UNITED FUEL & ENERGY, INC.
NEITHER THIS WARRANT NOR THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, PLEDGED OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SECURITIES UNDER THE ACT OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
Warrant Date:
200,000 Shares September 27, 2004
UNITED FUEL & ENERGY, INC.
WARRANT
UNITED FUEL & ENERGY, INC., a Texas corporation ("UF&E"), for value
received hereby grants this warrant ("Warrant") to Xxxxxx Xxxxxx, or registered
assigns (the "Holder"). The Warrant entitles the Holder to purchase from UF&E at
any time prior to the Expiration Date (as defined below) up to 200,000 shares of
Common Stock of UNITED FUEL & ENERGY, INC., a Texas corporation. The exercise
price for the Warrant shall be $2.00 per share of Common Stock (the "Exercise
Price"). The Warrant Holder has paid $100 for this Warrant.
1. Expiration Date; Exercise
1.1 Vesting. The Warrant granted hereunder shall be deemed fully vested,
i.e., become exercisable as of the date hereof.
1.2 Expiration Date and Registration. If the shares underlying the Warrant
are freely tradable i.e., may be sold by the Holder without registration under
the Securities Act of 1933, the Warrant shall expire one (1) year from the date
hereof, if the shares underlying the Warrant are not freely tradable, the
Warrant shall expire one (1) year from the effectiveness of the registration
statement under the Securities Act of 1933, to be filed as set forth below,
which date shall be extended for such period that the shares may not be sold
under the registration statement. UF&E hereby agrees (if the underlying shares
are not freely tradable) to include the shares underlying this Warrant in any
registration statement (except for a registration statement on Form S-8 or S-4)
filed by UF&E under the securities Act of 1933 and to keep such registration
statement current and effective for one year from this date when such
registration first becomes effective. Such registration shall name Xxxxxx Xxxxxx
as a selling shareholder. After the Expiration Date, the Warrant shall expire
and be of no further force or effect.
1.3 Callable Warrant. If during any consecutive 20 trading day period
(after the effectiveness of the registration statement if applicable), the
Common Stock of UF&E closes at the prices set forth in the following table
("Trading Price"), the Warrant shall be callable upon 10 days written notice at
$0.01 per share, in the following amounts:
2
Number of Warrants callable Trading Price
--------------------------- -------------
100,000 $4.00
100,000 $4.50
If UF&E has called the applicable Warrants, then Holder shall exercise such
Warrants at $2.00 per share. If Holder does not exercise such Warrants when
called within 10 days of receiving notice, then such Warrants shall immediately
expire after such 10 day period.
2. Adjustments of Exercise Price and Number and Kind of Conversion Shares
2.1 In the event that UF&E shall at any time hereafter (a) pay a dividend
in Common Stock or securities convertible into Common Stock; (b) subdivide or
split its outstanding Common Stock; (c) combine its outstanding Common Stock
into a smaller number of shares; (d) spin-off to its shareholders a subsidiary
or operating-business unit; then the number of shares to be issued immediately
after the occurrence of any such event shall be adjusted so that the Holder
thereafter may receive the number of shares of Common Stock or the equivalent
value it would have owned immediately following such action if it had exercised
the Warrant immediately prior to such action and the Exercise Price shall be
adjusted to reflect such proportionate increases or decreases in the number of
shares.
3
2.2 In case of any reclassification of the outstanding shares of Common
Stock (other than a change covered by Section 2.1 hereof or a change which
solely affects the par value of such shares) or in the case of any merger or
consolidation or merger in which UF&E is not the continuing corporation and
which results in any reclassification or capital reorganization of the
outstanding shares), the holder shall have the right thereafter (until the
Expiration Date) to receive upon the exercise hereof, for the same aggregate
Exercise Price payable hereunder immediately prior to such event, the kind and
amount of shares of stock or other securities or property receivable upon such
reclassification, capital reorganization, merger or consolidation, by a holder
of the number of shares of Common Stock obtainable upon the exercise of the
Warrant immediately prior to such event; and if any reclassification also
results in a change in shares covered by Section 2.1, then such adjustment shall
be made pursuant to both this Section 2.2 and Section 2.1. The provisions of
this Section 2.2 shall similarly apply to successive reclassifications, capital
reorganizations and mergers or consolidations, sales or other transfers.
3. Transfer. Subject to compliance with applicable securities laws, the Warrant
is transferable in person, or by duly authorized attorney, upon surrender of
this Warrant properly endorsed and upon payment of any necessary transfer tax or
other governmental charge imposed upon such transfer. If less than all of the
Warrant is transferred, UF&E will, upon transfer, execute and deliver to the
Holder a new certificate for the portion of the Warrant not so transferred.
4. Reservation of Shares. UF&E shall at all times reserve and keep available out
of its authorized but unissued shares of Common Stock, such number of shares of
Common Stock as shall from time to time be issuable upon exercise of the
Warrant. If at any time the number of authorized but unissued shares of Common
Stock shall not be sufficient to permit the exercise of the Warrant, UF&E shall
promptly seek such corporate action as may necessary to increase its authorized
but unissued shares of Common Stock to such number of shares as shall be
sufficient for such purpose.
4
5. Certificate as to Adjustments. In each case of any adjustment in the Exercise
Price, or number or type of shares issuable upon exercise of the Warrant, UF&E
shall compute such adjustment in accordance with the terms of the Warrant and
prepare a certificate setting forth such adjustment and showing in detail the
facts upon which such adjustment is based, including a statement of the adjusted
Exercise Price. UF&E shall promptly send (by facsimile and by either first class
mail, postage prepaid or overnight delivery) a copy of each such certificate to
the Holder.
6. Loss or Mutilation. Upon receipt of evidence reasonably satisfactory to UF&E
of the ownership of and the loss, theft, destruction or mutilation of this
Warrant, and of indemnity reasonably satisfactory to it, and (in the case of
mutilation) upon surrender and cancellation of the Warrant, UF&E will execute
and deliver in lieu thereof a new Warrant of like tenor as the lost, stolen,
destroyed or mutilated Warrant.
7. Representations and Warranties of UF&E. UF&E hereby represents and warrants
to Holder that:
7.1 Due Authorization. All corporate action on the part of UF&E, its
officers, directors and shareholders necessary for (a) the authorization,
execution and delivery of, and the performance of all obligations of UF&E under
this Warrant, and (b) the authorization, issuance, reservation for issuance and
delivery of all of the Common Stock issuable upon exercise of this Warrant, has
been duly taken. This Warrant constitute a valid and binding obligation of UF&E
enforceable in accordance with their terms, subject, as to enforcement of
remedies, to applicable bankruptcy, insolvency, moratorium, reorganization and
similar laws affecting creditors' rights generally and to general equitable
principles.
5
7.2 Organization. UF&E is a corporation duly organized, validly existing
and in good standing under the laws of the state of its incorporation has all
requisite corporate power to grant this Warrant.
7.3 Valid Issuance of Stock. Any shares of Common Stock issued upon
exercise of this Warrant will be duly and validly issued, fully paid and
non-assessable.
7.4 Governmental Consents. All consents, approvals, orders, authorizations
or registrations, qualifications, declarations or filings with any federal or
state governmental authority on the part of UF&E required in connection with the
consummation of the transactions contemplated herein have been obtained.
8. Notices of Record Date.
In case:
8.1 UF&E shall take a record of the holders of its Common Stock (or other
stock or securities at the time receivable upon the exercise of this Warrant),
for the purpose of entitling them to receive any dividend or other distribution,
or any right to subscribe for or purchase any shares of stock of any class or
any other securities or to receive any other right; or
6
8.2 of any consolidation or merger of UF&E with or into another
corporation, any capital reorganization of UF&E, any reclassification of the
capital stock of UF&E, or any conveyance of all or substantially all of the
assets of UF&E to another corporation in which holders of UF&E stock are to
receive stock, securities or property of another corporation; or
8.3 of any voluntary dissolution, liquidation or winding-up of UF&E; or
8.4 of any redemption or conversion of all outstanding Common Stock; then,
and in each such case, UF&E will mail or cause to be mailed to the Holder a copy
of the notice with respect to the foregoing received by it from UF&E specifying,
as the case may be, (a) the date on which a record is to be taken for the
purpose of such dividend, distribution or right, or (b) the date on which such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation, winding-up, redemption or conversion is to take place,
and the time, if any is to be fixed, as of which the holders of record of Common
Stock or (such stock or securities as at the time are receivable upon the
exercise of this Warrant), shall be entitled to exchange their shares of Common
Stock (or such other stock or securities), for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
conveyance, dissolution, liquidation or winding-up. UF&E shall use all
reasonable efforts to ensure such notice shall be delivered at least 15 days
prior to the date therein specified.
9. Severability. If any term, provision, covenant or restriction of the Warrant
is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of the Warrant shall remain in full force and effect and shall in
no way be affected, impaired or invalidated to the same extent as if UF&E is
owner of the underlying Common Stock.
7
10. Notices. All notices, requests, consents and other communications required
hereunder shall be in writing and by first class mail or by registered or
certified mail, postage prepaid, return receipt requested, and (other than in
connection with the exercise of the Warrant) shall be deemed to have been duly
made when received or, if sent registered or certified mail, postage prepaid,
return receipt requested, on the third day following deposit in the mails: if
addressed to the Holder, 00000 Xxxxxxxx Xxxxxxxxx, #000, Xxx Xxxxxxx, Xxxxxxxxxx
00000; and if addressed to UF&E, Attention, Xxxxx Xxxxxx, 000 Xxxxx Xxxxxxxxxx,
Xxxxx 000, Xxxxxxx, Xxxxx 00000 or such other address as it may designate in
writing.
11. No Rights as Shareholder. The Holder shall have no rights as a shareholder
of UF&E with respect to the shares issuable upon exercise of the Warrant until
the receipt by UF&E of all of the Exercise Documents. Except as may be provided
by Section 2 of this Warrant, no adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to the date
UF&E receives all of the Exercise Documents.
UNITED FUEL &ENERGY, INC.
By:
--------------------------------
XXXXX XXXXXX, CEO
8
EXHIBIT "A"
NOTICE OF EXERCISE
(To be signed only upon exercise of the Warrant)
To: UNITED FUEL & ENERGY, INC.
The undersigned hereby elects to purchase shares of Common Stock (the
"Warrant Shares") of UNITED FUEL & ENERGY, INC. ("UF&E"), pursuant to the terms
of the enclosed Warrant (the "Warrant"). The undersigned tenders herewith
payment of the exercise price pursuant to the terms of the Warrant.
The undersigned hereby represents and warrants to, and agrees with UF&E as
follows:
1. Holder is acquiring the Warrant Shares for its own account, for
investment purposes only.
2. Holder understands that an investment in the Warrant Shares involves a
high degree of risk, and Holder has the financial ability to bear the economic
risk of this investment in the Warrant Shares, including a complete loss of such
investment. Holder has adequate means for providing for its current financial
needs and has no need for liquidity with respect to this investment.
3. Holder has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of an investment
in the Warrant Shares and in protecting its own interest in connection with this
transaction.
9
4. Holder understands that the Warrant Shares have not been registered
under the Securities Act or under any state securities laws. Holder is familiar
with the provisions of the Securities Act and Rule 144 thereunder and
understands that the restrictions on transfer on the Warrant Shares may result
in Holder being required to hold the Warrant Shares for an indefinite period of
time.
5. Holder agrees not to sell, transfer, assign, gift, create a security
interest in, or otherwise dispose of, with or without consideration
(collectively, "Transfer") any of the Warrant Shares except pursuant to an
effective registration statement under the Securities Act or an exemption from
registration. As a further condition to any such Transfer, except in the event
that such Transfer is made pursuant to an effective registration statement under
the Securities Act, if in the reasonable opinion of counsel to UF&E any Transfer
of the Warrant Shares by the contemplated transferee thereof would not be exempt
from the registration and prospectus delivery requirements of the Securities
Act, UF&E may require the contemplated transferee to furnish UF&E with an
investment letter setting forth such information and agreements as may be
reasonable requested by UF&E to ensure compliance by such transferee with the
Securities Act.
Until the effectiveness of the registration statement each certificate
evidencing the Warrant Shares will bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY APPLICABLE STATE SECURITIES LAWS
AND MAY NOT BE EXERCISED, SOLD, PLEDGED OR TRANSFERRED IN THE ABSENCE OF AN
10
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE ACT OR UNLESS AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
Number of Warrant Exercised: ________
Dated:
[Name]
11
