares of
common stock through October 16, 1999. In March 1999, such option was
terminated, and an existing stockholder issued options to the note holder.
Included in the accompanying statement of operations is interest expense
totaling $22,400, representing the value ascribed to these options. The
value of these options was estimated at the date of grant using the
Black-Scholes option-pricing model.
Common Stock Issued for Cash
In December 1997, the Company accepted a subscription for 30,000 restricted
shares of common stock valued at $0.75 per share, or $22,500. Such amounts
were collected in 1998.
During 1998, the Company issued 1,039,959 restricted shares of common stock
for cash totaling $359,682, or ranging from $0.13 to $0.69 per share.
F-18
<PAGE>
TMEX USA, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
December 31, 1999
- --------------------------------------------------------------------------------
NOTE 9 - CAPITAL TRANSACTIONS (Continued)
Common Stock Issued for Cash (Continued)
During 1999, the Company issued 966,386 restricted shares of common stock
for cash totaling $867,776, or ranging from $0.35 to $2 per share.
No offering costs were incurred in association with the issuance of the
above common stock issued for cash.
Common Stock Issued for Services
The Company values all shares issued for services based on the fair value
of the common shares issued for such services.
During 1998, the Company issued 715,600 restricted shares of common stock
for legal, professional, and outside services valued at $250,415, or
ranging from $0.125 to $0.50 per share. The Company also issued 308,250
restricted shares of common stock for salaries and bonuses to officers and
employees valued at $78,225, or ranging from $0.125 to $0.50 per share.
During 1999, the Company issued 182,360 restricted shares of common stock
for legal, professional, and outside services valued at $185,166, or
ranging from $0.35 to $2 per share. The Company also issued 1,922,500
restricted shares of common stock for salaries and bonuses to officers and
employees valued at $1,398,000, or ranging from $0.60 to $1.90 per share.
Other Common Stock Transactions
In February 1997, the Company sold 86,000 units for cash at $0.75 per unit.
Each unit consisted of one share of common stock and one warrant to
purchase one share of common stock for cash at $0.75 per share. The warrant
was exercisable between June 1, 1998 and June 30, 1998, and expired. The
value ascribed to the warrants totaled $30,100. The value of these warrants
was estimated at the date of grant using the Black-Scholes option-pricing
model.
In April 1998, the Company issued 1,000,000 restricted shares of common
stock in connection with the conversion of a $200,000 convertible note
payable. Interest expense totaling $200,000, representing the difference
between the principal amount and the value of the restricted shares, has
been recorded in the accompanying statement of operations.
F-19
<PAGE>
TMEX USA, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
December 31, 1999
- --------------------------------------------------------------------------------
NOTE 9 - CAPITAL TRANSACTIONS (Continued)
Options and Warrants
On April 12, 2000, the Board of Directors approved and adopted an incentive
stock option and non-qualified stock option plan (the "Plan") for
directors, officers, key employees, and consultants. The Plan provides for
the granting of options for common shares at exercise prices equal to or
exceeding the fair market value at the date of grant, as determined by an
option committee consisting of a minimum of three parties (the "Option
Committee"), as defined. Options become exercisable over a period as
determined by the Option Committee. In no event are options to be
exercisable after 10 years from the date of grant. The Board of Directors
has authorized a total of 5,000,000 shares to be available for grant under
the Company's stock option plans.
Options granted under the Plan may be either "incentive stock options,"
within the meaning of Section 422 of the Internal Revenue Code, or
"non-qualified stock options," as determined by the Option Committee at the
time of grant. No incentive stock option may be granted to any person who
owns stock possessing more than 10% of the combined voting power of all
classes of the Company's stock or of its parent ("10% Stockholders"),
unless the exercise price is at least equal to 110% of the fair market
value on the date of grant. Options may be granted under the Plan for terms
of up to five years, except for incentive stock options granted to 10%
Stockholders, which are limited to three-year terms.
The exercise price in the case of incentive stock options granted under the
Plan must be at least equal to the fair market value of the common stock as
of the date of grant. No incentive stock options may be granted to an
optionee under the Plan if the aggregate fair market value (determined on
the date of grant) of the stock with respect to which incentive stock
options are exercisable by such optionee in any calendar year under all
such plans of the Company and its affiliates exceeds $100,000.
No options have been granted under the Plan.
During 1997, in connection with a consulting agreement for common stock and
warrants, the Company issued two options, each for 50,000 shares of common
stock. The two options were exercisable at $0.10 and $0.25, subject to a
share value exceeding $1 and $2, respectively, for five consecutive trading
days. The options expired in June 1998. The Company recorded compensation
expense totaling $36,000, representing the value ascribed to these options.
The value of these options was estimated at the date of grant using the
Black-Scholes option-pricing model.
During 1998, options for 42,000 shares of common stock exercisable at $1
were issued in connection with services provided. The options expired in
December 1998. The value ascribed to these options was insignificant and
was estimated at the date of grant using the Black-Scholes option-pricing
model and was insignificant.
F-20
<PAGE>
TMEX USA, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
December 31, 1999
- --------------------------------------------------------------------------------
NOTE 9 - CAPITAL TRANSACTIONS (Continued)
Options and Warrants (Continued)
The following summarizes options and warrants granted and outstanding
through December 31, 1999:
Number of Shares Weighted-
-------------------- Average
Non- Exercise
Employee Employee Total Price
-------- -------- ----- -----
Balance, December 31,
1997 -- 186,000 186,000 $ 0.44
Granted -- 322,000 322,000 $ 1.22
Expired, cancelled -- (186,000) (186,000) $(0.44)
-------- -------- --------
Balance, December 31, 322,000 322,000 1.22
1998 -- -- -- $ --
Expired, cancelled -- (322,000) (322,000) $(1.22)
-------- -------- --------
Balance, December 31,
1999 -- -- -- $ --
======== ======== ========
NOTE 10 - INCOME TAXES
The components of the income tax provision for the years ended December 31,
1999 and 1998 were as follows:
1999 1998
----- -----
Current $ 800 $ 800
Deferred -- --
----- -----
Total $ 800 $ 800
===== =====
F-21
<PAGE>
TMEX USA, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
December 31, 1999
- --------------------------------------------------------------------------------
NOTE 10 - INCOME TAXES (Continued)
Income tax expense (benefit) for the years ended December 31, 1999 and 1998
differed from the amounts computed applying the federal statutory rate of
34% to pre-tax income as a result of:
1999 1998
--------- ---------
Computed "expected" tax benefit $(922,979) $(346,107)
Deferred state tax benefit (64,546) --
Expenses not deducted for tax purposes 550,643 174,556
Change in beginning of the year balance of the
valuation allowance for deferred tax assets 437,154 171,823
State and local income taxes, net of tax benefit 528 528
--------- ---------
Total $ 800 $ 800
========= =========
Significant components of the Company's deferred tax assets and liabilities
for federal and state income taxes as of December 31, 1999 consisted of the
following:
Deferred tax assets
Net operating loss carryforwards $ 782,779
Value of stock options not exercised 38,402
Other 2,696
Valuation allowance (784,622)
---------
Total deferred tax assets 39,255
Deferred tax liabilities
Depreciation and amortization (9,019)
State taxes (30,236)
---------
Total $ --
=========
The valuation allowance for deferred tax assets as of December 31, 1999
totaled approximately $785,000. The net change in the valuation allowance
for the year ended December 31, 1999 was an increase of approximately
$419,000.
As of December 31, 1999, the Company had net tax operating loss
carryforwards of approximately $2,071,000 available to offset future
federal taxable income and tax liabilities. The federal carryforwards
expire in varying amounts through 2019. The Company also had net tax
operating loss carryforwards of approximately $890,000 available to offset
future California taxable income and tax liabilities. The state
carryforwards expire through 2004.
F-22
<PAGE>
TMEX USA, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
December 31, 1999
- --------------------------------------------------------------------------------
NOTE 11 - PRIOR PERIOD ADJUSTMENTS
As of December 31, 1998, the Company did not reflect charges to operations
for certain assets or the valuation of certain issuances of stock. As of
December 31, 1998, this resulted in a decrease to assets totaling $29,356,
an increase to common stock totaling $90, and a net decrease to additional
paid-in capital totaling $29,386. The impact for 1998 of these adjustments
was reduced by the offsetting the adjustment related to the quasi
reorganization (see Note 1) totaling $1,864,282, representing the
additional adjustment required to reclassify the accumulated deficit to
additional paid-in capital.
As of December 31, 1997, the Company did not reflect the transferor's cost
basis for assets purchased from an officer and stockholder, the issuance of
certain shares of common stock, or the valuation of certain issuances of
stock, options, and warrants. As of December 31, 1997, this resulted in a
decrease to investments totaling $1,085,000, an increase to common stock
totaling $87, an increase to additional paid-in capital totaling $208,886,
and an increase to the accumulated deficit totaling $1,271,473.
Accordingly, the 1998 and 1997 financial statements and balances have been
restated.
NOTE 12 - YEAR 2000 ISSUE
The issue whether computer systems would properly recognize date-sensitive
information when the year changed to 2000 resulted in no system failures to
the Company. The Company is dependent on computer processing in the conduct
of its business activities.
While the Company has taken steps to communicate with outside suppliers, it
cannot guarantee that they have all taken the necessary steps to prevent
any service interruption that may affect the Company.
Based on the current operations of the Company's computer systems,
management believes there will not be any additional costs related to this
issue.
NOTE 13 - SUBSEQUENT EVENTS
Capital Transactions
In February and March 2000, the Company accepted subscriptions for 667,250
shares of the Company's common stock for cash ranging from $1.45 to $1.55
per share, or an aggregate of $937,915, net of costs of $62,085. The per
share price included a 30% discount.
F-23
<PAGE>
TMEX USA, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
December 31, 1999
- --------------------------------------------------------------------------------
NOTE 13 - SUBSEQUENT EVENTS (Continued)
Capital Transactions (Continued)
Subsequent to the year ended December 31, 1999 and through the date of this
report, the Company issued 516,000 shares of restricted common stock for
services valued at $0.80 to $1.75 per share, or an aggregate of $796,450.
The Company also issued 24,911 shares of restricted common stock for cash
at $1.75 per share to two individuals, or an aggregate of $43,594.
F-24
<PAGE>
Management's Discussion and Analysis of Certain Relevant Factors
THIS FOLLOWING INFORMATION SPECIFIES CERTAIN FORWARD-LOOKING STATEMENTS OF
MANAGEMENT OF THE COMPANY. FORWARD-LOOKING STATEMENTS ARE STATEMENTS THAT
ESTIMATE THE HAPPENING OF FUTURE EVENTS ARE NOT BASED ON HISTORICAL FACT.
FORWARD-LOOKING STATEMENTS MAY BE IDENTIFIED BY THE USE OF FORWARD-LOOKING
TERMINOLOGY, SUCH AS "MAY", "SHALL", "WILL", "COULD", "EXPECT", "ESTIMATE",
"ANTICIPATE", "PREDICT", "PROBABLE", "POSSIBLE", "SHOULD", "CONTINUE", OR
SIMILAR TERMS, VARIATIONS OF THOSE TERMS OR THE NEGATIVE OF THOSE TERMS. THE
FORWARD-LOOKING STATEMENTS SPECIFIED IN THE FOLLOWING INFORMATION HAVE BEEN
COMPILED BY OUR MANAGEMENT ON THE BASIS OF ASSUMPTIONS MADE BY MANAGEMENT AND
CONSIDERED BY MANAGEMENT TO BE REASONABLE. OUR FUTURE OPERATING RESULTS,
HOWEVER, ARE IMPOSSIBLE TO PREDICT AND NO REPRESENTATION, GUARANTY, OR WARRANTY
IS TO BE INFERRED FROM THOSE FORWARD-LOOKING STATEMENTS.
THE ASSUMPTIONS USED FOR PURPOSES OF THE FORWARD-LOOKING STATEMENTS SPECIFIED IN
THE FOLLOWING INFORMATION REPRESENT ESTIMATES OF FUTURE EVENTS AND ARE SUBJECT
TO UNCERTAINTY AS TO POSSIBLE CHANGES IN ECONOMIC, LEGISLATIVE, INDUSTRY, AND
OTHER CIRCUMSTANCES. AS A RESULT, THE IDENTIFICATION AND INTERPRETATION OF DATA
AND OTHER INFORMATION AND THEIR USE IN DEVELOPING AND SELECTING ASSUMPTIONS FROM
AND AMONG REASONABLE ALTERNATIVES REQUIRE THE EXERCISE OF JUDGMENT. TO THE
EXTENT THAT THE ASSUMED EVENTS DO NOT OCCUR, THE OUTCOME MAY VARY SUBSTANTIALLY
FROM ANTICIPATED OR PROJECTED RESULTS, AND, ACCORDINGLY, NO OPINION IS EXPRESSED
ON THE ACHIEVABILITY OF THOSE FORWARD-LOOKING STATEMENTS. NO ASSURANCE CAN BE
GIVEN THAT ANY OF THE ASSUMPTIONS RELATING TO THE FORWARD-LOOKING STATEMENTS
SPECIFIED IN THE FOLLOWING INFORMATION ARE ACCURATE, AND WE ASSUME NO OBLIGATION
TO UPDATE ANY SUCH FORWARD-LOOKING STATEMENTS.
Summary Financial Information. The summary financial information set forth below
is derived from the more detailed consolidated financial statements and notes
thereto appearing elsewhere in this Form SB-1. We have prepared our consolidated
financial statements contained in this Form SB-1 in accordance with generally
accepted accounting principles in the United States. See "Report of Independent
Auditors" and "Consolidated Financial Statements". All information should be
considered in conjunction with our consolidated financial statements and the
notes contained elsewhere in this Form SB-1.
Year Ended December 31
================================================================================
Income Statement 1999 1998 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Revenue 413,999 80,145 146,266
- --------------------------------------------------------------------------------
Gross Profit (Loss) (128,567) 69,886 79,315
- --------------------------------------------------------------------------------
Net Income (Loss) (2,714,443) (1,107,963) (569,416)
- --------------------------------------------------------------------------------
Net Income (Loss) Per Share (0.25) (0.15) (0.10)
================================================================================
23
<PAGE>
============================================================================
Balance Sheet 1999 1998 1997
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
Total Assets 1,543,635 854,898 560,331
- ----------------------------------------------------------------------------
Long Term Debt 170,066 300,000 200,000
- ----------------------------------------------------------------------------
Total Liabilities 989,545 445,807 383,789
- ----------------------------------------------------------------------------
Shareholders' Equity 554,090 409,091 176,542
============================================================================
Results of Operations for the Year Ended December 31, 1999 Compared to the Year
Ended December 31, 1998. Revenues for the year ended December 31, 1998 totaled
$80,145 and increased for the year ended December 31, 1999 to $413,999. The
increase represents the beginning of two new revenue sources, (i) in May 1999,
we began offering Mexican voice and data services to United States
telecommunications companies using a laser connection in Laredo Texas which
resulted in $354,611 in 1999 only; and (ii), in December 1999, we began
generating revenues from our debit calling card business which resulted in
$14,057 in 1999 only.
We incurred a net loss of $2,714,443 for the year ended December 31, 1999,
compared to $1,107,963, for the year ended December 31, 1998. The increased loss
for the year ended December 31, 1999, resulted from 2 reasons, (i) the margins
on the telecommunications services being provided are very small; and (ii) stock
issued for services totaled $1,663,166 of compensation expenses in 1999,
compared to $328,640 in 1998.
In total, compensation increased from $183,953 for the year ended December 31,
1998, to $1,714,641 for the year ended December 31, 1999, due primarily to
additional services and compensation paid in stock.
We have incurred losses since our inception. As of December 31, 1999, we had an
accumulated deficit of $2,714,443. We expect to incur operating losses during
2000. Our results of operations have been and may continue to be subject to
significant fluctuations. The results for a particular period may vary due to a
number of factors, many of which are beyond our control, including (i) the
impact of price competition on our prices for products and services; (ii) market
acceptance of new product or service introductions by us or our competitors;
(iii) the timing of expenditures in anticipation of future sales; and, (iv)
economic conditions generally.
Results of Operations for the Year Ended December 31, 1998 Compared to the Year
Ended December 31, 1997. Revenues for the year ended December 31, 1997 totaled
$146,266 and decreased for the year ended December 31, 1998 to $80,145. The
decrease in revenues was primarily attributed to the decrease in the amount of
computer network consulting services provided by us.
We incurred a net loss of $1,107,963 for the year ended December 31, 1998,
compared to approximately $569,416, for the year ended December 31, 1997. The
increased loss for the fiscal year ending December 31, 1998, resulted primarily
from stock issued for services which totaled $328,640 of compensation expenses
in 1998.
Liquidity and Capital Resources. In 1998 and 1999 we funded our operations
primarily from equity investments through issuances of our securities and
through the issuance of notes payable.
In March 1999, we issued 315,789 shares of our $.001 par value common stock
pursuant to Section 4(2) of the Securities Act of 1933 and Rule 506 of
Regulation D promulgated pursuant to that Act in connection with the conversion
of a $300,000 convertible note payable, or at a conversion rate of $0.95 per
share. In connection with the conversion, the parties agreed to modify an option
to purchase shares of our $.001 par value common stock. The original option was
granted in October 1998, whereby the note holder had the option to purchase
280,000 shares of shares of our $.001 par value common stock for cash at $1.25
per share at the time of conversion of the note payable into shares of shares of
our $.001 par value common stock through October 16, 1999. In March 1999, such
option was terminated, and an existing stockholder issued options to the note
holder.
24
<PAGE>
Our available cash and equivalents increased from $248,515 at December 31, 1998,
to $375,387 at December 31, 1999. Our current liabilities increased from
$145,807 to $819,479. Our net property and equipment increased from $539,566 to
$823,190 due primarily to the purchase of additional telecom equipment. Our
property and equipment consists primarily of equipment with an expected useful
life of 5 years. Depreciation expense for the years ended December 31, 1999 and
1998, were $184,748 and $86,655, respectively.
Our cash flows used in operating activities were $400,579 for the year ended
December 31, 1998, and $708,981 for the year ended December 31, 1999. The
increase in funds expended was primarily the result of ongoing capital
acquisitions necessary to effectuate our business plan. Cash provided by
financing activities increased from $884,278 for the year ended December 31,
1998, to $1,008,808 for the year ended December 31, 1999, due to $896,276
received from a private placement of our common stock.
Our available cash and equivalents increased from $73,880 at December 31, 1997
to $248,515 at December 31, 1998. Our net property and equipment increased from
$317,157 to $539,566, and our current liabilities decreased from $183,789 to
$145,807.As of December 31, 1998 we had $146,573 of working capital, which is an
increase from the working capital deficit of $25,817 we had at December 31,
1997.
We believe that current and future available capital resources, including
revenues generated from operations and planned issuances of our capital stock,
will be adequate to meet our anticipated working capital and capital expenditure
requirements for at least the next 12 months. If, however, our capital
requirements or cash flows vary materially from our current projections or if
unforeseen circumstances occur, we may require additional financing sooner than
we anticipate. Failure to raise necessary capital could restrict our growth,
limit our development of new products and services, or hinder our ability to
compete. Such capital may be raised through public or private financing as well
as borrowing and other sources.
There can be no assurance that funding for our operations will be available
under favorable terms, if at all. If adequate funds are not available, we may be
required to curtail operations significantly or to obtain funds by entering into
arrangements with collaborative partners or others that may require us to
relinquish rights to certain products and services that we would not otherwise
relinquish.
Our Plan of Operation For Next 12 Months. We have entered into substantial
contracts in connection with the debit calling card business, and we anticipate
that we will have significant revenue growth in 2000. In addition, we are in the
process of increasing our capacity through the acquisition of new telephone
circuitry which will allow us to enter into new and more cost efficient
contracts in the purchase of wholesale telephone and data minutes.
To fulfill current contracts, we must expand our infrastructure and facilities.
The current capacity of our network is 4 million minutes per month. Our capacity
limitation is primarily based on current access to the Alestra fiber network in
Mexico. We have entered into an agreement for additional connections to
Alestra's fiber network, and we anticipate that the proposed expansion of our
network will increase our capacity to more than 50 million minutes a month with
100% redundancy. We believe that 12 weeks is required from the receipt of
additional financing to complete the connection process.
We anticipate that we will seek additional capital to expand our global Network
Point of Presence (POPs) in Atlanta and New York. With this additional capital
and expansion of our network, we can support existing wholesale and debit
calling card contracts, hire additional personnel, attract more strategic
partners, and implement our sales and marketing strategy.
We believe that the expansion of our POPs in Atlanta and New York will allow us
greater access to competitive rates into telecommunications markets on a global
basis, therefore, lowering the costs of goods sold. The majority of telephone
minutes for our current debit card programs are mainly targeted towards the
Mexican and Latin markets, which traditionally operate upon lower profit
margins. We plan to expand our debit calling card programs globally, including
Central and South America, Europe and Asia upon the completion of our network
expansion.
25
<PAGE>
We also anticipate that the expansion of our POPs in Atlanta and New York will
allow for quicker implementation time for connecting to our customers and
vendors. By having switching facilities in the major United States telephony
cross-connection facilities, we will reduce the implementation time and
bandwidth required to facilitate wholesale contracts for Mexican telephone
traffic and vendors. Delays in implementation could result in the loss of
wholesale contracts due to the changing market prices.
Business Interruption; Reliance on Computer and Telecommunications
Infrastructure. Our success is dependent, in large part, on our continued
investment in sophisticated telecommunications, computer systems and computer
software. We anticipate making significant expenditures for the acquisition,
development and maintenance of such technologies in an effort to remain
competitive and anticipate that such expenditures will be necessary on an
ongoing basis. Moreover, computer and telecommunication technologies are
evolving rapidly and are characterized by short product life cycles, which
requires us to anticipate technological developments. There can be no assurance
that we will be successful in anticipating, managing or adopting such
technological changes on a timely basis or that we will have the cash necessary
to acquire new technologies or improve existing technologies. In addition, our
business is highly dependent on its computer and telecommunications equipment
and software systems, the temporary or permanent loss of which, by physical
damage or operating malfunction, could have a material adverse effect on our
business. Operating malfunctions in the software systems of financial
institutions, market makers and other parties might have an adverse affect on
our operations. Our business is materially dependent on service provided by
various local and long distance telephone companies. A significant increase in
the cost of telephone services that is not recoverable through an increase in
the price of our services, or any significant interruption in telephone
services, could have a material adverse effect on us.
Our systems may fail due to natural disasters, telecommunications failures and
other events, any of which would limit user traffic. Fire, floods, earthquakes,
power loss, telecommunications failures, break-ins and similar events could
damage our communications hardware and computer hardware operations and cause
interruptions in services. Computer viruses, electronic break-ins or other
similar disruptive problems could cause failures in our systems. If any of these
circumstances occurred, our business could be harmed. Our insurance policies, if
any, may not adequately compensate us for any losses that may occur due to any
failures of or interruptions in our systems. We do not presently have a formal
disaster recovery plan. Our telecommunications must accommodate a high volume of
traffic. Our telecommunications may experience slower response times or
decreased traffic for a variety of reasons. In addition, we depend on third
party service providers. Many of these providers and operators have experienced
significant outages in the past and could experience outages, delays and other
difficulties due to system failures unrelated to our systems. Any of these
system failures could harm our business.
Impact of the Year 2000. The Year 2000 (commonly referred to as "Y2K") issue
results from the fact that many computer programs were written using two, rather
than four, digits to identify the applicable year. As a result, computer
programs with time-sensitive software may recognize a two-digit code for any
year in the next century as related to this century. For example, "00", entered
in a date-field for the year 2000, may be interpreted as the year 1900,
resulting in system failures or miscalculations and disruptions of operations,
including, among other things, a temporary inability to process transactions or
engage in other normal business activities. Although companies and governments
in the United States spent an estimated $150 billion to $225 billion repairing
the problem, countries such as Russia and China, which spent relatively minor
amounts, seemed to clear the New Year's Day hurdle with equal success. Major
news media in the United States are reporting that, after years of work and
billions of dollars spent repairing the Year 2000 computer glitch; the
technological tranquility of New Year's Day has raised a new concern that the
United States overreacted to this problem. Although it is still too soon to
conclude positively that the Y2K transition has passed without mishap, we
believe that Y2K issues will not have a material adverse affect on our business.
Significant Parties.
List the full names and business and residential addresses, as applicable, for
the following persons:
26
<PAGE>
a) the issuer's directors;
===================================================================
Full Name Business Address
- -------------------------------------------------------------------
Cooper Lee 5031 Birch Street, Suite G
Newport Beach, CA 92660
- -------------------------------------------------------------------
Crofton Cooper 5031 Birch Street, Suite G
Newport Beach, CA 92660
- -------------------------------------------------------------------
Cecil Zeringue 5031 Birch Street, Suite G
Newport Beach, CA 92660
===================================================================
b) the issuer's officers;
===================================================================
Full Name Business Address
- -------------------------------------------------------------------
Cooper Lee 5031 Birch Street, Suite G
Newport Beach, CA 92660
- -------------------------------------------------------------------
Crofton Cooper 5031 Birch Street, Suite G
Newport Beach, CA 92660
- -------------------------------------------------------------------
Cecil Zeringue 5031 Birch Street, Suite G
Newport Beach, CA 92660
- -------------------------------------------------------------------
Ray Taylor 5031 Birch Street, Suite G
Newport Beach, CA 92660
- -------------------------------------------------------------------
David Shomaker 5031 Birch Street, Suite G
Newport Beach, CA 92660
===================================================================
c) the issuer's general partners;
None. Issuer is a corporation.
d) record owners of 5 percent or more of any class of the issuer's equity
securities;
===================================================================
Full Name Business Address
- -------------------------------------------------------------------
- -------------------------------------------------------------------
David Lohrey 6 Leeward Rd
Belvedere, CA 94920
- -------------------------------------------------------------------
- -------------------------------------------------------------------
Cooper Lee 5031 Birch Street, Suite G
Newport Beach, CA 92660
- -------------------------------------------------------------------
- -------------------------------------------------------------------
Crofton Cooper 5031 Birch Street, Suite G
Newport Beach, CA 92660
===================================================================
e) beneficial owners of 5 percent or more of any class of the issuer's equity
securities;
Same owners as specified in Paragraph 4.
f) promoters of the issuer;
Not Applicable
g) affiliates of the issuer;
None.
27
<PAGE>
h) counsel to the issuer with respect to the proposed offering;
Stepp & Beauchamp LLP
1301 Dove Street, Suite 460
Newport Beach, CA 92660
i) each underwriter with respect to the proposed offering;
There are no underwriters for the proposed offering, although the
Company reserves the right to engage underwriters in the future.
j) the underwriter's directors;
No underwriters. No directors.
k) the underwriter's officers;
No underwriters. No officers.
l) the underwriter's general partners; and
No underwriters. No general partners.
m) counsel to the underwriter.
No underwriters. No counsel.
Relationship with Issuer of Experts Named in Registration Statement.
No "expert", as that term is defined pursuant to Regulation Section 228.509(a)
of Regulation S-B, or the Company's "counsel", as that term is defined pursuant
to Regulation Section 228.509(b) of Regulation S-B, was hired on a contingent
basis, or will receive a direct or indirect interest in the Company, or was a
promoter, underwriter, voting trustee, director, officer, or employee of the
Company, at any time prior to the filing of this Registration Statement.
Selling Security Holders.
Not Applicable.
Changes in and Disagreements with Accountants.
There have been no changes in or disagreements with our accountants since our
formation required to be disclosed pursuant to Item 304 of Regulation S-B,
except for the following:
In February 2000, our former accountant, the firm of Haynie and Company, a
California corporation ("Haynie"), resigned as our independent auditor. Haynie's
reports on the financial statements for either of the past two (2) years did not
contain an adverse opinion or disclaimer of opinion and the reports were not
modified as to audit scope or accounting principles. The decision to change
accountants was recommended and approved by our Board of Directors and did not
result from any disagreement regarding our policies or procedures. In February
2000, we engaged new accountants, the firm of Singer, Lewak, Greenbaum &
Goldstein, LLP as the principal accountants to audit our financial statements. A
correspondence from Haynie dated April 12, 2000 specifying that our disclosures
regarding the change in accountants are true and correct was attached as Exhibit
99 to the Form 10-KSB, which was filed with the Securities and Exchange
Commission on or about April 17, 2000.
28
<PAGE>
Disclosure of Commission Position on Indemnification for Securities Act
Liabilities.
IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION, INDEMNIFICATION FOR
LIABILITIES ARISING PURSUANT TO THE SECURITIES ACT OF 1933 IS CONTRARY TO PUBLIC
POLICY AND, THEREFORE, UNENFORCEABLE.
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Indemnification of Directors and Officers.
Indemnification Agreements. On April 12, 2000, we entered into indemnification
agreements with Cooper Lee, Crofton Cooper and Cecil Zeringue pursuant to which
we agree to indemnify each such person for all expenses and liabilities,
including criminal monetary judgments, penalties and fines, incurred by such
person in connection with any criminal or civil action brought or threatened
against such person by reason of such person being or having been our executive
officer or director. In order to be entitled to indemnification by us, such
person must have acted in good faith and in a manner such person believed to be
in our best interests and, with respect to criminal actions, such person must
have had no reasonable cause to believe his or her conduct was unlawful.
IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION, INDEMNIFICATION FOR
LIABILITIES ARISING PURSUANT TO THE SECURITIES ACT OF 1933 IS CONTRARY TO PUBLIC
POLICY AND, THEREFORE, UNENFORCEABLE.
Other Expenses of Issuance and Distribution.
We will pay all expenses in connection with the registration and sale of the
shares of our $.001 par value common stock. The estimated expenses of issuance
and distribution are set forth below.
===================================================================
Registration Fees Approximately $1,320.00
-------------------------------------------------------------------
Transfer Agent Fees Approximately $2,000.00
-------------------------------------------------------------------
Costs of Printing and Engraving Approximately $3,680.00
-------------------------------------------------------------------
Legal Fees Approximately $10,000.00
-------------------------------------------------------------------
Accounting Fees Approximately $8,000.00
===================================================================
Undertakings.
A. Insofar as indemnification for liabilities arising under the 1933 Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
B. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the 1933
Act;
29
<PAGE>
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) (Section 230.424(b) of Regulation S-B) if, in the
aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective Registration
Statement; and
(iii) To include any additional or changed material information with
respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under the 1933 Act,
each such post-effective amendment shall be deemed to be a new Registration
Statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
Unregistered Securities Issued or Sold Within One Year.
There have been no sales of unregistered securities within the last year which
would be required to be disclosed pursuant to Item 701 of Regulation S-B, except
for the following:
In March 1999, we issued 315,789 shares of our $.001 par value common stock
pursuant to Section 4(2) of the Securities Act of 1933 and Rule 506 of
Regulation D promulgated pursuant to that Act in connection with the conversion
of a $300,000 convertible note payable, or at a conversion rate of $0.95 per
share. In connection with the conversion, the parties agreed to modify an option
to purchase shares of our $.001 par value common stock. The original option was
granted in October 1998, whereby the note holder had the option to purchase
280,000 shares of shares of our $.001 par value common stock for cash at $1.25
per share at the time of conversion of the note payable into shares of shares of
our $.001 par value common stock through October 16, 1999. In March 1999, such
option was terminated, and an existing stockholder issued options to the note
holder.
Index to Exhibits.
Exhibit No.
3.1 Articles of Incorporation
(Charter Document)
3.2 Certificate of Amendment to Articles of Incorporation
(Charter Document)
3.3 Bylaws
5. Opinion Re: Legality
8. Opinion Re: Tax Matters (not applicable)
30
<PAGE>
10.1 Employment Agreement with Crofton Cooper
(material contract)
10.2 Employment Agreement with Cooper Lee
(material contract)
10.3 Employment Agreement with Cecil Zeringue
(material contract)
10.4 Employment Agreement with Michael Garone
(material contract)
10.5 Indemnification Agreement with Crofton Cooper
(material contract)
10.6 Indemnification Agreement with Cooper Lee
(material contract)
10.7 Indemnification Agreement with Cecil Zeringue
(material contract)
10.8 Stock Option Plan
23.1 Consent of Auditors
23.2 Consent of Counsel
24. Power of Attorney is included on the Signature Page of the
Registration Statement
27. Financial Data Schedule
99 Correspondence from former accountants
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it satisfies
all of the requirements of filing this Registration Statement on Form SB-1 and
authorized this Registration Statement to be signed on its behalf by the
undersigned, in the City of Newport Beach, State of California on this 3 day of
May, 2000.
TMEX USA, Inc.
a Nevada corporation
By: /s/ Cooper Lee
-----------------
Cooper Lee
Its: President
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed on this 3 day of May, 2000, the following
persons in the capacities and on the dates stated:
/s/ Crofton Cooper May 3, 2000
- -----------------------------------
Crofton Cooper
Chief Executive Officer, Director
/s/ Cecil Zeringue May 3, 2000
- -----------------------------------
Cecil Zeringue
Vice President, Director
[STAMP]
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
JUL 20 1987
FRANKIE ___ DEL PAPA SECRETARY OF THE STATE
/s/ FRANKIE ___ DEL PAPA
No. 5505-87
ARTICLES OF INCORPORATION
OF
SWISS CELLULAR LABORATORIES, INC.
****
FIRST. The name of the corporation is
SWISS CELLULAR LABORATORIES, INC.
SECOND. Its principal office in the State of Nevada is located at One East
First Street, Reno Washoe County, Reno, Nevada 89501. The name and address of
its resident agent is The Corporation Trust Company of Nevada, One East First
Street, Reno, Nevada 89501.
THIRD. The nature of the business, or objects or purposes proposed to be
transacted, promoted or carried on are:
To engage in any lawful activity and to manufacture, purchase or otherwise
acquire, invest in, own, mortgage, pledge, sell assign and transfer or otherwise
dispose of, trade, deal in and deal with goods, wares and merchandise and
personal property of every class and description.
FOURTH: The amount of the total authorized capital stock of the corporation
is fifty million (50,000,000) shares of common stock of the par value of one
tenth of one cent ($.001) each.
FIFTH. The governing board of this corporation shall be known as directors,
and the number of directors may from time to time be increased or decreased in
such manner as shall be provided by the by-laws of this corporation, provided
that the number of directors shall not be reduced to less than five (5) except
that in cases where all the shares of the corporation are owned bemefocially and
of record by wither one or tow stockholders, the number of directors may be less
than five (5) but not less than the number of stockholders.
The initial number of stockholders shall be one (1).
The name and post-office address of the first Board of Directors, which
shall be three (3), are as follows:
NAME POST-OFFICE ADDRESS
---- -------------------
John D. Davis, Sr. 109 Via Yella
Newport Beach, CA 92663
Rodger W. Garrity 15292 Nantes Cir.
Irvine, CA 92714
Frankie M. Garrity 15292 Nantes Cir.
Irvine, CA 92714
<PAGE>
SIXTH. The capital stock, after the amount of the subscription price, or
par value, has been paid in shall not be subject to assessment to pay the debts
of the corporation.
SEVENTH. The name and post-office address of each of the incorporators
signing the Articles of Incorporation are as follows:
NAME POST-OFFICE ADDRESS
---- -------------------
John D. Davis, Sr. 109 Via Yella
Newport Beach, CA 92663
Rodger W. Garrity 15292 Nantes Cir.
Irvine, CA 92714
Frankie M. Garrity 15292 Nantes Cir.
Irvine, CA 92714
EIGHTH. The corporation is to have perpetual existence.
NINTH. In furtherance and not limitation of the powers conferred by
statute, the board of directors is expressly authorized:
Subject to the by-laws, if any, adopted by the stockholders, to make, alter
or amend the by-laws of the corporation.
To fix the amount to be reserved as working capital over and above its
capital stock paid in, to authorize and cause to be executed mortgages and liens
upon the real and personal property of this corporation.
By resolution passed by a majority of the whole board, to designate one (1)
or more committees, each committee to consist of one (1) or more of the
directors of the corporation, which, to the extent provided in the resolution or
in the by-laws of the corporation, shall have and may exercise the powers of the
board of directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it. Such committee or committees shall have such name
or names as may be stated in the by-laws of the corporation or as may be
determined from time to time by resolution adopted by the board of directors.
When and as authorized by the affirmative vote of stockholders holding
stock entitling them to exercise at least a majority of the voting power given
at a stockholders' meeting called for that purpose, or when authorized by the
written consent of the holders of at least a majority of the voting stock issued
and outstanding, the board of directors shall have power and authority at any
meeting to sell, lease or exchange all of the property and assets of the
corporation, including its good will and its corporate franchises, upon such
terms and conditions as its board of directors deem expedient and for the best
interests of the corporation.
<PAGE>
TENTH. Meetings of stockholders may be held outside the State of Nevada, if
the by-laws so provide. The books of the corporation may be kept (subject to any
provision contained in the statutes) outside the State of Nevada at such place
or places as may be designated from time to time by the board of directors or in
the by-laws of the corporation.
ELEVENTH. This corporation reserves the right to amend, alter, change or
repeal any provision contained in the articles of incorporation, in the manner
now or hereafter prescribed by statute, or by the articles of incorporation, and
all rights conferred upon stockholders herein are granted subject to this
reservation.
WE, THE UNDERSIGNED, being each of the incorporators hereinbefore 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 herein stated are true, and accordingly
have hereunto set our hands this 16th day of July, 1987.
/s/ John D. Davis, Sr.
----------------------
John D. Davis, Sr.
/s/ Rodger W. Garrity
----------------------
Rodger W. Garrity
/s/ Frankie M. Garrity
----------------------
Frankie M. Garrity
<PAGE>
STATE OF CALIFORNIA
COUNTY OF ORANGE
On this 16th day of July, 1987, before me, a Notary Public, personally
appeared John. D. Davis, Sr., Rodger W. Garrity and Frankie M. Garrity, who
severally acknowledged that they executed the above instrument.
/s/ Vicki K. Wessel
----------------------------
Notary Public
- --------------------------------------------------------------------------------
CAT. NO. NN00627
TO 1944 CA (9-84)
[LOGO] TICOR TITLE INSURANCE
(Individual)
STATE OF CALIFORNIA )SS.
COUNTY OF ORANGE )
On July 16, 1987 before me, the undersigned, a Notary Public in and for said
State, personally, appeared John D. Davis, Sr., Rodger W. Garrity and Frankie M.
Garrity, personally known to me or proved to me on the basis of satisfactory
evidence to be the persons whose names are subscribed to the within instrument
and acknowledged that they executed the same.
WITNESS my hand and official deal. [NOTARIAL SEAL]
Vicki K. Wessel
Signature /s/ Vicki K. Wessel NOTARY PUBLIC CALIFORNIA
------------------------ PRINCIPAL OFFICE IN
ORANGE COUNTY
My Commission Expires Feb. 12, 1991
(This areas for official notarial seal)
CERTIFICATE OF AMENDMENT
(After Issuance of Stock) Filed by:
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
JUN 15 1995
DEAN HELLER SECRETARY OF STATE
/s/ Dean Heller
Swiss Cellular Laboratories, Inc.
- --------------------------------------------------------------------------------
Name of Corporation
We the undersigned Rodger W. Garrity and
-------------------------------------
President or Vice President
Frankie M. Garrity of Swiss Cellular Laboratories, Inc.
- ---------------------------------- -------------------------------------------
Secretary or Assistant Secretary Name of Corporation
do hereby certify:
That the Board of Directors of said corporation at a meeting duly convened,
on the 13th day of June, 1995, adopted a resolution to amend the original
articles as follows:
Article FIRST is hereby amended to read as follows:
The name of the corporation is
TMEX USA, INC.
The number of shares of the corporation outstanding and entitled to vote on
an amendment to the Articles of Incorporation is 300,000; that the said
change(s) and amendment have been consented to and approved by a majority vote
of the stockholders holding at least a majority of each class of stock
outstanding and entitled to vote thereon.
/s/ Rodger Garrity
-----------------------------------
President or Vice President
/s/ Frankie M. Garrity
-----------------------------------
Secretary or Assistant Secretary
--------------------------
[SEAL]
State of California ) A. MESBAH
)SS. Comm. #1056732
County of Orange ) NOTARY PUBLIC - CALIFORNIA
ORANGE COUNTY
Comm. Exp. May 17, 1999
--------------------------
On June 14, 1995, personally appeared before me, a Notary Public,
Rodger Garrity and Frankie Garrity, who acknowledged that they executed the
- ----------------------------------
Names of Persons Appearing and Signing Documents
above instrument.
/s/ [ILLEGIBLE]
-----------------------------------------------
Signature of Notary
--------------------------
(Notary Stamp Or Seal) [SEAL]
A. MESBAH
Comm. #1056732
NOTARY PUBLIC - CALIFORNIA
ORANGE COUNTY
Comm. Exp. May 17, 1999
--------------------------
RECEIVED
JUN 15 1995
11:55 [ILLEGIBLE]
------------------
SECRETARY OF STATE
- 6 -
SWISS CELLULAR LABORATORIES, INC.
(a Nevada corporation)
****
BY-LAWS
****
ARTICLE I
OFFICES
Section 1. The principal office shall be in the City of Reno, County of
Washoe, State of Nevada.
Section 2. The corporation may also have offices at such other places both
within and without the State of Nevada as the Board of Directors may from time
to time determine or the business of the corporation may require.
ARTICLE II
MEETING OF STOCKHOLDERS
Section 1. All annual meetings of the stockholders shall be held in the
City of Irvine, State of California. Special meetings of the stockholder may be
held at such time and place within or without the State of Nevada as shall be
stated in the notice of the meeting, or in a duly executed waiver of notice
thereof.
Section 2. Annual meetings of stockholders, commencing with the year 1988,
shall be held on the 30th day of May, if not a legal holiday, and if a legal
holiday, then on the next regular day following, at 10:00 A.M., at which they
shall elect by a plurality vote a board of directors, and transact such other
business as may properly be brought before the meeting.
Section 3. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the articles of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the board of
directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
<PAGE>
Section 4. Notices of meetings shall be in writing and signed by the
president or a vice president, or the secretary, or an assistant secretary, or
by such other person or persons as the directors shall designate. Such notice
shall state the purpose or purposes for which the meeting is called and the time
when, and the place, which may be within or without this state, where it is to
be held. A copy of such notice shall be either delivered personally to or shall
be mailed, postage prepaid, to each stockholder of record entitled to vote at
such meeting not less than ten nor more than sixty days before such meeting. If
mailed, it shall be directed to a stockholder at his address as it appears upon
the records of the corporation and upon such mailing of any such notice, the
service thereof shall be complete, and the time of the notice shall begin to run
from the date upon which such notice is deposited in the mail for transmission
to such stockholder. Personal delivery of any such notice to any officer of a
corporation or association, or to any member of a partnership shall constitute
delivery of such notice to such corporation, association or partnership. In the
event of the transfer of stock after delivery or mailing of the notice of and
prior to the holding of the meeting, it shall not be necessary to deliver or
mail notice of the meeting to the transferee.
Section 5. Business transacted at any special meeting of stockholders shall
be limited to the purpose stated in the notice.
Section 6. The holders of a majority of the stock issued an outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the articles of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified.
Section 7. When a quorum is present or represented at any meeting, the vote
of the holders of a majority of the stock haveing voting power present in person
or represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the articles of incorporation a different vote is required in which case such
express provision shall govern and control the decision of such question.
Section 8. Every stockholder of record of the corporation shall be entitled
at each meeting of stockholders to one vote for each share of stock standing in
his name on the books of the corporation.
<PAGE>
Section 9. At any meeting of the stockholders, any stockholder may be
represented and vote by a proxy or proxies appointed by an instrument in
writing. In the event that any such instrument in writing shall designate two or
more persons to act as proxies, a majority of such persons present at the
meeting, or, if only one shall be present, then that one shall have and may
exercise all of the powers conferred by such written instrument upon all of the
persons so designated unless the instrument shall otherwise provide. No such
proxy shall be valid after the expiration of six months from the date of its
execution, unless coupled with an interest, or unless the person executing it
specifies therein the length of time for which it is to continue in force, which
in no case shall exceed seven years from the date of its execution. Subject to
the above, any proxy duly executed is not revoked and continues in full force
and effect until an instrument revoking it or a duly executed proxy bearing a
later date is filed with the secretary of the corporation.
Section 10. Any action, except election of directors, which may be taken by
the vote of the stockholders at a meeting, may be taken without a meeting if
authorized by the written consent of stockholders holding at least a majority of
the voting power, unless the provisions of the statutes or of the articles of
incorporation require a greater proportion of voting power to authorize such
action in which case such greater proportion of written consents shall be
required.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole board
shall be five (5). The directors shall be elected at the annual meeting of the
stockholders, and except as provided in Section 2 of this article, each director
elected shall hold office until his successor is elected and qualified.
Directors need not be stockholders.
Section 2. Vacancies, including those caused by an increase in the number
of directors, may be filled by a majority of the remaining directors though less
than a quorum. When one or more directors shall give notice of his or their
resignation to the board, effective at a future date, the board shall have power
to fill such vacancy or vacancies to take effect when such resignation or
resignations shall become effective, each director so appointed to hold office
during the remainder of the term of office of the resigning director or
directors.
Section 3. The business of the corporation shall be managed by its board of
directors which may exercise all such powers of the corporation and do all such
lawful acts and things as are not by statute or by the articles of incorporation
or by these by-laws directed or required to be exercised or done by the
stockholders.
<PAGE>
Section 4. The board of directors of the corporation may hold meetings,
both regular and special, either within or without the State of Nevada.
MEETINGS OF THE BOARD OF DIRECTORS
Section 5. The first meeting of each newly elected board of directors shall
be held at such time and place as shall be fixed by the vote of the stockholders
at the annual meeting and no notice of such meeting shall be necessary to the
newly elected directors in order legally to constitute the meeting, provided a
quorum shall be present. In the event of the failure of the stockholders to fix
the time or place of such first meeting of the newly elected board of directors,
or in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors, or as shall be specified in a written waiver signed by all
of the directors.
Section 6. Regular meetings of the board of directors may be held without
notice at such time and place as shall from time to time be determined by the
board.
Section 7. Special meetings of the board of directors may be called by the
president or secretary on the written request of two directors. Written notice
of special meetings of the board of directors shall be given to each director at
least ten (10) days before the date of the meeting.
Section 8. A majority of the board of directors, at a meeting duly
assembled, shall be necessary to constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which a quorum is present shall be the act of the board of directors, except as
may be otherwise specifically provided by statute or by the articles of
incorporation. Any action required or permitted to be taken at a meeting of the
directors may be taken without a meeting if a consent in writing, setting forth
the action so taken, shall be signed by all of the directors entitled to vote
with respect to the subject matter thereof.
COMMITTEES OF DIRECTORS
Section 9. The board of directors may, by resolution passed by a majority
of the whole board, designate one or more committees, each committee to consist
of one or more of the directors of the corporation, which, to the extent
provided in the resolution, shall have and may exercise the powers of the board
of directors in the management of the business and affairs of the corporation to
be affixed to all papers which may require it. Such committee or committees
shall have such name or names as may be determined from time to time by
resolution adopted by the board of directors.
Section 10. The committees shall keep regular minutes of their proceedings
and report the same to the board when required.
<PAGE>
COMPENSATION OF DIRECTORS
Section 11. The directors may be paid their expenses, if any, of attendance
at each meeting of the board of directors and may be paid a fixed sum for
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. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
ARTICLE IV
NOTICES
Section 1. Notices to directors and stockholders shall be in writing and
delivered personally or mailed to the directors or stockholders at their
addresses appearing on the books of the corporation. Notice by mail shall be
deemed to be given at the time when the same shall be mailed. Notice to
directors may also be given by telegram.
Section 2. Whenever all parties entitled to vote at any meeting, whether of
directors or stockholders, consent, either by a writing on the records of the
meeting or filed with the secretary, or by presence at such meeting and oral
consent entered on the minutes, or by taking part in the deliberations at such
meeting without objection, the doings of such meeting shall be as valid as if
had a meeting regularly called and noticed, and at such meeting any business may
be transacted which is not excepted from the written consent or to the
consideration of which no objection for want of notice or of such consent,
provided a quorum was present at such meeting, the proceedings of said meeting
may be ratified and approved and rendered likewise valid and the irregularity or
defect therein waived by a writing signed by all parties having the right to
vote at such meetings; and such consent or approval of stockholders may be by
proxy or attorney, but all such proxies and powers of attorney must be in
writing.
Section 3. Whenever any notice whatever is required to be given under the
provisions of the statutes, of the articles of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the board of
directors and shall be a president, a vice president, a secretary and a
treasurer. Any person may hold two or more offices.
<PAGE>
Section 2. The board of directors at its first meeting after each annual
meeting of stockholders shall choose a president, a vice president, a secretary
and a treasurer, none of whom need be a member of the board.
Section 3. The board of directors may appoint additional vice presidents,
and assistant secretaries and assistant treasurers and such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. The salaries of all officers and agents of the corporation shall
be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until their
successors are chosen and qualify. Any officer elected or appointed by the board
of directors may be removed at any time by the affirmative vote of a majority of
the board of directors. Any vacancy occurring in any office of the corporation
by death, resignation, removal or otherwise shall be filled by the board of
directors.
THE PRESIDENT
Section 6. The president shall be the chief executive officer of the
corporation, shall preside at all meetings of the stockholders and the board of
directors, shall have general and active management of the business of the
corporation, and shall see that all orders and resolutions of the board of
directors are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts requiring
a seal, under the seal of the corporation, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the board of directors to some
other officer or agent of the corporation.
THE VICE PRESIDENT
Section 8. The vice president shall, in the absence or disability of the
president, perform the duties and exercise the powers of the president and shall
perform such other duties as the board of directors may form time to time
prescribe.
<PAGE>
THE SECRETARY
Section 9. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book kept for
that purpose and shall perform like duties for the standing committees when
required. He shall give, or cause to be given, notice of all meetings of the
stockholders and special meetings of the board of directors, and shall perform
such other duties as may be prescribed by the board of directors, and shall
perform such other duties as may be prescribed by the board of directors or
president, under whose supervision he shall be. He shall keep in safe custody
the seal of the corporation and, when authorized by the board of directors,
affix the same to any instrument requiring it and, when so affixed, it shall be
attested by his signature or by the signature of the treasurer or an assistant
secretary.
THE TREASURER
Section 10. The treasurer shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors.
Section 11. He shall disburse the funds of the corporation as may be
ordered by the board of directors taking proper vouchers for such disbursements,
and shall render to the president and the board of directors, at the regular
meetings of the board, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 12. If required by the board of directors, he shall give the
corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the board of directors for the faithful performance of the
duties of his office and for the restoration to the corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Every stockholder shall be entitled to have a certificate,
signed by the president or a vice president and the treasurer or an assistant
treasurer, or the secretary or an assistant secretary of the corporation,
certifying the number of shares owned by him in the corporation. When the
corporation is authorized to issue shares of more than one class or more than
one series of any class, there shall be set forth upon the face or back of the
certificate, or the certificate shall have a statement that the corporation will
furnish to any stockholders upon request and without charge, a full or summary
statement of the designations, preferences and relative, participating, optional
or other specific rights of the various classes of stock or series thereof and
the qualifications, limitations or restrictions of such rights, and, if the
corporation shall be authorized to issue only
<PAGE>
special stock, such certificate shall set forth in full or summarize the rights
to the holders of such stock.
Section 2. Whenever any certificate is countersigned or otherwise
authenticated by a transfer agent or transfer clerk, and by a registrar, then a
facsimile of the signatures of the officers or agents of the corporation may be
printed or lighographed upon such certificate in lieu of the actual signatures.
In case any officer or officers who shall have signed, or whose facsimile
signature or signatures shall have been used on, any such certificate or
certificates shall cease to be such officer or officers of the corporation,
whether because of death, resignation or otherwise, before such certificate or
certificates shall have been delivered by the corporation, such certificate or
certificates may nevertheless be adopted by the corporation and be issued and
delivered as though the person or persons who signed such certificate or
certificates, or whose facsimile signature or signatures shall have been used
thereon, had not ceased to be the officer or officers of such corporation.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate or
certificates to be issued in place of any certificates or certificates to be
issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificate of stock to be
lost or destroyed. When authorizing such issue of a new certificate or
certificates, the board of directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and/or give the corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost or
destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
CLOSING OF TRANSFER BOOKS
Section 5. The directors may prescribe a period not exceeding sixty days
prior to any meeting of the stockholders during which no transfer of stock on
the books of the corporation may be made, or may fix a day not more than sixty
days prior to the holding of any such meeting as the day as of which
stockholders entitled to notice of and to vote at such meeting shall be
determined; and only stockholders of record on such day shall be entitled to
notice or to vote at such meeting.
<PAGE>
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Nevada.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject to
the provisions of the articles of incorporation, if any, may be declared by the
board of directors at any regular or special meeting pursuant to law. Dividends
may be paid in cash, in property, or in shares of the capital stock, subject to
the provisions of the articles of incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish and such reserves in the
manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by resolution
of the board of directors.
<PAGE>
SEAL
Section 5. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its incorporation and the words "Corporate Seal,
Nevada."
ARTICLE VIII
AMENDMENTS
Section 1. These by-laws may be altered or repealed at any regular meeting
of the stockholders or of the board of directors or at any special meeting of
the stockholders or the board of directors if notice of such alteration or
repeal be contained in the notice of such special meeting.
AGREEMENT OF EMPLOYMENT
THIS AGREEMENT OF EMPLOYMENT ("Agreement") is made and entered into in
duplicate this 12th day of April, 2000, by and between TMEX, Inc., a Nevada
corporation ("Employer"), and Crofton Cooper("Executive").
RECITALS
A. Employer is a corporation duly organized and validly existing pursuant
to the laws of the State of Nevada.
B. Employer is in the business of developing and marketing high-speed
communication networks and services.
C. Employer desires to employ Executive, and Executive desires to serve, as
Chief Executive Officer of Employer and to do and perform any and all services,
acts and things specified hereinafter.
AGREEMENT
NOW, THEREFORE, IN CONSIDERATION OF THE RECITALS SPECIFIED ABOVE THAT SHALL
BE DEEMED TO BE A SUBSTANTIVE PART OF THIS AGREEMENT, AND THE MUTUAL COVENANTS,
PROMISES, UNDERTAKINGS, AGREEMENTS, REPRESENTATIONS AND WARRANTIES SPECIFIED IN
THIS AGREEMENT AND OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND
SUFFICIENCY OF WHICH ARE HEREBY ACKNOWLEDGED, WITH THE INTENT TO BE OBLIGATED
LEGALLY AND EQUITABLY, THE PARTIES DO HEREBY COVENANT, PROMISE, AGREE, REPRESENT
AND WARRANT AS FOLLOWS:
ARTICLE I.
DEFINITIONS
For the purposes of this Agreement, the following terms have the meanings
specified or referred to in this Article I.
Section 1.1 "Basic Compensation"-- Salary and Benefits.
Section 1.2 "Board of Directors" -- the Board of Directors of Employer.
Section 1.3 "Confidential Information" -- information that is used in
Employer's and
1
<PAGE>
Employer's affiliates' business and (i) any and all trade secrets concerning the
business and affairs of the Employer, product specifications, data, know-how,
formulae, compositions, processes, designs, sketches, photographs, graphs,
drawings, samples, inventions and ideas, past, current and planned research and
development, current and planned manufacturing and distribution methods and
processes, customer lists, current and anticipated customer requirements, price
lists, market studies, business plans, computer software and programs (including
object code and source code), computer software and database technologies,
systems, structures and architectures (and related processes, formulae,
compositions, improvements, devices, know-how, inventions, discoveries,
concepts, ideas, designs, methods and information, of the Employer and any other
information, however documented, of the Employer that is a trade secret within
the meaning of applicable law; (ii) any and all information concerning the
business and affairs of the Employer (which includes historical financial
statements, financial projections and budgets, historical and projected sales,
capital spending budgets and plans, the names and backgrounds of key personnel,
personnel training and techniques and materials), however documented; and (iii)
any and all notes, analysis, compilations, studies, summaries, and other
material prepared by or for the Employer containing or based, in whole or in
part, on any information included in the foregoing.
Confidential Information shall not include (i) information already in
Executive's possession prior to the date of this Agreement and that was not
acquired or obtained from Employer or its affiliates or pursuant to a
confidentiality agreement; (ii) information that is obtained or was previously
obtained by the Executive from a third Person who, insofar as is known to the
Executive after reasonable inquiry, is not prohibited from transmitting the
information to the Executive by contractual, legal or fiduciary obligation to
the Employer or its affiliates; or (iii) information that is, or becomes,
generally available to the public other than as a result of a direct or indirect
disclosure by the Executive.
Section 1.4 "Effective Date" -- the date specified in the preamble of the
Agreement.
Section 1.5 "Employee Inventions" -- all discoveries, inventions,
improvements, designs, innovations and works of authorship (including all data
and records pertaining thereto) that relate to the business of Employer, whether
or not able to be patented, copyrighted or reduced to writing, that Employee may
discover, invent or originate during the term of his employment pursuant to this
Agreement, and for a period of six (6) months following the termination of this
Agreement, either alone or with other persons and whether or not during working
hours or by the use of the facilities of Employer.
Section 1.6 "Fiscal Year" -- Employer's fiscal year, as it exists on the
Effective Date or as changed from time to time.
Section 1.7 "Person" -- any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, or
governmental body.
2
<PAGE>
ARTICLE II.
EMPLOYMENT TERMS AND DUTIES
Section 2.1 Employment. Employer hereby employs Executive, and Executive
hereby accepts employment by Employer, upon the terms and subject to the
conditions set forth in this Agreement.
Section 2.2 Term. Subject to the provisions of Article VI, the term (the
"Term") of Executive's employment pursuant to this Agreement will be one (1)
year, beginning on the Effective Date and ending that date which is exactly one
(1) year after the Effective Date ("the First Term"). The term of this Agreement
shall be renewed automatically for succeeding periods of one (1) year each
unless either party gives to the other party notice, at least sixty (60) days
prior to the expiration of any term, of the noticing party's intention not to
renew the term of this Agreement.
Section 2.3 Duties. Executive will have such duties as are assigned or
delegated to Executive by the Board of Directors, and will initially serve as
Chief Executive Officer of Employer. Executive will (i) devote his entire
business time, attention, skill, and energy exclusively to the business of
Employer, (ii) use his best efforts to promote the success of Employer's
business, and (iii) cooperate fully with the Board of Directors in the
advancement of the best interests of Employer. If Executive is elected as a
member of the Board if Directors, or as a director or officer of any of
Employer's affiliates, Executive will fulfill his duties as such director or
officer without additional compensation.
ARTICLE III.
COMPENSATION AND BENEFITS
Section 3.1 Basic Compensation. During the Term, Executive will receive an
aggregate Basic Compensation of One Hundred Twenty Thousand Dollars
($120,000.00) annually which will be payable in equal periodic installments
according to Employer's customary payroll practices, but no less frequently than
semi-monthly ("Salary"), and benefits resulting from Executive's participation
in such pension, life insurance, hospitalization, major medical, disability and
other employee benefit plans of Employer that may be in effect from time to time
(including any right to an automobile), to the extent Executive is eligible
pursuant to the terms of those plans (collectively, the "Benefits").
Section 3.2 Bonus. In addition to the Salary and the Benefits, Executive
shall be entitled to receive from Employer and Employer shall pay to Executive,
for each of Employer's complete fiscal quarters during the term of this
Agreement, a cash bonus in an amount equal to two percent (2%) of the "net
profits" of Employer for that fiscal quarter. For purposes of this Section 3.2,
the term "net profits" shall be defined as and mean all gross income from the
operations of the Employer (other than capital gains) less all expenses,
deductions and credits of Employer attributable to those operations. In
computing net profits, federal and state income taxes and payments made pursuant
to this Agreement and other bonus and other incentive plans of Employer shall be
deducted. The net profits shall be determined in accordance with generally
accepted accounting principles utilized by the certified public accountants
regularly employed by Employer, and the determination of those accountants shall
obligate and be conclusive on Employer and Executive. Payment of that bonus
shall be made no later than forty-five (45) days after the end of Employer's
fiscal quarter for which such bonus is due and payable.
3
<PAGE>
Section 3.3 Health Care Benefits. Employer shall include Employee in the
hospital, surgical, medical and dental benefit plan maintained by Employer.
Section 3.4 Illness. During the Term, Executive shall be entitled to ten
(10) days per year as sick leave with full pay. Sick leave shall not be
accumulated.
Section 3.5 Other Benefits. Executive shall receive all other benefits of
employment available generally to other employees of Employer.
ARTICLE IV.
FACILITIES AND EXPENSES
Section 4.1 Office and Staff. Employer will furnish Executive office
facilities, equipment, supplies, and such other facilities and personnel, as
Employer deems necessary or appropriate for the performance of Executive's
duties pursuant to this Agreement.
Section 4.2 Reimbursement of Business Expenses. Employer will pay on behalf
of Executive (or reimburse the Executive for) reasonable business expenses
incurred by Executive at the request of, or on behalf of, Employer in the
performance of the Executive's duties pursuant to this Agreement, and in
accordance with Employer's employment policies. Executive must file expense
reports with respect to such expenses in accordance with Employer's policies.
ARTICLE V.
VACATIONS AND HOLIDAYS
Section 5.1 Annual Vacation. Executive will be entitled to ten (10) days
paid vacation each Fiscal Year in accordance with the vacation policies of
Employer in effect for Employer's executive officers from time to time. Vacation
must be taken by Executive at such time or times as approved by the Chairman of
the Board of Directors or the Board of Directors. In the event that Executive is
unable for any reason to take the total amount of vacation time authorized
herein during any year, Executive may not accrue that time and add that time to
vacation time for any following year. In lieu of vacation leave, Executive may
elect to receive payment for all or any part of the vacation leave to which
Executive is entitled, in which case the vacation leave shall be valued at the
amount of salary earned by Executive during an equivalent period of time during
the fiscal year in which such vacation leave accrued.
Section 5.2 Paid Holidays. Executive shall be entitled to be paid for those
holidays designated by Employer, as specified in Employer's personnel policies.
ARTICLE VI.
TERMINATION
Section 6.1 (a) Disability. Employer may terminate this Agreement for
Disability. "Disability" shall exist if because of ill health, physical or
mental disability, or any other reason
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beyond Executive's control, and notwithstanding reasonable accommodations made
by Employer, Executive shall have been unable, unwilling or shall have failed to
perform Executive's duties pursuant to this Agreement, as determined in good
faith by the Board of Directors, for a period of thirty (30) consecutive days,
or if, in any twelve (12) month period, Executive shall have been unable or
unwilling or shall have failed to perform Executive's duties for a period of
sixty (60) days, irrespective of whether or not such days are consecutive.
Executive hereby consents to examination by a physician designated by Employer,
and Executive hereby waives any physician-patient privilege resulting from any
such examination.
(b) Cause. Employer may terminate Executive's employment for Cause.
Termination for "Cause" shall mean termination because of Executive's (i) gross
incompetence; (ii) willful gross misconduct that causes economic harm to
Employer or its affiliates or that brings discredit to Employer's or Employer's
affiliates' reputation; (iii) failure to follow directions of the Board of
Directors that are consistent with Executive's duties pursuant to this
Agreement; (iv) final, nonappealable conviction of a felony involving moral
turpitude; or (v) material breach of any provision of this Agreement. Those
events specified in clauses (i), (iii) and (v) of this subsection shall not
constitute Cause unless Employer notifies Executive thereof in writing,
specifying in reasonable detail the basis therefor and specifying that any such
event is for Cause, and unless Executive fails to cure such matter within 60
days after such notice is sent or given pursuant to this Agreement. Executive
shall be permitted to respond and to defend himself before the Board of
Directors or any appropriate committee thereof within a reasonable time after
written notification of any proposed termination for Cause pursuant to any event
specified in clauses (i), (ii), (iii) or (v) of this subsection.
(c) Without Good Reason. During the Term, Executive may terminate his
employment Without Good Reason. Termination "Without Good Reason" shall mean
termination of the Executive's employment by the Executive other than
termination for Employer Breach or resulting from the death of Executive.
(d) Explanation of Termination of Employment. Any party terminating this
Agreement shall give prompt written notice ("Notice of Termination") to the
other party hereto advising such other party of the termination of this
Agreement. Within thirty (30) days after notification that this Agreement has
been terminated, the terminating party shall deliver to the other party hereto a
written explanation, which shall specify in reasonable detail the basis for such
termination and shall indicate whether termination is being made for Cause,
Without Cause or for Disability (if Employer has terminated the Agreement) or
for Employer Breach or Without Good Reason (if Executive has terminated the
Agreement).
(e) Date of Termination. "Date of Termination" shall mean the date on which
Notice of Termination is sent or given pursuant to this Agreement.
Section 6.2 Compensation During Disability or Upon Termination.
(a) During Disability. During any period that Executive fails to perform
his duties pursuant to this Agreement because of ill health, physical or mental
disability, or any other reason beyond Executive's control, Executive shall be
entitled to receive the sick pay specified by the provisions of Section 3.4 of
this Agreement.
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(b) Termination for Disability. If Employer shall terminate Executive's
employment for Disability, Employer's obligation to pay Basic Compensation shall
terminate, except that Employer shall pay Executive (i) accrued but unpaid Basic
Compensation through the Date of Termination, and (ii) the benefits set forth in
Section 6.2(d).
(c) Termination for Cause or Without Good Reason. If Employer shall
terminate Executive's employment for Cause or if the Executive shall terminate
his employment Without Good Reason, then Employer's obligation to pay Basic
Compensation shall terminate, except that Employer shall pay Executive his
accrued but unpaid Basic Compensation through the Date of Termination.
(d) Employee Benefits. Upon the termination of Executive's employment with
Employer, the Basic Compensation shall terminate on the Date of Termination.
Section 6.3 Death of Executive. If Executive dies prior to the expiration
of the Term, Executive's employment and other obligations pursuant to this
Agreement shall automatically terminate and all compensation, to which Executive
is or would have been entitled pursuant to (including, without limitation, under
Section 3.1), shall terminate as of the date in which Executive's death occurs.
ARTICLE VII.
NON-DISCLOSURE COVENANT; EMPLOYEE INVENTIONS
Section 7.1 Acknowledgments by the Executive. Executive acknowledges that
(a) during the Term and as a part of his employment, Executive will have access
to Confidential Information; (b) public disclosure of such Confidential
Information could have an adverse effect on the Employer and its business; (c)
because Executive possesses substantial technical expertise and skill with
respect to Employer's business, Employer desires to obtain exclusive ownership
of each Employee Invention, and Employer will be at a substantial competitive
disadvantage if Employer fails to acquire exclusive ownership of each Employee
Invention; and (d) the provisions of this Article VII are reasonable and
necessary to prevent the improper use or disclosure of Confidential Information
and to provide Employer with exclusive ownership of all Employee Inventions.
Section 7.2 Agreements of the Executive. In consideration of the
compensation and benefits to be paid or provided to Executive by Employer
pursuant to this Agreement, Executive covenants as follows:
(a) Confidentiality.
(i) During and following the Term, Executive will hold in confidence the
Confidential Information and will not disclose the Confidential
Information, or any portion thereof, to any Person, except with the
specific prior written consent of Employer or except as otherwise
expressly permitted by the terms of this Agreement.
(ii) Any trade secrets of Employer or its affiliates will be entitled to
all of the protections and benefits pursuant to applicable law. If
any information that Employer or its
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affiliates deems to be a trade secret is determined by a court of
competent jurisdiction not to be a trade secret for purposes of this
Agreement, such information will, nevertheless, be considered
Confidential Information for purposes of this Agreement. Executive
hereby waives any requirement that Employer submit proof of the
economic value of any trade secret or post a bond or other security.
(iii) None of the foregoing obligations and restrictions applies to any
part of the Confidential Information that Executive demonstrates was
or became generally available to the public other than as a result of
a direct or indirect disclosure by Executive.
(iv) The Executive will not remove from the Employer's or Employer's
affiliates' premises (except to the extent such removal is for
purposes of the performance of the Executive's duties at home or
while traveling, or except as otherwise specifically authorized by
Employer) any document, record, notebook, plan, model, component,
device, or computer software or code, whether embodied in a disk or
in any other form (collectively, the "Proprietary Items"). Executive
agrees that, as between Employer and Executive, all of the
Proprietary Items, whether or not developed by Executive, are the
exclusive property of Employer. Upon termination of this Agreement by
either party, or upon the request of Employer during the Term,
Executive will return to Employer all of the Proprietary Items in
Executive's possession or subject to Executive's control, and
Executive shall not retain any copies, abstracts, sketches, or other
physical embodiment of any of the Proprietary Items.
(b) Employee Inventions. Each Employee Invention will belong exclusively to
Employer. Executive covenants that Executive will promptly:
(i) disclose to Employer in writing any Employee Invention;
(ii) assign to Employer or to a party designated by Employer, at
Employer's request and without additional compensation, all of
Executive's right to the Employee Invention for the United States and
all foreign jurisdictions;
(iii) execute and deliver to Employer such applications, assignments, and
other documents as Employer may request in order to apply for and
obtain patents or other registrations with respect to any Employee
Invention in the United States and any foreign jurisdictions;
(iv) sign all other papers necessary to carry out the above obligations;
and
(v) give testimony and render any other assistance in support of
Employer's rights to any Employee Invention.
Section 7.3 Disputes or Controversies. Executive acknowledges that in the
event that a dispute or controversy resulting from or relating to this Agreement
be submitted for adjudication to any court, arbitration panel, or other third
party, the preservation of the secrecy of Confidential
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Information may be jeopardized. All pleadings, documents, testimony and records
relating to any such adjudication will be maintained in secrecy and will be
available for inspection by Employer, Executive, and their respective attorneys
and experts, who will agree, in advance and in writing, to receive and maintain
all such information in secrecy, except as may be limited by them in writing.
ARTICLE VIII.
NON-COMPETITION AND NON-INTERFERENCE
Section 8.1 Acknowledgments by Executive. Executive acknowledges that (a)
the services to be performed by him pursuant to this Agreement are of a special,
unique, unusual, extraordinary, and intellectual character; (b) Employer's
business conducted nationally and Employer's services and products are marketed
throughout the United States; (c) Employer competes with other businesses that
are or could be located in any part of the United States; and (d) the provisions
of this Article VIII are reasonable and necessary to protect the Employer's
business.
Section 8.2 Covenants of Executive. In consideration of the acknowledgments
by Executive, and in consideration of the compensation and benefits to be paid
or provided to Executive by Employer, Executive covenants that Executive will
not, directly or indirectly:
(a) during the Term, except in the course of his employment pursuant to
this Agreement, and during the Post-Agreement Period, directly or indirectly,
engage or invest in, own, manage, operate, finance, control, or participate in
the ownership, management, operation, financing, or control of, be employed by,
associated with, or in any manner connected with, lend the Executive's name or
any similar name to, lend Executive's credit to or render services or advice to,
any business whose products, services or activities compete in whole or in part
with the products, services or activities of the Employer or any affiliate of
Employer anywhere in the United States; provided, however, that the Executive
may purchase or otherwise acquire up to (but not more than) three percent (3%)
of any class of securities of any issuer (but without otherwise participating in
the activities of such issuer), if such securities are listed on any national or
regional securities exchange or have been registered pursuant to Section 12(g)
of the Securities Exchange Act of 1934;
(b) whether for Executive's own account or for the account of any other
Person, at any time during the Term and the Post-Agreement Period, solicit
business of the same or similar type being carried on by the Employer, from any
Person known by Executive to be a customer of Employer, whether or not Executive
had personal contact with such Person during and by reason of Executive's
employment with Employer;
(c) whether for Executive's account or the account of any other Person (i)
at any time during the Term and the Post-Agreement Period, solicit, employ, or
otherwise engage as an employee, independent contractor, or otherwise, any
Person who is or was an employee of Employer at any time during the Term or in
any manner induce or attempt to induce any employee of Employer to terminate his
or her employment relationship with Employer; or (ii) at any time during the
Term and the Post-Agreement Period, interfere with Employer's relationship with
any Person, including any Person who at any time during the Term was an
employee, contractor, supplier, or customer of Employer; or (d) at any time
during or after the Term, disparage Employer or any of Employer's shareholders,
directors, officers, employees, or agents.
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For purposes of this Section 8.2, the term "Post-Agreement Period" means
the period beginning on the date of termination of the Executive's employment
with the Employer, plus five (5) years.
If any covenant in this Section 8.2 is determined by a court of competent
jurisdiction to be unreasonable, arbitrary, or against public policy, such
covenant will be considered to be divisible with respect to scope, time, and
geographic area, and such reduced scope, time, or geographic area, or all of
them, as a court of competent jurisdiction may determine to be reasonable, not
arbitrary, and not against public policy, will be effective, obligatory, and
enforceable against Executive.
The period of time applicable to any covenant in this Section 8.2 will be
extended by the duration of any violation by Executive of such covenant.
Executive will, while the covenant pursuant to this Section 8.2 is in
effect, give notice to Employer, within ten (10) days after accepting any other
employment, of the identity of Executive's employer. Employer may notify such
employer that Executive is obligated by this Agreement and, at Employer's
election, furnish such employer with a copy of this Agreement or relevant
portions thereof.
ARTICLE IX.
GENERAL PROVISIONS
Section 9.1 Injunctive Relief and Additional Remedy. Executive acknowledges
that the damage that would be suffered by Employer as a result of a breach of
the provisions of this Agreement (including any provision of Articles VII and
VIII) would be irreparable and that an award of monetary damages to the Employer
for such a breach would be an inadequate remedy. Consequently, Employer will
have the right, in addition to any other rights Employer may have, to obtain
injunctive relief to restrain any breach or threatened breach or otherwise to
specifically enforce any provision of this Agreement, and Employer will not be
obligated to post bond or other security in seeking such relief.
Section 9.2 Covenants of Articles VII and VIII Are Essential and
Independent Covenants. The covenants by Executive in Articles VII and VIII are
essential provisions of this Agreement, and without Executive's agreement to
comply with such covenants, Employer would not have entered into this Agreement
or employed or continued the employment of Executive. Employer and Executive
have independently consulted their respective counsel and have been advised in
all respects concerning the reasonableness and propriety of such covenants, with
specific regard to the nature of the business conducted by Employer.
Executive's covenants in Articles VII and VIII are independent covenants
and the existence of any claim by Executive against Employer or any of its
affiliates under this Agreement or otherwise will not excuse Executive's breach
of any covenant in Articles VII or VIII.
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If Executive's employment pursuant to this Agreement expires or is
terminated, this Agreement will continue in full force and effect as is
necessary or appropriate to enforce the covenants and agreements of Executive in
Articles VII and VIII.
Section 9.3 Offset. Employer will be entitled to offset against any and all
amounts owing to Executive pursuant to this Agreement the amount of any and all
claims that Employer may have against Executive.
Section 9.4 Representations and Warranties by the Executive. Executive
represents and warrants to Employer that the execution and delivery by Executive
of this Agreement do not, and the performance by Executive of Executive's
obligations pursuant to this Agreement will not, with or without the giving of
notice or the passage of time, or both (a) violate any judgment, writ,
injunction, or order of any court, arbitrator, or governmental agency applicable
to Executive; or (b) conflict with, result in the breach of any provisions of or
the termination of, or constitute a default under, any agreement to which
Executive is a party or by which Executive is or may be obligated.
Section 9.4 Obligations Contingent on Performance. The obligations of
Employer pursuant to this Agreement, including Employer's obligation to pay the
compensation provided for in this Agreement, are contingent upon Executive's
performance of Executive's obligations pursuant to this Agreement.
Section 9.5 Waiver. The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Neither the failure nor any delay
by either party in exercising any right, power, or privilege pursuant to this
Agreement will operate as a waiver of such right, power, or privilege, and no
single or partial exercise of any such right, power, or privilege will preclude
any other or further exercise of such right, power, or privilege or the exercise
of any other right, power, or privilege. To the maximum extent permitted by
applicable law, (a) no claim or right resulting from this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other party; (b) no waiver that
may be given by a party will be applicable, except in the specific instance for
which it is given; and (c) no notice to or demand on one party will be deemed to
be a waiver of any obligation of such party or of the right of the party giving
such notice or demand to take additional action without notice or demand as
provided in this Agreement.
Section 9.6 Binding Effect; Delegation of Duties Prohibited. This Agreement
shall inure to the benefit of, and shall obligate, the parties hereto and their
respective successors, assigns, heirs, and legal representatives, including any
entity with which the Employer may merge or consolidate or to which all or
substantially all of its assets may be transferred. The duties and covenants of
Executive pursuant to this Agreement are personal and may not be delegated.
Section 9.7 Notices. All notices, requests, demands or other communications
pursuant to this Agreement shall be in writing or by telex or facsimile
transmission and shall be deemed to have been duly given (i) on the date of
service if delivered in person or by telex or facsimile machine transmission
(with the telex or facsimile confirmation of transmission receipt acting as
confirmation of service when sent and provide telexed or telecopied notices are
also mailed by first class, certified
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or registered mail, postage prepaid); or (ii) seventy-two (72) hours after
mailing by first class, registered or certified mail, postage prepaid, and
properly addressed as follows:
If to Executive: Crofton Cooper
5031 Birch Street, Suite G
Newport Beach, CA 92660
If to Employer: TMEX USA, Inc.
5031 Birch Street, Suite G
Newport Beach, CA 92660
With a copy to: STEPP & BEAUCHAMP LLP
1301 Dove Street, Suite 460
Newport Beach, California 92660
949.660.9700
Telecopier: 949.660.9010
or at such other address as the party affected may designate in a written notice
to such other party in compliance with this section.
Section 9.8 Entire Agreement; Amendments. This Agreement specifies the
entire agreement among the parties with respect to the (i) employment
relationship by and among Employer and Executive and (ii) the terms and
conditions of all other relationships by and among Employer, in any capacity,
and Executive, in any capacity and supersede all prior agreements and
understandings, oral or written, among the parties hereto with respect thereto.
This Agreement may not be amended orally, but only by an agreement in writing
signed by the parties hereto.
Section 9.9 Governing Law. This Agreement will be governed by the laws of
the State of California, without regard to conflicts of laws principles.
Section 9.10 Jurisdiction. Any action or proceeding seeking to enforce any
provision of, or based on any right arising out of, this Agreement shall be
brought against either of the parties in the courts of the State of California,
County of Orange, and each of the parties consents to the jurisdiction of such
courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue. Process in any action or
proceeding referred to in the preceding sentence may be served on either party
anywhere in the world.
Section 9.11 Section and Article Headings, Construction. The headings of
sections and articles in this Agreement are provided for convenience only and
will not affect its construction or interpretation. All references to "section"
or "sections" and "article" or "articles" refer to the corresponding section or
sections and article or articles of this Agreement unless otherwise specified.
All words used in this Agreement will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
word "including" does not limit the preceding words or terms.
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Section 9.12 Severability. If any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any provision
of this Agreement determined to be invalid or unenforceable only in part will
remain in full force and effect to the extent not determined to be invalid or
unenforceable.
Section 9.13 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
Section 9.14 Indemnification for Negligence or Misconduct.
A. Employer shall save Employee harmless from and against and shall
indemnify Executive for any liability, loss, costs, expenses or damages
howsoever caused by reason of any injury (whether to body, property, or personal
or business character or reputation) sustained by any person or to any person or
to property by reason of any act, neglect, default or omission of Employer, and
Employer shall pay any and all amounts to be paid or discharged in case of an
action for any such damages or injuries. No provision of this section is
intended to, nor shall any provision of this section, relieve Executive from
that Executive's own act, omission or negligence.
B. Executive shall save Employer harmless from and against and shall
indemnify Employer for any liability, loss, costs, expenses or damages howsoever
caused by reason of any injury (whether to body, property, personal or business
character or reputation) sustained by any person or to any person or to property
by reason of any act, neglect, default or omission of Executive, and Executive
shall pay any and all amounts to be paid or discharged in case of an action for
any such damages or injuries. No provision of this section is intended to, nor
shall any provision of this section, relieve Employer from Employer's own act,
omission or negligence.
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IN WITNESS WHEREOF the parties have executed this Agreement of Employment
in duplicate and in multiple counterparts, each of which shall have the force
and effect of an original, on the date specified in the preamble of this
Agreement.
"EMPLOYER" "EXECUTIVE"
TMEX USA, Inc.,
a Nevada corporation
By: /s/ Cooper Lee /s/ Crofton Cooper
---------------------- -----------------------
Cooper Lee Crofton Cooper
Its: President
By: /s/ Cecil Zeringue
----------------------
Cecil Zeringue
Its: Vice President
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AGREEMENT OF EMPLOYMENT
THIS AGREEMENT OF EMPLOYMENT ("Agreement") is made and entered into in
duplicate this 12th day of April, 2000, by and between TMEX, Inc., a Nevada
corporation ("Employer"), and Cooper Lee ("Executive").
RECITALS
A. Employer is a corporation duly organized and validly existing pursuant
to the laws of the State of Nevada.
B. Employer is in the business of developing and marketing high-speed
communication networks and services.
C. Employer desires to employ Executive, and Executive desires to serve, as
President of Employer and to do and perform any and all services, acts and
things specified hereinafter.
AGREEMENT
NOW, THEREFORE, IN CONSIDERATION OF THE RECITALS SPECIFIED ABOVE THAT SHALL
BE DEEMED TO BE A SUBSTANTIVE PART OF THIS AGREEMENT, AND THE MUTUAL COVENANTS,
PROMISES, UNDERTAKINGS, AGREEMENTS, REPRESENTATIONS AND WARRANTIES SPECIFIED IN
THIS AGREEMENT AND OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND
SUFFICIENCY OF WHICH ARE HEREBY ACKNOWLEDGED, WITH THE INTENT TO BE OBLIGATED
LEGALLY AND EQUITABLY, THE PARTIES DO HEREBY COVENANT, PROMISE, AGREE, REPRESENT
AND WARRANT AS FOLLOWS:
ARTICLE I.
DEFINITIONS
For the purposes of this Agreement, the following terms have the meanings
specified or referred to in this Article I.
Section 1.1 "Basic Compensation"-- Salary and Benefits.
Section 1.2 "Board of Directors" -- the Board of Directors of Employer.
Section 1.3 "Confidential Information" -- information that is used in
Employer's and
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Employer's affiliates' business and (i) any and all trade secrets concerning the
business and affairs of the Employer, product specifications, data, know-how,
formulae, compositions, processes, designs, sketches, photographs, graphs,
drawings, samples, inventions and ideas, past, current and planned research and
development, current and planned manufacturing and distribution methods and
processes, customer lists, current and anticipated customer requirements, price
lists, market studies, business plans, computer software and programs (including
object code and source code), computer software and database technologies,
systems, structures and architectures (and related processes, formulae,
compositions, improvements, devices, know-how, inventions, discoveries,
concepts, ideas, designs, methods and information, of the Employer and any other
information, however documented, of the Employer that is a trade secret within
the meaning of applicable law; (ii) any and all information concerning the
business and affairs of the Employer (which includes historical financial
statements, financial projections and budgets, historical and projected sales,
capital spending budgets and plans, the names and backgrounds of key personnel,
personnel training and techniques and materials), however documented; and (iii)
any and all notes, analysis, compilations, studies, summaries, and other
material prepared by or for the Employer containing or based, in whole or in
part, on any information included in the foregoing.
Confidential Information shall not include (i) information already in
Executive's possession prior to the date of this Agreement and that was not
acquired or obtained from Employer or its affiliates or pursuant to a
confidentiality agreement; (ii) information that is obtained or was previously
obtained by the Executive from a third Person who, insofar as is known to the
Executive after reasonable inquiry, is not prohibited from transmitting the
information to the Executive by contractual, legal or fiduciary obligation to
the Employer or its affiliates; or (iii) information that is, or becomes,
generally available to the public other than as a result of a direct or indirect
disclosure by the Executive.
Section 1.4 "Effective Date" -- the date specified in the preamble of the
Agreement.
Section 1.5 "Employee Inventions" -- all discoveries, inventions,
improvements, designs, innovations and works of authorship (including all data
and records pertaining thereto) that relate to the business of Employer, whether
or not able to be patented, copyrighted or reduced to writing, that Employee may
discover, invent or originate during the term of his employment pursuant to this
Agreement, and for a period of six (6) months following the termination of this
Agreement, either alone or with other persons and whether or not during working
hours or by the use of the facilities of Employer.
Section 1.6 "Fiscal Year" -- Employer's fiscal year, as it exists on the
Effective Date or as changed from time to time.
Section 1.7 "Person" -- any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, or
governmental body.
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ARTICLE II.
EMPLOYMENT TERMS AND DUTIES
Section 2.1 Employment. Employer hereby employs Executive, and Executive
hereby accepts employment by Employer, upon the terms and subject to the
conditions set forth in this Agreement.
Section 2.2 Term. Subject to the provisions of Article VI, the term (the
"Term") of Executive's employment pursuant to this Agreement will be one (1)
year, beginning on the Effective Date and ending that date which is exactly one
(1) year after the Effective Date ("the First Term"). The term of this Agreement
shall be renewed automatically for succeeding periods of one (1) year each
unless either party gives to the other party notice, at least sixty (60) days
prior to the expiration of any term, of the noticing party's intention not to
renew the term of this Agreement.
Section 2.3 Duties. Executive will have such duties as are assigned or
delegated to Executive by the Board of Directors, and will initially serve as
President of Employer. Executive will (i) devote his entire business time,
attention, skill, and energy exclusively to the business of Employer, (ii) use
his best efforts to promote the success of Employer's business, and (iii)
cooperate fully with the Board of Directors in the advancement of the best
interests of Employer. If Executive is elected as a member of the Board if
Directors, or as a director or officer of any of Employer's affiliates,
Executive will fulfill his duties as such director or officer without additional
compensation.
ARTICLE III.
COMPENSATION AND BENEFITS
Section 3.1 Basic Compensation. During the Term, Executive will receive an
aggregate Basic Compensation of One Hundred Twenty Thousand Dollars
($120,000.00) annually which will be payable in equal periodic installments
according to Employer's customary payroll practices, but no less frequently than
semi-monthly ("Salary"), and benefits resulting from Executive's participation
in such pension, life insurance, hospitalization, major medical, disability and
other employee benefit plans of Employer that may be in effect from time to time
(including any right to an automobile), to the extent Executive is eligible
pursuant to the terms of those plans (collectively, the "Benefits").
Section 3.2 Bonus. In addition to the Salary and the Benefits, Executive
shall be entitled to receive from Employer and Employer shall pay to Executive,
for each of Employer's complete fiscal quarters during the term of this
Agreement, a cash bonus in an amount equal to two percent (2%) of the "net
profits" of Employer for that fiscal quarter. For purposes of this Section 3.2,
the term "net profits" shall be defined as and mean all gross income from the
operations of the Employer (other than capital gains) less all expenses,
deductions and credits of Employer attributable to those operations. In
computing net profits, federal and state income taxes and payments made pursuant
to this Agreement and other bonus and other incentive plans of Employer shall be
deducted. The net profits shall be determined in accordance with generally
accepted accounting principles utilized by the certified public accountants
regularly employed by Employer, and the determination of those accountants shall
obligate and be conclusive on Employer and Executive. Payment of that bonus
shall be made no later than forty-five (45) days after the end of Employer's
fiscal quarter for which such bonus is due and payable.
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Section 3.3 Health Care Benefits. Employer shall include Employee in the
hospital, surgical, medical and dental benefit plan maintained by Employer.
Section 3.4 Illness. During the Term, Executive shall be entitled to ten
(10) days per year as sick leave with full pay. Sick leave shall not be
accumulated.
Section 3.5 Other Benefits. Executive shall receive all other benefits of
employment available generally to other employees of Employer.
ARTICLE IV.
FACILITIES AND EXPENSES
Section 4.1 Office and Staff. Employer will furnish Executive office
facilities, equipment, supplies, and such other facilities and personnel, as
Employer deems necessary or appropriate for the performance of Executive's
duties pursuant to this Agreement.
Section 4.2 Reimbursement of Business Expenses. Employer will pay on behalf
of Executive (or reimburse the Executive for) reasonable business expenses
incurred by Executive at the request of, or on behalf of, Employer in the
performance of the Executive's duties pursuant to this Agreement, and in
accordance with Employer's employment policies. Executive must file expense
reports with respect to such expenses in accordance with Employer's policies.
ARTICLE V.
VACATIONS AND HOLIDAYS
Section 5.1 Annual Vacation. Executive will be entitled to ten (10) days
paid vacation each Fiscal Year in accordance with the vacation policies of
Employer in effect for Employer's executive officers from time to time. Vacation
must be taken by Executive at such time or times as approved by the Chairman of
the Board of Directors or the Board of Directors. In the event that Executive is
unable for any reason to take the total amount of vacation time authorized
herein during any year, Executive may not accrue that time and add that time to
vacation time for any following year. In lieu of vacation leave, Executive may
elect to receive payment for all or any part of the vacation leave to which
Executive is entitled, in which case the vacation leave shall be valued at the
amount of salary earned by Executive during an equivalent period of time during
the fiscal year in which such vacation leave accrued.
Section 5.2 Paid Holidays. Executive shall be entitled to be paid for those
holidays designated by Employer, as specified in Employer's personnel policies.
ARTICLE VI.
TERMINATION
Section 6.1 (a) Disability. Employer may terminate this Agreement for
Disability. "Disability" shall exist if because of ill health, physical or
mental disability, or any other reason beyond Executive's control, and
notwithstanding reasonable accommodations made by Employer,
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Executive shall have been unable, unwilling or shall have failed to perform
Executive's duties pursuant to this Agreement, as determined in good faith by
the Board of Directors, for a period of thirty (30) consecutive days, or if, in
any twelve (12) month period, Executive shall have been unable or unwilling or
shall have failed to perform Executive's duties for a period of sixty (60) days,
irrespective of whether or not such days are consecutive. Executive hereby
consents to examination by a physician designated by Employer, and Executive
hereby waives any physician-patient privilege resulting from any such
examination.
(b) Cause. Employer may terminate Executive's employment for Cause.
Termination for "Cause" shall mean termination because of Executive's (i) gross
incompetence; (ii) willful gross misconduct that causes economic harm to
Employer or its affiliates or that brings discredit to Employer's or Employer's
affiliates' reputation; (iii) failure to follow directions of the Board of
Directors that are consistent with Executive's duties pursuant to this
Agreement; (iv) final, nonappealable conviction of a felony involving moral
turpitude; or (v) material breach of any provision of this Agreement. Those
events specified in clauses (i), (iii) and (v) of this subsection shall not
constitute Cause unless Employer notifies Executive thereof in writing,
specifying in reasonable detail the basis therefor and specifying that any such
event is for Cause, and unless Executive fails to cure such matter within 60
days after such notice is sent or given pursuant to this Agreement. Executive
shall be permitted to respond and to defend himself before the Board of
Directors or any appropriate committee thereof within a reasonable time after
written notification of any proposed termination for Cause pursuant to any event
specified in clauses (i), (ii), (iii) or (v) of this subsection.
(c) Without Good Reason. During the Term, Executive may terminate his
employment Without Good Reason. Termination "Without Good Reason" shall mean
termination of the Executive's employment by the Executive other than
termination for Employer Breach or resulting from the death of Executive.
(d) Explanation of Termination of Employment. Any party terminating this
Agreement shall give prompt written notice ("Notice of Termination") to the
other party hereto advising such other party of the termination of this
Agreement. Within thirty (30) days after notification that this Agreement has
been terminated, the terminating party shall deliver to the other party hereto a
written explanation, which shall specify in reasonable detail the basis for such
termination and shall indicate whether termination is being made for Cause,
Without Cause or for Disability (if Employer has terminated the Agreement) or
for Employer Breach or Without Good Reason (if Executive has terminated the
Agreement).
(e) Date of Termination. "Date of Termination" shall mean the date on which
Notice of Termination is sent or given pursuant to this Agreement.
Section 6.2 Compensation During Disability or Upon Termination.
(a) During Disability. During any period that Executive fails to perform
his duties pursuant to this Agreement because of ill health, physical or mental
disability, or any other reason beyond Executive's control, Executive shall be
entitled to receive the sick pay specified by the provisions of Section 3.4 of
this Agreement.
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(b) Termination for Disability. If Employer shall terminate Executive's
employment for Disability, Employer's obligation to pay Basic Compensation shall
terminate, except that Employer shall pay Executive (i) accrued but unpaid Basic
Compensation through the Date of Termination, and (ii) the benefits set forth in
Section 6.2(d).
(c) Termination for Cause or Without Good Reason. If Employer shall
terminate Executive's employment for Cause or if the Executive shall terminate
his employment Without Good Reason, then Employer's obligation to pay Basic
Compensation shall terminate, except that Employer shall pay Executive his
accrued but unpaid Basic Compensation through the Date of Termination.
(d) Employee Benefits. Upon the termination of Executive's employment with
Employer, the Basic Compensation shall terminate on the Date of Termination.
Section 6.3 Death of Executive. If Executive dies prior to the expiration
of the Term, Executive's employment and other obligations pursuant to this
Agreement shall automatically terminate and all compensation, to which Executive
is or would have been entitled pursuant to (including, without limitation, under
Section 3.1), shall terminate as of the date in which Executive's death occurs.
ARTICLE VII.
NON-DISCLOSURE COVENANT; EMPLOYEE INVENTIONS
Section 7.1 Acknowledgments by the Executive. Executive acknowledges that
(a) during the Term and as a part of his employment, Executive will have access
to Confidential Information; (b) public disclosure of such Confidential
Information could have an adverse effect on the Employer and its business; (c)
because Executive possesses substantial technical expertise and skill with
respect to Employer's business, Employer desires to obtain exclusive ownership
of each Employee Invention, and Employer will be at a substantial competitive
disadvantage if Employer fails to acquire exclusive ownership of each Employee
Invention; and (d) the provisions of this Article VII are reasonable and
necessary to prevent the improper use or disclosure of Confidential Information
and to provide Employer with exclusive ownership of all Employee Inventions.
Section 7.2 Agreements of the Executive. In consideration of the
compensation and benefits to be paid or provided to Executive by Employer
pursuant to this Agreement, Executive covenants as follows:
(a) Confidentiality.
(i) During and following the Term, Executive will hold in confidence the
Confidential Information and will not disclose the Confidential
Information, or any portion thereof, to any Person, except with the
specific prior written consent of Employer or except as otherwise
expressly permitted by the terms of this Agreement.
(ii) Any trade secrets of Employer or its affiliates will be entitled to
all of the protections and benefits pursuant to applicable law. If any
information that Employer or its affiliates deems to be a trade secret
is determined by a court of competent jurisdiction
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not to be a trade secret for purposes of this Agreement, such
information will, nevertheless, be considered Confidential Information
for purposes of this Agreement. Executive hereby waives any
requirement that Employer submit proof of the economic value of any
trade secret or post a bond or other security.
(iii) None of the foregoing obligations and restrictions applies to any
part of the Confidential Information that Executive demonstrates was
or became generally available to the public other than as a result of
a direct or indirect disclosure by Executive.
(iv) The Executive will not remove from the Employer's or Employer's
affiliates' premises (except to the extent such removal is for
purposes of the performance of the Executive's duties at home or while
traveling, or except as otherwise specifically authorized by Employer)
any document, record, notebook, plan, model, component, device, or
computer software or code, whether embodied in a disk or in any other
form (collectively, the "Proprietary Items"). Executive agrees that,
as between Employer and Executive, all of the Proprietary Items,
whether or not developed by Executive, are the exclusive property of
Employer. Upon termination of this Agreement by either party, or upon
the request of Employer during the Term, Executive will return to
Employer all of the Proprietary Items in Executive's possession or
subject to Executive's control, and Executive shall not retain any
copies, abstracts, sketches, or other physical embodiment of any of
the Proprietary Items.
(b) Employee Inventions. Each Employee Invention will belong exclusively to
Employer. Executive covenants that Executive will promptly:
(i) disclose to Employer in writing any Employee Invention;
(ii) assign to Employer or to a party designated by Employer, at Employer's
request and without additional compensation, all of Executive's right
to the Employee Invention for the United States and all foreign
jurisdictions;
(iii) execute and deliver to Employer such applications, assignments, and
other documents as Employer may request in order to apply for and
obtain patents or other registrations with respect to any Employee
Invention in the United States and any foreign jurisdictions;
(iv) sign all other papers necessary to carry out the above obligations;
and
(v) give testimony and render any other assistance in support of
Employer's rights to any Employee Invention.
Section 7.3 Disputes or Controversies. Executive acknowledges that in the
event that a dispute or controversy resulting from or relating to this Agreement
be submitted for adjudication to any court, arbitration panel, or other third
party, the preservation of the secrecy of Confidential Information may be
jeopardized. All pleadings, documents, testimony and records relating to any
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such adjudication will be maintained in secrecy and will be available for
inspection by Employer, Executive, and their respective attorneys and experts,
who will agree, in advance and in writing, to receive and maintain all such
information in secrecy, except as may be limited by them in writing.
ARTICLE VIII.
NON-COMPETITION AND NON-INTERFERENCE
Section 8.1 Acknowledgments by Executive. Executive acknowledges that (a)
the services to be performed by him pursuant to this Agreement are of a special,
unique, unusual, extraordinary, and intellectual character; (b) Employer's
business conducted nationally and Employer's services and products are marketed
throughout the United States; (c) Employer competes with other businesses that
are or could be located in any part of the United States; and (d) the provisions
of this Article VIII are reasonable and necessary to protect the Employer's
business.
Section 8.2 Covenants of Executive. In consideration of the acknowledgments
by Executive, and in consideration of the compensation and benefits to be paid
or provided to Executive by Employer, Executive covenants that Executive will
not, directly or indirectly:
(a) during the Term, except in the course of his employment pursuant to
this Agreement, and during the Post-Agreement Period, directly or indirectly,
engage or invest in, own, manage, operate, finance, control, or participate in
the ownership, management, operation, financing, or control of, be employed by,
associated with, or in any manner connected with, lend the Executive's name or
any similar name to, lend Executive's credit to or render services or advice to,
any business whose products, services or activities compete in whole or in part
with the products, services or activities of the Employer or any affiliate of
Employer anywhere in the United States; provided, however, that the Executive
may purchase or otherwise acquire up to (but not more than) three percent (3%)
of any class of securities of any issuer (but without otherwise participating in
the activities of such issuer), if such securities are listed on any national or
regional securities exchange or have been registered pursuant to Section 12(g)
of the Securities Exchange Act of 1934;
(b) whether for Executive's own account or for the account of any other
Person, at any time during the Term and the Post-Agreement Period, solicit
business of the same or similar type being carried on by the Employer, from any
Person known by Executive to be a customer of Employer, whether or not Executive
had personal contact with such Person during and by reason of Executive's
employment with Employer;
(c) whether for Executive's account or the account of any other Person (i)
at any time during the Term and the Post-Agreement Period, solicit, employ, or
otherwise engage as an employee, independent contractor, or otherwise, any
Person who is or was an employee of Employer at any time during the Term or in
any manner induce or attempt to induce any employee of Employer to terminate his
or her employment relationship with Employer; or (ii) at any time during the
Term and the Post-Agreement Period, interfere with Employer's relationship with
any Person, including any Person who at any time during the Term was an
employee, contractor, supplier, or customer of Employer; or
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(d) at any time during or after the Term, disparage Employer or any of
Employer's shareholders, directors, officers, employees, or agents.
For purposes of this Section 8.2, the term "Post-Agreement Period" means
the period beginning on the date of termination of the Executive's employment
with the Employer, plus five (5) years.
If any covenant in this Section 8.2 is determined by a court of competent
jurisdiction to be unreasonable, arbitrary, or against public policy, such
covenant will be considered to be divisible with respect to scope, time, and
geographic area, and such reduced scope, time, or geographic area, or all of
them, as a court of competent jurisdiction may determine to be reasonable, not
arbitrary, and not against public policy, will be effective, obligatory, and
enforceable against Executive.
The period of time applicable to any covenant in this Section 8.2 will be
extended by the duration of any violation by Executive of such covenant.
Executive will, while the covenant pursuant to this Section 8.2 is in
effect, give notice to Employer, within ten (10) days after accepting any other
employment, of the identity of Executive's employer. Employer may notify such
employer that Executive is obligated by this Agreement and, at Employer's
election, furnish such employer with a copy of this Agreement or relevant
portions thereof.
ARTICLE IX.
GENERAL PROVISIONS
Section 9.1 Injunctive Relief and Additional Remedy. Executive acknowledges
that the damage that would be suffered by Employer as a result of a breach of
the provisions of this Agreement (including any provision of Articles VII and
VIII) would be irreparable and that an award of monetary damages to the Employer
for such a breach would be an inadequate remedy. Consequently, Employer will
have the right, in addition to any other rights Employer may have, to obtain
injunctive relief to restrain any breach or threatened breach or otherwise to
specifically enforce any provision of this Agreement, and Employer will not be
obligated to post bond or other security in seeking such relief.
Section 9.2 Covenants of Articles VII and VIII Are Essential and
Independent Covenants. The covenants by Executive in Articles VII and VIII are
essential provisions of this Agreement, and without Executive's agreement to
comply with such covenants, Employer would not have entered into this Agreement
or employed or continued the employment of Executive. Employer and Executive
have independently consulted their respective counsel and have been advised in
all respects concerning the reasonableness and propriety of such covenants, with
specific regard to the nature of the business conducted by Employer.
Executive's covenants in Articles VII and VIII are independent covenants
and the existence of any claim by Executive against Employer or any of its
affiliates under this Agreement or otherwise will not excuse Executive's breach
of any covenant in Articles VII or VIII.
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If Executive's employment pursuant to this Agreement expires or is
terminated, this Agreement will continue in full force and effect as is
necessary or appropriate to enforce the covenants and agreements of Executive in
Articles VII and VIII.
Section 9.3 Offset. Employer will be entitled to offset against any and all
amounts owing to Executive pursuant to this Agreement the amount of any and all
claims that Employer may have against Executive.
Section 9.4 Representations and Warranties by the Executive. Executive
represents and warrants to Employer that the execution and delivery by Executive
of this Agreement do not, and the performance by Executive of Executive's
obligations pursuant to this Agreement will not, with or without the giving of
notice or the passage of time, or both (a) violate any judgment, writ,
injunction, or order of any court, arbitrator, or governmental agency applicable
to Executive; or (b) conflict with, result in the breach of any provisions of or
the termination of, or constitute a default under, any agreement to which
Executive is a party or by which Executive is or may be obligated.
Section 9.4 Obligations Contingent on Performance. The obligations of
Employer pursuant to this Agreement, including Employer's obligation to pay the
compensation provided for in this Agreement, are contingent upon Executive's
performance of Executive's obligations pursuant to this Agreement.
Section 9.5 Waiver. The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Neither the failure nor any delay
by either party in exercising any right, power, or privilege pursuant to this
Agreement will operate as a waiver of such right, power, or privilege, and no
single or partial exercise of any such right, power, or privilege will preclude
any other or further exercise of such right, power, or privilege or the exercise
of any other right, power, or privilege. To the maximum extent permitted by
applicable law, (a) no claim or right resulting from this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other party; (b) no waiver that
may be given by a party will be applicable, except in the specific instance for
which it is given; and (c) no notice to or demand on one party will be deemed to
be a waiver of any obligation of such party or of the right of the party giving
such notice or demand to take additional action without notice or demand as
provided in this Agreement.
Section 9.6 Binding Effect; Delegation of Duties Prohibited. This Agreement
shall inure to the benefit of, and shall obligate, the parties hereto and their
respective successors, assigns, heirs, and legal representatives, including any
entity with which the Employer may merge or consolidate or to which all or
substantially all of its assets may be transferred. The duties and covenants of
Executive pursuant to this Agreement are personal and may not be delegated.
Section 9.7 Notices. All notices, requests, demands or other communications
pursuant to this Agreement shall be in writing or by telex or facsimile
transmission and shall be deemed to have been duly given (i) on the date of
service if delivered in person or by telex or facsimile machine transmission
(with the telex or facsimile confirmation of transmission receipt acting as
confirmation of service when sent and provide telexed or telecopied notices are
also mailed by first class, certified
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or registered mail, postage prepaid); or (ii) seventy-two (72) hours after
mailing by first class, registered or certified mail, postage prepaid, and
properly addressed as follows:
If to Executive: Cooper Lee
5031 Birch Street, Suite G
Newport Beach, CA 92660
If to Employer: TMEX USA, Inc.
5031 Birch Street, Suite G
Newport Beach, CA 92660
With a copy to: STEPP & BEAUCHAMP LLP
1301 Dove Street, Suite 460
Newport Beach, California 92660
949.660.9700
Telecopier: 949.660.9010
or at such other address as the party affected may designate in a written notice
to such other party in compliance with this section.
Section 9.8 Entire Agreement; Amendments. This Agreement specifies the
entire agreement among the parties with respect to the (i) employment
relationship by and among Employer and Executive and (ii) the terms and
conditions of all other relationships by and among Employer, in any capacity,
and Executive, in any capacity and supersede all prior agreements and
understandings, oral or written, among the parties hereto with respect thereto.
This Agreement may not be amended orally, but only by an agreement in writing
signed by the parties hereto.
Section 9.9 Governing Law. This Agreement will be governed by the laws of
the State of California, without regard to conflicts of laws principles.
Section 9.10 Jurisdiction. Any action or proceeding seeking to enforce any
provision of, or based on any right arising out of, this Agreement shall be
brought against either of the parties in the courts of the State of California,
County of Orange, and each of the parties consents to the jurisdiction of such
courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue. Process in any action or
proceeding referred to in the preceding sentence may be served on either party
anywhere in the world.
Section 9.11 Section and Article Headings, Construction. The headings of
sections and articles in this Agreement are provided for convenience only and
will not affect its construction or interpretation. All references to "section"
or "sections" and "article" or "articles" refer to the corresponding section or
sections and article or articles of this Agreement unless otherwise specified.
All words used in this Agreement will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
word "including" does not limit the preceding words or terms.
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Section 9.12 Severability. If any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any provision
of this Agreement determined to be invalid or unenforceable only in part will
remain in full force and effect to the extent not determined to be invalid or
unenforceable.
Section 9.13 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
Section 9.14 Indemnification for Negligence or Misconduct.
A. Employer shall save Employee harmless from and against and shall
indemnify Executive for any liability, loss, costs, expenses or damages
howsoever caused by reason of any injury (whether to body, property, or personal
or business character or reputation) sustained by any person or to any person or
to property by reason of any act, neglect, default or omission of Employer, and
Employer shall pay any and all amounts to be paid or discharged in case of an
action for any such damages or injuries. No provision of this section is
intended to, nor shall any provision of this section, relieve Executive from
that Executive's own act, omission or negligence.
B. Executive shall save Employer harmless from and against and shall
indemnify Employer for any liability, loss, costs, expenses or damages howsoever
caused by reason of any injury (whether to body, property, personal or business
character or reputation) sustained by any person or to any person or to property
by reason of any act, neglect, default or omission of Executive, and Executive
shall pay any and all amounts to be paid or discharged in case of an action for
any such damages or injuries. No provision of this section is intended to, nor
shall any provision of this section, relieve Employer from Employer's own act,
omission or negligence.
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IN WITNESS WHEREOF the parties have executed this Agreement of Employment
in duplicate and in multiple counterparts, each of which shall have the force
and effect of an original, on the date specified in the preamble of this
Agreement.
"EMPLOYER" "EXECUTIVE"
TMEX USA, Inc.,
a Nevada corporation
By: /s/ Crofton Cooper /s/ Cooper Lee
---------------------------- ---------------------------
Crofton Cooper Cooper Lee
Its: Chief Executive Officer
By: /s/ Crofton Cooper
----------------------------------
Crofton Cooper
Its: Secretary
AGREEMENT OF EMPLOYMENT
THIS AGREEMENT OF EMPLOYMENT ("Agreement") is made and entered into in
duplicate this 12th day of April, 2000, by and between TMEX, Inc., a Nevada
corporation ("Employer"), and Cecil Zeringue ("Executive").
RECITALS
A. Employer is a corporation duly organized and validly existing pursuant
to the laws of the State of Nevada.
B. Employer is in the business of developing and marketing high-speed
communication networks and services.
C. Employer desires to employ Executive, and Executive desires to serve, as
Vice President of Employer and to do and perform any and all services, acts and
things specified hereinafter.
AGREEMENT
NOW, THEREFORE, IN CONSIDERATION OF THE RECITALS SPECIFIED ABOVE THAT SHALL
BE DEEMED TO BE A SUBSTANTIVE PART OF THIS AGREEMENT, AND THE MUTUAL COVENANTS,
PROMISES, UNDERTAKINGS, AGREEMENTS, REPRESENTATIONS AND WARRANTIES SPECIFIED IN
THIS AGREEMENT AND OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND
SUFFICIENCY OF WHICH ARE HEREBY ACKNOWLEDGED, WITH THE INTENT TO BE OBLIGATED
LEGALLY AND EQUITABLY, THE PARTIES DO HEREBY COVENANT, PROMISE, AGREE, REPRESENT
AND WARRANT AS FOLLOWS:
ARTICLE I.
DEFINITIONS
For the purposes of this Agreement, the following terms have the meanings
specified or referred to in this Article I.
Section 1.1 "Basic Compensation"-- Salary and Benefits.
Section 1.2 "Board of Directors" -- the Board of Directors of Employer.
Section 1.3 "Confidential Information" -- information that is used in
Employer's and
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Employer's affiliates' business and (i) any and all trade secrets concerning the
business and affairs of the Employer, product specifications, data, know-how,
formulae, compositions, processes, designs, sketches, photographs, graphs,
drawings, samples, inventions and ideas, past, current and planned research and
development, current and planned manufacturing and distribution methods and
processes, customer lists, current and anticipated customer requirements, price
lists, market studies, business plans, computer software and programs (including
object code and source code), computer software and database technologies,
systems, structures and architectures (and related processes, formulae,
compositions, improvements, devices, know-how, inventions, discoveries,
concepts, ideas, designs, methods and information, of the Employer and any other
information, however documented, of the Employer that is a trade secret within
the meaning of applicable law; (ii) any and all information concerning the
business and affairs of the Employer (which includes historical financial
statements, financial projections and budgets, historical and projected sales,
capital spending budgets and plans, the names and backgrounds of key personnel,
personnel training and techniques and materials), however documented; and (iii)
any and all notes, analysis, compilations, studies, summaries, and other
material prepared by or for the Employer containing or based, in whole or in
part, on any information included in the foregoing.
Confidential Information shall not include (i) information already in
Executive's possession prior to the date of this Agreement and that was not
acquired or obtained from Employer or its affiliates or pursuant to a
confidentiality agreement; (ii) information that is obtained or was previously
obtained by the Executive from a third Person who, insofar as is known to the
Executive after reasonable inquiry, is not prohibited from transmitting the
information to the Executive by contractual, legal or fiduciary obligation to
the Employer or its affiliates; or (iii) information that is, or becomes,
generally available to the public other than as a result of a direct or indirect
disclosure by the Executive.
Section 1.4 "Effective Date" -- the date specified in the preamble of the
Agreement.
Section 1.5 "Employee Inventions" -- all discoveries, inventions,
improvements, designs, innovations and works of authorship (including all data
and records pertaining thereto) that relate to the business of Employer, whether
or not able to be patented, copyrighted or reduced to writing, that Employee may
discover, invent or originate during the term of his employment pursuant to this
Agreement, and for a period of six (6) months following the termination of this
Agreement, either alone or with other persons and whether or not during working
hours or by the use of the facilities of Employer.
Section 1.6 "Fiscal Year" -- Employer's fiscal year, as it exists on the
Effective Date or as changed from time to time.
Section 1.7 "Person" -- any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, or
governmental body.
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ARTICLE II.
EMPLOYMENT TERMS AND DUTIES
Section 2.1 Employment. Employer hereby employs Executive, and Executive
hereby accepts employment by Employer, upon the terms and subject to the
conditions set forth in this Agreement.
Section 2.2 Term. Subject to the provisions of Article VI, the term (the
"Term") of Executive's employment pursuant to this Agreement will be one (1)
year, beginning on the Effective Date and ending that date which is exactly one
(1) year after the Effective Date ("the First Term"). The term of this Agreement
shall be renewed automatically for succeeding periods of one (1) year each
unless either party gives to the other party notice, at least sixty (60) days
prior to the expiration of any term, of the noticing party's intention not to
renew the term of this Agreement.
Section 2.3 Duties. Executive will have such duties as are assigned or
delegated to Executive by the Board of Directors, and will initially serve as
Vice President of Employer. Executive will (i) devote his entire business time,
attention, skill, and energy exclusively to the business of Employer, (ii) use
his best efforts to promote the success of Employer's business, and (iii)
cooperate fully with the Board of Directors in the advancement of the best
interests of Employer. If Executive is elected as a member of the Board if
Directors, or as a director or officer of any of Employer's affiliates,
Executive will fulfill his duties as such director or officer without additional
compensation.
ARTICLE III.
COMPENSATION AND BENEFITS
Section 3.1 Basic Compensation. During the Term, Executive will receive an
aggregate Basic Compensation of One Hundred Thousand Dollars ($100,000.00)
annually which will be payable in equal periodic installments according to
Employer's customary payroll practices, but no less frequently than semi-monthly
("Salary"), and benefits resulting from Executive's participation in such
pension, life insurance, hospitalization, major medical, disability and other
employee benefit plans of Employer that may be in effect from time to time
(including any right to an automobile), to the extent Executive is eligible
pursuant to the terms of those plans (collectively, the "Benefits").
Section 3.2 Bonus. In addition to the Salary and the Benefits, Executive
shall be entitled to receive from Employer and Employer shall pay to Executive,
for each of Employer's complete fiscal quarters during the term of this
Agreement, a cash bonus in an amount equal to two percent (2%) of the "net
profits" of Employer for that fiscal quarter. For purposes of this Section 3.2,
the term "net profits" shall be defined as and mean all gross income from the
operations of the Employer (other than capital gains) less all expenses,
deductions and credits of Employer attributable to those operations. In
computing net profits, federal and state income taxes and payments made pursuant
to this Agreement and other bonus and other incentive plans of Employer shall be
deducted. The net profits shall be determined in accordance with generally
accepted accounting principles utilized by the certified public accountants
regularly employed by Employer, and the determination of those accountants shall
obligate and be conclusive on Employer and Executive. Payment of that bonus
shall be made no later than forty-five (45) days after the end of Employer's
fiscal quarter for which such bonus is due and payable.
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Section 3.3 Health Care Benefits. Employer shall include Employee in the
hospital, surgical, medical and dental benefit plan maintained by Employer.
Section 3.4 Illness. During the Term, Executive shall be entitled to ten
(10) days per year as sick leave with full pay. Sick leave shall not be
accumulated.
Section 3.5 Other Benefits. Executive shall receive all other benefits of
employment available generally to other employees of Employer.
ARTICLE IV.
FACILITIES AND EXPENSES
Section 4.1 Office and Staff. Employer will furnish Executive office
facilities, equipment, supplies, and such other facilities and personnel, as
Employer deems necessary or appropriate for the performance of Executive's
duties pursuant to this Agreement.
Section 4.2 Reimbursement of Business Expenses. Employer will pay on behalf
of Executive (or reimburse the Executive for) reasonable business expenses
incurred by Executive at the request of, or on behalf of, Employer in the
performance of the Executive's duties pursuant to this Agreement, and in
accordance with Employer's employment policies. Executive must file expense
reports with respect to such expenses in accordance with Employer's policies.
ARTICLE V.
VACATIONS AND HOLIDAYS
Section 5.1 Annual Vacation. Executive will be entitled to ten (10) days
paid vacation each Fiscal Year in accordance with the vacation policies of
Employer in effect for Employer's executive officers from time to time. Vacation
must be taken by Executive at such time or times as approved by the Chairman of
the Board of Directors or the Board of Directors. In the event that Executive is
unable for any reason to take the total amount of vacation time authorized
herein during any year, Executive may not accrue that time and add that time to
vacation time for any following year. In lieu of vacation leave, Executive may
elect to receive payment for all or any part of the vacation leave to which
Executive is entitled, in which case the vacation leave shall be valued at the
amount of salary earned by Executive during an equivalent period of time during
the fiscal year in which such vacation leave accrued.
Section 5.2 Paid Holidays. Executive shall be entitled to be paid for those
holidays designated by Employer, as specified in Employer's personnel policies.
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ARTICLE VI.
TERMINATION
Section 6.1 (a) Disability. Employer may terminate this Agreement for
Disability. "Disability" shall exist if because of ill health, physical or
mental disability, or any other reason beyond Executive's control, and
notwithstanding reasonable accommodations made by Employer, Executive shall have
been unable, unwilling or shall have failed to perform Executive's duties
pursuant to this Agreement, as determined in good faith by the Board of
Directors, for a period of thirty (30) consecutive days, or if, in any twelve
(12) month period, Executive shall have been unable or unwilling or shall have
failed to perform Executive's duties for a period of sixty (60) days,
irrespective of whether or not such days are consecutive. Executive hereby
consents to examination by a physician designated by Employer, and Executive
hereby waives any physician-patient privilege resulting from any such
examination.
(b) Cause. Employer may terminate Executive's employment for Cause.
Termination for "Cause" shall mean termination because of Executive's (i) gross
incompetence; (ii) willful gross misconduct that causes economic harm to
Employer or its affiliates or that brings discredit to Employer's or Employer's
affiliates' reputation; (iii) failure to follow directions of the Board of
Directors that are consistent with Executive's duties pursuant to this
Agreement; (iv) final, nonappealable conviction of a felony involving moral
turpitude; or (v) material breach of any provision of this Agreement. Those
events specified in clauses (i), (iii) and (v) of this subsection shall not
constitute Cause unless Employer notifies Executive thereof in writing,
specifying in reasonable detail the basis therefor and specifying that any such
event is for Cause, and unless Executive fails to cure such matter within 60
days after such notice is sent or given pursuant to this Agreement. Executive
shall be permitted to respond and to defend himself before the Board of
Directors or any appropriate committee thereof within a reasonable time after
written notification of any proposed termination for Cause pursuant to any event
specified in clauses (i), (ii), (iii) or (v) of this subsection.
(c) Without Good Reason. During the Term, Executive may terminate his
employment Without Good Reason. Termination "Without Good Reason" shall mean
termination of the Executive's employment by the Executive other than
termination for Employer Breach or resulting from the death of Executive.
(d) Explanation of Termination of Employment. Any party terminating this
Agreement shall give prompt written notice ("Notice of Termination") to the
other party hereto advising such other party of the termination of this
Agreement. Within thirty (30) days after notification that this Agreement has
been terminated, the terminating party shall deliver to the other party hereto a
written explanation, which shall specify in reasonable detail the basis for such
termination and shall indicate whether termination is being made for Cause,
Without Cause or for Disability (if Employer has terminated the Agreement) or
for Employer Breach or Without Good Reason (if Executive has terminated the
Agreement).
(e) Date of Termination. "Date of Termination" shall mean the date on which
Notice of Termination is sent or given pursuant to this Agreement.
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Section 6.2 Compensation During Disability or Upon Termination.
(a) During Disability. During any period that Executive fails to perform
his duties pursuant to this Agreement because of ill health, physical or mental
disability, or any other reason beyond Executive's control, Executive shall be
entitled to receive the sick pay specified by the provisions of Section 3.4 of
this Agreement.
(b) Termination for Disability. If Employer shall terminate Executive's
employment for Disability, Employer's obligation to pay Basic Compensation shall
terminate, except that Employer shall pay Executive (i) accrued but unpaid Basic
Compensation through the Date of Termination, and (ii) the benefits set forth in
Section 6.2(d).
(c) Termination for Cause or Without Good Reason. If Employer shall
terminate Executive's employment for Cause or if the Executive shall terminate
his employment Without Good Reason, then Employer's obligation to pay Basic
Compensation shall terminate, except that Employer shall pay Executive his
accrued but unpaid Basic Compensation through the Date of Termination.
(d) Employee Benefits. Upon the termination of Executive's employment with
Employer, the Basic Compensation shall terminate on the Date of Termination.
Section 6.3 Death of Executive. If Executive dies prior to the expiration
of the Term, Executive's employment and other obligations pursuant to this
Agreement shall automatically terminate and all compensation, to which Executive
is or would have been entitled pursuant to (including, without limitation, under
Section 3.1), shall terminate as of the date in which Executive's death occurs.
ARTICLE VII.
NON-DISCLOSURE COVENANT; EMPLOYEE INVENTIONS
Section 7.1 Acknowledgments by the Executive. Executive acknowledges that
(a) during the Term and as a part of his employment, Executive will have access
to Confidential Information; (b) public disclosure of such Confidential
Information could have an adverse effect on the Employer and its business; (c)
because Executive possesses substantial technical expertise and skill with
respect to Employer's business, Employer desires to obtain exclusive ownership
of each Employee Invention, and Employer will be at a substantial competitive
disadvantage if Employer fails to acquire exclusive ownership of each Employee
Invention; and (d) the provisions of this Article VII are reasonable and
necessary to prevent the improper use or disclosure of Confidential Information
and to provide Employer with exclusive ownership of all Employee Inventions.
Section 7.2 Agreements of the Executive. In consideration of the
compensation and benefits to be paid or provided to Executive by Employer
pursuant to this Agreement, Executive covenants as follows:
(a) Confidentiality.
(i) During and following the Term, Executive will hold in confidence the
Confidential
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Information and will not disclose the Confidential Information, or any
portion thereof, to any Person, except with the specific prior written
consent of Employer or except as otherwise expressly permitted by the
terms of this Agreement.
(ii) Any trade secrets of Employer or its affiliates will be entitled to
all of the protections and benefits pursuant to applicable law. If any
information that Employer or its affiliates deems to be a trade secret
is determined by a court of competent jurisdiction not to be a trade
secret for purposes of this Agreement, such information will,
nevertheless, be considered Confidential Information for purposes of
this Agreement. Executive hereby waives any requirement that Employer
submit proof of the economic value of any trade secret or post a bond
or other security.
(iii) None of the foregoing obligations and restrictions applies to any
part of the Confidential Information that Executive demonstrates was
or became generally available to the public other than as a result of
a direct or indirect disclosure by Executive.
(iv) The Executive will not remove from the Employer's or Employer's
affiliates' premises (except to the extent such removal is for
purposes of the performance of the Executive's duties at home or while
traveling, or except as otherwise specifically authorized by Employer)
any document, record, notebook, plan, model, component, device, or
computer software or code, whether embodied in a disk or in any other
form (collectively, the "Proprietary Items"). Executive agrees that,
as between Employer and Executive, all of the Proprietary Items,
whether or not developed by Executive, are the exclusive property of
Employer. Upon termination of this Agreement by either party, or upon
the request of Employer during the Term, Executive will return to
Employer all of the Proprietary Items in Executive's possession or
subject to Executive's control, and Executive shall not retain any
copies, abstracts, sketches, or other physical embodiment of any of
the Proprietary Items.
(b) Employee Inventions. Each Employee Invention will belong exclusively to
Employer. Executive covenants that Executive will promptly:
(i) disclose to Employer in writing any Employee Invention;
(ii) assign to Employer or to a party designated by Employer, at Employer's
request and without additional compensation, all of Executive's right
to the Employee Invention for the United States and all foreign
jurisdictions;
(iii) execute and deliver to Employer such applications, assignments, and
other documents as Employer may request in order to apply for and
obtain patents or other registrations with respect to any Employee
Invention in the United States and any foreign jurisdictions;
(iv) sign all other papers necessary to carry out the above obligations;
and
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(v) give testimony and render any other assistance in support of
Employer's rights to any Employee Invention.
Section 7.3 Disputes or Controversies. Executive acknowledges that in the
event that a dispute or controversy resulting from or relating to this Agreement
be submitted for adjudication to any court, arbitration panel, or other third
party, the preservation of the secrecy of Confidential Information may be
jeopardized. All pleadings, documents, testimony and records relating to any
such adjudication will be maintained in secrecy and will be available for
inspection by Employer, Executive, and their respective attorneys and experts,
who will agree, in advance and in writing, to receive and maintain all such
information in secrecy, except as may be limited by them in writing.
ARTICLE VIII.
NON-COMPETITION AND NON-INTERFERENCE
Section 8.1 Acknowledgments by Executive. Executive acknowledges that (a)
the services to be performed by him pursuant to this Agreement are of a special,
unique, unusual, extraordinary, and intellectual character; (b) Employer's
business conducted nationally and Employer's services and products are marketed
throughout the United States; (c) Employer competes with other businesses that
are or could be located in any part of the United States; and (d) the provisions
of this Article VIII are reasonable and necessary to protect the Employer's
business.
Section 8.2 Covenants of Executive. In consideration of the acknowledgments
by Executive, and in consideration of the compensation and benefits to be paid
or provided to Executive by Employer, Executive covenants that Executive will
not, directly or indirectly:
(a) during the Term, except in the course of his employment pursuant to
this Agreement, and during the Post-Agreement Period, directly or indirectly,
engage or invest in, own, manage, operate, finance, control, or participate in
the ownership, management, operation, financing, or control of, be employed by,
associated with, or in any manner connected with, lend the Executive's name or
any similar name to, lend Executive's credit to or render services or advice to,
any business whose products, services or activities compete in whole or in part
with the products, services or activities of the Employer or any affiliate of
Employer anywhere in the United States; provided, however, that the Executive
may purchase or otherwise acquire up to (but not more than) three percent (3%)
of any class of securities of any issuer (but without otherwise participating in
the activities of such issuer), if such securities are listed on any national or
regional securities exchange or have been registered pursuant to Section 12(g)
of the Securities Exchange Act of 1934;
(b) whether for Executive's own account or for the account of any other
Person, at any time during the Term and the Post-Agreement Period, solicit
business of the same or similar type being carried on by the Employer, from any
Person known by Executive to be a customer of Employer, whether or not Executive
had personal contact with such Person during and by reason of Executive's
employment with Employer;
(c) whether for Executive's account or the account of any other Person (i)
at any time during the Term and the Post-Agreement Period, solicit, employ, or
otherwise engage as an employee,
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independent contractor, or otherwise, any Person who is or was an employee of
Employer at any time during the Term or in any manner induce or attempt to
induce any employee of Employer to terminate his or her employment relationship
with Employer; or (ii) at any time during the Term and the Post-Agreement
Period, interfere with Employer's relationship with any Person, including any
Person who at any time during the Term was an employee, contractor, supplier, or
customer of Employer; or
(d) at any time during or after the Term, disparage Employer or any of
Employer's shareholders, directors, officers, employees, or agents.
For purposes of this Section 8.2, the term "Post-Agreement Period" means
the period beginning on the date of termination of the Executive's employment
with the Employer, plus five (5) years.
If any covenant in this Section 8.2 is determined by a court of competent
jurisdiction to be unreasonable, arbitrary, or against public policy, such
covenant will be considered to be divisible with respect to scope, time, and
geographic area, and such reduced scope, time, or geographic area, or all of
them, as a court of competent jurisdiction may determine to be reasonable, not
arbitrary, and not against public policy, will be effective, obligatory, and
enforceable against Executive.
The period of time applicable to any covenant in this Section 8.2 will be
extended by the duration of any violation by Executive of such covenant.
Executive will, while the covenant pursuant to this Section 8.2 is in
effect, give notice to Employer, within ten (10) days after accepting any other
employment, of the identity of Executive's employer. Employer may notify such
employer that Executive is obligated by this Agreement and, at Employer's
election, furnish such employer with a copy of this Agreement or relevant
portions thereof.
ARTICLE IX.
GENERAL PROVISIONS
Section 9.1 Injunctive Relief and Additional Remedy. Executive acknowledges
that the damage that would be suffered by Employer as a result of a breach of
the provisions of this Agreement (including any provision of Articles VII and
VIII) would be irreparable and that an award of monetary damages to the Employer
for such a breach would be an inadequate remedy. Consequently, Employer will
have the right, in addition to any other rights Employer may have, to obtain
injunctive relief to restrain any breach or threatened breach or otherwise to
specifically enforce any provision of this Agreement, and Employer will not be
obligated to post bond or other security in seeking such relief.
Section 9.2 Covenants of Articles VII and VIII Are Essential and
Independent Covenants. The covenants by Executive in Articles VII and VIII are
essential provisions of this Agreement, and without Executive's agreement to
comply with such covenants, Employer would not have entered into this Agreement
or employed or continued the employment of Executive. Employer and Executive
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have independently consulted their respective counsel and have been advised in
all respects concerning the reasonableness and propriety of such covenants, with
specific regard to the nature of the business conducted by Employer.
Executive's covenants in Articles VII and VIII are independent covenants
and the existence of any claim by Executive against Employer or any of its
affiliates under this Agreement or otherwise will not excuse Executive's breach
of any covenant in Articles VII or VIII.
If Executive's employment pursuant to this Agreement expires or is
terminated, this Agreement will continue in full force and effect as is
necessary or appropriate to enforce the covenants and agreements of Executive in
Articles VII and VIII.
Section 9.3 Offset. Employer will be entitled to offset against any and all
amounts owing to Executive pursuant to this Agreement the amount of any and all
claims that Employer may have against Executive.
Section 9.4 Representations and Warranties by the Executive. Executive
represents and warrants to Employer that the execution and delivery by Executive
of this Agreement do not, and the performance by Executive of Executive's
obligations pursuant to this Agreement will not, with or without the giving of
notice or the passage of time, or both (a) violate any judgment, writ,
injunction, or order of any court, arbitrator, or governmental agency applicable
to Executive; or (b) conflict with, result in the breach of any provisions of or
the termination of, or constitute a default under, any agreement to which
Executive is a party or by which Executive is or may be obligated.
Section 9.4 Obligations Contingent on Performance. The obligations of
Employer pursuant to this Agreement, including Employer's obligation to pay the
compensation provided for in this Agreement, are contingent upon Executive's
performance of Executive's obligations pursuant to this Agreement.
Section 9.5 Waiver. The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Neither the failure nor any delay
by either party in exercising any right, power, or privilege pursuant to this
Agreement will operate as a waiver of such right, power, or privilege, and no
single or partial exercise of any such right, power, or privilege will preclude
any other or further exercise of such right, power, or privilege or the exercise
of any other right, power, or privilege. To the maximum extent permitted by
applicable law, (a) no claim or right resulting from this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other party; (b) no waiver that
may be given by a party will be applicable, except in the specific instance for
which it is given; and (c) no notice to or demand on one party will be deemed to
be a waiver of any obligation of such party or of the right of the party giving
such notice or demand to take additional action without notice or demand as
provided in this Agreement.
Section 9.6 Binding Effect; Delegation of Duties Prohibited. This Agreement
shall inure to the benefit of, and shall obligate, the parties hereto and their
respective successors, assigns, heirs, and legal representatives, including any
entity with which the Employer may merge or consolidate or to
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which all or substantially all of its assets may be transferred. The duties and
covenants of Executive pursuant to this Agreement are personal and may not be
delegated.
Section 9.7 Notices. All notices, requests, demands or other communications
pursuant to this Agreement shall be in writing or by telex or facsimile
transmission and shall be deemed to have been duly given (i) on the date of
service if delivered in person or by telex or facsimile machine transmission
(with the telex or facsimile confirmation of transmission receipt acting as
confirmation of service when sent and provide telexed or telecopied notices are
also mailed by first class, certified or registered mail, postage prepaid); or
(ii) seventy-two (72) hours after mailing by first class, registered or
certified mail, postage prepaid, and properly addressed as follows:
If to Executive: Cecil Zeringue
5031 Birch Street, Suite G
Newport Beach, CA 92660
If to Employer: TMEX USA, Inc.
5031 Birch Street, Suite G
Newport Beach, CA 92660
With a copy to: STEPP & BEAUCHAMP LLP
1301 Dove Street, Suite 460
Newport Beach, California 92660
949.660.9700
Telecopier: 949.660.9010
or at such other address as the party affected may designate in a written notice
to such other party in compliance with this section.
Section 9.8 Entire Agreement; Amendments. This Agreement specifies the
entire agreement among the parties with respect to the (i) employment
relationship by and among Employer and Executive and (ii) the terms and
conditions of all other relationships by and among Employer, in any capacity,
and Executive, in any capacity and supersede all prior agreements and
understandings, oral or written, among the parties hereto with respect thereto.
This Agreement may not be amended orally, but only by an agreement in writing
signed by the parties hereto.
Section 9.9 Governing Law. This Agreement will be governed by the laws of
the State of California, without regard to conflicts of laws principles.
Section 9.10 Jurisdiction. Any action or proceeding seeking to enforce any
provision of, or based on any right arising out of, this Agreement shall be
brought against either of the parties in the courts of the State of California,
County of Orange, and each of the parties consents to the jurisdiction of such
courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue. Process in any action or
proceeding referred to in the preceding sentence may be served on either party
anywhere in the world.
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Section 9.11 Section and Article Headings, Construction. The headings of
sections and articles in this Agreement are provided for convenience only and
will not affect its construction or interpretation. All references to "section"
or "sections" and "article" or "articles" refer to the corresponding section or
sections and article or articles of this Agreement unless otherwise specified.
All words used in this Agreement will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
word "including" does not limit the preceding words or terms.
Section 9.12 Severability. If any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any provision
of this Agreement determined to be invalid or unenforceable only in part will
remain in full force and effect to the extent not determined to be invalid or
unenforceable.
Section 9.13 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
Section 9.14 Indemnification for Negligence or Misconduct.
A. Employer shall save Employee harmless from and against and shall
indemnify Executive for any liability, loss, costs, expenses or damages
howsoever caused by reason of any injury (whether to body, property, or personal
or business character or reputation) sustained by any person or to any person or
to property by reason of any act, neglect, default or omission of Employer, and
Employer shall pay any and all amounts to be paid or discharged in case of an
action for any such damages or injuries. No provision of this section is
intended to, nor shall any provision of this section, relieve Executive from
that Executive's own act, omission or negligence.
B. Executive shall save Employer harmless from and against and shall
indemnify Employer for any liability, loss, costs, expenses or damages howsoever
caused by reason of any injury (whether to body, property, personal or business
character or reputation) sustained by any person or to any person or to property
by reason of any act, neglect, default or omission of Executive, and Executive
shall pay any and all amounts to be paid or discharged in case of an action for
any such damages or injuries. No provision of this section is intended to, nor
shall any provision of this section, relieve Employer from Employer's own act,
omission or negligence.
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IN WITNESS WHEREOF the parties have executed this Agreement of Employment
in duplicate and in multiple counterparts, each of which shall have the force
and effect of an original, on the date specified in the preamble of this
Agreement.
"EMPLOYER" "EXECUTIVE"
TMEX USA, Inc.,
a Nevada corporation
By: /s/ Crofton Cooper /s/ Cecil Zeringue
---------------------------- ---------------------------
Crofton Cooper Cecil Zeringue
Its: Chief Executive Officer
By: /s/ Crofton Cooper
----------------------------------
Crofton Cooper
Its: Secretary
EMPLOYMENT AGREEMENT
Agreement made this 1st day of October, 1999 by and between TMEX USA, INC.,
a Nevada corporation also authorized to do business in the state of California
(herein "TMEX") and Michael W. Garone residing at 11625 Vista Forest Drive,
Alpharetta, Georgia (herein "EMPLOYEE" and sometimes referred to as "GARONE").
RECITALS
1. Employee has a successful background of management and sales in the
operation of a telephone debit card business, with an established network
distribution system.
2. TMEX is a telecommunications company headquartered in Newport Beach,
California, with a current US-Mexico Laser Communications network and facilities
available for national and international telephone transmission services.
3. TMEX desires to enter into the telephone debit card business
("Venture"), by and through the employment of GARONE and the opening of a sales
office in Atlanta, Georgia. GARONE desires to be and become an employee of TMEX,
for such purpose.
WITNESSETH
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises herein contained, the parties agree as follows:
AGREEMENT
1. Employment. TMEX agrees to employ EMPLOYEE AND EMPLOYEE agrees to serve
TMEX upon the terms and conditions hereinafter set forth.
2. Term of Employment. The employment of EMPLOYEE hereunder shall commence
on October 1, 1999 and shall continue for a period of three years thereafter
with an automatic renewal period of three consecutive years thereafter, unless
sooner terminated pursuant to the provisions of this agreement.
3. Duties of Employee. EMPLOYEE agrees to serve TMEX faithfully in a senior
executive capacity with such title as may be designated by TMEX, to the best of
his ability under direction of the Chief Executive Officer of TMEX or his
successor. It is the intention of the parties that EMPLOYEE shall serve TMEX
specifically in connection with the management and sales operation of a
telephone debit card business by and through a sales office to be established in
Atlanta Georgia, including, but not limited to, such other executive and other
duties, consonant with the management/sales operation of a telephone debit card
business, as TMEX may reasonably require.
<PAGE>
4. Compensation. TMEX agrees to pay, or cause to be paid, to EMPLOYEE and
EMPLOYEE agrees to accept, as compensation for the services to be rendered by
EMPLOYEE hereunder, a minimum salary of $5,000 per month for the first two
months of his employment and $10,000 per month, for the next ten consecutive
months and thereafter increased annually by ten percent, all payable in equal
bimonthly installments on the 1st and 15th day of each successive month. TMEX
shall reimburse EMPLOYEE for all reasonable expenses incurred by EMPLOYEE on
behalf of TMEX, including the expense of any business trips undertaken by
Employee at the request of TMEX.
5. Bonus Compensation. In addition to the base salary and compensation
provided in paragraph 4 above, TMEX shall, as signing bonus compensation, issue
50,000 shares of its common stock to EMPLOYEE upon the signing of this agreement
and thereafter contingent bonus compensation of a total of 960,000 shares of its
common stock, over a period of three years in equal quarterly installments of
80,000 shares, provided that EMPLOYEE meets the minimum profit/revenue
projections set forth on the first year cash flow analysis furnished by
Employees, a copy of which is annexed as Exhibit "A" and, thereafter, set forth
in an annual cash flow analysis for each succeeding year mutually agreed to by
the parties. It is expressly understood that the minimum profit/revenue for each
quarterly period shall be determined on a quarterly roll-over basis.
6. Rule 144 Stock. EMPLOYEE agrees and recognizes that all shares of the
common stock of TMEX issued to him under this agreement have not been registered
under Section 5 of the Securities Act of 1933 and are "restricted securities" as
that term is defined in Rule 144 (a) (3) [17 CFR 230.144(a)(3)] and are subject
to the resale limitations which require a holding period of at least one-year
before resale measured from the date they are acquired. For restricted
securities held between one and two years, other provisions of the rule require
that limited amounts may be resold only in ordinary brokerage transactions with
a notice of the resale to be filed with the Securities Exchange Commission.
After a two-year holding period they may be resoled by a non-affiliate without
any restrictions.
7. Employee Insurance. TMEX warrants and represents that its employees are
covered by a PRO health/hospital insurance plan, under which EMPLOYEE will
likewise be covered, effective upon the signing of this agreement. TMEX also
agrees upon the signing and during the life of this agreement to provide and pay
the premium for a $500,000 15-year level payment term life insurance policy
covering EMPLOYEE, who shall be the owner thereof.
8. Commissions. EMPLOYEE shall be entitled to and shall be paid a
commission equal to one and one-half percent on all debit card sales.
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9. Restrictive Covenant of EMPLOYEE. In addition to the provisions of
paragraph 3 hereof, EMPLOYEE agrees during the employment period, to devote all
or such part of his time as reasonably necessary to the Venture and that he will
not engage or be otherwise directly or indirectly interested any way in any
business competing with or of a nature similar to the business of TMEX. EMPLOYEE
further agrees that during the employment period and thereafter without limit
that he will not, except to TMEX communicate, or divulge to any person, firm or
corporation, either directly or indirectly, any information (except that which
is generally known to the public) relating to the business, customers and
suppliers or other affairs of TMEX.
10. TMEX Obligations. In addition to payment of salaries, travel expenses,
health and life insurance, and other items provided above, TMEX shall be
obligated for, including but without limitation, the following:
a) To pay for the lease of office space and necessary office equipment in
Atlanta Georgia:
b) Provide and pay for accounting services, switching lease and switches,
licenses and permits, telephone service, and legal fees; and
c) Provide one time capitalization of the Venture as required by Exhibit A
not to exceed $80,000.
11. Merger, Consolidation of TMEX. In the event that TMEX shall at any time
be merged or consolidated with any other corporation or corporations or shall
sell or otherwise transfer a substantial portion of its assets to another entity
or corporation, the provisions of this Agreement shall bed binding upon and
inure to the benefit of the corporation or entity surviving or resulting from
such merger or consolidation or to which the assets shall be sold or
transferred. Except as provided in the preceding sentence, this Agreement shall
not be assignable by the EMPLOYEE or TMEX.
12. Termination Conditions. TMEX, for the reasons set forth below, shall
have the right to terminate this Agreement by sending written notice of
termination together with two-weeks severance pay to the EMPLOYEE, and thereupon
his employment hereunder shall terminate.
a) In the event the EMPLOYEE shall become incapacitated by reason of mental
or physical disability or otherwise during the term of this agreement, so that
he is prevented from performing his principal duties and services hereunder for
a period of four (4) consecutive months, or the equivalent of six (6)
consecutive months during any 12-month period, TMEX shall have the right to
terminate this Agreement.
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b) In the event the Venture incurs a loss in any month, or months during
the first six months of this Agreement, to the extent that TMEX would of
necessity be required to infuse additional capital into the Venture (new money),
TMEX shall have the right to terminate this Agreement, unless, the additional
capital required does not, in the aggregate, exceed 50% of the profit stemming
from the Venture already realized by TMEX. However, nothing herein contained, is
intended to prevent TMEX from infusing additional capital into the Venture at
anytime, regardless of the source of such capital.
13. Covenant Not To Sue. The parties expressly agree, (1) that the Venture
covered by the terms of this agreement is a development stage venture; (2) that
the success of the Venture is dependent solely upon the ability of EMPLOYEE to
cause the Venture to fully meet the projections set forth in Exhibit A, absence
Acts of God (or similar occurences, ("Force Majure") which temporarily prevents
the facilities of TMEX to accomodate the business generated by the Venture and,
(3) that TMEX has agreed to provide the initial capitalization for the Venture
solely in reliance upon such projections provided by EMPLOYEE and has made no
arrangements and is not willing to provide additional capital for the Venture in
the event it occurs losses or otherwise fails to meet the projections absence
Force Majure. Accordingly, the parties for themselves, their respective heirs,
assigns, legal representatives, assigns and successors covenant with each other
to never collectively or individually institute any suit or action at law or in
equity against the other party arising directly or indirectly out of this
Agreement nor in any way aid in the institution or prosecuting against the other
party of any claim, demand, action or cause of action for damages, arising
directly or indirectly, out of this Agreement.
14. Joint Endeavor. The parties agree that the drafting of this Agreement
was a joint effort on the part of both parties.
15. Notices. All notices, requests, demands and other communications
arising out of this Agreement, if any, shall be delivered personally, by Fax, to
the other party at the address first set forth above. Any party may change such
address by sending written notice of such change by Fax to the other party. All
documents faxed by a party pursuant hereto, including the signature of a party
thereon, if any, shall be deemed an original document for all purposes.
16. Complete Understanding. This Agreement constitutes the complete
understanding between the parties and no statements representation, warranty or
covenant has been made by either party except as expressly set forth herein.
This Agreement shall not be altered, modified, amended or terminated by written
instrument signed by both of the parties hereto.
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IN WITNESS WHEREOF, the parties have executed this agreement the year and
date set forth along side their respective signatures in the space provided
below. The parties agree that if a signed faxed copy of this Agreement is
delivered by one party to the other, it shall be deemed to be an original signed
document, for all purposes.
TMEX USA, INC. EMPLOYEE
By /s/ [ILLEGIBLE] 9-30-99 By /s/ Michael W. Garone
------------------------ -----------------------
Its Michael W. Garone
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AGREEMENT FOR INDEMNIFICATION
THIS AGREEMENT FOR INDEMNIFICATION ("Agreement") is made and entered into
as of the 12th day of April 2000, by and between TMEX USA, Inc., a Nevada
corporation ("Corporation"), and Crofton Cooper, Chief Executive Officer,
Secretary, Treasurer and a director of the Corporation ("Indemnitee").
RECITALS
A. The Corporation and the Indemnitee understand and agree that
interpretations of statutes, regulations, court opinions, and the Corporation's
Articles of Incorporation and Bylaws, are too uncertain to provide the
Corporation's officers and directors with adequate or reliable advance knowledge
or guidance with respect to the legal risks and potential liabilities to which
they may become exposed personally as a result of performing, in good faith,
their duties as officers and directors of the Corporation.
B. The Corporation and the Indemnitee are aware of the substantial increase
in the number of litigation matters filed against corporate officers and
directors.
C. The Corporation and the Indemnitee are aware that the cost of defending
those litigation matters, whether or not those litigation matters are
meritorious, may be in excess of the financial resources of the officers and
directors of the Corporation or may significantly exceed the limited benefits
derived by persons serving as officers and directors of the Corporation.
D. The Corporation and the Indemnitee are aware that the legal risks and
potential officer and director liabilities, or the very threat thereof, and the
resulting substantial time endured, and fees and expenses incurred, in defending
against such litigation matters have no reasonable logical relationship to the
amount of compensation received by the Corporation's officers and directors.
These factors (i) cause a significant deterrent to, and (ii) induce increased
reluctance on the part of, experienced and capable persons to serve as officers
and directors of the Corporation.
E. The Corporation has investigated the availability and deficiency of
liability insurance to provide its officers and directors with adequate
protection against the foregoing legal risks and potential liabilities. The
Corporation has concluded that such insurance does not provide adequate
protection to the Corporation's officers and directors. Therefore, the
Corporation believes it will be in the best interests of the Corporation and
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its shareholders for the Corporation to agree with the Corporation's officers
and directors, including the Indemnitee, to indemnify those officers and
directors, to the most complete extent permitted by law, against personal
liability for actions taken in the good faith performance in their duties to the
Corporation.
F. Section 78.7502 of the General Corporation Law of Nevada ("Law")
specifies the circumstances regarding the mandatory and permissive
indemnification by a Nevada corporation of the officers, directors, employees
and agents of that corporation, and those provisions (i) require indemnification
in certain circumstances, (ii) permit indemnification in other circumstances,
and (iii) prohibit indemnification in some circumstances.
G. The members of the Board of Directors of the Corporation have
determined, after careful consideration and investigation of the various options
available, that the provisions of this Agreement are reasonable, prudent, and
necessary to promote and ensure the best interests of the Corporation and its
shareholders. The provisions of the Agreement are intended to (i) induce and
encourage significantly experienced and capable persons such as the Indemnitee
to serve as officers and directors of the Corporation; (ii) encourage such
persons to resist what they consider to be unjustifiable litigation matters and
claims made against them regarding the good faith performance of their duties to
the Corporation, secure in the knowledge that certain expenses, costs, and
liabilities incurred by them in their defense of such litigation matters will be
borne and paid by the Corporation and that they will receive the maximum
protection against such risks and liabilities as legally may be made available
to them; and (iii) encourage officers and directors of the Corporation to
exercise their best business judgment regarding matters which will be submitted
to them for consideration, without undue concern for the risk that claims may be
made against them because they are officers or directors of the Corporation.
H. The Corporation desires to cause the Indemnitee to continue to serve as
an officer and director of the Corporation free from concern for unpredictable,
inappropriate, or unreasonable legal risk and personal liabilities by reason of
his acting in good faith in the performance of his duties to the Corporation.
The Indemnitee desires to serve as an officer and director of the Corporation;
provided, however, and on the express condition, that he is furnished with the
indemnification specified by the provisions of this Agreement.
NOW, THEREFORE, IN CONSIDERATION OF THE FOREGOING RECITALS, PREMISES, PROMISES,
COVENANTS, AGREEMENTS, AND UNDERTAKINGS SPECIFIED BY THE PROVISIONS OF THIS
AGREEMENT AND FOR OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND
SUFFICIENCY
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OF WHICH ARE HEREBY ACKNOWLEDGED, WITH THE INTENT TO BE OBLIGATED LEGALLY AND
EQUITABLY, THE PARTIES TO THIS AGREEMENT AGREE WITH EACH OTHER AS FOLLOWS:
1. Definitions. For the purposes of this Agreement, the following words and
terms shall be defined as follows:
(a) The term "Proceeding" does and shall include any threatened, pending,
or completed action, inquiry, lawsuit, litigation matter, or
proceeding, whether commenced in the name of the Corporation, or
otherwise, and whether civil, criminal, administrative, or
investigative in nature, including, but not limited to, actions,
inquiries, investigations, litigation matters, or proceedings
commenced pursuant to or predicated on the provisions of the
Securities Act of 1933, as amended; the Securities Exchange Act of
1934, as amended; their respective state and provincial counterparts;
and any rule or regulation promulgated pursuant thereto, in which the
Indemnitee may be, or may have been involved as, a party, or otherwise
(other than plaintiff against the Corporation), because of (i) the
fact that the Indemnitee is or was an officer or director of the
Corporation, (ii) any action taken by the Indemnitee, or (iii) any
inaction by the Indemnitee while he is or was functioning as such an
officer or director of the Corporation.
(b) The term "Expenses" includes, but is not limited to, expenses of
investigations, judicial or administrative proceedings or appeals,
court costs, attorneys' fees and disbursements, and any expenses of
establishing a right to indemnification pursuant to applicable law or
the provisions of Paragraph 7 of this Agreement.
(c) References to "other enterprise" does and shall include each entity of
and for which the Corporation is the managing agent and references to
"serving at the request of the Corporation" does and shall include any
service by the Indemnitee as an officer and director of the
Corporation which imposes duties on, or involves services by the
Indemnitee while functioning as such officer and director with respect
to any such entity, its members, partners, or beneficiaries; and if
the Indemnitee acts in good faith and in a manner he reasonably
believes to be in the best interests of the members, partners and
beneficiaries of such entity, the Indemnitee shall be deemed to have
acted in a manner "not opposed to the best interests of the
Corporation," as that
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phrase is contemplated by the provisions of this Agreement.
(d) For the purposes of this Agreement, the Indemnitee shall be deemed to
have been acting as an "Agent" if he was functioning in his capacity
as (i) an officer of the Corporation, (ii) a director of the
Corporation, (iii) a member of a committee of the Board of Directors
of the Corporation, or (iv) a representative or agent of any other
enterprise at the request of the Corporation, whether or not he is
functioning in such capacity at the time any liability or expense is
incurred for which indemnification or reimbursement can be provided
pursuant to the provisions of this Agreement.
(e) The term "Applicable Standard" means that the Indemnitee acted in good
faith and in a manner that the Indemnitee reasonably believed to be in
the best interests of the Corporation; except that in a criminal
proceeding, the Indemnitee must also have had no reasonable cause to
believe that the Indemnitee's conduct was unlawful. The termination of
any Proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or any equivalent procedure shall not, of
itself, create any presumption, or establish, that the Indemnitee did
not satisfy the "Applicable Standard."
(f) "Independent Legal Counsel" shall include any law firm selected by the
regular counsel for the Corporation from a list of law firms which
satisfy reasonable criteria established by the Board of Directors of
the Corporation; provided, however, such law firm has not represented
the Corporation, the Indemnitee, or any person controlled by the
Indemnitee within the preceding 24 calendar months.
(g) The term "Estate" shall include the following terms as those are
understood by applicable law:
(1) The duly appointed and qualified executor, executrix,
administrator, administratrix, administrator with the Will
annexed, or administratrix with the Will annexed, of the estate
of a decedent;
(2) The surviving joint tenant of a decedent, when shares of capital
stock issued by the Corporation are owned by a decedent and a
person who is not active in the business of the Corporation as
joint tenants;
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(3) Any other person who, because of the community property or other
law of any jurisdiction, may acquire, by reason of the death of
such decedent, and without formal probate proceedings, any right,
title, or interest in or to shares of capital stock issued by the
Corporation to such decedent; or
(4) An irrevocable living or grantor's trust for the benefit of a
deceased shareholder of the Corporation.
2. Agreement to Serve. The Indemnitee shall serve or continue to serve as
Chief Executive Officer, Secretary, Treasurer and a member of the Board of
Directors of the Corporation at the will of the Corporation's shareholders, or
pursuant to the provisions of separate agreement, as the case may be, for such
time as he is duly elected or appointed, and until such time as he tenders his
resignation in writing or he is removed.
3. Indemnity in Third Party Proceedings. The Corporation shall indemnify
the Indemnitee, if the Indemnitee is made a party to or threatened to be made a
party to, or otherwise involved in, any Proceeding (other than a Proceeding
which is an action by or in the right of the Corporation to procure a judgment
in its favor), because of the fact that the Indemnitee is or was an Agent of the
Corporation. The indemnification contemplated by the provisions of this
Paragraph 3 shall apply, and be limited, to and against all Expenses, judgments,
fines, penalties, settlements, and other amounts, actually and reasonably
incurred by the Indemnitee in connection with the defense or settlement of any
such Proceeding; provided, however, it is determined pursuant to the provisions
of Paragraph 7 of this Agreement or by the court in which such Proceeding is or
was pending that the Indemnitee satisfied the Applicable Standard.
4. Indemnity in Proceedings By or In the Name of the Corporation. The
Corporation shall indemnify the Indemnitee, if the Indemnitee is made a party
to, or threatened to be made a party to, or otherwise involved in, any
Proceeding which is an action by or in the right of the Corporation to procure a
judgment in the Corporation's favor because the Indemnitee is or was an Agent of
the Corporation. The indemnification contemplated by the provisions of this
Paragraph 4 shall apply, and be limited, to and against all Expenses actually
and reasonably incurred by the Indemnitee in connection with the defense or
settlement of such Proceeding, but only if:
(a) the Indemnitee satisfies the Applicable Standard (except that the
Indemnitee's belief regarding the best interests the Corporation or
other enterprise need
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not have been reasonable);
(b) the Indemnitee acted with such care, including reasonable inquiry, as
an ordinarily prudent person in a similar circumstance would use; and
(c) the Proceeding is settled or otherwise disposed of with approval of
the Corporation.
No indemnification shall be made pursuant to the provisions of this
Paragraph 4 for any claim, issue, or matter as to which the Indemnitee shall
have been adjudged to be liable to the Corporation in the performance of the
Indemnitee's duty to the Corporation, unless, and only to the extent that, the
court in which such Proceeding is or was pending shall determine upon
application that, considering all the circumstances of such Proceeding, the
Indemnitee is fairly and reasonably entitled to indemnification for the
Expenses, which such court shall determine.
5. Expenses of Successful Indemnitee. Notwithstanding any other provision
of this Agreement, to the extent that the Indemnitee has been successful on the
merits in defense of any Proceeding or in defense of any claim, issue, or matter
in such Proceeding, the Indemnitee shall be indemnified by the Corporation from
and against all Expenses actually and reasonably incurred in connection with
such Proceeding.
6. Advances of Expenses. The Expenses incurred by the Indemnitee in any
Proceeding shall be advanced by the Corporation prior to the final disposition
of such Proceeding at the written request of the Indemnitee, but only if the
Indemnitee shall undertake to repay such advances, unless and to the extent that
it is ultimately determined that the Indemnitee is entitled to indemnification.
Any advance required pursuant to the provisions of this Paragraph 6 shall be
deemed to have been approved by the members of the Board of Directors of the
Corporation to the extent the provisions of this Agreement have been approved by
the members of that Board of Directors. In determining whether or not to make an
advance pursuant to the provisions of this Paragraph 6, the ability of the
Indemnitee to repay any such advance shall not be a factor. In a Proceeding
commenced by the Corporation directly, in its own right (as distinguished from a
Proceeding commenced derivatively or by any receiver or trustee), the
Corporation shall have the discretion not to make the advance contemplated by
the provisions of this Paragraph 6, if independent counsel advises the
Corporation in writing that the Corporation has probable cause to believe, and
the Corporation does, in fact, believe, that the Indemnitee did not act in good
faith with regard to the subject matter of such Proceeding or a material portion
of
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such Proceeding.
7. Right of the Indemnitee to Indemnification Upon Application; Procedure
Upon Application. Any indemnification or advance contemplated by the provisions
of this Agreement shall be made no later than 30 calendar days after receipt by
the Corporation of a written request by the Indemnitee for such advance or
indemnification and which request shall be provided in accordance with the
provisions of Paragraph 11 of this Agreement. In all other situations,
indemnification shall be made by the Corporation only if authorized in the
specific situation, upon a determination that indemnification of the Indemnitee
is proper according to the circumstances and the provisions of this Agreement
by:
(a) a majority vote of a quorum of the members of the Board of Directors
of the Corporation (or a duly constituted committee of that Board of
Directors), consisting of officers and directors who are not parties
to the Proceeding at issue;
(b) approval of a majority in interest of the issued and outstanding
voting capital stock of the Corporation, and any shares of the
Corporation's voting capital stock entitled to vote therefor held by
the Indemnitee shall not be entitled to vote regarding such
indemnification;
(c) the court in which the Proceeding at issue is or was pending, upon
application made by the Corporation or made by (i) the Indemnitee or
(ii) any person rendering services in connection with the Indemnitee's
defense, whether or not the Corporation opposes such application; or
(d) to the extent permitted by law and as expressed by independent legal
counsel in a written opinion.
The right to indemnification or advances contemplated by the provisions of
this Agreement shall be enforceable by the Indemnitee in any court of competent
jurisdiction. The burden of proving that such indemnification or advances is
appropriate shall be on the Indemnitee. Neither the failure of the Corporation
(including the members of its Board of Directors or independent legal counsel)
to make a determination prior to the commencement of any action to determine
whether such indemnification or advances is appropriate in the particular
circumstances because the Indemnitee has satisfied the Applicable Standard, nor
a determination by the Corporation (including the members of its Board of
Directors or independent legal counsel) that the Indemnitee has not satisfied
such
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Applicable Standard, shall be a defense to such action or create a presumption
that the Indemnitee has not satisfied the Applicable Standard. The Indemnitee's
Expenses incurred in connection with successfully establishing his right to such
indemnification or advances, in whole or in part, in any Proceeding shall also
be indemnified by the Corporation; provided, however, that if the Indemnitee is
only partially successful, only an equitably allocated portion of such Expenses
shall be indemnified by the Corporation.
If the Indemnitee is entitled to indemnification by the Corporation for
some or a portion of the Expenses, judgments, fines, or penalties actually and
reasonably incurred by the Indemnitee in the investigation, defense, appeal, or
settlement of any Proceeding but not, however, for the total amount of those
Expenses, judgments, fines or penalties the Corporation shall nevertheless
indemnify the Indemnitee for the portion (determined on an equitable basis) of
those Expenses, judgments, fines, or penalties to which the Indemnitee is
entitled.
The Corporation's obligations to advance or indemnify the Indemnitee
pursuant to the provisions of this Agreement shall be deemed satisfied to the
extent of any payments made by an insurer for or on behalf of the Corporation or
the Indemnitee.
8. Indemnification Pursuant to this Agreement Is Not Exclusive. The
indemnification contemplated by the provisions of this Agreement shall not be
deemed exclusive of any other rights to which the Indemnitee may be entitled
pursuant to the provisions of the Certificate of Incorporation or Bylaws of the
Corporation, or any agreement, vote of shareholders, or disinterested officers
and directors, the General Corporation Law of the State of Nevada, or otherwise,
as to action in his official capacities as an officer, director of the
Corporation and any other capacity while serving as an officer or director of
the Corporation. The indemnification contemplated by the provisions of this
Agreement shall continue as to the Indemnitee although he may have ceased to be
an Agent of the Corporation and shall inure to the benefit of the heirs and
personal representatives of the Indemnitee, including the Estate of the
Indemnitee.
9. Limitations. The Corporation shall not be obligated pursuant to the
provisions of this Agreement to make any payment in connection with any claim
made against the Indemnitee:
(a) for which payment is made to the Indemnitee pursuant to the provisions
of a valid and collectible insurance policy, except with respect to
any excess beyond the amount of payments pursuant to the provisions of
such policy;
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(b) for which the Indemnitee is indemnified by the Corporation otherwise
than pursuant to the provisions of this Agreement;
(c) based upon or attributable to the Indemnitee gaining any personal
profit or advantage to which he was not legally entitled;
(d) for an accounting of profits made from the purchase or sale by the
Indemnitee of securities of the Corporation within the meaning of
Section 16(b) of the Securities Exchange Act of 1934 and amendments
thereto or similar provisions of any state statutory law or common
law;
(e) resulting from or contributed to by the active and deliberate
dishonesty of the Indemnitee; provided, however, the Indemnitee shall
be indemnified by the Corporation to the extent otherwise specified by
the provisions of this Agreement as to any claims for which a
litigation action may be commenced against the Indemnitee because of
any alleged dishonesty on his part, unless a judgment or other final
adjudication of such litigation action adverse to the Indemnitee shall
establish that he committed acts of active and deliberate dishonesty
with an actual dishonest purpose and intent, which acts were material
to the litigation action so adjudicated;
(f) for omissions or acts committed in bad faith or which involve
intentional misconduct or a knowing violation of law;
(g) for any omission or act that the Indemnitee believed at the time of
his action to be contrary to, or inconsistent with, the best interests
of both the Corporation and its shareholders, or
(h) for any transaction from which the Indemnitee derived an improper
personal economic benefit in a capacity other than as a shareholder of
the Corporation.
10. Severability. In the event any part of this Agreement, for any reason,
is determined to be invalid, such determination shall not affect the validity of
any remaining portion of this Agreement, which remaining portion shall remain in
complete force and effect as if this Agreement had been executed with the
invalid portion of this Agreement eliminated. It is hereby declared the
intention of the parties that the parties would have
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executed the remaining portion of this Agreement without including any such
part, parts or portion which, for any reason, hereafter may be determined to be
invalid.
11. Notices. The Indemnitee shall, as a condition precedent to his right to
be indemnified pursuant to the provisions of this Agreement, provide to the
Corporation notice in writing within 20 calendar days after he becomes aware of
any claim made against him for which he believes, or should reasonably believe,
indemnification will or could be sought pursuant to the provisions of this
Agreement. All notices, requests, demands, and other communications
(collectively, "notices") contemplated or required by the provisions of this
Agreement shall be in writing (including communications by telephone, telex, or
telecommunication facilities providing facsimile transmission) and mailed
(postage prepaid and return receipt requested), telegraphed, telexed,
transmitted or personally served to each party at the address for such party
specified below such party's signature to this Agreement or at such other
address as such party may designate in a written notice to the other party in
compliance with the provisions of this paragraph. All notices shall be effective
when received; provided, however, receipt shall be deemed to be effective (i) 2
business days of any properly addressed notice having been deposited in the
mail, (ii) 24 hours from the time electronic transmission was made, or (iii)
upon actual receipt of electronic delivery, whichever occurs first.
12. Parties in Interest. No provision of this Agreement is intended to, nor
shall any such provision confer any right or remedies pursuant to or by reason
of the provisions of this Agreement to any persons other than the parties to
this Agreement and their respective successors and assigns, including the Estate
of the Indemnitee, nor is any provision of in this Agreement intended to relieve
or discharge the obligation or liability of any third party to any party to this
Agreement. No provision of this Agreement shall provide any third person any
right of subrogation or action against any party to this Agreement.
13. Successors and Assigns. This Agreement shall inure to the benefit of
and obligate the undersigned parties and their respective successors and
assigns. Whenever, in this Agreement, a reference to any party is made, such
reference shall be deemed to include a reference to the successors and assigns
of such party; provided, however, neither this paragraph nor any other portion
of this Agreement shall be interpreted to constitute a consent to any assignment
or transfer other than pursuant to and in accordance with the other provisions
of this Agreement. Neither party shall assign, transfer or delegate that party's
rights, responsibilities, duties or obligation created by the provisions of this
Agreement to any other person without the prior written consent of the other
party.
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14. Captions and Interpretation. Captions of the paragraphs of this
Agreement are for convenience and reference only, and the words specified in
those captions shall in no way be held to explain, modify, amplify or aid in the
interpretation, construction or meaning of the terms, conditions and provisions
of this Agreement. The language and all parts to this Agreement, in all cases,
shall be construed in accordance with the fair meaning of that language and
those parts and as if that language and those parts were prepared by both
parties and not strictly for or against any party. The rule of construction,
which requires a court to resolve any ambiguities against the drafting party,
shall not apply in interpreting the provisions of this Agreement.
15. Number and Gender. Whenever the singular number is used in this
Agreement, and when required by the context, the same shall include the plural,
and vice versa; the masculine gender shall include the feminine and the neuter
genders, and vice versa; and the word "person" shall include corporation, firm,
trust, estate, joint venture, governmental agency, sole proprietorship,
political subdivision, organization, fraternal order, club, league, joint stock
company, society, municipality, association, partnership or other form of
entity.
16. Execution in Counterparts. This Agreement shall be prepared and
forwarded to the Indemnitee for execution. Counsel for the Corporation shall
cause the executed Agreement to be filed in the principal office of such
counsel.
17. Entire Agreement. This Agreement is the final written expression and
the complete and exclusive statement of all the agreements, conditions,
promises, representations, warranties and covenants between the parties with
respect to the subject matter of this Agreement, and this Agreement supersedes
all prior or contemporaneous agreements, negotiations, representations,
warranties, covenants, understandings and discussions by and between and among
the parties, their respective representatives, and any other person, with
respect to the subject matter specified in this Agreement. This Agreement may be
amended only by an instrument in writing which expressly refers to this
Agreement and specifically states that that instrument is intended to amend this
Agreement and is signed by each of the parties. Nothing specified in any exhibit
attached to this Agreement shall supersede or annul the terms and provisions of
this Agreement, unless the matter specified in such exhibit shall expressly so
provide to the contrary, and in the event of any ambiguity in meaning or
understanding between this Agreement proper and the appended exhibits, the
provisions of this Agreement shall prevail and control. Each of the parties
represents, warrants and covenants that in executing this Agreement that party
has relied solely on the terms, conditions and provisions specified in this
Agreement. Each of
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the parties additionally represents, warrants and covenants that in executing
and delivering this Agreement such party has placed no reliance whatsoever on
any statement, representation, warranty, covenant or promise of the other party,
or any other person, not specified expressly in this Agreement, or upon the
failure of any party or any other person to make any statement, representation,
warranty, covenant or disclosure of any nature whatsoever. The parties have
included this paragraph to preclude (i) any claim that any party was in any
manner whatsoever induced fraudulently to enter into, execute and deliver this
Agreement, and (ii) the introduction of parol evidence to vary, interpret,
supplement or contradict the terms, conditions and provisions of this Agreement.
18. Governing Law. This Agreement shall be deemed to have been entered into
in the State of Nevada, and all questions concerning the validity,
interpretation, or performance of any of the terms, conditions and provisions of
this Agreement or of any of the rights or obligations of the parties shall be
governed by, and resolved in accordance with, the laws of the State of Nevada,
without regard to conflicts of law principles.
19. Government Regulations. The transactions and relationship contemplated
by the provisions of this Agreement are, and shall remain, subject to any and
all present and future orders, rules and regulations of any duly constituted
authority or agency having jurisdiction of those transactions and that
relationship.
20. Further Assurances. The parties shall from time to time sign and
deliver any further instruments and take any further actions as may be necessary
to effectuate the intent and purposes of this Agreement.
21. All Consents in Writing. In any instance in which any party shall be
requested to consent to or approve of any matter with respect to which that
party's consent or approval is required by any of the provisions of this
Agreement, such consent or approval shall be furnished in writing.
22. Attorneys' Fees. In the event any party shall institute any action or
proceeding to enforce any provision of this Agreement to seek relief from any
violation of this Agreement, or to otherwise obtain any judgment or order
relating to or resulting from the subject matter of this Agreement, the
prevailing party shall be entitled to receive from the losing party such
prevailing party's actual attorneys' fees and costs incurred to prosecute or
defend such action or proceeding, including, but not limited to, actual
attorneys' fees and costs incurred preparatory to such prosecution and defense.
Moreover, while a court of competent jurisdiction may assist in determining
whether or not the fees actually
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incurred are reasonable in the circumstances then existing, that court is not be
governed by any judicially or legislatively established fee schedule, and such
fees and costs are to include those as may be incurred on appeal of any issue
and all of which fees and costs shall be included as part of any judgment, by
cost bill or otherwise, and where applicable, any appellate decision rendered in
or resulting from such action or proceeding. For purposes of this Agreement, in
any action or proceeding instituted by a party, the prevailing party shall be
that party in any such action or proceeding (i) in whose favor a judgment is
entered, or (ii) prior to trial, hearing or judgment any other party shall pay
all or any portion of amounts claimed by the party seeking payment, or such
other party shall eliminate the condition, cease the act, or otherwise cure the
act of commission or omission claimed by the party initiating such action or
proceeding.
23. Reservation of Rights. The failure of any party at any time or times
hereafter to require strict performance by any other party of any of the
warranties, representations, covenants, terms, conditions and provisions
specified in this Agreement shall not waive, affect or diminish any right of
such party failing to require strict performance to demand strict compliance and
performance therewith and with respect to any other provisions, warranties,
terms, and conditions specified in this Agreement. Any waiver of any default
shall not waive or affect any other default, whether prior or subsequent
thereto, and whether the same or of a different type. None of the
representations, warranties, covenants, conditions, provisions and terms
specified in this Agreement shall be deemed to have been waived by any act or
knowledge of any party, its agents, trustees, officers, or employees and any
such waiver shall be made only by an instrument in writing, signed by the
waiving party and directed to any non-waiving party specifying such waiver, and
each party reserves such party's rights to insist upon strict compliance
herewith at all times.
24. Purpose of Covenants. All covenants made by each party shall be deemed
made for the purpose of inducing the other party to enter into and execute this
Agreement. The representations, warranties, and covenants specified in this
Agreement shall survive any investigation by either party whether before or
after the execution of this Agreement.
25. Concurrent Remedies. No right or remedy specified in this Agreement
conferred on or reserved to the parties is exclusive of any other right or
remedy specified in this Agreement or by law or equity provided or permitted;
but each such right and remedy shall be cumulative of, and in addition to, every
other right and remedy specified in this Agreement or now or hereafter existing
at law or in equity or by statute or otherwise, and may be enforced concurrently
therewith or from time to time. The termination of this Agreement for any reason
whatsoever shall not prejudice any right or
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remedy which any party may have, either at law, in equity, or pursuant to the
provisions of this Agreement.
26. Force Majeure. If any party is rendered unable, completely or
partially, by the occurrence of an event of "force majeure" (hereinafter
defined) to perform such party's obligations created by the provisions of this
Agreement, such party shall give to the other party prompt written notice of the
event of "force majeure" with reasonably complete particulars concerning such
event; thereupon, the obligations of the party giving such notice, so far as
those obligations are affected by the event of "force majeure," shall be
suspended during, but no longer than, the continuance of the event of "force
majeure." The party affected by such event of "force majeure" shall use all
reasonable diligence to resolve, eliminate and terminate the event of "force
majeure" as quickly as practicable. The term "force majeure," as contemplated by
the provisions of this Paragraph 27 means any act of God, strike, lockout or
other industrial disturbance, act of the public enemy, war blockage, public
riot, lightening, fire, storm, flood explosion, governmental action, earthquake,
governmental delay, restraint or inaction, unavailability or equipment, and any
other cause or event, whether of the kind enumerated specifically herein, or
otherwise, which is not within the control of the party claiming such
suspension.
27. Consent to Agreement. By executing this Agreement, each party, for
itself, represents such party has read or caused to be read this Agreement in
all particulars, and consents to the rights, conditions, duties and
responsibilities imposed upon such party as specified in this Agreement. Each
party represents, warrants and covenants that such party executes and delivers
this Agreement of its own free will and with no threat, undue influence, menace,
coercion or duress, whether economic or physical. Moreover, each party
represents, warrants, and covenants that such party executes this Agreement
acting on such party's own independent judgment and upon the advice of such
party's counsel.
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IN WITNESS WHEREOF the parties have executed this Agreement for
Indemnification on the date specified in the preamble of this Agreement.
TMEX USA, Inc.,
a Nevada corporation
By: /s/ Cooper Lee /s/ Crofton Cooper
---------------------------- --------------------
Cooper Lee Crofton Cooper
Its: President
15
AGREEMENT FOR INDEMNIFICATION
THIS AGREEMENT FOR INDEMNIFICATION ("Agreement") is made and entered into
as of the 12th day of April 2000, by and between TMEX USA, Inc., a Nevada
corporation ("Corporation"), and Cooper Lee, President and a director of the
Corporation ("Indemnitee").
RECITALS
A. The Corporation and the Indemnitee understand and agree that
interpretations of statutes, regulations, court opinions, and the Corporation's
Articles of Incorporation and Bylaws, are too uncertain to provide the
Corporation's officers and directors with adequate or reliable advance knowledge
or guidance with respect to the legal risks and potential liabilities to which
they may become exposed personally as a result of performing, in good faith,
their duties as officers and directors of the Corporation.
B. The Corporation and the Indemnitee are aware of the substantial increase
in the number of litigation matters filed against corporate officers and
directors.
C. The Corporation and the Indemnitee are aware that the cost of defending
those litigation matters, whether or not those litigation matters are
meritorious, may be in excess of the financial resources of the officers and
directors of the Corporation or may significantly exceed the limited benefits
derived by persons serving as officers and directors of the Corporation.
D. The Corporation and the Indemnitee are aware that the legal risks and
potential officer and director liabilities, or the very threat thereof, and the
resulting substantial time endured, and fees and expenses incurred, in defending
against such litigation matters have no reasonable logical relationship to the
amount of compensation received by the Corporation's officers and directors.
These factors (i) cause a significant deterrent to, and (ii) induce increased
reluctance on the part of, experienced and capable persons to serve as officers
and directors of the Corporation.
E. The Corporation has investigated the availability and deficiency of
liability insurance to provide its officers and directors with adequate
protection against the foregoing legal risks and potential liabilities. The
Corporation has concluded that such insurance does not provide adequate
protection to the Corporation's officers and directors. Therefore, the
Corporation believes it will be in the best interests of the Corporation and
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its shareholders for the Corporation to agree with the Corporation's officers
and directors, including the Indemnitee, to indemnify those officers and
directors, to the most complete extent permitted by law, against personal
liability for actions taken in the good faith performance in their duties to the
Corporation.
F. Section 78.7502 of the General Corporation Law of Nevada ("Law")
specifies the circumstances regarding the mandatory and permissive
indemnification by a Nevada corporation of the officers, directors, employees
and agents of that corporation, and those provisions (i) require indemnification
in certain circumstances, (ii) permit indemnification in other circumstances,
and (iii) prohibit indemnification in some circumstances.
G. The members of the Board of Directors of the Corporation have
determined, after careful consideration and investigation of the various options
available, that the provisions of this Agreement are reasonable, prudent, and
necessary to promote and ensure the best interests of the Corporation and its
shareholders. The provisions of the Agreement are intended to (i) induce and
encourage significantly experienced and capable persons such as the Indemnitee
to serve as officers and directors of the Corporation; (ii) encourage such
persons to resist what they consider to be unjustifiable litigation matters and
claims made against them regarding the good faith performance of their duties to
the Corporation, secure in the knowledge that certain expenses, costs, and
liabilities incurred by them in their defense of such litigation matters will be
borne and paid by the Corporation and that they will receive the maximum
protection against such risks and liabilities as legally may be made available
to them; and (iii) encourage officers and directors of the Corporation to
exercise their best business judgment regarding matters which will be submitted
to them for consideration, without undue concern for the risk that claims may be
made against them because they are officers or directors of the Corporation.
H. The Corporation desires to cause the Indemnitee to continue to serve as
an officer and director of the Corporation free from concern for unpredictable,
inappropriate, or unreasonable legal risk and personal liabilities by reason of
his acting in good faith in the performance of his duties to the Corporation.
The Indemnitee desires to serve as an officer and director of the Corporation;
provided, however, and on the express condition, that he is furnished with the
indemnification specified by the provisions of this Agreement.
NOW, THEREFORE, IN CONSIDERATION OF THE FOREGOING RECITALS, PREMISES, PROMISES,
COVENANTS, AGREEMENTS, AND UNDERTAKINGS SPECIFIED BY THE PROVISIONS OF THIS
AGREEMENT AND FOR OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND
SUFFICIENCY
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OF WHICH ARE HEREBY ACKNOWLEDGED, WITH THE INTENT TO BE OBLIGATED LEGALLY AND
EQUITABLY, THE PARTIES TO THIS AGREEMENT AGREE WITH EACH OTHER AS FOLLOWS:
1. Definitions. For the purposes of this Agreement, the following words and
terms shall be defined as follows:
(a) The term "Proceeding" does and shall include any threatened, pending,
or completed action, inquiry, lawsuit, litigation matter, or
proceeding, whether commenced in the name of the Corporation, or
otherwise, and whether civil, criminal, administrative, or
investigative in nature, including, but not limited to, actions,
inquiries, investigations, litigation matters, or proceedings
commenced pursuant to or predicated on the provisions of the
Securities Act of 1933, as amended; the Securities Exchange Act of
1934, as amended; their respective state and provincial counterparts;
and any rule or regulation promulgated pursuant thereto, in which the
Indemnitee may be, or may have been involved as, a party, or otherwise
(other than plaintiff against the Corporation), because of (i) the
fact that the Indemnitee is or was an officer or director of the
Corporation, (ii) any action taken by the Indemnitee, or (iii) any
inaction by the Indemnitee while he is or was functioning as such an
officer or director of the Corporation.
(b) The term "Expenses" includes, but is not limited to, expenses of
investigations, judicial or administrative proceedings or appeals,
court costs, attorneys' fees and disbursements, and any expenses of
establishing a right to indemnification pursuant to applicable law or
the provisions of Paragraph 7 of this Agreement.
(c) References to "other enterprise" does and shall include each entity of
and for which the Corporation is the managing agent and references to
"serving at the request of the Corporation" does and shall include any
service by the Indemnitee as an officer and director of the
Corporation which imposes duties on, or involves services by the
Indemnitee while functioning as such officer and director with respect
to any such entity, its members, partners, or beneficiaries; and if
the Indemnitee acts in good faith and in a manner he reasonably
believes to be in the best interests of the members, partners and
beneficiaries of such entity, the Indemnitee shall be deemed to have
acted in a manner "not opposed to the best interests of the
Corporation," as that
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phrase is contemplated by the provisions of this Agreement.
(d) For the purposes of this Agreement, the Indemnitee shall be deemed to
have been acting as an "Agent" if he was functioning in his capacity
as (i) an officer of the Corporation, (ii) a director of the
Corporation, (iii) a member of a committee of the Board of Directors
of the Corporation, or (iv) a representative or agent of any other
enterprise at the request of the Corporation, whether or not he is
functioning in such capacity at the time any liability or expense is
incurred for which indemnification or reimbursement can be provided
pursuant to the provisions of this Agreement.
(e) The term "Applicable Standard" means that the Indemnitee acted in good
faith and in a manner that the Indemnitee reasonably believed to be in
the best interests of the Corporation; except that in a criminal
proceeding, the Indemnitee must also have had no reasonable cause to
believe that the Indemnitee's conduct was unlawful. The termination of
any Proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or any equivalent procedure shall not, of
itself, create any presumption, or establish, that the Indemnitee did
not satisfy the "Applicable Standard."
(f) "Independent Legal Counsel" shall include any law firm selected by the
regular counsel for the Corporation from a list of law firms which
satisfy reasonable criteria established by the Board of Directors of
the Corporation; provided, however, such law firm has not represented
the Corporation, the Indemnitee, or any person controlled by the
Indemnitee within the preceding 24 calendar months.
(g) The term "Estate" shall include the following terms as those are
understood by applicable law:
(1) The duly appointed and qualified executor, executrix,
administrator, administratrix, administrator with the Will
annexed, or administratrix with the Will annexed, of the estate
of a decedent;
(2) The surviving joint tenant of a decedent, when shares of capital
stock issued by the Corporation are owned by a decedent and a
person who is not active in the business of the Corporation as
joint tenants;
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(3) Any other person who, because of the community property or other
law of any jurisdiction, may acquire, by reason of the death of
such decedent, and without formal probate proceedings, any right,
title, or interest in or to shares of capital stock issued by the
Corporation to such decedent; or
(4) An irrevocable living or grantor's trust for the benefit of a
deceased shareholder of the Corporation.
2. Agreement to Serve. The Indemnitee shall serve or continue to serve as
President and a member of the Board of Directors of the Corporation at the will
of the Corporation's shareholders, or pursuant to the provisions of separate
agreement, as the case may be, for such time as he is duly elected or appointed,
and until such time as he tenders his resignation in writing or he is removed.
3. Indemnity in Third Party Proceedings. The Corporation shall indemnify
the Indemnitee, if the Indemnitee is made a party to or threatened to be made a
party to, or otherwise involved in, any Proceeding (other than a Proceeding
which is an action by or in the right of the Corporation to procure a judgment
in its favor), because of the fact that the Indemnitee is or was an Agent of the
Corporation. The indemnification contemplated by the provisions of this
Paragraph 3 shall apply, and be limited, to and against all Expenses, judgments,
fines, penalties, settlements, and other amounts, actually and reasonably
incurred by the Indemnitee in connection with the defense or settlement of any
such Proceeding; provided, however, it is determined pursuant to the provisions
of Paragraph 7 of this Agreement or by the court in which such Proceeding is or
was pending that the Indemnitee satisfied the Applicable Standard.
4. Indemnity in Proceedings By or In the Name of the Corporation. The
Corporation shall indemnify the Indemnitee, if the Indemnitee is made a party
to, or threatened to be made a party to, or otherwise involved in, any
Proceeding which is an action by or in the right of the Corporation to procure a
judgment in the Corporation's favor because the Indemnitee is or was an Agent of
the Corporation. The indemnification contemplated by the provisions of this
Paragraph 4 shall apply, and be limited, to and against all Expenses actually
and reasonably incurred by the Indemnitee in connection with the defense or
settlement of such Proceeding, but only if:
(a) the Indemnitee satisfies the Applicable Standard (except that the
Indemnitee's belief regarding the best interests the Corporation or
other enterprise need
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not have been reasonable);
(b) the Indemnitee acted with such care, including reasonable inquiry, as
an ordinarily prudent person in a similar circumstance would use; and
(c) the Proceeding is settled or otherwise disposed of with approval of
the Corporation.
No indemnification shall be made pursuant to the provisions of this
Paragraph 4 for any claim, issue, or matter as to which the Indemnitee shall
have been adjudged to be liable to the Corporation in the performance of the
Indemnitee's duty to the Corporation, unless, and only to the extent that, the
court in which such Proceeding is or was pending shall determine upon
application that, considering all the circumstances of such Proceeding, the
Indemnitee is fairly and reasonably entitled to indemnification for the
Expenses, which such court shall determine.
5. Expenses of Successful Indemnitee. Notwithstanding any other provision
of this Agreement, to the extent that the Indemnitee has been successful on the
merits in defense of any Proceeding or in defense of any claim, issue, or matter
in such Proceeding, the Indemnitee shall be indemnified by the Corporation from
and against all Expenses actually and reasonably incurred in connection with
such Proceeding.
6. Advances of Expenses. The Expenses incurred by the Indemnitee in any
Proceeding shall be advanced by the Corporation prior to the final disposition
of such Proceeding at the written request of the Indemnitee, but only if the
Indemnitee shall undertake to repay such advances, unless and to the extent that
it is ultimately determined that the Indemnitee is entitled to indemnification.
Any advance required pursuant to the provisions of this Paragraph 6 shall be
deemed to have been approved by the members of the Board of Directors of the
Corporation to the extent the provisions of this Agreement have been approved by
the members of that Board of Directors. In determining whether or not to make an
advance pursuant to the provisions of this Paragraph 6, the ability of the
Indemnitee to repay any such advance shall not be a factor. In a Proceeding
commenced by the Corporation directly, in its own right (as distinguished from a
Proceeding commenced derivatively or by any receiver or trustee), the
Corporation shall have the discretion not to make the advance contemplated by
the provisions of this Paragraph 6, if independent counsel advises the
Corporation in writing that the Corporation has probable cause to believe, and
the Corporation does, in fact, believe, that the Indemnitee did not act in good
faith with regard to the subject matter of such Proceeding or a material portion
of
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such Proceeding.
7. Right of the Indemnitee to Indemnification Upon Application; Procedure
Upon Application. Any indemnification or advance contemplated by the provisions
of this Agreement shall be made no later than 30 calendar days after receipt by
the Corporation of a written request by the Indemnitee for such advance or
indemnification and which request shall be provided in accordance with the
provisions of Paragraph 11 of this Agreement. In all other situations,
indemnification shall be made by the Corporation only if authorized in the
specific situation, upon a determination that indemnification of the Indemnitee
is proper according to the circumstances and the provisions of this Agreement
by:
(a) a majority vote of a quorum of the members of the Board of Directors
of the Corporation (or a duly constituted committee of that Board of
Directors), consisting of officers and directors who are not parties
to the Proceeding at issue;
(b) approval of a majority in interest of the issued and outstanding
voting capital stock of the Corporation, and any shares of the
Corporation's voting capital stock entitled to vote therefor held by
the Indemnitee shall not be entitled to vote regarding such
indemnification;
(c) the court in which the Proceeding at issue is or was pending, upon
application made by the Corporation or made by (i) the Indemnitee or
(ii) any person rendering services in connection with the Indemnitee's
defense, whether or not the Corporation opposes such application; or
(d) to the extent permitted by law and as expressed by independent legal
counsel in a written opinion.
The right to indemnification or advances contemplated by the provisions of
this Agreement shall be enforceable by the Indemnitee in any court of competent
jurisdiction. The burden of proving that such indemnification or advances is
appropriate shall be on the Indemnitee. Neither the failure of the Corporation
(including the members of its Board of Directors or independent legal counsel)
to make a determination prior to the commencement of any action to determine
whether such indemnification or advances is appropriate in the particular
circumstances because the Indemnitee has satisfied the Applicable Standard, nor
a determination by the Corporation (including the members of its Board of
Directors or independent legal counsel) that the Indemnitee has not satisfied
such
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Applicable Standard, shall be a defense to such action or create a presumption
that the Indemnitee has not satisfied the Applicable Standard. The Indemnitee's
Expenses incurred in connection with successfully establishing his right to such
indemnification or advances, in whole or in part, in any Proceeding shall also
be indemnified by the Corporation; provided, however, that if the Indemnitee is
only partially successful, only an equitably allocated portion of such Expenses
shall be indemnified by the Corporation.
If the Indemnitee is entitled to indemnification by the Corporation for
some or a portion of the Expenses, judgments, fines, or penalties actually and
reasonably incurred by the Indemnitee in the investigation, defense, appeal, or
settlement of any Proceeding but not, however, for the total amount of those
Expenses, judgments, fines or penalties the Corporation shall nevertheless
indemnify the Indemnitee for the portion (determined on an equitable basis) of
those Expenses, judgments, fines, or penalties to which the Indemnitee is
entitled.
The Corporation's obligations to advance or indemnify the Indemnitee
pursuant to the provisions of this Agreement shall be deemed satisfied to the
extent of any payments made by an insurer for or on behalf of the Corporation or
the Indemnitee.
8. Indemnification Pursuant to this Agreement Is Not Exclusive. The
indemnification contemplated by the provisions of this Agreement shall not be
deemed exclusive of any other rights to which the Indemnitee may be entitled
pursuant to the provisions of the Certificate of Incorporation or Bylaws of the
Corporation, or any agreement, vote of shareholders, or disinterested officers
and directors, the General Corporation Law of the State of Nevada, or otherwise,
as to action in his official capacities as an officer, director of the
Corporation and any other capacity while serving as an officer or director of
the Corporation. The indemnification contemplated by the provisions of this
Agreement shall continue as to the Indemnitee although he may have ceased to be
an Agent of the Corporation and shall inure to the benefit of the heirs and
personal representatives of the Indemnitee, including the Estate of the
Indemnitee.
9. Limitations. The Corporation shall not be obligated pursuant to the
provisions of this Agreement to make any payment in connection with any claim
made against the Indemnitee:
(a) for which payment is made to the Indemnitee pursuant to the provisions
of a valid and collectible insurance policy, except with respect to
any excess beyond the amount of payments pursuant to the provisions of
such policy;
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(b) for which the Indemnitee is indemnified by the Corporation otherwise
than pursuant to the provisions of this Agreement;
(c) based upon or attributable to the Indemnitee gaining any personal
profit or advantage to which he was not legally entitled;
(d) for an accounting of profits made from the purchase or sale by the
Indemnitee of securities of the Corporation within the meaning of
Section 16(b) of the Securities Exchange Act of 1934 and amendments
thereto or similar provisions of any state statutory law or common
law;
(e) resulting from or contributed to by the active and deliberate
dishonesty of the Indemnitee; provided, however, the Indemnitee shall
be indemnified by the Corporation to the extent otherwise specified by
the provisions of this Agreement as to any claims for which a
litigation action may be commenced against the Indemnitee because of
any alleged dishonesty on his part, unless a judgment or other final
adjudication of such litigation action adverse to the Indemnitee shall
establish that he committed acts of active and deliberate dishonesty
with an actual dishonest purpose and intent, which acts were material
to the litigation action so adjudicated;
(f) for omissions or acts committed in bad faith or which involve
intentional misconduct or a knowing violation of law;
(g) for any omission or act that the Indemnitee believed at the time of
his action to be contrary to, or inconsistent with, the best interests
of both the Corporation and its shareholders, or
(h) for any transaction from which the Indemnitee derived an improper
personal economic benefit in a capacity other than as a shareholder of
the Corporation.
10. Severability. In the event any part of this Agreement, for any reason,
is determined to be invalid, such determination shall not affect the validity of
any remaining portion of this Agreement, which remaining portion shall remain in
complete force and effect as if this Agreement had been executed with the
invalid portion of this Agreement eliminated. It is hereby declared the
intention of the parties that the parties would have
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executed the remaining portion of this Agreement without including any such
part, parts or portion which, for any reason, hereafter may be determined to be
invalid.
11. Notices. The Indemnitee shall, as a condition precedent to his right to
be indemnified pursuant to the provisions of this Agreement, provide to the
Corporation notice in writing within 20 calendar days after he becomes aware of
any claim made against him for which he believes, or should reasonably believe,
indemnification will or could be sought pursuant to the provisions of this
Agreement. All notices, requests, demands, and other communications
(collectively, "notices") contemplated or required by the provisions of this
Agreement shall be in writing (including communications by telephone, telex, or
telecommunication facilities providing facsimile transmission) and mailed
(postage prepaid and return receipt requested), telegraphed, telexed,
transmitted or personally served to each party at the address for such party
specified below such party's signature to this Agreement or at such other
address as such party may designate in a written notice to the other party in
compliance with the provisions of this paragraph. All notices shall be effective
when received; provided, however, receipt shall be deemed to be effective (i) 2
business days of any properly addressed notice having been deposited in the
mail, (ii) 24 hours from the time electronic transmission was made, or (iii)
upon actual receipt of electronic delivery, whichever occurs first.
12. Parties in Interest. No provision of this Agreement is intended to, nor
shall any such provision confer any right or remedies pursuant to or by reason
of the provisions of this Agreement to any persons other than the parties to
this Agreement and their respective successors and assigns, including the Estate
of the Indemnitee, nor is any provision of in this Agreement intended to relieve
or discharge the obligation or liability of any third party to any party to this
Agreement. No provision of this Agreement shall provide any third person any
right of subrogation or action against any party to this Agreement.
13. Successors and Assigns. This Agreement shall inure to the benefit of
and obligate the undersigned parties and their respective successors and
assigns. Whenever, in this Agreement, a reference to any party is made, such
reference shall be deemed to include a reference to the successors and assigns
of such party; provided, however, neither this paragraph nor any other portion
of this Agreement shall be interpreted to constitute a consent to any assignment
or transfer other than pursuant to and in accordance with the other provisions
of this Agreement. Neither party shall assign, transfer or delegate that party's
rights, responsibilities, duties or obligation created by the provisions of this
Agreement to any other person without the prior written consent of the other
party.
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14. Captions and Interpretation. Captions of the paragraphs of this
Agreement are for convenience and reference only, and the words specified in
those captions shall in no way be held to explain, modify, amplify or aid in the
interpretation, construction or meaning of the terms, conditions and provisions
of this Agreement. The language and all parts to this Agreement, in all cases,
shall be construed in accordance with the fair meaning of that language and
those parts and as if that language and those parts were prepared by both
parties and not strictly for or against any party. The rule of construction,
which requires a court to resolve any ambiguities against the drafting party,
shall not apply in interpreting the provisions of this Agreement.
15. Number and Gender. Whenever the singular number is used in this
Agreement, and when required by the context, the same shall include the plural,
and vice versa; the masculine gender shall include the feminine and the neuter
genders, and vice versa; and the word "person" shall include corporation, firm,
trust, estate, joint venture, governmental agency, sole proprietorship,
political subdivision, organization, fraternal order, club, league, joint stock
company, society, municipality, association, partnership or other form of
entity.
16. Execution in Counterparts. This Agreement shall be prepared and
forwarded to the Indemnitee for execution. Counsel for the Corporation shall
cause the executed Agreement to be filed in the principal office of such
counsel.
17. Entire Agreement. This Agreement is the final written expression and
the complete and exclusive statement of all the agreements, conditions,
promises, representations, warranties and covenants between the parties with
respect to the subject matter of this Agreement, and this Agreement supersedes
all prior or contemporaneous agreements, negotiations, representations,
warranties, covenants, understandings and discussions by and between and among
the parties, their respective representatives, and any other person, with
respect to the subject matter specified in this Agreement. This Agreement may be
amended only by an instrument in writing which expressly refers to this
Agreement and specifically states that that instrument is intended to amend this
Agreement and is signed by each of the parties. Nothing specified in any exhibit
attached to this Agreement shall supersede or annul the terms and provisions of
this Agreement, unless the matter specified in such exhibit shall expressly so
provide to the contrary, and in the event of any ambiguity in meaning or
understanding between this Agreement proper and the appended exhibits, the
provisions of this Agreement shall prevail and control. Each of the parties
represents, warrants and covenants that in executing this Agreement that party
has relied solely on the terms, conditions and provisions specified in this
Agreement. Each of
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the parties additionally represents, warrants and covenants that in executing
and delivering this Agreement such party has placed no reliance whatsoever on
any statement, representation, warranty, covenant or promise of the other party,
or any other person, not specified expressly in this Agreement, or upon the
failure of any party or any other person to make any statement, representation,
warranty, covenant or disclosure of any nature whatsoever. The parties have
included this paragraph to preclude (i) any claim that any party was in any
manner whatsoever induced fraudulently to enter into, execute and deliver this
Agreement, and (ii) the introduction of parol evidence to vary, interpret,
supplement or contradict the terms, conditions and provisions of this Agreement.
18. Governing Law. This Agreement shall be deemed to have been entered into
in the State of Nevada, and all questions concerning the validity,
interpretation, or performance of any of the terms, conditions and provisions of
this Agreement or of any of the rights or obligations of the parties shall be
governed by, and resolved in accordance with, the laws of the State of Nevada,
without regard to conflicts of law principles.
19. Government Regulations. The transactions and relationship contemplated
by the provisions of this Agreement are, and shall remain, subject to any and
all present and future orders, rules and regulations of any duly constituted
authority or agency having jurisdiction of those transactions and that
relationship.
20. Further Assurances. The parties shall from time to time sign and
deliver any further instruments and take any further actions as may be necessary
to effectuate the intent and purposes of this Agreement.
21. All Consents in Writing. In any instance in which any party shall be
requested to consent to or approve of any matter with respect to which that
party's consent or approval is required by any of the provisions of this
Agreement, such consent or approval shall be furnished in writing.
22. Attorneys' Fees. In the event any party shall institute any action or
proceeding to enforce any provision of this Agreement to seek relief from any
violation of this Agreement, or to otherwise obtain any judgment or order
relating to or resulting from the subject matter of this Agreement, the
prevailing party shall be entitled to receive from the losing party such
prevailing party's actual attorneys' fees and costs incurred to prosecute or
defend such action or proceeding, including, but not limited to, actual
attorneys' fees and costs incurred preparatory to such prosecution and defense.
Moreover, while a court of competent jurisdiction may assist in determining
whether or not the fees actually
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incurred are reasonable in the circumstances then existing, that court is not be
governed by any judicially or legislatively established fee schedule, and such
fees and costs are to include those as may be incurred on appeal of any issue
and all of which fees and costs shall be included as part of any judgment, by
cost bill or otherwise, and where applicable, any appellate decision rendered in
or resulting from such action or proceeding. For purposes of this Agreement, in
any action or proceeding instituted by a party, the prevailing party shall be
that party in any such action or proceeding (i) in whose favor a judgment is
entered, or (ii) prior to trial, hearing or judgment any other party shall pay
all or any portion of amounts claimed by the party seeking payment, or such
other party shall eliminate the condition, cease the act, or otherwise cure the
act of commission or omission claimed by the party initiating such action or
proceeding.
23. Reservation of Rights. The failure of any party at any time or times
hereafter to require strict performance by any other party of any of the
warranties, representations, covenants, terms, conditions and provisions
specified in this Agreement shall not waive, affect or diminish any right of
such party failing to require strict performance to demand strict compliance and
performance therewith and with respect to any other provisions, warranties,
terms, and conditions specified in this Agreement. Any waiver of any default
shall not waive or affect any other default, whether prior or subsequent
thereto, and whether the same or of a different type. None of the
representations, warranties, covenants, conditions, provisions and terms
specified in this Agreement shall be deemed to have been waived by any act or
knowledge of any party, its agents, trustees, officers, or employees and any
such waiver shall be made only by an instrument in writing, signed by the
waiving party and directed to any non-waiving party specifying such waiver, and
each party reserves such party's rights to insist upon strict compliance
herewith at all times.
24. Purpose of Covenants. All covenants made by each party shall be deemed
made for the purpose of inducing the other party to enter into and execute this
Agreement. The representations, warranties, and covenants specified in this
Agreement shall survive any investigation by either party whether before or
after the execution of this Agreement.
25. Concurrent Remedies. No right or remedy specified in this Agreement
conferred on or reserved to the parties is exclusive of any other right or
remedy specified in this Agreement or by law or equity provided or permitted;
but each such right and remedy shall be cumulative of, and in addition to, every
other right and remedy specified in this Agreement or now or hereafter existing
at law or in equity or by statute or otherwise, and may be enforced concurrently
therewith or from time to time. The termination of this Agreement for any reason
whatsoever shall not prejudice any right or
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remedy which any party may have, either at law, in equity, or pursuant to the
provisions of this Agreement.
26. Force Majeure. If any party is rendered unable, completely or
partially, by the occurrence of an event of "force majeure" (hereinafter
defined) to perform such party's obligations created by the provisions of this
Agreement, such party shall give to the other party prompt written notice of the
event of "force majeure" with reasonably complete particulars concerning such
event; thereupon, the obligations of the party giving such notice, so far as
those obligations are affected by the event of "force majeure," shall be
suspended during, but no longer than, the continuance of the event of "force
majeure." The party affected by such event of "force majeure" shall use all
reasonable diligence to resolve, eliminate and terminate the event of "force
majeure" as quickly as practicable. The term "force majeure," as contemplated by
the provisions of this Paragraph 27 means any act of God, strike, lockout or
other industrial disturbance, act of the public enemy, war blockage, public
riot, lightening, fire, storm, flood explosion, governmental action, earthquake,
governmental delay, restraint or inaction, unavailability or equipment, and any
other cause or event, whether of the kind enumerated specifically herein, or
otherwise, which is not within the control of the party claiming such
suspension.
27. Consent to Agreement. By executing this Agreement, each party, for
itself, represents such party has read or caused to be read this Agreement in
all particulars, and consents to the rights, conditions, duties and
responsibilities imposed upon such party as specified in this Agreement. Each
party represents, warrants and covenants that such party executes and delivers
this Agreement of its own free will and with no threat, undue influence, menace,
coercion or duress, whether economic or physical. Moreover, each party
represents, warrants, and covenants that such party executes this Agreement
acting on such party's own independent judgment and upon the advice of such
party's counsel.
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IN WITNESS WHEREOF the parties have executed this Agreement for
Indemnification on the date specified in the preamble of this Agreement.
TMEX USA, Inc.,
a Nevada corporation
By: /s/ Crofton Cooper /s/ Cooper Lee
---------------------------- ---------------------------
Crofton Cooper Cooper Lee
Its: Chief Executive Officer
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AGREEMENT FOR INDEMNIFICATION
THIS AGREEMENT FOR INDEMNIFICATION ("Agreement") is made and entered into
as of the 12th day of April 2000, by and between TMEX USA, Inc., a Nevada
corporation ("Corporation"), and Cecil Zeringue, Vice President and a director
of the Corporation ("Indemnitee").
RECITALS
A. The Corporation and the Indemnitee understand and agree that
interpretations of statutes, regulations, court opinions, and the Corporation's
Articles of Incorporation and Bylaws, are too uncertain to provide the
Corporation's officers and directors with adequate or reliable advance knowledge
or guidance with respect to the legal risks and potential liabilities to which
they may become exposed personally as a result of performing, in good faith,
their duties as officers and directors of the Corporation.
B. The Corporation and the Indemnitee are aware of the substantial increase
in the number of litigation matters filed against corporate officers and
directors.
C. The Corporation and the Indemnitee are aware that the cost of defending
those litigation matters, whether or not those litigation matters are
meritorious, may be in excess of the financial resources of the officers and
directors of the Corporation or may significantly exceed the limited benefits
derived by persons serving as officers and directors of the Corporation.
D. The Corporation and the Indemnitee are aware that the legal risks and
potential officer and director liabilities, or the very threat thereof, and the
resulting substantial time endured, and fees and expenses incurred, in defending
against such litigation matters have no reasonable logical relationship to the
amount of compensation received by the Corporation's officers and directors.
These factors (i) cause a significant deterrent to, and (ii) induce increased
reluctance on the part of, experienced and capable persons to serve as officers
and directors of the Corporation.
E. The Corporation has investigated the availability and deficiency of
liability insurance to provide its officers and directors with adequate
protection against the foregoing legal risks and potential liabilities. The
Corporation has concluded that such insurance does not provide adequate
protection to the Corporation's officers and directors. Therefore, the
Corporation believes it will be in the best interests of the Corporation and
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its shareholders for the Corporation to agree with the Corporation's officers
and directors, including the Indemnitee, to indemnify those officers and
directors, to the most complete extent permitted by law, against personal
liability for actions taken in the good faith performance in their duties to the
Corporation.
F. Section 78.7502 of the General Corporation Law of Nevada ("Law")
specifies the circumstances regarding the mandatory and permissive
indemnification by a Nevada corporation of the officers, directors, employees
and agents of that corporation, and those provisions (i) require indemnification
in certain circumstances, (ii) permit indemnification in other circumstances,
and (iii) prohibit indemnification in some circumstances.
G. The members of the Board of Directors of the Corporation have
determined, after careful consideration and investigation of the various options
available, that the provisions of this Agreement are reasonable, prudent, and
necessary to promote and ensure the best interests of the Corporation and its
shareholders. The provisions of the Agreement are intended to (i) induce and
encourage significantly experienced and capable persons such as the Indemnitee
to serve as officers and directors of the Corporation; (ii) encourage such
persons to resist what they consider to be unjustifiable litigation matters and
claims made against them regarding the good faith performance of their duties to
the Corporation, secure in the knowledge that certain expenses, costs, and
liabilities incurred by them in their defense of such litigation matters will be
borne and paid by the Corporation and that they will receive the maximum
protection against such risks and liabilities as legally may be made available
to them; and (iii) encourage officers and directors of the Corporation to
exercise their best business judgment regarding matters which will be submitted
to them for consideration, without undue concern for the risk that claims may be
made against them because they are officers or directors of the Corporation.
H. The Corporation desires to cause the Indemnitee to continue to serve as
an officer and director of the Corporation free from concern for unpredictable,
inappropriate, or unreasonable legal risk and personal liabilities by reason of
his acting in good faith in the performance of his duties to the Corporation.
The Indemnitee desires to serve as an officer and director of the Corporation;
provided, however, and on the express condition, that he is furnished with the
indemnification specified by the provisions of this Agreement.
NOW, THEREFORE, IN CONSIDERATION OF THE FOREGOING RECITALS, PREMISES, PROMISES,
COVENANTS, AGREEMENTS, AND UNDERTAKINGS SPECIFIED BY THE PROVISIONS OF THIS
AGREEMENT AND FOR OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND
SUFFICIENCY
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OF WHICH ARE HEREBY ACKNOWLEDGED, WITH THE INTENT TO BE OBLIGATED LEGALLY AND
EQUITABLY, THE PARTIES TO THIS AGREEMENT AGREE WITH EACH OTHER AS FOLLOWS:
1. Definitions. For the purposes of this Agreement, the following words and
terms shall be defined as follows:
(a) The term "Proceeding" does and shall include any threatened, pending,
or completed action, inquiry, lawsuit, litigation matter, or
proceeding, whether commenced in the name of the Corporation, or
otherwise, and whether civil, criminal, administrative, or
investigative in nature, including, but not limited to, actions,
inquiries, investigations, litigation matters, or proceedings
commenced pursuant to or predicated on the provisions of the
Securities Act of 1933, as amended; the Securities Exchange Act of
1934, as amended; their respective state and provincial counterparts;
and any rule or regulation promulgated pursuant thereto, in which the
Indemnitee may be, or may have been involved as, a party, or otherwise
(other than plaintiff against the Corporation), because of (i) the
fact that the Indemnitee is or was an officer or director of the
Corporation, (ii) any action taken by the Indemnitee, or (iii) any
inaction by the Indemnitee while he is or was functioning as such an
officer or director of the Corporation.
(b) The term "Expenses" includes, but is not limited to, expenses of
investigations, judicial or administrative proceedings or appeals,
court costs, attorneys' fees and disbursements, and any expenses of
establishing a right to indemnification pursuant to applicable law or
the provisions of Paragraph 7 of this Agreement.
(c) References to "other enterprise" does and shall include each entity of
and for which the Corporation is the managing agent and references to
"serving at the request of the Corporation" does and shall include any
service by the Indemnitee as an officer and director of the
Corporation which imposes duties on, or involves services by the
Indemnitee while functioning as such officer and director with respect
to any such entity, its members, partners, or beneficiaries; and if
the Indemnitee acts in good faith and in a manner he reasonably
believes to be in the best interests of the members, partners and
beneficiaries of such entity, the Indemnitee shall be deemed to have
acted in a manner "not opposed to the best interests of the
Corporation," as that
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phrase is contemplated by the provisions of this Agreement.
(d) For the purposes of this Agreement, the Indemnitee shall be deemed to
have been acting as an "Agent" if he was functioning in his capacity
as (i) an officer of the Corporation, (ii) a director of the
Corporation, (iii) a member of a committee of the Board of Directors
of the Corporation, or (iv) a representative or agent of any other
enterprise at the request of the Corporation, whether or not he is
functioning in such capacity at the time any liability or expense is
incurred for which indemnification or reimbursement can be provided
pursuant to the provisions of this Agreement.
(e) The term "Applicable Standard" means that the Indemnitee acted in good
faith and in a manner that the Indemnitee reasonably believed to be in
the best interests of the Corporation; except that in a criminal
proceeding, the Indemnitee must also have had no reasonable cause to
believe that the Indemnitee's conduct was unlawful. The termination of
any Proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or any equivalent procedure shall not, of
itself, create any presumption, or establish, that the Indemnitee did
not satisfy the "Applicable Standard."
(f) "Independent Legal Counsel" shall include any law firm selected by the
regular counsel for the Corporation from a list of law firms which
satisfy reasonable criteria established by the Board of Directors of
the Corporation; provided, however, such law firm has not represented
the Corporation, the Indemnitee, or any person controlled by the
Indemnitee within the preceding 24 calendar months.
(g) The term "Estate" shall include the following terms as those are
understood by applicable law:
(1) The duly appointed and qualified executor, executrix,
administrator, administratrix, administrator with the Will
annexed, or administratrix with the Will annexed, of the estate
of a decedent;
(2) The surviving joint tenant of a decedent, when shares of capital
stock issued by the Corporation are owned by a decedent and a
person who is not active in the business of the Corporation as
joint tenants;
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(3) Any other person who, because of the community property or other
law of any jurisdiction, may acquire, by reason of the death of
such decedent, and without formal probate proceedings, any right,
title, or interest in or to shares of capital stock issued by the
Corporation to such decedent; or
(4) An irrevocable living or grantor's trust for the benefit of a
deceased shareholder of the Corporation.
2. Agreement to Serve. The Indemnitee shall serve or continue to serve as
Vice President and a member of the Board of Directors of the Corporation at the
will of the Corporation's shareholders, or pursuant to the provisions of
separate agreement, as the case may be, for such time as he is duly elected or
appointed, and until such time as he tenders his resignation in writing or he is
removed.
3. Indemnity in Third Party Proceedings. The Corporation shall indemnify
the Indemnitee, if the Indemnitee is made a party to or threatened to be made a
party to, or otherwise involved in, any Proceeding (other than a Proceeding
which is an action by or in the right of the Corporation to procure a judgment
in its favor), because of the fact that the Indemnitee is or was an Agent of the
Corporation. The indemnification contemplated by the provisions of this
Paragraph 3 shall apply, and be limited, to and against all Expenses, judgments,
fines, penalties, settlements, and other amounts, actually and reasonably
incurred by the Indemnitee in connection with the defense or settlement of any
such Proceeding; provided, however, it is determined pursuant to the provisions
of Paragraph 7 of this Agreement or by the court in which such Proceeding is or
was pending that the Indemnitee satisfied the Applicable Standard.
4. Indemnity in Proceedings By or In the Name of the Corporation. The
Corporation shall indemnify the Indemnitee, if the Indemnitee is made a party
to, or threatened to be made a party to, or otherwise involved in, any
Proceeding which is an action by or in the right of the Corporation to procure a
judgment in the Corporation's favor because the Indemnitee is or was an Agent of
the Corporation. The indemnification contemplated by the provisions of this
Paragraph 4 shall apply, and be limited, to and against all Expenses actually
and reasonably incurred by the Indemnitee in connection with the defense or
settlement of such Proceeding, but only if:
(a) the Indemnitee satisfies the Applicable Standard (except that the
Indemnitee's belief regarding the best interests the Corporation or
other enterprise need
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not have been reasonable);
(b) the Indemnitee acted with such care, including reasonable inquiry, as
an ordinarily prudent person in a similar circumstance would use; and
(c) the Proceeding is settled or otherwise disposed of with approval of
the Corporation.
No indemnification shall be made pursuant to the provisions of this
Paragraph 4 for any claim, issue, or matter as to which the Indemnitee shall
have been adjudged to be liable to the Corporation in the performance of the
Indemnitee's duty to the Corporation, unless, and only to the extent that, the
court in which such Proceeding is or was pending shall determine upon
application that, considering all the circumstances of such Proceeding, the
Indemnitee is fairly and reasonably entitled to indemnification for the
Expenses, which such court shall determine.
5. Expenses of Successful Indemnitee. Notwithstanding any other provision
of this Agreement, to the extent that the Indemnitee has been successful on the
merits in defense of any Proceeding or in defense of any claim, issue, or matter
in such Proceeding, the Indemnitee shall be indemnified by the Corporation from
and against all Expenses actually and reasonably incurred in connection with
such Proceeding.
6. Advances of Expenses. The Expenses incurred by the Indemnitee in any
Proceeding shall be advanced by the Corporation prior to the final disposition
of such Proceeding at the written request of the Indemnitee, but only if the
Indemnitee shall undertake to repay such advances, unless and to the extent that
it is ultimately determined that the Indemnitee is entitled to indemnification.
Any advance required pursuant to the provisions of this Paragraph 6 shall be
deemed to have been approved by the members of the Board of Directors of the
Corporation to the extent the provisions of this Agreement have been approved by
the members of that Board of Directors. In determining whether or not to make an
advance pursuant to the provisions of this Paragraph 6, the ability of the
Indemnitee to repay any such advance shall not be a factor. In a Proceeding
commenced by the Corporation directly, in its own right (as distinguished from a
Proceeding commenced derivatively or by any receiver or trustee), the
Corporation shall have the discretion not to make the advance contemplated by
the provisions of this Paragraph 6, if independent counsel advises the
Corporation in writing that the Corporation has probable cause to believe, and
the Corporation does, in fact, believe, that the Indemnitee did not act in good
faith with regard to the subject matter of such Proceeding or a material portion
of
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such Proceeding.
7. Right of the Indemnitee to Indemnification Upon Application; Procedure
Upon Application. Any indemnification or advance contemplated by the provisions
of this Agreement shall be made no later than 30 calendar days after receipt by
the Corporation of a written request by the Indemnitee for such advance or
indemnification and which request shall be provided in accordance with the
provisions of Paragraph 11 of this Agreement. In all other situations,
indemnification shall be made by the Corporation only if authorized in the
specific situation, upon a determination that indemnification of the Indemnitee
is proper according to the circumstances and the provisions of this Agreement
by:
(a) a majority vote of a quorum of the members of the Board of Directors
of the Corporation (or a duly constituted committee of that Board of
Directors), consisting of officers and directors who are not parties
to the Proceeding at issue;
(b) approval of a majority in interest of the issued and outstanding
voting capital stock of the Corporation, and any shares of the
Corporation's voting capital stock entitled to vote therefor held by
the Indemnitee shall not be entitled to vote regarding such
indemnification;
(c) the court in which the Proceeding at issue is or was pending, upon
application made by the Corporation or made by (i) the Indemnitee or
(ii) any person rendering services in connection with the Indemnitee's
defense, whether or not the Corporation opposes such application; or
(d) to the extent permitted by law and as expressed by independent legal
counsel in a written opinion.
The right to indemnification or advances contemplated by the provisions of
this Agreement shall be enforceable by the Indemnitee in any court of competent
jurisdiction. The burden of proving that such indemnification or advances is
appropriate shall be on the Indemnitee. Neither the failure of the Corporation
(including the members of its Board of Directors or independent legal counsel)
to make a determination prior to the commencement of any action to determine
whether such indemnification or advances is appropriate in the particular
circumstances because the Indemnitee has satisfied the Applicable Standard, nor
a determination by the Corporation (including the members of its Board of
Directors or independent legal counsel) that the Indemnitee has not satisfied
such
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Applicable Standard, shall be a defense to such action or create a presumption
that the Indemnitee has not satisfied the Applicable Standard. The Indemnitee's
Expenses incurred in connection with successfully establishing his right to such
indemnification or advances, in whole or in part, in any Proceeding shall also
be indemnified by the Corporation; provided, however, that if the Indemnitee is
only partially successful, only an equitably allocated portion of such Expenses
shall be indemnified by the Corporation.
If the Indemnitee is entitled to indemnification by the Corporation for
some or a portion of the Expenses, judgments, fines, or penalties actually and
reasonably incurred by the Indemnitee in the investigation, defense, appeal, or
settlement of any Proceeding but not, however, for the total amount of those
Expenses, judgments, fines or penalties the Corporation shall nevertheless
indemnify the Indemnitee for the portion (determined on an equitable basis) of
those Expenses, judgments, fines, or penalties to which the Indemnitee is
entitled.
The Corporation's obligations to advance or indemnify the Indemnitee
pursuant to the provisions of this Agreement shall be deemed satisfied to the
extent of any payments made by an insurer for or on behalf of the Corporation or
the Indemnitee.
8. Indemnification Pursuant to this Agreement Is Not Exclusive. The
indemnification contemplated by the provisions of this Agreement shall not be
deemed exclusive of any other rights to which the Indemnitee may be entitled
pursuant to the provisions of the Certificate of Incorporation or Bylaws of the
Corporation, or any agreement, vote of shareholders, or disinterested officers
and directors, the General Corporation Law of the State of Nevada, or otherwise,
as to action in his official capacities as an officer, director of the
Corporation and any other capacity while serving as an officer or director of
the Corporation. The indemnification contemplated by the provisions of this
Agreement shall continue as to the Indemnitee although he may have ceased to be
an Agent of the Corporation and shall inure to the benefit of the heirs and
personal representatives of the Indemnitee, including the Estate of the
Indemnitee.
9. Limitations. The Corporation shall not be obligated pursuant to the
provisions of this Agreement to make any payment in connection with any claim
made against the Indemnitee:
(a) for which payment is made to the Indemnitee pursuant to the provisions
of a valid and collectible insurance policy, except with respect to
any excess beyond the amount of payments pursuant to the provisions of
such policy;
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(b) for which the Indemnitee is indemnified by the Corporation otherwise
than pursuant to the provisions of this Agreement;
(c) based upon or attributable to the Indemnitee gaining any personal
profit or advantage to which he was not legally entitled;
(d) for an accounting of profits made from the purchase or sale by the
Indemnitee of securities of the Corporation within the meaning of
Section 16(b) of the Securities Exchange Act of 1934 and amendments
thereto or similar provisions of any state statutory law or common
law;
(e) resulting from or contributed to by the active and deliberate
dishonesty of the Indemnitee; provided, however, the Indemnitee shall
be indemnified by the Corporation to the extent otherwise specified by
the provisions of this Agreement as to any claims for which a
litigation action may be commenced against the Indemnitee because of
any alleged dishonesty on his part, unless a judgment or other final
adjudication of such litigation action adverse to the Indemnitee shall
establish that he committed acts of active and deliberate dishonesty
with an actual dishonest purpose and intent, which acts were material
to the litigation action so adjudicated;
(f) for omissions or acts committed in bad faith or which involve
intentional misconduct or a knowing violation of law;
(g) for any omission or act that the Indemnitee believed at the time of
his action to be contrary to, or inconsistent with, the best interests
of both the Corporation and its shareholders, or
(h) for any transaction from which the Indemnitee derived an improper
personal economic benefit in a capacity other than as a shareholder of
the Corporation.
10. Severability. In the event any part of this Agreement, for any reason,
is determined to be invalid, such determination shall not affect the validity of
any remaining portion of this Agreement, which remaining portion shall remain in
complete force and effect as if this Agreement had been executed with the
invalid portion of this Agreement eliminated. It is hereby declared the
intention of the parties that the parties would have
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executed the remaining portion of this Agreement without including any such
part, parts or portion which, for any reason, hereafter may be determined to be
invalid.
11. Notices. The Indemnitee shall, as a condition precedent to his right to
be indemnified pursuant to the provisions of this Agreement, provide to the
Corporation notice in writing within 20 calendar days after he becomes aware of
any claim made against him for which he believes, or should reasonably believe,
indemnification will or could be sought pursuant to the provisions of this
Agreement. All notices, requests, demands, and other communications
(collectively, "notices") contemplated or required by the provisions of this
Agreement shall be in writing (including communications by telephone, telex, or
telecommunication facilities providing facsimile transmission) and mailed
(postage prepaid and return receipt requested), telegraphed, telexed,
transmitted or personally served to each party at the address for such party
specified below such party's signature to this Agreement or at such other
address as such party may designate in a written notice to the other party in
compliance with the provisions of this paragraph. All notices shall be effective
when received; provided, however, receipt shall be deemed to be effective (i) 2
business days of any properly addressed notice having been deposited in the
mail, (ii) 24 hours from the time electronic transmission was made, or (iii)
upon actual receipt of electronic delivery, whichever occurs first.
12. Parties in Interest. No provision of this Agreement is intended to, nor
shall any such provision confer any right or remedies pursuant to or by reason
of the provisions of this Agreement to any persons other than the parties to
this Agreement and their respective successors and assigns, including the Estate
of the Indemnitee, nor is any provision of in this Agreement intended to relieve
or discharge the obligation or liability of any third party to any party to this
Agreement. No provision of this Agreement shall provide any third person any
right of subrogation or action against any party to this Agreement.
13. Successors and Assigns. This Agreement shall inure to the benefit of
and obligate the undersigned parties and their respective successors and
assigns. Whenever, in this Agreement, a reference to any party is made, such
reference shall be deemed to include a reference to the successors and assigns
of such party; provided, however, neither this paragraph nor any other portion
of this Agreement shall be interpreted to constitute a consent to any assignment
or transfer other than pursuant to and in accordance with the other provisions
of this Agreement. Neither party shall assign, transfer or delegate that party's
rights, responsibilities, duties or obligation created by the provisions of this
Agreement to any other person without the prior written consent of the other
party.
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14. Captions and Interpretation. Captions of the paragraphs of this
Agreement are for convenience and reference only, and the words specified in
those captions shall in no way be held to explain, modify, amplify or aid in the
interpretation, construction or meaning of the terms, conditions and provisions
of this Agreement. The language and all parts to this Agreement, in all cases,
shall be construed in accordance with the fair meaning of that language and
those parts and as if that language and those parts were prepared by both
parties and not strictly for or against any party. The rule of construction,
which requires a court to resolve any ambiguities against the drafting party,
shall not apply in interpreting the provisions of this Agreement.
15. Number and Gender. Whenever the singular number is used in this
Agreement, and when required by the context, the same shall include the plural,
and vice versa; the masculine gender shall include the feminine and the neuter
genders, and vice versa; and the word "person" shall include corporation, firm,
trust, estate, joint venture, governmental agency, sole proprietorship,
political subdivision, organization, fraternal order, club, league, joint stock
company, society, municipality, association, partnership or other form of
entity.
16. Execution in Counterparts. This Agreement shall be prepared and
forwarded to the Indemnitee for execution. Counsel for the Corporation shall
cause the executed Agreement to be filed in the principal office of such
counsel.
17. Entire Agreement. This Agreement is the final written expression and
the complete and exclusive statement of all the agreements, conditions,
promises, representations, warranties and covenants between the parties with
respect to the subject matter of this Agreement, and this Agreement supersedes
all prior or contemporaneous agreements, negotiations, representations,
warranties, covenants, understandings and discussions by and between and among
the parties, their respective representatives, and any other person, with
respect to the subject matter specified in this Agreement. This Agreement may be
amended only by an instrument in writing which expressly refers to this
Agreement and specifically states that that instrument is intended to amend this
Agreement and is signed by each of the parties. Nothing specified in any exhibit
attached to this Agreement shall supersede or annul the terms and provisions of
this Agreement, unless the matter specified in such exhibit shall expressly so
provide to the contrary, and in the event of any ambiguity in meaning or
understanding between this Agreement proper and the appended exhibits, the
provisions of this Agreement shall prevail and control. Each of the parties
represents, warrants and covenants that in executing this Agreement that party
has relied solely on the terms, conditions and provisions specified in this
Agreement. Each of
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the parties additionally represents, warrants and covenants that in executing
and delivering this Agreement such party has placed no reliance whatsoever on
any statement, representation, warranty, covenant or promise of the other party,
or any other person, not specified expressly in this Agreement, or upon the
failure of any party or any other person to make any statement, representation,
warranty, covenant or disclosure of any nature whatsoever. The parties have
included this paragraph to preclude (i) any claim that any party was in any
manner whatsoever induced fraudulently to enter into, execute and deliver this
Agreement, and (ii) the introduction of parol evidence to vary, interpret,
supplement or contradict the terms, conditions and provisions of this Agreement.
18. Governing Law. This Agreement shall be deemed to have been entered into
in the State of Nevada, and all questions concerning the validity,
interpretation, or performance of any of the terms, conditions and provisions of
this Agreement or of any of the rights or obligations of the parties shall be
governed by, and resolved in accordance with, the laws of the State of Nevada,
without regard to conflicts of law principles.
19. Government Regulations. The transactions and relationship contemplated
by the provisions of this Agreement are, and shall remain, subject to any and
all present and future orders, rules and regulations of any duly constituted
authority or agency having jurisdiction of those transactions and that
relationship.
20. Further Assurances. The parties shall from time to time sign and
deliver any further instruments and take any further actions as may be necessary
to effectuate the intent and purposes of this Agreement.
21. All Consents in Writing. In any instance in which any party shall be
requested to consent to or approve of any matter with respect to which that
party's consent or approval is required by any of the provisions of this
Agreement, such consent or approval shall be furnished in writing.
22. Attorneys' Fees. In the event any party shall institute any action or
proceeding to enforce any provision of this Agreement to seek relief from any
violation of this Agreement, or to otherwise obtain any judgment or order
relating to or resulting from the subject matter of this Agreement, the
prevailing party shall be entitled to receive from the losing party such
prevailing party's actual attorneys' fees and costs incurred to prosecute or
defend such action or proceeding, including, but not limited to, actual
attorneys' fees and costs incurred preparatory to such prosecution and defense.
Moreover, while a court of competent jurisdiction may assist in determining
whether or not the fees actually
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incurred are reasonable in the circumstances then existing, that court is not be
governed by any judicially or legislatively established fee schedule, and such
fees and costs are to include those as may be incurred on appeal of any issue
and all of which fees and costs shall be included as part of any judgment, by
cost bill or otherwise, and where applicable, any appellate decision rendered in
or resulting from such action or proceeding. For purposes of this Agreement, in
any action or proceeding instituted by a party, the prevailing party shall be
that party in any such action or proceeding (i) in whose favor a judgment is
entered, or (ii) prior to trial, hearing or judgment any other party shall pay
all or any portion of amounts claimed by the party seeking payment, or such
other party shall eliminate the condition, cease the act, or otherwise cure the
act of commission or omission claimed by the party initiating such action or
proceeding.
23. Reservation of Rights. The failure of any party at any time or times
hereafter to require strict performance by any other party of any of the
warranties, representations, covenants, terms, conditions and provisions
specified in this Agreement shall not waive, affect or diminish any right of
such party failing to require strict performance to demand strict compliance and
performance therewith and with respect to any other provisions, warranties,
terms, and conditions specified in this Agreement. Any waiver of any default
shall not waive or affect any other default, whether prior or subsequent
thereto, and whether the same or of a different type. None of the
representations, warranties, covenants, conditions, provisions and terms
specified in this Agreement shall be deemed to have been waived by any act or
knowledge of any party, its agents, trustees, officers, or employees and any
such waiver shall be made only by an instrument in writing, signed by the
waiving party and directed to any non-waiving party specifying such waiver, and
each party reserves such party's rights to insist upon strict compliance
herewith at all times.
24. Purpose of Covenants. All covenants made by each party shall be deemed
made for the purpose of inducing the other party to enter into and execute this
Agreement. The representations, warranties, and covenants specified in this
Agreement shall survive any investigation by either party whether before or
after the execution of this Agreement.
25. Concurrent Remedies. No right or remedy specified in this Agreement
conferred on or reserved to the parties is exclusive of any other right or
remedy specified in this Agreement or by law or equity provided or permitted;
but each such right and remedy shall be cumulative of, and in addition to, every
other right and remedy specified in this Agreement or now or hereafter existing
at law or in equity or by statute or otherwise, and may be enforced concurrently
therewith or from time to time. The termination of this Agreement for any reason
whatsoever shall not prejudice any right or
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remedy which any party may have, either at law, in equity, or pursuant to the
provisions of this Agreement.
26. Force Majeure. If any party is rendered unable, completely or
partially, by the occurrence of an event of "force majeure" (hereinafter
defined) to perform such party's obligations created by the provisions of this
Agreement, such party shall give to the other party prompt written notice of the
event of "force majeure" with reasonably complete particulars concerning such
event; thereupon, the obligations of the party giving such notice, so far as
those obligations are affected by the event of "force majeure," shall be
suspended during, but no longer than, the continuance of the event of "force
majeure." The party affected by such event of "force majeure" shall use all
reasonable diligence to resolve, eliminate and terminate the event of "force
majeure" as quickly as practicable. The term "force majeure," as contemplated by
the provisions of this Paragraph 27 means any act of God, strike, lockout or
other industrial disturbance, act of the public enemy, war blockage, public
riot, lightening, fire, storm, flood explosion, governmental action, earthquake,
governmental delay, restraint or inaction, unavailability or equipment, and any
other cause or event, whether of the kind enumerated specifically herein, or
otherwise, which is not within the control of the party claiming such
suspension.
27. Consent to Agreement. By executing this Agreement, each party, for
itself, represents such party has read or caused to be read this Agreement in
all particulars, and consents to the rights, conditions, duties and
responsibilities imposed upon such party as specified in this Agreement. Each
party represents, warrants and covenants that such party executes and delivers
this Agreement of its own free will and with no threat, undue influence, menace,
coercion or duress, whether economic or physical. Moreover, each party
represents, warrants, and covenants that such party executes this Agreement
acting on such party's own independent judgment and upon the advice of such
party's counsel.
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IN WITNESS WHEREOF the parties have executed this Agreement for
Indemnification on the date specified in the preamble of this Agreement.
TMEX USA, Inc.,
a Nevada corporation
By: /s/ Cooper Lee /s/ Cecil Zeringue
-------------------------- -------------------------
Cooper Lee Cecil Zeringue
Its: President
15
STOCK OPTION PLAN
Article
I. Purposes of the Plan
II. Amount of Stock Subject to Plan
III. Effective Date and Term of the Plan
IV. Administration
V. Eligibility
VI. Limitation on Exercise of Incentive Options
VII. Options: Price and Payment
VIII. Use of Proceeds
IX. Term of Options and Limitations on the Right of Exercise
X. Exercise of Options
XI. Nontransferability of Options and Stock Appreciation Rights
XII. Termination of Directors, Employees and Independent Contractors
XIII. Adjustment of Shares; Effect of Certain Transactions
XIV. Right to Terminate Employees and Independent Contractors
XV. Purchase for Investment
XVI. Issuance of Certificates; Legends; Payment of Expenses
XVII. Withholding Taxes
XVIII. Listing of Shares and Related Matters
XIX. Amendment of the Plan
XX. Termination or Suspension of the Plan
XXI. Governing Law
XXII. Partial Invalidity
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TMEX USA INC. 2000 STOCK OPTION PLAN
I. PURPOSES OF THE PLAN
1.01 TMEX USA, Inc., a Nevada corporation ("Company"), desires to provide
to certain of its directors, employees and independent contractors and the
directors, employees and independent contractors of any subsidiary corporation
or parent corporation of the Company who are responsible for the continued
growth of the Company an opportunity to acquire a proprietary interest in the
Company, and, therefore, to create in such directors, employees and independent
contractors an increased interest in and a greater concern for the welfare of
the Company.
The Company, by means of this TMEX USA, Inc. 2000 Stock Option Plan (the
"Plan"), seeks to retain the services of persons now serving in certain
capacities and to secure the services of persons capable of serving in similar
capacities.
1.02 The stock options ("Options") offered pursuant to the Plan are a
matter of separate inducement and are not in lieu of any salary or other
compensation for the services of any director, employee or independent
contractor.
1.02 The Options granted pursuant to the Plan are intended to be either
incentive stock options ("Incentive Options") within the meaning of Section 422A
of the Internal Revenue Code of 1986, as amended (the "Code"), or options that
do not satisfy the requirements for Incentive Options ("Non-Qualified Options"),
but the Company makes no warranty as to the qualification of any Option as an
Incentive Option.
II. AMOUNT OF STOCK SUBJECT TO THE PLAN
2.01 The total number of shares of common stock of the Company which either
may be purchased pursuant to the exercise of Options shall not exceed, in the
aggregate, five million (5,000,000) shares of the authorized common stock, $.001
par value per share, of the Company (the "Shares").
2.02 Shares which may be acquired pursuant to the Plan may be either
authorized but unissued Shares, Shares of issued stock held in the Company's
treasury, or both, at the discretion of the Company. If and to the extent that
Options expire or terminate without having been exercised, new Options may be
granted with respect to Shares subject to such expired or terminated Options;
provided, however, that the grant and the terms of such new Options shall in all
respects comply with the provisions of the Plan.
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III. EFFECTIVE DATE AND TERM OF THE PLAN
3.01 The Plan is shall become effective on the date (the "Effective Date")
on which it is adopted by the Board of Directors of the Company (the "Board of
Directors"); provided, however, that if the Plan is not approved by a vote of
the shareholders of the Company within twelve (12) months before or after the
Effective Date, the Plan and any Options granted pursuant thereto shall
terminate.
3.02 The Company may, from time to time during the period beginning on the
Effective Date and ending on April 12, 2010 ("Termination Date"), grant Options
to persons eligible to participate in the Plan, pursuant to the terms of the
Plan. Options granted prior to the Termination Date may extend beyond that date,
in accordance with the terms thereof.
3.03 As used in the Plan, the terms "subsidiary corporation" and "parent
corporation" shall have the meanings ascribed to such terms, respectively, in
Sections 425(f) and 425(e) of the Code.
3.04 A director, employee or independent contractor to whom Options are
granted may be referred to herein as a "Participant."
IV. ADMINISTRATION
4.01 The Board of Directors shall designate an option committee (the
"Committee") which shall consist of no fewer than three (3) directors, each of
whom shall be a "disinterested person" within the meaning of Rule 16b-3 (or any
successor rule or regulation) promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), to administer the Plan. A majority of the
members of the Committee shall constitute a quorum, and the act of a majority of
the members of the Committee shall be the act of the Committee. Any member of
the Committee may be removed at any time either with or without cause by
resolution adopted by the Board of Directors, and any vacancy on the Committee
may at any time be filled by resolution adopted by the Board of Directors.
4.02 Any or all powers and functions of the Committee may at any time and
from time to time be exercised by the Board of Directors; provided, however,
that, with respect to the participation in the Plan by members of the Board of
Directors, such powers and functions of the Committee may be exercised by the
Board of Directors only if, at the time of such exercise, a majority of the
members of the Board of Directors, as the case may be, and a majority of the
directors acting in the particular matter, are "disinterested persons" within
the meaning of Rule 16b-3 (or any successor rule or
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regulation) promulgated pursuant to the Exchange Act. Any reference in the Plan
to the Committee shall be deemed also to refer to the Board of Directors, to the
extent that the Board of Directors is exercising any of the powers and functions
of the Committee.
4.03 Subject to the express provisions of the Plan, the Committee shall
have the authority, in its discretion,
(i) to determine the directors, employees and independent contractors to
whom Options shall be granted, the time when such Options shall be
granted, the number of Shares which shall be subject to each Option;
the purchase price or exercise price of each Share which shall be
subject to each Option, the period(s) during which such Options shall
be exercisable (whether in whole or in part), and the other terms and
provisions of the respective Options (which need not be identical);
(ii) to construe the Plan and Options granted pursuant thereto;
(iii) to prescribe, amend and rescind rules and regulations relating to the
Plan; and
(iv) to make all other determinations necessary or advisable for
administering the Plan.
4.04 Without limiting the generality of the foregoing, the Committee also
shall have the authority to require, in its discretion, as a condition of the
granting of any Option, that the Participant agree (i) not to sell or otherwise
dispose of Shares acquired pursuant to the Option for a period of twelve (12)
months following the date of acquisition of such Shares and (ii) that in the
event of termination of directorship, employment, term of any independent
contractor relationship or agreement, or term of any consulting relationship
agreement of such Participant, other than as a result of dismissal without
cause, such Participant will not, for a period to be determined at the time of
the grant of the Option, enter into any employment or participate directly or
indirectly in any business or enterprise which is competitive with the business
of the Company or any subsidiary corporation or parent corporation of the
Company, or enter into any employment or participate directly or indirectly in
any business or enterprise in which such person will be called upon to utilize
special knowledge obtained through directorship, employment, term of any
independent contractor relationship or agreement, or term of any consulting
relationship agreement with the Company or any subsidiary corporation or parent
corporation thereof.
The determination of the Committee on matters referred to in this Article
IV shall
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be conclusive.
4.05 The Committee may employ such legal counsel, consultants and agents as
it may deem desirable for the administration of the Plan and may rely upon any
opinion received from any such counsel or consultant and any computation
received from any such consultant or agent. Expenses incurred by the Committee
in the engagement of such counsel, consultant or agent shall be paid by the
Company. No member or former member of the Committee or of the Board of
Directors shall be liable for any action or determination made in good faith
with respect to the Plan or any Option.
V. ELIGIBILITY
5.01 Non-Qualified Options may be granted only to directors, employees and
independent contractors of the Company, or of any subsidiary corporation or
parent corporation of the Company now existing or hereafter formed or acquired,
except as hereinafter provided. Any person who shall have retired from active
employment by the Company, including such person having entered into an
independent contractor agreement with the Company shall also be eligible to
receive an Option.
VI. LIMITATION ON EXERCISE OF INCENTIVE OPTIONS
6.01 Except as otherwise provided pursuant to the Code, to the extent that
the aggregate fair market value of Shares with respect to which Incentive
Options are exercisable for the first time by an employee or independent
contractor during any calendar year (pursuant to all stock options plans of the
Company and any parent corporation or subsidiary corporation of the Company)
exceeds One Hundred Thousand Dollars ($100,000), such Options shall be treated
as Non-Qualified Options. For purposes of this limitation, (i) the fair market
value of Shares is determined as of the time the Option is granted, and (ii) the
limitation will be applied by taking into account Options in the order in which
they were granted.
VII. OPTIONS: PRICE AND PAYMENT
7.01 The purchase price for each Share purchasable under any Non-Qualified
Option granted pursuant to the Plan shall be such amount as the Committee shall
deem appropriate.
7.02 The purchase price for each Share purchasable pursuant to any
Incentive Option shall be such amount as the Committee shall, in its best
judgment, determine to be not less than one hundred percent (100%) of the fair
market value per Share on the date the option is granted; provided, however,
that in the case of an Incentive Option
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granted to a Participant who, at the time such Incentive option is granted, owns
stock of the Company or any subsidiary corporation or parent corporation of the
Company possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or of any subsidiary corporation or
parent corporation of the Company, the purchase price for each Share shall be
such amount as the Committee shall, in its best judgment, determine to be not
less than one hundred ten percent (110%) of the fair market value per Share at
the date such Option is granted.
7.03 If the Shares are listed on a national securities exchange in the
United States on any date on which the fair market value per Share is to be
determined, the fair market value per Share shall be deemed to be the average of
the high and low quotations at which such Shares are sold on such national
securities exchange on such date. If the Shares are listed on a national
securities exchange in the United States of America on such date but the Shares
are not traded on such date, or such national securities exchange is not open
for business on such date, the fair market value per Share shall be determined
as of the closest preceding date on which such exchange shall have been open for
business and the Shares were traded. If the Shares are listed on more than one
national securities exchange in the United States of America on the date any
such Option is granted, the Committee shall determine which national securities
exchange shall be used for the purpose of determining the fair market value per
Share.
7.04 If a public market exists for the Shares on any date on which the fair
market value per Share is to be determined, but the Shares are not listed on a
national securities exchange in the United States of America, the fair market
value per Share shall be deemed to be the mean between the closing bid and asked
quotations in the over-the-counter market for the Shares on such date. If there
are no bid and asked quotations for the Shares on such date, the fair market
value per Share shall be deemed to be the mean between the closing bid and asked
quotations in the over-the-counter market for the Shares on the closest date
preceding such date for which such quotations are available.
7.05 If no public market exists for the Shares on any date on which the
fair market value per Share is to be determined, the Committee shall, in its
sole discretion and best judgment, determine the fair market value of a Share.
For purposes of the Plan, the determination by the Committee of the fair
market value of a Share shall be conclusive.
7.06 Upon the exercise of an Option, the Company shall cause the purchased
Shares to be issued only when it shall have received the full and complete
purchase price for the Shares in cash or by certified check; provided, however,
that in lieu of cash or
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certified check, the Participant may, if and to the extent the terms of the
option so provide and to the extent permitted by applicable law, exercise an
option in whole or in part, by delivering to the Company shares of common stock
of the Company (in proper form for transfer and accompanied by all requisite
stock transfer tax stamps or cash in lieu thereof) owned by such Participant
having a fair market value equal to the purchase price of the Shares as to which
the Option is being exercised. The fair market value of the stock so delivered
shall be determined as of the date immediately preceding the date on which the
Option is exercised, or as may be required in order to comply with or to conform
to the requirements of any applicable laws or regulations.
VIII. USE OF PROCEEDS
8.01 The cash proceeds of the sale of Shares subject to Options are to be
added to the general funds of the Company and used for its general corporate
purposes as the Board of Directors shall determine.
IX. TERM OF OPTIONS AND LIMITATIONS
ON THE RIGHT OF EXERCISE
9.01 Any Option shall be exercisable at such times, in such amounts and
during such period or periods as the Committee shall determine at the date of
the grant of such Option; provided, however, that an Incentive option shall not
be exercisable after the expiration of five (5) years from the date such Option
is granted; and provided, further, that, in the event that an Incentive Option
granted to a Participant who, at the time such Option is granted, owns stock of
the Company or any subsidiary corporation or parent corporation of the Company
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or of any subsidiary corporation or parent
corporation of the Company, such Option shall not be exercisable after the
expiration of three (3) years from the date such option is granted.
9.02 Subject to the provisions of Article XX of the Plan, the Committee
shall have the right to accelerate, in whole or in part, from time to time,
conditionally or unconditionally, rights to exercise any option.
9.03 To the extent that an Option is not exercised within the period of
exerciseability specified therein, it shall expire as to the then unexercised
part.
In no event shall an option granted pursuant to the Plan be exercisable for
a fraction of a Share.
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X. EXERCISE OF OPTIONS
10.01 Any Option shall be exercised by the Participant holding such option
as to all or part of the Shares contemplated by such Option by giving written
notice of such exercise to the Secretary of the Company at the principal
business office of the Company, specifying the number of Shares to be purchased
and specifying a business day not more than fifteen (15) days from the date such
notice is given, for the payment of the purchase price against delivery of the
Shares being purchased. Subject to the terms of Articles XV, XVII and XVIII of
the Plan, the Company shall cause certificates for the Shares so purchased to be
delivered to the Participant at the principal business office of the Company, in
exchange for payment of the full and complete purchase price, on the date
specified in the notice of exercise.
XI. NONTRANSFERABILITY OF OPTIONS
AND STOCK APPRECIATION RIGHTS
11.01 No Option shall be transferable, whether by operation of law or
otherwise, other than by will or the laws of descent and distribution, and any
Option shall be exercisable, during the lifetime of the Participant, only by
such Participant.
XII. TERMINATION OF DIRECTORS, EMPLOYEES
AND INDEPENDENT CONTRACTORS
12.01 Upon termination of the directorship, employment, term of any
independent contractor relationship or agreement, or term of any consulting
relationship agreement of any Participant with the Company and all subsidiary
corporations and parent corporations of the Company, unless specified to the
contrary in the respective Stock Option Agreement to which the Company and such
Participant are parties and which relates to such Option, any Option previously
granted to such Participant, shall, to the extent not theretofore exercised,
terminate and become null and void, provided that:
(a) if such Participant shall die while serving as a director, while in
the employ of such corporation, during the term of any independent
contractor relationship or agreement, or during the term of any
consulting relationship agreement or during either the three (3) month
or one (1) year period, whichever is applicable, specified in clause
(b) below and at a time when such Participant was entitled to exercise
an Option as provided in the Plan, the legal representative of such
Participant, or such person who acquired such Option by bequest or
inheritance or by reason of the death of such Participant, may, not
later than one (1) year from the date of
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death, exercise such Option, to the extent not theretofore exercised,
in respect of any or all of such number of Shares as specified by the
Committee in such Option; and
(b) if the directorship, employment, term of any independent contractor
relationship or agreement, or term of any consulting relationship
agreement any Participant to whom such Option shall have been granted
shall terminate by reason of the Participant's retirement (at such age
or upon such conditions as shall be specified by the Committee),
disability (as described in Section 22(e)(3) of the Code) or dismissal
by the Company or any subsidiary corporation or parent corporation of
the Company now existing or hereafter formed or acquired other than
for cause (as defined below), and while such Participant is entitled
to exercise such Option as herein provided, such Participant shall
have the right to exercise such Option, to the extent not theretofore
exercised, in respect of any or all of such number of Shares as
specified by the Committee in such Option, at any time up to and
including (i) three (3) months after the date of such termination of
directorship, employment, term of any independent contractor
relationship or agreement, or term of any consulting relationship
agreement in the case of termination by reason of retirement or
dismissal other than for cause and (ii) one (1) year after the date of
termination of directorship, employment, term of any independent
contractor relationship or agreement, or term of any consulting
relationship agreement in the case of termination by reason of
disability.
In no event, however, shall any person be entitled to exercise any Option
after the expiration of the period of exerciseability of such Option as
specified therein.
12.02 If a Participant voluntarily terminates his directorship, employment,
term of any independent contractor relationship or agreement, or term of any
consulting relationship agreement, or is discharged for cause, unless specified
to the contrary in the respective Stock Option Agreement to which the Company
and such participant are parties, and which relates to such Option, any Option
shall forthwith terminate with respect to any unexercised portion thereof.
12.03 If an Option shall be exercised by the legal representative of a
deceased Participant, or by a person who acquired an Option by bequest or
inheritance or by reason of the death of any Participant, written notice of such
exercise shall be accompanied by a certified copy of letter testamentary or
equivalent proof of the right of such legal representative or other person to
exercise such Option.
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12.04 For the purposes of the Plan, the term "for cause" shall mean (i)
with respect to an employee who is a party to a written agreement with, or,
alternatively, participates in a compensation or benefit plan of the Company or
a subsidiary corporation or parent corporation of the Company, which agreement
or plan contains a definition of "for cause" or "cause" (or words of similar
import) for purposes of termination of employment pursuant thereto by the
Company or such subsidiary corporation or parent corporation of the Company,
"for cause" or "cause" as defined in the most recent of such agreements or
plans, or (ii) a party to any independent contractor relationship or agreement
or any consulting relationship or agreement, whether oral or written, or (iii)
in all other cases, as determined by the Board of Directors, in its sole
discretion, (a) the willful commission by an employee or independent contractor
of a criminal or other act that causes or probably will cause substantial
economic damage to the Company or a subsidiary corporation or parent corporation
of the Company or substantial injury or damage to the business reputation of the
Company or a subsidiary corporation or parent corporation of the Company; (b)
the commission by an employee or independent contractor of an act of fraud in
the performance of such employee's duties on behalf of the Company or a
subsidiary corporation or parent corporation of the Company; (c) the continuing
willful failure of an employee or independent contractor to perform the duties
of such employee or independent contractor to the Company or a subsidiary
corporation or parent corporation of the Company (other than such failure
resulting from the employee's or independent contractor's incapacity due to
physical or mental illness) after written notice thereof (specifying the
particulars thereof in reasonable detail) and a reasonable opportunity to be
heard and cure such failure are given to the employee or independent contractor
by the Board of Directors; or (d) the order of a court of competent jurisdiction
requiring the termination of the employee's employment, or term of any
independent contractor relationship or agreement, or term of any consulting
relationship agreement. For purposes of the Plan, no act, or failure to act, on
the employee's or independent contractor's part shall be considered "willful"
unless done or omitted to be done by the employee or independent contractor not
in good faith and without reasonable belief that the employee's or independent
contractor's action or omission was in the best interest of the Company or a
subsidiary corporation or parent corporation of the Company.
12.05 For the purposes of the Plan, an employment relationship shall be
deemed to exist between a person and a corporation if, at the time of the
determination, the individual was an "employee" of such corporation for purposes
of Section 422A(a) of the Code. If a person is on maternity, military, or sick
leave or other bona fide leave of absence, such person shall be considered an
"employee" for purposes of the exercise of an Option shall be entitled to
exercise such Option during such leave if the period of such leave does not
exceed ninety (90) days, or, if longer, so long as such person's right to
reemployment with his employer is guaranteed either by statute or by contract.
If the
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period of leave exceeds ninety (90) days, the employment relationship shall be
deemed to have terminated on the ninety-first (91) day of such leave, unless
such person's right to reemployment is guaranteed by statute or contract.
12.06 An employee or independent contractor shall not be deemed terminated
by reason of (i) the transfer of a Participant from the Company to a subsidiary
corporation or a parent corporation of the Company or (ii) the transfer of a
Participant from a subsidiary corporation or a parent corporation of the Company
by the Company or by another subsidiary corporation or parent corporation of the
Company.
XIII. ADJUSTMENT OF SHARES; EFFECT OF CERTAIN TRANSACTIONS
13.01 In the event of any change in the outstanding Shares as a result of
merger, consolidation, reorganization, recapitalization, stock dividend, stock
split, split-up, split-off, spin-off, combination or exchange of shares, or
other similar change in capital structure of the Company, an adjustment shall be
made to each outstanding Option such that each such Option shall thereafter be
exercisable for such securities, cash or other property as would have been
received in respect of the Shares subject to such Option had such Option been
exercised in full immediately prior to such change, and such an adjustment shall
be made successively each time any such change shall occur. The term "Shares"
after any such change shall refer to the securities, cash or property then
receivable upon exercise of an Option. In addition, in the event of any such
change, the Committee shall make any additional adjustment as may be appropriate
to the maximum number of Shares subject to the Plan, the maximum number of
Shares, if any, for which Options may be granted to any one employee or
independent contractor, and the number of Shares and price per Share subject to
outstanding Options as shall be appropriate to prevent dilution or enlargement
of rights under such Options, and the determination of the Committee as to these
matters shall be conclusive. Notwithstanding the foregoing, (i) each such
adjustment with respect to an Incentive Option shall comply with the rules of
Section 425(a) of the Code, and (ii) in no event shall any adjustment be made
which would render any Incentive Option other than an "incentive stock option"
for purposes of Section 422A of the Code.
13.02 For purposes of the Plan, a "change in control" of the Company occurs
if: (a) any "person" (defined as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act, as amended) other than the current owner is or
becomes the beneficial owner, directly or indirectly, of securities of the
Company representing ten percent (10%) or more of the combined voting power of
the Company's outstanding securities then entitled to vote for the election of
directors; or (b) during any period of two consecutive years, persons who at the
beginning of such period constitute the Board of Directors cease for any reason
to constitute at least a majority thereof; or (c) the Board
11
<PAGE>
of Directors shall approve the sale of all or substantially all of the assets of
the Company or any merger, consolidation, issuance of securities or purchase of
assets, the result of which would be the occurrence of any event described in
clause (a) or (b) above.
13.03 In the event of a change in control of the Company (defined above),
the Committee, in its discretion, may determine that, upon the occurrence of a
transaction described in the preceding paragraph, each Option outstanding
pursuant to the Plan shall terminate within a specified number of days after
notice to the holder, and such holder shall receive, with respect to each Share
subject to such Option, an amount of cash equal to the excess of the fair market
value of such Share immediately prior to the occurrence of such transaction
increases the exercise price per Share of such Option. The provisions specified
in the preceding sentence shall be inapplicable to an Option granted within six
(6) months before the occurrence of a transaction described above if the holder
of such Option is a director or officer of the Company or a beneficial owner of
the Company who is described in Section 16(a) of the Exchange Act, unless such
holder dies or becomes disabled (within the meaning of Section 22(e)(3) of the
Code) prior to the expiration of such six-month period.
Alternatively, the Committee may determine, in its discretion, that all
then outstanding Options shall immediately become exercisable upon a change of
control of the Company.
XIV. RIGHT TO TERMINATE EMPLOYEES
AND INDEPENDENT CONTRACTORS
14.01 The Plan shall not impose any obligation on the Company or on any
subsidiary corporation or parent corporation thereof to continue the retention
of any Participant; and it shall not impose any obligation on the part of any
Participant to remain in the employ of the Company or of any subsidiary
corporation or parent corporation thereof.
XV. PURCHASE FOR INVESTMENT
15.01 Except as provided otherwise in the Plan, a Participant shall, upon
any exercise of an Option, execute and deliver to the Company a written
statement, in form satisfactory to the Company, in which such Participant
represents and warrants that such Participant is purchasing or acquiring the
Shares acquired pursuant thereto for such Participant's own account, for
investment only and not with an intention of the resale or distribution thereof,
and agrees that any subsequent offer for sale or sale or distribution of any of
such Shares shall be made only pursuant to either (a) a Registration Statement
on an appropriate form pursuant to the Securities Act of 1933, as amended (the
12
<PAGE>
"Securities Act"), which Registration Statement has become effective and is
current with regard to the Shares being offered or sold, or (b) a specific
exemption from the registration requirements of the Securities Act, but in
claiming such exemption the holder shall, if so requested by the Company, prior
to any offer for sale or sale of such Shares, obtain a prior favorable written
opinion, in form and substance satisfactory to the Company, from counsel for or
approved by the Company, as to the applicability of such exemption thereto. The
foregoing restriction shall not apply to (i) issuances by the Company so long as
the Shares being issued are registered pursuant to the Securities Act and a
prospectus in respect thereof is current or (ii) reofferings of Shares by
affiliates of the Company (as defined in Rule 405 or any successor rule or
regulation promulgated pursuant to the Securities Act) if the Shares being
reoffered are registered pursuant to the Securities Act and a prospectus in
respect thereof is current.
XVI. ISSUANCE OF CERTIFICATES; LEGENDS; PAYMENT OF EXPENSES
16.01 Upon any exercise of an Option and, in the case of an Option, payment
of the purchase price, a certificate or certificates for the Shares as to which
such Option has been exercised shall be issued by the Company in the name of the
person exercising such Option and shall be delivered to or upon the order of
such person or persons.
16.02 The Company may endorse such legend or legends upon the certificates
for Shares issued upon exercise of an Option granted pursuant to the Plan and
may issue such "stop transfer" instructions to its transfer agent in respect of
such Shares as, in its discretion, it determines to be necessary or appropriate
to (i) prevent a violation of, or to perfect an exemption from, the registration
requirements of the Securities Act, (ii) implement the provisions of the Plan
and any agreement between the Company and the optionee with respect to such
Shares, or (iii) permit the Company to determine the occurrence of a
disqualifying disposition, within the meaning of Section 421(b) of the Code, of
Shares transferred upon exercise of an Incentive Option.
16.03 The Company shall pay all issue or transfer taxes with respect to the
issuance or transfer of Shares, as well as all fees and expenses incurred by the
Company in connection with such issuance or transfer.
All Shares issued as provided in the Plan shall be fully paid and
non-assessable to the extent permitted by law.
XVII. WITHHOLDING TAXES
17.01 The Company may require an employee or independent contractor
exercising a Non-Qualified Option granted pursuant to the Plan or disposing of
Shares
13
<PAGE>
acquired pursuant to the exercise of an Incentive Option in a disqualifying
disposition (within the meaning of Section 421(b) of the Code), to reimburse the
corporation that employs such employee for any taxes required by any government
to be withheld or otherwise deducted and paid by such corporation in respect of
the issuance or disposition of such Shares. In lieu thereof, the employer
corporation shall have the right to withhold the amount of such taxes from any
other amounts due or to become due from such corporation to the employee or
independent contractor upon such terms and conditions as the Committee shall
prescribe. The employer corporation may, in its discretion, hold the stock
certificate to which such employee or independent contractor is entitled upon
the exercise of an Option as security for the payment of such withholding tax
liability, until cash sufficient to pay that liability has been accumulated.
XVIII. LISTING OF SHARES AND RELATED MATTERS
18.01 If at any time the Board of Directors shall determine in its
discretion that the listing, registration or qualification of the Shares subject
to the Plan upon any national securities exchange or pursuant to any state or
federal law, or the consent or approval of any governmental regulatory agency,
is necessary or desirable as a condition of, or in connection with, the sale or
purchase of Shares pursuant to the Plan, no Shares shall be issued unless and
until such listing, registration, qualification, consent or approval shall have
been effected or obtained, or otherwise provided for, free of any conditions not
acceptable to the Board of Directors.
XIX. AMENDMENT OF THE PLAN
19.01 The Board of Directors or the Committee may, from time to time, amend
the Plan, provided that, notwithstanding anything to the contrary in the Plan,
no amendment shall be made, without the approval of the shareholders of the
Company, that will (i) increase the total number of Shares reserved for Options
pursuant to the Plan (other than an increase resulting from an adjustment
provided for in Article XII), (ii) reduce the exercise price of any Incentive
Option granted pursuant to the Plan to an amount less than the price required by
Article VI, (iii) modify the provisions of the Plan relating to eligibility, or
(iv) materially increase the benefits accruing to participants pursuant to the
Plan. The Board of Directors or the Committee shall be authorized to amend the
Plan and the Options to permit the Incentive Options to qualify as "incentive
stock options" within the meaning of Section 422A of the Code. The rights and
obligations pursuant to any Option granted before amendment of the Plan or any
unexercised portion of such Option shall not be adversely affected by amendment
of the Plan or the Option without the consent of the holder of the Option.
14
<PAGE>
XX. TERMINATION OR SUSPENSION OF THE PLAN
20.01 The Board of Directors or the Committee may at any time and for any
or no reason suspend or terminate the Plan. The Plan, unless sooner terminated
pursuant to Article III of the Plan or by action of the Board of Directors,
shall terminate at the close of business on the Termination Date. An Option may
not be granted while the Plan is suspended or after it is terminated. Options
granted while the Plan is in effect shall not be altered or impaired by
suspension or termination of the Plan, except upon the consent of the person to
whom the Option was granted. The power of the Committee pursuant to Article IV
of the Plan to construe and administer any Options granted prior to the
termination or suspension of the Plan shall continue after such termination or
during such suspension.
XXI. GOVERNING LAW
21.01 The Plan and such Options as may be granted pursuant thereto and all
related matters shall be governed by, and construed and enforced in accordance
with, the laws of the State of Nevada, as from time to time amended.
XXII. PARTIAL INVALIDITY
22.01 The invalidity or illegality of any provision of the Plan shall not
be deemed to affect the validity of any other provision of the Plan.
15
23.1 CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use in this Registration Statement on Form SB-1 of our
report, dated March 27, 2000, except for Notes 7 and 9, as to which the date is
April 12, 2000, relating to the consolidated financial statements of TMEX USA,
Inc. and subsidiary.
/s/ Singer Lewak Greenbaum & Goldstein LLP
- ------------------------------------------
Santa Ana, California
May 3, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 375,387 248,515
<SECURITIES> 0 0
<RECEIVABLES> 291,350 21,104
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 704,445 292,380
<PP&E> 1,194,703 747,635
<DEPRECIATION> 371,513 208,069
<TOTAL-ASSETS> 1,543,635 854,989
<CURRENT-LIABILITIES> 819,479 145,807
<BONDS> 0 0
0 0
0 0
<COMMON> 12,688 9,225
<OTHER-SE> 541,402 399,866
<TOTAL-LIABILITY-AND-EQUITY> 1,543,635 854,898
<SALES> 413,999 80,145
<TOTAL-REVENUES> 413,999 80,145
<CGS> 542,566 10,259
<TOTAL-COSTS> 2,586,195 892,039
<OTHER-EXPENSES> (319) 285,810
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 4,436 222,760
<INCOME-PRETAX> (2,713,643) (1,107,163)
<INCOME-TAX> 800 800
<INCOME-CONTINUING> (2,714,443) (1,107,963)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,714,443) (1,107,963)
<EPS-BASIC> (0.25) (.15)
<EPS-DILUTED> (0.25) (.15)
</TABLE>
[LOGO] Haynie & Company
(a professional corporation)
Certerfied Public Accountants and Management Consultants
4910 Campus Drive Newport Beach, California 92660-2118 (949) 724-1880
FAX (949) 724-1889
April 12, 2000
Office of Small Business
Securities and Exchange Commission
450 5th Street N.W.
Washington, D.C. 20549
Mailstop: 4-6, SEC
RE: TMEX USA, Inc.
Dear Sir or Madam:
We are the former accountant for TMEX USA, Inc., a Nevada corporation
("Company"). We have reviewed the Company's Form 10-KSB. We agree with the
Company's disclosures in "Item 8. Changes in and Disagreements with Accountants"
of Form 10-KSB regarding the change in certifying accountants.
HAYNIE & COMPANY, CPAS
/s/ David T. Shomaker
David T. Shomaker, CPA, CVA
DTS:sig
