SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
December 9, 1996
- -----------------------------------------------------------------
Date of Report (Date of earliest event reported)
AMERICAN RESOURCES OF DELAWARE, INC.
- -----------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware
- -----------------------------------------------------------------
(State or other jurisdiction of incorporation)
0-21472 86-0713506
- -----------------------------------------------------------------
(Commission File Number) (IRS Employer Identification No.)
160 Morgan Street
P. O. Box 87
Versailles, Kentucky 40383
- -----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(606) 873-5455
- -----------------------------------------------------------------
(Registrant's Telephone Number, including Area Code)
Not Applicable
- -----------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 1. Changes in Control of Registrant. Not Applicable.
Item 2. Acquisition or Disposition of Assets. Not Applicable
Item 3. Bankruptcy Receivership. Not Applicable.
Item 4. Change in Registrant's Certified Accountant. Not
Applicable.
Item 5. Other Events.
On or about December 11, 1996, the Company filed its
Restated Certificate of Incorporation (attached hereto as Exhibit
3.10) with the office of the Secretary of State of Delaware.
In the fourth quarter of 1996, the Company issued
convertible debentures (the specimen convertible debenture
purchase agreement with exhibits is attached hereto as Exhibit
4.9) in an aggregate amount of Six Million Dollars
($6,000,000.00). The Company received net proceeds of
$5,580,000.
On December 9, 1996 the Company's Board of Directors
ratified a Change of Control Agreement (attached hereto as
Exhibit 10.57) and an Employment Agreement (attached hereto as
Exhibit 10.58) with Rick G. Avare, its Chief Executive Officer
and President, which had been entered into on November 12, 1996.
The Company entered into Indemnity Agreements with Rick
G. Avare, in his capacity as President and Chief Executive
Officer; Jeffrey J. Hausman, its Chief Financial Officer; Karen
M. Underwood, its Corporate Secretary; and David Fox, Jr., a new
member of its Board of Directors. A specimen copy of the
Indemnity Agreements is attached hereto as Exhibit 10.59.
On November 29, 1996, the Company entered into an
agreement to retain the services of Corporate Relations Group,
Inc., to provide the Company with public and investor relations
services. A copy of the agreement is attached hereto as Exhibit
10.60. Also attached hereto as Exhibit 4.10 is a specimen copy
of a Stock Option Agreement between the Company and Corporate
Relations Group, Inc. pursuant to which the Company granted
Corporate Relations Group, Inc. an option to purchase 500,000
shares of the Company's common stock, as well as Exhibit 4.11
which is a copy of a Stock Option Agreement between the Company
and World Capital Funding, Inc. pursuant to which the Company
granted World Capital Funding, Inc. an option to purchase 100,000
shares of the Company's common stock.
Item 6. Resignation of Registrant's Directors. Not Applicable.
2
<PAGE>
Item 7. Financial Statements and Exhibits.
(a) Financial Statements. Not applicable.
(b) Pro Forma Financial Information. Not applicable.
(c) Exhibits:
Exhibit 3.10 Restated Certificate of
Incorporation filed with the
Delaware Secretary of State.
Exhibit 4.9 Specimen copy of the Convertible
Debenture Purchase Agreement, with
exhibits.
Exhibit 4.10 Specimen copy of a Stock Option
Agreement between American
Resources of Delaware, Inc., and
Corporate Relations Group, Inc.
Exhibit 4.11 Copy of a Stock Option Agreement
between American Resources of
Delaware, Inc., and World Capital
Funding, Inc.
Exhibit 10.57 Specimen Change of Control
Agreement
Exhibit 10.58 Employment Agreement with Rick G.
Avare.
Exhibit 10.59 Specimen copy of the Indemnity
Agreement with Officers and
Directors.
Exhibit 10.60 Lead Generation Agreement with
Corporate Relations Group, Inc.
3
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
AMERICAN RESOURCES OF DELAWARE, INC.
By: /s/Jeffrey J. Hausman
--------------------------------
Jeffrey J. Hausman
Its: Chief Financial Officer
Dated: December 11, 1996
----------------------
4
<PAGE>
Exhibit 3.10
RESTATED
CERTIFICATE OF INCORPORATION
OF
AMERICAN RESOURCES OF DELAWARE, INC.
(PURSUANT TO SECTION 245 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE)
American Resources of Delaware, Inc., a corporation
organized and existing under and by virtue of the General
Corporation Law of the State of Delaware (the "Corporation"),
does hereby certify that:
The name of the Corporation is AMERICAN RESOURCES OF
DELAWARE, INC. The original Certificate of Incorporation of the
Corporation was filed with the Secretary of State of the State of
Delaware on August 4, 1992.
The Restated Certificate of Incorporation of the Corporation
only restates and integrates, and does not further amend, the
provisions of the Corporation's Certificate of Incorporation as
heretofore amended or supplemented, and there is no discrepancy
between those provisions and the provisions of the Restated
Certificate of Incorporation.
The Restated Certificate of Incorporation of the Corporation
was duly adopted by the directors of the Corporation, without a
vote of stockholders, in accordance with the provisions of
Section 245 of the General Corporation Law of the State of
Delaware.
The text of the Certificate of Incorporation is hereby
restated to read in its entirety as follows:
ARTICLE ONE
The name of the Corporation is AMERICAN RESOURCES OF
DELAWARE, INC.
ARTICLE TWO
The registered office of the Corporation is located at 1209
Orange Street, in the city of Wilmington, County of New Castle,
in the State of Delaware. The name of its registered agent at
that address is The Corporation Trust Company.
1
ARTICLE THREE
The purpose of the Corporation is to engage in any lawful
act or activity for which a corporation may be organized under
the General Corporation Law of Delaware.
ARTICLE FOUR
The aggregate number of shares of capital stock of all
classes which the Corporation shall have authority to issue is
TWENTY-THREE MILLION (23,000,000), of which TWENTY MILLION
(20,000,000) shares having a par value of $.00001 per share shall
be of a class designated "Common Stock" (or "Common Shares"), ONE
MILLION (1,000,000) shares of preferred stock having a par value
of $12.00 per share which shall be designated SERIES 1993 8%
CONVERTIBLE PREFERRED STOCK, and TWO MILLION (2,000,000) shares
having a par value of $.00001 per share shall be of a class
designated "Preferred Stock" (or "Preferred Shares"). All shares
of the Corporation shall be issued for such consideration or
considerations as the Board of Directors may from time to time
determine. The designations, voting powers, preferences,
optional or other special rights and qualifications, limitations,
or restrictions of the above classes of stock shall be as
follows:
I. SERIES 1993 8% CONVERTIBLE PREFERRED STOCK
(a) DIVIDENDS:
1. GENERAL OBLIGATION. When and as declared by the
Board of Directors, to the extent permitted by law, the
Corporation shall pay to the holders of the Series 1993 8%
Convertible Preferred Stock (the "Series 1993 Preferred Stock")
preferential dividends, as more fully set forth in this Section
a(1).
2. RATE AND PAYMENT DATA. Such dividends shall be
payable semi-annually on the fifteenth day of January and July in
each year at the rate of 8% per annum of the aggregate par value
of the Series 1993 Preferred Stock. To the extent that there are
any unpaid dividends in any year, the amount of unpaid dividends
will accumulate with additional interest at the rate of 10% per
annum until paid. Such dividends shall be paid in Common Stock
of the Corporation on the basis of one share for each dollar of
declared but unpaid dividends (rounded to the nearest whole share
for fractions of shares).
3. DISTRIBUTION OF PARTIAL DIVIDEND PAYMENTS. If at
any time the Corporation shall pay less dividends on the Series
1993 Preferred Stock than the total amount of dividends then due
with respect to the Series 1993 Preferred Stock, such payment
shall be distributed among the holders of the Series 1993
Preferred Stock so that an equal amount shall be paid with
respect to each outstanding share of Series 1993 Preferred Stock.
2
<PAGE>
4. RESTRICTION ON SERIES 1993 PREFERRED STOCK
DIVIDENDS. The Corporation shall not pay any dividends on the
Series 1993 Preferred Stock if (i) there is any interest due and
unpaid on any debt instrument of the Company or (ii) the
declaration and payment violate any contract to which the
Corporation is a party.
5. RESTRICTION ON COMMON STOCK DIVIDENDS. The
Corporation shall not declare or pay any dividends on the Common
Stock (or on any other equity security of any kind which the
Corporation shall at any time issue or be authorized to issue)
for any year (or portion of any year) for which a dividend on the
Series 1993 Preferred Stock has not been first declared and paid.
In the event that the Corporation shall have been required to
have declared and paid a dividend on the Series 1993 Preferred
Stock and such dividend shall not have been declared or paid or
set apart for payment, the Corporation may not declare or pay or
set apart for the payment of dividends or make any other
distributions on, or make any payment on account of the purchase,
redemption or retirement of the Common Stock or any other stock
of the Corporation ranking as to dividends or distribution of
assets upon liquidation, dissolution or winding up of the
Corporation junior to the Series 1993 Preferred Stock (other than
dividends or distributions paid in shares of Common Stock or
other junior ranking stock) until all required dividends on the
Series 1993 Preferred Stock shall have been declared and paid or
set apart for payment.
(b) LIQUIDATION. Upon any liquidation, dissolution or
winding up of the Corporation, the holders of the Series 1993
Preferred Stock shall be entitled (before any distribution or
payment is made upon any equity security of any kind which the
Corporation shall at any time issue or be authorized to issue) to
be paid out of the assets of the Corporation available for
distribution to its stockholders an amount in cash equal to the
amount of any declared but unpaid dividends plus the par value of
their shares of Series 1993 Preferred Stock ( the "Liquidation
Value") and shall not be entitled to any further payment. If,
upon such liquidation, dissolution or winding up of the
Corporation, the assets to be distributed among the holders of
the Series 1993 Preferred Stock shall be insufficient to permit
payment to the holders of the Series 1993 Preferred Stock of the
aggregate Liquidation Value of all shares of Series 1993
Preferred Stock outstanding, then the assets of the Corporation
to be distributed to the holders of the Series 1993 Preferred
Stock shall be distributed ratably among them based upon the
aggregate Liquidation Value of the number of shares held by them.
Written notice of such liquidation, dissolution or winding up,
stating a payment date, the amount of the payment and the place
where the amounts distributable shall be payable, shall be mailed
by certified or registered mail, return receipt requested, not
less than sixty (60) days prior to the payment date stated
therein, to each record holder of any share of Series 1993
3
<PAGE>
Preferred Stock. Neither the consolidation or merger of the
Corporation into or with any other corporation or corporations,
nor the sale or transfer by the Corporation of all or any part of
its assets, nor the reduction of the capital stock of the
Corporation, shall be deemed to be a liquidation, dissolution or
winding up of the Corporation for purposes of this Section (b).
(c) VOTING. Except as otherwise required by law, the
holders of Series 1993 Preferred Stock shall be entitled to
participate in all actions of any nature taken by the Corporation
or the shareholders thereof and shall be entitled to receive
notice of any meeting of the shareholders of the Corporation.
Each share of Series 1993 Preferred Stock issued and outstanding,
from time to time, shall be entitled to four (4) votes.
In addition, so long as any shares of the Series 1993
Preferred Stock remain outstanding, the affirmative vote or
consent of the holders of at least a majority of the shares of
the Series 1993 Preferred Stock outstanding at the time, given in
person or by proxy, either in writing or at a meeting (voting as
a class with the holders of all other series of Series 1993
Preferred Stock ranking on a parity with the Series 1993
Preferred Stock upon a liquidation, dissolution or winding up of
Corporation), will be necessary to permit, effect or validate:
(i) the authorization, creation or issuance, or any increase in
authorized or issued amount, of any class or series of stock
ranking equal or prior to the Series 1993 Preferred Stock with
respect to the payment of dividends, rights to redemption or the
distribution of assets on liquidation, dissolution or winding up
of Corporation; (ii) the amendment, alteration or repeal of any
of the provisions of the Certificate of Incorporation, as
amended, which would materially or adversely affect any right,
preference or privilege of the Series 1993 Preferred Stock or of
the holders thereof; or (iii) authorize the merger or
consolidation of Corporation if the effect of such merger or
consolidation would be to materially alter or change the powers,
preference or rights given to the holders of any shares of the
Preferred Stock; provided, however, the issuance of additional
shares of Common Stock or the creation and issuance of other
series of Preferred Stock, ranking junior to the Series 1993
Preferred Stock with respect to dividends or the distribution of
assets upon liquidation, dissolution or winding up, shall not be
deemed to materially and adversely affect such rights,
preferences or privileges.
(d) CONVERSION.
1. GENERAL. Subject to adjustment as set forth in
subsection 4 hereof, each share of the Series 1993 Preferred
Stock shall be convertible, at the option of the holder thereof,
at any time after the date of issuance of such share at the
office of this Corporation or any transfer agent for the Series
4
<PAGE>
1993 Preferred Stock, into one (1) share of fully paid and
nonassessable shares of Common Stock.
2. CONVERSION PRICE. The Conversion Price per share
at which shares of Common Stock shall be initially issuable upon
conversion of any shares of Series 1993 Preferred Stock shall be
$.01, subject to adjustment as provided in paragraph 4 hereof.
3. MECHANICS OF CONVERSION. Before any holder of
Series 1993 Preferred Stock shall be entitled to convert the same
into shares of Common Stock, he shall surrender the certificate
or certificates therefor, duly endorsed, at the office of the
Corporation or of any transfer agent for the Series 1993
Preferred Stock, and shall give written notice by mail, postage
prepaid, to the Corporation at its principal corporate office, of
the election to convert the same and shall state therein the name
or names in which the certificate or certificates for shares of
Common Stock are to be issued. The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such
holder of Series 1993 Preferred Stock or to the nominee or
nominees of such holder, a certificate or certificates for the
number of shares of Common Stock to which such holder shall be
entitled. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such
surrender of the shares of Series 1993 Preferred stock to be
converted, and the person or persons entitled to receive the
shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such
shares of Common Stock as of such date. If the conversion is in
connection with an underwritten offer of securities registered
pursuant to the Securities Act of 1993, the conversion may, at
the option of any holder tendering Series 1993 Preferred Stock
for conversion, be conditioned upon the closing with the
underwriter of the sale of securities pursuant to such offering,
in which event the person(s) entitled to receive the Common Stock
issuable upon such conversion of the Preferred Stock shall not be
deemed to have converted such Series 1993 Preferred Stock until
immediately prior to the closing of such sale of securities.
4. ADJUSTMENT PROVISIONS. The number of shares of
Common Stock issuable upon the conversion of the Preferred Stock
and the Conversion Price shall be subject to adjustment as
follows:
(i) In case the Corporation shall (i) pay a
dividend in Common Stock or securities convertible into,
exchangeable for or otherwise entitling a holder thereof to
receive Common Stock (other than payments of Common Stock as
interest under the Plan), (ii) declare a dividend payable in cash
on its Common Stock and at substantially the same time shall
offer its shareholders a right to purchase new Common Stock (or
securities convertible into, exchangeable for or other entitling
a holder thereof to receive Common Stock) from the proceeds of
5
<PAGE>
such dividend all Common Stock so issued shall be deemed to have
been issued as a stock dividend, (iii) subdivide its outstanding
shares of Common Stock into a greater number of shares of Common
Stock, (iv) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock, (v) issue by
reclassification of its Common Stock any shares of the
Corporation, the number of shares of Common Stock issuable upon
conversion of the Series 1993 Preferred Stock immediately prior
thereto shall be adjusted so that the Holder of the Series 1993
Preferred Stock shall be entitled to receive after the happening
of any of the events described above had such Series 1993
Preferred Stock been converted immediately prior to the happening
of such event or any record date with respect thereto. Further,
the number of shares of Common Stock payable in dividends
pursuant to Section (a) of Article Fourth hereof shall be subject
to adjustment as set forth in this subsection (4)(i) if the
Corporation shall (x) subdivide its outstanding shares of Common
Stock into a greater number of shares of Common Stock or (y)
combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock. Any adjustment made pursuant
to this subdivision shall become effective immediately after the
record date in the case of a stock dividend and shall become
effective immediately after the effective date in the case of a
stock split, subdivision, combination or reclassification.
(ii) In case the Corporation shall distribute, without
receiving consideration therefor, to all holders of its Common
Stock evidence of its indebtedness or assets (excluding cash
dividends other than as described in Subsection 4(i)), then, in
each such case, the number of shares of Common Stock thereafter
issuable upon the conversion of each Share of Series 1993
Preferred Stock shall be determined by multiplying the number of
shares of Common Stock theretofore issuable upon the conversion
of each Share of Series 1993 Preferred Stock, by a fraction, of
which the numerator shall be the then current market price per
share of Common Stock on the record date for such distribution,
and of which the denominator shall be such current market price
per share of Common Stock less the then fair value (as determined
by the Board of Directors of the Corporation, whose determination
shall be conclusive) of the portion of the assets or evidences of
indebtedness so distributed per share of Common Stock. Such
adjustment shall be made whenever any such distribution is made
and shall become effective immediately after the record date for
the determination of Stockholders entitled to receive such
distribution.
(iii) Any adjustment in the number of shares of Common
Stock issuable hereunder otherwise required to be made by this
Subsection 4(iii) will not have to be adjusted If such adjustment
would not require an increase or decrease of one percent (1%) or
more in the number of shares of Common Stock issuable upon
conversion of the Series 1993 Preferred Stock.
6
<PAGE>
(iv) Whenever the number of shares of Common Stock
issuable upon the conversion of the Series 1993 Preferred Stock
is adjusted, as herein provided, the Conversion Price shall be
adjusted (to the nearest cent) by multiplying such Conversion
Price immediately prior to such adjustment by a fraction, of
which the numerator shall be the number of shares of Common Stock
issuable upon the exercise of each share of Series 1993 Preferred
Stock immediately prior to such adjustment, and of which the
denominator shall be the number of shares of Common Stock so
issuable immediately thereafter.
(v) Whenever the number of shares of Common Stock
issuable upon the Conversion of the Preferred to the Conversion
Price is adjusted as herein provided, the Corporation shall, no
less than ten (10) days prior to the event requiring such
adjustment, mail by first class mail, postage prepaid, to each
holder of the Series 1993 Preferred Stock written notice of such
adjustment or adjustments.
5. NO IMPAIRMENT. This Corporation will not, by
amendment of its Certificate of Incorporation or through any
reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities
or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or
performed hereunder by the Corporation, but will at all times in
good faith assist in the carrying out of all the provisions of
this Section (d) and in taking of all such action as may be
necessary or appropriate in order to protect the Conversion
Rights of the holders of Series 1993 Preferred Stock against
impairment.
6. NO FRACTIONAL SHARES AND CERTIFICATES AS TO
ADJUSTMENTS.
(i) No fractional shares shall be issued upon
conversion of the Series 1993 Preferred Stock or as dividends
payable under the Series 1993 Preferred Stock, and the number of
shares of Common Stock to be issued shall be rounded to the
nearest whole share. Whether or not fractional shares are
issuable upon such conversion shall be determined on the basis of
the total number of shares of Series 1993 Preferred Stock the
holder is at the time converting to Common Stock and the number
of shares of Common Stock issuable upon such aggregate
conversion.
(ii) Upon the occurrence of each adjustment or
readjustment of the Conversion Price of Series 1993 Preferred
Stock pursuant to this Section (d) this Corporation, at its
expense, shall promptly compute such adjustment or readjustment
in accordance with the terms hereof and prepare and furnish to
each holder of such Series 1993 Preferred Stock a certificate
setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is
7
<PAGE>
based. This Corporation shall, upon written request at any time
of any holder of such Series 1993 Preferred Stock, furnish or
cause to be furnished to such holder a like certificate setting
forth (A) such adjustment or readjustment, (B) the Conversion
Price at the time in effect, and (C) the number of shares of
Common Stock and the amount, if any, of other property which at
the time would be received upon the conversion of a share of
Series 1993 Preferred Stock.
7. RESERVATION OF COMMON STOCK ISSUABLE UPON
CONVERSION. The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Common
Stock solely for the purpose of effecting the conversions of the
shares of Series 1993 Preferred Stock, such number of its shares
of Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding shares of Series 1993
Preferred Stock. If at any time the number of authorized but
unissued shares of Common Stock, in addition to such other
remedies as shall be available to the holder of Series 1993
Preferred Stock, this Corporation will take such corporate action
as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number
of shares as shall be sufficient for such purposes.
8. STATUS OF CONVERTED STOCK. In the event any
shares of Series 1993 Preferred Stock shall be converted pursuant
to Section (d) hereof, the shares so converted shall be cancelled
and shall not be issuable by the Corporation. The Certificate of
Incorporation of this Corporation shall be appropriately amended
to effect the corresponding reduction in the Corporation's
authorized capital stock.
(c) NOTICES
1. UPON CORPORATION. Any notice pursuant to the
terms hereof to be given or made by a holder of shares of
Preferred Stock or upon the Corporation shall be sufficiently
given or made if sent by certified or registered mail, postage
prepaid, addressed (until another address is sent by the
Corporation to the holder) as follows:
American Resources, Inc.
950 North Finance Center Drive
Suite 270
Tucson, Arizona 85710
2. UPON SERIES 1993 PREFERRED STOCK HOLDERS. Any
notice pursuant to the terms hereof to be given or made by the
Corporation to or upon any holder of shares of Series 1993
Preferred Stock shall be sufficiently given or made if sent by
certified or registered mail, postage prepaid, addressed (until
another address is sent by the holder to the Corporation) to the
address of such holder on the records of the Corporation.
8
<PAGE>
3. REGISTRATION OF TRANSFER. The Corporation shall
keep at its principal office (or such other place as the
Corporation reasonably designates) a register for the
registration of shares of Series 1993 Preferred Stock. Upon the
surrender of any certificate representing Series 1993 Preferred
Stock at such place, the Corporation shall, at the request of the
registered holder of such certificate, execute and deliver (at
the Corporation's expense) a new certificate or certificates in
exchange therefor representing in the aggregate the number of
shares of Series 1993 Preferred Stock represented by the
surrendered certificate (and the Corporation forthwith shall
cancel such surrendered certificate), subject to the requirements
of applicable securities laws. Each such new certificate shall
be registered in such name and shall represent such number of
shares of Series 1993 Preferred Stock as shall be requested by
the holder of the surrendered certificate, shall be substantially
identical in form to the surrendered certificate, and the shares
of Series 1993 Preferred Stock represented by such new
certificate shall be entitled to dividends from the date to which
dividends shall have been paid on the shares represented by the
surrendered certificate at the rate and in the manner applicable
to such certificate.
II. OTHER PREFERRED STOCK
(a) ISSUANCE IN CLASS AND SERIES. Shares of Preferred
Stock (other than the Series 1993 Preferred Stock) may be issued
in one or more classes or series at such time or times as the
Board of Directors may determine. All shares of any one series
shall have preferences, limitations and relative rights identical
with those of other shares of the same series and, except to the
extent otherwise provided in the description of such series, with
those of other shares of Preferred Stock.
(b) AUTHORITY OF BOARD FOR ISSUANCE. Authority is hereby
expressly granted to the Board of Directors to fix from time to
time, by resolution or resolutions providing for the
establishment and/or issuance of any class or series of Preferred
Stock (other than the Series 1993 Preferred Stock), the
designation of such classes and series and the powers,
preferences, and rights of the shares of such classes and series,
and the qualifications, limitations or restrictions thereof,
including the following:
1. The distinctive designation and number of shares
comprising such class or series, which number may (except where
otherwise provided by the Board of Directors in creating such
class or series) be increased or decreased (but not below the
number of shares then outstanding) from time to time by action of
the Board of Directors;
2. The rate of dividends, if any, on the shares of
that class or series, whether dividends shall be cumulative and,
if so, from which date or dates, whether dividends shall be
payable in cash, property or rights, or in shares of the
9
<PAGE>
Corporation, capital stock, and the relative rights of priority,
if any, of payment of dividends on shares of that class or series
over shares of any other class or series;
3. Whether the shares of that series shall be
redeemable and, if so, the terms and conditions of such
redemption, including the date or dates upon or after which they
shall be redeemable, the event or events upon or after which they
shall be redeemable, whether they shall be redeemable at the
option of the Corporation, the stockholder or another person, the
amount per share payable in case of redemption (which amount may
vary under different conditions and at different redemption
dates), whether such amount shall be a designated amount or an
amount determined in accordance with a designated formula or by
reference to extrinsic data or events and whether such amount
shall be paid in cash, indebtedness, securities or other property
or rights, including securities of any other corporation;
4. Whether that class or series shall have a sinking
fund for the redemption or purchase of shares of that class or
series and, if so, the terms and amounts payable into such
sinking fund;
5. The rights to which the holders of the shares of
that class or series shall be entitled in the event of voluntary
or involuntary liquidation, dissolution, distribution of assets
or winding up of the Corporation, relative rights of priority, if
any, of payment of shares of that class or series over shares of
any other series or class;
6. Whether the shares of that series shall be
convertible into or exchangeable for cash, shares of stock of any
other class or any other series, indebtedness, or other property
or rights, including securities of another corporation, and, if
so, the terms and conditions of such conversion or exchange,
including the rate or rates of conversion or exchange, and
whether such rate shall be a designated amount or an amount
determined in accordance with a designated formula or by
reference to extrinsic data or events, the date or dates upon or
after which they shall be convertible or exchangeable, the
duration for which they shall be convertible or exchangeable, the
event or events upon or after which they shall be convertible or
exchangeable, and whether they shall be convertible or
exchangeable at the option of the Corporation, the stockholder or
another person, and the method (if any) of adjusting the rate of
conversion or exchange in the event of a stock split, stock
dividend, combination of shares or similar event;
7. Whether the issuance of any additional shares of
such class or series, or of any shares of any other class or
series, shall be subject to restrictions as to issuance, or as to
10
<PAGE>
the powers, preferences or rights of any such other class or
series; and
8. Any other preferences, privileges and powers, and
relative, participating, optional or other special rights, and
qualifications, limitations or restrictions of such class or
series, as the Board of Directors may deem advisable and as shall
not be inconsistent with the provisions of the Corporation's
Charter, as from time to time amended, and to the full extent now
or hereinafter permitted by the laws of the State of Delaware.
(c) DIVIDENDS. Payment of dividends shall be as follows on
Preferred Stock other than the Series 1993 Preferred Stock;
1. The holders of Preferred Stock of each class or
series, in preference to the holders of Common Stock, shall be
entitled to receive, as and when declared by the Board of
Directors out of funds legally available therefor, all dividends,
at the rate for such class or series fixed in accordance with the
provisions of this Article Fourth and no more;
2. Dividends may be paid upon, or declared or set
aside for, any class or series of Preferred Stock in preference
to the holders of any other class or series of Preferred Stock in
the manner determined by the resolutions of the Board of
Directors authorizing and creating such class or series;
3. So long as any shares of Preferred Stock shall be
outstanding, in no event shall any dividend, whether in cash or
in property, be paid or declared nor shall any distribution be
made, on the Common Stock, nor shall any shares of Common Stock
be purchased, redeemed or otherwise acquired for value by the
Corporation, unless all dividends on all cumulative classes and
series of Preferred Stock with respect to all past dividend
periods, and unless all dividends on all classes and series of
Preferred Stock for the then current dividend period shall have
been paid or declared, and provided for, and unless the
Corporation shall not be in default with respect to any of its
obligations with respect to any sinking fund for any class or
series of Preferred Stock. The foregoing provisions of this
subparagraph (3) shall not, however, apply to any dividend
payable in Common Stock;
4. No dividend shall be deemed to have accrued on any
share of Preferred Stock of any class or series with respect to
any period prior to the date of the original issue of such share
or the dividend payment date immediately proceeding or following
such date of the original issue, as may be provided in the
resolutions of the Board of Directors creating such class or
series. Preferred Stock shall not be entitled to participate in
any dividends declared and paid on Common Stock, whether payable
in cash, stock or otherwise. Accruals of dividends shall not pay
interest.
11
<PAGE>
(d) DISSOLUTION OR LIQUIDATION. In the event of any
voluntary or involuntary liquidation, dissolution of assets or
winding up of the Corporation, the holders of the shares of each
class and series of Preferred Stock then outstanding shall be
entitled to receive out of the net assets of the Corporation, but
only in accordance with the preferences, if any, provided for
such class or series, before any distribution or payment shall be
made to the holders of Common Stock, the amount per share fixed
by the resolution or resolutions of the Board of Directors to be
received by the holder of each such share on such voluntary or
involuntary liquidation, dissolution, distribution of assets or
winding up, as the case may be. If such payment shall have been
made in full to the holders of all outstanding Preferred Stock of
all classes and series, or duly provided for, the remaining
assets of the Corporation shall be available for distribution
among the holders of Common Stock as provided in this Article
Fourth. If upon any such liquidation, dissolution, distribution
of assets or winding up, the net assets of the Corporation
available for distribution among the holders of any one or more
classes or series of Preferred Stock which (i) are entitled to a
preference over the holders of Common Stock upon such
liquidation, dissolution, distribution of assets or winding up,
and (ii) rank equally in connection therewith, shall be
insufficient to make payment for the preferential amount to which
the holders of such shares shall be entitled, then such assets
shall be distributed among the holders of each such series of
Preferred Stock ratably according to the respective amounts to
which they would be entitled in respect of the shares held by
them upon such distribution if all amounts payable on or with
respect to such shares were paid in full.
Neither the consolidation nor merger of the Corporation, nor
the exchange, sale, lease or conveyance (whether for cash,
securities, or other property) of all, substantially all or any
part of its assets, shall be deemed a liquidation, dissolution,
distribution of assets or winding up of the Corporation within
the meaning of this provision.
(e) VOTING RIGHTS. Except to the extent otherwise required
by law or provided in the resolution of the Board of Directors
adopted pursuant to authority granted in this Article Fourth, the
shares of Preferred Stock shall have no voting power with respect
to any matter whatsoever. The Board of Directors may determine
whether the shares of any class or series shall have limited,
contingent, full or no voting rights, in addition to the voting
rights provided by law and, if so, the terms of such voting
rights. In no event shall the Preferred Stock be entitled to
more than one vote in respect of each share of such stock.
12
<PAGE>
III. 6% JUNIOR CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES B
At a meeting held on September 26, 1994, the Board of
Directors of American Resources of Delaware, Inc. duly adopted
the following resolutions:
RESOLVED, that pursuant to the authority expressly granted
to and vested in the Board by provisions of the Certificate of
Incorporation of the Company, as amended (the "Certificate of
Incorporation"), and the General Corporation Law of the State of
Delaware, the issuance of a series of Preferred Stock which shall
consist of 1,000,000 shares, par value $.00001 per share, of the
three million (3,000,000) shares of Preferred Stock which the
Company now has authority to issue, be, and the same hereby is,
authorized, and the Board hereby fixes the powers, designations,
preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or
restrictions thereof of the shares of such series (in addition to
the powers, designations, preferences and relative,
participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof, set forth in
the Certificate of Incorporation which may be applicable to the
Preferred Stock) authorized by this resolution as follows:
(a) DESIGNATION AND RANK.
The designation of the series of Preferred Stock authorized
by this resolution shall be 6% Junior Cumulative Convertible
Preferred Stock (the "Series B Preferred Stock"). The maximum
number of shares of Series B Preferred Stock shall be 1,000,000.
Shares of the Series B Preferred Stock shall have a liquidation
preference (the "Liquidation Preference") of $10.00 per share.
The Series B Preferred Stock shall rank prior to the Company's
Common Stock and to all other classes and series of equity
securities of the Company now or hereafter authorized, issued or
outstanding, other than any classes or series of equity
securities of the Company ranking on a parity with or senior to
the Series B Preferred Stock as to dividend rights or rights upon
liquidation, winding up or dissolution of the Company. The Series
B Preferred Stock shall be junior to the Series 1993 8%
Convertible Preferred Stock as to both the payment of dividends
and the distribution of assets upon liquidation, dissolution or
winding up of the Company, and shall be junior to all outstanding
debt of the Company. The Series B Preferred Stock shall be
subject to the creation of senior stock parity stock and junior
stock to the extent not expressly prohibited by the Company's
Certificate of Incorporation.
(b) DIVIDENDS.
1. General Obligation. When and as declared by the
Board of Directors, to the extent permitted by law, the
13
<PAGE>
Corporation shall pay to the holder of the Series B Preferred
Stock preferential dividends as more fully set forth in this
Section (b).
2. Rate and Payment Dates. Dividends shall be payable
quarterly on the 15th day (or if not a business day, on the next
business day) of January, April, July and October of each year at
the rate of 6% per annum of the aggregate Liquidation Preference
of the Series B Preferred Stock. Dividends shall be paid in cash
or, at the election of the Corporation, in the Common Stock of
the Corporation based upon the closing bid price of the Common
Stock on the date the dividend is declared, as more fully
provided in Section (e)(5)(1) below. Unpaid dividends will
accumulate without interest. The initial quarterly dividend
payable on January 15, 1994 and the amount of any dividend
payable for any other period shorter than a dividend period shall
be computed on the basis of a 360-day year composed of twelve
30-day months and the actual number of days elapsed in the
dividend period.
Each declared dividend shall be payable to holders of record
as they appear on the stock books of the Company at the close of
business on the record date, which shall not be more than 60
calendar days preceding the payment date therefor, as determined
by the Board of Directors (the "Board"). Accrued and unpaid
dividends for any prior dividend periods may be declared and paid
at any time, without reference to any regular dividend payment
date, to holders of record on such date, not exceeding 45 days
preceding the payment date thereof as may be fixed by the Board.
3. Restriction on Series B Preferred Stock Dividends.
The Corporation shall not pay any dividends on the Series B
Preferred Stock if (i) there is any interest due and unpaid on
any debt instrument of the Corporation, (ii) the declaration and
payment would violate any contract to which the Corporation is a
party, or (iii) any dividends on the Series 1993 8% Convertible
Preferred Stock or any stock of the Corporation ranking as to the
payment of dividends senior to the Series B Preferred Stock are
in arrears.
4. Restriction on Parity or Junior Stock Dividends and
Repurchases. No full dividends shall be declared or paid or set
apart for payment on Preferred Stock of any series ranking, as to
dividends, on a parity with or junior to the Series B Preferred
Stock for any period unless full dividends for the immediately
preceding dividend period on the Series B Preferred Stock
(including any accumulation in respect of unpaid dividends from
prior dividend periods) have been or contemporaneously are
declared and paid (or declared and a sum sufficient for the
payment thereof set apart for such payment). When dividends are
not paid in full (or declared and a sum sufficient for such full
payment is not so set apart) upon the Series B Preferred Stock
and any other Preferred Stock ranking on a parity as to dividends
with the Series B Preferred Stock dividends declared upon shares
14
<PAGE>
of Series B Preferred Stock and such other Preferred Stock
ranking on a parity as to dividends shall be declared pro rata,
so that the amount of dividends declared per share on the Series
B Preferred Stock and such other Preferred Stock shall bear in
all cases to each other the same ratio that accrued dividends on
the shares of Series B Preferred Stock and accrued dividends on
such other Preferred Stock bear to each other as of their
respective immediately preceding dividend periods.
Unless full dividends on the Series B Preferred Stock and
any parity stock have been declared and paid or set apart for
payment for their respective immediately preceding dividend
periods (including any accumulation in respect of unpaid
dividends for prior dividend periods) (i) no cash dividend or
distribution (other than in shares of Common Stock or other
junior stock) shall be declared or paid or set aside for payment
on Common Stock or other junior stock and (ii) the Corporation
may not, directly or indirectly, repurchase, redeem or otherwise
acquire any shares of its Common Stock or junior stock (or pay
any moneys into a sinking fund for the redemption of any shares)
except by conversion into or exchange for Common Stock or other
junior stock or except in connection with any benefit plan or
arrangement.
(c) LIQUIDATION.
1. General. Upon any liquidation, dissolution or
winding up of the Corporation, the holders of the Series B
Preferred Stock shall be entitled to be paid out of the assets of
the Corporation available for distribution to stockholders,
before any distribution or payment is made upon any Common Stock
or any other stock ranking as to the distribution of assets upon
liquidation, dissolution or winding up of the Corporation junior
to the Series B Preferred Stock an amount in cash equal to the
amount of any accumulated but unpaid dividends plus the
Liquidation Preference of the Series B Preferred Stock
(collectively, the "Liquidation Value"), and shall not be
entitled to any further payment. Written notice of such
liquidation, dissolution or winding up, stating a payment date,
the amount of the payment and the place where the amounts
distributable shall be payable, shall be mailed by certified or
registered mail, return receipt requested, not less than 60 days
prior to the payment date stated therein, to each record holder
of any share of Series B Preferred Stock. Neither the
consolidation or merger of the Corporation into or with any other
corporation or corporations nor the sale or transfer by the
Corporation of all or any part of its assets, nor the reduction
of the capital stock of the Corporation, shall be deemed to be a
liquidation, dissolution or winding up of the Corporation for
purposes hereof.
2. Partial Distribution of Assets. If the amounts
available for distribution with respect to the Series B Preferred
Stock and all other outstanding stock of the Corporation ranking
on a parity with the Series B Preferred Stock upon liquidation
15
<PAGE>
are not sufficient to satisfy the full liquidation rights of all
the outstanding Series B Preferred Stock and stock ranking on a
parity therewith, then the holders of each series of such stock
will share ratably in any such distribution of assets in
proportion to the full respective preferential amount (which in
the case of Preferred Stock may include accumulated dividends) to
which they are entitled.
(d) VOTING.
1. General. Except as otherwise required by law, the
holders of Series B Preferred Stock shall be entitled to
participate in all actions of the stockholders thereof and shall
be entitled to receive notice of any meeting of the stockholders
of the Corporation. Each share of Series B Preferred Stock issued
and outstanding from time to time shall be entitled to one vote
on all matters properly before the stockholders of the
Corporation, except that when any other series of Preferred Stock
shall have the right to vote with the Series B Preferred Stock as
a single class on any matter, then the Series B Preferred Stock
and such other series shall have with respect to such matters one
vote per $10.00 of stated liquidation preference.
2. Class Votes. In addition, so long as any shares of
the Series B Preferred Stock remain outstanding, the affirmative
vote or consent of the holders of at least a majority of the
shares of the Series B Preferred Stock outstanding at the time,
given in person or by proxy, either in writing or at a meeting
(voting as a class with the holders of all other series of
Preferred Stock ranking on a parity with the Series B Preferred
Stock as to the payment of dividends or the distribution of
assets upon liquidation, dissolution or winding up of the
Corporation), will be necessary to permit, effect or validate:
(i) the authorization, creation or issuance, or any increase in
authorized or issued amount, of any class or series of stock
ranking prior to the Series B Preferred Stock with respect to the
payment of dividends or the distribution of assets on
liquidation, dissolution or winding up of Corporation; (ii) the
amendment, alteration or repeal of any of the provisions of the
Certificate of Incorporation, which would materially or adversely
affect any right, preference or privilege of the Series B
Preferred Stock or of the holders thereof; or (iii) the merger or
consolidation of the Corporation if the effect of such merger or
consolidation would be to materially alter or change the powers,
preference or rights given to the holders of any shares of the
Series B Preferred Stock; provided, however, that the
authorization or issuance of additional shares of Common Stock or
the creation and issuance of other series of Preferred Stock
ranking equal or junior to the Series B Preferred Stock with
respect to dividends or the distribution of assets upon
liquidation or winding up, shall not be deemed to materially and
adversely affect such rights, preferences or privileges.
16
<PAGE>
(e) CONVERSION.
1. General. Subject to the other provisions hereof,
each share of the Series B Preferred Stock shall be convertible,
at the option of the holder thereof, after the date of issuance
of such share at the of office of this Corporation or any
transfer agent for the Series B Preferred Stock into that number
of shares of fully paid and nonassessable shares of Common Stock
derived from dividing the Liquidation Preference by the
Conversion Price. For purposes hereof, the Conversion Price shall
be equal to 73% of the closing bid price of the Common Stock on
the date a notice of conversion is actually received by the
Corporation under subparagraph (e)(3) below. The closing bid
price for a date shall be the reported last bid price regular way
on the New York Stock Exchange or, if the Common Stock is not
listed or admitted to trading on such exchange, on the principal
national securities exchange on which the Common Stock is listed
or admitted to trading, or if the Common Stock not listed or
admitted to trading on any national securities exchange, on the
National Association of Securities Dealers Automated Quotations
("NASDAQ") National Market System, or, if the Common Stock is not
listed or admitted to trading on any national securities exchange
or quoted on such National Market System, the closing bid price
as reported by NASDAQ or such other system then in use, or, if
the Common Stock is not quoted by any such organization, the
closing bid price in the over-the-counter market as furnished by
any New York Stock Exchange member firm selected from time to
time by the Corporation for that purpose.
2. Limitations. Notwithstanding the foregoing, the
Series B Preferred Stock shall (i) not be convertible until the
forty-first day after issuance of the Series B Preferred Stock
and (ii) thereafter, only one-half of the Series B Preferred
Stock shall be convertible in any given month, with conversions
during a given month to be effected on a first come, first serve
basis based upon the date of actual receipt of each notice of
conversion; provided, however, that if the Corporation is unable
to determine the specific order of receipt of notices and the
total amount requested for conversion exceeds the limitation set
forth in subsection (ii) hereof, requested conversions shall be
given effect in such manner as the Board shall deem equitable,
which determination shall be conclusive on all holders of Series
B Preferred Stock.
3. Mechanics of Conversion. Before any holder of
Series B Preferred Stock shall be entitled to convert the same
into shares of Common Stock he shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the
Corporation or of any transfer agent for the Series B Preferred
Stock and shall give written notice by facsimile or by mail,
postage prepaid, to the Corporation at its principal corporate
office, of the election to convert the same and shall state
therein the name or names in which the certificate or
17
<PAGE>
certificates for shares of Common Stock are to be issued. The
Corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Series B Preferred Stock
or to the nominee or nominees of such holder, a certificate or
certificates for the number of shares of Common Stock to which
such holder shall be entitled. Such, conversion shall be deemed
to have been made immediately prior to the close of business on
the date of such surrender of the shares of Series B Preferred
Stock to be converted, and the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders
of such shares of Common Stock as of such date. If certificates
for Common Stock are not delivered within 5 business days of
actual receipt of a duly completed election to convert and the
certificate to be converted, then the Corporation shall reimburse
the holder for the loss in value, if any, from the closing bid
price of the Common Stock on the fifth day after receipt of the
conversion notice and the closing bid price of the Common Stock
on the date certificates therefor are actually issued and mailed
to the holder multiplied by the number of shares of Common Stock
into which the Series B Preferred Stock is converted, provided
that in no event shall such amount exceed 5% of the closing bid
price of the Common Stock on the fifth day after closing
multiplied by the number of shares of Common Stock converted.
4. Dividend Upon Conversion. Holders of shares of
Series B Preferred Stock at the close of business on a dividend
payment record date shall be entitled to receive the dividend
payable on such shares on the corresponding dividend payment date
notwithstanding the conversion thereof following such dividend
payment record date and prior to such dividend payment date.
However, shares of Series B Preferred Stock surrendered for
conversion during the period between the close of business on any
dividend payment record date and the opening of business on the
corresponding dividend payment date except shares converted after
the issuance of notice of redemption with respect to a redemption
date during such period, such shares of Series B Preferred Stock
being entitled to such dividend on the dividend payment date must
be accompanied by payment of an amount equal to the dividend
payable on such shares on such dividend payment date. A holder of
shares of Series B Preferred Stock on a dividend payment record
date who (or whose transferee) tenders any such shares for
conversion into shares of Common Stock on such dividend payment
date will receive the dividend payable by the Corporation on such
shares of Series B Preferred Stock on such date, and the
converting holder need not include payment of the amount of such
dividend upon surrender of shares of Series B Preferred Stock for
conversion. Except as provided above, the Corporation shall make
no payment or allowance for unpaid dividends, whether or not in
arrears, on converted shares or for dividends on the shares of
Common Stock issued upon such conversion.
18
<PAGE>
5. Adjustment Provisions. The number of shares of
Common Stock issuable upon the conversion of the Preferred Stock
and the Conversion Price shall be subject to adjustment as
follows:
(i) In case the Corporation shall (i) pay a dividend on
Common Stock in Common Stock; or securities convertible into,
exchangeable for or otherwise entitling a holder thereof to
receive Common Stock (ii) declare a dividend payable in cash on
its Common Stock and at substantially the same time offer its
shareholders a right to purchase new Common Stock (or securities
convertible into, exchangeable for or other entitling a holder
thereof to receive Common Stock) from the proceeds of such
dividend (alI Common Stock so issued shall be deemed to have been
issued as a stock dividend), (iii) subdivide its outstanding
shares of Common Stock into a greater number of shares of Common
Stock (iv) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock or (v) issue by
reclassification of its Common Stock any shares of Common Stock
of the Corporation, the number of shares of Common Stock issuable
upon conversion of the Series B Preferred Stock immediately prior
thereto shall be adjusted so that the holders of the Series B
Preferred Stock shall be entitled to receive after the happening
of any of the events described above that number and kind of
shares as the holders would have received had such Series B
Preferred Stock been converted immediately prior to the happening
of such event or any record date with respect thereto. Further,
the number of shares of Common Stock payable in dividends
pursuant to Section (b) hereof shall be subject to adjustment as
set forth in this subsection (5)(i) if the Corporation shall (x)
subdivide its outstanding shares of Common Stock into a greater
number of shares of Common Stock or (y) combine its outstanding
shares of Common Stock into a small number of shares of Common
Stock. Any adjustment made pursuant to this subdivision shall
become effective immediately after the close of business on the
record date in the case of a stock dividend and shall become
effective immediately after the close of business on the
effective date in the case of a stock split, subdivision,
combination or reclassification.
(ii) In case the Corporation shall distribute, without
receiving consideration therefor, to all holders of its Common
Stock evidences of its indebtedness or assets (excluding cash
dividends other than as described in Section (e)(5)(ii)), then in
such case, the number of shares of Common Stock thereafter
issuable upon the conversion of each share of Series B Preferred
Stock shall be determined by multiplying the number of shares of
Common Stock theretofore issuable upon the conversion of each
share of Series B Preferred Stock by a fraction, of which the
numerator shall be the closing bid price per share of Common
Stock on the record date for such distribution, and of which the
denominator shall be the closing bid price of the Common Stock
less the then fair value (as determined by the Board of Directors
of the Corporation whose determination shall be conclusive) of
19
<PAGE>
the portion of the assets or evidences of indebtedness so
distributed per share of Common Stock. Such adjustment shall be
made whenever any such distribution is made and shall become
effective immediately after the record date for the determination
of stockholders entitled to receive such distribution.
(iii) Any adjustment in the number of shares of Common
Stock issuable hereunder otherwise required to be made by this
Section (e)(5) will not have to be made if such adjustment would
not require an increase or decrease in one percent (1%) or more
in the number of shares of Common Stock issuable upon conversion
of the Series B Preferred Stock. No adjustment in the conversion
Rate will be made for the issuance of shares of capital stock to
directors, employees or independent contractors pursuant to the
Corporation's or any of its subsidiaries' stock option, stock
ownership or other benefit plans or arrangements or trusts
related thereto or for issuance of any shares of Common Stock
pursuant to any plan providing for the reinvestment of dividends
or interest payable on securities of the Corporation and the
investment of additional optional amounts in shares of Common
Stock under such plan.
(iv) Whenever the number of shares of Common Stock
issuable upon the conversion of the Series B Preferred Stock is
adjusted, as herein provided, the Conversion Price shall be
adjusted (to the nearest cent) by multiplying such Conversion
Price immediately prior to such adjustment by a fraction, of
which the numerator shall be the number of shares of Common Stock
issuable upon the exercise of each share of Series B Preferred
Stock immediately prior to such adjustment, and of which the
denominator shall be the number of shares of Common Stock
issuable immediately thereafter.
(v) The Corporation from time to time (by action of the
Board of Directors) may increase the conversion rate (or decrease
the Conversion Price) by any amount for any period of time if the
period is at least 20 days, the increase is irrevocable during
the period and the Board of Directors of the Corporation in its
sole discretion shall have made a determination that such
increase would be in the best interests of the Corporation, which
determination shall be conclusive. Whenever the conversion rate
is increased pursuant to the preceding sentence, the Corporation
shall mail to holders of record of the Series B Preferred Stock a
notice of the increase at least 15 days prior to the date the
increased conversion rate takes effect, and such notice shall
state the increased conversion rate and the period it will be in
effect.
6. Mergers, Etc. In the case of any (i) consolidation
or merger of the Corporation into any entity (other than a
consolidation or merger that does not result in any
reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock of the Corporation), (ii)
20
<PAGE>
sale, transfer, lease or conveyance of all or substantially all
of the assets of the Corporation as an entirety or substantially
as an entirety, or (iii) reclassification, capital reorganization
or change of the Common Stock (other than solely a change in par
value, or from par value to no par value), in each case as a
result of which shares of Common Stock shall be converted into
the right to receive stock securities or other property
(including cash or any combination thereof), each holder of a
share of Series B Preferred Stock then outstanding shall have the
right thereafter to convert such share only into the kind and
amount of securities, cash and other property receivable upon
such consolidation, merger, sale, transfer, capital
reorganization or reclassification by a holder of the number of
shares of Common Stock of the Corporation into which such shares
of Series B Preferred Stock would have been converted immediately
prior to such consolidation, merger, sale, transfer, capital
reorganization or reclassification, assuming such holder of
Common Stock of the Corporation (A) is not an entity with which
the Corporation consolidated or into which the Corporation merged
or which merged into the Corporation or to which such sale or
transfer was made, as the case may be ("constituent entity"), or
an affiliate of a constituent entity, and (B) failed to exercise
his or her rights of election, if any, as to the kind or amount
of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer (provided that if the
kind or amount of securities, cash and other property receivable
upon such consolidation merger, sale or transfer is not the same
for each share of Common Stock of the Corporation held
immediately prior to such consolidation, merger, sale or transfer
by other than a constituent entity or an affiliate thereof and in
respect of which such rights or election shall not have been
exercised ("non-electing share"), then for the purpose of this
Section (e)(6) the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, sale or
transfer by each non-electing share shall be deemed to be the
kind and amount so receivable per share by a plurality of the
non-electing shares). If necessary, appropriate adjustment shall
be made in the application of the provisions set forth herein
with respect to the rights and interests thereafter of the
holders of shares of Series B Preferred Stock to the end that the
provisions set forth herein shall thereafter correspondingly be
made applicable, as nearly as may reasonably be, in relation to
any shares of stock or other securities or property thereafter
deliverable on the conversion of the shares. The above provisions
shall similarly apply to successive consolidations, mergers,
sales, transfers, capital reorganizations and reclassification.
The Corporation shall not effect any such consolidation, merger,
sale or transfer unless prior to or simultaneously with the
consummation thereof the successor company or entity (if other
than the Corporation) resulting from such consolidation, merger,
sale or transfer shall assume, by written instrument, the
obligation to deliver to the holder of each share of Series B
Preferred Stock such shares of stock securities or assets as, in
21
<PAGE>
accordance with the foregoing provisions, such holder may be
entitled to receive under this Section (e)(6).
7. No Impairment. This Corporation shall not, by
amendment of its Certificate of Incorporation or through any
reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities
or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or
performed hereunder by the Corporation, but will at all times in
good faith assist in the carrying out of all the provisions of
this Section (e) and in taking of all such action as may be
necessary or appropriate in order to protect the conversion
rights of the holders of Series B Preferred Stock against
impairment.
8. Fractional Shares. Any fractional shares issuable
upon conversion. of the Series B Preferred Stock or as dividends
payable on the Series B Preferred Stock shall be rounded to the
nearest whole share or, at the election of the Corporation, the
Corporation shall pay the holder thereof an amount in cash equal
to the closing bid price thereof. Whether or not fractional
shares are issuable upon conversion shall be determined on the
basis of the total number of shares of Series B Preferred Stock
the holder is at the time converting to Common Stock and the
number of shares of Common Stock issuable upon such aggregate
conversion.
9. Certificate as to Adjustments. Upon the occurrence
of each adjustment or readjustment of the Conversion Price of
Series B Preferred Stock pursuant to Section (e)(5), the
Corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof
and prepare and furnish to each holder of such Series B Preferred
Stock a certificate setting forth such adjustment or readjustment
and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon written
request at any time of any holder of Series B Preferred Stock,
furnish or cause to be furnished to such holder a certificate
setting forth (A) the Conversion Price at the time in effect, and
(B) the number of shares of Common Stock and the amount, if any,
of other property which at the time would be received upon the
conversion of a share of Series B Preferred Stock.
10. Reservation of Common Stock Issuable Upon
Conversion. The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Common
Stock solely for the purpose of effecting the conversion of
shares of Series B Preferred Stock such number of its shares of
Common Stock as shall from time to time be sufficient to effect
the conversion of all outstanding shares of Series B Preferred
Stock. If at any time the number of authorized but unissued
shares of Common Stock shall be insufficient to satisfy the
conversion rights hereunder, in addition to such other remedies
22
<PAGE>
as shall be available to the holder of Series B Preferred Stock,
the Corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized
but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purposes.
11. Status of Converted Stock. In the event any shares
of Series B Preferred Stock shall be converted pursuant to
Section (e) hereof the shares so converted shall be cancelled and
shall not be issuable by the Corporation but shall have the
status of authorized but unissued shares of Preferred Stock and
may be reissued by the Corporation at any time as shares of any
series of Preferred Stock other than Series B Preferred Stock.
(f) REDEMPTION.
1. Optional Redemption by the Corporation. The shares
of Series B Preferred Stock may be redeemed by the Corporation in
whole or in part at the Liquidation Preference thereof, plus
accrued and unpaid dividends (the "Redemption Price"), at any
time after January 1, 1996, provided that the average closing bid
price of a share of Common Stock is at least equal to 120% of the
closing bid price on the date of the initial issuance of the
Series B Preferred Stock, as the same may adjusted below (the
"Call Price"). for any period of at least 5 consecutive trading
days ending within 30 days prior to the date on which the
Corporation mails notice to the holders of the Series B Preferred
Stock of the date (the "Redemption Date") and place of
redemption, as more fully provided in Section (f)(2) below.
If fewer than all the outstanding shares of Series B
Preferred Stock are to be redeemed, the Corporation will select
those to be redeemed pro rata, by lot or by other method deemed
equitable by the Corporation in its sole discretion.
On and after the Redemption Date, dividends shall cease to
accrue on the shares of Series B Preferred Stock called for
redemption, and they shall be deemed to cease to be outstanding,
provided that the Redemption Price (including any accrued and
unpaid dividends to the date fixed for redemption) has been duly
paid or provided for. If the Redemption Date falls after a
dividend payment record date and prior to the corresponding
dividend payment date, then each holder of Series B Preferred
Stock at the close of business on such record date shall be
entitled to the dividend payable on such shares on the
corresponding dividend payment date notwithstanding the
redemption of such shares before such dividend payment date.
Except as provided above, the Corporation shall make no payment
or allowance for unpaid dividends, whether or not in arrears, on
shares of Series B Preferred Stock called for redemption or on
the shares of Common Stock issued upon such redemption.
23
<PAGE>
2. Notice of Redemption. Notice of any redemption,
setting forth (i) the Redemption Date and the place fixed for
redemption, (ii) the Redemption Price, (iii) a statement that
dividends on the shares of Series B Preferred Stock to be
redeemed will cease to accrue on such Redemption Date and (iv) a
statement of or reference to the conversion right set forth in
Section (e) hereof including that the right to give a notice of
conversion in respect of any shares to be redeemed shall
terminate at the close of business on the date prior to the
Redemption Date), shall be mailed, postage prepaid, at least 20
days prior to the Redemption Date to each holder of record of the
Series B Preferred Stock to be redeemed at his or her address as
the same shall appear on the books of the Company or its transfer
agent. If fewer than all the shares of the Series B Preferred
Stock owned by such holder are then to be redeemed, the notice
shall specify the number of shares thereof that are to be
redeemed and, if practicable, the numbers of the certificates
representing such shares.
3. Mechanics of Redemption. At any time up to the date
immediately prior to the Redemption Date, the holders shall have
the right to convert the Series B Preferred Stock into Common
Stock as more fully provided in Section (e) hereof. Unless so
converted, at the close of business on redemption Date, each
share of Series B Preferred Stock to be redeemed shall be
automatically cancelled and converted into a right to receive the
Redemption Price, and all rights of the Series B Preferred Stock,
including the right to conversion and to receive dividends, shall
cease without further action. At any time following the
Redemption Date, holders of the Series B Preferred Stock may
surrender their certificates at the office of the Corporation or
any transfer agent therefor, duly endorsed and with signature
guaranteed. As soon as practicable after surrender of the
certificate, the Corporation or transfer agent, as the case may
be, shall forward payment of the Redemption Price to the holder
thereof or his assignee.
4. Adjustment of Call Price. The Call Price shall be
adjusted proportionally upon any adjustment of the Conversion
Price under Section (e)(5) hereof in the event of any stock
dividend, stock split, combination of shares or similar event.
5. Retired Shares. Shares of Series B Preferred Stock
redeemed, purchased or otherwise acquired for value by the
Company, including by conversion in accordance with Section (e)
hereof, shall, after such acquisition, have the status of
authorized and unissued shares of Preferred Stock and may be
reissued by the Corporation at any time as shares of any series
of Preferred Stock other than as shares of Series B Preferred
Stock.
(g) NOTICES.
1. Upon Corporation. Any notice pursuant to the terms
hereof to be given or made by a holder of shares of Preferred
24
<PAGE>
Stock to or upon the Corporation shall be sufficiently given or
made if sent by facsimile or by mail, postage prepaid, addressed
(until another address is sent by the Corporation to the holder)
as follows:
American Resources, Inc.
950 North Finance Center Drive
Suite 270
Tucson, Arizona 85710
Fax No. 602-298-2440
2. Upon Series B Preferred Stock Holders. Any notice
pursuant to the terms hereof to be given or made by the
Corporation to or upon any holder of shares of Series B Preferred
Stock shall be sufficiently given or made if sent by mail,
postage prepaid, addressed (until another address is sent by the
holder to redemption Corporation) to the address of such holder
on the records of the Corporation.
3. Registration of Transfer. The Corporation shall
keep at its principal office (or such other place as the
Corporation reasonably designates) a register for the
registration of shares of Series B Preferred Stock. Upon the
surrender of any certificate representing Series B Preferred
Stock at such place, the Corporation shall, at the request of the
registered holder of such certificate, execute and deliver (at
the Corporation's expense) a new certificate or certificates in
exchange therefor representing in the aggregate the number of
shares of Series B Preferred Stock represented by the surrendered
certificate (and the Corporation forthwith shall cancel such
surrendered certificate), subject to the requirements of
applicable securities laws. Each such new certificate shall be
registered in such name and shall represent such number of shares
of Series B Preferred Stock as shall be requested by the holder
of the surrendered certificate, shall be substantially identical
in form to the surrendered certificate, and the shares of Series
B Preferred Stock represented by such new certificate shall be
entitled to dividends from the date to which dividends shall have
been paid on the shares represented by the surrendered
certificate at the rate and in the manner applicable to such
certificate.
ARTICLE FIVE
The following provisions are inserted for the management of
the business and for the conduct of the affairs of the
Corporation, and for further definition, limitation and
regulation of the powers of the Corporation and of its directors
and stockholders:
1. The directors in their discretion may submit any
contract or act for approval or ratification at any annual
meeting of the stockholders or at any meeting of the stockholders
called for the purpose of considering any such act or contract
25
<PAGE>
and any contract or act that shall be approved or be ratified by
the vote of the holders of a majority of the stock of the
Corporation which is represented in person or by proxy at such
meeting and entitled to vote thereat (provided that a lawful
quorum of stockholders be there represented in person or by proxy
shall be as valid and as binding upon the Corporation and upon
all the stockholders as though it had been approved or ratified
by every stockholder of the Corporation, whether or not the
contract or act would otherwise be open to legal attack because
of director's interest, or for any other reason.
2. In addition to the powers and authorities
hereinbefore or by statute expressly conferred upon them, the
directors are hereby empowered to exercise all such powers and do
all such acts and things as may be exercised or done by the
Corporation; subject, nevertheless, to the provisions of the
statutes of Delaware, of this certificate, and to the By-Laws.
ARTICLE SIX
The Corporation may, to the full extent permitted by Section
145 of the Delaware General Corporation Law, as amended from time
to time, indemnify all persons whom it may indemnify pursuant
thereto.
ARTICLE SEVEN
Whenever a compromise or arrangement is proposed between
this Corporation and its creditors or any class of them and/or
between this Corporation and its stockholders or any class of
them, any court of equitable jurisdiction within the State of
Delaware, may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this
Corporation under the provisions of section 291 of Title 8 of the
Delaware Code or on the application of trustees in dissolution or
of any receiver or receivers appointed for this Corporation under
the provision of section 279 of Title 8 of the Delaware Code
order a meeting of the creditors or class of creditors and/or of
the stockholders or class of stockholders of this Corporation, as
the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and
the said reorganization shall, if sanctioned by the court to
which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders
or class of stockholders, of this Corporation, as the case may
be, and also of this Corporation.
ARTICLE EIGHT
Election of directors need not be by written ballot unless
the Bylaws of the Corporation so provide.
26
<PAGE>
ARTICLE NINE
Meetings of stockholders may be held within or without the
State of Delaware, as the Bylaws may provide. The books of the
Corporation may be kept (subject to any provision contained in
the statutes) outside the State of Delaware at such place or
places as may be designated from time to time by the Board of
Directors or in the Bylaws of the Corporation.
ARTICLE TEN
The Corporation, by its Board of Directors, reserves the
right to amend, alter, change or repeal any provision contained
in this Certificate of Incorporation in the manner now or
hereafter prescribed by law, and all rights and powers conferred
herein on stockholders, directors and officers are subject to
this reserved power.
IN WITNESS WHEREOF, the Corporation has caused this
Certificate to be executed in its name and on its behalf by its
duly authorized officer as of the 9th day of December, 1996.
---
AMERICAN RESOURCES OF DELAWARE, INC.
By:/S/ Rick G. Avare
---------------------------------
Rick G. Avare
President and Chief
Executive Officer
ATTEST:
/S/ Karen M. Underwood
- -----------------------
Karen M. Underwood
Secretary
27
<PAGE>
Exhibit 4.9
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION
OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "1933 ACT"). THIS SUBSCRIPTION AGREEMENT SHALL NOT
CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY
THE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL. THE SECURITIES ARE "RESTRICTED"
AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS PERMITTED UNDER
THE ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
AMERICAN RESOURCES OF DELAWARE, INC.
THIS AGREEMENT is made this day of October, 1996,
----
between AMERICAN RESOURCES OF DELAWARE, INC., Nasdaq Symbol
"GASS" (the "Company"), a Delaware corporation, with its
principal office at 160 Morgan Street, Versailles, Kentucky
40383, and (the "Purchaser"), with
------------------------------
its principal office at
------------------------------------.
IN CONSIDERATION of the mutual covenants contained in
this Agreement, the Company and the Purchaser agree as follows:
Section 1. Certain Definitions. For purposes of this
-------------------
Agreement:
"Closing Date" means the date agreed to by the parties
for the delivery of the Debenture against a wire transfer of the
funds to the Company.
"Closing" means the completion of the purchase and sale
of the Debenture on the Closing Date.
"Common Stock" means the Common Stock of the Company
$.00001 par value.
"Conversion Date" means the date on which the Purchaser
has telecopied the Notice of Conversion to the Company.
"Conversion Shares" means the Common Stock issued upon
the conversion of the Convertible Debenture.
"Convertible Debenture" means the Debenture of the
Company convertible into common stock of the Company as
hereinafter provided.
"Conversion Price" means an amount equal to a
twenty-five (25%) percent discount from the average closing bid
price of the Common Stock as reported by Nasdaq or on other
securities exchanges or markets on which the Common Stock is
listed for the previous five (5) business days ending on the day
before the Conversion Date. The Conversion Price may not exceed
the closing bid price of the Company's Common Stock on the
Closing Date.
"Debenture" or "Debentures" means the Convertible
Debenture or Convertible Debentures, as appropriate.
Section 2. Authorization and Sale of Debenture.
-----------------------------------
2.1 Authorization. Subject to the terms and
-------------
conditions of this Agreement, the Company has authorized the
execution and delivery of one or more Convertible Debenture
purchase agreements in an aggregate principal amount of Six
Million ($ 6,000,000) Dollars (the "Principal"), with a maturity
date of 5:00 PM Eastern Standard Time on October , 1997 (the
--
"Maturity Date"). The Company promises to pay to the Purchaser
the Principal if any remains unconverted, with interest at 4% per
annum, in shares of Common Stock on the Maturity Date. The
Principal and interest on this Debenture is payable only in
shares of Common Stock pursuant to the formula as described in
Section 3.2 below (form of Debenture annexed hereto as Exhibit
A).
2.2 Agreement to Execute and Delivery the Debenture
-----------------------------------------------
Agreement and the Debenture. The Company will borrow $
- --------------------------- --------
from the Purchaser in reliance upon the representations and
warranties of the Company contained in this Agreement. The
Purchaser will lend such sum to the Company, upon the terms and
conditions hereinafter set forth. The Debenture shall pay four
(4%) percent interest per annum, payable in common stock at the
time of each Conversion Date. Such loan shall occur on the
Closing Date.
2.3 Time and Place of Closing. The Closing shall be
-------------------------
held at the offices of Sheldon E. Goldstein, P.C. ("Escrow
Agent"), 65 Broadway, New York, NY 10006, as promptly as
practicable as agreed to by the parties to this Agreement.
2.4 Payment and Delivery. At or prior to the Closing,
--------------------
the following shall occur:
(a) Purchaser shall remit by wire transfer the
Purchase Price to Escrow Agent as per separate Escrow Agreement,
as payment in full for the Debenture.
(b) Company shall deliver or cause to be
delivered to Escrow Agent this Debenture Agreement and a
Debenture, substantially in the form set forth in Exhibit B
hereto, bearing the original signatures of an authorized officer
of the Company.
(c) Wire instructions for Sheldon E. Goldstein,
P.C. are as follows:
2
<PAGE>
Chase Manhattan Bank, N.A.
ABA #021000021
For the Account of
United States Trust Company of New York
Account #920-1-073195
In Favor of
Sheldon E. Goldstein, P.C. Attorney Trust Account
Account #59-02347
Section 3. General Representations and Warranties of
-----------------------------------------
the Company. The Company hereby represents and warrants to, and
- -----------
covenants with, the Purchaser that the following are true and
correct as of the date hereof and as of the Closing Date.
3.1 Organization; Qualification. The Company is a
---------------------------
corporation duly organized and validly existing under the laws of
Delaware and is in good standing under such laws. The Company
has all requisite corporate power and authority to own, lease and
operate its properties and assets, and to carry on its business
as presently conducted. The Company is qualified to do business
as a foreign corporation in each jurisdiction in which the
ownership of its property or the nature of its business requires
such qualification, except where failure to so qualify would not
have a material adverse effect on the Company.
3.2 Capitalization. The authorized capital stock of
--------------
the Company consists of 23,000,000 Shares, 20,000,000 Shares of
which are Common Stock, $.00001 par value, of which 6,578,572
have been issued and 3,000,000 Shares of which are Preferred
Stock, of which 268,851 have been issued. All issued and
outstanding Shares of Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable. As of the
Closing Date, the Company had reserved from its authorized but
unissued shares of Common Stock a sufficient number of shares of
Common Stock for issuance upon conversion of the Debenture, which
is convertible at any time after the Closing Date, at Purchaser's
option, at the Conversion Price, and will be automatically
converted on the first anniversary of closing, at the Conversion
Price, if not previously converted. Each such conversion shall
reduce the principal amount owing on the Debenture by the amount
stated in the Notice of Conversion (Exhibit B) and will be
reflected in a Convertible Debenture Principal Reduction Schedule
signed by an authorized officer of the Company.
3.3 Authorization. The Company has all requisite
-------------
corporate right, power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby.
All corporate action on the part of the Company, its directors
and shareholders necessary for the authorization, execution,
delivery and performance of this Agreement and the Debenture by
the Company, the authorization, sale, issuance and delivery of
the Conversion Shares and the performance of the Company's
obligations hereunder has been taken. This Agreement has been
duly executed and delivered by the Company and constitutes a
legal, valid and binding obligation of the Company enforceable in
accordance with its terms,
3
<PAGE>
subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable
remedies, and to limitations of public policy as they may apply
to the indemnification provisions set forth in Section 7.4 of
this Agreement. Upon their issuance and delivery pursuant to this
Agreement, the Conversion Shares will be validly issued, fully
paid and nonassessable and will be free of any liens or
encumbrances except for those imposed by or on behalf of the
Purchaser, its creditors or agents; provided, however, execution
and delivery of this Agreement will not give rise to any
preemptive right or right of first refusal or right of
participation on behalf of any person.
3.4 No Conflict. The execution and delivery of this
-----------
Agreement do not, and the consummation of the transactions
contemplated hereby will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of
time, or both), or give rise to a right of termination,
cancellation or acceleration of any obligation or to a loss of a
material benefit, under, any provision of the Articles of
Incorporation, and any amendments thereto, Bylaws, Stockholders
Agreements and any amendments thereto of the Company or any
material mortgage, indenture, lease or other agreement or
instrument, permit, concession, franchise, license, judgment,
order, decree statute, law, ordinance, rule or regulation
applicable to the Company, its properties or assets.
3.5 Accuracy of Reports and Information. The Company
-----------------------------------
is in full compliance, to the extent applicable, with all
reporting obligations under either Section 12(b), 12 (g) or 15(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange
Action"). The Company has registered its Common Stock pursuant
to Section 12 of the Exchange Act and the Common Stock is listed
and trades on the Nasdaq Small Cap Market.
The Company has filed all material required to be filed
pursuant to all reporting obligations, under either Section 13(a)
or 15(d) of the Exchange Act for a period of at least twelve (12)
months immediately preceding the offer and sale of the Debenture
(or for such shorter period that the Company has been required to
file such material).
3.6 SEC Filings/Full Disclosure. For a period of at
---------------------------
least twelve (12) months immediately preceding this offer and
sale (i) none of the Company's filings with the Securities and
Exchange Commission contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein in light of
the circumstances under which they were made, not misleading, and
(ii) the Company has timely filed all requisite forms, reports
and exhibits thereto with the Securities and Exchange Commission.
There is no fact known to the Company (other than
general economic conditions known to the public generally) that
has not been publicly disclosed by the Company or disclosed in
writing to the Purchaser which could reasonably be expected to
have a material adverse effect on the condition (financial or
otherwise) or in the earnings, business affairs, properties or
assets of the Company, or (ii) could reasonably be expected to
materially and adversely affect the ability of the Company to
perform its obligations pursuant to this Agreement.
4
<PAGE>
3.7 Absence of Undisclosed Liabilities. The Company
----------------------------------
has no material liabilities or obligations, absolute or
contingent (individually or in the aggregate), except as set
forth in the Financial Statements or as incurred in the ordinary
course of business after the date of the Financial Statements.
3.8 Governmental Consent, etc. No consent, approval
--------------------------
or authorization of or designation, declaration or filing with
any governmental authority on the part of the Company is required
in connection with the valid execution and delivery of this
Agreement, or the offer, sale or issuance of the Debenture, or
the consummation of any other transaction contemplated hereby,
except the filing with the SEC of a registration statement on
Form S-3 for the purpose of registering the Common Stock
underlying the Debenture.
3.9 Intellectual Property Rights. Except as disclosed
----------------------------
in the Form 10-Ks, Form 10-Qs, Form 10-QSBs, and Form 8-Ks filed
by the Company for a period of at least twelve (12) months
immediately preceding this offer and sale and the Company's
Private Placement Memorandum draft dated October 11, 1996 (the
"Reports"), the Company has sufficient trademarks, trade names,
patent rights, copyrights and licenses to conduct its business.
To the Company's knowledge, neither the Company nor its products
is infringing or will infringe any trademark, trade name, patent
right, copyright, license, trade secret or other similar right of
others currently in existence; and there is no claim being made
against the Company regarding any trademark, trade name, patent,
copyright, license, trade secret or other intellectual property
right which could have a material adverse effect on the condition
(financial or otherwise), business, results of operations or
prospects of the Company.
3.10 Material Contracts. Except as set forth in the
------------------
Reports, the agreements to which the Company is a party described
in the Reports are valid agreements, in full force and effect,
the Company is not in material breach or material default (with
or without notice or lapse of time, or both) under any of such
agreements, and, to the Company's knowledge, the other
contracting party or parties thereto are not in material breach
or material default (with or without notice or lapse of time, or
both) under any of such agreements.
3.11 Litigation. Except as disclosed in the Reports,
----------
there is no action, proceeding or investigation pending, or to
the Company's knowledge threatened, against the Company which
might result, either individually or in the aggregate, in any
material adverse change in the business, prospects, conditions,
affairs or operations of the Company. The Company is not a party
to or subject to the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or
investigation by the Company currently pending or which the
Company currently intends to initiate.
3.12 Title to Assets. Except as set forth in the
---------------
Reports, the Company has good and marketable title to all
properties and material assets described in the Reports as owned
by it, free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest other than such as are
not material to the business of the Company.
5
<PAGE>
3.13 Subsidiaries. Except as disclosed in the Reports
------------
and the financial statements, the Company does not presently own
or control, directly or indirectly, any interest in any other
corporation, partnership, association or other business entity.
3.14 Required Governmental Permits. The Company is in
-----------------------------
possession of and operating in compliance with all
authorizations, licenses, certificates, consents, orders and
permits from state, federal and other regulatory authorities
which are material to the conduct of its business, all of which
are valid and in full force and effect.
3.15 Other Outstanding Securities. Except as disclosed
----------------------------
in the Reports, there are no other material outstanding debt or
equity securities presently convertible into Common Stock.
3.16 Legal Opinion. Purchaser shall, upon purchase of
-------------
the Debenture, receive an opinion letter from counsel to the
Company, and the Company represents that it will immediately
obtain such an opinion from counsel to the effect that:
(i) The Company is duly incorporated and validly
existing under the laws and jurisdiction of its
incorporation. The Company and/or its subsidiaries are duly
qualified to do business as a foreign corporation and is in
good standing in all jurisdictions where the Company and/or
its subsidiaries owns or leases properties, maintains
employees or conducts business, except for jurisdictions in
which the failure to so qualify would not have a material
adverse effect on the Company, and has all requisite
corporate power and authority to own its properties and
conduct its business.
(ii) There is no action, proceeding or
investigation pending, threatened against the Company which
might reasonably result, either individually or in the
aggregate, in any material adverse change in the business,
conditions, affairs or operations of the Company.
(iii) The Company is not a party to or subject to
the provisions of any order, writ, injunction, judgment or
decree of any court or government agency or instrumentality.
(iv) There is no action, suit, proceeding or
investigation by the Company currently pending or which the
Company currently intends to initiate.
(v) All issued and outstanding shares of Common
Stock have been duly authorized and validly issued and are
fully paid and nonassessable.
(vi) The Debenture, which shall be issued at the
closing, is properly issued in accordance with the law of
the Company's state of incorporation.
(vii) This Debenture Purchase Agreement, the
issuance of the Debenture and the issuance of Conversion
Shares, upon conversion of the Debenture, have been duly
6
<PAGE>
approved by all required corporate action and that, upon
payment of the consideration by the Purchaser in the manner
specified in the Convertible Debenture Purchase Agreement,
all such securities, upon delivery, shall be validly issued
and outstanding, fully paid and nonassessable.
(viii) The issuance of the Conversion Shares, upon
conversion of the Debenture in accordance with the terms and
conditions of the Debenture and this Agreement, will not
violate the applicable listing agreement between the Company
and any securities exchange or market on which the Company's
securities are listed. The Company has not received any
--------------------------------
notice from Nasdaq questioning the continuing eligibility of
------------------------------------------------------------
its Common Stock for trading in Nasdaq.
--------------------------------------
(ix) The Company's Common Stock is registered
pursuant to Section 12(b) or Section 12(g) of the Securities
Exchange Act of 1934, as amended, and the Company has timely
--------------------------
filed all the material requested to be filed pursuant to
--------------------------------------------------------
Sections 13(a) and 15(d) of such Act for a period of at
-------------------------------------------------------
least twelve months preceding the date hereof.
---------------------------------------------
(x) The authorized capital stock of the Company
-------------------------------------------
consists of 23,000,000 shares, 20,000,000 Shares of which
---------------------------------------------------------
are Common Stock, .00001 par value, of which 6,578,572 have
-----------------------------------------------------------
been issued, and 3,000,000 Shares of which are Preferred
--------------------------------------------------------
Stock, of which 268,851 have been issued.
----------------------------------------
(xi) The Company has the requisite corporate power
---------------------------------------------
and authority to enter into the Agreements and to sell and
----------------------------------------------------------
deliver the Debentures and the Conversion Shares to be
------------------------------------------------------
issued upon the conversion of the Debentures as described in
------------------------------------------------------------
the Agreements; each of the Agreements has been duly and
--------------------------------------------------------
validly authorized by all necessary corporate action by the
-----------------------------------------------------------
Company to our knowledge, no approval of any governmental or
------------------------------------------------------------
other body is required for the execution and delivery of
--------------------------------------------------------
each of the Agreements by the Company or the consummation of
------------------------------------------------------------
the transactions contemplated thereby; each of the
--------------------------------------------------
Agreements has been duly and validly executed and delivered
-----------------------------------------------------------
by and on behalf of the Company, as is a valid and binding
----------------------------------------------------------
agreement of the Company, enforceable in accordance with its
------------------------------------------------------------
terms, except as enforceability may be limited by general
---------------------------------------------------------
equitable principles, bankruptcy, insolvency, fraudulent
--------------------------------------------------------
conveyance, reorganization, moratorium or other laws
----------------------------------------------------
affecting creditors rights generally.
------------------------------------
(xii) To the best of our knowledge, the execution,
--------------------------------------------
delivery and performance of the Agreements by the Company
---------------------------------------------------------
and the performance of its obligations thereunder do not and
------------------------------------------------------------
will not constitute a breach or violation of any of the
-------------------------------------------------------
terms and provisions of, or constitute a default under or
---------------------------------------------------------
conflict with or violate any provision of (i) the Company's
-----------------------------------------------------------
Certificate of Incorporation or By-Laws, (ii) any indenture,
------------------------------------------------------------
mortgage, deed of trust, agreement or other instrument to
---------------------------------------------------------
which the Company is a party or by which it or any of its
---------------------------------------------------------
property is bound, (iii) any applicable statute or
--------------------------------------------------
regulation or as other, (iv) or any judgment, decree or
-------------------------------------------------------
order or any court or governmental body having jurisdiction
-----------------------------------------------------------
over the Company or any of its property.
---------------------------------------
7
<PAGE>
Section 4. Representations, Warranties and Covenants
-----------------------------------------
of the Purchaser. The Purchaser represents and warrants to, and
- ----------------
covenants with, the Company that the following are true and
correct as of the date hereof and as of the Closing Date.
4.1 Authority. The Purchaser's signatory has all
---------
right, power, authority and capacity to execute and deliver this
Agreement and to consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered by the
Purchaser and will constitute the legal, valid and binding
obligations of the Purchaser, enforceable in accordance with its
terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other
equitable remedies, and to limitations of public policy as they
may apply to the indemnification provisions set forth in Section
7.4 of this Agreement.
4.2 Investment Experience. Purchaser is an
---------------------
"accredited investor" as defined in Rule 501(a) under the
Securities Act. Purchaser is aware of the Company's business
affairs and financial condition and has had access to and has
acquired sufficient information about the Company, including the
Reports to reach an informed and knowledgeable decision to
acquire the Debenture. Purchaser has such business and financial
experience as is required to give it the capacity to protect its
own interests in connection with the purchase of the Debenture.
4.3 Investment Intent. Without limiting its ability
-----------------
to resell the Debenture and underlying Common Stock pursuant to
an effective registration statement, Purchaser represents that it
is purchasing the Debenture for its own account as principal for
investment purposes. Purchaser understands that its acquisition
of the Debenture has not been registered under the Securities Act
or registered or qualified under any state securities law in
reliance on specific exemptions therefrom, which exemptions may
depend upon, among other things, the bona fide nature of
Purchaser's investment intent as expressed herein. Purchaser
will not, directly or indirectly, offer, sell, pledge, transfer
or otherwise dispose of (or solicit any offers to buy, purchaser
or otherwise acquire or take a pledge of) any of the Debenture
except in compliance with the Securities Act and any applicable
state securities laws, and the rules and regulations promulgated
thereunder.
4.4 Registration or Exemption Requirements. Purchaser
-------------------------------------- further
acknowledges and understands that the Debenture or the Conversion
Shares may not be resold or otherwise transferred except in a
transaction registered under the Securities Act and any
applicable state securities laws or unless an exemption from such
registration is available. Purchaser understands that the
Debenture and, if converted, the Conversion Shares will be
imprinted with a legend that prohibits the transfer of the
Debenture unless (i) it is registered or such registration is not
required, and (ii) if the transfer is pursuant to an exemption
from registration other than Rule 144 under the Securities Act
and, if the Company shall so request in writing, an opinion of
counsel reasonably satisfactory to the Company is obtained to the
effect that the transaction is so exempt.
4.5 No Legal, Tax or Investment Advice. Purchaser
----------------------------------
understands that nothing in this Agreement or any other materials
presented to Purchaser in connection with the purchase and sale
8
<PAGE>
of the Debenture constitutes legal, tax or investment advice.
Purchaser has consulted such legal, tax and investment advisors
as it, in its sole discretion, has deemed necessary or
appropriate in connection with its purchaser of the Debenture.
4.6 Purchaser Review. Purchaser hereby represents and
----------------
warrants that the Purchaser has carefully examined the Reports,
and the financial statements contained therein. The Purchaser
acknowledges that the Company has made available to the Purchaser
all documents and information that it has requested relating to
the Company and has provided answers to all of its questions
concerning the Company and the Debenture. Nothing stated in the
previous two sentences, however, shall be deemed to affect the
representations and warranties of the Company contained in this
Agreement.
4.7 Legend. The certificate or certificates
------
representing the Debenture and, upon conversion, the Underlying
Common Stock shall be subject to a legend restricting transfer
under the Securities Act of 1933, such legend to be substantially
as follows:
"THIS DEBENTURE HAS BEEN ACQUIRED FOR INVESTMENT AND
HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
SUCH DEBENTURE MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID
ACT WHICH, EXCEPT IN THE CASE OF AN EXEMPTION PURSUANT TO
RULE 144 UNDER SAID ACT, IS CONFIRMED IN A LEGAL OPINION
SATISFACTORY TO THE COMPANY."
The Debenture shall also include any legends required by any
applicable state securities laws.
The legend(s) shall be removed and the Company shall
issue a replacement Debenture without such legend to the holder
of such certificate if the Debenture or if such holder provides
to the Company an opinion of counsel reasonably acceptable to the
Company, to the effect that a public sale, transfer or assignment
of such Debenture may be made without registration.
4.8 Restrictions on Conversion of Debenture. The
---------------------------------------
Purchaser or any subsequent holder of the Debenture (the
"Holder") shall be prohibited from converting any portion of the
Debenture which would result in the Purchaser or the Holder being
deemed the beneficial owner, in accordance with the provisions of
Rule 13d-3 of the Securities Exchange Act of 1934, as amended, of
4.99% or more of the then issued and outstanding Common Stock of
the Company.
4.9 Certain Risks. The Purchaser recognizes that the
-------------
purchase of the Shares involves a high degree of risk in that:
(i) an investment in the Company is highly
speculative and only investors who can afford the loss of
their entire investment should consider investing in the
Company and the Debenture;
9
<PAGE>
(ii) a purchaser may not be able to liquidate its
investment;
(iii) transferability of the Debenture is extremely
limited;
(iv) in the event of disposition, Purchaser could
sustain the loss of its entire investment;
(v) the Debentures represent non-voting
securities, which have the right to convert into and
purchase shares of voting equity securities in a corporate
entity;
(vi) no return on investment, whether through
distributions, appreciation, transferability or otherwise,
and no performance by, through or of the Company, has been
promised, assured, represented or warranted by the Company,
or by any director, officer, employee, agent or
representative thereof;
(vii) while the Common Stock is presently quoted
and traded on the Nasdaq Small Cap Market and while the
Purchasers are beneficiaries of certain registration rights
provided herein, the Debenture and the Conversion Shares:
(a) are not registered under applicable federal
or state securities laws, and thus may not be
sold, conveyed, assigned or transferred unless
registered under such laws or unless an exemption
from registration is available under such laws, as
more fully described below; and
(b) are not quoted, traded or listed for trading
or quotation on the Nasdaq Small cap Market, or
any other organized market or quotation system,
and there is therefore no present public or other
market for such Debenture, nor can there be any
assurance that the Common Stock will continue to
be quoted, traded or listed for trading or
quotation on the Nasdaq Small Cap Market or on any
other organized market or quotation system.
4.10 No Registration, Review or Approval. The
-----------------------------------
Purchaser acknowledges and understand that the limited private
offering and sale of Shares pursuant to this Agreement has not
been reviewed or approved by the SEC or by any state securities
commission, authority or agency, and is not registered under the
Act or under the securities or "blue sky" laws, rules or
regulations of any state. The Purchaser acknowledges,
understands and agrees that the Shares are being offered and sold
hereunder pursuant to (i) a private placement exemption to the
registration provisions of the Act pursuant to Section 3(b) or
Section 4(2) of such Act and Regulation D promulgated under such
Act, and (ii) a similar exemption to the registration provisions
of applicable state securities laws.
Section 5. Conditions to the Purchaser's Obligation to
-------------------------------------------
Purchase. The Company understands that the Purchaser's
- --------
obligation to purchase the Debenture is conditioned upon:
10
<PAGE>
(a) Acceptance by Purchaser of this Subscription
Agreement for the purchase of the Debenture, as evidenced by the
execution of this Agreement by its authorized officers;
(b) Delivery of the Debenture into Escrow;
(c) Delivery of legal opinion as required by this
---------------------------------------------
Agreement.
- ---------
Section 6. Conditions to Company's Obligation to Sell.
------------------------------------------
Purchaser understands that the Company's obligation to sell the
Debenture is conditioned upon:
(a) The receipt and acceptance by the Company of
this Subscription Agreement for the Debenture as evidenced by
execution of this Subscription Agreement by the President or any
Vice President of the Company;
(b) Delivery into escrow by Purchaser of good
funds as payment in full for the purchase of the Debenture; and
Section 7. Registration of the Common Stock;
---------------------------------
Compliance with the Securities Act.
- ----------------------------------
7.1 Definitions. For the purpose of this Section 7:
-----------
(a) the term "Registration Statement" shall mean
any registration statement required to be filed by Section 7.2
below, and shall include any preliminary prospectus, final
prospectus, exhibit or amendment included in or relating to such
registration statement; and
(b) the term "untrue statement" shall include any
untrue statement or alleged untrue statement, or any omission or
alleged omission to state in the Registration Statement a
material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under
which they were made, not misleading.
7.2 Registration Procedures and Expenses. The
------------------------------------
Company has entered into a Demand Registration Rights Agreement
with Purchaser, whereby a holder of the Convertible Debenture has
the right to demand that the Company:
(a) promptly after the exercise of the Demand
Registration Right and in sufficient time to have such
registration effective within one hundred twenty (120) days
thereof, file with the SEC a registration statement under the
Securities Act on a form which is appropriate to register the
Common Stock underlying the Debenture;
(b) use its best efforts, subject to receipt of
necessary information from the Purchaser, to cause such
Registration Statement to become effective as promptly after
filing as practicable;
11
<PAGE>
(c) prepare and file with the SEC such amendments
and supplements to such Registration Statement and the prospectus
used in connection therewith as may be necessary to keep such
Registration Statement effective until termination of such
obligation as provided in Section 7.9 below;
(d) furnish to the Purchaser with respect to
Conversion Shares registered on the Registration Statement (and
to each underwriter, if any, of such Common Stock) such number of
copies of prospectuses in conformity with the requirements of the
Securities Act and such other documents as the Purchaser may
reasonably request, in order to facilitate the public sale or
other disposition of all or any of the Conversion Shares by the
Purchaser; provided, however, that the obligation of the Company
to deliver copies of prospectuses to the Purchaser shall be
subject to the receipt by the Company of reasonable assurances
from the Purchaser that the Purchaser will comply with the
applicable provisions of the Securities Act and of such other
securities laws as may be applicable in connection with any use
of such prospectuses;
(e) file such documents as may be required of the
Company for normal securities law clearance for the resale of the
Common Stock in which states of the United States as may be
reasonably requested by the Purchaser; provided, however, that
the Company shall not be required in connection with this
paragraph (e) to qualify as a foreign corporation or execute a
general consent to service of process in any jurisdiction;
(f) bear all expenses in connection with the
procedures in paragraphs (a) through (e) of this Section 7.2 and
the registration of the Common Stock on such Registration
Statement and the satisfaction of the blue sky laws of such
states, including the reasonable fees and expenses of legal
counsel to the Purchaser in connection with the procedures in
paragraph (a) through (e) of this Section 7.2, other than
underwriting discounts and selling commissions or expenses
required by law to be borne by Purchaser; and
(g) In the event that the Registration Statement
is not effective within 120 days of the exercise of the Demand
Registration Right, because of the Company's acts, solely and not
due to Securities and Exchange Commission delay in response, the
Company shall pay Purchaser by wire transfer, as liquidated
damages for such failure and not as a penalty, two (2%) percent
of the principal amount of this Debenture for the first month and
three (3%) percent of the principal amount of this Debenture for
each month thereafter until the Company procures registration of
the Conversion Shares. If the Company does not remit the damages
to the Purchaser as set forth above, the Company will pay the
Purchaser reasonable costs of collection, including attorneys
fees, in addition to the liquidated damages. Such payment shall
be made to the Purchaser immediately if the registration of the
Debenture is not effected; provided, however, that the payment of
such liquidated damages shall not relieve the Company from its
obligations to register the Debenture pursuant to this Section.
The registration of the Debenture pursuant to this provision
shall not affect or limit Purchaser's other rights or remedies as
set forth in this Agreement.
12
<PAGE>
7.3 Underwriter. The Company understands that the
-----------
Purchaser disclaims being an "underwriter" (as such term is
defined under the Securities Act and the rules and regulations
promulgated thereunder (an "Underwriter")), but Purchaser being
deemed an Underwriter shall not relieve the Company of any
obligation it has hereunder.
7.4 Indemnification. Each of the Company and the
---------------
Purchaser agrees to indemnify the other and to hold the other
harmless from and against any and all losses, damages,
liabilities, costs and expenses (including reasonable attorneys'
fees) which the other may sustain or incur in connection with the
breach by the indemnifying party of any representation, warranty
or covenant made by it in this Agreement.
7.5 Information Available. So long as any
---------------------
registration statement is effective covering the resale of the
Common Stock underlying the Debenture, the Company will furnish
to Purchaser:
(a) as soon as possible after available (but in
the case of the Company's Annual Report to Stockholders, within
150 days after the end of each fiscal year of the Company), one
copy of (i) its Annual Report to Stockholders (which Annual
report shall contain financial statements audited in accordance
with generally accepted accounting principles in the United
States of America by a national firm of certified public
accountants); (ii) if not included in substance in the Annual
Report to Stockholders its Annual Report on Form 10-K within 100
days after the end of each fiscal year of the Company; (iii) each
of its Quarterly Reports to Stockholders, and its Quarterly
Reports on Form 10-Q; and (iv) a full copy of the registration
statement covering the Conversion Shares (the foregoing, in each
case, including exhibits); and
(b) upon the reasonable request of Purchaser,
such other information that is generally available to the public.
7.6 Rule 144 Reporting. With a view to making
------------------
available the benefits of certain rules and regulations of the
SEC which may at any time permit the sale of the Debenture to the
public without registration, the Company agrees to use its best
efforts to:
(a) make and keep public information available,
as those terms are understood and defined in Rule 144 under the
Securities Act, at all times after the effective date on which
the Company becomes subject to the reporting requirements of the
Securities Act or the Exchange Act;
(b) use its best efforts to file with the SEC in
a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act;
(c) to furnish to Purchaser forthwith upon
request a written statement by the Company as to its compliance
with the reporting requirements of said Rule 144, and of the
Securities Act and the Exchange Act, a copy of the most recent
13
<PAGE>
annual or quarterly report of the Company, and such other reports
and documents of the Company and other information in the
possession of or reasonably obtainable by the Company as
Purchaser may reasonably request in availing itself of any rule
or regulation of the SEC allowing Purchaser to sell any such
Debenture without registration.
7.7 Temporary Cessation of Offers and Sales by
------------------------------------------
Purchaser. The Purchaser acknowledges that there may
- ---------
occasionally be times when the Company may be required to suspend
the use of the prospectus forming part of the Registration
Statement until such time as an amendment to the Registration
Statement has been filed by the Company and declared effective by
the Commission, until the prospectus is supplemented or amended
to comply with the Securities Act, or until such time as the
Company has filed an appropriate report with the Commission
pursuant to the Exchange Act. The Company agrees to file any
necessary amendments, supplements and reports as soon as
practicable under the circumstances. Purchaser hereby covenants
that it will not sell any Common Stock pursuant to said
prospectus during a period of not more than 20 days commencing at
the time at which the Company gives the Purchaser notice of the
suspension of the use of said prospectus and ending at the time
the Company gives the Purchaser notice that the Purchaser may
thereafter effect sales pursuant to said prospectus, as the same
may have been supplemented or amended. There shall be no more
than two (2) such cessations in any one (1) year period
commencing on the effectiveness of the Registration Statement.
7.8 Transfer of Common Stock After Registration.
-------------------------------------------
Purchaser hereby covenants with the Company not to make any sale
of the Common Stock except either (i) in accordance with the
Registration Statement, in which case Purchaser covenants to
comply with the requirement of delivering a current prospectus,
or (ii) in accordance with Rule 144, in which case Purchaser
covenants to comply with Rule 144.
7.9 Termination of Obligations. The obligations of
--------------------------
the Company pursuant to Sections 7.2, 7.3 and 7.6 hereof shall
cease and terminate upon the earlier to occur of (i) such time as
all of the Common Stock have been re-sold, or (ii) such time as
all of the Common Stock may be re-sold in any three-month period
pursuant to Rule 144 under the Securities Act.
Section 8. Legal Fees and Expenses. Each of the
-----------------------
parties shall pay its own fees and expenses (including the fees
of any attorneys, accountants, appraisers or others engaged by
such party) in connection with this Agreement and the
transactions contemplated hereby.
Section 9. Conversion of the Debenture. Conversion of
---------------------------
the Debenture to Common Stock may be made at any time on or after
the Registration Statement is deemed effective, or pursuant to an
-----------------
exemption from registration (and if the Company shall so request
- ----------------------------------------------------------------
in writing, by a submission of an opinion of counsel reasonably
- ---------------------------------------------------------------
satisfactory to the Company that such an exemption exists), to
- ----------------------------------------------------------
convert up to one hundred (100%) percent of the original amount
of the Debentures into shares of Common Stock of the Company.
The Debenture may be held by Purchaser for up to one (1) year
from the Closing Date. If any Debenture remain outstanding on
the first anniversary of the Closing Date, all remaining portions
14
<PAGE>
of the Debenture will be converted on that date at the conversion
price as defined herein. This period shall be extended for each
day after 120 days from the date of exercise of the Demand
Registration Right, that the Registration Statement is not
effective.
9.1 Notice of Conversion. Conversion of the Debenture
--------------------
to Common Stock may be exercised in whole or in part by
Purchasers telecopying an executed and completed Notice of
Conversion (in the form annexed hereto as Exhibit B) to the
Company and delivering the original Notice of Conversion and the
certificate representing the Debenture to the Company by express
courier within three (3) business days of exercise. Each date on
which a Notice of Conversion is telecopied to and received by the
Company in accordance with the provisions hereof shall be deemed
a Conversion Date. The Company will transmit the certificates
representing the Common Stock issuable upon conversion of all or
any part of the Debenture (together with the certificates
representing portions of the Debenture not so converted) to the
Purchaser via express courier within five (5) business days after
the Company has received the original Notice of Conversion and
Debenture certificate being so converted. In addition to any
other remedies which may be available to the Purchaser, in the
event that the Company fails for any reason to effect delivery of
such shares of Common Stock within such five (5) business day
period, the Purchaser will be entitled to revoke the relevant
Notice of Conversion by delivering by telecopier with an original
by overnight courier a notice to such effect to the Company
whereupon the Company and the Purchaser shall each be restored to
their respective positions immediately prior to the delivery of
the Notice of Conversion. Upon receipt of such Notice the
Company shall return by overnight courier the original
certificate representing the Debenture. The Notice of Conversion
and certificate representing the portion of the Debenture
converted shall be delivered as follows:
To the Company:
American Resources of Delaware, Inc.
160 Morgan Street
Versailles, KY 40383
Attn: Karen Underwood, Corporate Secretary
David Stetson, Esq., General Counsel
(phone) (606) 873-5455
(fax) (606) 873-4689
or to such other person at such other place as the Company shall
designate to the Purchaser in writing.
In the event that the Common Stock issuable upon
--------------------------
conversion of the Debenture is not delivered within five (5)
- --------------------------------------------
business days of receipt by the Company of a valid Conversion
Notice and the Debenture to be converted (such date of receipt
referred to as the "Conversion Date"), the Company shall pay to
the Purchaser, by wire transfer, as liquidated damages for such
failure and not as a penalty, for each $100,000 of Debenture
------------------------------
sought to be converted, $100 for each of the first two (2) days,
- ----------------------------------------------------------------
$200 for each of the next two days, $300 for each of the next two
- -----------------------------------------------------------------
15
<PAGE>
days, $400 for each of the next two days and $500 per day
- ---------------------------------------------------------
thereafter that the Conversion Shares are not delivered, which
- --------------------------------------------------------
penalty shall run from the sixth business day after the
- ------- ------------------------
Conversion Date.
9.2 Permissive Redemption. The Company has the right
---------------------
to redeem the Debenture in cash, should the conversion price
based upon the five (5) day average closing bid formula be below
the closing bid price on the Closing Date, at one hundred twenty
five (125%) percent of the Debenture Purchase Price, plus accrued
interest. Upon notice by fax of its election to redeem the
------ --------
Debentures, the Company will pay an additional one (1%) percent
per month in cash in a pro rata basis until redemption for cash
is complete. In the event after ten (10) business days from such
-----------------
notice, the redemption for cash is not complete, the Purchasers
shall again have the right to convert the Debentures into
Conversion Shares. Any such redemption notice shall not be
---------------------------------------
effective with respect to the Debentures for which a Notice of
- --------------------------------------------------------------
Conversion has been faxed to the Company.
- -----------------------------------------
A Purchaser may fax a Notice to the Company, Attn:
--------------------------------------------------
David Stetson, Esq., requiring the Company to declare, by faxed
- ---------------------------------------------------------------
notice within 24 hours of the Notice from the Purchaser, whether
- ----------------------------------------------------------------
it intends to effect any redemption during the five (5) business
- ----------------------------------------------------------------
days following 24 hours from the Purchaser's Notice. In the
- ------------------------------------------------------------
event the Company does not reply during said 24 hour period, the
- ----------------------------------------------------------------
Company may not redeem that Purchaser's Debentures during the
- -------------------------------------------------------------
five (5) day period commencing 24 hours after the Notice from the
- -----------------------------------------------------------------
Purchaser.
- ----------
Section 10. Notices. All notices, requests, consents
-------
and other communications hereunder shall be in writing, shall be
mailed by first class registered or certified airmail, postage
prepaid, and shall be deemed given when so mailed:
(a) if to the Company, to
American Resources of Delaware, Inc.
160 Morgan Street
Versailles, KY 40383
Attn: Karen Underwood, Corporate Secretary
David Stetson, Esq., General Counsel
copy to:
Phillip E. Allen
The Marketplace, Suite 130
12910 Shelbyville Road
Louisville, KY 40243
or to such other person at such other place as the Company shall
designate to the Purchaser in writing;
16
<PAGE>
(b) if to the Purchaser, to
copy to:
or at such other address or addresses as may have been furnished
to the Company in writing; or
(c) if to any transferee or transferees of a
Purchaser, at such address or addresses as shall have been
furnished to the Company at the time of the transfer or
transfers, or at such other address or addresses as may have been
furnished by such transferee or transferees to the Company in
writing.
Section 11. Miscellaneous.
-------------
11.1 Listing. The Company will use its best efforts to
-------
maintain the listing of its Common Stock on the Nasdaq Small Cap
Market.
11.2 Entire Agreement. This Agreement, including
---------------- ---------
Exhibit A (Form of Notice of Conversion), Exhibit B (Form of
- ------------------------------------------------------------
Convertible Debenture), Exhibit C (Form of Convertible Debenture
- ----------------------------------------------------------------
Escrow Agreement) and Exhibit D (Form of Registration Rights
- ------------------------------------------------------------
Agreement), embodies the entire agreement and understanding
- ----------
between the parties hereto with respect to the subject matter
hereof and supersedes all prior oral or written agreements and
understandings relating to the subject matter hereof. No
statement, representation, warranty, covenant or agreement or any
kind not expressly set forth in this Agreement shall affect, or
be used to interpret, change or restrict, the express terms and
provisions of this Agreement.
11.3 Amendments. This Agreement may not be modified or
----------
amended except pursuant to an instrument in writing signed by the
Company and by Purchaser.
11.4 Headings. The headings of the various sections
--------
of this Agreement have been inserted for convenience of reference
only and shall not be deemed to be part of this Agreement.
17
<PAGE>
11.5 Severability. In case any provision contained in
------------
this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be
affected or impaired thereby.
11.6 Governing Law/Jurisdiction. This Agreement will
--------------------------
be construed and enforced in accordance with and governed by the
laws of the State of New York, except for matters arising under
the 1933 Act, without reference to principles of conflicts of
law. Each of the parties consents to the jurisdiction of the
federal district court for the Southern District of New York in
connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on forum non conveniens,
--------------------
to the bringing of any such proceeding in such jurisdictions.
Each party hereby agrees that if another party to this Agreement
obtains a judgment against it in such a proceeding, the party
which obtained such judgment may enforce same by summary judgment
in the courts of any country having jurisdiction over the party
against whom such judgment was obtained, and each party hereby
waives any defenses available to it under local law and agrees to
the enforcement of such a judgment. Each party to this Agreement
irrevocably consents to the service of process in any such
proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to such party at its address set
forth herein. Nothing herein shall affect the right of any party
to serve process in any other manner permitted by law.
11.7 Recovery of Attorney's Fees. Should any party
---------------------------
bring an action to enforce the terms of this Agreement then, if
Purchaser prevails in such action it should be entitled to
recovery of its attorney's fees from the Company, and if the
Company prevails in such action it shall be entitled to recovery
of its attorney's fees from the Purchasers.
11.8 Fees. Notwithstanding Section 11.6, the Company
----
acknowledges that Purchaser shall have no responsibility for the
payment of any of its fees in connection with this offering.
11.9 Counterparts/Facsimile. This Agreement may be
----------------------
executed in two or more counterparts, each of which shall
constitute an original, but all of which, when taken together,
shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party
hereto and delivered to the other party. In lieu of the
original, a facsimile transmission or copy of the original shall
be as effective and enforceable as the original.
11.10 Publicity. The Purchaser shall not issue any
---------
press releases or otherwise make any public statement with
respect to the transactions contemplated by this Agreement
without the prior written consent of the Company, except as may
be required by applicable law or regulation.
11.11 Survival. The representations and warranties in
--------
this Agreement shall survive Closing.
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized representatives
the day and year first above written.
AMERICAN RESOURCES OF
DELAWARE, INC.
By
----------------------------
Officer
PURCHASER:
------------------------------
By
----------------------------
Officer
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
--------------------
(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT THE
4% CONVERTIBLE DEBENTURE)
The undersigned hereby irrevocably elects to convert the above
applicable portion of Debenture No. into shares of common
----
stock of AMERICAN RESOURCES OF DELAWARE, INC. (the "Company")
according to the conditions hereof, as of the date written below.
The undersigned represents and warrants that
(i) All offers and sales by the undersigned of the shares
of Common Stock issuable to the undersigned upon
conversion of the Debenture shall be made in compliance
with Regulation D, pursuant to an exemption from
registration under the Act, or pursuant to registration
of the Common Stock under the Securities Act of 1933,
as amended (the "Securities Act"), subject to any
restrictions on sale or transfer set forth in the
Convertible Debenture Purchase Agreement between the
Company and the original holder of the Certificate
submitted herewith for conversion.
(ii) Upon conversion pursuant to this Notice of Conversion,
the undersigned will not own or deemed to beneficially
own (within the meaning of the Securities Exchange Act
of 1934) 4.9% or more of the then issued and
outstanding shares of the company.
- ------------------------------ ------------------------------
Date of Conversion Applicable Conversion Price
- ------------------------------ ------------------------------
Number of Common Shares upon $ Amount of Conversion
Conversion
- ------------------------------ ------------------------------
Signature Name
Address: Delivery of Shares to:
------------------------------
<PAGE>
EXHIBIT B
No. $ USD
------ --------
AMERICAN RESOURCES OF DELAWARE, INC.
$6,000,000 4% Convertible Debenture
THIS DEBENTURE HAS BEEN ACQUIRED FOR INVESTMENT AND HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH DEBENTURE MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN EXEMPTION THEREFROM UNDER SAID ACT WHICH, EXCEPT IN THE CASE
OF AN EXEMPTION PURSUANT TO RULE 144 UNDER SAID ACT, IS CONFIRMED
IN A LEGAL OPINION SATISFACTORY TO THE COMPANY.
THIS DEBENTURE is one of a duly authorized issue of Debentures of
AMERICAN RESOURCES OF DELAWARE, INC., a corporation duly
organized and existing under the laws of the State of Delaware
(the "ISSUER") designated as its Four (4%) Percent Convertible
Debenture due October , 1997, in an aggregate face amount not
---
exceeding Six Million (USD$6,000,000) Dollars, issuable in One
Hundred Thousand ($100,000) Dollars par value face amounts.
FOR VALUE RECEIVED, the ISSUER promises to pay to
the registered holder hereof and its successors and assigns (the
"HOLDER"), the principal sum of:
United States Dollars,
on October , 1997 (the "Maturity Date"), and to pay interest,
--
as outlined below, at the rate of 4% per annum, on the principal
sum outstanding from time to time for the term of the Debenture
or until the Debenture is completely converted. Accrual of
Interest shall commence on the first business day to occur after
the date hereof and shall continue until payment in full of the
principal sum has been made or duly provided for. The interest
so payable will be paid to the person in whose name this
Debenture (or one or more predecessor Debentures) is registered
on the records of the Issuer regarding registration and transfers
of the Debenture (the "Debenture Register"), provided, however,
that the ISSUER'S obligation to a transferee of this Debenture
arises only if such transfer, sale or other disposition is made
in accordance with the terms and conditions of the Convertible
Debenture Purchase Agreement dated as of October , 1996 between
--
the ISSUER and HOLDER (the "Subscription Agreement"). The
principal of, and interest on, this Debenture are payable
<PAGE>
in shares of Common Stock of the Company (the "Conversion
- ---------------------------------------------------------
Shares"), at the address last appearing on the Debenture register
- --------
of the ISSUER as designated in writing by the Holder hereof from
time to time. The ISSUER will pay the principal of and all
accrued and unpaid interest due upon this Debenture on the
Maturity Date in Conversion Shares at the Conversion Price, less
any amounts required by law to be deducted or withheld, to the
Holder at the last address on the Debenture Register. Such
payment shall constitute a payment of principal and interest
hereunder and shall satisfy and discharge the liability for
principal and interest on the Debenture to the extent of the sum
represented by such check plus any amounts so deducted.
The Debenture is subject to the following additional provisions:
1. The Debenture is exchangeable for like Debentures
in equal aggregate principal amount of authorized denominations,
as requested by the HOLDERS surrendering the same. No service
charge will be made for such registration or transfer or
exchange.
2. The ISSUER shall be entitled to withhold from all
payments of principal of, and interest on, this Debenture any
amounts required to be withheld under the applicable provisions
of the United States Income Tax or other applicable laws at the
time of such payments.
3. This Debenture has been issued subject to
investment representations of the original HOLDER hereof and may
be transferred or exchanged in the US only in compliance with
Securities Act of 1933, as amended (the "Act") and applicable
state securities laws. Prior to the due presentment for such
transfer of this Debenture, the ISSUER and any agent of the
ISSUER may treat the person in whose name this Debenture is duly
registered on the ISSUER'S Debenture Register as the owner hereof
for the purpose of receiving payment as herein provided and all
other purposes, whether or not this debenture is overdue, and
neither the ISSUER nor any such agent shall be affected by notice
to the contrary. The transferee shall be bound, as the original
HOLDER by the same representations and terms described herein and
under the Subscription Agreement.
4. The Subscriber is entitled, at its option,
commencing at any time on or after the effective date of
registration to convert up to One Hundred (100%) percent of the
original principal amount of Debentures into shares of Common
Stock of the Company (the "Shares") at a conversion price which
shall be the lesser of:
(i) The Purchase Date Price (as defined below);
and
(ii) Seventy-Five (75%) percent of the Market
Price (as defined below).
For purposes of this Section 4, "Purchase Date Price"
shall be the closing bid price of the Common Stock as reported on
the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") for the Closing Date. For purposes
of this Section 4, "Market Price" shall be the average of the
closing bid prices of the Common Stock as reported by NASDAQ for
2
<PAGE>
the five (5) trading days prior to the date of conversion of the
4% Convertible Debenture, as adjusted to reflect any stock
dividend on, or stock split, or stock combination of, the Common
Stock since the Closing Date.
If any Debentures remain outstanding on the first
anniversary of the Closing Date, all remaining portions of the
Debentures will be converted on that date at the Conversion Price
as set forth in Section 4 herein. This period shall be extended
for each day after One Hundred Twenty (120) days from the date of
exercise of the Demand Registration Right, that the registration
is not effective.
No fractional shares or script representing fractions
of shares will be issued on conversion, but the number of shares
issuable shall be rounded to the nearest whole share, with the
fraction paid in cash at the discretion of the ISSUER. For
purposes of this Debenture, the "Conversion Date" on which notice
of conversion is given by the HOLDER shall be deemed to be the
day Notice is sent by facsimile, provided thereafter Debenture is
sent by overnight courier within three (3) business days, subject
to the Conversion Dates aforesaid and, with the conversion notice
duly executed, to the Transfer Agent via recognized overnight
courier.
5. No provision of this Debenture shall alter or
impair the obligation of the ISSUER, which is absolute and
unconditional, to pay the principal of, and interest on this
Debenture at the place, time, and rate, and in the coin or
currency herein prescribed.
6. The ISSUER hereby expressly waives demand and
presentment for payment, notice on nonpayment, protest, notice of
protest, notice of dishonor, notice of acceleration or intent to
accelerate, and diligence in taking any action to collect amounts
called for hereunder and shall be directly and primarily liable
for the payment of all sums owing and to be owing hereon,
regardless of and without any notice, diligence, act or omission
as or with respect to the collection of any amount called for
hereunder.
7. The ISSUER agrees to pay all costs and expenses,
including reasonable attorneys' fees, which may be incurred by
the Holder in collecting any amount due or exercising the
conversion rights under this Debenture.
If one or more of the following described "Events of
Default" shall occur,
a. The ISSUER shall default in the payment of
principal or Interest on this Debenture and
continuance for five (5) days; or
b. Any of the representations or warranties made
by the ISSUER herein, or in the Subscription
Agreement shall have been incorrect in any
material respect; or
3
<PAGE>
c. The ISSUER shall fail to perform or observe
any other covenant, term, provision, condition,
agreement or obligation of the ISSUER under this
Debenture and such failure shall continued uncured
for a period of seven (7) days after notice from
the Holder of such failure; or
d. A trustee, liquidator or receiver shall be
appointed for the ISSUER or for a substantial part
of its property or business without its consent
and shall not be discharged within thirty (30)
days after such appointment; or
e. Any governmental agency or any court of
competent jurisdiction at the instance of any
governmental agency shall assume custody or
control of the whole or any substantial portion of
the properties or assets of the ISSUER and shall
not be dismissed within thirty (30) calendar days
thereafter; or
f. Bankruptcy reorganization, Insolvency or
liquidation proceedings or other proceedings for
relief under any bankruptcy law or any law for the
relief or debtors shall be instituted by or
against the ISSUER, and if instituted against the
ISSUER, ISSUER shall by any action or answer
approve of, consent to or acquiesce in any such
proceedings or admit the material allegations of,
or default in answering a petition filed in any
such proceeding; or
g. The ISSUER'S Common Stock is delisted from
trading on NASDAQ Small Cap Market unless it is
thereupon admitted to trading on the NASDAQ
National Market or a national stock exchange.
Then, or at any time thereafter, and in each and every such
case, unless such Event of Default shall have been waived in
writing by the HOLDER (which waiver shall not be deemed to
be a waiver of any subsequent default) at the option of the
HOLDER and in the HOLDER'S sole discretion, the HOLDER may
consider this Debenture immediately due and payable, without
presentment, demand protest or notice of any kind, all of
which are hereby expressly waived, anything herein or in any
note or other instruments contained to the contrary
notwithstanding, and HOLDER may immediately, and without
expiration of any period of grace, enforce any and all of
the HOLDER'S rights and remedies provided herein or any
other rights or remedies afforded by law.
8. The Company has the right to redeem the Debenture
in case should the Conversion Price be below the closing bid
price on the Closing Date at one hundred twenty five (125%)
percent of the Purchase Price, plus interest, upon notice of its
right to redeem the Debentures, the Company will pay an
additional one (1%) percent per month in cash on a pro rata basis
until redemption for cash is complete. In the event after ten
business days from such notice, the redemption for cash is not
complete, then the Purchaser shall again have the right to
convert the Debentures into Conversion Shares.
4
<PAGE>
9. In case any provision of this Debenture is held by
a court of competent jurisdiction to be excessive in scope or
otherwise invalid or unenforceable, such provision shall be
adjusted rather than voided, if possible, so that it is
enforceable to the maximum extent possible, and the validity and
enforceability of the remaining provisions of this Debenture will
not in any way be affected or impaired thereby.
10. This Debenture and the Agreement referred to in
this Debenture constitute the full and entire understanding and
agreement between the ISSUER and HOLDER with respect hereof.
Neither this Debenture nor any terms hereof may be amended,
waived, discharged or terminated other than by a written
instrument signed by the ISSUER and the HOLDER.
11. This Debenture shall be governed by and construed
in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the ISSUER has caused this
instrument to be duly executed by an officer thereunto duly
authorized.
AMERICAN RESOURCES OF
DELAWARE, INC.
By
----------------------------
Name:
Title:
Date:
5
<PAGE>
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated the day
-----
of October, 1996, between the person and/or entity whose name
and address appears on the signature page attached hereto
(individually a "Holder" or collectively with the holders of the
other Securities issued pursuant to a Debenture Purchase
Agreement of even date herewith, as defined below, the "Holders")
and AMERICAN RESOURCES OF DELAWARE, INC., a Delaware corporation
having its principal place of business at 160 Morgan Street,
Versailles, KY 40383.
WHEREAS, simultaneously with the execution and delivery
of this Agreement, the Holders are purchasing from the Company,
pursuant to a Convertible Debenture Purchase Agreement dated the
date hereof (the "Subscription Agreement"), an aggregate of up to
Six Million ($6,000,000) Dollars principal amount of Debentures
(singularly the "Debenture" and collectively the "Debentures");
and
WHEREAS, the Debenture is convertible into shares (the
"Conversion Shares") of the Company's Common Stock, par value
$.00001 per share (the "Common Stock"); and
WHEREAS, the Company desires to grant to the Holders
the registration rights set forth herein with respect to the
Conversion Shares.
NOW, THEREFORE, the parties hereto mutually agree as
follows:
Section 1. Registrable Securities. As used herein the
----------------------
term "Registrable Security" means each of the Conversion Shares;
provided, however, that with respect to any particular
Registrable Security, such security shall cease to be a
Registrable Security when, as of the date of determination, (i)
it has been effectively registered under the Securities Act of
1933, as amended (the "Securities Act") and disposed of
pursuant thereto, (ii) registration under the Securities Act
is no longer required for the immediate public distribution of
such security as a result of the provisions of Rule 144, or (iii)
it has ceased to be outstanding. The term "Registrable
Securities" means any and/or all of the securities falling within
the foregoing definition of a "Registrable Security." In the
event of any merger, reorganization, consolidation,
recapitalization or other change in corporate structure affecting
the Common Stock, such adjustment shall be made in the definition
of "Registrable Security" as is appropriate in order to prevent
any dilution or enlargement of the rights granted pursuant to
this Section 1.
Section 2. Restrictions on Transfer. The Holder
------------------------
acknowledges and understands that prior to the registration of
the Conversion Shares as provided herein, the Debenture and the
Conversion Shares are "restricted securities" as defined in Rule
144 promulgated under the Act. The Holder understands that no
disposition or transfer of the Debenture or Conversion Shares may
be made by Holder in the absence of (i) an opinion of counsel
reasonably satisfactory to the Company that such transfer may be
made or (ii) a registration statement under the Securities Act is
then in effect with respect thereto.
<PAGE>
Section 3. Registration Rights.
-------------------
(a) At any time commencing after the date hereof a
Holder of the Conversion Shares (whether or not the Debentures
have been converted) shall have the right, exercisable by written
notice to the Company (the "Demand Registration Request"), to
have the Company prepare and file with the Securities and
Exchange Commission ("SEC"), on one occasion, at the sole expense
of the Company (except as provided in Section 3(c) hereof), in
respect of all holders of Registrable Securities, so as to permit
a public offering and sale of the Registrable Securities under
the Act. The number of Conversion Shares to be registered shall
------------------------------------------------------
be one hundred fifty (150%) percent of the number of such shares
- ----------------------------------------------------------------
that would be required, if all of the Debentures were converted
- ---------------------------------------------------------------
on the effective date of the Registration Statement.
- ----------------------------------------------------
(b) The Company will maintain any Registration
Statement or post-effective amendment filed under this Section 3
hereof current under the Securities Act until the earlier of (i)
the date that all of the Registrable Securities have been sold
pursuant to the Registration Statement, (ii) the date the holders
thereof receive an opinion of counsel that the Registrable
Securities may be sold under the provisions of Rule 144 or (iii)
the second anniversary of the effective date of the Registration
Statement.
(c) All fees, disbursements and out-of-pocket expenses
and costs incurred by the Company in connection with the
preparation and filing of any Registration Statement under
subparagraph 3(a) and in complying with applicable securities and
Blue Sky laws (including, without limitation, all attorneys'
fees) shall be borne by the Company. The Holder shall bear the
cost of underwriting discounts and commissions, if any,
applicable to the Registrable Securities being registered and the
fees and expenses of its counsel. The Company shall use its best
efforts to qualify any of the securities for sale in such states
as such Holder reasonably designates and shall furnish
indemnification in the manner provided in Section 6 hereof.
However, the Company shall not be required to qualify in any
state which will require an escrow or other restriction relating
to the Company and/or the sellers. The Company at its expense
will supply the Holder with copies of such Registration Statement
and the prospectus or offering circular included therein and
other related documents in such quantities as may be reasonably
requested by the Holder.
(d) The Company shall not be required by this Section
3 to include a Holder's Registrable Securities in any
Registration Statement which is to be filed if, in the opinion of
counsel for both the Holder and the Company (or, should they not
agree, in the opinion of another counsel experienced in
securities law matters acceptable to counsel for the Holder and
the Company) the proposed offering or other transfer as to which
such registration is requested is exempt from applicable federal
and state securities laws and would result in all purchasers or
transferees obtaining securities which are not "restricted
securities", as defined in Rule 144 under the Securities Act.
(e) In the event the Registration Statement to be
filed by the Company pursuant to Section 3(a) above is not
declared effective by the SEC within 120 days of the receipt by
the Company of the Demand Registration Request, because of the
2
<PAGE>
Company's acts solely and not due to Securities and Exchange
Commission delay in response, then the Company will pay Holder by
wire transfer, as liquidated damages for such failure and not as
a penalty, two (2%) percent of the principal amount of this
Debenture for the first month and three (3%) percent of the
principal amount of the Debenture for each month thereafter until
the Company procures registration of the Common Stock underlying
the Debenture (the "Conversion Shares"). If the Company does not
remit the damages to the Purchaser as set forth above, the
Company will pay the Purchaser reasonable costs of collection,
including attorneys fees, in addition to the liquidated damages.
Such payment shall be made to the Purchaser immediately if the
registration of the Conversion Shares are not effected; provided,
however, that the payment of such liquidated damages shall not
relieve the Company from its obligations to register the
Conversion Shares pursuant to this Section. The registration of
the Conversion Shares pursuant to this provision shall not affect
or limit Purchaser's other rights or remedies as set forth in
this Agreement.
(f) No provision contained herein shall preclude the
Company from selling securities pursuant to any Registration
Statement in which it is required to include Registrable
Securities pursuant to this Section 3.
Section 4. Cooperation with Company. Holders will
------------------------
cooperate with the Company in all respects in connection with
this Agreement, including, timely supplying all information
reasonably requested by the Company and executing and returning
all documents reasonably requested in connection with the
registration and sale of the Registrable Securities.
Section 5. Registration Procedures. If and whenever
-----------------------
the Company is required by any of the provisions of this
Agreement to effect the registration of any of the Registrable
Securities under the Act, the Company shall (except as otherwise
provided in this Agreement), as expeditiously as possible:
(a) prepare and file with the Commission such
amendments and supplements to such registration statement and the
Prospectus used in connection therewith as may be necessary to
keep such registration statement effective and to comply with the
provisions of the Act with respect to the sale or other
disposition of all securities covered by such registration
statement whenever the Holder or Holders of such securities shall
desire to sell or otherwise dispose of the same (including
prospectus supplements with respect to the sales of securities
from time to time in connection with a registration statement
pursuant to Rule 415 of the Commission);
(b) furnish to each Holder such numbers of copies of a
summary prospectus or other prospectus, including a preliminary
prospectus or any amendment or supplement to any prospectus, in
conformity with the requirements of the Act, and such other
documents, as such Holder may reasonably request in order to
facilitate the public sale or other disposition of the securities
owned by such Holder;
(c) use its best efforts to register and qualify the
securities covered by such registration statement under such
other securities or blue sky laws of such jurisdictions as the
Holder, shall reasonably request, and do any and all other acts
3
<PAGE>
and things which may be necessary or advisable to enable each
Holder to consummate the public sale or other disposition in
such jurisdiction of the securities owned by such Holder, except
that the Company shall not for any such purpose be required to
qualify to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified or to file therein
any general consent to service of process;
(d) use its best efforts to list such securities on
Nasdaq or any securities exchange on which any securities of the
Company is then listed, if the listing of such securities is then
permitted under the rules of such exchange or Nasdaq;
(e) enter into and perform its obligations under an
underwriting agreement, if the offering is an underwritten
offering, in usual and customary form, with the managing
underwriter or underwriters of such underwritten offering;
(f) notify each Holder of Registrable Securities
covered by such registration statement, at any time when a
prospectus relating thereto covered by such registration
statement is required to be delivered under the Act, of the
happening of any event of which it has knowledge as a result of
which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in
the light of the circumstances then existing.
Section 6. Indemnification.
---------------
(a) In the event of the filing of any Registration
Statement with respect to Registrable Securities pursuant to
Section 3 hereof, the Company agrees to indemnify and hold
harmless the Holder and each person, if any, who controls the
Holder within the meaning of the Securities Act ("Distributing
Holders") against any losses, claims, damages or liabilities,
joint or several (which shall, for all purposes of this
Agreement, include, but not be limited to, all costs of defense
and investigation and all attorneys' fees), to which the
Distributing Holders may become subject, under the Securities Act
or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of
any material fact contained in any such Registration Statement,
or any related preliminary prospectus, final prospectus, offering
circular, notification or amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading;
provided, however, that the Company will not be liable in any
such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in
such Registration Statement, preliminary prospectus, final
prospectus, offering circular, notification or amendment or
supplement thereto in reliance upon, and in conformity with,
written information furnished to the Company by the Distributing
Holders, specifically for use in the preparation thereof. This
indemnity agreement will be in addition to any liability which
the Company may otherwise have.
4
<PAGE>
(b) Each Distributing Holder agrees that it will
indemnify and hold harmless the Company, and each officer,
director of the Company or person, if any, who controls the
Company within the meaning of the Securities Act, against any
losses, claims, damages or liabilities (which shall, for all
purposes of this Agreement, include, but not be limited to, all
costs of defense and investigation and all attorneys' fees) to
which the Company or any such officer, director or controlling
person may become subject under the Securities Act or otherwise,
insofar as such losses claims, damages or liabilities (or actions
in respect thereof; arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact
contained in a Registration Statement requested by such
Distributing Holder, or any related preliminary prospectus, final
prospectus, offering circular, notification or amendment or
supplement thereto, or arise out of or are based upon the
omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, but in each case only to the extent that
such untrue statement or alleged untrue statement or omission or
alleged omission was made in such Registration Statement,
preliminary prospectus, final prospectus, offering circular,
notification or amendment or supplement thereto in reliance upon,
and in conformity with, written information furnished to the
Company by such Distributing Holder, specifically for use in the
preparation thereof and, provided further, that the indemnity
agreement contained in this Section 6(b) shall not inure to the
benefit of the Company with respect to any person asserting such
loss, claim, damage or liability who purchased the Registrable
Securities which are the subject thereof if the Company failed to
send or give (in violation of the Securities Act or the rules and
regulations promulgated thereunder) a copy of the prospectus
contained in such Registration Statement to such person at or
prior to the written confirmation to such person of the sale of
such Registrable Securities, where the Company was obligated to
do so under the Securities Act or the rules and regulations
promulgated thereunder. This indemnity agreement will be in
addition to any liability which the Distributing Holders may
otherwise have.
(c) Promptly after receipt by an indemnified party
under this Section 6 of notice of the commencement of any action,
such indemnified party will, if a claim in respect thereof is to
be made against the indemnifying party under this Section 6,
notify the indemnifying party of the commencement thereof; but
the omission so to notify the indemnifying party will not relieve
the indemnifying party from any liability which it may have to
any indemnified party otherwise than as to the particular item as
to which indemnification is then being sought solely pursuant to
this Section 6. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate in, and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, assume the
defense thereof, subject to the provisions herein stated and
after notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party
under this Section 6 for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation, unless the
indemnifying party shall not pursue the action to its final
conclusion. The indemnified party shall have the right to employ
separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall
not be at the expense of the indemnifying party if the
5
<PAGE>
indemnifying party has assumed the defense of the action with
counsel reasonably satisfactory to the indemnified party;
provided that if the indemnified party is the Distributing
Holder, the fees and expenses of such counsel shall be at the
expense of the indemnifying party if (i) the employment of such
counsel has been specifically authorized in writing by the
indemnifying party, or (ii) the named parties to any such action
(including any impleaded parties) include both the Distributing
Holder and the indemnifying party and the Distributing Holder
shall have been advised by such counsel that there may be one or
more legal defenses available to the indemnifying party different
from or in conflict with any legal defenses which may be
available to the Distributing Holder (in which case the
indemnifying party shall not have the right to assume the defense
of such action on behalf of the Distributing Holder, it being
understood, however, that the indemnifying party shall, in
connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out
of the same general allegations or circumstances, be liable only
for the reasonable fees and expenses of one separate firm of
attorneys for the Distributing Holder, which firm shall be
designated in writing by the Distributing Holder). No settlement
of any action against an indemnified party shall be made without
the prior written consent of the indemnified party, which consent
shall not be unreasonably withheld.
Section 7. Contribution. In order to provide for just
------------
and equitable contribution under the Securities Act in any case
in which (i) the Distributing Holder makes a claim for
indemnification pursuant to Section 6 hereof but is judicially
determined (by the entry of a final judgment or decree by a court
of competent jurisdiction and the expiration of time to appeal or
the denial of the last right of appeal) that such indemnification
may not be enforced in such case notwithstanding the fact that
the express provisions of Section 6 hereof provide for
indemnification in such case, or (ii) contribution under the
Securities Act may be required on the part of any Distributing
Holder, then the Company and the applicable Distributing Holder
shall contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (which shall, for all
purposes of this Agreement, include, but not be limited to, all
costs of defense and investigation and all attorneys' fees), in
either such case (after contribution from others) on the basis of
relative fault as well as any other relevant equitable
considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied
by the Company on the one hand or the applicable Distributing
Holder, on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the
Distributing Holder agree that it would not be just and equitable
if contribution pursuant to this Section 7 were determined by pro
rata allocation or by any other method of allocation which does
not take account of the equitable considerations referred to in
this Section 7. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages or liabilities
(or actions in respect thereof) referred to above in this Section
7 shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person
guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such
fraudulent misrepresentation.
6
<PAGE>
Section 8. Notices. Any notice pursuant to this
-------
Agreement by the Company or by the Holder shall be in writing and
shall be deemed to have been duly given if delivered by (i)hand,
(ii) by facsimile and followed by mail delivery or (iii) if
mailed by certified mail, return receipt requested, postage
prepaid, addressed as follows:
(a) If to the Holder, to its, his or her address set
forth on the signature page of this Agreement, with a copy to the
person designated in the Subscription Agreement.
(b) If to the Company, at 160 Morgan Street,
Versailles, KY 40383, (fax) (606) 873-4689, Attn: Karen
Underwood, Corporate Secretary, and David Stetson, Esq., General
Counsel, and a copy to Phillip E. Allen, The Marketplace, Suite
130, 12910 Shelbyville Road, Louisville, KY 40243, (fax) (502)
254-1224, or to such other address as any such party may
designate by notice to the other party. Notices shall be deemed
given at the time they are delivered personally or five (5) days
after they are mailed in the manner set forth above. If notice
is delivered by facsimile to the Company and followed by mail,
delivery shall be deemed given two (2) days after such facsimile
is sent.
Section 9. Assignment. This Agreement is binding upon
----------
and inures to the benefit of the parties hereto and their
respective heirs, successors and permitted assigns. This
Agreement cannot be assigned, amended or modified by the parties
hereto, except by written agreement executed by the parties. If
requested by the Company, the Holder shall have furnished to the
Company an opinion of counsel reasonably satisfactory to the
Company to such effect.
Section 10. Counterparts. This Agreement may be
------------
executed in counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
Section 11. Headings. The headings in this Agreement
--------
are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
Section 12. Governing Law, Venue. This Agreement
--------------------
shall be governed by and construed in accordance with the laws of
the State of New York applicable to contracts made and to be
performed entirely within such State, without regard to its
principles of conflicts of laws. Each of the parties hereto
agrees that in the event of any dispute arising hereunder venue
shall be New York, New York and each party hereby submits to the
jurisdiction of the United States Federal Court in the Southern
District of New York.
Section 13. Severability. If any provision of this
------------
Agreement shall for any reason be held invalid or unenforceable,
such invalidity or unenforceability shall not affect any other
provision hereof and this Agreement shall be construed as if such
invalid or unenforceable provision had never been contained
herein.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, on the day and year first above
written.
AMERICAN RESOURCES OF
DELAWARE, INC.
By:
---------------------------
Name:
Title:
PURCHASER:
------------------------------
By:
---------------------------
8
<PAGE>
EXHIBIT D
CONVERTIBLE DEBENTURE ESCROW AGREEMENT
THIS AGREEMENT is made as of the day of October,
1996 by and between AMERICAN RESOURCES OF DELAWARE, INC., with
its principal office at 160 Morgan Street, Versailles, KY 40383
(hereinafter the "Company"),
---------------------------------
with its principal office at
---------------------------------
(hereinafter the "Purchaser") and SHELDON E. GOLDSTEIN, P.C., 65
Broadway, 10th Fl., New York, NY 10006 (hereinafter the "Escrow
Agent").
W I T N E S S E T H:
WHEREAS, the Purchaser will be purchasing Debentures
(the "Securities") from the Company at a purchase price as set
forth in a Convertible Debenture Purchase Agreement (the
"Subscription Agreement") signed by the Company and Purchaser;
and
WHEREAS, it is intended that the purchase of Securities
be consummated in accordance with the requirements set forth by
Regulation D promulgated under the Securities Act of 1933, as
amended; and
WHEREAS, the Company has requested that the Escrow
Agent hold the funds of Purchaser in escrow until the Escrow
Agent has received the Securities from the Company. The Escrow
Agent will then immediately wire transfer or otherwise deliver at
the Company's direction immediately available funds to the
Company or the Company's account and arrange for delivery of the
Securities to Purchaser per the Purchaser's written instructions.
NOW, THEREFORE, in consideration of the covenants and
mutual promises contained herein and other good and valuable
consideration, the receipt and legal sufficiency of which are
hereby acknowledged and intending to be legally bound hereby, the
parties agree as follows:
ARTICLE 1
---------
TERMS OF THE ESCROW
-------------------
1.1 The parties hereby agree to establish an escrow
account with the Escrow Agent whereby the Escrow Agent shall hold
the funds for the purchase of the Securities.
1.2 Upon Escrow Agent's receipt of funds into its
attorney trustee account, it shall notify the Company, or the
Company's designated attorney or agent, of the amount of funds it
has received into its account.
1.3 The Company, upon receipt of said notice and
acceptance of Convertible Debenture Purchase Agreement, as
evidenced by the Company's execution thereof, shall deliver to
<PAGE>
Escrow Agent the Securities being purchased and opinion of
counsel as required by the Subscription Agreement. Escrow Agent
shall then communicate with the Company or its agents to confirm
the validity of its issuance.
1.4 Once Escrow Agent confirms the validity of the
issuance of the Securities, it shall immediately wire that amount
of funds necessary to purchase the Securities, per the written
instructions of the Company. Once the funds have been received
per the Company's instructions, the Escrow Agent shall then
arrange to have the Securities delivered as per instructions from
the Purchaser.
1.5 This Agreement may be altered or amended only with
the consent of all of the parties hereto. Should the Company
attempt to change this Agreement in a manner which, in the Escrow
Agent's discretion, shall be undesirable, the Escrow Agent may
resign as Escrow Agent by notifying the Company and the Purchaser
in writing. In the case of the Escrow Agent's resignation or
removal pursuant to the foregoing, its only duty, until receipt
of notice from the Company and the Purchaser or its agent that a
successor escrow agent shall have been appointed, shall be to
hold and preserve the Securities and/or funds. Upon receipt by
the Escrow Agent of said notice from the Company and the
Purchaser of the appointment of a successor escrow agent, the
name of a successor escrow account and a direction to transfer
the Securities and/or funds, the Escrow Agent shall promptly
thereafter transfer all of the Securities and/or funds held in
escrow to said successor escrow agent. Immediately after said
transfer of Securities, the Escrow Agent shall furnish the
Company and the Purchaser with proof of such transfer. The
Escrow Agent is authorized to disregard any notices, requests,
instructions or demands received by it from the Company or the
Purchaser after notice of resignation or removal shall have been
given, unless the same shall be the aforementioned notice from
the Company and the Purchaser to transfer the Securities and
funds to a successor escrow agent or to return same to the
respective parties.
1.6 The Escrow Agent shall be reimbursed by the
Company and the Purchaser for any reasonable expenses incurred in
the event there is a conflict between the parties and the Escrow
Agent shall deem it necessary to retain counsel.
1.7 The Escrow Agent shall not be liable for any
action taken or omitted by it in good faith in accordance with
the advice of the Escrow Agent's counsel; and in no event shall
the Escrow Agent be liable or responsible except for the Escrow
Agent's own gross negligence or willful misconduct.
1.8 The Company and the Purchaser warrant to and agree
with the Escrow Agent that, unless otherwise expressly set forth
in this Agreement:
(i) there is no security interest in the
Securities or any part thereof;
(ii) no financing statement under the Uniform
Commercial Code is on file in any jurisdiction
claiming a security interest or in describing
(whether specifically or generally) the Securities
or any part thereof; and
2
<PAGE>
(iii) the Escrow Agent shall have no
responsibility at any time to ascertain whether or
not any security interest exists in the Securities
or any part thereof or to file any financing
statement under the Uniform Commercial Code with
respect to the Securities or any part thereof.
1.9 The Escrow Agent has no liability hereunder to
either party other than to hold the Securities and funds and to
deliver them under the terms hereof. Each party hereto agrees to
indemnify and hold harmless the Escrow Agent from and with
respect to any suits, claims, actions or liabilities arising in
any way out of this transaction including the obligation to
defend any legal action brought which in any way arises out of or
is related to this Escrow.
ARTICLE 2
---------
MISCELLANEOUS
-------------
2.1 No waiver or any breach of any covenant or
provision herein contained shall be deemed a waiver of any
preceding or succeeding breach thereof, or of any other covenant
or provision herein contained. No extension of time for
performance of any obligation or act shall be deemed any
extension of the time for performance of any other obligation or
act.
2.2 All notices or other communications required or
permitted hereunder shall be in writing, and shall be sent by
fax, overnight courier, registered or certified mail, postage
prepaid, return receipt requested, and shall be deemed received
upon receipt thereof, as follows:
(i) American Resources of Delaware, Inc.
160 Morgan Street
Versailles, KY 40383
with a copy to:
(ii)
(iii)
3
<PAGE>
(iv)
2.3 This Agreement shall be binding upon and shall
inure to the benefit of the permitted successors and assigns of
the parties hereto.
2.4 This Agreement is the final expression of, and
contains the entire Agreement between, the parties with respect
to the subject matter hereof and supersedes all prior
understandings with respect thereto. This Agreement may not be
modified, changed, supplemented or terminated, nor may any
obligations hereunder be waived, except by written instrument
signed by the parties to be charged or by its agent duly
authorized in writing or as otherwise expressly permitted herein.
2.5 Whenever required by the context of this
Agreement, the singular shall include the plural and masculine
shall include the feminine. This Agreement shall not be
construed as if it had been prepared by one of the parties, but
rather as if both parties had prepared the same. Unless
otherwise indicated, all references to Articles are to this
Agreement.
2.6 The Company and Purchaser acknowledges and
confirms that it is not being represented in a legal capacity by
Sheldon E. Goldstein, P.C. and it has had the opportunity to
consult with its own legal advisors prior to the signing of this
Agreement. The Company and Purchaser acknowledge that it is
aware that Sheldon E. Goldstein, P.C. has done and may continue
to do legal work for the placement agents.
2.7 The parties hereto expressly agree that this
Agreement shall be governed by, interpreted under and construed
and enforced in accordance with the laws of the State of New
York. Any action to enforce, existing out of, or relating in any
way to, any provisions of this Agreement shall be brought through
the American Arbitration Association at the designated locale of
New York, New York.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the day of October, 1996.
----
AMERICAN RESOURCES OF
DELAWARE, INC.
By
---------------------------
Officer
PURCHASER:
------------------------------
By
----------------------------
SHELDON E. GOLDSTEIN, P.C.,
ESCROW AGENT
By
----------------------------
Sheldon E. Goldstein
5
<PAGE>
Exhibit 4.10
AMERICAN RESOURCES OF DELAWARE, INC.
============================
STOCK OPTION
AGREEMENT
============================
This Stock Option Agreement (the "AGREEMENT") is entered
into this 27th day of November, 1996 (the "DATE OF GRANT")
between American Resources of Delaware, Inc., a Delaware
corporation (the "COMPANY") and Corporate Relations Group, Inc.,
a Florida corporation ("CRG" or "OPTIONEE").
RECITALS
WHEREAS, the Company and CRG entered into a Lead
Generation/Corporate Relations Agreement (the "AGREEMENT") dated
November 27, 1996.
WHEREAS, the Agreement provides, among other things, that
the Company grant to CRG an Option to purchase 100,000 shares of
the Company's Common Stock at a price per Share of $3.00, such
Option to expire on November 27, 1997 (the "OPTION SHARES").
NOW, THEREFORE, in consideration of the foregoing recitals
and for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as
follows:
1. GRANT. The Company hereby grants to the Optionee an
option (the "OPTION") to purchase 100,000 shares of the Company's
common stock, $0.00001 par value per share (the "OPTION SHARES")
at the price of $3.00 per share (the "PURCHASE PRICE" or
"EXERCISE PRICE"). Both the Purchase Price and the number of
Option Shares purchasable may be adjusted pursuant to Paragraph 8
hereof.
2. TERM AND VESTING. The Option granted herein is fully
vested on the date of grant and is exercisable in whole or from
time to time in part during the period beginning on the Date of
Grant, ending at 5:00 o'clock p.m. (Eastern Standard Time) on
November 27, 1997.
3. EXERCISE OF OPTION. This Option may only be exercised
by presentation at the principal offices of the Company of
written notice to the Company's Secretary advising the Company of
the Optionee's election to purchase Option Shares, specifying the
number of Option Shares being purchased, accompanied by payment
in full. No Option Shares shall be issued until full payment is
made therefor. Payment shall be made in cash, represented by bank
or cashier's check, certified check or money order.
4. ISSUANCE OF OPTION SHARES; RESTRICTIVE LEGEND.
(a) Upon proper exercise of this Option, the Company
shall mail or deliver to the Optionee, as promptly as
practicable, a stock certificate or certificates representing the
Option Shares purchased, subject to clause (b) below. The Company
shall not be required to sell or issue any shares under the
Option if the issuance of such shares shall constitute a
violation of any applicable law or regulation or of any
requirements of any national securities exchange or quotation
medium upon which the Company's common stock may be listed.
(b) Upon any exercise of this Option, if a
registration statement under the Securities Act of 1933 (the
"Act") is not in effect with respect to the Option Shares, the
Company shall not be required to issue any Option Shares unless
the Company has received evidence reasonably satisfactory to it
to the effect that the Optionee is
PAGE 1
<PAGE>
acquiring such shares for investment and not with a view to
distribution thereof. Any reasonable determination in this
connection by the Company shall be final, binding and conclusive.
(c) Unless and until removed as provided below, each
certificate evidencing unregistered Option Shares shall bear a
legend in substantially the following form:
"THE SHARES OF STOCK REPRESENTED BY
THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT
OF 1933 OR UNDER THE SECURITIES
LAWS OF ANY STATE AND MAY NOT BE
SOLD OR TRANSFERRED EXCEPT UPON
SUCH REGISTRATION OR UPON RECEIPT
BY THIS CORPORATION OF AN OPINION
OF COUNSEL SATISFACTORY TO THIS
CORPORATION, IN FORM AND SUBSTANCE
SATISFACTORY TO THIS CORPORATION,
THAT REGISTRATION IS NOT REQUIRED
FOR SUCH SALE OR TRANSFER."
The Company shall issue a new certificate which does not
contain such legend if (i) the shares represented by such
certificate are sold pursuant to a registration statement
(including a current prospectus) which has become effective under
the Act, or (ii) the staff of the Securities and Exchange
Commission shall have issued a "no action" letter, reasonably
satisfactory to the Company's counsel, to the effect that such
shares may be freely sold and thereafter traded publicly without
registration under the Act, or (iii) the Company's counsel, or
other counsel acceptable to the Company, shall have rendered an
opinion satisfactory to the Company to the effect that such
shares may be freely sold and thereafter publicly traded without
registration under the Act.
5. TRANSFER OF OPTION SHARES. Option Shares issued upon
exercise of this Option which have not been registered under the
Act shall be transferable by a holder thereof only upon
compliance with the conditions in this Paragraph. Before making
any transfer of Option Shares, the holder of the shares shall
give written notice to the Company of the holder's intention to
make the transfer, describing the manner and circumstances of the
transfer. If in the opinion of the Company's counsel, or of
other counsel acceptable to the Company, the proposed transfer
may be effected without registration under the Act, the Company
shall so notify the holder and the holder shall be entitled to
transfer such shares as described in the holder's notice to the
Company. If such counsel opines that the transfer may not be
made without registration under the Act, then the Company shall
so notify the holder, in which event the holder shall not be
entitled to transfer the shares until (i) the Company notifies
the holder that it is permissible to proceed with the transfer,
or (ii) registration of the shares under the Act has become
effective. The Company may issue "stop transfer" instructions to
its transfer agent with respect to any or all of the Option
Shares as it deems necessary to prevent any violation of the Act.
6. TRANSFER OR ENCUMBRANCE OF THIS OPTION. This Option
may only be transferred or assigned by the Optionee, with the
Company's prior consent. The same restriction on transfer or
assignment shall apply to any beneficiaries or other persons
acquiring this Option or an interest herein in accordance with
this agreement or by operation of law. Further, this Option
shall not be pledged, hypothecated or otherwise encumbered, by
operation of law or otherwise, nor shall it be subject to
execution, attachment or similar process.
7. NO RIGHTS AS STOCKHOLDER. The Optionee shall have no
rights as a stockholder with respect to Option Shares until the
date of issuance of a stock certificate for such shares. No
adjustment for dividends, or otherwise, shall be made if the
record date therefor is prior to the date of exercise of such
Option.
8. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The
existence of this Option shall not limit or affect in any way the
right or power of the Company or its shareholders to make or
authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the
Company, or any issue of bonds, debentures, preferred or prior
preference stock ahead of or affecting the Option Shares or the
rights thereof, or the dissolution or liquidation of the Company,
or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a
similar character or otherwise. However,
PAGE 2
<PAGE>
(a) If, prior to the Company's delivery of all the Option
Shares subject to this Option, the Company shall: (i) effect a
subdivision (split) or combination (reverse split) of shares or
other capital readjustment, the payment of a common stock
dividend, or other increase or reduction of the number of shares
of common stock outstanding, without receiving compensation
therefor in money, services or property, then (A) in the event of
an increase in the number of such shares outstanding, the
Purchase Price shall be proportionately reduced and the number of
Option Shares then still purchasable shall be proportionately
increased; and (B) in the event of a reduction in the number of
such shares outstanding, the Purchase Price payable per share
shall be proportionately increased and the number of Option
Shares then still purchasable shall be proportionately reduced;
or (ii) effect any change in the nature of a recapitalization
which changes the class or type of shares of the Company herein
defined as "Option Shares" into a different class or type of
shares, then this Option shall thereafter permit the purchase of
such number of the different class or type of shares as is equal
to the number of Option Shares purchasable, as it may be
adjustable for any subdivision or combination.
(b) Except as hereinbefore expressly provided, the issue by
the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or
property, or for labor or services either upon direct sale or
upon the exercise of rights or warrants to subscribe therefor, or
upon conversion of shares or obligations of the Company
convertible into such shares or other securities, shall not
affect, and no adjustment by reason thereof shall be made with
respect to, the Purchase Price or the number of Option Shares
then subject to this Option.
9. WITHHOLDING TAXES. Pursuant to applicable federal and
state laws, the Company may be required to collect withholding
taxes upon any exercise of this Option. The Company may require,
as a condition to any exercise of this Option, that the Optionee
concurrently pay to the Company the entire amount or a portion of
any taxes which the Company is required to withhold by reason of
such exercise, in such amount as the Board of Directors or
Compensation Committee of the Board in its discretion may
determine. In lieu of part or all of any such payment, the
Optionee may elect, with the consent of the Board of Directors or
Compensation Committee, to have the Company withhold from the
Option Shares to be issued upon exercise of this Option that
number of shares having a fair market value equal to the amount
which the Company is required to withhold.
11. NOTICES, ETC. Any notice hereunder by the Optionee
shall be given to the Company in writing, and such notice and any
payment by the Optionee hereunder shall be deemed duly given or
made only upon receipt thereof at the Company's office at 160
Morgan Street, P. O. Box 87, Versailles, Kentucky 40383, or at
such other address as the Company may designate by notice to the
Optionee. Any notice or other communication to the Optionee
hereunder shall be in writing and shall be deemed duly given or
made if mailed or delivered to the Optionee at the last address
as the Optionee may have on file with the Company's Secretary.
This Option shall be governed under and construed in accordance
with the laws of the State of Arizona. This address shall be
binding on the Company and the Optionee and all successors,
assigns, heirs, devisees and personal representatives thereof.
NOTE: This Stock Option Agreement must match the control
---- -----
copy maintained by the Company, in all particulars.
IN WITNESS WHEREOF, the Company has executed this Stock
Option Agreement as of the date first above written.
AMERICAN RESOURCES OF DELAWARE, INC.
By /S/Rick G. Avare
---------------------------------
RICK G. AVARE, PRESIDENT AND CEO
ATTEST:
By /S/Karen M. Underwood
-----------------------------
KAREN M. UNDERWOOD, SECRETARY
PAGE 3
<PAGE>
OPTIONEE NAME and STATUS:
Corporate Relations Group, Inc.
(Consultant)
By: /S/Joseph H. Landis
--------------------------------
Its: Chief Financial Officer
------------------------------
(SEAL)
==== Original to Optionee/COPY to Company ====
ku\crg..opt
PAGE 4
<PAGE>
Exhibit 4.11
AMERICAN RESOURCES OF DELAWARE, INC.
============================
STOCK OPTION
AGREEMENT
============================
This Stock Option Agreement (the "AGREEMENT") is entered
into this 27th day of November, 1996 (the "DATE OF GRANT")
between American Resources of Delaware, Inc., a Delaware
corporation (the "COMPANY") and World Capital Funding, Inc.
("WCF" or "OPTIONEE).
RECITALS
WHEREAS, the Company and WCF entered into a letter agreement
(the "AGREEMENT) dated October 7, 1996.
WHEREAS, the Agreement provides, among other things, that
the Company grant to WCF an Option to purchase 100,000 shares of
the Company's Common Stock at a price per Share of $4.50, such
Option to expire on November 27, 2001 (the "OPTION SHARES").
NOW, THEREFORE, in consideration of the foregoing recitals
and for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as
follows:
1. GRANT. The Company hereby grants to the Optionee an
option (the "OPTION") to purchase 100,000 shares of the Company's
common stock, $0.00001 par value per share (the "OPTION SHARES")
at the price of $4.50 per share (the "PURCHASE PRICE" or
"EXERCISE PRICE"). Both the Purchase Price and the number of
Option Shares purchasable may be adjusted pursuant to Paragraph 8
hereof.
2. TERM AND VESTING. The Option granted herein is fully
vested on the date of grant and is exercisable in whole or from
time to time in part during the period beginning on the Date of
Grant, ending at 5:00 o'clock p.m. (Eastern Standard Time) on
November 27, 2001.
3. EXERCISE OF OPTION. This Option may only be exercised
by presentation at the principal offices of the Company of
written notice to the Company's Secretary advising the Company of
the Optionee's election to purchase Option Shares, specifying the
number of Option Shares being purchased, accompanied by payment
in full. No Option Shares shall be issued until full payment is
made therefor. Payment shall be made in cash, represented by bank
or cashier's check, certified check or money order.
4. ISSUANCE OF OPTION SHARES; RESTRICTIVE LEGEND.
(a) Upon proper exercise of this Option, the Company
shall mail or deliver to the Optionee, as promptly as
practicable, a stock certificate or certificates representing the
Option Shares purchased, subject to clause (b) below. The Company
shall not be required to sell or issue any shares under the
Option if the issuance of such shares shall constitute a
violation of any applicable law or regulation or of any
requirements of any national securities exchange or quotation
medium upon which the Company's common stock may be listed.
(b) Upon any exercise of this Option, if a
registration statement under the Securities Act of 1933 (the
"ACT") is not in effect with respect to the Option Shares, the
Company shall not be required to issue any Option Shares unless
the Company has received evidence reasonably satisfactory to it
to the effect that the Optionee is acquiring such shares for
investment and not with a view to distribution thereof. Any
reasonable determination in this connection by the Company shall
be final, binding and conclusive.
PAGE 1
<PAGE>
(c) Unless and until removed as provided below, each
certificate evidencing unregistered Option Shares shall bear a
legend in substantially the following form:
"THE SHARES OF STOCK REPRESENTED BY
THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT
OF 1933 OR UNDER THE SECURITIES
LAWS OF ANY STATE AND MAY NOT BE
SOLD OR TRANSFERRED EXCEPT UPON
SUCH REGISTRATION OR UPON RECEIPT
BY THIS CORPORATION OF AN OPINION
OF COUNSEL SATISFACTORY TO THIS
CORPORATION, IN FORM AND SUBSTANCE
SATISFACTORY TO THIS CORPORATION,
THAT REGISTRATION IS NOT REQUIRED
FOR SUCH SALE OR TRANSFER."
The Company shall issue a new certificate which does not
contain such legend if (i) the shares represented by such
certificate are sold pursuant to a registration statement
(including a current prospectus) which has become effective under
the Act, or (ii) the staff of the Securities and Exchange
Commission shall have issued a "no action" letter, reasonably
satisfactory to the Company's counsel, to the effect that such
shares may be freely sold and thereafter traded publicly without
registration under the Act, or (iii) the Company's counsel, or
other counsel acceptable to the Company, shall have rendered an
opinion satisfactory to the Company to the effect that such
shares may be freely sold and thereafter publicly traded without
registration under the Act.
5. TRANSFER OF OPTION SHARES. Option Shares issued upon
exercise of this Option which have not been registered under the
Act shall be transferable by a holder thereof only upon
compliance with the conditions in this Paragraph. Before making
any transfer of Option Shares, the holder of the shares shall
give written notice to the Company of the holder's intention to
make the transfer, describing the manner and circumstances of the
transfer. If in the opinion of the Company's counsel, or of
other counsel acceptable to the Company, the proposed transfer
may be effected without registration under the Act, the Company
shall so notify the holder and the holder shall be entitled to
transfer such shares as described in the holder's notice to the
Company. If such counsel opines that the transfer may not be
made without registration under the Act, then the Company shall
so notify the holder, in which event the holder shall not be
entitled to transfer the shares until (i) the Company notifies
the holder that it is permissible to proceed with the transfer,
or (ii) registration of the shares under the Act has become
effective. The Company may issue "stop transfer" instructions to
its transfer agent with respect to any or all of the Option
Shares as it deems necessary to prevent any violation of the Act.
6. TRANSFER OR ENCUMBRANCE OF THIS OPTION. This Option
may only be transferred or assigned by the Optionee, with the
Company's prior consent. The same restriction on transfer or
assignment shall apply to any beneficiaries or other persons
acquiring this Option or an interest herein in accordance with
this agreement or by operation of law. Further, this Option
shall not be pledged, hypothecated or otherwise encumbered, by
operation of law or otherwise, nor shall it be subject to
execution, attachment or similar process.
7. NO RIGHTS AS STOCKHOLDER. The Optionee shall have no
rights as a stockholder with respect to Option Shares until the
date of issuance of a stock certificate for such shares. No
adjustment for dividends, or otherwise, shall be made if the
record date therefor is prior to the date of exercise of such
Option.
8. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The
existence of this Option shall not limit or affect in any way the
right or power of the Company or its shareholders to make or
authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the
Company, or any issue of bonds, debentures, preferred or prior
preference stock ahead of or affecting the Option Shares or the
rights thereof, or the dissolution or liquidation of the Company,
or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a
similar character or otherwise. However,
(a) If, prior to the Company's delivery of all the Option
Shares subject to this Option, the Company shall: (i) effect a
subdivision (split) or combination (reverse split) of shares or
other capital readjustment, the payment of a common stock
dividend, or other increase or reduction of the number of shares
of common stock outstanding, without receiving compensation
therefor in money, services or property, then (A) in the event of
an increase in the number of such shares
PAGE 2
<PAGE>
outstanding, the Purchase Price shall be proportionately reduced
and the number of Option Shares then still purchasable shall be
proportionately increased; and (B) in the event of a reduction in
the number of such shares outstanding, the Purchase Price payable
per share shall be proportionately increased and the number of
Option Shares then still purchasable shall be proportionately
reduced; or (ii) effect any change in the nature of a
recapitalization which changes the class or type of shares of the
Company herein defined as "Option Shares" into a different class
or type of shares, then this Option shall thereafter permit the
purchase of such number of the different class or type of shares
as is equal to the number of Option Shares purchasable, as it may
be adjustable for any subdivision or combination.
(b) Except as hereinbefore expressly provided, the issue by
the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or
property, or for labor or services either upon direct sale or
upon the exercise of rights or warrants to subscribe therefor, or
upon conversion of shares or obligations of the Company
convertible into such shares or other securities, shall not
affect, and no adjustment by reason thereof shall be made with
respect to, the Purchase Price or the number of Option Shares
then subject to this Option.
9. WITHHOLDING TAXES. Pursuant to applicable federal and
state laws, the Company may be required to collect withholding
taxes upon any exercise of this Option. The Company may require,
as a condition to any exercise of this Option, that the Optionee
concurrently pay to the Company the entire amount or a portion of
any taxes which the Company is required to withhold by reason of
such exercise, in such amount as the Board of Directors or
Compensation Committee of the Board in its discretion may
determine. In lieu of part or all of any such payment, the
Optionee may elect, with the consent of the Board of Directors or
Compensation Committee, to have the Company withhold from the
Option Shares to be issued upon exercise of this Option that
number of shares having a fair market value equal to the amount
which the Company is required to withhold.
11. NOTICES, ETC. Any notice hereunder by the Optionee
shall be given to the Company in writing, and such notice and any
payment by the Optionee hereunder shall be deemed duly given or
made only upon receipt thereof at the Company's office at 160
Morgan Street, P. O. Box 87, Versailles, Kentucky 40383, or at
such other address as the Company may designate by notice to the
Optionee. Any notice or other communication to the Optionee
hereunder shall be in writing and shall be deemed duly given or
made if mailed or delivered to the Optionee at the last address
as the Optionee may have on file with the Company's Secretary.
This Option shall be governed under and construed in accordance
with the laws of the State of Arizona. This address shall be
binding on the Company and the Optionee and all successors,
assigns, heirs, devisees and personal representatives thereof.
NOTE: This Stock Option Agreement must match the control
---- -----
copy maintained by the Company, in all particulars.
IN WITNESS WHEREOF, the Company has executed this Stock
Option Agreement as of the date first above written.
AMERICAN RESOURCES OF DELAWARE, INC.
By /S/ Rick G. Avare
--------------------------------
RICK G. AVARE, PRESIDENT AND CEO
ATTEST:
By /S/ Karen M. Underwood
------------------------------
KAREN M. UNDERWOOD, SECRETARY
PAGE 3
<PAGE>
OPTIONEE NAME and STATUS:
World Capital Funding, Inc.
(Consultant)
By:
------------------------------------
Its:
-----------------------------------
(SEAL)
==== Original to Optionee/COPY to Company ====
ku\wcf.opt
PAGE 4
<PAGE>
Exhibit 10.57
CHANGE OF CONTROL AGREEMENT
---------------------------
THIS CHANGE OF CONTROL AGREEMENT ("Agreement"), is made and
entered into as of the 12th day of November, 1996, by and between
American Resources of Delaware, Inc. and Southern Gas Co. of
Delaware, Inc., both Delaware corporations (collectively the
"Company"), and Rick G. Avare, of Lexington, Kentucky
("Employee").
RECITALS
WHEREAS, the Company considers the establishment and
maintenance of a sound and vital management essential to
protecting and enhancing the best interests of the Company and
its shareholders; and
WHEREAS, in this connection, the Company recognizes that, as
it the case with many publicly held corporations, the possibility
of a change in control may exist and that such possibility, and
the uncertainty and questions which it may raise among
management, may result in the departure or distraction of
management personnel to the detriment of the Company and its
shareholders; and,
WHEREAS, the Company's Board of Directors (the "Board") has
determined that appropriate steps should be taken to reinforce
and encourage the continued attention and dedication of members
of the Company's management to their assigned duties without
distraction in the face of the potentially disturbing
circumstances arising from the possibility of a change in control
of the Company; and
1
<PAGE>
WHEREAS, in order to induce you to remain in the employ of
the Company, this Agreement sets forth certain benefits which the
Company agrees will be provided to you in the event your
employment with the Company is terminated subsequent to a "change
in control of the Company" (as defined in section 2 hereof) under
the circumstances described below.
NOW, THEREFORE, it is agreed by and among the parties hereto
as follows:
1. TERM. This Agreement shall have an initial term
----
expiring on the fifth anniversary of the date hereof, assuming
there has been no change in control of the Company; provided,
however, that the term shall be automatically extended for
successive periods of one (1) year unless either party shall give
written notice of intention not to so extend at least six (6)
months prior to the end of the third anniversary of the date
hereof and on each subsequent anniversary year or renewal period.
No notice by the Company of its intention not to extend shall be
effective if, within one year prior to the original expiration
date, or if this Agreement is in a renewal period, within one
year prior to the termination date proposed by the Company, the
Company has received notice, official or unofficial, or otherwise
has reason to believe that another person (as defined herein) has
taken or is considering steps that would, when completed, bring
about a change in control of the Company.
2. CHANGE IN CONTROL. Change of Control for purposes of
-----------------
Section 2 of this Agreement, a Change of Control shall be deemed
at have occurred in the event of:
(a) The acquisition, after the date hereof, by any person
or group of persons, other than a group of persons
comprising the majority of the Company's Officers and
2
<PAGE>
Directors as of date hereof, acting in concert, of
"beneficial ownership" (as such term is defined in
Securities and Exchange Commission ("SEC") Rule 13d-3
under the Securities Exchange Act of 1934, as amended)
(the "Exchange Act") of securities of the Company which
together with securities previously owned, confer upon
such person, entity or group the voting power, on any
matters brought to a vote of Shareholders, of Twenty
percent (20%) or more of the then outstanding shares of
capital stock of the Company, or
(b) The sale, assignment or transfer of assets of the
Company or any subsidiary or subsidiaries, in a
transaction on or series of transactions, if the
aggregate consideration paid or to be received by the
Company or any such subsidiary in connection with such
sale, assignment or transfer is greater than fifty
percent (50%) of the book value, determined by the
Company in accordance with generally accepted
accounting principles, of the Company's assets
determined on a consolidated basis immediately before
such transactions or the first of such transactions; or
(c) The merger, consolidation, share exchange or
reorganization of the Company (or one or more
subsidiaries of the Company) as a result of which the
Company's Officers and Directors, as of he date hereof,
would receive less than thirty five (35%) of the voting
power of the capital stock or other interests of the
surviving or resulting corporation or entity; or
3
<PAGE>
(d) The adoption of a plan of liquidation or the approval
of the dissolution of the Company, or
(e) The commencement (within the meaning of SEC Rule 14d-2
under the Exchange Act) of a tender or exchange offer
which, if successful, would result in a Change of
Control of the Company or
(f) A determination by the Board of Directors of the
Company, in view of then current circumstances or
impending events, that a Change of Control of the
company has occurred or is imminent, which
determination shall be made for the specific purpose
of triggering the operative provisions of this
Agreement
(g) The persons who were directors of the Company
immediately prior to any merger, consolidation, sale of
assets or contested election, or any combination of the
foregoing, shall as a result thereof cease to
constitute a majority of the Board of Directors of the
Company or its successor, or
(h) The persons who were directors of the Company
immediately prior to a tender offer or exchange offer
for the voting stock of the Company (other than by the
Company or a subsidiary) shall within two years after
the making of such tender offer or exchange offer cease
to constitute a majority of the Board of Directors of
the Company or its successor.
3. COMPENSATION UPON CHANGE OF CONTROL. Following a
-----------------------------------
Change of Control, you shall receive compensation consisting of:
(A) The amount of monies equal to the remaining
portion of your Employment Contract for its
primary term and any extended term plus the
4
<PAGE>
average amount of net proceeds received by you
from the exercising of Company Stock Options for a
period of five (5) years prior to your
termination.
(B) All legal fees and expenses incurred by you as a
result of such termination (including all such
fees and expenses, if any, incurred in contesting
or disputing any such termination in seeking to
obtain or enforce any right or benefit provided by
this Agreement).
(C) The lump sum of 2.99 times the Employee's Bonus
awarded the year prior to the Change of Control
or Three Hundred Thousand Dollars ($300,000.00),
whichever is greater.
(D) If at the Change of Control you hold unexercised
stock incentive options, all remaining
installments of said options not yet exercisable
will automatically become exercisable to the
extent permitted by the regulatory authorities
having jurisdiction over such affairs, and the
execution by the Company of this Agreement, the
terms of which have been approved by the Board
shall constitute an acceleration of the time of
exercise for said options.
(iv) Upon the Change of Control the Company shall maintain
in full force and effect for your continued benefit for a period
terminating on the earliest of (A) three years after the Change
of Control or (B) the commencement date of equivalent benefits
from a new employer, all life, health, accident and disability
5
<PAGE>
insurance plans and programs in which you were a participant
immediately prior to the Change of Control, provided that your
continued participation is possible under the terms and
provisions of such plans and programs. In the event that your
participation in any such plan or program is barred, the Company
shall provide you with benefits substantially similar to those to
which you would be entitled as a participant in such plans and
programs. At the end of the period of coverage, you shall have
the option to have assigned to you, at no cost and with no
apportionment of prepaid premiums, any assignable insurance
policy owned by the Company and relating specifically to you.
Furthermore, the Company will provide you with a leased
vehicle similar or identical to the current vehicle provided to
you by the Company at the time of the Change of Control.
(v) You shall not be required to mitigate the amount of any
payment provided for in this section 4 by seeking other
employment or otherwise, nor (except as provided in section
4(iv)) shall the amount of any payment of benefit provided for in
this section 4 be reduced by any compensation earned or benefit
received by you as the result of employment by another employer
after the Change of Control, or otherwise.
4. LIMITATIONS ON CHANGE OF CONTROL COMPENSATION. In the
---------------------------------------------
event that the lump-sum payment payable to Employee under section
4 hereof ("Severance Benefit), or any other payments or benefits
received or to be received by Employee from the Company whether
payable pursuant to the terms of this Agreement, or any other
6
<PAGE>
plan, agreement or arrangement with the Company or any
corporation affiliated with the Company within the meaning of
Section 1504 of the Code, the opinion of tax counsel selected by
the Company acceptable to Employee, constitute "parachute
payments" within the meaning of Section 280G(b)(2) of the Code
and the present value of such "parachute payments" equals or
exceeds three times the, average of the annual compensation
payable to Employee by the Company (or an Affiliate) and
includable in Employee's gross income for federal income tax
purposes for the five (5) calendar years preceding the year in
which a change in ownership or control (as hereinafter defined)
of the Company occurred ("Base Amount") such Severance Benefits
shall be reduced to an amount the present value of which when
combined with the present value of any other payments or benefits
received or to be received by Employee from the Company (or an
affiliate) that are deemed "parachute payments" is equal to 2.99
times the Base Amount, notwithstanding other provision to the
contrary in this Agreement. The Severance Benefits shall not be
reduced if (i) Employee shall have effectively waived his receipt
or enjoyment of any such payment or benefit which triggered the
applicability of this Section 5 or (ii) in the opinion of such
tax counsel, the Severance Benefits (in their full amount or as
partially reduced, as the case may be) plus all other payments or
benefits which constitute "parachute payments" within the meaning
of Section 280G(b)(2) of the Code are reasonable compensation for
the services actually rendered, within the meaning of Section
280G(b)(4) of the Code and such payments are deductible, by the
Company. The Base Amount shall include every type and form of
compensation includable in Employee's gross income in respect of
7
<PAGE>
his employment by the Company (or an Affiliate), except to the
extent otherwise provided in temporary or final regulations
promulgated under Section 280G(b) of the Code. For Purposes of
this Section 5, a "change in ownership or control" shall have the
meaning set forth in Section 280G(b) of the Code and any
temporary or final regulations promulgated thereunder. The
present value of any non-cash benefit or any deferred cash
payment shall be determined by the Company's independent auditors
in accordance with the principles of Section 280G of the Code.
Employee shall have the right to request that the Company
obtain a ruling from the Internal Revenue Service ("IRS") as to
whether any or all payments or benefits determined by such tax
counsel, are in the view of the IRS "parachute payments" under
Section 280G. If a ruling is sought pursuant to Employee's
request, no Severance Benefits payable under this Agreement in
excess of the Section 280G limitations shall be made to Employee
until after fifteen (15) days from the date of such ruling,
however, Severance Benefits shall continue to be paid during the
time up to the amount of that limitation. For purposes of this
Section 5, Employee and the Company shall agree to be bound by
the IRS's ruling as to whether payments constitute "parachute
payments" under Section 280G. If the IRS declines, for any
reason, to provide the what requested, the tax counsel opinion
provided with to what payment or benefits constitute "parachute
payments" shall control and the period during which the Severance
Benefits nay be deferred shall be extended to a date fifteen (15)
days from the date of the IRS's notice indicating that no ruling
would be forthcoming.
8
<PAGE>
In the event that Section 280G, or any successor statute is
repealed, this Section 5, shall cease to be effective on the
effective date of such repeal. The parties to this Agreement
recognize that final regulations under Section 280G of the Code
may affect the amounts that may be paid under this Agreement and
agree that, upon issuance of such final regulations, this
Agreement may be modified as in good faith deemed necessary in
light of the provision of such regulations to achieve the
purposes of this Agreement, and that consent to such modification
shall not be unreasonably withheld.
5. EMPLOYEE'S COMMITMENT. In consideration for the
---------------------
benefits accorded you hereunder, you agree that:
(i) During the life of this Agreement, you will faithfully
perform your duties to the best of your ability in accordance
with the directions of the Chairman of the Board and the Board,
until such time as a change in control of the Company occurs.
(ii) You will not at any time during the life of this
Agreement, or thereafter, communicate or disclose to any
unauthorized person, or use for your own account, without the
written consent of the Company, any information regarding any oil
and gas properties, processes, equipment or products of the
Company or any subsidiary, or other information concerning its
business or affairs it being understood, however, that the
obligations of this paragraph shall not apply to the extent that
the aforesaid matters become generally known to and available for
use by the public otherwise than by your act or omission.
9
<PAGE>
6. Successor's Binding Agreement.
-----------------------------
(i) This Agreement shall bind the Company and any successor
by operation of law or otherwise. The Company will require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company, by agreement in form and
substance satisfactory to you, expressly to assume and agree to
perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such
succession had taken place.
(ii) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees. If you should die before all amounts that would still
be payable to you hereunder if you had continued to live are
paid, all such unpaid amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to
your devisee, legatee, or other designee or, if there be no such
designee, to your estate.
7. Notice. Notices and all other communications provided
------
for herein shall be in writing and shall be deemed to have been
duly given when delivered or mailed by certified or registered
mail, return receipt requested, postage prepaid addressed to the
respective addresses set forth on the first page of this
Agreement or to such other address as either party may have
furnished to the other in writing in accordance herewith, except
that notices of change of address shall be effective only upon
receipt. All notices to the Company shall be directed to the
attention of the Chairman of the Board with a copy to the
Secretary of the Company.
10
<PAGE>
8. Miscellaneous. No provision of this Agreement may be
-------------
modified, waived or discharged except in writing specifically
referring to such provision and signed by you and such officer as
may be specially designated by the Board of Directors of the
Company. No waiver at any time by either party hereto of the
breach of any condition or provision of this Agreement, or of
compliance by the other party with the same, shall be deemed a
waiver of any other condition or provision at the same or at any
other time. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of
the Commonwealth of Kentucky.
9. Validity. The invalidity or unenforceability of any
--------
provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
10. COUNTERPARTS. This Agreement may be executed in one or
------------
more counterparts, each of which shall be deemed to be an
original but all of which together will constitute one and the
same instrument.
11. MISCELLANEOUS.
-------------
(a) WAIVER OF BREACH. The waiver by either party of a
----------------
breach of any provision of this Agreement by the other shall not
operate or be construed as a waiver of any subsequent breach.
(b) ENTIRE AGREEMENT; CANCELLATION OF PRIOR AGREEMENTS.
--------------------------------------------------
This Agreement contains the entire agreement of the parties with
respect to the subject matter hereof. It may not be changed
orally, but only by an amendment in writing signed by the parties
11
<PAGE>
hereto. All prior agreements or understandings concerning
Employees's employment by this Agreement.
(c) SEVERABILITY. The invalidity or unenforceability of
------------
any provision of this Agreement shall not affect the validity or
enforceability of the remainder of this Agreement.
(d) AGREEMENT CONFIDENTIAL. The terms and provisions
----------------------
hereof are strictly confidential, and Employee agrees he shall
not exhibit this Agreement or mention its terms to any person or
entity. If this letter correctly sets forth our agreement on the
subject matter hereof, kindly sign and return to the Company the
enclosed copy of this letter which will then constitute our
agreement on this subject.
American Resources of Delaware, Inc.
By: /S/ Douglas L. Hawthorne
-------------------------------------
Date: November 12, 1996
----------------------------------
Rick G. Avare
/S/ Rick G. Avare
----------------------------------------
avare.change
12
<PAGE>
Exhibit 10.58
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), is made and
entered into as of the 12th day of November, 1996, by and between
American Resources of Delaware, Inc., a Delaware corporation (the
"Company"), and Rick G. Avare, of Lexington, Kentucky
("Employee").
RECITAL:
--------
Employee desires to be employed by the Company and the
Company desires to employ Employee on the terms and conditions
hereinafter provided.
NOW, THEREFORE, it is agreed by and among the parties hereto
as follows:
1. EMPLOYMENT. The Company hereby employs Employee and
----------
Employee accepts employment by the Company and agrees to serve
the Company, upon the terms and conditions hereinafter set forth.
2. TERM. Employee's employment shall have an initial term
----
expiring on the fifth anniversary of the date hereof (the
"Term"), however, the term shall be automatically extended for
sucessive periods of one (1) year on a continuing basis unless
either party shall give written notice of intention not to do
extend at least six (6) months prior to the end of the third
anniversary of the date hereof and for each anniversary date
thereafter, unless Employee's employment terminates prior thereto
as provided in Section 8.
<PAGE>
3. DUTIES. Employee shall be employed by the Company as
its Chief Executive Officer. So long as he is employed
hereunder, Employee agrees a) to devote that portion of his time
and energy necessary for the business and affairs of the Company,
(b) to perform his duties hereunder effectively, diligently, to
the best of his ability and at a level of competency and
effectiveness consistent with the position occupied, and not to
do anything which would be detrimental tot he best interests of
the Company, (c) to use his best efforts, skill and ability to
promote the profitable growth of the Company, (d) to perform such
duties as are customarily performed by one holding the position
of Chief Executive Officer of a company comparable to the
Company, and (e) to perform such other duties as may be assigned
to him by the Company's Chairman or by the Company's Board of
Directors ("Board") from time to time. The Company acknowledges
that Employee may now, or may in the future , have other business
and investment activities, endeavors and ventures to which
Employee will desire to devote time and effort. The Company
agrees that Employee may devote to such other activities,
endeavors and ventures such time and effort as Employee may deem
reasonable necessary in connection therewith, subject, however,
to the provisions of the first sentence hereof. Neither the
Company nor any shareholder of the Company shall have any rights
in and to such profits derived therefrom by virtue of this
Agreement, by virtue of Employee's being an officer of the
Company or by virtue of any other reason.
4. COMPENSATION AND BENEFITS. For all services rendered
-------------------------
by Employee, the Company shall pay compensation and provide
benefits to Employee as follows:
(a) SALARY. The Company shall pay Employee an annual
------
salary ("Salary") of One Hundred and Sixty Thousand Dollars
($160,000), payable not less frequently than semi-monthly. At
<PAGE>
least once every 12 months the Board shall review Employee's
Salary and make such adjustments to the Salary as it deems
appropriate, provided, that the Salary shall not be reduced.
(b) INCENTIVE BONUS. The Company has established a bonus
---------------
plan ("Bonus Plan") which shall be utilized by the Employee to
compensate the key members of management, including himself, at
such levels as he deems appropriate, subject to the Compensation
Committee approval.
(c) BUSINESS EXPENSES. The Company shall reimburse
-----------------
Employee for his reasonable direct out-of-pocket ordinary and
necessary expenses incurred by Employee in the performance of his
services hereunder and for which Employee properly accounts in
accordance with the Company's regulations and procedures in
effect from time to time.
(d) VACATION. Employee shall be entitled to four weeks (20
--------
business days) paid vacation during each 12-month period of the
Term. Employee shall be entitled to carry over any unused
vacation from any prior 12-month periods during the Term to any
successive 12-month periods during the Term.
(e) COMPANY CAR. The Company shall provide Employee with
-----------
an automobile for use by Employee in connection with his services
hereunder and shall pay the related operating expenses for such
automobile attributable to Employee's services hereunder all
related expenses for such automobile, including, but not limited
to, gas, insurance, maintenance, repairs, license fees and taxes.
(f) RETIREMENT PLAN. Employee shall be eligible to
---------------
participate in the Company's Retirement Plan in accordance with
the terms thereof as may be in effect from time to time.
<PAGE>
(g) LIFE INSURANCE. The Company shall provide or pay for
--------------
group or other term life insurance for Employee in an amount of
$250,000, payable to such beneficiary or beneficiaries as
Employee shall designate. If such insurance policy permits,
Employee may, at Employee's expense, purchase additional life
insurance under such policy.
(h) DISABILITY INSURANCE. The Company shall provide or pay
--------------------
for group or other standard disability insurance for Employee, of
the type generally provided to other employees of the Company in
an amount not less than that necessary to maintain $8000.00 a
month disability benefits with a waiting period not to exceed six
months.
(i) HEALTH INSURANCE. The Company shall provide or pay for
----------------
group or other medical and hospital insurance for Employee and
his family, including major medical, of the type generally
provided to other employees of the company.
(j) ADDITIONAL BENEFITS. Employee shall be entitled to
-------------------
participate (at the expense of the Company, where appropriate) in
any and all employee retirement and other benefit plans and
perquisites in effect from time to time generally for senior
management level employees of the Company, and in any and all
other benefits made available generally to employees of the
Company.
(k) INDEMNIFICATION AND LIABILITY INSURANCE. The Company
---------------------------------------
shall indemnify and hold Employee harmless from any and all
penalties, judgments, fines, amounts paid in settlement and
expenses (including, but not limited to, attorneys' fees)
incurred by him in connection with any threatened, pending or
completed claim, action, suit or proceeding, whether civil,
criminal, administrative or investigative, including, but not
limited to, any appeals, to which he is, or is threatened to be
made, a party because he is or was an officer, employee or agent
of the Company or an affiliated corporation or other entity, and
advance expenses to Employee in connection therewith, to the
<PAGE>
fullest extent permitted by the Delaware Business Corporation
Act. The Company shall obtain and maintain during the Term and
for so long thereafter as the Company shall continue to actively
conduct any trade or business, insurance that provides liability
coverage for Employee, in his capacity as an officer of the
Company (and in any other capacity in which he may hereafter
serve) in the aggregate amount of no less than $1,000,000.
5. WITHHOLDING. The Company shall be authorized to deduct
-----------
and withhold from Employee's compensation, such sums as are
required by law to be deducted and withheld.
6. EVENTS CAUSING TERMINATION OF EMPLOYMENT. Employee's
----------------------------------------
employment with the Company shall terminate prior to the
expiration of the Term, without further obligation on the part of
the Company upon the occurrence of any of the following events:
(a) The death of Employee;
(b) The discharge of Employee for continued gross neglect
or willful misconduct on Employee's part in connection with the
performance of any duties he is obligated to perform hereunder;
(c) The discharge of Employee for a material breach by
Employee of any of the terms of this Agreement, provided Employee
shall have been given written notice thereof from the Board and a
reasonable opportunity to cure such breach and shall have failed
to do so;
(d) The discharge of Employee upon a determination of the
Board, acting in good faith, that Employee has been unable, for
any continuous period of at least six months, or for shorter
periods aggregating six months during any 24-month period, to
<PAGE>
perform his duties hereunder by reason of injury, illness or
other physical or mental disability The discharge of Employee as
a result of a determination by a physician reasonably acceptable
to Employee that Employee is presumably permanently and totally
disabled as such term is defined in Employee's disability
insurance policy, provided, in such event, Employee shall be paid
his semi-monthly Salary until the earlier of six months from the
date of such discharge or the time payments would commence under
such policy ("Salary Continuation Period"). If during such
Salary Continuation Period employee becomes no longer presumably
permanently and totally disabled and is able to perform his
duties hereunder, Employee shall be re-employed and this
Agreement shall continue as if such discharge had not occurred;
or
(e) The discharge of Employee for the conviction of
Employee of a felony involving moral turpitude.
7. PAYMENTS TO EMPLOYEE UPON TERMINATION OF EMPLOYMENT.
---------------------------------------------------
In the event Employee's employment with the Company shall
terminate during the Term for any of the reasons set forth in
Section 6, Employee's Salary and any Incentive Bonus shall be
prorated and paid through the date of termination.
8. RESIGNATION FOLLOWING A CHANGE OF CONTROL.
-----------------------------------------
Notwithstanding any provision of this Agreement, the Employee may
voluntarily resign his position within six (6) months following
the Change of Control of the Company (as defined in the Change of
Control Agreement) by giving the Company thirty day advance
notice. In such event the Employee shall be entitled to all
benefits and compensation as more fully set forth in Section 4
for the remaining Term of this Agreement.
<PAGE>
9. NON-DISCLOSURE. At no time shall Employee divulge,
--------------
furnish or make accessible to anyone (other than in the regular
course of the Company's business) any knowledge or information
with respect to confidential information or data of the company,
or with respect to any confidential information or data of any of
the customers of the Company, or with respect to any other
confidential aspect of the business or products or services of
the Company or its customers, including but not limited to the
customer list of the Company.
10. NOTICES. All notices and other communications
-------
hereunder shall be in writing and shall be given or made by hand
delivery, or by certified or registered mail, return receipt
requested, postage prepaid, or by telegram, as follows, or to
such other person or address as shall be hereafter designated by
notice given in accordance with this Section:
(a) If to the Company: American Resources of Delaware, Inc.
160 Morgan Street
P.O. Box 87
Versailles, Kentucky 40383
Attention: Doug Hawthorne
With copy to: David Stetson,
General Counsel
(b) If to Employee: Rick G. Avare
1532 Lakewood Drive
Lexington, Kentucky 40502
Any notice or other communication hereunder shall be deemed to
have been duly given or made (i) if made by hand, when delivered
against receipt thereof or when attempted delivery shall be
rejected, as the case may be, (ii) if made by letter, upon
deposit thereof in the mail, postage prepaid, registered or
certified, with return receipt requested, and (iii) if made by
telegram, when sent. Notwithstanding the foregoing, any notice
or other communication hereunder which is actually received by a
party hereto shall be deemed to have been duly given or made to
such party.
<PAGE>
11. MISCELLANEOUS.
-------------
(a) ASSIGNMENT. This is a contract for personal
----------
services by Employee and may not be assigned by Employee. This
Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
(b) WAIVER OF BREACH. The waiver by the either party
----------------
of a breach of any provision of this Agreement by the other shall
not operate or be construed as a waiver of any subsequent breach.
(c) ENTIRE AGREEMENT; CANCELLATION OF PRIOR
---------------------------------------
AGREEMENTS. This Agreement contains the entire agreement of the
- ----------
parties with respect to the subject matter hereof. It may not be
changed orally, but only by an amendment in writing signed by the
parties hereto. All prior agreements or understandings
concerning Employee's employment by the Company are hereby
cancelled and superseded by this Agreement.
(d) SEVERABILITY. The invalidity or unenforceability
------------
of any provision of this Agreement shall not affect the validity
or enforceability of the remainder of this Agreement.
(e) AGREEMENT CONFIDENTIAL. The terms and provisions
----------------------
hereof are strictly confidential, and Employee agrees he shall
not exhibit this Agreement or mention its terms to any person or
entity other than his legal counsel, accountants and other
advisors], unless otherwise ordered by a court of competent
jurisdiction or agreed to in writing by the Company.
(f) HEADINGS. The headings contained in this
--------
Agreement are for convenience only and shall not be deemed a part
of this Agreement in construing or interpreting the provisions
hereof.
<PAGE>
(g) GOVERNING LAW. This Agreement shall be governed
-------------
by and construed in accordance with the laws of the Commonwealth
of Kentucky.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day, month and year first above written.
American Resources of Delaware, Inc.
/S/ Douglas L. Hawthorne
----------------------------------------
By: Douglas L. Hawthorne
Title: Chairman of the Board
/S/ Rick G. Avare
----------------------------------------
Rick G. Avare
("Employee")
<PAGE>
Exhibit 10.59
INDEMNITY AGREEMENT
-------------------
By this INDEMNITY AGREEMENT (this "Agreement"), AMERICAN
RESOURCES OF DELAWARE, INC., a Delaware corporation (the
"Corporation"), and the undersigned officer of the Corporation
("Officer"), warrant, covenant and agree as follows:
WHEREAS, Officer is an officer of the Corporation and in
such capacity is performing a valuable service for the
Corporation, and
WHEREAS, the Corporation's Certificate of Incorporation (the
"Certificate") provides for indemnification of Officers to the
full extent permitted by Section 145 of the Delaware General
Corporation Law (the "Indemnification Statute"); and
WHEREAS, the Indemnification Statute provides that the
indemnification rights provided thereunder are not exclusive, and
that agreements may be entered into between the Corporation and
its Officers with respect to indemnification; and
WHEREAS, in order to induce Officer to serve as an Officer
of the Corporation, the Corporation has entered into this
contract with Officer;
NOW, THEREFORE, in consideration of Officer's continued
service as an Officer after the date hereof the parties hereto
agree as follows:
1. INDEMNIFICATION OF OFFICER. Subject to Section 2
below,
--------------------------
the Corporation shall hold harmless and indemnify Officer against
any and all expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably
incurred by Officer in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (including any action by or in
the right of the Corporation) to which Officer is, was or at any
time becomes a party, or is threatened to be made a party, by
reason of the fact that Officer is, or was or at any time becomes
an officer, employee or agent of the Corporation, or is or was
serving or at any time serves at the request of the Corporation
as an officer, employee or agent of another corporation,
partnership, joint venture trust or other enterprise. The
foregoing indemnification is expressly intended to, and shall,
apply to any and all liability or expenses arising on or after
the date Officer became an Officer of the Corporation, even if
prior to the date hereof.
2. LIMITATIONS ON INDEMNIFICATION. No indemnity pursuant
------------------------------
to Section 1 hereof shall be paid by the Corporation;
(a) Except to the extent that the aggregate of
losses to be indemnified hereunder exceeds the amount
of losses for which the Officer is indemnified pursuant
to any policy of insurance purchased and maintained by
the Corporation;
(b) In respect to remuneration paid to Officer if
it shall be determined by a final judgment or other
<PAGE>
final adjudication that such remuneration was in
violation of law;
(c) On account of any suit in which final
judgment is rendered against Officer for an accounting
of profits made from the purchase or sale by Officer of
securities of the Corporation pursuant to the
provisions of Section 16(b) of the Securities Exchange
Act of 1934 and amendments thereto or similar
provisions of any law;
(d) On account of an action or omission of
Officer which is finally adjudged to constitute willful
misconduct or to have been knowingly fraudulent or
deliberately dishonest; or
(e) If a final decision by a Court having
jurisdiction in the matter shall determine that such
indemnification is not lawful.
3. CONTINUATION OF INDEMNIFICATION. All obligations of
the
-------------------------------
Corporation hereunder shall continue during the period Officer is
an officer, employee or agent of the Corporation (or is or was
serving at the request of the Corporation as an officer, employee
or agent of another corporation, partnership, joint venture,
trust or other enterprise) and shall continue thereafter so long
as Officer shall be subject to any possible claim or threatened,
pending or completed action, suit or proceeding, whether civil,
criminal or investigative, by reason of the fact that Officer was
an officer of the Corporation or serving in any other capacity
referred to herein.
4. NOTIFICATION AND DEFENSE OF CLAIM. Promptly after
---------------------------------
receipt by Officer of notice of the commencement of any action,
suit or proceeding, or of notice of any matter which is or may be
the subject of an indemnification claim hereunder, Officer will
notify the Corporation thereof. With respect to any such action,
suit or proceeding:
(a) The Corporation will be entitled to
participate therein at its own expense;
(b) Except as otherwise provided below, to the
extent that it may wish, the Corporation jointly with
any other indemnifying party may assume the defense
thereof, with counsel reasonably satisfactory to
Officer. After notice from the Corporation to Officer
of its election so to assume the defense thereof, the
Corporation will not be liable to Officer for any legal
or other expenses subsequently incurred by Officer in
connection with the defense thereof other than
reasonable costs of investigation or as otherwise
provided below. Officer shall have the right to employ
counsel in such action, suit or proceeding, but the
fees and expenses of such counsel incurred after notice
from the Corporation of its assumption of the defense
thereof shall be at the expense of Officer unless (i)
the employment of counsel by Officer has been
authorized by the Corporation, (ii) Officer shall have
reasonably concluded that there may be a material
conflict of interest between the Corporation and
Officer in the
2
<PAGE>
conduct of the defense of such action, or (iii) the
Corporation shall not in fact have employed counsel to
assume the defense of such action, in each of which
cases the fees and expenses of counsel shall be borne
by the Corporation. The Corporation shall not be
entitled to assume the defense of any action, suit or
proceeding brought by or on behalf of the Corporation
or as to which Officer shall have made the
determination provided for in (ii) above.
(c) The Corporation shall not be obligated to
indemnify Officer under this Agreement for any amounts
paid in settlement of any action or claim effected
without its written consent. The Corporation shall not
settle any action or claim in any manner which would
impose any penalty or limitation on Officer without
Officer's written consent. Neither the Corporation nor
Officer will unreasonably withhold its or his consent
to any settlement proposed by the other of any matter
for which indemnity is provided hereunder, including
any settlement including a penalty or limitation on the
Officer.
5. PREPAID EXPENSES. The expenses (including attorneys'
----------------
fees) incurred by Officer in investigating, defending, or
appealing any threatened, pending or completed action, suit or
proceeding covered hereunder, whether civil, criminal,
administrative or investigative, including without limitation any
action by or in the right of the Corporation (other than expenses
to be paid directly by the Corporation in assuming the defense of
any matter covered hereby under Section 4(b) hereof), shall be
paid in advance by the Corporation.
6. REPAYMENT OF EXPENSES. Officer shall reimburse the
---------------------
Corporation for all expenses paid by the Corporation in defending
any civil or criminal action, suit or proceeding against Officer
in the event and only to the extent that it shall be finally
determined that Officer is not entitled to be indemnified by the
Corporation for such expenses under this Agreement or otherwise.
7. OTHER RIGHTS AND REMEDIES. The rights provided by any
-------------------------
provision of this Agreement shall not be deemed exclusive of any
other rights to which Officer may be entitled under any provision
of law, any Articles, any Bylaw, this or other agreement, vote of
Shareholders or disinterested officers or otherwise, both as to
action in his official capacity and as to action in another
capacity while occupying any of the positions or having any of
the relationships referred to in Section 1 of this Agreement, and
shall continue after Officer has ceased to occupy such position
or have such relationship.
8. ENFORCEMENT. In the event Officer is required to bring
-----------
any action to enforce rights or to collect monies due under this
Agreement and is successful in such action, Corporation shall
reimburse Officer for all of Officer's fees and expenses in
bringing and pursuing such action.
9. SEPARABILITY. Each of the provisions of this Agreement
------------
is a separate and distinct agreement and independent of the
others,
3
<PAGE>
so that if any provision hereof shall be held to be invalid or
unenforceable for any reason, such invalidity or enforceability
shall not affect the validity or enforceability of the other
provisions hereof.
10. MISCELLANEOUS. This Agreement shall be interpreted and
-------------
enforced in accordance with the laws of Kentucky. This Agreement
shall be binding upon Officer and upon Corporation, its successor
and assigns, and shall inure to the benefit of Officer, his
heirs, personal representatives and assigns and to the benefit of
Corporation, its successors and assigns. No amendment,
modification, termination or cancellation of this Agreement,
other than pursuant to Section 10, shall be effective unless in
writing signed by both parties hereto.
11. NOTICES. Any notice or communication given under the
-------
terms of this Agreement ("Notice") shall be in writing and
delivered in person or deposited, certified mail, return receipt
requested, addressed as follows:
if to the Company: AMERICAN RESOURCES OF DELAWARE,
INC.
160 Morgan Street
Versailles, Kentucky 40383
if to Officer: Rick G. Avare
American Resources of Delaware,
Inc.
160 Morgan Street
Versailles, Kentucky 40383
or to such other addresses as a party may from time to time
designate by Notice hereunder. Notices shall be effective upon
delivery in person, or at midnight on the third (3rd) business
day after the date of mailing, if mailed.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of November 12, 1996.
AMERICAN RESOURCES OF DELAWARE, INC.,
a Delaware corporation
By: /S/ Douglas L. Hawthorne
-------------------------------------
- -
Douglas L. Hawthorne, Chairman
"CORPORATION"
/S/ Rick G. Avare
----------------------------------------
- -
Rick G. Avare
"Officer"
4
<PAGE>
Exhibit 10.60
LEAD GENERATION / CORPORATE RELATIONS AGREEMENT
----------------------------------------------------
THIS AGREEMENT is made this 27th day of November, 1996, between
---- --------
CORPORATE RELATIONS GROUP, INC., a Florida corporation
(hereinafter "CRG"), and AMERICAN RESOURCES OF DELAWARE, INC.,
(hereinafter the "Client").
RECITALS
--------
1. The Client wishes to retain CRG to provide corporate
relations services to the Client.
2. CRG is willing to provide such corporate relations services
as are more fully described herein.
NOW THEREFORE, in consideration of the mutual promises contained
herein, it is agreed as follows:
1. Furnishing of Information by Client. The Client shall
furnish
-----------------------------------
to CRG information about the Client such as copies of
disclosure and filing materials, financial statements,
business plans, promotional information and background of
the Client's officers and directors ("Information Package").
The Client shall update the Information Package on a
continuous basis. The Client understands that the sole
purpose for providing CRG with the Information Package is
for utilization in a Lead Generation / Corporate Relations
program. CRG is not obligated to assess the financial
viability of the Client. CRG may rely on, and assume the
accuracy of the Information Package.
2. Representations and Warranties of Client. The Client
----------------------------------------
represents that all information included in the Information
Package furnished to CRG shall disclose all material facts
and shall not omit any facts necessary to make statements
made on behalf of the Client not misleading.
3. Covenants of the Client. The Client covenants and warrants
-----------------------
that any information submitted for dissemination will be
truthful, accurate, in compliance with all copyright and all
other applicable laws and regulations and will not be
submitted in connection with any improper or illegal act or
deed.
R.G.A/,JS
---------
Initials
-1-
<PAGE>
4. Based on the Information Package, CRG will perform the
services more fully described in Exhibit "A" for a period of
sixty (60) months pursuant to the terms hereof, which
services shall specifically include CRG making oral
representations on behalf of the Client pursuant to the
following procedures:
(a) Preparation of Proofs. CRG shall prepare proofs and or
---------------------
tapes of the agreed upon materials and information, as
set for dissemination, for the Client's review and
approval;
(b) Correction and Changes of Proofs and or Tapes. CRG
---------------------------------------------
shall make all corrections and changes that the Client
may request.
(c) Sign Offs. All approvals, corrections and change of
---------
proofs by the Client shall be signed by a duly
authorized representative of the Client. The Client
hereby designates the individual(s) listed in Exhibit
"C" hereof as authorized representatives for purposes
of this paragraph 4(a), (b) and (c); and CRG may rely
upon this designation.
5. Compensation. Refer to Exhibit "B".
------------
6. IT IS UNDERSTOOD AND AGREED BY THE PARTIES THAT THE ABOVE
COMPENSATION IN U.S. CURRENCY, OR OPTIONS TO ACQUIRE FREE
TRADING SHARES OF THE COMPANY, SHOULD BE PAID TIMELY UPON
EXECUTION OF THIS AGREEMENT. CRG WILL RETAIN THE OPTION,
BUT IS NOT COMPELLED TO BEGIN IT'S PERFORMANCE UNDER THIS
AGREEMENT PRIOR TO THE PAYMENT OF SUCH COMPENSATION IN U.S.
CURRENCY OR FREE TRADING SHARES.
7. Assumption of Liability and Indemnification. The Client
-------------------------------------------
assumes and claims all responsibility and liability for the
content of all information disseminated on behalf of the
Client which have been approved by Client. The Client shall
indemnify and hold CRG, its subsidiaries and parent company
harmless from and against all demands, claims or liability
arising for any reason due to the context of information
disseminated on behalf of the Client. This indemnity shall
include any reasonable costs incurred by CRG including, but
not limited to, legal fees and expenses incurred both in
administrative proceedings, at trial and appellate levels,
in settlement of claims and payment of any judgment against
CRG.
8. Assignment and Delegation. Neither party may assign any
-------------------------
rights or delegate any duties hereunder without the other
party's express prior written consent.
RGA/,JS
-------
Initials
-2-
<PAGE>
9. Entire Agreement. This writing contains the entire
----------------
agreement of the parties. No representations were made or
relied upon by either party, other than those expressly set
forth. Furthermore, the Client understands that CRG makes
no guarantees, assurances or representations in regard to
the results of its corporate relations program. No agent,
employee or other representative of either party is
empowered to alter any of the above terms, unless done in
writing and signed by an executive officer of the respective
parties.
10. Controlling Law and Venue. This Agreement's validity,
-------------------------
interpretation and performance shall be controlled by and
construed under the laws of the State of Florida. The proper
venue and jurisdiction shall be the Circuit Court in Orange
County, Florida.
11. Prevailing Party. In the event of the institution of any
----------------
legal proceedings or litigation, at the trial level or
appellate level, with regard to this Agreement, the
prevailing party shall be entitled to receive from the
non-prevailing party all costs, reasonable attorney's fees
and expenses.
12. Failure to Object not a Waiver. The failure of either party
------------------------------
to this Agreement to object to, or to take affirmative
action with respect to any conduct of the other which is in
violation of the terms of this Agreement shall not be
construed as a waiver of the violation or breach, or of any
future violation, breach or wrongful conduct.
13. Approval of Dissemination of Information. Prior to the
----------------------------------------
distribution of any Information Package as identified in
paragraph 2 or any information that is being submitted for
dissemination as identified in paragraph 3 that the Client
shall provide written confirmation that the information
disclosed can be disseminated under the terms and conditions
and paragraphs 2 and 3 above. That the above approval shall
be for a term of ninety (90) days and should CRG elect to
forward any additional Information Package or other
information concerning ARI that it will request that ARI
update and amend its written authorization and approval for
dissemination.
14. Notices. All notices or other documents under this
-------
Agreement shall be in writing and delivered personally or
mailed by certified mail, postage prepaid, addressed to the
representative or Company as follows:
COMPANY: CORPORATE RELATIONS GROUP, INC.
1801 Lee Road, Suite 301
Winter Park, FL 32789
Attention: Roberto E. Veitia, President
RGA/,JS
-------
Initials
-3-
<PAGE>
CLIENT: AMERICAN RESOURCES OF DELAWARE, INC.
160 Morgan Street
Versailles, KY 40383
Attention: Rick G. Avare, President/CEO
Copy: David J. Stetson
15. Headings. Headings in this Agreement are for convenience
--------
only and shall not be used to interpret or construe its
provisions.
16. Time. For all intents and purposes, time is of the essence
----
with this Agreement.
17. Agreement Not To Hire. The Client understands and
---------------------
appreciates that CRG has invested a tremendous amount of
time, energy and expertise in the training of its employees
to be able to provide the very service that Client desires.
Client further understands that should an employee be
enticed to leave, then CRG will be damaged in an amount the
parties are incapable of calculating at this time.
Therefore, the Client agrees not to offer employment to any
employee or subcontractor of CRG, nor to allow any officer
or director of Client to offer such employment with Client
or any other company with whom officers and directors of
Client are employed or hold a financial stake for a period
of three (3) years.
IN WITNESS WHEREOF, this Agreement is executed as of the date
first above written.
CORPORATE RELATIONS GROUP, INC.
BY: /s/ Roberto E. Veitia BY: /s/ James W. Spratt III
---------------------------- --------------------------
Roberto E. Veitia James W. Spratt III
President VP-Venture Capital
AMERICAN RESOURCES OF DELAWARE, INC.
BY: /s/ Rick G. Avare
---------------------------------
Rick G. Avare
President/CEO
-4-
<PAGE>
EXHIBIT "A"
The Corporate Relations Services to be provided by CRG for a
sixty (60) month period are as follows:
I. ADVERTISING and PRINTING SERVICES
A. MONEYWORLD MAGAZINE - Lead Generation mailing (150,000
print run total for the sixty month period)
- Eighteen page, four color magazine will be created
of which four page advertorial will be dedicated
to the Client.
- Creative concept, color separations, copy work and
printing
- 150,000 to be mailed
B. GROWTH INDUSTRY REPORT - Four page, four color follow-
up mail piece designed for additional informational
purposes that is mailed to respondents. A total of
7,500 will be printed.
C. THE CORE BROKER PROGRAM - CRG will produce a core of 8-
10 retail brokers, market makers and/or money managers
who will take positions in the stock of "AMERICAN
--------
RESOURCES OF DELAWARE, INC.". This process will begin
---------------------------
immediately upon CRG receiving the payment as
stipulated in Exhibit "B" and will be completed no
later than a month before mailing occurs. Upon
completion, selection and approval of the Core Broker
Group, CRG will arrange a Core Broker meeting. This
will last for two days, which will include; a show and
tell from the top management of "AMERICAN RESOURCES OF
---------------------
DELAWARE, INC." in intense training of these core
--------------
brokers.
D. Public relations exposure to newsletter writers, trade
publications and financial gurus. At CRG's discretion,
it will pay for any special reports that may be
required. The Client shall be totally responsible for
all reasonable travel expenses for the purpose of due
diligence of the company by financial newsletter
writers and/or brokers. The Client will have total
pre-approval rights on these trips.
E. Inclusion as a featured "Lead Generator of the Month"
in CONFIDENTIAL FAX ALERT, a newsletter transmitted by
fax to over 3,000 Brokers.
F. Preparation of a Broker Bullet Sheet to be sent to
every broker who shows interest in working the leads
and the stock. (As soon as possible).
G. Lead Tracking Summary maintained for all response leads
generated and provided.
H. Follow-up with shareholders, brokers, funds and
institutions.
RGA/,JS
-------
Initials
-1-
<PAGE>
EXHIBIT "A"
CONTINUED
I. Investor Relations - Press release placements in market
publications. The Client shall pay the reasonable cost
incurred for these wire services.
J. Two Location Road Shows - Locations to be determined.
Client will cover all reasonable expenses of Road
Shows. Client will have prior approval over those
reasonable expenses.
K. Junior Page Advertising in four (4) separate issues of
MoneyWorld Magazine.
L. CRG will distribute at its cost the due diligence
packages to all inquiring brokers. The Client shall
supply the necessary materials for this package.
M. CRG guarantees a minimum of 3% return of qualified
investor leads specifically generated for the Company.
N. Advice on Fund Raising.
1. If travel is required, the Client will pay
transportation and hotel reasonable expenses.
O. Assistance in review of documentation to be sent to
brokers.
1. If travel is required, the Client will pay
transportation and hotel reasonable expenses.
P. Assistance in public relations with investment
newsletter writers and financial institutions.
1. If travel is required, the Client will pay
transportation and hotel reasonable expenses.
Q. Advice on mergers and acquisitions.
1. If travel is required, the Client will pay
transportation and hotel reasonable expenses.
RGA/,JS
-------
Initials
-2-
<PAGE>
EXHIBIT "B"
PAYMENT AGREEMENT
made by and between
AMERICAN RESOURCES OF DELAWARE, INC.
and
CORPORATE RELATIONS GROUP, INC.
THIS AGREEMENT is made this 27th day of November, 1996, and will
---- --------
serve as confirmation of payment terms for services to be
provided AMERICAN RESOURCES OF DELAWARE, INC.("CLIENT") whereby
CORPORATE RELATIONS GROUP, INC. ("CRG") has agreed to perform
said services as defined in the "Lead Generation / Corporate
Relations Agreement."
TERMS
-----
A. CLIENT will pay to CRG, FIVE HUNDRED FIFTY THOUSAND DOLLARS
($550,000 U.S. cy).
B. This Agreement is subject to compliance with the rules of
the Exchanges and Securities Commissions on which Client is
listed and registered.
C. IT IS UNDERSTOOD AND AGREED BY THE PARTIES THAT THE ABOVE
COMPENSATION IN U.S. CURRENCY, OR OPTIONS TO ACQUIRE FREE
TRADING SHARES OF THE COMPANY, SHOULD BE PAID TIMELY UPON
EXECUTION OF THIS AGREEMENT. CRG WILL RETAIN THE OPTION,
BUT IS NOT COMPELLED TO BEGIN IT'S PERFORMANCE UNDER THIS
AGREEMENT PRIOR TO THE PAYMENT OF SUCH COMPENSATION IN U.S.
CURRENCY OR FREE TRADING SHARES.
D. In the event of termination of the Agreement by Client, CRG
shall be fully released and forever discharged by Client
from any further obligations or liabilities with respect to
the "Lead Generation / Corporate Relations Agreement" and
any results therefrom, save and except liabilities arising
from CRG's own negligence during the term of this Agreement.
Concurrently, Client shall be fully released and forever
discharged by CRG from any and all obligations of further
payments or liabilities with respect to the "Lead Generation
/ Corporate Relations Agreement." This release in no way
affects Point #7, Page 2 of the"Lead Generation / Corporate
Relations Agreement."
RGA/,JS
-------
Initials
-1-
<PAGE>
EXHIBIT " B "
CONTINUED
E. Shares shall be made free trading through the registration
that is mutually agreed upon by the Company's attorney and
CRG's attorney.
F. Company shall issue options to CRG as outlined below.
Amount Price Duration
------ ----- --------
100,000 shares at $3.00 One (1) year from the date of this
Agreement
100,000 shares at $3.60 Two (2) years from the date of this
Agreement
100,000 shares at $4.20 Three (3) years from the date of
this Agreement
100,000 shares at $4.80 Five (5) years from the date of
this Agreement
100,000 shares at $6.00 Five (5) years from the date of
this Agreement.
G. That CRG represents and warrants that during the term of
this agreement, that Jim Spratt will be the lead individual
on behalf of CRG performing those services as more fully
deliniated in the agreement betwen ARI and CRG. Without
limiting this representation, CRG acknowledges that ARI is
entering this agreement contingent upon CRG's representation
that Mr. Spratt intends to continue his employment with CRG
for a period of not less than one (1) year from the date
hereof. In the event that Jim Spratt should leave the
services of CRG, ARI will have the sole and exclusive right
to select the successor of Mr. Spratt, on behalf of CRG, to
handle its account.
IN WITNESS WHEREOF, this Agreement is executed as of the date
first above written.
CORPORATE RELATIONS GROUP, INC.
BY: /s/ Roberto E. Veitia BY: /s/ James W. Spratt III
---------------------------- ---------------------------
Roberto E. Veitia James W. Spratt III
President VP-Venture Capital
AMERICAN RESOURCES OF DELAWARE, INC.
BY: /s/ Rick G. Avare
---------------------------------
Rick G. Avare
President/CEO
-2-
<PAGE>
EXHIBIT "C"
AMERICAN RESOURCES OF DELAWARE, INC. hereby designates the
following person or persons to act on its behalf for purposes of
signing off on all copies pursuant to Paragraph 4 of this
Corporation Relations Agreement. CRG may rely upon the signature
of any of the following:
/s/ Leonard K. Nave Leonard K. Nave
- ------------------------------- ------------------------------
DIRECTOR (PLEASE SIGN) DIRECTOR (PLEASE PRINT)
/s/ Rick G Avare Rick G. Avare
- ------------------------------- ------------------------------
PRESIDENT (PLEASE SIGN) PRESIDENT (PLEASE PRINT)
/s/ Karen M. Underwood Karen M. Underwood
- ------------------------------- ------------------------------
Corporate Secretary (PLEASE SIGN) Corporate Secretary (PLEASE
PRINT)
