history/link with terax and truestar:
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
Each of our directors is elected by stockholders to a term of one year and
serves until his or her successor is elected and qualified. Each of our officers
is elected by the board of directors to a term of one year and serves until his
or her successor is duly elected and qualified, or until he is removed from
office. The board of directors has no nominating, compensation or audit
committees. We do not have an "audit committee financial expert" as defined in
Item 401(e) of Regulation S-B. Our Board of Directors believes that attracting
and retaining board members that could be classified as an "audit committee
financial expert" is unlikely due to the high cost of such Director candidates.
The names, addresses, ages and positions of our present officers and directors
are set forth below:
Full Name and Address Age Positions Date Appointed Director
Chief Executive Officer
J. William Rhea, IV 52 and May 27, 2005
c/o 9600 Great Hills Trail Director
Suite 150W, Austin
Texas 78759
Vice-President,
Bill Chester 56 Business March 22, 2005
c/o 9600 Great Hills Trail Development, Chief
Financial Officer,
Suite 150W, Austin Secretary
Texas 78759 and Director
The persons named above have held their offices/positions since the date of
appointment and are expected to hold their offices/positions until the next
annual general meeting of our stockholders.
Background of Officers and Directors
J. William Rhea, IV, our Chief Executive Officer, has over 30 years of business
and petroleum engineering experience in all phases of the upstream exploration
and production sector of the oil and gas industry, both domestically and
internationally on four continents. Mr. Rhea has been a petroleum engineering
consultant to the industry for many years and has served in senior management
and chief executive roles in several independent oil and gas companies. Most
recently, Mr. Rhea was the President and Chief Operating Officer of Truestar
Petroleum Corp. (formerly Trinity Plumas Capital Corp.), a TSX Venture Exchange
listed gas exploration and production company with assets in North and Central
America. He was formerly President and Chief Executive Officer of APP
Production, Inc., which acquired various oil and gas producing properties
totaling US$85 Million over a several-year period. Mr. Rhea is also deeply
versed in exploration and has recently served as President and Chief Operating
Officer of BF Production, Inc., which acquired exploration licenses for
high-risk, high-potential exploration prospects in South Australia. Mr. Rhea
additionally served as President and Chief Executive Officer of LAE Energy,
Inc., a London, England based exploration venture that invested US$100 Million
in Lower 48 States exploration opportunities. He also served as Managing Partner
of TexStar Partners and TexStar North America, Inc., an independent oil and gas
company engaged in exploration ventures, producing property acquisitions, and
secondary recovery operations. Mr. Rhea earned a B.S. in Mechanical Engineering
with Honors from the University of Texas at Austin and worked toward an MBA from
the University of Texas, Permian Basin.
24
--------------------------------------------------------------------------------
Bill Chester, our Vice-President, Business Development, Chief Financial Officer
and Secretary, has over 25 years experience in the oil and gas, banking and real
estate industries. Since 2000, Mr. Chester has been an independent consultant
providing services to the oil and gas and real estate industries. From 1998 to
2000 Mr. Chester was Vice-President of Strategy One Solutions, a 3D seismic
services company and from 1985 to 1997 Mr. Chester was President of Crestar
Investments, an oil and gas exploration company. Mr. Chester received a Bachelor
of Science Degree in 1971 from Lamar University and a Masters Degree form
Stephen F. Austin State University in 1977.
Conflicts of Interest
We believe that all of our directors and officers may be subject to conflicts of
interest. The conflicts of interest arise from their relationships in other
mining companies and agreements with us.
ITEM 10. EXECUTIVE COMPENSATION
Compensation of Directors
Our directors have not been compensated for their services and there are no
plans to compensate them in the near future until such time as we generate
sufficient revenue to do so.
Executive Compensation - Summary Compensation Table
The following table sets forth information with respect to the total
compensation paid or accrued by us for the six month period ended June 30, 2005
and the three years ended December 31, 2004 on behalf of each of our named
executive officers.
SUMMARY COMPENSATION TABLE
ANNUAL
COMPENSATION LONG TERM COMPENSATION
Awards Payouts
Name and Other Restricted Securities All
Principal
Position Year Salary Bonus annual stock underlying LTIP payouts other
($) ($) compensation award(s) options/SARs ($) compen -
($) ($) (#) sation ($)
J. William 2005(2) $93,454 $ - $ - Nil Nil Nil $ -
Rhea IV
(1)
Chief
Executive
Officer
Bill 2005(2) $7,500 $ - $ - Nil Nil Nil $ -
Chester(3)
President
Joseph 2005(2) Nil
Wilson(4)
President 2004 Nil Nil Nil Nil Nil Nil Nil
2003 Nil
(1) Appointed Chief Executive Officer May 27, 2005.
(2) Six Month Period Ended June 30, 2005.
(3) Appointed President March 22, 2005. Resigned as President May 27, 2005.
(4) Resigned as President March 22, 2005.
During the six month period ended June 30, 2005, we paid Mr. Rhea $93,454.
During the six month
25
--------------------------------------------------------------------------------
period ended June 30, 2005, we paid Mr. Chester $7,500.
During the years ended December 31, 2004 and 2003, we did not pay any
compensation to our named executive officers.
Employment Agreements with Executive Officers
We have entered into employment agreements with our officers or directors as
follows:
• On May 27, 2005 we entered into an Executive Employment Agreement with
J. William Rhea, IV pursuant to which we agreed to employ Mr. Rhea as
our Chief Executive Officer for a term of two years ending May 31, 2007.
The Executive Employment Agreement was effective June 1, 2005. We also
agreed to appoint Mr. Rhea to our board of directors. We have agreed to
pay to Mr. Rhea a base salary of $275,000 per year during the term of
his agreement. In addition, we have agreed to consider Mr. Rhea for an
annual bonus (to be determined by our board of directors) of up to an
additional $82,500 (to be paid in cash or common stock at Mr. Rhea's
election).
• On June 7, 2005 we entered into an Employment Agreement with Bill
Chester pursuant to which we agreed to employ Mr. Chester as our Vice
President (Business Development) for a term of one year ending May 31,
2006. The Employment Agreement was effective June 1, 2005. We have
agreed to pay to Mr. Chester a base salary of $90,000 per year during
the term of his agreement. In addition, we have agreed to consider Mr.
Chester for an annual bonus (to be determined by our board of
directors).
Compensation Committee
We do not have a formal Compensation Committee. Our Board of Directors will
perform the functions of a Compensation Committee. Due to the lack of revenues
and our development stage status, we deemed a Compensation Committee to not be
necessary at this time.
Benefit Plans
We do not have a long-term incentive plan nor do we have a defined benefit,
pension plan, profit sharing or other retirement plan.
Code of Ethics
We have adopted a Code of Ethics and Business Conduct for Officers, Directors
and Employees, that applies to all of our officers, directors and employees. The
Code of Ethics is filed as an exhibit to this Report on Form 10-KSB.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The following table sets forth, as at August 12, 2005, the total number of
shares owned beneficially by the present owners of 5% or more of our total
outstanding shares. Unless otherwise stated, the stockholders listed below have
direct ownership of their shares and possess sole voting and dispositive power
with respect to their shares:
26
--------------------------------------------------------------------------------
The persons named below may be deemed to be a parent and promoter of our company
within the meaning of such terms under the Securities Act, as amended, by virtue
of his/its direct and indirect stock holdings. Mr. Rhea is the only promoter of
our company.
Title of Class Name and Address of Amount and Nature of Percent of Class
Beneficial Owner Beneficial Ownership
Common Stock J. William Rhea, IV 5,000,000 Common Shares 9.86%
c/o 9600 Great Hills
Trail Direct
Suite 150W, Austin
Texas 78759
The following table sets forth, as at August 12, 2005, the total number of
shares owned beneficially by each of our directors, officers and key employees,
individually and as a group. Unless otherwise stated, the stockholders listed
below have direct ownership of their shares and possess sole voting and
dispositive power with respect to their shares:
Title of Class Name and Address of Amount and Nature of Percent of Class
Beneficial Owner Beneficial Ownership
Common Stock J. William Rhea, IV 5,000,000 Common Shares 9.86%
c/o 9600 Great Hills
Trail Direct
Suite 150W, Austin
Texas 78759
Common Stock Bill Chester 500,000 Common Shares 0.99%
c/o 9600 Great Hills
Trail Direct
Suite 150W, Austin
Texas 78759
Common Stock All Officers and 5,500,000 Common Shares 10.84%
Directors, as a
group
Except as otherwise noted, it is believed that all persons have full voting and
investment power with respect to the shares indicated. Under the rules of the
Securities and Exchange Commission, a person (or group of persons) is deemed to
be a beneficial owner of a security if he or she, directly or indirectly, has or
shares the power to vote or to direct the voting of such security, or the power
to dispose of or to direct the disposition of such security. Accordingly, more
than one person may be deemed to be a beneficial owner of the same security. A
person is also deemed to be a beneficial owner of any security, which that
person has the right to acquire within 60 days, such as options or warrants to
purchase our Common Stock.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except as disclosed below, none of the following parties has in the last two
fiscal years had any material interest, direct or indirect, in any transaction
with us or in any presently proposed transaction that has or will materially
affect us:
• Any of our directors or officers;
• Any person proposed as a nominee for election as a director;
• Any person who beneficially owns, directly or indirectly, shares
carrying more than 10% of the voting rights attached to our outstanding
shares of common stock;
• Any of our promoters; or
• Any relative or spouse of any of the foregoing persons who has the same
house as such person.
27
--------------------------------------------------------------------------------
On June 1, 2005, we acquired all of the issued and outstanding securities of
Erath Energy Inc. from Holywell Technological Investments Ltd. and First Finance
Limited. Bill Chester, one of our directors, was also a director of Erath Energy
Inc. The particulars of this transaction are described under the heading
"Description of Business", above.
ITEM 13. EXHIBITS
Exhibit No. Document Description
3.1(1) Articles of Incorporation
3.1.1(2) Certificate of Change
3.1.2 (3) Certificate of Name Change
3.1.3 (4) Certificate of Change
3.1.4 Certificate of Correction
3.2 (1) Bylaws
4.1 (5) Specimen Stock Certificate
4.2 (5) Specimen Warrant Certificated dated August 8, 2005.
10.1(1) Separation and Distribution Agreement dated October 18, 2001, between
Desert Health Products, Inc. and Royal Phoenix
10.2 (1) License, Manufacture and Distribution Agreement
10.3 (1) Addendum to Separation and Distribution Agreement
10.4 (6) Stock Purchase Agreement dated May 31, 2005 between Terax Energy,
Inc., Holywell Technological Investments Ltd. and First Finance
Limited.
10.5 (5) Executive Employment Agreement between Terax Energy, Inc. and J.
William Rhea, IV dated May 27, 2005.
10.6 (5) Executive Employment Agreement between Terax Energy, Inc. and Bill
Chester dated June 7, 2005.
10.7 (6) Management Group Stock Pool Agreement between Terax Energy, Inc., J.
William Rhea, IV and Bill Chester dated for reference June 7, 2005.
10.8 (5) Form of Subscription Agreement dated for reference June 13, 2005.
21.1 (5) Subsidiaries of Terax Energy, Inc.
31.1 Certification of Chief Executive Officer and Chief Financial
Officer pursuant to Rule 13a-14 and Rule 15d-14(a), Promulgated under
the Securities and Exchange Act of 1934, as Amended.
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Chief
Executive Officer and Chief Financial Officer)
99.1 (5) Code of Ethics and Business Conduct of Officers, Directors and
Employees.
(1) Incorporated by reference to same exhibit filed with the Company's Form
SB-2 filed with the SEC on October 26, 2001, SEC File No, 333-72230.
(2) Incorporated by reference to same exhibit filed with the Company's Form
8-K filed with the SEC on October 22, 2004, SEC File No, 333-72230.
(3) Incorporated by reference to same exhibit filed with the Company's Form
8-K filed with the SEC on March 28, 2005, SEC File No, 333-72230.
(4) Incorporated by reference to same exhibit filed with the Company's Form
8-K filed with the SEC on June 9, 2005, SEC File No, 333-72230.
(5) Incorporated by reference to same exhibit filed with the Company's Form
10-KSB filed with the SEC on August 19, 2005, SEC File No. 333-72230
(6) Incorporated by reference to same exhibit filed with the Company's Form
8-K filed with the SEC on June 2, 2005, SEC File No, 333-72230.
28
--------------------------------------------------------------------------------
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The Company's board of directors reviews and approves audit and permissible
non-audit services performed by Malone & Bailey, PC, as well as the fees charged
by Malone & Bailey, PC for such services. In its review of non-audit service
fees and its appointment of Malone & Bailey, PC as the Company's independent
accountants, the board of directors considered whether the provision of such
services is compatible with maintaining Malone & Bailey, PC 's independence. All
of the services provided and fees charged by Malone & Bailey, PC in 2005 were
pre-approved by the board of directors.
Audit Fees
The aggregate fees billed for professional services rendered by Malone & Bailey,
PC for the audit of our financial statements for the six month period ended June
30, 2005 are $5,000, and the aggregate feels billed by our predecessor auditors
Beckstead and Watts for the year ended June 30, 2004 were $4,250.
Audit-Related, Tax and Other Fees
There were no other fees billed by Malone & Bailey, PC or Beckstead and Watts
for 2005 or 2004.
29
--------------------------------------------------------------------------------
