EXHIBIT 10.6
SECURITIES SUBSCRIPTION AND INVESTMENT AGREEMENT
This SECURITIES SUBSCRIPTION AND INVESTMENT AGREEMENT dated as of the 7th
day of July 2003, is made between EARTH SCIENCES, INC., a Colorado corporation
with principal executive offices located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("ESI"), ADA-ES, INC., a Colorado corporation with the same
address as ESI (the "Company"), and ARCH COAL, INC., a Delaware corporation with
its principal executive offices located at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇.
▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Company is a wholly-owned subsidiary of the ESI: and
WHEREAS, Buyer desires to purchase from the Company, and the Company
desires to issue and sell to the Buyer, upon the terms and subject to the
conditions of this Agreement, shares of the Company's common stock, (the "Common
Stock") and an option to purchase shares of such Common Stock; and
WHEREAS, such investment will be made in reliance upon the provisions of
Section 4(2) and Regulation D of the United States Securities Act of 1933, as
amended and the regulations promulgated thereunder (the "Securities Act"),
and/or upon such other exemption from the registration requirements of the
Securities Act as may be available with respect to any or all of the investments
in Common Stock subscribed to hereunder.
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. PURCHASE AND SALE OF COMMON STOCK AND OPTION
a. Transaction and Purchase Price. Buyer hereby subscribes, upon the
satisfaction of each of the conditions set forth in Section 9 hereto, for
$1,000,000 (payable in United States Dollars) of Common Stock (the "Shares").
The price per share and the number of shares shall be determined as follows:
(i) The price per share for the Shares (the "Purchase Price") shall be
equal to twenty times the price of one share of the common stock of
ESI (OTCBB: ESCI) ("ESI Stock") or $10.00 per share whichever is less
as determined by the average closing price per share of ESI Stock for
the twenty-day trading period immediately preceding the record date of
the Distribution (as defined below) as reported on the OTCBB (as
defined below).
(ii) The number of Shares of Common Stock to be issued to Buyer shall be
equal to $1,000,000 divided by the Purchase Price.
b. Form of Payment. Buyer shall pay the Purchase Price on the Closing Date
by wire transfer or check of immediately available funds to the Company.
Simultaneously against receipt by the Company of the Purchase Price, the Company
shall deliver one or more duly authorized, issued and executed certificates
(I/N/O Buyer) evidencing the Shares, to the Buyer or its designated depository.
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c. Method of Payment. Payment to the Company of the Purchase Price shall be
made by wire transfer of immediately available funds to the account of the
Company as follows:
▇▇▇▇▇ Fargo Bank Denver
ABA# ▇▇▇▇▇▇▇▇▇
For the Account of: ADA-ES
Account# 1013093222
Simultaneously with the receipt of the Purchase Price the Company shall arrange
for delivery the Shares as follows:
(i) If the number of shares as determined in Section 1(a)(ii) is in less
than or equal to 100,000 shares of Common Stock, then the Company will
deliver all the Shares to the Buyer.
(ii) If the number of shares as determined in Section 1(a)(ii) is greater
than 100,000 shares of Common Stock, then the shares in excess of
100,000 shares (the "Excess Shares"), shall be delivered to an escrow
account as mutually agreed to by Buyer and Company.
d. Release of Shares from Escrow. During the 365 days following the Closing
Date, the average of the highest twenty consecutive day share price ("HSP") as
provided by the closing price per share as quoted by the OTC Bulletin Board
("OTCBB") or similar quotation will be determined. The HSP will be used to
determine the percentage, if any, of the Excess Shares that will be returned to
the Company from escrow if there are shares in escrow as determined in Section 1
(c). The floor price ("FP") for these escrow calculations will be 125% of the
Purchase Price, and the ceiling price ("CP") will be 200% of the Purchase Price
or $15.00, whichever is greater.
(i) If the HSP is less than or equal to the FP, then all of the Excess
Shares will be released to the Buyer.
(ii) If the HSP is greater that or equal to the CP, then all of the Excess
Shares will be released to the Company.
(iii) If the HSP is greater than the FP but less than the CP, then the
number of shares to be released from escrow to the Company shall be
equal to:
Escrow Shares times (HSP - FP) / (CP - FP)
e. Option Shares. The Buyer shall also receive on the Closing Date an
option to purchase additional shares in the form provided for in Exhibit A
attached hereto. The number of shares under option shall be equal to half the
amount of Shares purchased at the Closing Date not to exceed 50,000 shares at a
price of $10.00 per share.
2. BUYER'S REPRESENTATIONS, WARRANTIES; ACCESS TO INFORMATION; INDEPENDENT
INVESTIGATION.
Buyer represents and warrants to and covenants and agrees with the Company
as follows:
a. Buyer is purchasing the Shares of Common Stock for its own account, for
investment purposes only and not with a view towards or in connection with the
public sale or distribution thereof in violation of the Securities Act of 1933,
as amended (the "Securities Act").
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b. Buyer is (i) an "accredited investor" within the meaning of Rule 501 of
Regulation D under the Securities Act, (ii) experienced in making investments of
the kind contemplated by this Agreement, (iii) capable, by reason of its
business and financial experience, of evaluating the relative merits and risks
of an investment in the Securities, and (iv) able to afford the loss of its
investment in the Securities.
c. Buyer understands that the Shares of Common Stock are being offered and
sold by the Company in reliance on an exemption from the registration
requirements of the Securities Act and equivalent state securities and "blue
sky" laws, and that the Company is relying upon the accuracy of, and Buyer's
compliance with, Buyer's representations, warranties and covenants set forth in
this Agreement to determine the availability of such exemption and the
eligibility of Buyer to purchase the Shares;
d. Buyer acknowledges that it has been furnished with copies of the ESI's
Annual Report on Form 10-KSB for the fiscal years ended December 31, 2002 and
2001, the ESI's Quarterly Report on Form 10-QSB for the fiscal quarters ended
March 31, 2003, and all other reports and documents heretofore filed by the
Company with the Securities and Exchange Commission (the "Commission") pursuant
to the Securities Act and the Securities Exchange Act of 1934, as amended (the
"Exchange Act") since December 31, 2002 (collectively the "Commission Filings").
e. Buyer acknowledges that in making its decision to purchase the Shares it
has (i) relied upon independent investigations made by it and its professional
advisors, (ii) visited the Company's principal executive offices and been given
access and the opportunity to examine all agreements, books and records of the
Company which Buyer requested, (iii) received and examined the Company's draft
Registration Statement on Form 10-SB prepared in connection with the
Distribuiton, and (iv) been given an opportunity to ask questions of and to
receive answers from the Company's and ESI'sexecutive officers, directors and
management personnel concerning the terms and conditions of the private
placement of the Shares by the Company.
f. Buyer understands that sale of the Shares have not been approved or
disapproved by the Commission or any state securities commission and that the
foregoing authorities have not reviewed any documents or instruments in
connection with the offer and sale to it of the Securities and have not
confirmed or determined the adequacy or accuracy of any such documents or
instruments.
g This Agreement has been duly and validly authorized, executed and
delivered by the Buyer and is a valid and binding agreement of the Buyer
enforceable against it in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally.
h. Neither Buyer nor its affiliates nor any person acting on its or their
behalf has the intention of entering, or will enter into, prior to the Closing,
any put option, short position or other similar instrument or position with
respect to the Common Stock and neither Buyer nor any of its affiliates nor any
person acting on its or their behalf will use at any time shares of Common Stock
acquired pursuant to this Agreement to settle any put option, short position or
other similar instrument or position that may have been entered into prior to
the execution of this Agreement or any issuance of the Shares.
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3. ESI'S AND THE COMPANY'S REPRESENTATIONS
The Company and ESI represent and warrant to Buyer that:
a. Capitalization.
(i) The authorized capital stock of the Company consists of 50,000,000 shares of
Common Stock and 50,000,000 shares of Preferred Stock, of which 10,000 shares of
Common Stock were outstanding as of December 31, 2002. All of the issued and
outstanding shares of Common Stock have been duly authorized and validly issued
and are fully paid and non-assessable. The Common Stock issuable upon purchase
of the Shares has been duly and validly authorized and reserved for issuance by
the Company, and when issued by the Company will be duly and validly issued,
fully paid and non-assessable and will not subject the holder thereof to
personal liability by reason of being such holder. There are no preemptive,
subscription, "call" or other similar rights to acquire the Common Stock that
have been issued or granted to any person, except as disclosed in the Commission
Filings or otherwise previously disclosed in writing to Buyer.
(ii) Except as disclosed in the Commission Filings, ESI and/or the Company do
not own or control, directly or indirectly, any interest in any other
corporation, partnership, limited liability company, unincorporated business
organization, association, trust or other business entity. Except as disclosed
in the Commission Filings, the Company owns 100% of the outstanding shares of
capital stock of each of its subsidiaries, free and clear of any and all liens,
pledges, encumbrances, charges, agreements, security interests, mortgages or
claims of any kind whatsoever.
b. Organization; Reporting Company Status.
(i) The Company and ESI are corporations duly organized, validly existing and in
good standing under the laws of the State of Colorado and are duly qualified as
a foreign corporation in all jurisdictions in which the failure to so qualify
would have a material adverse effect on the business, properties, prospects,
condition (financial or otherwise) or results of operations of the Company and
its subsidiaries, taken as a whole, or on the consummation of any of the
transactions contemplated by this Agreement (a "Material Adverse Effect"). Each
of the Company's subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of its respective jurisdiction of
incorporation and is duly qualified as a foreign corporation in all
jurisdictions in which the failure to so qualify would have a Material Adverse
Effect.
(ii) The Company has not registered the Common Stock pursuant to Section 12 of
the Exchange Act and has not filed any separate reports or information with
regard to the Company with the Commission. The Company knows of no reports or
information required to be filed with regard to the Company with the Commission
by it pursuant to any reporting obligations under Section 13(a) or 15(d), as
applicable, of the Exchange Act for the 24-month period immediately preceding
the date hereof.
c. Authority; Validity and Enforceability. The Company and ESI have the
requisite corporate power and authority to enter into this Agreement and to
perform all of their obligations hereunder and thereunder (including the
issuance, sale and delivery to Buyer of the Shares). The execution, delivery and
performance by the Company and ESI of this Agreement, and the consummation by
the Company and ESI of the transactions contemplated hereby, have been duly
authorized by all necessary corporate action on the part of the Company and ESI.
This Agreement has been duly and validly executed and delivered by the Company
and ESI and constitutes a valid and binding agreement of the Company and ESI
enforceable against them in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally. The Shares have
been duly and validly authorized for issuance by the Company.
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d. Non-contravention. The execution and delivery by the Company and ESI of
this Agreement, the issuance of the Shares, and the consummation by the Company
and ESI of the other transactions contemplated hereby, does not and will not
conflict with or result in a breach by the Company and/or ESI of any of the
terms or provisions of, or constitute a default (or an event which, with notice,
lapse of time or both, would constitute a default) under, the articles of
incorporation or by-laws of the Company and/or ESI, or any indenture, mortgage,
deed of trust or other material agreement or instrument to which the Company
and/or ESI or any of their subsidiaries is a party or by which its or any of its
subsidiaries' properties or assets are bound, or any law, rule, regulation,
decree, judgment or order of any court or public or governmental authority
having jurisdiction over the Company and/or ESI or any of their subsidiaries or
any of their or their subsidiaries' properties or assets, except such conflict,
breach or default which would not have a Material Adverse Effect.
e. Approvals. No authorization, approval or consent of any court or public
or governmental authority is required to be obtained by the Company or ESI for
the issuance and sale of the Shares to Buyer as contemplated by this Agreement,
except such authorizations, approvals and consents that have been obtained by
the Company and ESI prior to the date hereof.
f. Commission Filings. None of the Commission Filings contained at the time
they were filed any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.
g. Absence of Certain Changes. Since the Balance Sheet Date (as defined in
Section 3.k.), there has not occurred any change, event or development, and
there has not existed any condition having or reasonably likely to have, a
Material Adverse Effect.
h. Full Disclosure. There is no fact known to the Company or ESI (other
than general economic or industry conditions known to the public generally) that
has not been fully disclosed to the Buyer that (i) reasonably could be expected
to have a Material Adverse Effect or (ii) reasonably could be expected to
materially and adversely affect the ability of the Company or ESI to perform its
obligations pursuant to this Agreement.
i. Absence of Litigation. There is no action, suit, claim, proceeding,
inquiry or investigation pending or, to the Company's or ESI's knowledge,
threatened, by or before any court or public or governmental authority which, if
determined adversely to the Company or ESI or any of their subsidiaries, would
have a Material Adverse Effect.
j. Absence of Events of Default. No "Event of Default" (as defined in any
agreement or instrument to which the Company or ESI or any of their subsidiaries
is a party) and no event which, with notice, lapse of time or both, would
constitute an Event of Default (as so defined), has occurred and is continuing,
which could have a Material Adverse Effect.
k. Financial Statements; No Undisclosed Liabilities. ESI has delivered to
Buyer true and complete copies of its (i) audited consolidated balance sheet as
at December 31, 2002 and the related audited consolidated statements of
operations and cash flows for the fiscal years ended December 31, 2002 and
December 31, 2001, and (ii) an unaudited Pro Forma balance sheet of the Company
as at December 31, 2002, including in all such cases the related notes and
schedules thereto (collectively, the "Financial Statements). Each of the
Financial Statements is complete and correct in all material respects, has been
prepared in accordance with United States General Accepted Accounting Principles
("GAAP") (subject, in the case of the interim Financial Statements, to normal
year-end adjustments and the absence of footnotes, and subject, in case of the
Pro Forma balance sheet to the absence of footnotes) and in conformity with the
practices consistently applied by ESI without modification of the accounting
principles used in the preparation thereof, and fairly presents the financial
position, results of operations and cash flows of ESI and its consolidated
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subsidiaries as at the dates and for the periods indicated. For purposes hereof,
the audited consolidated balance sheet of the ESI and its subsidiaries as at
December 31, 2002 is hereinafter referred to as the "Balance Sheet" and December
31, 2002 is hereinafter referred to as the "Balance Sheet Date". Neither ESI nor
any of its subsidiaries has any indebtedness, obligations or liabilities of any
kind (whether accrued, absolute, contingent or otherwise, and whether due or to
become due) that would have been required to be reflected in, reserved against
or otherwise described in the Balance Sheet or in the notes thereto in
accordance with GAAP, which was not fully reflected in, reserved against or
otherwise described in the Balance Sheet or the notes thereto or was not
incurred in the ordinary course of business consistent with ESI's past practices
since the Balance Sheet Date.
l. Compliance with Laws; Permits. ESI and each of its subsidiaries is in
compliance with all laws, rules, regulations, codes, ordinances and statutes
(collectively "Laws") applicable to it or to the conduct of its business, except
for such non-compliance which would not have a Material Adverse Effect. ESI and
each of its subsidiaries possesses all permits, approvals, authorizations,
licenses, certificates and consents from all public and governmental authorities
which are necessary to conduct its business, except for those the absence of
which would not have a Material Adverse Effect.
m. Related Party Transactions. Except as set forth in the Commission
Filings, neither the Company, ESI nor any of their officers, directors or
"Affiliates" (as such term is defined in Rule 12b-2 under the Exchange Act) has
borrowed any moneys from or has outstanding any indebtedness or other similar
obligations to the Company or ESI. Neither the Company, ESI nor any of their
officers, directors or Affiliates (i) owns any direct or indirect interest of
any kind in, or controls or is a director, officer, partner, member or employee
of, or consultant to or lender to or borrower from, or has the right to
participate in the profits of, any person or entity which is (x) a competitor,
supplier, customer, landlord, tenant, creditor or debtor of the Company or any
of its subsidiaries, (y) engaged in a business related to the business of the
Company or any of its subsidiaries, or (z) a participant in any transaction to
which the Company or any of its subsidiaries is a party or (ii) is a party to
any contract, agreement, commitment or other arrangement with the Company or any
of its subsidiaries. Notewithstanding the foregoing, this paragraph does not
require the disclosure by the Company or ESI to the Buyer of any related party
transactions not required to be disclosed in the Commission Filings.
n. Insurance. Each of the Company and ESI maintains property and casualty,
general liability, workers' compensation, environmental hazard, personal injury
and other similar types of insurance with financially sound and reputable
insurers that is adequate, consistent with industry standards and ESI and the
Company's historical claims experience, to cover all loss contingencies which
forseeably may arise in the conduct of the business of the Company and its
subsidiaries. Neither the Company nor ESI has received notice from, and has no
knowledge of any threat by, any insurer (that has issued any insurance policy to
the Company or any of its subsidiaries) that such insurer intends to deny
coverage under or cancel, discontinue or not renew any insurance policy
presently in force.
o. Securities Law Matters. Based, in part, upon the representations and
warranties of Buyer set forth in Section 2 hereof, the offer and sale by the
Company of the Shares is exempt from (i) the registration and prospectus
delivery requirements of the Securities Act and the rules and regulations of the
Commission thereunder and (ii) the registration and/or qualification provisions
of all applicable state securities and "blue sky" laws. Other than pursuant to
an effective registration statement under the Securities Act, the Company has
not issued, offered or sold the Shares or any shares of Common Stock (including
for this purpose any securities of the same or a similar class as the Common
Stock, or any securities convertible into or exchangeable or exercisable for the
Common Stock or any such other securities) within the six-month period next
preceding the date hereof, except as disclosed in the Commission Filings or
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otherwise previously disclosed in writing to Buyer, and neither the Company nor
ESI shall directly or indirectly take, and shall permit any of its directors,
officers or Affiliates directly or indirectly to take, any action (including,
without limitation, any offering or sale to any person or entity of shares of
Common Stock), so as to make unavailable the exemption from Securities Act
registration being relied upon by the Company for the offer and sale to Buyer of
Shares as contemplated by this Agreement. No form of general solicitation or
advertising has been used or authorized by ESI, the Company or any of their
officers, directors or Affiliates in connection with the offer or sale of Shares
as contemplated by this Agreement or any other agreement to which ESI or the
Company is a party.
p. Environmental Matters.
(i) The operations of ESI and each of its subsidiaries are in compliance
with all applicable Environmental Laws and all permits issued pursuant
to Environmental Laws or otherwise;
(ii) to its knowledge, ESI and each of its subsidiaries has obtained all
permits required under all applicable Environmental Laws necessary to
operate its business;
(iii) neither ESI nor any of its subsidiaries is the subject of any
outstanding written order of or agreement with any governmental
authority or person respecting (i) Environmental Laws, (ii) Remedial
Action or (iii) any Release or threatened Release of Hazardous
Materials;
(iv) neither ESI nor any of its subsidiaries has received any written
communication alleging either or both that ESI or any of its
subsidiaries may be in violation of any Environmental Law or any permit
issued pursuant to Environmental Law, or may have any liability under
any Environmental Law;
(v) except as set forth in the Commission Filings, to ESI's knowledge,
there are no investigations of the business, operations, or currently
or previously owned, operated or leased property of the Company or any
of its subsidiaries pending or threatened which could lead to the
imposition of any liability pursuant to any Environmental Law; and,
(vi) the Company has provided to Buyer all environmentally related audits,
studies, reports, analyses, and results of investigations that have
been performed with respect to the currently or previously owned,
leased or operated properties of the Company or any of its
subsidiaries.
For purposes of this Section 3.p.:
"Environmental Law" means any foreign, federal, state or local statute,
regulation, ordinance, or rule of common law as now or hereafter in effect in
any way relating to the protection of human health and safety or the environment
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act (42 ▇.▇.▇.▇▇. 9601 et seq.), the Hazardous
Materials Transportation Act (49 U.S.C. ▇▇▇.▇▇. 1801 et seq.), the Resource
Conservation and Recovery Act (42 ▇.▇.▇.▇▇. 6901 et seq.), the Clean Water Act
(33 ▇.▇.▇.▇▇. 1251 et seq.), the Clean Air Act (42 ▇.▇.▇.▇▇. 7401 et seq.), the
Toxic Substances Control Act (15 ▇.▇.▇.▇▇. 2601 et seq.), the Federal
Insecticide, Fungicide, and Rodenticide Act (7 ▇.▇.▇.▇▇. 136 et seq.), and the
Occupational Safety and Health Act (29 ▇.▇.▇.▇▇. 651 et seq.), and the
regulations promulgated pursuant thereto.
"Hazardous Material" means any substance, material or waste which is
regulated by the United States, Canada or any of its provinces, or any state or
local governmental authority including, without limitation, petroleum and its
by-products, asbestos, and any material or substance which is defined as a
"hazardous waste," "hazardous substance," "hazardous material," "restricted
hazardous waste," "industrial waste," "solid waste," "contaminant," "pollutant,"
"toxic waste" or toxic substance" under any provision of any Environmental Law;
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"Release" means any release, spill, filtration, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, or leaching into the indoor
or outdoor environment, or into or out of any property;
"Remedial Action" means all actions to (x) clean up, remove, treat or in
any other way address any Hazardous Material; (y) prevent the Release of any
Hazardous Material so it does not endanger or threaten to endanger public health
or welfare or the indoor or outdoor environment; or (z) perform pre-remedial
studies and investigations or post-remedial monitoring and care.
Notwithstanding the foregoing, neither ESI nor the Company shall be deemed in
breach of any of the representations set forth in this Section 3p unless such
breach shall have a Material Adverse Affect on the Company or the value of the
Shares.
q. Labor Matters. Neither ESI nor any of its subsidiaries is party to any
labor or collective bargaining agreement and there are no labor or collective
bargaining agreements which pertain to employees of the Company or any of its
subsidiaries. No employees of the Company or any of its subsidiaries are
represented by any labor organization and none of such employees has made a
pending demand for recognition, and there are no representation proceedings or
petitions seeking a representation proceeding presently pending or, to the
Company's knowledge, threatened to be brought or filed, with the National Labor
Relations Board or other labor relations tribunal. There is no organizing
activity involving the Company or any of its subsidiaries pending or to the
Company's knowledge, threatened by any labor organization or group of employees
of the Company or any of its subsidiaries. There are no (i) strikes, work
stoppages, slowdowns, lockouts or arbitrations or (ii) material grievances or
other labor disputes pending or, to the knowledge of the Company, threatened
against or involving the company or any of its subsidiaries. There are no unfair
labor practice charges, grievances or complaints pending or, to the knowledge of
the Company, threatened by or on behalf of any employee or group of employees of
the Company.
r. ERISA Matters. Each of the Company, its subsidiaries and their ERISA
Affiliates is in compliance in all material respects with all provisions of
ERISA applicable to it. No Reportable Event has occurred, been waived or exists
as to which the Company or any of its subsidiaries or any ERISA Affiliate was
required to file a report with the Pension Benefits Guaranty Corporation, and
the present value of all liabilities under all Plans (based on those assumptions
used to fund such Plans) did not, as of the most recent annual valuation date
applicable thereto, exceed the value of the assets of all such Plans in the
aggregate. None of the Company or any of its subsidiaries or ERISA Affiliates
has incurred any Withdrawal Liability that could result in a Material Adverse
Effect. None of the Company or any of its subsidiaries or ERISA Affiliates has
received any notification that any Multiemployer Plan is in reorganization or
has been terminated within the meaning of Title IV of ERISA, and no
Multiemployer Plan is reasonably expected to be in reorganization or termination
where such reorganization or termination has resulted or could reasonably be
expected to result in increases to the contributions required to be made to such
Plan or otherwise.
For purposes of this Section 3.r.:
"ERISA" means the Employee Retirement Income Security Act of 1974, or any
successor statute, together with the regulations thereunder, as the same may be
amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not incorporated)
that was, is or hereafter may become, a member of a group of which the Company
or any of its subsidiaries is a member and which is treated as a single employer
under ss. 414 of the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code").
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"Multiemployer Plan" means a multiemployer plan as defined in Section
4001(a)(3) of ERISA to which the Company or any ERISA Affiliate (other than one
considered an ERISA Affiliate only pursuant to subsection (m) or (o) of ss. 414
of the Internal Revenue Code) is making or accruing an obligation to make
contributions, or has within any of the preceding five plan years made or
accrued an obligation to make contributions.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"Plan" means any pension plan (other than a Multiemployer Plan) subject to
the provision of Title IV of ERISA or ss. 412 of the Internal Revenue Code that
is maintained for employees of the Company or any ERISA Affiliate.
"Reportable Event" means any reportable event as defined in Section 4043(b)
of ERISA or the regulations issued thereunder with respect to a Plan (other than
a Plan maintained by an ERISA Affiliate that is considered an ERISA Affiliate
only pursuant to subsection (m) or (o) of ss. 414 of the Internal Revenue Code.
"Withdrawal Liability" means liability to a Multiemployer Plan as a result
of a complete or partial withdrawal from such Multiemployer Plan, as such terms
are defined in Part I of Subtitle E of Title IV of ERISA.
s. Tax Matters.
(i) ESI and each of its subsidiaries have filed all Tax Returns which they are
required to file under applicable Laws, except for such Tax Returns in
respect of which the failure to so file does not and could not have a
Material Adverse Effect; all such Tax Returns are true and accurate and
have been prepared in compliance with all applicable Laws; ESI and each of
its subsidiaries have paid all Taxes due and owing by them (whether or not
such Taxes are required to be shown on a Tax Return) and have withheld and
paid over to the appropriate taxing authorities all Taxes which they are
required to withhold from amounts paid or owing to any employee,
stockholder, creditor or other third parties; and since the Balance Sheet
Date, the charges, accruals and reserves for Taxes with respect to the
Company (including any provisions for deferred income taxes) reflected on
the books of the Company are adequate to cover any Tax liabilities of the
Company and its subsidiaries if their current tax year were treated as
ending on the date hereof.
(ii) No claim has been made by a taxing authority in a jurisdiction where either
ESI or any of its subsidiaries does not file tax returns that such
corporation is or may be subject to taxation by that jurisdiction. There
are no foreign, federal, state or local tax audits or administrative or
judicial proceedings pending or being conducted with respect to ESI or any
of its subsidiaries; no information related to Tax matters has been
requested by any foreign, federal, state or local taxing authority; and no
written notice indicating an intent to open an audit or other review has
been received by ESI from any foreign, federal, state or local taxing
authority. There are no material unresolved questions or claims concerning
ESI's or any of its subsidiaries' Tax liability. Neither ESI nor any of its
subsidiaries (A) has executed or entered into a closing agreement pursuant
toss. 7121 of the Internal Revenue Code or any predecessor provision
thereof or any similar provision of state, local or foreign law; or (B) has
agreed to or is required to make any adjustments pursuant toss. 481 (a) of
9
the Internal Revenue Code or any similar provision of state, local or
foreign law by reason of a change in accounting method initiated by ESI or
any of its subsidiaries or has any knowledge that the IRS has proposed any
such adjustment or change in accounting method, or has any application
pending with any taxing authority requesting permission for any changes in
accounting methods that relate to the business or operations of ESI or any
of its subsidiaries. Neither ESI nor any of its subsidiaries has been a
United States real property holding corporation within the meaning ofss.
897(c)(2) of the Internal Revenue Code during the applicable period
specified inss. 897(c)(1)(A)(ii) of the Internal Revenue Code.
(iii) Neither the Company nor any of its subsidiaries has made an election under
ss. 341(f) of the Internal Revenue Code. Neither ESI nor any of its
subsidiaries is liable for the Taxes of another person that is not a
subsidiary of ESI under (A) Treas. Reg. ss. 1.1502-6 (or comparable
provisions of state, local or foreign law), (B) as a transferee or
successor, (C) by contract or indemnity or (D) otherwise. Neither ESI nor
any of its subsidiaries is a party to any tax sharing agreement. Neither
ESI nor any of its subsidiaries has made any payments, is obligated to make
payments or is a party to an agreement that could obligate it to make any
payments that would not be deductible under ss. 280G of the Internal
Revenue Code.
For purposes of this Section 3.s.:
"IRS" means the United States Internal Revenue Service.
"Tax" or "Taxes" means federal, state, county, local, foreign, or other
income, gross receipts, ad valorem, franchise, profits, sales or use, transfer,
registration, excise, utility, environmental, communications, real or personal
property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.
"Tax Return" means any return, information report or filing with respect to
Taxes, including any schedules attached thereto and including any amendment
thereof.
t. No Misrepresentation. No representation or warranty of ESI or the
Company contained in this Agreement, any schedule, annex or exhibit hereto or
any agreement, instrument or certificate furnished by ESI or the Company to
Buyer pursuant to this Agreement, contains any 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.
u. Disclosure of Material Information. ESI has provided the Buyer will all
material information with respect to the Company, including a true and complete
copy of the Company's registration statement on Form 10-SB prepared in
connection with the Distribution, which could be reasonably necessary for Buyer
to make a informed decision to invest in the Shares.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Restrictive Legend. Buyer acknowledges and agrees that, upon issuance
pursuant to this Agreement, any certificate representing the Shares shall have
endorsed thereon a legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the Shares):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE, AND ARE BEING OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM
10
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS.
THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OR SUCH OTHER LAWS."
b. Filings. The Company and/or ESI shall make all necessary filings in
connection with the sale of the Shares to the Buyer as required by all
applicable Laws, and shall provide a copy thereof to the Buyer promptly after
such filing.
c. Use of Proceeds. The Company shall use the proceeds from the sale of the
Shares (excluding amounts paid by the Company for legal fees in connection with
such sale) for general corporate purposes
5. TRANSFER AGENT INSTRUCTIONS a. The Company undertakes and agrees that no
instruction other than the instructions referred to in this Section 5 and
customary stop transfer instructions prior to the registration and sale of the
Common Stock pursuant to an effective Securities Act registration statement will
be given to its transfer agent for the Shares and that the Shares otherwise
shall be freely transferable on the books and records of the Company as and to
the extent provided in this Agreement and applicable law. Nothing contained in
this Section 5.a. shall affect in any way Buyer's obligations and agreement to
comply with all applicable securities laws upon resale of such Common Stock. If,
at any time, Buyer provides the Company with an opinion of counsel reasonably
satisfactory to the Company that registration of the resale by Buyer of such
Common Stock is not required under the Securities Act and that the removal of
restrictive legends is permitted under applicable law, the Company shall permit
the transfer of such Common Stock and, promptly instruct the Company's transfer
agent to issue one or more certificates for Common Stock without any restrictive
legends endorsed thereon.
6. DELIVERY INSTRUCTIONS.
The Shares shall be delivered by the Company to the Buyer pursuant to
Section 1(b) hereof at the Closing.
7. CLOSING DATE.
The date and time of the issuance and sale of the Shares (the "Closing
Date") shall be mutually agreed between the parties but shall be no later than
five (5) business days after the Distribution (as defined below) and all other
conditions set forth in Section 9 have been satisfied. The issuance and sale of
the Shares shall occur on the Closing Date at the offices of the Company.
Notwithstanding anything to the contrary contained herein, the Company shall not
be authorized to accept the Purchase Price and to issue the Buyer the
certificate(s) (I/N/O Buyer) evidencing the Shares being purchased by Buyer
unless the conditions set forth in Section 8(c) and 9(e) hereof have been
satisfied.
8. CONDITIONS TO ESI'S AND THE COMPANY'S OBLIGATIONS.
The Buyer understands that the Company's obligation to sell the Shares on
the Closing Date to Buyer pursuant to this Agreement is conditioned upon:
a. Delivery by Buyer to the Company of the Purchase Price;
11
b. The accuracy on the Closing Date of the representations and warranties
of Buyer contained in this Agreement as if made on the Closing Date
(except for representations and warranties which, by their express
terms, speak as of and relate to a specified date, in which case such
accuracy shall be measured as of such specified date) and the
performance by Buyer in all material respects on or before the Closing
Date of all covenants and agreements of Buyer required to be performed
by it pursuant to this Agreement on or before the Closing Date;
c. There shall not be in effect any Law or order, ruling, judgment or
writ of any court or public or governmental authority restraining,
enjoining or otherwise prohibiting any of the transactions
contemplated by this Agreement.
d. Each of the Stock Option Agreement attached hereto as Exhibit A (the
"Option"), the Standstill and Registration Rights Agreement attached
hereto as Exhibit B (the "Standstill Agreement"), the 6% Convertible
Debenture attached hereto as Exhibit C (the "Debenture"); and the
Stockholder Agreement attached hereto as Exhibit D (the "Stockholder
Agreement") shall have been fully executed by each of the parties.
9. CONDITIONS TO BUYER'S OBLIGATIONS.
ESI and the Company understand that Buyer's obligation to purchase the
Shares on the Closing Date pursuant to this Agreement is conditioned upon:
a. Delivery by the Company to the Buyer of one or more certificates
(I/N/O Buyer) evidencing the Shares to be purchased by Buyer pursuant
to this Agreement less those Shares to be held in an escrow account;
b. The accuracy on the Closing Date of the representations and warranties
of ESI and the Company contained in this Agreement as if made on the
Closing Date (except for representations and warranties which, by
their express terms, speak as of and relate to a specified date, in
which case such accuracy shall be measured as of such specified date)
and the performance by ESI and the Company in all material respects on
or before the Closing Date of all covenants and agreements of ESI and
the Company required to be performed by it pursuant to this Agreement
on or before the Closing Date;
c. There not having occurred (i) any general suspension of trading in, or
limitation on prices listed for, the common stock of ESI or the
Company on the OTC:BB, (ii) the declaration of a banking moratorium or
any suspension of payments in respect of banks in the United States,
(iii) the commencement of a war, armed hostilities or other
international or national calamity directly or indirectly involving
the United States or any of its territories, protectorates or
possessions, or (iv) in the case of the foregoing existing at the date
of this Agreement, a material acceleration or worsening thereof.
d. There not having occurred any event or development, and there being in
existence no condition, having or which reasonably and forseeably
could have a Material Adverse Effect on the Company's business.
e. There shall not be in effect any Law or order, ruling, judgment or
writ of any court or public or governmental authority restraining,
enjoining or otherwise prohibiting any of the transactions
contemplated by this Agreement.
12
f. ESI shall have completed the distribution of all of its shares of the
Company to ESI's shareholders (the "Distribution") as contemplated by
the Form 10SB filed by the Company with the Securities Exchange
Commission on March 24, 2003 (the "Form 10SB") and there shall not
have been any material adverse revisions or other changes in the Form
10SB between the date of its initial filing with the SEC and the date
of its effectiveness
g. Each of the Option, the Standstill Agreement, the Stockholder
Agreement and the Debenture shall have been fully executed by each of
the parties.
h. ADA-ES shall have executed final documentation refinancing its
remaining indebtedness to Tectonic Construction Co., with terms of at
least a seven-year amortization period with a three-year balloon
payment.
10. TERMINATION.
a. Termination by Mutual Written Consent. This Agreement may be terminated
and the transactions contemplated hereby may be abandoned, for any reason
and at any time prior to the Closing Date, by the mutual written consent of
ESI, the Company and Buyer.
b. Termination by ESI, the Company or Buyer. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned by
action of ESI, the Company or Buyer if (i) the Closing shall not have
occurred at or prior to 5:00 p.m., Denver time, on September 30, 2003;
provided, however, that the right to terminate this Agreement pursuant to
this Section 10.b.(i) shall not be available to any party whose failure to
fulfill any of its obligations under this Agreement has been the cause of
or resulted in the failure of the Closing to occur at or before such time
and date or (ii) any court or public or governmental authority shall have
issued an order, ruling, judgment or writ, or there shall be in effect any
Law, restraining, enjoining or otherwise prohibiting the consummation of
any of the transactions contemplated by this Agreement.
c. Termination by Buyer. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned by Buyer at any time
prior to the Closing Date, if (i) the Company and/or ESI shall have failed
to comply in any material respect with any of their covenants or agreements
contained in this Agreement, (ii) there shall have been a breach by the
Company and/or ESI with respect to any representation or warranty made by
them in this Agreement, or (iii) there shall have occurred any event or
development, or there shall be in existence any condition, having or
reasonably and forseeably likely to have a Material Adverse Effect.
d. Termination by ESI or the Company. This Agreement may be terminated and
the transactions contemplated hereby may be abandoned by ESI or the Company
at any time prior to the Closing Date, if (i) Buyer shall have failed to
comply in any material respect with any of its covenants or agreements
contained in this Agreement or (ii) there shall have been a breach by Buyer
with respect to any representation or warranty made by it in this
Agreement.
13
11. SURVIVAL; INDEMNIFICATION.
a. Survival. The representations, warranties and covenants made by each of
the Company, ESI and Buyer in this Agreement, the annexes, schedules and
exhibits hereto and in each instrument, agreement and certificate entered
into and delivered by them pursuant to this Agreement, shall survive the
Closing and the consummation of the transactions contemplated hereby. In
the event of a breach or violation of any of such representations,
warranties or covenants, the party to whom such representations, warranties
or covenants have been made shall have all rights and remedies for such
breach or violation available to it under the provisions of this Agreement
or otherwise, whether at law or in equity, irrespective of any
investigation made by or on behalf of such party on or prior to the Closing
Date.
b. Indemnification of Buyer by the Company and ESI. The Company and ESI
hereby agree to indemnify and hold harmless the Buyer, its Affiliates and
their respective officers, directors, partners and members (collectively,
the "Buyer Indemnitees"), from and against any and all losses, claims,
damages, judgments, penalties, liabilities and deficiencies (collectively,
"Losses"), and agree to reimburse the Buyer Indemnitees for all
out-of-pocket expenses (including the fees and expenses of legal counsel),
in each case promptly as incurred by the Buyer Indemnitees and to the
extent arising out of or in connection with:
(i) any misrepresentation, omission of fact or breach of any of the
Company's and/or ESI's representations or warranties contained in this
Agreement, the annexes, schedules or exhibits hereto or any instrument,
agreement or certificate entered into or delivered by the Company pursuant
to this Agreement; or
(ii) any failure by the Company and/or ESI to perform in any material
respect any of its covenants, agreements, undertakings or obligations set
forth in this Agreement, the annexes, schedules or exhibits hereto or any
instrument, agreement or certificate entered into or delivered by the
Company and/or ESI pursuant to this Agreement.
c. Indemnification of the Company and ESI by Buyer. Buyer hereby agrees to
indemnify and hold harmless the Company and ESI, their Affiliates and their
respective officers, directors, partners and members (collectively, the
"Company Indemnitees"), from and against any and all Losses, and agrees to
reimburse the Company Indemnitees for all out-of-pocket expenses (including
the fees and expenses of legal counsel), in each case promptly as incurred
by the Company Indemnitees and to the extent arising out of or in
connection with:
(i) any misrepresentation, omission of fact, or breach of any of
Buyer's representations or warranties contained in this Agreement, the
annexes, schedules or exhibits hereto or any instrument, agreement or
certificate entered into or delivered by Buyer pursuant to this
Agreement; or
(ii) any failure by Buyer to perform in any material respect any of
its covenants, agreements, undertakings or obligations set forth in
this Agreement or any instrument, certificate or agreement entered
into or delivered by Buyer pursuant to this Agreement.
d. Third Party Claims. Promptly after receipt by either party hereto
seeking indemnification pursuant to this Section 11 (an "Indemnified
Party") of written notice of any investigation, claim, proceeding or other
action in respect of which indemnification is being sought (each, a
"Claim"), the Indemnified Party promptly shall notify the party against
whom indemnification pursuant to this Section 11 is being sought (the
"Indemnifying Party") of the commencement thereof; but the omission to so
notify the Indemnifying Party shall not relieve it from any liability that
it otherwise may have to the Indemnified Party, except to the extent that
the Indemnifying Party is materially prejudiced and forfeits substantive
14
rights and defenses by reason of such failure. In connection with any Claim
as to which both the Indemnifying Party and the Indemnified Party are
parties, the Indemnifying Party shall be entitled to assume the defense
thereof. Notwithstanding the assumption of the defense of any Claim by the
Indemnifying Party, the Indemnified Party shall have the right to employ
separate legal counsel and to participate in the defense of such Claim, and
the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
and expenses of such separate legal counsel to the Indemnified Party if
(and only if): (x) the Indemnifying Party shall have agreed to pay such
fees, out-of-pocket costs and expenses, (y) the Indemnified Party and the
Indemnifying Party reasonably shall have concluded that representation of
the Indemnified Party by the Indemnifying Party by the same legal counsel
would not be appropriate due to actual or, as reasonably determined by
legal counsel to the Indemnified Party, potentially differing interests
between such parties in the conduct of the defense of such Claim, or if
there may be legal defenses available to the Indemnified Party that are in
addition to or disparate from those available to the Indemnifying Party, or
(z) the Indemnifying Party shall have failed to employ legal counsel
reasonably satisfactory to the Indemnified Party within a reasonable period
of time after notice of the commencement of such Claim. If the Indemnified
Party employs separate legal counsel in circumstances other than as
described in clauses (x), (y) or (z) above, the fees, costs and expenses of
such legal counsel shall be borne exclusively by the Indemnified Party.
Except as provided above, the Indemnifying Party shall not, in connection
with any Claim in the same jurisdiction, be liable for the fees and
expenses of more than one firm of legal counsel for the Indemnified Party
(together with appropriate local counsel). The Indemnifying Party shall
not, without the prior written consent of the Indemnified Party (which
consent shall not unreasonably be withheld), settle or compromise any Claim
or consent to the entry of any judgment that does not include an
unconditional release of the Indemnified Party from all liabilities with
respect to such Claim or judgment.
e. Other Claims. In the event one party hereunder should have a claim for
indemnification that does not involve a claim or demand being asserted by a
third party, the Indemnified Party promptly shall deliver notice of such
claim to the Indemnifying Party. If the Indemnified Party disputes the
claim, such dispute shall be resolved by mutual agreement of the
Indemnified Party and the Indemnifying Party or by binding arbitration
conducted in accordance with the procedures and rules of the American
Arbitration Association. Judgment upon any award rendered by any
arbitrators may be entered in any court having competent jurisdiction
thereof.
12. GOVERNING LAW: MISCELLANEOUS.
This Agreement shall be governed by and interpreted in accordance with the
laws of the State of Colorado without regard to the conflicts of law principles
of such state. Each of the parties consents to the jurisdiction of the federal
courts whose districts encompass any part of the City of Denver or the state
courts of the State of Colorado sitting in the City of Denver 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. A
facsimile transmission of this signed Agreement shall be legal and binding on
all parties hereto. This Agreement may be signed in one or more counterparts,
15
each of which shall be deemed an original. The headings of this Agreement are
for convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement. This Agreement
supersedes all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof.
13. NOTICES. Any notice required or permitted hereunder shall be given in
writing (unless otherwise specified herein) and shall be deemed effectively
given upon personal delivery or seven business days after deposit in the United
States Postal Service, or by (a) advance copy by fax, and (b) mailing by express
courier or registered or certified mail with postage and fees prepaid, addressed
to each of the other parties thereunto entitled at the following addresses, or
at such other addresses as a party may designate by ten days advance written
notice to each of the other parties hereto.
COMPANY and ESI: EARTH SCIENCES, INC. and ADAES, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
BUYER: Arch Coal, Inc.
▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇)▇▇▇-▇▇▇▇
With a copy to: Attention: General Counsel
Telephone: (▇▇▇)▇▇▇-▇▇▇▇
Fax: (▇▇▇)▇▇▇-▇▇▇▇
14. CONFIDENTIALITY. Each of the Company, ESI and Buyer agrees to keep
confidential and not to disclose to or use for the benefit of any third party
the terms of this Agreement or any other information which at any time is
communicated by the other party as being confidential without the prior written
approval of the other party; provided, however, that this provision shall not
apply to information which, at the time of disclosure, is already part of the
public domain (except by breach of this Agreement) and information which is
required to be disclosed by law or in Commission Filings.
15. ASSIGNMENT. This Agreement shall not be assignable by either of the
parties hereto prior to the Closing without the prior written consent of the
other party, and any attempted assignment contrary to the provisions hereby
shall be null and void; provided, however, that Buyer may assign its rights and
obligations hereunder, in whole or in part, to any affiliate of Buyer who
furnishes to the Company and ESI the representations and warranties set forth in
Section 2 hereof.
16
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement on the date first above written.
EARTH SCIENCES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President
ADA-ES, Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
BUYER
Arch Coal, Inc.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
17
EXHIBIT A
To
SECURITIES SUBSCRIPTION AND INVESTMENT AGREEMENT
Dated July 7, 2003
STOCK OPTION AGREEMENT
Stock Option Agreement made as of this ____ day of _______, 2003 between
Earth Sciences, Inc., a Colorado corporation, (hereinafter called the "ESI"),
ADA-ES, Inc., a Colorado corporation and wholly-owned subsidiary of ESI,
(hereinafter called the "Company") and Arch Coal, Inc., ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇, (hereinafter referred to as "Holder").
WHEREAS, Holder, the Company and ESI have entered into a Securities
Subscription and Investment Agreement dated as of July 7, 2003, and
WHEREAS, the Company's Board of Directors has specifically authorized the
granting of the stock option hereinafter described as a portion of the
consideration for the investment to be made by Holder in the Common Stock of the
Company.
NOW THEREFORE, in consideration of the premises, the mutual covenants,
hereinafter set forth, and other good and valuable considerations, the Company,
ESI and Holder agree as follows:
1. The Company hereby grants to Holder effective this date, as a matter of
separate inducement and agreement, the Option to Purchase (hereinafter the
"Option") an aggregate of ____________ shares of the Company's Common Stock, no
par value, on the terms and conditions hereinafter set forth, at the purchase
price of $10.00 per share.
(a) The option shall be exercisable one-third after the first
anniversary date of this Option, another one-third after the second anniversary
date of this Option and the final one-third after the third anniversary date of
this Option. The eligible shares under the Option shall be exercisable in whole
or in part, and from time to time, but not as to less than 10,000 shares or a
multiple thereof, or the remaining shares eligible for exercise under the
Option, whichever is smaller.
(b) To the extent not exercised, the remaining shares shall be
exercisable, in whole or in part, at any time not later than December 31, 2007.
(c) The purchase price of any shares as to which the Option shall be
exercised shall be paid in full at the time of such exercise. Such shares shall
be issued as fully paid and nonassessable shares. Holder shall not be required
to take any further action to exercise Option other than making payment to the
Company.
2. (a) The Option may not be assigned and shall be exercisable only by
Holder. No other person shall acquire any rights herein.
(b) If Holder shall terminate its existence by law or otherwise and
not have fully exercised the Option, the Option shall immediately expire.
(c) In the event that another company or individual acquires a 50% or
greater interest in the Company, any remaining shares eligible for exercise
under the Option shall be immediately exercisable, but will otherwise expire
within 30 days from the date of such acquisition.
18
3. Holder shall have no rights as a stockholder with respect to any shares
covered by the Option until the date of the issuance of a stock certificate to
it for such shares.
4. Holder acknowledges that any purchase of stock under the Option shall be
for investment purposes, and not with a view to resale or distribution except
that in the event the stock subject to such Option is registered under the
Securities Act of 1933, as amended or in the event a resale of such stock
without such registration would otherwise be permissible, such condition shall
be inoperative if, in the opinion of counsel for the Company, such condition is
not required under the Securities Act of 1933 or any other applicable law,
regulation or rule of any governmental agency. Holder acknowledges that any
certificates representing the Shares covered by the Option shall, if applicable,
bear the customary Securities Act of 1933 legend restricting resale of the
shares.
5. This agreement shall be governed by the laws of the State of Colorado.
6. This agreement shall inure to the benefit of and be binding upon each
successor and assign of the Company. All obligations imposed upon Holder and all
rights granted to the Company, hereunder shall be binding upon Holder's heirs,
legal representatives and successors.
IN WITNESS WHEREOF, ESI, the Company and Holder have caused this Stock
Option Agreement to be executed as of this ____ day of______, 2003.
EARTH SCIENCES, INC.
By
--------------------------------------
President
ADA-ES, INC.
By
--------------------------------------
President
Holder
Arch Coal, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
By
--------------------------------------
Its
-------------------------------------
19
20
EXHIBIT B
To
SECURITIES SUBSCRIPTION AND INVESTMENT AGREEMENT
Dated July 7, 2003
STANDSTILL AND REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT, dated as of _______ __, 2003, is between Arch Coal, Inc. a
Delaware corporation ("Arch Coal"), and ADA-ES, Inc., a Delaware corporation
("ADA-ES").
WITNESSETH:
WHEREAS on the date hereof, Arch Coal is acquiring ________shares (the
"Purchased Shares") of common stock of ADA-ES (the "Common Stock") and an option
(the "Option") to purchase up to ______additional shares of Common Stock (the
"Option Shares") pursuant to the terms of a Securities Subscription and
Investment Agreement, dated as of July 7, 2003 (the "Subscription Agreement;"
terms capitalized and not defined herein shall have the meaning ascribed to them
in the Subscription Agreement);
WHEREAS, Arch Coal has the right, under certain circumstances, to acquire an
additional ______ shares of Common Stock pursuant to a 6% Convertible Debenture
due ______ __, 2007 in the face amount of $300,000 (the "Convertible Debenture
Shares"; and together with the Purchased Shares and the Option Shares; the
"Shares")); and
WHEREAS the execution and delivery of this Agreement by the parties is a
condition precedent to the parties' obligations under the Subscription
Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants and
agreements set forth herein and for other good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, the parties, intending
to be legally bound hereby, agree as follows:
ARTICLE I
REPRESENTATIONS AND WARRANTIES
Section 1.01 Arch Coal represents and warrants to ADA-ES as follows:
(a) Arch Coal has full legal right, power and authority to enter into and
perform this Agreement. The execution and delivery of this Agreement by Arch
Coal and the consummation by Arch Coal of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on behalf of Arch
Coal. This Agreement is a valid and binding obligation of Arch Coal enforceable
against Arch Coal in accordance with its terms.
21
(b) Neither the execution and delivery of this Agreement by Arch Coal nor the
consummation by Arch Coal of the transactions contemplated hereby conflicts with
or constitutes a violation of or default under the charter or by-laws of Arch
Coal, any statute, law, regulation, order or decree applicable to Arch Coal, or
any contract, commitment, agreement, arrangement or restriction of any kind to
which Arch Coal is a party or by which Arch Coal is bound.
Section 1.02. ADA-ES represents and warrants to Arch Coal as follows:
(a) ADA-ES has full legal right, power and authority to enter into and perform
this Agreement. The execution and delivery of this Agreement by ADA-ES and the
consummation by ADA-ES of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on behalf of ADA-ES. This Agreement
is a valid and binding obligation of ADA-ES enforceable against ADA-ES in
accordance with its terms.
(b) Neither the execution and delivery of this Agreement by ADA-ES nor the
consummation by ADA-ES of the transactions contemplated hereby conflicts with or
constitutes a violation of or default under the charter or by-laws of ADA-ES,
any statute, law, regulation, order or decree applicable to ADA-ES, or any
contract, commitment, agreement, arrangement or restriction of any kind to which
ADA-ES is a party or by which ADA-ES is bound.
ARTICLE II
LIMITATIONS AND RESTRICTIONS
Section 2.01. Restrictions on Sales by Arch Coal. Arch Coal agrees that until
the first anniversary of this Agreement, it will not, nor will it permit any of
its Affiliates, to sell, solicit an offer to sell, agree to sell, offer or
propose to sell (collectively "Sell"), the Shares; except as follows:
(a) Arch Coal may transfer all or a portion of the Shares to a wholly-owned
subsidiary subject to all of the terms and conditions of this Agreement,
provided that Arch Coal maintains 100% ownership and voting control of such
subsidiary, and the certificates for any securities of such subsidiary are
marked with a legend restricting the transfer of such securities and
specifically referring to this Agreement; and
(b) Arch Coal may sell its shares pursuant to a tender offer for all outstanding
shares of ADA-ES's Common Stock approved by ADA-ES's Board of Directors.
ARTICLE III
REGISTRATION RIGHTS
Section 3.01. "Piggy-Back" Registrations. If at any time after the Distribution,
ADA-ES shall determine to register for its own account or the account of others
under the Securities Act (other than a registration demanded by Arch Coal
pursuant to Section 3.02 hereof) any of its equity securities, other than on
Form S-4 or Form S-8 or their then equivalents or otherwise relating to shares
of Common Stock to be issued in connection with any acquisition of any entity or
business or shares of Common Stock issuable in connection with stock option or
22
other employee benefit plans, it shall send to Arch Coal written notice of such
determination and, if within ten (10) business days after receipt of such
notice, Arch Coal shall so request in writing, ADA-ES shall use its best efforts
to include in such registration statement all or any part of the Shares then
held by Arch Coal ("Registrable Shares") and which Arch Coal requests to be
registered.
If, in connection with any offering involving an underwriting, the managing
underwriter shall impose a limitation on the number of shares of Common Stock
which may be included in the registration statement because, in its judgment,
such limitation is necessary to effect an orderly public distribution, then
ADA-ES shall be obligated to include in such registration statement only such
limited portion (which may be none) of the Registrable Shares with respect to
which Arch Coal has requested inclusion pursuant hereto as may reasonably be
determined by the managing underwriters; provided, that inclusion of any of Arch
Coal's Registrable Shares shall be subordinate to the currently existing
"piggyback" registration rights granted by ADA-ES. Any inclusion of Registrable
Shares in an offering, when the managing underwriter has so limited the number
of shares that may be included in such offering, shall be allocated as follows:
first, pro rata among the holders of registration rights granted by ADA-ES prior
to the date hereof seeking to include their shares, in proportion to the number
of shares of Common Stock (whether or not such shares are sought to be included
in such offering) held by such persons; and thereafter, to Arch Coal. ADA-ES
shall have the right to withdraw any registration initiated by it pursuant to
this Section 3.01.
Section 3.02. Registrations on Form S-1 or Form S-2. In addition to the rights
provided Arch Coal in Section 3.01 above, if the registration of Registrable
Shares under the Securities Act can be effected on Form S-3 (or any similar form
promulgated by the Commission), then, at any time after the first anniversary of
this Agreement, upon the written request of Arch Coal, ADA-ES will use its best
efforts to effect qualification and registration under the Securities Act on
Form S-1 or Form S-2 of such portion of the Registrable Shares as Arch Coal
shall specify, up to the lesser of (i) twenty-five percent (25%) of the
Registrable Shares then held by Arch Coal, and (ii) the amount of Registrable
Shares then held by Arch Coal and permitted to be sold under Section 2.02 of
this Agreement; provided, however, ADA-ES shall not be required to effect a
registration pursuant to this Section 3.02 unless the market value of the
Registrable Shares to be sold in any such registration shall be estimated to be
at least $1,000,000 at the time of filing such registration statement, and
further provided that ADA-ES shall not be required to effect more than one (1)
registration during any twelve (12) month period pursuant to this Section 3.02
and four (4) registrations in the aggregate under this Section 3.02. No request
for registration under this Section 3.02 may be made within the one hundred and
eighty day period after the effective date of a registration statement filed by
ADA-ES or while ADA-ES is in the process of preparing a registration statement.
Section 3.03 Effectiveness. ADA-ES will use its best efforts to maintain the
effectiveness for up to 90 days (or such shorter period of time as the
underwriters need to complete the distribution of a registered offering or until
the securities are actually sold) of any registration statement pursuant to
which any of the Registrable Shares are being offered, and from time to time
will amend or supplement such registration statement and the prospectus
contained therein to the extent necessary to comply with the Securities Act and
any applicable state securities statute or regulation. ADA-ES will also provide
23
Arch Coal with as many copies of the prospectus contained in any such
registration statement as it may reasonably request. For a period not to exceed
ninety (90) days, ADA-ES shall not be obligated to prepare and file, or be
prevented from delaying or abandoning, a registration statement pursuant to this
Agreement at any time when ADA-ES, in its good faith judgment with advice of
counsel, reasonably believes:
(a) that the filing thereof at the time requested, or the offering of
Registrable Shares pursuant thereto, would materially and adversely affect (a) a
pending or scheduled public offering of ADA-ES's securities, (b) an acquisition,
merger, recapitalization, consolidation, reorganization or similar transaction
by or of ADA-ES, (c) pre-existing and continuing negotiations, discussions or
pending proposals with respect to any of the foregoing transactions, or (d) the
financial condition of ADA-ES in view of the disclosure of any pending or
threatened litigation, claim, assessment or governmental investigation which may
be required thereby; and
(b) that the failure to disclose any material information with respect to the
foregoing would cause a violation of the Securities Act or the Exchange Act.
Section 3.04. Indemnification of Arch Coal. In the event that ADA-ES registers
any of the Registrable Shares under the Securities Act, ADA-ES will indemnify
and hold harmless Arch Coal and each underwriter of Registrable Shares
(including their officers, directors, affiliates and partners and including any
broker or dealer through whom Registrable Shares may be sold in such
registration) and each person, if any, who controls Arch Coal or any such
underwriter within the meaning of Section 15 of the Securities Act from and
against any and all losses, claims, damages, expenses or liabilities, joint or
several, to which they or any of them become subject under the Securities Act,
applicable state securities laws or under any other statute or at common law or
otherwise, as incurred, and, except as hereinafter provided, will reimburse Arch
Coal, each such underwriter and each such controlling person, if any, for any
legal or other expenses reasonably incurred by them or any of them in connection
with investigating or defending any actions whether or not resulting in any
liability, as incurred, insofar as such losses, claims, damages, expenses,
liabilities or actions arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in the registration
statement, in any preliminary or amended preliminary prospectus or in the final
prospectus (or the registration statement or prospectus as from time to time
amended or supplemented by ADA-ES) 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 in order to make the statements therein not
misleading, or any violation by ADA-ES of any rule or regulation promulgated
under the Securities Act or any state securities laws applicable to ADA-ES and
relating to action or inaction required of ADA-ES in connection with such
registration, unless (i) such untrue statement or alleged untrue statement or
omission or alleged omission was made in such registration statement,
preliminary or amended preliminary prospectus or final prospectus in reliance
upon and in conformity with information furnished in writing to ADA-ES in
connection therewith by Arch Coal (in the case of indemnification of Arch Coal),
any such underwriter (in the case of indemnification of such underwriter) or any
such controlling person (in the case of indemnification of such controlling
person) expressly for use therein, or unless (ii) in the case of a sale directly
by Arch Coal (including a sale of Registrable Shares through any underwriter
24
retained by Arch Coal to engage in a distribution solely on behalf of Arch
Coal), such untrue statement or alleged untrue statement or omission or alleged
omission was contained in a preliminary prospectus and corrected in a final or
amended prospectus copies of which were delivered to Arch Coal or such
underwriter on a timely basis, and Arch Coal failed to deliver a copy of the
final or amended prospectus at or prior to the confirmation of the sale of the
Registrable Shares to the person asserting any such loss, claim, damage or
liability in any case where such delivery is required by the Securities Act.
Promptly after receipt by Arch Coal, any underwriter or any controlling person
of notice of the commencement of any action in respect of which indemnity may be
sought against ADA-ES, Arch Coal, or such underwriter or such controlling
person, as the case may be, shall notify ADA-ES in writing of the commencement
thereof (provided, that failure to so notify ADA-ES shall not relieve ADA-ES
from any liability it may have hereunder, except to the extent prejudiced by
such failure) and, subject to the provisions hereinafter stated, ADA-ES shall be
entitled to assume the defense of such action (including the employment of
counsel, who shall be counsel reasonably satisfactory to Arch Coal, such
underwriter or such controlling person, as the case may be) and the payment of
expenses insofar as such action shall relate to any alleged liability in respect
of which indemnity may be sought against ADA-ES.
Arch Coal, any such underwriter or any such controlling person 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 subsequent to any
assumption of the defense by ADA-ES shall not be at the expense of ADA-ES unless
the employment of such counsel has been specifically authorized in writing by
ADA-ES; provided, however, that, if the defendants in any such action include
both the indemnified party and the indemnifying party and the indemnified party
shall have reasonably concluded that there may be reasonable defenses available
to it which are different from or additional to those available to the
indemnifying party or if the interests of the indemnified party reasonably may
be deemed to conflict with the interests of the indemnifying party, the
indemnified party shall have the right to select a separate counsel and to
assume such legal defenses and otherwise to participate in the defense of such
action, with the expenses and fees of such separate counsel and other expenses
related to such participation to be reimbursed by the indemnifying party as
incurred. At any time, Arch Coal may select separate counsel and assume its own
legal defense with the expenses and fees of such separate counsel and other
expenses related to such separate counsel to be borne by Arch Coal. ADA-ES shall
not be liable to indemnify Arch Coal, any underwriter or any controlling person
for any settlement of any such action effected without ADA-ES's written consent
(which consent shall not be unreasonably withheld or delayed). ADA-ES shall not,
except with the approval of each party being indemnified under this Section
3.04, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to the parties being so indemnified of a release from all liability in
respect to such claim or litigation.
In order to provide for just and equitable contribution to joint liability under
the Securities Act in any case in which Arch Coal, or any controlling person of
Arch Coal, makes a claim for indemnification pursuant to this Section 3.04 but
it 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
25
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 3.04 provides
for indemnification in such case, then, ADA-ES and Arch Coal will contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportion as is appropriate to
reflect the relative fault of ADA-ES on the one hand and of Arch Coal on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of ADA-ES on the one hand and of Arch Coal on
the other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by ADA-ES on
the one hand or by Arch Coal on the other, and each party's relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; provided, however, that, in any such case, (A) Arch Coal
will not be required to contribute any amount in excess of the public offering
price of all Registrable Shares offered by it pursuant to such registration
statement; and (B) no person or entity guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) will be entitled to
contribution from any person or entity who was not guilty of such fraudulent
misrepresentation.
The indemnities provided in this Section 3.04 shall survive the transfer of any
Registrable Shares by Arch Coal.
Section 3.05 Indemnification of Company. In the event that ADA-ES registers any
of the Registrable Shares under the Securities Act, Arch Coal will indemnify and
hold harmless ADA-ES, each of its directors, each of its officers who have
signed or otherwise participated in the preparation of the registration
statement, each underwriter of the Registrable Shares so registered (including
any broker or dealer through whom such of the shares may be sold) and each
person, if any, who controls ADA-ES within the meaning of Section 15 of the
Securities Act from and against any and all losses, claims, damages, expenses or
liabilities, joint or several, to which they or any of them may become subject
under the Securities Act, applicable state securities laws or under any other
statute or at common law or otherwise, and, except as hereinafter provided, will
reimburse ADA-ES and each such director, officer, underwriter or controlling
person for any legal or other expenses reasonably incurred by them or any of
them in connection with investigating or defending any actions whether or not
resulting in any liability, insofar as such losses, claims, damages, expenses,
liabilities or actions arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in the registration
statement, in any preliminary or amended preliminary prospectus or in the final
prospectus (or in the registration statement or prospectus as from time to time
amended or supplemented) 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 in order to make the statements therein not misleading, but only
insofar as any such statement or omission was made in reliance upon and in
conformity with information furnished in writing to ADA-ES in connection
therewith by Arch Coal expressly for use therein; provided, however, that Arch
Coal's obligations hereunder shall be limited to an amount equal to the proceeds
received by Arch Coal for the Registrable Shares sold in such registration.
26
Promptly after receipt of notice of the commencement of any action in respect of
which indemnity may be sought against Arch Coal, ADA-ES shall notify Arch Coal
in writing of the commencement thereof (provided, that failure to so notify Arch
Coal shall not relieve Arch Coal from any liability it may have hereunder,
except to the extent prejudiced by such failure), and Arch Coal shall, subject
to the provisions hereinafter stated, be entitled to assume the defense of such
action (including the employment of counsel, who shall be counsel reasonably
satisfactory to ADA-ES) and the payment of expenses insofar as such action shall
relate to the alleged liability in respect of which indemnity may be sought
against Arch Coal. ADA-ES and each such director, officer, underwriter or
controlling person 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 subsequent to any assumption of the defense by Arch Coal shall not
be at the expense of Arch Coal unless employment of such counsel has been
specifically authorized in writing by Arch Coal. Arch Coal shall not be liable
to indemnify any person for any settlement of any such action effected without
Arch Coal's written consent (which consent shall not be unreasonably withheld or
delayed).
In order to provide for just and equitable contribution to joint liability under
the Securities Act in any case in which ADA-ES, its officers, directors or
controlling persons ("ADA-ES Indemnitees") exercising its rights under this
Article III, makes a claim for indemnification pursuant to this Section 3.05,
but it 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 that this Section 3.05 provides for
indemnification, in such case, then, ADA-ES Indemnitee and Arch Coal will
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject (after contribution from others) in such proportion as is
appropriate to reflect the relative fault of ADA-ES Indemnitee on the one hand
and of the Arch Coal on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The relative fault of ADA-ES Indemnitee
on the one hand and of Arch Coal on the other shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by ADA-ES Indemnitee on the one hand or by Arch Coal on
the other, and each party's relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission; provided,
however, that, in any such case, (A) Arch Coal will not be required to
contribute any amount in excess of the public offering price of all such
Registrable Shares offered by it pursuant to such registration statement; and
(B) no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to contribution
from any person or entity who was not guilty of such fraudulent
misrepresentation.
Section 3.06. Further Obligations of ADA-ES. Whenever under the preceding
Sections of this Article III, ADA-ES is required hereunder to register
Registrable Shares, it agrees that it shall also do the following:
27
(a) Furnish to Arch Coal such copies of each preliminary and final prospectus
and such other documents as Arch Coal may reasonably request to facilitate the
public offering of the Registrable Shares;
(b) Use its best efforts to register or qualify the Registrable Shares covered
by said registration statement under the applicable securities or "blue sky"
laws of such jurisdictions as Arch Coal may reasonably request; provided,
however, that ADA-ES shall not be obligated to qualify to do business in any
jurisdictions where it is not then so qualified or to take any action which
would subject it to the service of process in suits other than those arising out
of the offer or sale of the securities covered by the registration statement in
any jurisdiction where it is not then so subject;
(c) Permit Arch Coal or its counsel or other representatives to inspect and copy
such corporate documents and records as may reasonably be requested by them,
after reasonable advance notice and without undue interference with the
operation of ADA-ES's business;
(d) Furnish to Arch Coal a copy of all documents filed with and all
correspondence from or to the Commission in connection with any such offering of
securities;
(e) Use its best efforts to insure the obtaining of all necessary approvals from
the National Association of Securities Dealers, Inc.; and
(f) Otherwise use its best efforts to comply with all applicable rules and
regulations of the Commission, and make available to its security holders, as
soon as reasonably practicable, an earning statement covering the period of at
least twelve months, but not more than eighteen months, beginning with the first
month after the effective date of the registration statement covering a Public
Offering, which earning statement shall satisfy the provisions of Section 11(a)
of the Securities Act and Rule 158 thereunder.
Whenever under the preceding Sections of this Article III Arch Coal is
registering Registrable Shares pursuant to any registration statement, (i) Arch
Coal agrees to timely provide to ADA-ES, at its request, such information and
materials as it may reasonably request in order to effect the registration of
such Registrable Shares and (ii) if the offering is underwritten, ADA-ES and
Arch Coal agree to execute an underwriting agreement containing customary
conditions..
Section 3.07. Expenses. Subject to Section 3.02(b) in the case of each
registration effected under Section 3.01 or 3.02, ADA-ES shall bear its own
reasonable costs and expenses of each such registration on behalf of Arch Coal,
including, but not limited to, ADA-ES's printing, legal and accounting fees and
expenses, Commission and NASD filing fees and "blue sky" fees and expenses;
provided, however, that ADA-ES shall have no obligation to pay or otherwise bear
any portion of the underwriters' commissions or discounts or transfer taxes
attributable to the Registrable Shares being offered and sold by Arch Coal, or
the fees and expenses of counsel for Arch Coal in connection with the
registration of the Registrable Shares.
ADA-ES shall pay all expenses in connection with any registration initiated
pursuant to this Article III which is withdrawn, delayed or abandoned at the
request of ADA-ES, unless such registration is withdrawn, delayed or abandoned
solely because of any action of Arch Coal.
28
Section 3.08. Non-Transferability. Arch Coal's rights and obligations contained
in this Article III shall not be transferable to any other party under any
circumstances, whether by operation of law or otherwise.
Section 3.09 Lock-Up Agreement. Arch Coal agrees, if so requested by ADA-ES in
connection with any public offering of ADA-ES's securities, not to sell, grant
any option or right to buy or sell, or otherwise transfer or dispose of in any
manner, whether in privately-negotiated or open-market transactions, any Common
Stock or other securities of ADA-ES held by it during the 180-day period
following the effective date of a registration statement filed pursuant to
apublic offering, nor will it permit any of its affiliates or associates to do
any of the foregoing. Arch Coal, its affiliates or associates shall enter into
"lock-up" agreements to such effect. Such "lock-up" agreements shall be in
writing and in form and substance satisfactory to ADA-ES. ADA-ES may impose
stop-transfer instructions with respect to the Shares (or securities) subject to
the foregoing restrictions until the end of said 180-day period.
Section 3.10. Termination of Registration Rights. Notwithstanding any other term
or provision of this Article III, at such time as Arch Coal is free to sell the
Registrable Shares without registration pursuant to Rule 144(k) promulgated
under the Securities Act, all rights of Arch Coal as to such Registrable Shares
under Sections 3.01 and 3.02 of this Article III shall terminate.
ARTICLE IV
MISCELLANEOUS
Section 4.01. Interpretation. For all purposes of this Agreement, the term
ADA-ES Common Stock shall include any securities of any issuer entitled to vote
generally for the election of directors of such issuer which securities the
holders of ADA-ES Common Stock shall have received or as a matter of right be
entitled to receive as a result of (i) any capital reorganization or
reclassification of the capital stock of ADA-ES, (ii) any consolidation, merger
or share exchange of ADA-ES with or into another corporation or (iii) any sale
or substantially all the assets of ADA-ES.
Section 4.02. Enforcement. (a) Arch Coal acknowledges and agrees that
irreparable damage would occur if any of the provisions of this Agreement were
not performed in accordance with their specific terms or were otherwise
breached. Accordingly, ADA-ES will be entitled to an injunction or injunctions
to prevent breaches of this Agreement and to enforce specifically its provisions
in any court of the United States or any state having jurisdiction, this being
in addition to any other remedy to which ADA-ES may be entitled at law or in
equity.
(b) No failure or delay on the part of ADA-ES in the exercise of any power,
right or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privilege.
29
Section 4.03. Entire Agreement. This Agreement, together with the applicable
provisions of the Subscription Agreement, constitutes the entire understanding
of the parties with respect to the transactions contemplated hereby and thereby.
This Agreement may be amended only by an agreement in writing executed by ADA-ES
and Arch Coal.
Section 4.04. Severability. If any provision of this Agreement is held by a
court of competent jurisdiction to be unenforceable, the remaining provisions
shall remain in full force and effect. It is declared to be the intention of the
parties that they would have executed the remaining provisions without including
any that may be declared unenforceable.
Section 4.05. Headings. Descriptive headings are for convenience only and will
not control or affect the meaning or construction of any provision of this
Agreement.
Section 4.06. Counterparts. This Agreement may be executed in two or more
counterparts, and each such executed counterpart will be an original instrument.
Section 4.07. Notices. All notices, consents, requests, instructions, approvals
and other communications provided for in this Agreement and all legal process in
regard to this Agreement will be validly given, made or served, if in writing
and delivered personally, by telecopy (except for legal process) or sent by
certified mail postage paid.
if to ADA-ES: ADA-ES, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: President
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
if to Arch Coal: Arch Coal, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: General Counsel
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address or telecopy number as any party may, from time to time,
designate in a written notice given in a like manner. Notice by telecopy shall
be deemed delivered on the day telephone confirmation of receipt is given.
Section 4.08. Successors and Assigns. This Agreement shall bind the successors
and assigns of the parties, and inure to the benefit of any successor or assign
of any of the parties; provided, however, that no party may assign this
Agreement without the other party's prior written consent; provided further,
however, that the rights contained in Article III of this Agreement may not be
transferred or assigned under any circumstances.
30
Section 4.09. Legend. Each certificate representing shares of capital stock of
ADA-ES beneficially owned by Arch Coal or its affiliates or associates shall
bear a legend in substantially the following form, until such time as the shares
of capital stock represented thereby are no longer subject to the provisions
hereof:
"The sale, transfer or assignment of the securities represented by this
certificate are subject to the terms and conditions of a certain Standstill and
Registration Rights Agreement dated __________ __, 2003, as amended from time to
time, between ADA-ES and Arch Coal, Inc. Copies of such Agreement may be
obtained at no cost by written request made by the holder of record of this
certificate to the Secretary of ADA-ES."
Section 4.10. Governing Law. This Agreement will be governed by and construed
and enforced in accordance with the laws of the State of Colorado, without
giving effect to the conflict of laws principles thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first referred to above.
ADA-ES, INC.
By:
-----------------------------------
Name:
Title:
Arch Coal, Inc.
By:
-----------------------------------
Name:
Title:
31
EXHIBIT C
To
SECURITIES SUBSCRIPTION AND INVESTMENT AGREEMENT
Dated July 7, 2003
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE.
THE SECURITIES MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), PURSUANT TO REGISTRATION OR AN
EXEMPTION THEREFROM.
No. 1 US$ 300,000
--------
ADA-ES, INC.
6% CONVERTIBLE DEBENTURE DUE ________ ___, 2008
THIS DEBENTURE is one of a duly authorized issue of Debentures of ADA-ES,
Inc., a corporation duly organized and existing under the laws of the State of
Colorado (the "Company"), designated as its Variable Interest Convertible
Debenture Due _______ __, 2008, in an aggregate principal amount not exceeding
US$ 300,000 (herein, the "Debentures").
FOR VALUE RECEIVED, the Company promises to pay to Arch Coal, Inc., the
registered holder hereof (the "Holder"), the principal sum of US$ 300,000.00, on
_____ __, 2008 (the "Maturity Date") together with interest on the principal sum
outstanding from time to time at the annual rate equal to the greater of (i) the
rate reported by the Wall Street Journal as the "prime rate" then in effect
("Prime Rate") plus one percent (1%), or (ii) six percent (6%), adjusted
quarterly and computed on the basis of the actual number of days elapsed in a
365-day year. All accrued interest shall be payable in arrears, and shall be due
and payable at the Maturity Date or, if earlier, on the Conversion Date (as
hereinafter defined). Accrual of interest shall commence on the date hereof and
shall continue until payment in full of the principal sum has been made or duly
provided for. All accrued and unpaid interest so payable, together with any and
all other amounts payable hereunder, less any amounts required by law to be
deducted or withheld, will be paid on the Maturity Date or, if earlier, on the
Conversion Date, and shall be paid to the person in whose name this Debenture
(or one or more predecessor Debentures) is registered on the records of the
Company regarding registration and transfers of the Debentures (the "Debenture
Register") on the Conversion Date or tenth day prior to the Maturity Date, as
the case may be; provided, however, that the Company's obligation to a
transferee of this Debenture arises only if such transferee executes a
subscription agreement and investment agreement as the Company may reasonably
require. The principal of, and interest on, this Debenture are payable in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts, at the address last
appearing on the Debenture Register of the Company as designated in writing by
the Holder from time to time. The Company may prepay a portion or all of the
Debentures at any time. The Company shall provide the Holder with no less than
30 days written notice of any prepayment. The forwarding of the Company's check
shall, subject to collection, constitute a payment of interest and principal
hereunder and shall satisfy and discharge the liability for principal and
interest on this Debenture to the extent of the sum represented by such check.
32
Any payments received by Holder will be applied in the following order: (i) any
collection and other costs, including, without limitation, attorneys' fees,
which the Holder may have incurred in procuring the Company's performance
hereunder, (ii) any charges assessed by the Holder, (iii) payment of the
interest then accrued and due on the unpaid interest and unpaid principal
balance of this Debenture, and (iv) principal.
This Debenture is subject to the following additional provisions:
1. This Debenture is exchangeable for an equal aggregate principal amount
of Debentures of different authorized denominations, as requested by the Holders
surrendering the same. No service charge will be made for such registration or
transfer or exchange.
2. This Debenture has been issued subject to investment representations of
the original purchaser hereof and may be transferred or exchanged only in
compliance with the Securities Act of 1933, as amended (the "Act") and the terms
of the Subscription Agreement. Prior to due presentment for transfer of this
Debenture, the Company and any agent of the Company may treat the person in
whose name this Debenture is duly registered on the Debenture Register as the
owner hereof for the purpose of receiving payment as herein provided and for all
other purposes, whether or not this Debenture be overdue, and neither the
Company nor any such agent shall be affected by notice to the contrary.
3. The Holder of this Debenture shall be entitled, at any time during the
period commencing on and after March 31, 2005 and expiring on the Maturity Date,
to convert up to the entire outstanding principal amount on this Debentures into
shares of common stock(the "Common Stock") of the Company at a conversion price
for each share of the Common Stock of the lesser of $20.00 during the period
from March 31, 2005 through March 30, 2006, $30.00 during the period from March
31, 2006 through March 30, 2007 and, $40.00 during the period from March 31,
2007 through the Maturity Date or 150% of the average trading price per share of
Common Stock on the Conversion Date. Such conversion shall be effectuated by
surrendering the Debenture to the Company with the form of conversion notice
attached hereto as Exhibit A, executed by the Holder evidencing its intent to
convert the Debenture. The amount of accrued but unpaid interest as of the
Conversion Date shall also be subject to conversion, and if not so requested
shall be paid in cash as of the Conversion Date. No fraction of shares of the
Common Stock or scrip representing fractions of shares will be issued on
conversion, but the number of shares of the Common Stock issuable shall be
rounded to the nearest whole share. The date on which notice of conversion is
given shall be deemed to be the date on which the Holder has delivered this
Debenture, with the conversion notice duly executed, to the Company, or if
earlier, the date set forth in such notice of conversion if the Debenture is
received by the Company within three business days thereafter. Such date is
referred to herein as the "Conversion Date." Facsimile delivery of the
conversion notice shall be accepted by the Company. Certificates representing
Common Stock upon conversion will be delivered to the Holder within five (5)
business days from the date the notice of conversion is delivered to the
Company. The Common Stock issuable upon conversion will not have been registered
under the Securities Act of 1933, and will be issued in reliance upon exemptions
from the registration requirements of the Securities Acts of 1933, and the
transfer of such Common Stock will be subject to restrictions imposed by
applicable securities laws. A legend restricting the transfer of the Commons
Stock may be placed on any Certificate representing the Common Stock. If the
Holder converts less than then entire outstanding principal amount of this
Debenture, the Company shall execute and issue to the Holder a substitute
debenture for the remaining unpaid and unconverted principal amount, and shall
deliver same to the Holder together with the stock certificate(s).
33
4. Any of the following shall constitute an "Event of Default":
a. The Company defaults in the payment of principal or interest on
this Debenture as and when the same is due and payable and such
default continues for five (5) business days after the receipt of
written notice that the Company is in default hereunder; or
b. Any of the representations or warranties made by the Company
herein, in the Subscription Agreement, or in any certificate or
financial or other written statements heretofore or hereafter
furnished by or on behalf of the Company in connection with the
execution and delivery of this Debenture or the Subscription Agreement
is false or misleading in any material respect at the time made; or
c. The Company fails to perform or observe, in any material respect,
any other covenant, term, provision, condition, agreement or
obligation of the Company under this Debenture, or under the
Subscription Agreement, or under any related agreement, or under any
document or instrument granting security for amounts owing under this
Debenture including, without limitation, any of the following
documents: Subscription Agreement and Investment Agreement of Earth
Sciences, Inc. dated December 31, 2002 in favor of Arch Coal, Inc.
(collectively referred to herein as the "Loan Documents"), and such
failure continues uncured for a period of five (5) business days after
the receipt of written notice that the Company is in default hereunder
(it being understood that in the case of defaults which can not
reasonably be cured within a 5-day period no grace period shall be
necessary as a precondition to the failure to perform such covenant
constituting an Event of Default); or
d. The Company (1) makes an assignment for the benefit of creditors or
commence proceedings for its dissolution; or (2) applies for or
consents to the appointment of a trustee, liquidator or receiver for
its or for a substantial part of its property or business; or
e. A trustee, liquidator or receiver is appointed for the Company or
for a substantial part of its property or business without its
consent, and is not discharged within sixty (60) days after such
appointment; or
f. Bankruptcy, reorganization, insolvency or liquidation proceedings
or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors is instituted by or against the Company and,
if instituted against the Company, is not dismissed within sixty (60)
days after such institution or the Company by any action or answer
approves of, consents to, or acquiesces in any such proceeding or
admits the material allegations of, or defaults in answering a
petition filed in any such proceeding; or
g. The Company fails to make any required material payments, fees,
taxes, costs, insurance premiums when due beyond any applicable grace
period; or
h. The Company defaults on the payment of any material indebtedness
for borrowed money beyond any applicable grace period; or
i. Any judgment, levy or attachment is rendered against the Company or
any of its assets or properties in an amount in excess of $100,000 and
such judgment, levy or attachment is not dismissed, stayed, bonded or
discharge within thirty (30) days of the date of entry thereof, or
34
j. The control of the Company or ADA -Environmental Solutions, LLC
("ADA ES"), is changed by reason of merger or acquisition of shares of
either company, or sale of substantially all assets of either company.
Upon the occurrence of any Event of Default or at any time thereafter, and in
each and every such case, unless such Event of Default has been waived in
writing by the Holder (which waiver shall not be deemed to be a waiver of any
subsequent Event of Default) at the option of the Holder and in the Holder's
sole discretion, then or at any time thereafter, the whole of said principal sum
then remaining unpaid hereunder, together with all interest accrued thereon, and
all other sums owing hereunder or under the Loan Documents, shall immediately
become due and payable upon the Company's receipt of the Holder's written notice
of acceleration ("Acceleration") and the liens given to secure the payment of
this Debenture may be foreclosed and the Holder may pursue all rights and
remedies available under this Debenture, or under the Loan Documents, or
otherwise available at law or in equity.
6. Following the occurrence of an Event of Default due to non-payment of
this Debenture or the Note, and so long as any such Event of Default remains
outstanding and uncured, if the Holder does not declare this Debenture in
default and provide the Company with a written notice of Acceleration, without
notice to the Company all unpaid principal and all other interest and charges
payable hereunder shall accrue interest at the annual rate equal to the greater
of (i) Prime Rate plus three percent (3%), or (ii) ten percent (10%). Following
the occurrence of an Event of Default, and for so long as any such Event of
Default shall remain outstanding and uncured, and upon the Holder's written
notice of such Event of Default and Acceleration, the Company promises to pay
interest on the outstanding principal balance of this Debenture, and on any and
all other amounts then outstanding, at an annual rate of interest equal to the
greater of (i) Prime Rate plus three percent (3%), or (ii) ten percent (10%) per
annum, provided that any interest which has accrued at the default rate shall be
paid at the time of, and as a condition precedent to the curing of any default
under any statutory right to cure. The fluctuating default rates at which
interest accrues shall be adjusted simultaneously, at each announced change of
the Prime Rate. Failure to exercise such option or charge of such increased
interest shall not be a waiver of the right to do so at any future time or with
respect to any other default.
7. No provision of this Debenture shall alter or impair the obligation of
the Company which is absolute and unconditional, to pay the principal of, and
interest on, this Debenture at the time, place, and rate, and in the coin or
currency, herein prescribed. This Debenture and all other Debentures now or
hereafter issued of similar terms are direct obligations of the Company. The
Company shall pay all costs and expenses, including reasonable attorneys' fees,
which the Holder may incur in connection with any effort or action to collect
amounts due under this Debenture.
8. No recourse shall be had for the payment of the principal of, or the
interest on, this Debenture, or for any claim based hereon, or otherwise in
respect hereof, against any incorporator, shareholder, officer or director, as
such, past, present or future, of the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such liability being,
by the acceptance hereof and as part of the consideration for the issue hereof,
expressly waived and released.
9. The rights or remedies of the Holder as provided in this Debenture and
the Loan Documents shall be cumulative and concurrent and may be pursued singly,
successively, or together against the Company, the property described in the
Loan Documents, and any other funds, property or security held by the Holder for
the payment hereof or otherwise at the sole discretion of the Holder. The
failure to exercise any such right or remedy shall in no event be considered as
a waiver or release of such rights or remedies or the right to exercise them at
any later time.
35
10. In the event the interest provisions hereof or any exactions provided
for herein, or in the Loan Documents or any other instrument securing this
Debenture shall result, because of any reduction of principal, or for any reason
at any time during the life of this loan, in any effective rate of interest
which, for any month, transcends the limit of the usury or any other law
applicable to the obligation evidenced hereby, all sums in excess of those
lawfully collectible as interest for the period in question shall, without
further agreement or notice between or by any party hereto, be applied upon
principal immediately upon receipt of such moneys by Holder, with the same force
and effect as though the payor had specifically designated such extra sums to be
so applied to principal and Holder had agreed to accept such extra payment as a
premium-free prepayment. In no event shall any agreed to or actual exaction as
consideration for this obligation transcend the limits imposed or provided by
the laws applicable to this transaction or the Company hereof in the
jurisdiction in which any of the security herefor is located for the use or
detention of money or for forbearance in seeking its collection.
11. The Company and all endorsers, guarantors and all persons liable or to
become liable on this Debenture waive presentment, protest and demand, notice of
protest, demand and dishonor and nonpayment of this Debenture, and consent to
any and all renewals and extensions in the time of payment hereof, and agree,
further, that at any time and from time to time without notice, the terms of
payment herein may be modified or the security described in the Loan Documents
released in whole or in part or increased, changed or exchanged by agreement
between the Holder hereof and any owner of the property affected by said Loan
Documents without in anywise affecting the liability of any party to this
instrument or any person liable or to become liable with respect to any
indebtedness evidenced hereby. The right to plead any and all statues of
limitation as a defense to any demand on this Debenture, or any guaranty hereof,
or any agreement to pay the same, or any demand secured by the Loan Documents,
or any and all obligations or liabilities arising out of or in connection with
this Debenture or in the Loan Documents, is expressly waived by each and every
of the Company, endorsers, or guarantors to the fullest extent permitted by law.
12. Any forbearance of Holder in exercising any right or remedy hereunder
or under the Loan Documents, or otherwise, afforded by applicable law, shall not
be a waiver of or preclude the exercise of any right or remedy. The acceptance
by Holder of payment of any sum payable, hereunder after the due date of such
payment shall not be a waiver of Holder's right to either require prompt payment
when due of all other sums payable hereunder or to declare a default for failure
to make prompt payment. Holder shall at all times have the right to proceed
against any portion of the security held herefor in such order and in such
manner as Holder may deem fit, without waiving any rights with respect to any
other security. No delay or omission on the part of Holder in exercising any
right hereunder shall operate as a waiver of such right or of any other right
under this Debenture.
13. This Debenture shall be governed by and construed in accordance with
the laws of the State of Colorado without regard to the choice of law provisions
thereof, and in the event this Debenture is placed in the hands of any attorney
for collection or is collected through any legal proceedings, the undersigned
promises to pay (in addition to costs and disbursements otherwise allowed), to
the extent permitted by law, reasonable attorneys' fee and legal costs (whether
or not suit is commenced and whether or not incurred in connection with appeal
of a lower court judgment or order or in collecting any judgment entered
therein),and if foreclosure is made by any public official, reasonable
attorneys' fees and legal costs shall be added by such public official to the
cost of foreclosure. The undersigned hereby represents that the proceeds of the
loan evidenced by this Debenture will be used for a commercial or business
purpose.
36
14. Time is of the essence with regard to the performance of the
obligations of the Company in this Debenture and each and every term, covenant
and condition herein by or applicable to the Company.
15. The Company hereby irrevocably waives, to the fullest extent permitted
by law, any and all right to trial by jury in any legal proceeding arising out
of or relating to this Debenture and the other Loan Documents or the
transactions contemplated thereby. In any action which may be brought under this
Debenture, Holder hereby irrevocably consents to the personal jurisdiction of
any State District Court or Federal Court located in the State of Colorado, and
further stipulates and agrees that venue shall be proper in the State of
Colorado for any such actions and further agrees not to seek a change of venue
to any court outside the State of Colorado without the consent of Holder.
16. All notices required or permitted to be given pursuant to the terms
hereof shall be in writing and shall be delivered either by (a) certified mail,
return receipt requested, in which case notice shall be deemed received three
(3) business days after deposit, postage prepaid in the U.S. mail, (b) a
reputable messenger service or a nationally-recognized overnight courier, in
which case notice shall be deemed received one (1) business day after deposit
with such messenger or courier, (c) facsimile or other telecopy transmission
(followed with "hard copy" sent by a nationally-recognized overnight courier or
mail as aforesaid), in which case notice shall be deemed received when the
facsimile or other telecopy transmission is received, provided such receipt
occurs before 5:00 p.m. recipient's local time on a business day, otherwise at
8:30 a.m. recipient's local time on the next business day or (d) personal
delivery with receipt acknowledged in writing, in which case notice shall be
deemed received upon delivery. Notices shall be deemed given or sent upon
deposit in the U.S. mail in the case of clause (a) above, or upon deposit with a
reputable messenger or courier in the case of clause (b) above. Notices shall be
deemed given or sent upon receipt of electronic confirmation in the case of
clause (c) above or upon receipt in the case of clause (d). All such notices
shall be addressed as follows:
To Maker:
ADA-ES, Inc.
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
To Holder:
Arch Coal, Inc.
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
37
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
ADA-ES, INC.
By:
----------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: CFO
38
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert the above Debenture
No. ______ into shares of Common Stock of ADA-ES, INC. (the "Company") according
to the conditions hereof, as of the date written below.
--------------------------------
Date of Conversion
--------------------------------
Applicable Conversion Price
[SUBSCRIBER]
--------------------------------
Signature
Address:
--------------------------------
--------------------------------
* The original Debenture and Notice of Conversion must be received by the
Company by the third business day following the Date of Conversion.
39
EXHIBIT D
To
SECURITIES SUBSCRIPTION AND INVESTMENT AGREEMENT
Dated July 7, 2003
STOCKHOLDER AGREEMENT
This Stockholder Agreement, dated as of July 7, 2003, is by and among Arch
Coal, Inc., a Delaware corporation ("Arch Coal"), ADA-ES, INC., a Colorado
corporation ("ADA-ES"), and Earth Sciences, Inc., a Colorado corporation
("ESI").
WHEREAS, on the Closing Date, as defined in that certain Securities
Subscription and Investment Agreement dated July 7, 2003, by and among the
parties hereto (the "Subscription Agreement"), Arch Coal will acquire shares of
the common stock of ADA-ES (the "Common Stock"); and
WHEREAS, Arch Coal has relied upon this Agreement in entering into the
Subscription Agreement; and
WHEREAS, the parties desire to enter into an agreement with respect to the
nomination of one member for election to the Board of Directors of ADA-ES; and
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto, intending to be legally bound, hereby
agree as follows:
SECTION 1. Definitions. As used in this Agreement, and unless the context
requires a different meaning, the following terms (whether used in the singular
or plural) have the meanings indicated:
"Affiliate" means, with respect to any Person, any Person that controls, is
controlled by or is under common control with such Person in question. For the
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlled by" and "under common control with"), as used with respect
to any Person, shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.
"Exchange Act" means the Securities Exchange Act of 1934 as amended from
time to time and the rules and regulations of the SEC thereunder.
"Person" means an individual, corporation, limited liability company,
partnership, trust, incorporated or unincorporated association, joint venture,
joint stock company, government (or an agency or political subdivision thereof)
or other entity of any kind.
"Voting Stock" means capital stock of any class or classes of ADA-ES, the
holders of which are entitled, in the absence of contingencies, to participate
generally in the election of the members of ADA-ES's Board of Directors, and any
securities of ADA-ES convertible into, or exercisable or exchangeable for, any
such capital stock of ADA-ES, including, without limitation, the Common Stock;
provided, however, that any capital stock held in the treasury of ADA-ES or held
by any subsidiary of ADA-ES shall not be Voting Stock.
40
SECTION 2. Director Nomination and Election. (a) The parties hereto agree
with the principle that Arch Coal, at all times during the effectiveness of this
Agreement and subject to the terms and conditions of this Agreement, shall be
entitled to be represented by one member of the Board of Directors of ADA-ES.
ADA-ES and ESI agree they shall take the following steps to cause one
representative of Arch Coal to be elected to the Board of Directors of ADA-ES:
(i) ADA-ES shall give at least 10 days' notice to Arch Coal of any
meeting of its Board of Directors (or any committee thereof) at which the
Board's nominees for election are to be selected. Upon receipt of such
notice from ADA-ES, Arch Coal shall within 10 days thereafter furnish
ADA-ES with a written designation of one nominee for election to the Board
of Directors of ADA-ES, with a copy thereof to ESI. Such notice shall be
given in the manner set forth in Section 5 of this Agreement. If no written
designation of a nominee is received by ADA-ES within the time frame
specified herein, the current director of ADA-ES designated by Arch Coal
shall be a nominee for the ensuing election.
(ii) So long as this Agreement is in effect, ADA-ES hereby agrees to
take all actions necessary to nominate or cause to be nominated and to
solicit proxies (and if properly executed or otherwise valid, to vote all
such proxies and other shares which ADA-ES management is otherwise entitled
to vote in accordance with the terms and requirements of this provision)
for election as a director at each annual meeting of stockholders (or, if
applicable, at any special meeting of stockholders) of ADA-ES, the
representative of Arch Coal designated by Arch Coal or in favor of the
current director designated by Arch Coal, as the case may be, pursuant to
Section 2(a)(i) above.
(iii) So long as this Agreement is in effect, if ESI or its Affiliates
shall be the beneficial owner (as defined in Rule 13d-3(a) under the
Exchange Act) of outstanding Voting Stock, then ESI will vote the shares of
Voting Stock so held or owned directly or indirectly by ESI in favor of the
election of the Arch Coal representative.
Except as specifically set forth in this Section 2(a)(iii), ESI shall
be free to vote its shares of Voting Stock in such manner as it may, in its
sole discretion, deem advisable.
(iv) So long as this Agreement is in effect, Arch Coal may designate a
successor to fill any vacancy created by the death, resignation, or
incapacity of its designated nominee to the ADA-ES Board of Directors by
giving notice to ADA-ES in the manner set forth in Section 5 of this
Agreement setting forth the name of the new designee. ADA-ES will recommend
to the Board such new designee and ESI will vote its shares, if any, in the
election of directors, if required, to cause the Board to appoint Arch
Coal's designee and each of ADA-ES and ESI will cause to be taken all steps
to assure the continued representation of Arch Coal on the ADA-ES Board of
Directors contemplated by this Section 2.
(b) Notwithstanding the foregoing Sections 2(a) (i) - (iv) , if at any time
during the term of this Agreement ADA-ES adopts a staggered Board of Directors,
ADA-ES and ESI shall take all steps regarding nomination and election of
directors to ensure Arch Coal continues to be represented by one member of the
Board of Directors.
SECTION 3. Enforceability. ADA-ES and ESI each hereby represent that this
Agreement is its valid and binding obligation enforceable against it in
accordance with its terms and that its obligations hereunder comply in all
respects with the provisions Colorado law applicable to corporations.
41
SECTION 4. Termination. This Agreement shall terminate if at any time Arch
Coal shall be the beneficial owner (as defined in Rule 13d-3(a) under the
Exchange Act) of less than 100,000 shares of Common Stock; provided that Arch
Coal shall be deemed to hold for this purpose any shares of ADA-ES Common Stock
which Arch Coal has transferred to ADA-ES or any subsidiary of ADA-ES in
exchange for voting equity securities of approximately equivalent voting power
of ADA-ES or such subsidiary.
SECTION 5. NOTICES. Any notice required or permitted hereunder shall be
given in writing (unless otherwise specified herein) and shall be deemed
effectively given upon personal delivery or seven business days after deposit in
the United States Postal Service, or by (a) advance copy by fax, and (b) mailing
by express courier or registered or certified mail with postage and fees
prepaid, addressed to each of the other parties thereunto entitled at the
following addresses, or at such other addresses as a party may designate by ten
days advance written notice to each of the other parties hereto.
ADA-ES and ESI: EARTH SCIENCES, INC. and ADA-ES, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Arch Coal: Arch Coal, Inc.
▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇)▇▇▇-▇▇▇▇
With a copy to: Attention: General Counsel
Telephone: (▇▇▇)▇▇▇-▇▇▇▇
Fax (▇▇▇)▇▇▇-▇▇▇▇
SECTION 6. Governing Law; Miscellaneous. This Agreement shall be governed
by and interpreted in accordance with the laws of the State of Colorado without
regard to the conflicts of law principles of such state. Each of the parties
consents to the jurisdiction of the federal courts whose districts encompass any
part of the City of Denver or the state courts of the State of Colorado sitting
in the City of Denver 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. A facsimile transmission
of this signed Agreement shall be legal and binding on all parties hereto. This
Agreement may be signed in one or more counterparts, each of which shall be
deemed an original. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement. If any provision of this Agreement shall be invalid or unenforceable
in any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction. This Agreement may
be amended only by an instrument in writing signed by the party to be charged
with enforcement. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
42
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement on the date first above written.
EARTH SCIENCES, INC.
By:
-------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President
ADA-ES, Inc.
By:
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
BUYER
Arch Coal, Inc.
By:
-------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President -
Business Development
43
