Schedule 14A Information
Proxy Statement
Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. 1)
Filed by the Registrant [X]
Filed by a Party other than the Registrant []
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section. 240.14a-11(c) or
Section 240.14a-12
Daleco Resources Corporation
435 Devon Park Drive, Suite 410, Wayne, Pennsylvania, 19087
Telephone No.: 610-254-4199
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
__________________________________________________________________
2) Aggregate number of securities to which transaction applies:
__________________________________________________________________
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
__________________________________________________________________
4) Proposed maximum aggregate value of transaction:
__________________________________________________________________
5) Total fee paid:
__________________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
__________________________________________________________________
2) Form, Schedule or Registration Statement No.:
__________________________________________________________________
3) Filing Party:
Ehmann, Van Denbergh & Trainor, P.C.
Two Penn Center Plaza, Suite 725, Philadelphia, Pennsylvania 19102
__________________________________________________________________
4) Dated Filed:
December __, 1997
__________________________________________________________________
<PAGE>
DALECO RESOURCES CORPORATION
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
December 9, 1997
NOTICE IS HEREBY given that the Annual Meeting of the
Shareholders of DALECO RESOURCES CORPORATION (the "Corporation") will be held in
the Wilshire Room, Radison Beverly Pavilion Hotel, 9360 Wilshire Boulevard,
Beverly Hills, California 90212, on February 16, 1998, at 10:00 A.M., local
time, to consider and take action upon the following matters:
(1) A ten for one reverse stock split and the amendment of the Certificate of
Incorporation to change the authorized capital stock of the Corporation to
20,000,00 shares of Common Stock and 10,000,000 shares of Preferred Stock;
(2) the approval of the Company's Non-Qualified Stock Option Plan;
(3) election of Directors of the Corporation;
(4) ratification of Miller & Company as the Company's independent accountants
for Fiscal Year 1998; and
(5) such other matters as may properly come before the meeting.
Stockholders of record at the close of business on December 29, 1997,
will be entitled to vote at the meeting.
A complete list of Stockholders entitled to vote at the meeting will be
kept at the offices of the Company, 435 Deven Park Drive, Suite 410, Wayne, PA
19087 and Suite 290, 10350 Santa Monica Blvd. Los Angeles, CA 90025, for
examination by any Stockholder, during ordinary business hours, for a period of
not less than ten (10) days prior to the meeting.
Attached to this Notice is a form of such Proxy which should be returned, if you
elect to use it, not later than 10:00 A.M., Eastern Time on February 16, 1998 to
the stock transfer agent of the Company, StockTrans, Inc., 7 E. Lancaster
Avenue, Ardmore, PA 19003.
By Order of the Board of Directors
----------------------------------
President
IMPORTANT: PLEASE FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN
- ---------- THE SELF-ADDRESSED RETURN ENVELOPE FURNISHED FOR THAT PURPOSE
AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE
ANNUAL MEETING. IF LATER YOU DESIRE TO REVOKE YOUR PROXY FOR
ANY REASON, YOU MAY DO SO IN THE MANNER DESCRIBED IN THE
ATTACHED PROXY STATEMENT.
<PAGE>
DALECO RESOURCES CORPORATION
435 Devon Park Drive, Suite 410
Wayne, Pennsylvania 19087
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD FEBRUARY 16, 1998
This PROXY STATEMENT is furnished to the Stockholders of Daleco
Resources Corporation (the "Company") in connection with the solicitation of the
accompanying proxy by the Board of Directors of the Company to be voted at the
Annual Meeting of Stockholders (the "Annual Meeting") and any adjournment
thereof. The Annual Meeting will be held on February 16, 1998 in the Wilshire
Room, Radison Beverly Pavilion Hotel, 9360 Wilshire Boulevard, Beverly Hills,
California, 90212, at 10:00 a.m. local time.
The approximate date on which this Proxy Statement and the accompanying
proxy card are first being sent or given to stockholders is __________, 199__.
STOCKHOLDER PROPOSALS
Stockholders desiring to present proposals for consideration at the
Company's next annual meeting of stockholders must have their proposal received
by the Company no later than September 1, 1998 to be considered for inclusion in
the Company's Proxy Statement and proxy card for such meeting. Should any
proposal be submitted after September 1, 1998, then it may be omitted by the
Company from the proxy statement and proxy relating to that meeting.
VOTING
General
The securities which can be voted at the Annual Meeting consist of
shares of Common Stock, par value $0.01 per share (the "Common Stock"), with
each share entitling its owner to one vote on each matter submitted to the
Stockholders. The record date for determining the holders of Common Stock who
are entitled to notice of and to vote at the Annual Meeting is December 29, 1997
(the "Record Date"). On the Record Date, 27,767,880 shares of Common Stock were
outstanding and eligible to vote at the Annual Meeting.
Quorum and Vote Required
The presence, in person or by proxy, of A MAJORITY of the outstanding
shares of Common Stock is necessary to constitute a quorum at the Annual
Meeting. The affirmative vote of a majority of the shares of Common Stock
represented in person or by proxy at the Annual Meeting is required to pass any
matter put to a vote at the Annual Meeting.
Vote by Proxy
When voting by proxy, stockholders should specify their election as to
each matter to be voted upon. If no specific instructions are given with regard
to the matter to be voted upon, the shares represented by a signed proxy card
will be voted "FOR" that matter.
Any stockholder delivering a proxy has the power to revoke same at any
time before it is voted by giving written notice to the Secretary of the
Company, by executing and delivering to the Secretary a proxy card bearing a
later date or by voting in person at the Annual Meeting.
In addition to soliciting proxies through the mail, the Company may
solicit proxies through its directors, offices and employees in person and by
telephone. Brokerage firms, nominees, custodians, and fiduciaries may also be
<PAGE>
requested to forward proxy materials to the beneficial owners of shares held of
record by them. All expenses incurred in connection with the Annual Meeting
will be borne by the Company.
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth information, as of December 1, 1997
regarding the ownership of the Company's Common Stock by each person known to
the Company to be the beneficial owner of more than five percent (5%) of the
Company's Common Stock.
<TABLE>
<CAPTION>
==========================================================================================================================
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNER CLASS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Dov Amir 2, 536,547 shares 7.55%
Chairman of the Board of Directors and (1)
Chief Executive Officer
10350 Santa Monica Blvd, Suite 250
Los Angeles, CA 90025 (4)
- --------------------------------------------------------------------------------------------------------------------------
Louis W. Erlich 2,072,245 6.14%
Vice Chairman of the Board of Directors (4) (2)
- --------------------------------------------------------------------------------------------------------------------------
David F. Lincoln 2,570,000 shares 7.62%
435 Devon Park Drive, Suite 410 (2)
Wayne, Pennsylvania 19087
==========================================================================================================================
</TABLE>
(1) The stock ownership of Mr. Amir includes: 2,385,817 shares owned directly;
730 shares owned by the Amir Family Trust, dated May 13, 1991; 150,000
shares which are subject to acquisition pursuant to an option to purchase
such shares on or before January 6, 2000 at $.25 per share.
(2) The stock ownership of Mr. Erlich includes: 1,919,055 shares owned
directly, 3,190 shares owned by his wife; 150,000 shares which are subject
to acquisition pursuant to an option to purchase such shares on or before
January 6, 2000 at $.25 per share.
(3) The stock ownership of Mr. Lincoln consists of 1,820,000 shares and
warrants for 750,000 shares at $.35 which expire October 1, 2001. Mr.
Lincoln is Vice Chairman of the Board of Directors and a Vice President of
the Company. Formerly, Mr. Lincoln was the Chairman of the Board and Chief
Executive Officer of Deven Resources, Inc. Mr. Lincoln is also a managing
director of EnerTech Capital Partners, a venture capital firm.
(4) The address of both Mr. Amir and Mr. Erlich is: 10350 Santa Monica
Boulevard, Suite 290, Los Angeles, California 90025.
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the shares of Common Stock of the
Company beneficially owned as of the Record Date by each officer and director of
the Company and by officers and directors as a group:
<TABLE>
<CAPTION>
===========================================================================================================================
CLASS OF NAME, AGE AND POSITION AMOUNT OF PERCENT
STOCK WITH THE COMPANY BENEFICIAL OF CLASS
OWNERSHIP (%)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Gary J. Novinskie (47) 1,077,233 shares (2)
Director, President and Chief Operating Officer (1)
- ---------------------------------------------------------------------------------------------------------------------------
Common Dov Amir (73) 2,536,547 shares 7.55%
Chairman of the Board of Directors and Chief Executive Officer (3)
- ---------------------------------------------------------------------------------------------------------------------------
Common Louis W. Erlich (84) 2,072,245 shares 6.14%
Vice Chairman of the Board of Directors (4)
- ---------------------------------------------------------------------------------------------------------------------------
Common David F. Lincoln (41) 2,570,000 shares 7.62%
Vice Chairman of the Board of Directors and Vice President (5)
- ---------------------------------------------------------------------------------------------------------------------------
Common C. Warren Trainor (52) 305,000 (2)
Director shares
(6)
- ---------------------------------------------------------------------------------------------------------------------------
Common All Directors and Officers of the Company as a Group 9,001,025 21.71%
shares
(7)
===========================================================================================================================
</TABLE>
(1) The stock ownership of Mr. Novinskie includes: warrants to purchase 200,000
shares of Daleco Common Stock on or before October 1, 2001 at $.35 per
share; 800,000 options to purchase shares of Daleco Common Stock on or
before November 12, 2002 at $.21875 per share; plus 77.235 shares owned
directly.
(2) Percentages less than one percent are not indicated. In calculating the
holder's percentage ownership, the shares of Common Stock subject to
options and warrants are deemed to be outstanding.
(3) See Footnote No. 1 to "PRINCIPAL HOLDERS OF VOTING SECURITIES".
(4) See Footnote No. 2 to "PRINCIPAL HOLDERS OF VOTING SECURITIES".
(5) See Footnote No. 3 to "PRINCIPAL HOLDERS OF VOTING SECURITIES".
(6) Mr. Trainor's stock ownership consists of 5,000 shares owned by him
directly and 300,000 options to purchase shares of Daleco Common Stock on
or before November 12, 2002 at $.21875 per share. The options are held by
FRW, LLC, a limited liability company of which Mr. Trainor is a member. Mr.
Trainor is a one-third member, and disclaims beneficial ownership of these
options.
(7) This group consists of 9 persons.
<PAGE>
REVERSE STOCK SPLIT
REQUIRED VOTE
The shares represented by the enclosed proxy will be voted at the
meeting as directed. If no choice is specified in the proxy, the shares
represented by the enclosed proxy will be voted "FOR" the Reverse Stock Split.
The Board of Directors recommends that the stockholders vote "FOR" the Reverse
Stock Split.
GENERAL
The Board of Directors has approved an Amendment to the Certificate of
Incorporation of the Company to effect a Reverse Stock Split and to reduce the
number of shares of Common Stock and Preferred Stock which the Company may
issue. The complete text of the Certificate of Amendment which reflects the
Amendment is set forth in Appendix A, however, such text is subject to change to
the extent required by the Delaware Secretary of State. After approval of a
majority of the stockholders entitled to vote at the annual meeting and upon
filing of the Certificate of Amendment with the Delaware Secretary of State, the
Reverse Stock Split will be effective, and each certificate representing shares
of Common Stock outstanding immediately prior to the Reverse Stock Split ("Old
Shares") will be deemed automatically and without any action on the part of the
stockholders to represent one-tenth the number of shares of Common Stock, $.01
par value per share, after the Reverse Stock Split ("New Shares"); provided,
however, that no fractional New Shares will be issued as a result of the Reverse
Stock Split. In lieu thereof, each stockholder whose Old Shares are not evenly
divisible by ten will receive cash equal to the average of the closing bid and
ask prices for Old Shares for the five successive trading days immediately
preceding the Effective Date for the fractional New Share that such stockholder
would otherwise be entitled to receive as a result of the Reverse Stock Split.
After the Reverse Stock Split becomes effective, stockholders will be asked to
surrender certificates representing Old Shares in accordance with the procedures
set forth in a letter of transmittal to be sent by the Company. Upon such
surrender, a certificate representing the New Shares will be issued and
forwarded (together with any payment in lieu of fractional shares) to the
stockholders, however, each certificate representing Old Shares will continue to
be valid and represent New Shares equal to one-tenth the number of Old Shares
until surrendered. The Common Stock issued pursuant to the Reverse Stock Split
will be fully paid and nonassessable. In addition, the Company is presently
authorized to issue up to 100,000,000 shares of stock, of which 50,000,000
shares are Common Stock, and 50,000,000 shares are Preferred Stock. The
Amendment will reduce the number of shares of capital stock authorized by the
Certificate of Incorporation to 30,000,000 shares, of which 20,000,000 shares
will be Common Stock, and 10,000,000 will be Preferred Stock. Although a ten for
one reverse split of the authorized stock of the Company would have reduced the
authorized Common Stock and preferred stock to 5,000,000 shares each, and thus
only 1,626,742 shares of Common Stock authorized and unissued (after giving
effect to the reserve of 596,470 shares for the outstanding options and
warrants), the Company believes that it would be in its best interest to have an
additional 15,000,000 shares of Common Stock and 5,000,000 of preferred stock
authorized with which to raise capital or to acquire additional assets without
having to convene a special meeting to authorize further amendment of the
Company's Certificate of Incorporation to authorize additional shares of stock
The voting and other rights that presently characterize the Old Shares of Common
Stock will not be altered by the Amendment.
The Amendment will be effected by means of filing the Certificate of
Amendment with the Delaware Secretary of State. The effective date ("Effective
Date") of the Reverse Stock Split shall be the date of the annual meeting. The
Certificate of Amendment will be filed with the Secretary of State effective as
of the Effective Date. Without any further action on the part of the Company or
the stockholders, after the Reverse Stock Split, a certificate representing Old
Shares will be deemed to represent one-tenth the number of New Shares.
Pursuant to the Delaware General Corporation Law, the Company's
stockholders are not entitled to dissenters' rights of appraisal with respect to
the Amendment.
REASONS FOR THE AMENDMENT
The Board of Directors believes the Amendment is desirable for several
reasons. The National Association of Securities Dealers Automated Quotation
Stock Market ("NASDAQ") has announced changes to its Small Cap Market listing
requirements which are to be effective February 23, 1998, which includes:
500,000 shares in the public float, a market value of the public float in excess
of $1,000,000, more than two market makers, 300 holders of 100 shares or
<PAGE>
more, and a minimum bid price of $1.00. According to the NASDAQ's new
requirements, the new price requirement will provide a safeguard against certain
market activity associated with low-priced securities, and will enhance the
credibility of the market. The bid price for the Common Stock of the Company has
over the past year been below $1.00 primarily due to the conversion of the
Company's Regulation S Debentures into Common Stock which substantially diluted
the price of the stock. Prior to the first quarter of Fiscal 1997, the Company's
Common Stock customarily traded in or above the $1.00 range. The Reverse Stock
Split is intended to help the Company meet the $1.00 minimum bid price standard
for the NASDAQ Small Cap Market. The Company believes that it already meets the
other requirements for listing on the NASDAQ Small Cap Market, such as more than
two market makers (the Company has over five) and more than 300 shareholders
holding 100 shares or more, more than 500,000 share in the public float (after
giving effect to the Reverse Stock Split), and a market value of the public
float in excess of $1,000,000. The proposed Reverse Stock Split would not affect
the Company's ability to meet any of these criteria and would allow the Company
to meet the $1.00 per share bid price criteria which it presently does not.
There can be no assurance that any or all of these effects will occur,
including, without limitation, that the market price per New Share of Common
Stock after the Reverse Stock Split will be ten times the market price per Old
Share of Common Stock before the Reverse Stock Split, or that such price will
either exceed or remain in excess of the $1.00 minimum bid price as required by
NASDAQ.
The Reverse Stock Split also should enhance the acceptability of the
Common Stock by the financial community and investing public. The reduction in
the number of shares of Common Stock outstanding caused by the Reverse Stock
Split presumably will increase the per share market price for the Common Stock.
Theoretically, the number of shares outstanding should not, by itself, affect
the marketability of the stock, the type of investor who acquires it, or the
Company's reputation in the financial community, but in practice this is not
necessarily the case, as many investors look upon a stock trading below $1.00 as
unduly speculative in nature and, as a matter of policy, avoid investment in
such stocks. In addition, many leading brokerage firms are reluctant to
recommend lower-priced securities to their clients and a variety of brokerage
house policies and practices currently tend to discourage individual brokers
within firms from dealing in lower-priced stocks. Some of those policies and
practices pertain to the payment of brokers' commissions and to time-consuming
procedures that function to make the handling of lower-priced stocks
unattractive to brokers from an economic standpoint. In addition, the structure
of trading commissions tends to have an adverse impact upon holders of
lower-priced stocks because the brokerage commission on a sale of a lower-
priced stock generally represents a higher percentage of the sales price than
the commission on a relatively higher-priced issue.
Although there can be no assurance that the price of the Company's
shares after the Reverse Stock Split will actually increase in an amount
proportionate to the decrease in the number of outstanding shares, the Reverse
Stock Split is intended to result in a price level for the Common Stock that
will reduce the effect of the above described policies and practices, broaden
investor interest and provide a market that will more closely reflect the
Company's underlying values. The increased value of the stock will enable the
Company to utilize the stock for the acquisition of favorable prospects. The
increased value will give greater value to any seller of assets and enable the
Company to compete for better prospects in the market place without the need to
fund the acquisition of such prospects through other conventional or
unconventional means.
Further, there is no assurance that the market for the Common Stock
will be improved. Stockholders should note that the Board of Directors cannot
predict what effect the Reverse Stock Split will have on the market price of the
Common Stock.
PRINCIPAL EFFECTS OF THE AMENDMENT
There were approximately 1,247 stockholders of record(1) of the Company
on the record date and the Reverse Stock Split is not expected to cause the
number of stockholders of record holding 100 shares or more to fall below 300.
The Company has no plans for the cancellation or purchase of its shares from
individuals holding a nominal number of such shares after the Reverse Stock
Split Effective Date or to de-register the Common Stock. The Common Stock is
currently registered under 12(b) of the Securities and Exchange Act of 1934 ("34
Act") and, as a result, the Company is subject to the periodic reporting
- --------
1 This number of stockholders does not necessarily include each
stockholder whose accounts are held in "street name." It is customary that
"street accounts" be consolidated into one or more accounts on the stock
register of the Company.
<PAGE>
and other requirements of the '34 Act. The Reverse Stock Split will not effect
the registration of the Common Stock under the '34 Act. After the
Effective Date, trades of the New Shares will continue to be reported on the
NASDAQ Small Cap Market under the symbol "DLOV" for so long as the Company meets
the NASDAQ requirements (See, "REASONS FOR THE AMENDMENT").
The principal effects of the Amendment will be:
1. Based upon 27,767,880 Old Shares outstanding as of December 1, 1997, the
Reverse Stock Split will decrease the outstanding shares of Common Stock by
approximately 90%, and thereafter approximately 2,776,788 New Shares will
be outstanding. The Reverse Stock Split will not affect any stockholder's
proportionate equity interest in the Company, subject to the provisions for
the elimination of fractional shares as described herein.
2. The Company is presently authorized under its Certificate of Incorporation
to issue up to 50,000,000 shares of Common Stock and 50,000,000 shares of
Preferred Stock. The Amendment reduces the authorized Common Stock to
20,000,000 shares and the authorized Preferred Stock to 10,000,000 shares.
After the Reverse Stock Split, the Common Stock issued and outstanding will
represent approximately 13.88% of the Company's authorized Common Stock
whereas the Old Shares represented approximately 55.53% of the authorized
Common Stock. There are 160,000 shares of Preferred Stock outstanding.
After the Reverse Stock Split, approximately 16,626,742 shares of Common
Stock and 9,984,000 shares of Preferred Stock will be available for future
issuance by the Board of Directors without further action by the
stockholders.
3. On December 1, 1997, the closing bid price of the Common Stock on NASDAQ
was $.1875 per share. By decreasing the number of shares of Common Stock
outstanding without altering the aggregate economic interest in the Company
represented by such shares, the Board of Directors believes that the
trading price will increase to a price that will meet the NASDAQ criteria
for continued listing on the Small Cap Market system and more appropriate
for a publicly-traded security. However, the actual conversion price will
be the price on the Effective Date, which cannot be predicted at this time.
Management believes that the price on the Effective Date should be higher
than the price on December 1, 1997.
4. As of December 1, 1997, there were outstanding options to purchase an
aggregate of shares of Common Stock with per share exercise prices ranging
from $.2188 to $.35 and warrants to purchase an aggregate of shares of
Common Stock with per share exercise prices ranging from $.4386 to $1.081.
All of the outstanding warrants and options include provisions for downward
adjustment in the number of shares covered thereby and a corresponding
proportional increase in the exercise price thereof, in the event of a
Reverse Stock Split. Each outstanding warrant/option after the Reverse
Stock Split will evidence the right to purchase one-tenth of the shares of
Common Stock previously covered thereby, and the exercise price per share
will be ten times the previous exercise price. After the Reverse Stock
Split there will be reserved for issuance upon exercise of outstanding
options and warrants approximately 596,470 shares of Common Stock.
5. The holders of shares of the Common Stock are entitled to receive
distributions of cash or other property, if any, that may be declared from
time to time by the Board of Directors in its discretion from funds legally
available therefor, subject to the dividend priority of the holders of
Preferred Stock of the Company, if any. Although the Reverse Stock Split
will have an immediate effect on the Company's capital in excess of par
value, the Reverse Stock Split and its impact on capital in excess of par
value will not affect distributions to the Company's stockholders. The
Company has never paid cash dividends on the Common Stock and has no plans
to pay cash dividends in the foreseeable future. The current policy of the
Board of Directors is to retain all available earnings for use in the
operation and expansion of the Company's business. Any future dividends
will depend upon the Company's earnings, capital requirements, financial
condition and other relevant factors.
EXCHANGE OF STOCK CERTIFICATES
As soon as practicable after the Effective Date, assuming approval of
the Reverse Stock Split by the stockholders, the Company will send a letter of
transmittal to each holder of record of Old Shares outstanding on the Effective
Date. The letter of transmittal will contain instructions for the surrender of
certificate(s) representing such Old Shares. Upon proper completion and
execution of the letter of transmittal and return thereof, together with the
<PAGE>
certificate(s) representing Old Shares, a stockholder will be entitled
to receive a certificate representing the number of New Shares into which his
Old Shares have been reclassified as a result of the Reverse Stock Split.
STOCKHOLDERS SHOULD NOT SUBMIT ANY CERTIFICATES UNTIL REQUESTED TO DO SO. No new
certificate will be issued to a stockholder until he/she has surrendered his/her
outstanding certificate(s) together with the properly completed and executed
letter of transmittal. Until so surrendered, each current certificate
representing Old Shares will be deemed for all corporate purposes after the
Effective Date to evidence ownership of New Shares in the appropriately reduced
number.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material federal income tax
consequences of the proposed Reverse Stock Split. This summary does not purport
to be complete and does not address the tax consequences to holders that are
subject to special tax rules, such as banks, insurance companies, regulated
investment companies, personal holding companies, foreign entities, nonresident
foreign individuals, broker-dealers and tax-exempt entities. This summary is
based on the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
regulations and proposed regulations, court decisions and current administrative
rulings and pronouncements of the Internal Revenue Service ("IRS"), all of which
are subject to change, possibly with retroactive effect, and assumes that the
New Shares of Common Stock will be held as a "capital asset" as defined in the
Code. Holders of Old Shares of Common Stock are advised to consult their own tax
advisers regarding the federal income tax consequences of the Reverse Stock
Split in light of their personal circumstances and the consequences under state,
local and foreign tax laws.
1. The Reverse Stock Split will qualify as a recapitalization described in
Section 386(a)(1)(E) of the Code.
2. No gain or loss will be recognized by the Company in connection with the
Reverse Stock Split.
3. No gain or loss will be recognized by a stockholder who exchanges all of
his Old Shares of Common Stock solely for New Shares of Common Stock,
except to the extent of any cash received in lieu of a fractional share.
4. The aggregate basis of the New Shares of Common Stock to be received in the
Reverse Stock Split (including any fractional share deemed received) will
be the same as the aggregate basis of the Old Shares of Common Stock
surrendered in exchange therefor.
5. The holding period of the New Shares of Common Stock to be received in the
Reverse Stock Split (including any fractional share deemed received) will
include the holding period of the Old Shares of Common Stock surrendered in
exchange therefor.
6. A holder of Common Stock receiving cash in lieu of a fractional share will
be treated as receiving the payment in connection with a redemption of the
fractional share, with the tax consequences of the redemption determined
under Section 302 of the Code. As such, a holder of Common Stock will
generally recognize gain or loss upon such payment equal to the difference,
if any, between such stockholder's basis in the fractional share (as
described in 4. above) and the amount of cash received. Such gain or loss
will be capital gain or loss and will be long-term capital gain loss if the
stockholder's holding period (as described in 5. above) exceeds one year. A
holder of Common Stock receiving cash in lieu of a fractional share may be
subject to dividend treatment on such payment if the redemption of the
fractional share is "essentially equivalent to a dividend" under Section
302 of the Code. However, based on a published IRS ruling, dividend
treatment is unlikely if, taking into account the constructive ownership
rules set forth in Section 318 of the Code, (a) the stockholder's relative
stock interest in the Company is minimal, (b) the stockholder exercises no
control over the Company's affairs and (c) there is a reduction in the
stockholder's proportionate interest in the Company.
THE FOREGOING SUMMARY IS INCLUDED FOR GENERAL INFORMATION ONLY. ACCORDINGLY,
EACH HOLDER OF COMMON STOCK OF THE COMPANY IS URGED TO CONSULT WITH THEIR OWN
TAX ADVISER WITH RESPECT TO THE TAX CONSEQUENCES OF THE PROPOSED REVERSE STOCK
SPLIT, INCLUDING THE APPLICATION AND EFFECT OF THE LAWS OF ANY STATE, MUNICIPAL,
FOREIGN OR OTHER TAXING JURISDICTION.
<PAGE>
NON-QUALIFIED STOCK OPERATION PLAN
REQUIRED VOTE
The shares represented by the enclosed proxy will be noted at the
meeting as directed. If no choice is specified in the proxy, the shares
represented by the enclosed proxy will be voted "FOR" approval of the
Non-Qualified Stock Option Plan. The Board of Directors recommends that the
Stockholders vote "FOR" the Non-Qualified Stock Option Plan.
GENERAL
The Board of Directors of the Company believes that it is in the best
interest of the Company to enhance the Company's ability to secure and retain
qualified key officers and outside Directors by affording them the opportunity
to participate in the growth of the Company. There are presently six Directors
of the Company of which two are outside Directors, that is Directors who are
not employed by the Company, and there are two key officers who would be
covered by this Plan. The proposed Non-Qualified Stock Option Plan ("Plan"), (a
copy of which is attached hereto as Appendix "B") was approved by the Board of
Directors on August 11, 1997 and requires approval by the shareholders of the
Company. The Plan provides generally, that 3,000,000 shares (prior to giving
consideration to a reverse stock split), if any, of Common Stock will be set
aside for issuance to outside Directors and key officers of the Company. The
Plan provides for the options to become fully vested in the grantee over a
period of four (4) years, with one-quarter (1/4) of the option vesting on each
of the four consecutive anniversary dates of the granting of the option. The
option will become fully vested should the Company be acquired by any other
entity.
The exercise price of each option is the closing bid price for the
Common Stock the day preceding the date of award of the option.
The Plan shall terminate and no further grants may be made on the day
following the annual meeting of shareholders in the year 2000.
Although the Plan contains accelerated vesting should the Company be
acquired, the Company does not view these provisions as being an anti-takeover
device. While the Plan, as a whole, could be looked at as a potential device to
thwart a hostile takeover, the Board of Directors has not adopted or considered
the Plan, and the issuance of options thereunder, to be a tool by which to
frustrate a takeover of the Company. (See, "ANTI-TAKEOVER PROVISIONS.")
ELECTION OF DIRECTORS
The current Board of Directors consists of six (6) directors who were
elected to serve for a period of one (1) year or until their successors are
elected and qualified. The directors elected at the Annual Meeting and who
qualify to serve will serve until their successors can be elected at the Annual
Meeting to be held in 1999.
Required Vote
The shares represented by the enclosed proxy will be voted at the
meeting as directed. If no choice is specified in the proxy, the shares
represented by the enclosed proxy will be voted "FOR" the election of the
nominees listed below. All of the nominees are now members of the Board of
Directors. If any nominee becomes unavailable for any reason or if another
vacancy should occur before the election (which events are not anticipated), the
shares represented by the enclosed proxy may be voted by the holders of such
proxy in their sole discretion. The Board of Directors recommends that the
Stockholders vote "FOR" the nominees.
Nominees
Each member of the Board of Directors currently in office shall be a
nominee for the Directors of the Company at the Annual Meeting. For information
regarding the number of shares of the Company's stock beneficially owned by each
nominee, (See "SECURITY OWNERSHIP OF MANAGEMENT" above.) Set forth below is
certain information about each of the persons nominated to be Directors
<PAGE>
of the Company including the name, age, principal occupation, business
experience and length of service as a Director of the Company:
Business Experience
Dov Amir (73)
Mr. Amir is the Chairman of the Board of Directors and Chief Executive
Officer of the Company. Mr. Amir has been an officer and director of the Company
since 1977, having previously held the position of President and Director. Mr.
Amir is the Vice President and Director of Haly Corporation. Prior to joining
the Company, Mr. Amir was involved in the development of natural resources and
economic development projects in the United States, Africa, South America and
Europe both in the capacity of a corporate executive and as a consultant. Mr.
Amir holds a B.S.C. degree in Petroleum Engineering, Cum Laude and M.S.C. degree
in Petroleum Engineering and Economics from the University of Southern
California as well as post graduate courses in management and finance at USC and
UCLA.
Louis W. Erlich (84)
Mr. Erlich is a Vice Chairman of the Board of Directors. Mr. Erlich has
been a director of the Company since 1977, having previously held the positions
of Chairman of the Board of Directors and Vice President. Mr. Erlich is the
President and a Director of Haly Corporation. Mr. Erlich has been involved in
exploration and development of natural resources in United States and Mexico
since 1938, both as a corporate executive and private entrepreneur. Mr. Erlich
is a graduate of the University of California at Los Angeles.
Gary J. Novinskie (47)
Mr. Novinskie is a Director, President and Chief Operating Officer of
the Company. Mr. Novinskie was previously the Chief Operating Officer of Deven
Resources, Inc. and assumed his new duties with the Company in October 1996.
Prior to his employment with Deven Resources, Inc. Mr. Novinskie was a Vice
President of Broad Street Financial Company, a privately held holding company in
Columbus, Ohio for four (4) years. Mr. Novinskie also served as the President of
Omni Exploration, Inc., a public oil and gas company for seven (7) years. Mr.
Novinskie holds a B.S. from Penn State University in Petroleum and National Gas
Engineering, and an M.B.A from Case Western Reserve University, majoring in
Banking and Financing.
David F. Lincoln (41)
Mr. Lincoln is a Vice Chairman of the Board of Directors and Vice
President of the Company. Mr. Lincoln is a Managing Director with EnerTech
Capital Partners, a venture capital firm specializing in technologies and
services associated with utilities and energy related industries. Prior to
assuming his duties with the Company in October, 1996, Mr. Lincoln was the
President, Chief Executive Officer and Chairman of the Board of Directors of
Deven Resources, Inc. Prior to forming Deven Resources in 1991, Mr. Lincoln was
a Principal/Partner with CMS Companies, a Philadelphia-based private investment
bank and financial services firm. Mr. Lincoln holds a B.A. with Honors in
Geology from Colgate University and a M.S. in Energy Management and Policy from
the University of Pennsylvania.
Eberhard Mueller (61)
Mr. Mueller has been a director of the Company since October 1995. Mr.
Mueller is the President and Director of Regent Ventures, Ltd. and a Director of
Montaro Resources, Inc., both of which are engaged in mining exploration in
Canada.
<PAGE>
C. Warren Trainor (52)
Mr. Trainor was appointed as a Director in October 1996. As a partner
with the law firm of Ehmann, Van Denbergh & Trainor, P.C., located in
Philadelphia, Pennsylvania, concentrating in Business and Oil and Gas Law, Mr.
Trainor is general counsel to the Company. Previously, Mr. Trainor served as a
Director of Deven Resources, Inc. Also, Mr. Trainor previously served as a Vice
President and General Counsel for Omni Exploration, Inc. Presently, Mr. Trainor
serves on the Board of Directors of North American Medical Centers, Inc. Mr.
Trainor has a B.S. from the United States Military Academy in 1967 and a J.D.
from Villanova University Law School in 1972.
Committees of the Board of Directors
Audit Committee: The following persons have been appointed to serve on
the Audit Committee:
Gary J. Novinskie
Eberhard Mueller
C. Warren Trainor
There has been one meeting of the Audit Committee at which the
Company's accountants for fiscal 1997 were recommended for consideration of the
Board of Directors and the Audited Financial Statements for Fiscal Year 1997
were reviewed with the Company's accountants Miller and Company. The Audit
Committee's responsibilities include; reviewing and reporting to the Board of
Directors on the appropriateness of the Company's accounting policies, the
adequacy of financial controls and the reliability of the Company's financial
information reported to the public; recommending independent accountants for
appointment by the Board; reviewing and approving audit plans, reviewing and
approving the Company's annual report on Form 10-K or 10-KSB, as appropriate;
and advising the Board concerning the work of the Company's independent
accountants.
Compensation Committee: The following persons have been appointed to
serve on the Compensation Committee:
Louis Erlich
David F. Lincoln
C. Warren Trainor
Since its formation, there has been one meeting of the Compensation
Committee. The Compensation Committee's responsibilities include the
recommendation to the Board of Directors on the salaries and other compensation
appropriate for the officers of the Company.
Executive Committee: The following persons have been appointed to serve
on the Executive Committee:
Dov Amir
Gary J. Novinskie
David F. Lincoln
There have been four (4) meetings of the Executive Committee since its
formation. The function of the Committee is to exercise the authority of the
Board of Directors in the management of the business of the Company between
regular meetings of the Board of Directors.
Meetings of the Board of Directors
During the Company's fiscal year ended September 30, 1997, the Company
held six (6) meetings of the Board of Directors. Each director attended at least
75% of the meetings.
<PAGE>
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
===========================================================================================================
NAME AND AGE OFFICE HELD
- -----------------------------------------------------------------------------------------------------------
<S> <C>
Dov Amir (73) Chairman of the Board and Chief Executive Officer (1)
- -----------------------------------------------------------------------------------------------------------
Gary J. Novinskie (47) President and Chief Operating Officer and Director (1)
- -----------------------------------------------------------------------------------------------------------
Louis W. Erlich (84) Vice Chairman of the Board of Directors (1)
- -----------------------------------------------------------------------------------------------------------
David F. Lincoln (41) Vice Chairman of the Board of Directors and Vice President (1)
- -----------------------------------------------------------------------------------------------------------
Edward J. Furman (43) Treasurer
- -----------------------------------------------------------------------------------------------------------
Maria L. Woodward (32) Secretary
- -----------------------------------------------------------------------------------------------------------
Jody Spencer (53) Assistant Secretary
===========================================================================================================
</TABLE>
(1) See "SECURITY OWNERSHIP OF MANAGEMENT" and "ELECTION OF DIRECTORS" for
positions held and experience.
<PAGE>
EXECUTIVE COMPENSATION
For the period ending September 30, 1997 the Company had six (6)
full-time employees. The following table sets forth the compensation paid its
three (3) highest paid officers for the past three (3) years.
<TABLE>
<CAPTION>
Summary Compensation Table
- ------------------------------------------------------------------------------------------------------------------------------------
Long Term Compensations
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Compensation Awards Payouts
- ------------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Securities
Principal Other Annual Restricted Underlying LTIP Payouts All other
Position Year Salary Bonus Compensation Stock Award(s) Options/SARs ($) Compensation
($) ($) ($) ($) (#) ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dov Amir 1994 96,000 0 10,965 0 0 0 0
President
- ------------------------------------------------------------------------------------------------------------------------------------
Dov Amir 1995 96,000 0 11,100 0 0 0 0
President
- ------------------------------------------------------------------------------------------------------------------------------------
Dov Amir 1996 96,000 0 14,100 0 0 0 0
President
- ------------------------------------------------------------------------------------------------------------------------------------
Dov Amir 1997 99,000 0 14,100 0 0 0 0
President
- ------------------------------------------------------------------------------------------------------------------------------------
Louis Erlich 1994 96,000 0 10,965 0 0 0 0
Chairman of the
Board and Vice
President
- ------------------------------------------------------------------------------------------------------------------------------------
Louis Erlich 1995 96,000 0 11,100 0 0 0 0
Chairman of the
Board and Vice
President
- ------------------------------------------------------------------------------------------------------------------------------------
Louis Erlich 1996 96,000 0 14,100 0 0 0 0
Chairman of the
Board and Vice
President
- ------------------------------------------------------------------------------------------------------------------------------------
Louis Erlich 1997 99,000 0 14,100 0 0 0 0
Chairman of the
Board and Vice
President
- ------------------------------------------------------------------------------------------------------------------------------------
Gary J. 1997 100,000 0 0 0 800,000 0 0
Novinskie
President
====================================================================================================================================
</TABLE>
1. As of March 1, 1997, the Company's management agreement with Haly
Corporation was terminated, with Messrs. Amir and Erlich becoming employees
of Daleco. All accounting and other functions of the Company relating
to its management were relocated to the Company's office in Wayne,
Pennsylvania from Haly's offices in California. Messrs. Amir and Erlich's
offices remain, however, in California. Mr. Amir and Erlich are reported as
if they had been employees of Daleco for the entirety of Fiscal 1997.
2. Mr. Erlich resigned as an officer of the Company as of January 1, 1998.
<PAGE>
COMPENSATION OF DIRECTORS
On December 6, 1996, the Board of Directors unanimously voted to
abolish fees for Directors, but agreed to reimburse Directors for travel and
lodging, if any, actually incurred by a Director in conjunction with his
attendance at a meeting of the Board. In Fiscal 1997, the Company incurred
$833.74 of costs, reimbursable to Directors, in connection with Directors
attendance at Board Meetings.
Historically, the Company has incurred, but not paid, Directors fees of
$10,989 in Fiscal 1996, $10,905 in Fiscal 1995 and $11,071 in Fiscal 1994.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors has selected the accounting firm of Miller &
Company to be the Company's accountants to audit the books and records of the
Company and its subsidiaries for the 1998 fiscal year. This firm audited the
books and records of the Company for Fiscal 1997. The Board of Directors
recommends the selection of Miller & Company as the Company's accountants for
the fiscal year ending September 30, 1998. Miller & Company has no material
relationship with the Company and is considered well qualified.
As a result of the Company's re-domestication from Canada, to Delaware
effective as of October 1, 1996, it was necessary for the Company to obtain a
United States auditor. While the Company had a good relationship with its
Canadian auditors, it was felt by the Company that it would be more beneficial
for the Company to employ a smaller accounting firm from which it would receive
more personal and prompt service than it would at one of the big four accounting
firms, primarily due to the Company's size. With this in mind, the Company
selected Miller & Company who have a historical relationship and familiarity
with the Company through Haly Corporation for whom Miller & Company has acted as
auditors for over 15 years.
The Board of Directors recommends a vote "FOR" the proposal to ratify
the selection of Miller & Company as the Company's independent certified public
accountants.
A representative of Miller & Company, the Company's accountants for
Fiscal 1997 is expected to be present at the Annual Meeting.
ANTI-TAKEOVER
The Board of Directors has not adopted any anti-takeover amendments,
but reserves the right to do so. There are presently 49,840,000 shares of
preferred stock, par value $.01, authorized but unissued, and approximately
16,267,415 shares of Common Stock, par value $.01, available, after giving
effect to reserves for the exercise of all warrants and options unissued and
which could be utilized by existing management, which presently holds 19.62% of
all of the issued and outstanding Common Stock (See "Principal Holders of Voting
Securities" and "Security Ownership of Management"), as an anti-takeover device.
Issuance of options under the Non-Qualified Stock Option Plan might also be
considered an anti-takeover device, but it is not intended to be so. (For a list
of outstanding warrants and options see the Annual Report which accompanies this
Proxy Statement.) Likewise, the Company could frustrate a takeover by the sale
of a large block of capital stock through a private placement with a friendly
third party sympathetic to management or the creation of a "poison pill" by
which capital stock would be issued to existing management or the shareholders
as a special dividend. The acceleration of the vesting of the options under the
Non-Qualified Stock Option Plan is not intended to be a "poison pill" defense.
Rather, it is a means by which the recipients would be rewarded for their
efforts and labors on behalf of the Company. The vesting provisions of the
Non-Qualified Stock Option Plan was a means by which to Board of Directors
wanted to entice the recipients to remain with the Company to insure growth and
prosperity. While these are all potential mechanisms which might be considered
by the Board of Directors to frustrate a hostile takeover of the Company, the
Board of Directors has not considered such actions and none has been put into
effect.
Should the shareholders approve the Reverse Stock Split, it would not
concentrate ownership of the Company in any one group of shareholders of the
Company. (See "REVERSE STOCK SPLIT"). As such, the Reverse Stock Split would be
essentially neutral and should not be considered as an anti-takeover device.
<PAGE>
CERTAIN RELATIONSHIP
Mr. C. Warren Trainor, Esquire, is a partner in the firm of Ehmann, Van
Denbergh & Trainor, P.C., which acts as general counsel to the Company. In
Fiscal 1997, the Company paid Ehmann, Van Denbergh & Trainor, P.C. the amount of
$182,053.80 for legal services and reimbursement of costs and incurred.
Additional charges of $113,732.11 remain unpaid as of September 30, 1997 for
services rendered and the reimbursement of costs.
OTHER MATTERS
The Board of Directors knows of no other matter to be brought before
the Annual Meet of the Stockholders. Should any other matter be properly issued
at the meeting, however, it is the intention of each of the persons named in the
proxy to vote in accordance with his judgment as to each such matter raised.
INCORPORATION BY REFERENCE
The Company incorporates herein by reference the audited financial
statements of the Company as set forth in the Annual Report distributed to each
shareholder with this Proxy Statement.
EXPENSES OF SOLICITATION
The expenses associated with the preparation, assembling, printing and
mailing of the Notice of Annual Meeting, Proxy Statement and Proxy will be borne
by the Company.
Dated: __________, 199_ By Order of the Board of Directors
___________________________________
Gary J. Novinskie, President
<PAGE>
APPENDIX A
CERTIFICATE OF AMENDMENT TO
THE CERTIFICATE OF INCORPORATION OF
DALECO RESOURCES CORPORATION
DALECO RESOURCES CORPORATION, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
FIRST: That on December 1, 1997, the Board of Directors of the Corporation duly
adopted by unanimous vote in accordance with the provisions of Section 141 of
the Delaware General Corporation Law ("DGCL") proposing and declaring the
following amendment of the Certificate of Incorporation of the Corporation to be
advisable and recommending the adoption of such amendment by the stockholders of
the Corporation.
SECOND: That at a meeting and by majority vote of the stockholders of the
Corporation, the requisite stockholder approval was given to the following
amendment in accordance with the provisions of Section 242 of the DGCL at a
meeting called pursuant to Section 222 of the DGCL.
THIRD: The Certificate of Incorporation of the Corporation is amended by: (i)
deleting paragraph (a) of Article Fourth thereof and replacing in lieu and
instead thereof the following:
"(a) 20,000,000 common shares with a par value of $0.01 per share, the
rights of the holders thereof being equal in all respects including the
rights, among other things:" and
(ii) deleting the first sentence of paragraph (b) Article Fourth thereof, and
replacing in lieu and instead thereof the following:
"(b) 10,000,000 preferred shares with a par value of $0.01 per share
("Preferred Stock")."
Effective as of the close of business on the day of the filing of the
Certificate of Amendment which contains this provision with the Secretary of
State of the State of Delaware, each share of Common Stock, par value $.01 per
share ("Old Common Stock"), issued at such time shall be and hereby is
automatically reclassified and changed into one-tenth of one share of Common
Stock, par value $.01 per share ("New Common Stock"), without any action by the
holder thereof, provided that no fractional shares shall be issued pursuant to
such reclassification and change. Effective as of the close of business on the
day of the filing of the Certificate of Amendment which contains this provision
with the Secretary of State of the State of Delaware, each certificate
outstanding and previously representing shares of Old Common Stock shall, until
surrendered and exchanged, be deemed, for all corporate purposes, to constitute
and represent the number of whole shares of New Common Stock of the Corporation
into which the outstanding shares of Old Common Stock previously represented by
such certificate were converted by virtue of the reverse stock split.
FOURTH: That the amendment was duly adopted in accordance with the provisions of
Sections 242 of the DGCL.
FIFTH: This Certificate of Amendment shall become effective as of the date of
the annual meeting or such other date as specified at the time of filing in the
office of the Secretary of State of the State of Delaware.
<PAGE>
Appendix B
NON-QUALIFIED STOCK OPTION PLAN OF
DALECO RESOURCES CORPORATION
DALECO RESOURCES CORPORATION, a corporation organized under
the laws of the State of Delaware, hereby adopts this Non-Qualified Stock Option
Plan (the "Plan" as defined below). The Plan provides for the grant of
non-qualified stock options to participants and will be submitted for the
approval of the Company's stockholders at the first annual meeting of
shareholders after the date of the Plan's initial adoption by the Board and the
Plan will become effective subject to obtaining such approval.
1. DEFINITIONS
Whenever the following terms are used in this Plan, they shall
have the meanings specified below unless the context clearly indicates to the
contrary.
1.1 "Company" shall mean Daleco Resources Corporation.
1.2 "Affiliate" shall mean any corporation in which the
Company owns, directly or indirectly, twenty-five percent or more of the voting
stock.
1.3 "Board" shall mean the Board of Directors of the Company.
1.4 "Committee" shall mean the committee which has been
appointed to administer the Plan under the provisions of Section 2 of the Plan;
if no committee has been formed, it shall mean the Board.
1.5 "Participant" shall mean a person to whom an option is
awarded.
1.6 "Option" shall mean an option granted under the provisions
of Section 4 of the Plan to purchase Common Stock, par value $.01 per share, of
the Company.
1.7 "Optionee" shall mean a Participant to whom an option is
granted.
1.8 "Fair Market Value" shall be the mean of the closing bid
and asked prices of the Company's Common Stock as quoted by the National
Association of Securities Dealers Automated Quotation ("NASDAQ") System for the
date in question. If no closing bid and asked prices are quoted by NASDAQ for
such date, the next preceding date for which such closing prices are quoted
shall be used.
<PAGE>
1.9 "Code" shall mean the Internal Revenue Code, in effect
from time to time. Reference to a specific section of the Code shall include
such section, any valid regulation promulgated thereunder and any comparable
provision of any future legislation amending, supplementing or superseding such
section.
1.10 "Total Disability" shall mean a permanent and total
disability so determined in accordance with Section 72(m)(7) of the Code.
1.11 "Secretary" shall mean the Secretary or Assistant
Secretary of the Company.
1.12 "Plan" shall mean this Non-Qualified Stock Option Plan.
1.13 "Subsidiary" shall mean any corporation in an unbroken
chain of corporations beginning with the Company if each of the corporations
other than the last corporation in the unbroken chain then owns stock possessing
fifty percent or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
2. ADMINISTRATION
2.1 APPOINTMENT OF COMMITTEE The Committee shall consist of at
least one Director, appointed by and holding office at the pleasure of the
Board.
2.2 DUTY AND POWER OF COMMITTEE
It shall be the duty of the Committee to conduct the
general administration of the Plan in accordance with its provisions. The
Committee shall have the power to interpret the Plan, the options and to adopt
rules for the administration, interpretation and application of the Plan as are
consistent therewith and to interpret, amend or revoke any such rules. The
Committee shall not have any discretion to determine who will be granted
Options, or to determine the number of shares subject to any Option granted to
any Optionee or the purchase price thereunder. Moreover, the Committee shall not
have the authority to take any action or make any determination that would
materially increase the benefits accruing to Optionees under the Plan. The
Secretary shall be authorized to implement the Plan in accordance with its terms
and to take such actions of a ministerial nature as shall be necessary to
effectuate the intent and purposes thereof.
<PAGE>
2.3 COMMITTEE ACTIONS
The Committee may act either by vote of a majority of
its members at a meeting or by a memorandum or other written instrument signed
by all members of the Committee.
2.4 COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS
Members of the Committee shall not receive any
compensation for their services as members, but all expenses and liabilities
they incur in connection with the administration of the Plan shall be borne by
the Company. The Committee may, with the approval of the Board, employ
attorneys, consultants, accountants, or other persons. The Committee, the
Company, and its officers and directors shall be entitled to rely upon the
advice, opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee in good faith shall be
final and binding upon all Optionees, the Company and all other interested
persons. No member of the Committee shall be personally liable for any action,
determination, or interpretation made in good faith with respect to the Plan and
all members of the Committee shall be fully protected and indemnified by the
Company in respect to any such action, determination or interpretation.
3. SHARES SUBJECT TO PLAN
3.1 LIMITATIONS
The shares of stock issuable pursuant to Options
shall be shares of the Company's $.01 par value Common Stock ("Shares"). The
total number of such Shares which may be subjected to Options granted under the
Plan shall not exceed 3,000,000 in the aggregate. The Shares deliverable upon
the exercise of Options may be made available from authorized but unissued
Shares or Shares reacquired by the Company, including Shares purchased in the
open market or in private transactions.
3.2 EFFECT OF UNEXERCISED OR CANCELED OPTIONS
If an option expires or is canceled for any reason
without having been fully exercised or vested, the number of Shares subject to
such Option which were not purchased or did not vest prior to such expiration or
cancellation may again be made subject to an Option granted hereunder (to the
same Optionee or to a different Optionee).
<PAGE>
3.3 CHANGES IN COMPANY'S SHARES
In the event that the outstanding shares of common
stock of the Company are hereafter increased or decreased or changed into or
exchanged for a different number or kind of shares or other securities of the
Company, or of another corporation, by reason of reorganization, merger,
consolidation, recapitalization, reclassification, stock split-up, stock
dividend (either in shares of the Company's Common Stock or of another class of
the Company's stock), spin-off or combination of shares, appropriate adjustments
shall be made by the Committee in the aggregate number and kind of shares which
may be issued on exercise of Options.
3.4 CORPORATE TRANSACTIONS
New options may be substituted for the Options
granted under this Plan, or the Company's obligations as to Options outstanding
under this Plan may be assumed, by an employer corporation other than the
Company, or by a parent or subsidiary of such employer corporation, in
connection with any merger, consolidation, acquisition, separation,
reorganization, liquidation or like occurrence in which the Company is involved.
Notwithstanding the foregoing, if such employer corporation, or parent or
subsidiary of such employer corporation, does not substitute new and
substantially equivalent options for the Options granted hereunder, or assume
the Options granted hereunder, the Options granted hereunder shall terminate (A)
upon dissolution or liquidation of the Company, or similar occurrence, or (B)
upon any merger, consolidation, acquisition, separation, or similar occurrence,
where the Company will not be a surviving corporation; provided, however, that
each Optionee shall be mailed notice at least thirty-five (35) days prior to
such dissolution, liquidation, merger, consolidation, acquisition, separation,
or similar occurrence, and shall have at least thirty (30) days after the
mailing of such notice to exercise his or her Option in whole or in part,
without regard to whether the option is then immediately exercisable.
4. STOCK OPTIONS
4.1 GRANTING OF OPTIONS
4.1.1 ELIGIBILITY
Each Director and officer of the Company and
designated professionals employed by the Company who have tendered invaluable
assistance in the efforts of the Company to become viable shall be eligible to
be granted options.
<PAGE>
4.1.2 GRANTING OF OPTIONS
Options may be granted to Participants at
the discretion of the Board of Directors. The Options shall be granted for a
period of five (5) years from the date of grant and shall be at an option price
equal to the closing bid price for the shares of Common Stock of the Company on
the last business day preceding the award of the grant of the option.
4.2 TERMS OF OPTIONS
4.2.1 OPTION AGREEMENT
Each Option shall be evidenced by a written
stock option agreement which shall be executed by the Optionee and the Company
and which shall contain such terms and conditions as the Committee determines
are required by the Plan.
4.2.2 OPTION PRICE
The price of the shares subject to each
Option shall be as set forth in Section 4 (a)(2) above.
4.2.3 DATE OF GRANT
The date on which an Option shall be granted
shall be the date determined in accordance with Section 4(a)(2).
4.2.4 COMMENCEMENT OF EXERCISABILITY
The Option shall be vested in equal
installments of twenty-five percent (25%) of the Option award per year. Should,
however, an event described in Section 3(D) occur, the Option shall be fully
vested in the holder thereof without further action by any party.
4.2.5 EXPIRATION OF OPTIONS
4.2.5.1 Except as otherwise provided in
Section 4(b)(5)(B), each Option shall terminate on the expiration of five (5)
years from the date the Option was granted.
4.2.5.2 Each Option which has become
exercisable may be exercised until the first to occur of the following events:
4.2.5.2.1 The expiration of the
options in accordance with their terms; or
4.2.5.2.2 Three months after the
termination of the Optionee's affiliation with the Company, or any subsidiary of
the Company without cause; or
4.2.5.2.3 Upon his discharge for
cause; or
<PAGE>
4.2.5.2.4 The expiration of six (6)
months from the date Optionee's death.
4.2.6 ADJUSTMENT IN OUTSTANDING OPTIONS
In the event that the outstanding shares of
the stock subject to options are increased or decreased or changed into or
exchanged for a different number or kind of shares of the Company, or other
securities of the Company, or of another corporation, by reason of
reorganization, merger, consolidation, recapitalization, reclassification, stock
split-up, stock dividend (either in shares of the Company's Common Stock or of
another class of the Company's stock), spin-off or combination of shares, the
Committee shall make an appropriate and equitable adjustment in the number and
kind of shares as to which all outstanding options, or portions thereof then
unexercised, shall be exercisable, to the end that after such event the
Optionee's proportionate interest shall be maintained as before the occurrence
of such event. Such adjustment in an outstanding Option shall be made without
change in the total price applicable to the Option or the unexercised portion of
the Option (except for any change in the aggregate price resulting from
rounding-off of share quantities or prices) and with any necessary corresponding
adjustment in option price per share. Any such adjustment made by the Committee
shall be final and binding upon all optionees, the Company and all other
interested persons.
4.3 EXERCISE OF OPTIONS
4.3.1 PERSON ELIGIBLE TO EXERCISE
Only the Optionee may exercise an Option
granted to him or her or any portion thereof.
4.3.2 FRACTIONAL SHARES
The Company shall not be required to issue
fractional shares on exercise of an option.
4.3.3 MANNER OF EXERCISE
An exercisable option, or any exercisable
portion thereof, may be exercised solely by delivery to the Secretary or his or
her office of all of the following:
4.3.3.1 Notice in writing signed by the
Optionee stating that such option or portion is exercised, such notice complying
with all applicable rules established by the Committee;
<PAGE>
4.3.3.2 Full cash payment for the shares
with respect to which such Option or portion is thereby exercised and which are
to be delivered to him or her pursuant to such exercise; and
4.3.3.3 Such representations and documents
as the Committee, in its absolute discretion, deems necessary or advisable to
effect compliance with all applicable provisions of the Securities Act of 1933,
as amended, and any other federal or state securities laws or regulations. The
Committee may, in its absolute discretion, also take whatever additional actions
it deems appropriate to effect such compliance including, without limitation,
placing legends on share certificates and issuing stop-transfer orders to
transfer agents and registrars.
4.3.4 CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES
The Company shall not be required to issue
or deliver any certificate or certificates for shares of Common Stock purchased
upon the exercise of any Option or portion thereof prior to fulfillment of all
of the following conditions:
4.3.4.1 The admission of such shares to
listing on all stock exchanges on which such class of stock is then listed;
4.3.4.2 The completion of any registration
or other qualification of such shares under any state or federal law or under
the rulings or regulations of the Securities and Exchange Commission or any
other governmental regulatory body, which the Company shall, in its absolute
discretion, deem necessary or advisable;
4.3.4.3 The obtaining of any approval or
other clearance from any state or federal governmental agency which the Company
shall, in its absolute discretion, determine to be necessary or advisable;
4.3.4.4 The provision for any income tax
withholding which the Company shall, in its absolute discretion, determine to be
necessary or advisable; and
4.3.4.5 The lapse of such reasonable period
of time following the exercise of the option as the Company may determine, in
its absolute discretion, from time to time to be necessary or advisable for
reasons of administrative convenience.
4.3.5 RIGHTS OF STOCKHOLDERS
An Optionee shall not be, nor have any of
the rights of, a stockholder of the Company in respect to any shares which may
be purchased upon the exercise of any option or portion thereof unless and until
certificates representing such shares have been issued by the Company to such
Optionee.
<PAGE>
5. MISCELLANEOUS PROVISIONS
5.1 OPTIONS NOT TRANSFERABLE
No Option or interest or right therein or part
thereof shall be liable for the debts, contracts or engagements of the Optionee
or his or her successors in interest or shall be subject to disposition by
transfer, alienation, anticipation, pledge, encumbrance, assignment or any other
means, whether such disposition is voluntary or involuntary or by operation of
law by judgment, levy, attachment, garnishment, or any other legal or equitable
proceedings (including bankruptcy) and any attempted disposition thereof shall
be null and void and of no effect; provided, however, that nothing in this
Section 5(a) shall prevent transfers by will or by the applicable laws of
descent and distribution.
5.2 AMENDMENT, SUSPENSION, OR TERMINATION OF THE PLAN
The Plan may be wholly or partially amended or
otherwise modified, suspended or terminated at any time or from time to time by
the Board. However, without approval of the Company's stockholders given within
12 months before or after the action by the Board, no action of the Board may,
except as provided in Section 3(c), modify the requirements as to eligibility
for participation in this Plan, increase the limits imposed in Section 3(a) on
the maximum number of shares which may be the subject of Options granted under
the Plan, amend Section 4(b)(5)(A) or (B) to permit the exercise of an option
after expiration of 10 years from the date the Option was granted or otherwise
materially increase the benefits accruing to participants under the Plan.
Neither the amendment, suspension, nor termination of the Plan shall, without
the consent of the Optionee, alter or impair any rights or obligations under any
Option theretofore granted. No Option may be granted during any period of
suspension nor after termination of the Plan.
5.3 LIMITATION OF RIGHTS
Neither the Plan nor the granting of an Option nor
any other action taken pursuant to the Plan shall constitute or be evidence of
any agreement or understanding, express or implied, between a Participant and
the Company, other than as set forth in the Plan.
5.4 EFFECTIVE DATE, SHAREHOLDERS APPROVAL AND DURATION
The Plan shall become effective upon its adoption by
the Board. However, no Option may be exercised until this Plan is approved by a
vote of the holders of a majority of the outstanding shares of the Company's
Common Stock at the first annual meeting of shareholders next following the
effective date. If the Shareholders do not approve the Plan, the Plan shall not
be effective and any and all actions taken prior to such disapproval shall be
null and void or shall, if necessary, be deemed to have been fully rescinded.
The period during which Options may be granted
<PAGE>
shall terminate on the day following the annual meeting of shareholders in the
year 2000 (unless the Plan is extended or terminated at an earlier date by the
shareholders), but such termination shall not affect the terms of any then
outstanding options.
5.5 TITLES
Titles are provided herein for convenience only and
are not to serve as a basis for interpretation or construction of the Plan,
TO RECORD the adoption of this Plan, the Board has caused this
instrument to be executed on this 11th day of August, 1997.
DALECO RESOURCES CORPORATION
By: /s/DOV AMIR
----------------------
Chairman
<PAGE>
STOCK OPTION AGREEMENT
DALECO RESOURCES CORPORATION
A. A STOCK OPTION for a total of __________ shares of Common
Stock, par value of $.01, of Daleco Resources Corporation, a Delaware
corporation (herein the "Company"), is hereby granted to ______________________
_________________________________________ (herein the "Optionee"), subject in
all respects to the terms and provisions of the Non-Qualified Stock Option Plan
of Daleco Resources Corporation (herein the "Plan"), dated ____________________,
which has been adopted by the Company and which is incorporated herein by
reference.
B. The option price as determined by the Board of Directors of
the Company is $.____ per share.
C. This Option may not be exercised if the issuance of shares
of Common Stock of the Company upon such exercise would constitute a violation
of any applicable Federal or State securities or other law or valid regulation.
The Optionee, as a condition to his exercise of this Option, shall represent to
the Company that the shares of Common Stock of the Company that he acquires
under this Option are being acquired by him for investment and not with a
present view to distribution or resale, unless counsel for the Company is then
of the opinion that such a representation is not required under the Securities
Act of 1933 or any other applicable law, regulation, or rule of any governmental
agency.
D. This Option may not be transferred in any manner and may be
exercised during the lifetime of the Optionee only by the Optionee and not by
any agent or representative thereof.
DALECO RESOURCES CORPORATION
Date: ____________________ By: ________________________________
______________________________________
The Optionee acknowledges receipt of a copy of the Plan, a
copy of which is annexed hereto, and represents that he is familiar with the
terms and provisions thereof. The Optionee hereby accepts this Option subject to
all the terms and provisions of the Plan. The Option hereby agrees to accept as
binding, conclusive, and final all decisions and interpretations of the Board of
Directors upon any questions arising under the Plan.
Date: ____________________ By: ________________________________
<PAGE>
PROXY
DALECO RESOURCES CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF The undersigned hereby appoints Dov
THE BOARD OF DIRECTORS. Amir and Gary Novinskie, and each of
them, jointly and severally, proxies
with full power of substitution to
vote, as designated below, all shares
of Stock which the undersigned is
PLEASE CHECK HERE IF YOU PLAN TO entitled to vote at the Annual Meeting
ATTEND THE ANNUAL MEETING. / / of Stockholders of Daleco Resources
Corporation to be held on February 16,
1998, or any adjournment thereof.
PLEASE MARK, SIGN, DATE AND RETURN DATED:
THIS PROXY PROMPTLY IN THE ENCLOSED ________________________________, 1998
ENVELOPE.
______________________________________
______________________________________
______________________________________
______________________________________
NAME AND ADDRESS (SIGNATURE)
(PLACE LABEL HERE)
IMPORTANT: Please sign on the signature line exactly as your name is printed on
- ---------- this Proxy. When shares are held by joint tenants, both should sign.
When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation, please
sign in full corporate name by authorized officer. If a partnership,
please sign in partnership name by authorized partner.
If instructions are not given in the spaces provided, the shares represented by
this Proxy, duly executed, will be voted (i) in favor of Management's Proposal
to conduct a 10 for 1 Reverse Stock Split; (ii) in favor of Management's
Proposal for the adoption of a Non-Qualified Stock Option Plan; (iii) in favor
of Management's Proposals for the election of directors named in Proposal 3,
(iv) in favor of the appointment of Miller & Company or such other accounting
firm as recommended by the Audit Committee of the Board of Directors as the
Company's independent accountants in Proposal 4 and (v) in the discretion of the
persons appointed proxies hereby as to any other business that may properly come
before the meeting and any adjournment thereof in Proposal 5, all as set forth
on the reverse side hereof.
<PAGE>
MANAGEMENT RECOMMENDS A VOTE FOR THE FOLLOWING MANAGEMENT PROPOSALS
1. Proposal to conduct a 10 for 1 reverse stock split.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. Proposal to adopt a Non-Qualified Stock Option Plan for officers and
outside Directors of the Company.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Election of DIRECTORS for a term expiring in 1999: Dov Amir, Louis W.
Erlich, Gary J. Novinskie, David F. Lincoln, Eberhard Mueller and C. Warren
Trainor
FOR all nominees (except as marked WITHHOLD AUTHORITY to vote for all
to the contrary below) [ ] nominees [ ]
------------------------------------
To withhold authority to vote for any individual nominee, write that
nominee's name here.
4. Proposal to ratify the selection of Miller & Company or such other
accounting firm as recommended by the Audit Committee of the Board of
Directors as the Company's independent accountants.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment
thereof.
-2-
