Janovec, alleged breach of contract and fraud settled out of court.
LEGAL PROCEEDINGS
The following litigation involves the Company and its subsidiaries.
American Factors Group, L.L.C. vs. AmeriResource Technologies, Inc., et al. This case was filed in the United States District Court, District of New Jersey, Case Number 3:97cv01094(GEB). In February 2000, the parties stipulated to the dismissal of certain claims in this suit with prejudice. This stipulation dismissed all of the claims in this suit except for the claims against defendants Rod Clawson, Michael Cederstrom and Tim Masters. These remaining claims were resolved pursuant to a Settlement Agreement, which has been subsequently amended. The Settlement Agreement provided for the payment by the Company and Delmar Janovec ("Janovec") of certain obligations and judgments entered against the defendants. On February 28, 2005 American Factors Group, L.L.C. ("AFG") and the Company executed a fourth addendum of which the terms reached are as follows;
1. AFG and the Company agreed that as of December 12, 2002, the amount owed by the Company and Delmar Janovec on the obligations was $363,713.19, and that interest has accrued on the obligations such that the amount owed on February 28, 2005 was $484,693.29.
2. The Company will be assessed a default penalty of $55,975.03 for not meeting the terms set forth in the settlement agreement, the note, and the third addendum.
3. The parties agree that from and after February 28, 2005 interest will accrue at the rate of 18% per annum, compounded monthly, until the obligations are paid in full.
4. Notwithstanding any provision of the settlement agreement, the note or the previous addenda to the contrary, the obligations shall be due and payable on the sooner of one year from the effective date of this Fourth Addendum or 90 days following certain enumerated transactions. No payment shall be due on either the principal or interest of the obligations until such date.
5. The parties acknowledge that on the effective date of the fourth addendum, The William R. Robins 1990 Family Trust No. 8 (the "Robins Trust"), as assignee of AFG, has received from the Company shares of the Company's common stock pursuant to the terms of the Settlement Agreement. The Company and Mr.Janovec agree that immediately following the effective date of this fourth addendum the Company will issue to the Robins Trust, in exchange for the shares of the Company common stock owned by the Robins Trust, one share of a Class E preferred stock of the Company (the "Class E Shares") for each four shares of the Company Common Stock then held by the Robins Trust.
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