OPERATING AGREEMENT
THIS OPERATING AGREEMENT (the "Agreement") is made effective this 1st
day of March, 2004 by and among GEOTEC THERMAL GENERATORS, INC., a Florida
corporation ("Geotec"), with its principal offices located at 0000 Xxxxx Xxxxxxx
Xxxxxxx, Xxxxx 000, Xxxx Xxxxx, Xxxxxxx 00000; and TELCO ENERGY CORPORATION, a
Nevada corporation ("TelcoEnergy"), with its principal offices located at 000
Xxxxxx Xxxx, Xxxx Xxxx Xxxxx, Xxxxxxx 00000.
WHEREAS, Geotec has entered into a letter of intent dated February 23,
2004 with TelcoEnergy, which contemplates the acquisition of 80% of the capital
interest of Geotec by TelcoEnergy pursuant to a merger or stock purchase
acquisition (the "Acquisition"); and
WHEREAS, pending the completion of the Acquisition and in order to
facilitate certain financing arrangements, the parties believe that it will be
in their respective interests for various day-to-day operations of Geotec to be
subject to the supervision of the operator pending completion or termination of
the proposed Acquisition;
NOW, THEREFORE, the parties agree as follows:
1. Board of Directors. The Board of Directors of Geotec currently
consists of Xxxxxxx Xxxxx and Xxxxxx Xxxx. Xx. Xxxx will resign as a member of
the Board of Directors effective upon execution of this Agreement, in favor of
Xx. Xxxxx Xxxxxxxxxxx. Geotec shares owned by Xx. Xxxx will become free trading
after 90 days. Xx. Xxxx agrees to sell a maximum of 25% of his shares each
quarter thereafter. Xx. Xxxx agrees to give TelcoEnergy the right to facilitate
the sale of his shares outside the public market, at no more than a 10% discount
from the bid price, within three days of his providing notification to sell. Xx.
Xxxx will be reimbursed the dollar amount of said discount with 144 restricted
Geotec shares. If for any reason the Acquisition is not completed, the operator
will submit the resignation of its Director, in favor of Xx. Xxxx, as well as
the resignation of any additional Directors it may have added to the Board.
2. Bank Account. Pending completion of the Acquisition, certain
financing may be completed in the name of Geotec through the operator. The
parties agree that any proceeds received from such financing will be deposited
in a special account established by the operator in the name of Geotec or other
entity in which the operator is the signatory or co-signatory on the account.
3. Operator. Geotec appoints TelcoEnergy as the operator for the
purpose of overseeing the administrative operations of Geotec pending completion
of the Acquisition. The operator shall oversee the administration of Geotec's
business consistent with normal and standard business practices and shall be
solely responsible for:
a. Ensuring that no action is taken which would diminish the
value of the assets of Geotec;
b. Ensuring that all of Geotec's business and administrative
expenses incurred as the operator, including, but not
limited to, accounting, lease expenses, insurance, office
supplies, payroll services, telephone charges and other
utility expenses are provided for by Geotec;
c. Ensuring that all of Geotec's taxes due and owing to
federal, state and local authorities are paid on a timely
basis out of Geotec's funds;
d. Maintaining supervision to ensure that accurate records of
all receipts of income and disbursements of expenses in
connection with Geotec's business are maintained and
available for inspection by Geotec executive personnel
during the term of this Agreement, and maintaining all
Securities and Exchange Commission reports and filings, on a
timely basis.
4. Compensation. The operator shall not be compensated for his services
under this Agreement.
5. Term. This Agreement shall terminate upon completion of the
Acquisition provided, however, that if the Acquisition is not consummated by
July 1, 2004, this Agreement shall automatically terminate unless the parties
agree to a further extension. Both parties agree to proceed in good faith and
make best effort to finalize the acquisition.
6. Continuation of Services of Management. Xxxxxxx Xxxxx shall continue
as an active employee of the Corporation at his current salary level and report
to the operator during the term of this Agreement. Xxx Xxxx will be paid $5,000
per month as a consultant to the operator during the term of this Agreement.
7. Independent Contractor Status. Geotec and the operator agree that
the operator will perform all of the services as an independent contractor and
not as a joint venturer or partner of Geotec.
8. Conduct. At all times during the term of this Agreement, the
operator and its agents will act in accordance with all applicable federal,
state and local laws and regulations.
9. Confidential Information and Inventions. Each of the parties has
previously executed or will execute nondisclosure agreements with the other
regarding the disclosure of proprietary and confidential information. Such
agreements shall remain in effect and continue to apply with regard to the
exchange of information hereunder that constitutes confidential information
under the terms of such agreements, respectively.
10.Miscellaneous.
10.1. Entire Agreement. This document constitutes the entire
agreement among the parties, all oral agreements being merged herein, and
supersedes all prior representations. There are no representations, agreements,
arrangements or understandings, oral or written, between the parties relating to
the subject matter of this Agreement that are not fully expressed herein.
10.2. Non-Assignability. This Agreement shall not be assigned by
any party without the prior written consent of the other parties.
10.3. Hold Harmless. Geotec and Telco mutually agree to hold each
other harmless for any action taken by the other party pursuant to the terms of
this agreement.
10.4. Succession. Subject to the provisions otherwise contained in
this Agreement, this Agreement shall inure to the benefit of, and be binding on,
the successors and assigns of the respective parties.
10.5. Notices. Any notice under this Agreement shall be in writing,
and any written notice or other document shall be deemed to have been duly given
(i) on the date of personal service on the parties, (ii) on the third business
day after mailing, if the document is mailed by registered or certified mail,
2
(iii) one day after being sent by professional or overnight courier or messenger
service guaranteeing one day delivery, with receipt confirmed by the courier, or
(iv) on the date of transmission if sent by telegram, telex, telecopy or other
means of electronic transmission resulting in written copies, with receipt
confirmed. Any such notice shall be delivered or addressed to the parties at the
addresses set forth above or at the most recent address specified by the
addressee through written notice under this provision. Failure to conform to the
requirement that mailings be done by registered or certified mail shall not
defeat the effectiveness of notice actually received by the addressee.
10.6. Counterparts. This Agreement may be executed in any number
of counterparts with the same effect as if the parties had all signed the same
document. All counterparts shall be construed together and shall constitute one
agreement.
10.7. Governing Law. The rights and obligations of the parties and
the interpretation and performance of this Agreement shall be governed by the
law of the State of Florida, excluding its conflict of laws rules.
GEOTEC THERMAL GENERATORS, INC.
By: /s/ Xxx Xxxx
-------------
Xxx Xxxx
Chairman and President
TELCO ENERGY CORPORATION
By: /s/ Xxxxx Xxxxxxxxxxx
---------------------
Xxxxx Xxxxxxxxxxx
Chairman and President
3
