American Resources and Development Company
                                 1997 STOCK PLAN


        1.  Purpose of the Plan.  The  purpose  of the  American  Resources  and
Development  Company  (ARDCO or Company)  1997 Stock Plan is to enable  ARDCO to
provide  an  incentive  to  its  and  its   subsidiaries   eligible   employees,
consultants,  officers  and  Board of  Directors  whose  present  and  potential
contributions are important to the continued  success of the Company,  to afford
these  individuals  the  opportunity  to acquire a  proprietary  interest in the
Company,  and to enable the Company to enlist and retain in its  employment  the
best available talent for the successful conduct of its business. It is intended
that this  purpose will be effected  through the granting of (a) stock  options,
(b) stock purchase  rights,  (c) stock  appreciation  rights,  and (d) long-term
performance award`.

        2. Definitions. As used herein, the following definitions shall apply:

               (a) "Administrator"  means the Board or such of its Committees as
shall be administering the Plan, in accordance with Section 5 of the Plan.

               (b) "Applicable  Laws" means the legal  requirements  relating to
the administration of stock option plans under applicable  securities laws, Utah
corporate law and the Code.

               (c) "Board" means the Board of Directors of the Company.

               (d) "Code" means the Internal Revenue Code of 1986, as amended.

               (e)  "Committee"  means a  Committee  appointed  by the  Board in
accordance with Section 5 of the Plan.

               (f) "Common  Stock" means the Common Stock,  $.001 par value,  of
the Company.

               (g) "Company" means American Resources and Development Company, a
Utah corporation.

               (h) "Consultant" means any person,  including an advisor, engaged
by the  Company  or a  Parent  or  Subsidiary  to  render  services  and  who is
compensated for such services.

               (i) "Continuous  Status as an Employee or Consultant"  means that
the employment or consulting  relationship  is not  interrupted or terminated by
the  Company,  any Parent or  Subsidiary.  Continuous  Status as an  Employee or
Consultant shall not be considered  interrupted in the case of: (i) any leave of
absence  approved by the Board,  including sick leave,  military  leave,  or any
other personal leave;  provided,  however,  that for purposes of Incentive Stock
Options,  any such leave may not exceed  ninety (90) days,  unless  reemployment
upon the expiration of such leave is guaranteed by contract  (including  certain
Company policies) or statute; or (ii) transfers between locations of the Company
or between the Company, its Parent, its Subsidiaries or its successor.

               (j) "Director" means a member of the Board.

               (k) "Disability" means total and permanent  disability as defined
in Section 22(e)(3) of the Code.

               (l)  "Employee"   means  any  person,   including   Officers  and
Directors,  employed by the Company or any Parent or  Subsidiary of the Company.
Neither  service as a Director  nor payment of a  director's  fee by the Company
shall be sufficient to constitute "employment" by the Company.

               (m) "Exchange Act" means the Securities  Exchange Act of 1934, as
amended.

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               (n) "Fair  Market  Value"  means,  as of any  date,  the value of
Common Stock determined as follows:

                      (i) If the  Common Stock  is  listed  on  any  established
stock exchange or a national  market system,  including  without  limitation the
National Market System of the National  Association of Securities Dealers,  Inc.
Automated  Quotation  ("NASDAQ")  System,  the Fair  Market  Value of a Share of
Common  Stock  shall be the  closing  sales price for such stock (or the closing
bid, if no sales were  reported)  as quoted on such  system or exchange  (or the
exchange with the greatest volume of trading in Common Stock) on the last market
trading  day prior to the day of  determination,  as reported in The Wall Street
Journal or such other source as the Administrator deems reliable;

                      (ii) If the Common  Stock is quoted on the  NASDAQ  System
(but not on the National  Market  System  thereof) or is  regularly  quoted by a
recognized  securities  dealer but  selling  prices are not  reported,  the Fair
Market  Value of a Share of Common  Stock shall be the mean between the high bid
and low asked prices for the Common  Stock on the last market  trading day prior
to the day of determination,as reported in The Wall Street Journal or such other
source as the Administrator deems reliable;

                      (iii) In the  absence  of an  established  market  for the
Common  Stock,  the Fair Market Value shall be  determined  in good faith by the
Administrator.

               (o) "Incentive  Stock Option" means an Option intended to qualify
as an incentive  stock option  within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.

               (p) "Long-Term  Performance  Award" means an award under Section9
below.  A Long-Term  Performance  Award shall permit the  recipient to receive a
cash or stock bonus (as determined by the  Administrator)  upon  satisfaction of
such  performance  factors as are set out in the recipient's  individual  grant.
Long-term   Performance   Awards   will  be  based  upon  the   achievement   of
Company,Subsidiary  and/or  individual  performance  factors  or upon such other
criteria asthe Administrator may deem appropriate.

               (q)  "Long-Term  Performance  Award  Agreement"  means a  written
agreement  between  the  Company  and  an  Optionee  evidencing  the  terms  and
conditions of an individual  Long-Term  Performance  Award grant.  The Long-Term
Performance Award Agreement is subject to the terms and conditions of the Plan.

               (r)  "Nonstatutory  Stock Option" means any Option that is not an
Incentive Stock Option.

               (s) "Notice of Grant" means a written notice  evidencing  certain
terms and  conditions of an individual  Option,  Stock  Purchase  Right,  SAR or
Long-Term  Performance  Award  grant.  The Notice of Grant is part of the Option
Agreement, the SAR Agreement and the Long-Term Performance Award Agreement.

               (t)  "Officer"  means a person who is an  officer of the  Company
within  the  meaning  of  Section  16 of the  Exchange  Act  and the  rules  and
regulations promulgated thereunder.

               (u) "Option" means a stock option granted pursuant to the Plan.

               (v)  "Option  Agreement"  means a written  agreement  between the
Company and an Optionee  evidencing  the terms and  conditions  of an individual
Option grant. The Option Agreement is subject to the terms and conditions of the
Plan.

               (w) "Option Exchange Program" means a program whereby outstanding
options are surrendered in exchange for options with a lower exercise price.

               (x) "Optioned  Stock" means the Common Stock subject to an Option
or Right.

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               (y)  "Optionee"  means an  Employee  or  Consultant  who holds an
outstanding Option or Right.

               (z)  "Parent"  means  a  "parent  corporation,"  whether  now  or
hereafter existing, as defined in Section 424(e) of the Code.

               (aa)   "Plan" means this 1997 Stock Plan.

               (bb) "Restricted Stock" means shares of Common Stock subject to a
Restricted  Stock  Purchase  Agreement  acquired  pursuant  to a grant  of Stock
Purchase Rights under Section 8 below.

               (cc)  "Restricted  Stock  Purchase  Agreement"  means  a  written
agreement  between  the  Company  and the  Optionee  evidencing  the  terms  and
restrictions  applying to stock  purchased  under a Stock  Purchase  Right.  The
Restricted  Stock  Purchase  Agreement is subject to the terms and conditions of
the Plan and the Notice of Grant.

               (dd)  "Right"  means and  includes  SARs,  Long-Term  Performance
awards and Stock Purchase Rights granted pursuant to the Plan.

               (ee) "Rule  16b-3"  means Rule 16b-3 of the  Exchange  Act or any
successor  rule thereto,  as in effect when  discretion is being  exercised with
respect to the Plan.


               (ff) "SAR" means a stock  appreciation  right granted pursuant to
Section 7 of the Plan.

               (gg)  "SAR  Agreement"  means a  written  agreement  between  the
Company and an Optionee evidencing the terms and conditions of an individual SAR
grant. The SAR Agreement is subject to the terms and conditions of the Plan.

               (hh) "Share"  means a share of the Common  Stock,  as adjusted in
accordance with Section 11 of the Plan.

               (ii) "Stock  Purchase  Right" means the right to purchase  Common
Stock pursuant to Section 8 of the Plan, as evidenced by a Notice of Grant.

               (jj) "Subsidiary" means a "subsidiary  corporation,"  whether now
or hereafter existing, as defined in Section 424(f) of the Code.

        3. Eligibility.  Nonstatutory Stock Options and Rights may be granted to
Employees  and  Consultants.  Incentive  Stock  Options  may be granted  only to
Employees. If otherwise eligible, an Employee or Consultant who has been granted
an Option or Right may be granted additional Options or Rights.

        4. Stock  Subject to the Plan.  The total number of Shares  reserved and
available for issuance under the Plan is 500,000 Shares. If any Shares that have
been  optioned  under an Option  cease to be subject to such Option  (other than
through exercise of the Option),  or if any Option or Right granted hereunder is
forfeited,  or any such award  otherwise  terminates  prior to the  issuance  of
Common Stock to the participant,  the Shares that were subject to such Option or
Right shall again be available for distribution in connection with future Option
or right  grants under the Plan.  In addition,  Shares that have been subject to
SARs exercised for cash,  whether granted in connection with or independently of
options,  shall again be available for distribution  under the Plan. Shares that
have actually been issued under the Plan,  whether upon exercise of an Option or
Right,  shall ot in any  event be  returned  to the Plan and  shall  not  become
available  for  future  distribution  under the Plan,  except  that if Shares of
Restricted  Stock were  repurchased  by the Company at their  original  purchase
price, and the original purchaser of such Shares did not receive any benefits of
ownership of such Shares,  such Shares shall become  available  for future grant
under the Plan. For purposes of the preceding sentence,  voting rights shall not
be considered a benefit of Share ownership.

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        5.     Administration.

               (a)    Composition of Administrator.

                      (i)     Multiple  Administrative  Bodies.  If permitted by
Rule 16b-3 and Applicable  Laws, the Plan may (but need not) be  administered by
different administrative bodies with respect to (A) Directors who are employees,
(B) Officers who are not Directors  and (C) Employees who are neither  Directors
nor Officers.

                      (ii)    Administration  with   respect  to  Directors  and
Officers.  With respect to grants of Options and Rights to eligible participants
who are Officers or Directors of the Company,  the Plan shall be administered by
(A) the Board,  if the Board may  administer  the Plan in  compliance  with Rule
16b-3 as it applies to a plan intended to qualify  thereunder as a discretionary
grant or award plan,  or (B) a Committee  designated  by the Board to administer
the Plan, which Committee shall be constituted (1) in such a manner as to permit
the Plan to comply  with Rule 16b-3 as it applies to a plan  intended to qualify
thereunder as a discretionary grant or award plan and (2) in such a manner as to
satisfy the Applicable Laws.

                      (iii) Administration with  respect to  Other Persons. With
respect to grants of Options to eligible  participants who are neither Directors
nor Officers of the Company,  the Plan shall be administered by (A) the Board or
(B) a Committee designated by the Board, which Committee shall be constituted in
such a manner as to satisfy the Applicable Laws.

                      (iv) General. Once a Committee has been appointed pursuant
to subsection  (ii) or (iii) of this Section 5(a), such Committee shall continue
to serve in its designated  capacity until otherwise directed by the Board. From
time to time the  Board  may  increase  the size of any  Committee  and  appoint
additional  members thereof,  remove members (with or without cause) and appoint
new members in substitution therefor, fill vacancies (however caused) and remove
all members of a Committee and thereafter  directly  administer the Plan, all to
the extent  permitted  by the  Applicable  Laws and,  in the case of a Committee
appointed  under  subsection  (ii), to the extent  permitted by Rule 16b-3 as it
applies to a plan  intended to qualify  thereunder as a  discretionary  grant or
award plan.

               (b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee,  subject to the specific duties  delegated
by the Board to such Committee,  the Administrator shall have the authority,  in
its discretion:

                      (i)     to determine the  Fair Market Value  of the Common
Stock, in accordance with Section 2(n) of the Plan;

                      (ii)    to select the  Consultants and  Employees  to whom
Options and Rights may be granted hereunder;

                      (iii)   to determine whether  and to what  extent  Options
and Rights or any combination thereof, are granted hereunder;

                      (iv)    to determine the number  of shares of Common Stock
to be covered by each Option and Right granted hereunder;

                      (v)     to approve  forms of agreement  for use  under the
Plan;

                      (vi)    to  determine  the   terms  and   conditions,  not
inconsistent  with the terms of the Plan, of any award granted  hereunder.  Such
terms and conditions  include,  but are not limited to, the exercise price,  the
time or times when  Options or Rights  may be  exercised  (which may be based on
performance  criteria),   any  vesting  acceleration  or  waiver  of  forfeiture
restrictions, and any restriction or limitation regarding any Option or Right or
the shares of Common Stock relating thereto,  based in each case on such factors
as the Administrator, in its sole discretion, shall determine;

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<PAGE>

                      (vii)   to construe and interpret the terms of the Plan;

                      (viii)  to  prescribe,   amend   and  rescind   rules  and
regulations relating to the Plan;

                      (ix)    to determine whether  and under what circumstances
an Option or  Right may be settled in  cash instead  of Common  Stock or  Common
Stock instead of cash;

                      (x)     to reduce  the exercise  price of  any  Option  or
Right;

                      (xi)    to modify  or amend each  Option or Right (subject
to Section 13 of the Plan);

                      (xii)   to authorize  any person to  execute on  behalf of
the Company any instrument required to  effect the grant  of an Option or  Right
previously granted by the Administrator;

                      (xiii)  to institute an Option Exchange Program;

                      (xiv)   to determine the terms and restrictions applicable
to Options and Rights and any Restricted Stock; and

                      (xv)    to make all other  determinations deemed necessary
or advisable for administering the Plan.

               (c)  Effect  of  Administrator's  Decision.  The  Administrator's
decisions,  determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Rights.

        6.  Duration  of the  Plan.  The  Plan  shall  remain  in  effect  until
terminated  by the Board under the terms of the Plan,  provided that in no event
may  Incentive  Stock Options be granted under the Plan later than 10 years from
the date the Plan was adopted by the Board.

        7. Options and SARs.

               (a) Options.  The  Administrator,  in its  discretion,  may grant
Options to eligible  participants and shall determine whether such Options shall
be Incentive Stock Options or Nonstatutory  Stock Options.  Each Option shall be
evidenced  by a Notice of Grant which shall  expressly  identify  the Options as
Incentive  Stock Options or as Nonstatutory  Stock Options,  and be in such form
and contain such  provisions as the  Administrator  shall from time to time deem
appropriate.  Without limiting the foregoing,  the Administrator may at any time
authorize the Company, with the consent of the respective  recipients,  to issue
new  Options  or  Rights in  exchange  for the  surrender  and  cancellation  of
outstanding  Options or Rights.  Option  agreements  shall contain the following
terms and conditions:

                      (i)     Exercise Price;  Number of  Shares.  The per Share
exercise price for the Shares issuable pursuant to an Option shall be such price
as is determined by the Administrator; provided, however, that in the case of an
Incentive Stock Option,  the price shall be no less than 100% of the Fair Market
Value of the  Common  Stock on the date the  Option is  granted,  subject to any
additional conditions set out in Section 7(a)(iv) below.

                      The Notice of Grant shall specify  the number of Shares to
which it pertains.

                      (ii)    Waiting Period and Exercise Dates.  At the time an
Option is granted,  the Administrator will determine the terms and conditions to
be satisfied before Shares may be purchased, including the dates on which Shares

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<PAGE>

subject to the Option may first be  purchased.  The  Administrator  may  specify
thatan Option may not be exercised  until the  completion of the service  period
specified  at the time of grant.  (Any such  period is referred to herein as the
"waiting period.") At the time an Option is granted, the Administrator shall fix
the period within which the Option may be exercised,  which shall not be earlier
than the end of the waiting  period,  if any,  nor, in the case of an  Incentive
Stock Option, later than ten (10) years, from the date of grant.

                      (iii)   Form of Payment.  The consideration to be paid for
the  Shares to be issued  upon  exercise  of an  Option,  including  the  method
ofpayment,  shall  be  determined  by the  Administrator  (and,  in the  case of
anIncentive  Stock  Option,  shall  be  determined  at the  time of  grant)  and
mayconsist entirely of:

                              (1)     cash;

                              (2)     check;

                              (3)     promissory note;

                              (4)     other  Shares  which (1)  in  the  case of
Shares acquired upon exercise of an option,  have been owned by the Optionee for
more than six months on the date of surrender,  and (2) have a Fair Market Value
on the date of surrender  not greater than the aggregate  exercise  price of the
Shares as to which said Option shall be exercised;

                              (5)     delivery of a  properly  executed exercise
notice  together  with  such  other   documentation  as  the  Administrator  and
thebroker, if applicable,  shall require to effect an exercise of the Option and
delivery  to the  Company  of the  sale or  loan  proceeds  required  to pay the
exercise price;

                              (6)     any combination  of the  foregoing methods
of payment; or

                              (7)     such  other consideration  and  method  of
payment for the issuance of Shares to the extent permitted by Applicable Laws.

                   (iv) Special Incentive Stock Option  Provisions.  In addition
to the  foregoing,  Options  granted  under the Plan  which are  intended  to be
Incentive  Stock  Options  under Section 422 of the Code shall be subject to the
following terms and conditions:

                              (1)     Dollar Limitation.  To the extent that the
aggregate  Fair  Market  Value of (a) the Shares with  respect to which  Options
designated  as  Incentive  Stock  Options  plus (b) the  shares  of stock of the
Company,  Parent and any Subsidiary  with respect to which other incentive stock
options are  exercisable  for the first time by an Optionee  during any calendar
year  under all plans of the  Company  and any  Parent  and  Subsidiary  exceeds
$100,000,  such Options  shall be treated as  Nonstatutory  Stock  Options.  For
purposes of the preceding  sentence,  (a) Options shall be taken into account in
the  order in which  they were  granted,  and (b) the Fair  Market  Value of the
Shares shall be  determined as of the time the Option or other  incentive  stock
option is granted.

                              (2)     10% Stockholder.  If any  Optionee to whom
an Incentive  Stock Option is to be granted  pursuant to the  provisions  of the
Plan is, on the date of grant,  the owner of Common Stock (as  determined  under
Section  424(d) of the  Code)  possessing  more  than 10% of the total  combined
voting power of all classes of stock of the Company or any Parent or  Subsidiary
of the Company, then the following special provisions shall be applicable to the
Option granted to such individual:

                                      (a)   The per Share Option price of Shares
subject to such  Incentive  Stock Option shall not be less than 110% of the Fair
Market Value of Common Stock on the date of grant; and

                                      (b)   The Option shall  not have a term in
excess of ten (10)  years  from the date of grant.  Except  as  modified  by the
preceding provisions of this subsection 7(a)(iv) and except as otherwise limited

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by  Section  422 of  the  Code,  all of the  provisions  of the  Plan  shall  be
applicable to the Incentive Stock Options granted hereunder.

                      (v)     Other Provisions.  Each  Option granted  under the
Plan may contain such other terms,  provisions,  and conditions not inconsistent
with the Plan as may be determined by the Administrator.

                      (vi)    Buyout Provisions.  The Administrator  may at  any
time  offer to buy out for a payment  in cash or  Shares,  an Option  previously
granted, based on such terms and conditions as the Administrator shall establish
and communicate to the Optionee at the time that such offer is made.

               (b)    SARs.

                      (i)     In  Connection   with   Options.   At   the   sole
discretion of the  Administrator,  SARs may be granted in connection with all or
any part of an Option,  either  concurrently  with the grant of the Option or at
any time  thereafter  during the term of the Option.  The  following  provisions
apply to SARs that are granted in connection with Options:

                              (1)     The SAR  shall  entitle  the  Optionee  to
exercise the SAR by  surrendering  to the Company  unexercised  a portion of the
related  Option.  The  Optionee  shall  receive in Exchange  from the Company an
amount  equal to the excess of (1) the Fair Market Value on the date of exercise
of the SAR of the Common Stock covered by the surrendered portion of the related
Option  over  (2)  the  exercise  price  of  the  Common  Stock  covered  by the
surrendered portion of the related Option.  Notwithstanding  the foregoing,  the
Administrator  may place limits on the amount that may be paid upon  exercise of
an SAR; provided, however, that such limit shall not restrict the exercisability
of the related Option.

                              (2)     When an  SAR  is  exercised,  the  related
Option, to the extent surrendered, shall cease to be exercisable.

                              (3)     An SAR shall be exercisable  only when and
to the extent that the related Option is  exercisable  and shall expire no later
than the date on which the related Option expires.

                              (4)     An SAR  may only  be exercised  at a  time
when the Fair Market  Value of the Common  Stock  covered by the related  Option
exceeds the exercise price of the Common Stock covered by the related Option.

                   (ii)  Independent of Options.  At the sole  discretion of the
Administrator,  SARs may be  granted  without  related  Options.  The  following
provisions apply to SARs that are not granted in connection with Options:

                              (1)     The SAR  shall  entitle  the  Optionee, by
exercising the SAR, to receive from the Company an amount equal to the excess of
(1) the Fair Market Value of the Common Stock covered by the  exercised  portion
of the SAR, as of the date of such  exercise,  over (2) the Fair Market Value of
the Common  Stock  covered by the  exercised  portion of the SAR, as of the last
market  trading date prior to the date on which the SAR was  granted;  provided,
however,  that the  Administrator  may place limits on the aggregate amount that
may be paid upon exercise of an SAR.

                              (2)     SARs shall be  exercisable, in whole or in
part, at such times as the  Administrator  shall specify in the  Optionee's  SAR
agreement.

                      (iii)   Form of Payment. The Company's  obligation arising
upon the  exercise of an SAR may be paid in Common  Stock or in cash,  or in any
combination  of  Common  Stock  and  cash,  as the  Administrator,  in its  sole
discretion,  may  determine.  Shares issued upon the exercise of an SAR shall be
valued at their Fair Market Value as of the date of exercise.

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               (c) Performance-Based Compensation Limitations. No Employee shall
be granted,  in any fiscal year of the Company,  Options or SARs to receive more
than  500,000  Shares of Common  Stock,  provided  that the  Company may make an
additional  one-time grant of up to 1,000,000  Shares to newly-hired  Employees.
The foregoing  limitations shall adjust  proportionately  in connection with any
change in the Company's recapitalization as described in Section 11(a).

               (d)    Method of Exercise.

                      (i)     Procedure for  Exercise; Rights as a  Stockholder.
Any Option or SAR granted hereunder shall be exercisable at such times and under
such conditions as determined by the  Administrator  and as shall be permissible
under the terms of the Plan.

                      An Option may not be exercised for a fraction of a Share.

                      An Option or SAR  shall be  deemed  to be  exercised  when
written notice of such exercise has been given to the Company in accordance with
the terms of the Option or SAR by the person  entitled to exercise the Option or
SAR and full  payment  for the  Shares  with  respect  to which  the  Option  is
exercised has been  received by the Company.  Full payment may, as authorized by
the Administrator (and, in the case of an Incentive Stock Option,  determined at
the  time of  grant)  and  permitted  by the  Option  Agreement  consist  of any
consideration  and method of payment  allowable  under  subsection  7(a)(iii) of
thePlan.  Until the issuance (as evidenced by the appropriate entry on the books
of the Company or of a duly  authorized  transfer  agent of the  Company) of the
stock certificate  evidencing such Shares, no right to vote or receive dividends
or any other  rights as a  stockholder  shall exist with respect to the Optioned
Stock,  notwithstanding  the exercise of the Option.  No adjustment will be made
for a dividend or other right for which the record date is prior to the date the
stock certificate is issued, except as provided in Section 11 of the Plan.

                      Exercise of an  Option in any  manner shall  result  in  a
decrease in the number of Shares which thereafter  shall be available,  both for
purposes of the Plan and for sale under the  Option,  by the number of Shares as
to which the Option is exercised. Exercise of an SAR in any manner shall, to the
extent the SAR is exercised,  result in a decrease in the number of Shares which
thereafter  shall be available for purposes of the Plan, and the SAR shall cease
to be exercisable to the extent it has been exercised.

                      (ii)    Rule  16b-3.   Options   and   SARs   granted   to
individuals  subject to Section 16 of the Exchange Act ("Insiders")  must comply
with the applicable  provisions of Rule 16b-3 and shall contain such  additional
conditions  or  restrictions  as may be required  thereunder  to qualify for the
maximum  exemption  from  Section 16 of the  Exchange  Act with  respect to Plan
transactions.

                      (iii)   Termination    of   Employment     or   Consulting
Relationship.  In the event an  Optionee's  Continuous  Status as an Employee or
Consultant terminates (other than upon the Optionee's death or Disability),  the
Optionee  may  exercise his or her Option or SAR, but only within such period of
time as is determined by the  Administrator  at the time of grant, not to exceed
six (6) months (three (3) months in the case of an Incentive  Stock Option) from
the date of such  termination,  and only to the  extent  that the  Optionee  was
entitled to exercise it at the date of such  termination  (but in no event later
than the expiration of the term of such Option or SAR as set forth in the Option
or SAR  Agreement).  To the extent that Optionee was not entitled to exercise an
Option  or SAR at the  date of such  termination,  and to the  extent  that  the
Optionee  does not  exercise  such  Option or SAR (to the  extent  otherwise  so
entitled) within the time specified herein, the Option or SAR shall terminate.

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                      (iv)    Disability of Optionee. In the event an Optionee's
Continuous  Status as an Employee or  Consultant  terminates  as a result of the
Optionee's  Disability,  the Optionee may exercise his or her Option or SAR, but
only within  twelve (12) months from the date of such  termination,  and only to
the extent  that the  Optionee  was  entitled to exercise it at the date of such
termination  (but in no  event  later  than the  expiration  of the term of such
Option or SAR as set forth in the Option or SAR  Agreement).  To the extent that
Optionee  was not  entitled  to  exercise  an  Option or SAR at the date of such
termination,  and to the extent that the Optionee  does not exercise such Option
or SAR (to the extent otherwise so entitled)  within the time specified  herein,
the Option or SAR shall terminate.

                      (v) Death  of  Optionee.  In  the  event  of an Optionee's
death, the Optionee's  estate or a person who acquired the right to exercise the
deceased  Optionee's  Option or SAR by bequest or  inheritance  may exercise the
Option or SAR, but only within  twelve (12) months  following the date of death,
and only to the extent that the Optionee was entitled to exercise it at the date
of death (but in no event later than the  expiration  of the term of such Option
or SAR as set forth in the Option or SAR Agreement). To the extent that Optionee
was not  entitled to exercise an Option or SAR at the date of death,  and to the
extent that the Optionee's estate or a person who acquired the right to exercise
such Option does not  exercise  such Option or SAR (to the extent  otherwise  so
entitled) within the time specified herein, the Option or SAR shall terminate.

        8.     Stock Purchase Rights.

               (a)  Rights to  Purchase.  Stock  Purchase  Rights  may be issued
either alone,  in addition to, or in tandem with other awards  granted under the
Plan  and/or  cash  awards  made  outside of the Plan.  After the  Administrator
determines  that it will offer Stock  Purchase  Rights under the Plan,  it shall
advise the offeree in writing of the terms,  conditions and restrictions related
to the offer,  including the number of Shares that the offeree shall be entitled
to  purchase,  the price to be paid,  and the time within which the offeree must
accept such offer, which shall in no event exceed thirty (30) days from the date
upon which the Administrator  made the determination to grant the Stock Purchase
Right.  The offer shall be accepted by execution of a Restricted  Stock Purchase
Agreement in the form determined by the Administrator.

               (b)  Repurchase  Option.  Unless  the  Administrator   determines
otherwise,  the Restricted  Stock Purchase  Agreement  shall grant the Company a
repurchase option  exercisable upon the voluntary or involuntary  termination of
the purchaser's  employment with the Company for any reason  (including death or
Disability).   The  purchase  price  for  Shares  repurchased  pursuant  to  the
Restricted  Stock  purchase  agreement  shall be the original  price paid by the
purchaser and may be paid by cancellation  of any  indebtedness of the purchaser
to  the  Company.  The  repurchase  option  shall  lapse  at  such  rate  as the
Administrator may determine.

               (c) Other  Provisions.  The Restricted  Stock Purchase  Agreement
shall contain such other terms,  provisions and conditions not inconsistent with
the Plan as may be determined by the  Administrator in its sole  discretion.  In
addition, the provisions of Restricted Stock Purchase Agreements need not be the
same with respect to each purchaser.

                                       9
<PAGE>

               (d) Rule 16b-3.  Stock Purchase  Rights granted to Insiders,  and
Shares purchased by Insiders in connection with Stock Purchase Rights,  shall be
subject to any restrictions applicable thereto in compliance with Rule 16b-3. An
Insider  may only  purchase  Shares  pursuant  to the grant of a Stock  Purchase
Right,  and may only  sell  Shares  purchased  pursuant  to the grant of a Stock
Purchase Right, during such time or times as are permitted by Rule 16b-3.

               (e) Rights as a  Stockholder.  Once the Stock  Purchase  Right is
exercised,  the  purchaser  shall  have  the  rights  equivalent  to  those of a
stockholder, and shall be a stockholder when his or her purchase is entered upon
the records of the duly authorized  transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 11
of the Plan.

               (f)   Withholding   Taxes.  In  accordance  with  any  applicable
administrative guidelines it establishes, the Committee may allow a purchaser to
pay the amount of taxes required by law to be withheld as a result of a purchase
of  Shares  or a lapse of  restrictions  in  connection  with  Shares  purchased
pursuant to a Stock Purchase  Right,  by withholding  from any payment of Common
Stock  due as a  result  of  such  purchase  or  lapse  of  restrictions,  or by
permitting the purchaser to deliver to the Company,  Shares having a Fair Market
Value,  as  determined  by the  Committee,  equal to the amount of such required
withholding taxes.

        9.     Long-Term Performance Awards.

               (a)  Administration.  Long-Term  Performance  Awards  are cash or
stock  bonus  awards  that may be granted  either  alone or in addition to other
awards  granted  under  the  Plan.  Such  awards  shall be  granted  for no cash
consideration. The Administrator shall determine the nature, length and starting
date of any  performance  period (the  "Performance  Period") for each Long-Term
Performance Award, and shall determine the performance or employment factors, if
any, to be used in the  determination  of Long-Term  Performance  Awards and the
extent  to which  such  Long-Term  Performance  Awards  are  valued or have been
earned.  Long-Term  Performance  Awards may vary from participant to participant
and between groups of  participants  and shall be based upon the  achievement of
Company,  Subsidiary,  Parent and/or individual performance factors or upon such
other criteria as the Administrator may deem  appropriate.  Performance  Periods
may overlap and  participants  may  participate  simultaneously  with respect to
Long-Term  Performance Awards that are subject to different  Performance Periods
and different  performance  factors and criteria.  Long-Term  Performance Awards
shall be confirmed  by, and be subject to the terms of, a Long-Term  Performance
Award  agreement.  The terms of such awards need not be the same with respect to
each participant.

               At the beginning of each Performance  Period,  the  Administrator
may determine for each Long-Term  Performance  Award subject to such Performance
Period  the  range of dollar  values  or number of shares of Common  Stock to be
awarded to the  participant at the end of the  Performance  Period if and to the
extent that the relevant measures of performance for such Long-Term  Performance
Award are met.  Such  dollar  values or number of shares of Common  Stock may be
fixed or may vary in accordance  with such  performance or other criteria as may
be determined by the Administrator.

                                       10
<PAGE>

               (b)  Adjustment  of  Awards.  The  Administrator  may  adjust the
performance factors applicable to the Long-Term  Performance Awards to take into
account changes in legal,  accounting and tax rules and to make such adjustments
as the Administrator  deems necessary or appropriate to reflect the inclusion or
exclusion  of  the  impact  of  extraordinary   or  unusual  items,   events  or
circumstances in order to avoid windfalls or hardships.

        10.  Non-Transferability of Options. Options and Rights may not be sold,
pledged, assigned, hypothecated,  transferred or disposed of in any manner other
than by will or by the laws of descent  or  distribution  and may be  exercised,
during the lifetime of the Optionee, only by the Optionee.

        11.  Adjustments Upon Changes in  Capitalization,  Dissolution,  Merger,
Asset Sale or Change of Control.

               (a) Changes in Capitalization.  Subject to any required action by
the stockholders of the Company, the number of shares of Common Stock covered by
each  outstanding  Option  and Right,  and the number of shares of Common  Stock
which  have  been  authorized  for  issuance  under  the Plan but as to which no
Options or Rights have yet been granted or which have been  returned to the Plan
upon  cancellation or expiration of an Option or Right, as well as the price per
share of Common Stock covered by each such outstanding Option or Right, shall be
proportionately  adjusted  for any  increase or decrease in the number of issued
shares of Common Stock resulting from a stock split,  reverse stock split, stock
dividend,  combination  or  reclassification  of the Common Stock,  or any other
increase  or decrease in the number of issued  shares of Common  Stock  effected
without  receipt  of  consideration  by the  Company;  provided,  however,  that
conversion of any  convertible  securities of the Company shall not be deemed to
have been "effected without receipt of consideration."  Such adjustment shall be
made by the Board, whose  determination in that respect shall be final,  binding
and conclusive.  Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities  convertible into shares of stock
of any class,  shall affect,  and no adjustment by reason  thereof shall be made
with  respect  to, the number or price of shares of Common  Stock  subject to an
Option or Right.

               (b)  Dissolution  or  Liquidation.  In the event of the  proposed
dissolution or liquidation of the Company, to the extent that an Option or Right
has not been previously  exercised,  it will terminate  immediately prior to the
consummation of such proposed action. The Board may, in the exercise of its sole
discretion in such  instances,  declare that any Option or Right shall terminate
as of a date fixed by the Board and give each Optionee the right to exercise his
or her Option or Right as to all or any part of the  Optioned  Stock,  including
Shares as to which the Option or Right would not otherwise be exercisable.

               (c) Merger or Asset Sale.  Subject to the provisions of paragraph
(d)  hereof,  in the  event  of a merger  of the  Company  with or into  another
corporation, or the sale of substantially all of the assets of the Company, each
outstanding  Option and Right shall be assumed or an equivalent  Option or Right
substituted  by the  successor  corporation  or a Parent  or  Subsidiary  of the
successor  corporation.  In the event that the  successor  corporation  does not
agree  to  assume  the  Option  or  to  substitute  an  equivalent  option,  the
Administrator shall, in lieu of such assumption or substitution, provide for the
Optionee to have the right to exercise the Option or Right as to all or a

                                       11
<PAGE>

portion  of the  Optioned  Stock,  including  Shares  as to which  it would  not
otherwise  be  exercisable.  If the  Administrator  makes  an  Option  or  Right
exercisable in lieu of assump tion or  substitution  in the event of a merger or
sale of assets,  the Administrator  shall notify the Optionee that the Option or
Right shall be  exercisable  for a period of fifteen  (15) days from the date of
such notice,  and the Option or Right will terminate upon the expiration of such
period.  For the  purposes  of this  paragraph,  the  Option  or Right  shall be
considered assumed if,  immediately  following the merger or sale of assets, the
Option or Right confers the right to purchase,  for each Share of Optioned Stock
subject  to the  Option  or Right  immediately  prior to the  merger  or sale of
assets, the consideration (whether stock, cash, or other securities or property)
received  in the merger or sale of assets by  holders  of Common  Stock for each
Share held on the effective date of the transaction (and if holders were offered
a choice of consideration,  the type of consideration chosen by the holders of a
majority  of  the  outstanding  Shares);   provided,   however,   that  if  such
consideration  received  in the merger or sale of assets  was not solely  common
stock of the successor  corporation or its Parent,  the Administrator  may, with
the consent of the successor  corporation and the  participant,  provide for the
consideration  to be received upon the exercise of the Option or Right, for each
Share of  Optioned  Stock  subject to the Option or Right,  to be solely  common
stock of the successor  corporation  or its Parent equal in Fair Market Value to
the per share consideration received by holders of Common Stock in the merger or
sale of assets.

               (d) Change in  Control.  In the event of a "Change in Control" of
the Company, as defined in paragraph (e) below, then the following  acceleration
and valuation provisions shall apply:

                      (i)     Except as  otherwise determined  by the  Board, in
its discretion,  prior to the occurrence of a Change in Control, any Options and
Rights  outstanding  on the date such  Change in Control is  determined  to have
occurred that are not yet exercisable and vested on such date shall become fully
exercisable and vested;

                      (ii)    Except as  otherwise determined  by the  Board, in
its discretion,  prior to the occurrence of a Change in Control, all outstanding
Options and Rights,  to the extent they are  exercisable  and vested  (including
Options  and Rights  that  shall  become  exercisable  and  vested  pursuant  to
subparagraph  (i) above),  shall be  terminated  in exchange  for a cash payment
equal to the Change in Control Price,  (reduced by the exercise  price,  if any,
applicable to such Options or Rights).  These cash proceeds shall be paid to the
Optionee  or,  in the event of death of an  Optionee  prior to  payment,  to the
estate of the  Optionee or to a person who  acquired  the right to exercise  the
Option or Right by bequest or inheritance.

               (e)  Definition  of "Change in  Control".  For  purposes  of this
Section 11, a "Change in Control" means the happening of any of the following:

                      (i)     When  any  "person,"  as  such  term  is  used  in
Sections  13(d)  and  14(d) of the  Exchange  Act  (other  than the  Company,  a
Subsidiary or a Company  employee  benefit  plan,  including any trustee of such
plan acting as trustee) is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange  Act),  directly or  indirectly,  of  securities of the
Company representing fifty percent (50%) or more of the combined voting power of
the Company's  then  outstanding  securities  entitled to vote  generally in the
election of directors; or

                                       12
<PAGE>

                      (ii)    The stockholders of the Company approve a merger
or consolidation of the Company with any other corporation,  other than a merger
or  consolidation  which would  result in the voting  securities  of the Company
outstanding  immediately  prior  thereto  continuing  to  represent  (either  by
remaining  outstanding  or by being  converted  into  voting  securities  of the
surviving  entity)  at least  fifty  percent  (50%) of the  total  voting  power
represented  by the voting  securities of the Company or such  surviving  entity
outstanding immediately after such merger or consolidation,  or the stockholders
of the Company  approve an agreement for the sale or  disposition by the Company
of all or substantially all the Company's assets; or

                      (iii)   A change in the composition of the Board of
Directors  of the  Company,  as a result of which  fewer than a majority  of the
directors are Incumbent  Directors.  "Incumbent  Directors" shall mean directors
who either (A) are  directors of the Company as of the date the Plan is approved
by the stockholders, or (B) are elected, or nominated for election, to the Board
of Directors of the Company with the affirmative votes of at least a majority of
the Incumbent  Directors at the time of such  election or nomination  (but shall
not include an individual  whose election or nomination is in connection with an
actual or threatened  proxy contest relating to the election of directors to the
Company).

               (f) Change in Control  Price.  For  purposes of this  Section 11,
"Change in Control Price" shall be, as determined by the Board,  (i) the highest
Fair Market Value of a Share within the 60-day period immediately  preceding the
date of  determination  of the Change in Control Price by the Board (the "60-Day
Period"),  or (ii) the highest price paid or offered per Share, as determined by
the Board, in any bona fide transaction or bona fide offer related to the Change
in Control of the Company,  at any time within the 60-Day Period,  or (iii) such
lower  price as the Board,  in its  discretion,  determines  to be a  reasonable
estimate of the fair market value of a Share.

        12. Date of Grant. The date of grant of an Option or Right shall be, for
all  purposes,  the date on which  the  Administrator  makes  the  determination
granting such Option or Right,  or such other later date as is determined by the
Administrator.  Notice of the  determination  shall be provided to each Optionee
within a reasonable time after the date of such grant.

        13. Amendment and Termination of the Plan.

               (a) Amendment and  Termination.  The Board may at any time amend,
alter, suspend or terminate the Plan.

               (b) Stockholder  Approval.  The Company shall obtain  stockholder
approval of any Plan  amendment to the extent  necessary and desirable to comply
with  Rule  16b-3 or with  Section  422 of the Code  (or any  successor  rule or
statute or other applicable law, rule or regulation,  including the requirements
of any  exchange  or  quotation  system on which the  Common  Stock is listed or
quoted).  Such stockholder  approval,  if required,  shall be obtained in such a
manner  and to such a degree  as is  required  by the  applicable  law,  rule or
regulation.

               (c) Effect of Amendment or Termination. No amendment, alteration,
suspension or  termination  of the Plan shall impair the rights of any Optionee,
unless mutually  agreed  otherwise  between the Optionee and the  Administrator,
which agreement must be in writing and signed by the Optionee and the Company.

                                       13
<PAGE>

        14.    Conditions Upon Issuance of Shares.

               (a) Legal Compliance.  Shares shall not be issued pursuant to the
exercise of an Option or Right  unless the  exercise of such Option or Right and
the  issuance  and  delivery  of such  Shares  shall  comply  with all  relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended,  the Exchange Act, the rules and  regulations  promulgated  thereunder,
Applicable  Laws, and the requirements of any stock exchange or quotation system
upon which the Shares may then be listed or quoted, and shall be further subject
to the approval of counsel for the Company with respect to such compliance.

               (b) Investment Representations. As a condition to the exercise of
an Option or Right, the Company may require the person exercising such Option or
Right to represent  and warrant at the time of any such exercise that the Shares
are being  purchased only for  investment  and without any present  intention to
sell or  distribute  such Shares if, in the opinion of counsel for the  Company,
such a representation is required.

        15.    Liability of Company.

               (a) Inability to Obtain  Authority.  The inability of the Company
to  obtain  authority  from  any  regulatory  body  having  jurisdiction,  which
authority  is deemed by the  Company's  counsel  to be  necessary  to the lawful
issuance  and sale of any Shares  hereunder,  shall  relieve  the Company of any
liability  in  respect of the  failure to issue or sell such  Shares as to which
such requisite authority shall not have been obtained.

               (b) Grants  Exceeding  Allotted  Shares.  If the  Optioned  Stock
covered by an Option or Right  exceeds,  as of the date of grant,  the number of
Shares  which  may be  issued  under  the Plan  without  additional  stockholder
approval,  such  Option  or Right  shall be void  with  respect  to such  excess
Optioned  Stock,  unless  stockholder  approval  of  an  amendment  sufficiently
increasing  the  number of Shares  subject  to the Plan is  timely  obtained  in
accordance with Section 13(b) of the Plan.

        16.  Reservation of Shares.  The Company,  during the term of this Plan,
will at all times reserve and keep  available  such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

        17.  Stockholder  Approval.  Continuance of the Plan shall be subject to
approval by the  stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted.  Such stockholder approval shall be obtained
in the manner and to the degree required under applicable federal and state law.

                                       14
<PAGE>

                   AMERICAN RESOURCES AND DEVELOPMENT COMPANY
                                1997 STOCK PLAN
                            NONSTATUTORY STOCK OPTION
                                 EXERCISE NOTICE

American Resources and Development Company
Attention:  Shareholder Services Department

  1.  Exercise  of  Option.  Effective  as of  today,  , 199 ,  the  undersigned
("Purchaser")  hereby  elects to purchase  shares (the  "Shares")  of the Common
Stock of American  Resources and Development  Company (the "Company")  under and
pursuant to the American Resources and Development  Company 1997 Stock Plan (the
"Plan") and the Stock Option Agreement dated (the "Option Agreement").

  2. Delivery of Payment.  Purchaser  herewith  delivers to the Company the full
purchase price for the Shares and any and all required taxes.

  3.  Representations  of Purchaser.  Purchaser  acknowledges that Purchaser has
received,  read and understood  the Plan and the Option  Agreement and agrees to
abide by and be bound by their terms and conditions.

  4.  Rights  as  Stockholder.  Subject  to the  terms  and  conditions  of this
Agreement,  Purchaser  shall  have all of the  rights  of a  stockholder  of the
Company with respect to the Shares from and after the date the stock certificate
evidencing such Shares is issued,  as evidenced by the appropriate  entry on the
books of the Company or of a duly authorized transfer agent of the Company.

  5. Tax Consultation.  Purchaser  understands that Purchaser may suffer adverse
tax  consequences  as a result of  Purchaser's  purchase or  disposition  of the
Shares.   Purchaser  represents  that  Purchaser  has  consulted  with  any  tax
consultants  Purchaser  deems  advisable  in  connection  with the  purchase  or
disposition  of the Shares and that  Purchaser is not relying on the Company for
any tax advice.

  6.  Entire  Agreement;  Governing  Law.  The Plan  and  Option  Agreement  are
incorporated  herein  by  reference.  This  Agreement,  the Plan and the  Option
Agreement  constitute the entire agreement of the parties and supersede in their
entirety all prior undertakings and agreements of the Company and Purchaser with
respect to the subject matter hereof, and such agreement is governed by Delaware
law except for that body of law pertaining to conflict of laws.

Submitted by:                    Accepted by:  AMERICAN RESOURCES AND
                                               DEVELOPMENT COMPANY


                                 By:
----------------------------         ----------------------------
Signature of Purchaser

                                 Title:
----------------------------            -------------------------
Printed Name


----------------------------
Social Security Number


Mailing Address:

----------------------------

----------------------------

                                       15
<PAGE>

           AMERICAN RESOURCES AND DEVELOPMENT COMPANY 1997 STOCK PLAN
                             STOCK OPTION AGREEMENT

        Unless  otherwise  defined  herein,  the terms  defined in the  American
Resources  and  Development  Company 1997 Stock Plan (the "Plan") shall have the
same defined meanings in this Option Agreement.

I.  NOTICE OF STOCK OPTION GRANT

        Employee ID:
                           ----------------------
        Name:
                           ----------------------
        Address:
                           ----------------------

                           ----------------------

                           ----------------------

                           ----------------------


        You have been granted an option to purchase Common Stock of the Company,
subject to the terms and  conditions of the Plan and this Option  Agreement,  as
follows:

        Grant Number:
                                            ---------------------------
        Date of Grant:
                                            ---------------------------
        Exercise Price per Share:
                                            ---------------------------
        Total Number of Shares Granted:
                                            ---------------------------
        Type of Option:
                                            ---------------------------
        Term/Expiration Date:
                                            ---------------------------

        Vesting  Schedule:  This  Option  will vest over four (4) years with 25%
        vesting one year from grant date and thereafter 6.25% per quarter.

        Termination  Period:  This  Option  may be  exercised  for 60 days after
        termination of Optionee's employment or consulting relationship, or such
        longer period as may be applicable  upon death or Disability of Optionee
        as provided in the Plan, but in no event later than the  Term/Expiration
        Date as provided above.

II.  AGREEMENT

        1. Grant of Option.  The Plan Administrator of the Company hereby grants
to the  Optionee  named  in the  Notice  of  Grant  attached  as  Part I of this
Agreement  (the  "Optionee")  an option (the "Option") to purchase the number of
Shares  set  forth in the  Notice of Grant at the  exercise  price per share set
forth in the Notice of Grant (the  "Exercise  Price"),  subject to the terms and
conditions of the American  Resources and  Development  Company 1997 Stock Plan,
which is incorporated herein by reference. Subject to Section 13(c) of the Plan,
in the event of a conflict  between the terms and conditions of the Plan and the
terms and conditions of this Option  Agreement,  the terms and conditions of the
Plan shall prevail.

        If designated in the Notice of Grant as an Incentive Stock Option,  this
Option is intended to qualify as an Incentive  Stock Option under Section 422 of
the Code.

                                       16
<PAGE>

        2. Exercise of Option.

              (a) Right to Exercise.  This Option is exercisable during its term
in accordance  with the Vesting  Schedule set out in the Notice of Grant and the
applicable  provisions  of the Plan and this Option  Agreement.  In the event of
Optionee's death,  Disability or other  termination of Optionee's  employment or
consulting  relationship,  the  exercisability  of the Option is governed by the
applicable provisions of the Plan and this Option Agreement.

               (b) Method of Exercise. This Option is exercisable by delivery of
an exercise  notice in the form  attached as Exhibit A (the  "Exercise  Notice")
which shall state the election to exercise  the Option,  the number of Shares as
to which the Option is being exercised (the  "Exercised  Shares") and such other
representations and agreements as may be required by the Company pursuant to the
provisions of the Plan. The Exercise  Notice shall be signed by the Optionee and
shall be delivered in person or by certified  mail to the  Shareholder  Services
Department of the Company.  The Exercise  Notice shall be accompanied by payment
of the aggregate Exercise Price as to all Exercised Shares. This Option shall be
deemed to be  exercised  upon  receipt by the  Company  of such  fully  executed
Exercise  Notice  accompanied by such aggregate  Exercise Price and any required
withholding tax.

        No Shares shall be issued pursuant to the exercise of this Option unless
such issuance and exercise complies with all relevant  provisions of law and the
requirements  of any stock  exchange  upon  which the  Shares  are then  listed.
Assuming such compliance,  for income tax purposes the Exercised Shares shall be
considered  transferred to the Optionee on the date the Option is exercised with
respect to such Exercised Shares.

        3. Method of Payment.  Payment of the aggregate  Exercise Price shall be
by any of the  following,  or a  combination  thereof,  at the  election  of the
Optionee:

               (a)  cash; or

               (b)  check; or

               (c) delivery of a properly executed Exercise Notice together with
such other  documentation as the  Administrator  and the broker,  if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the exercise price; or

               (d)  surrender  of other  Shares  which (i) in the case of Shares
acquired  upon  exercise of an option,  have been owned by the Optionee for more
than six (6) months on the date of  surrender,  and (ii)have a Fair Market Value
on the date of surrender equal to the aggregate  Exercise Price of the Exercised
Shares.

        4.  Non-Transferability of Option. This Option may not be transferred in
any manner  otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee. The terms
of the Plan and this  Option  Agreement  shall be  binding  upon the  executors,
administrators, heirs, successors and assigns of the Optionee.

        5. Term of Option.  This Option will expire ten (10) years from the date
of its grant.

        6. Tax  Consequences.  Some of the federal tax consequences  relating to
this Option, as of the date of this Option, are set forth below. THIS SUMMARY IS
NECESSARILY INCOMPLETE,  AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
THE  OPTIONEE  SHOULD  CONSULT A TAX ADVISER  BEFORE  EXERCISING  THIS OPTION OR
DISPOSING OF THE SHARES.

               (a)  Exercising the Option.

                                       17
<PAGE>

                      (i)  Nonqualified Stock Option ("NSO").  If this Option
does not qualify as an ISO, the Optionee may incur  regular  federal  income tax
liability  upon  exercise.  The  Optionee  will be  treated  as having  received
compensation  income (taxable at ordinary income tax rates) equal to the excess,
if any, of the fair market value of the Exercised Shares on the date of exercise
over their aggregate  Exercise Price. If the Optionee is an employee or a former
employee,  the Company will be required to withhold from his or her compensation
or collect from Optionee and pay to the applicable taxing  authorities an amount
equal to a percentage of this compensation income at the time of exercise.

                      (ii) Incentive Stock Option ("ISO").  If this Option
qualifies  as an ISO,  the  Optionee  will have no  regular  federal  income tax
liability  upon its  exercise,  although the excess,  if any, of the fair market
value of the  Exercised  Shares on the date of  exercise  over  their  aggregate
Exercise Price will be treated as an adjustment to the  alternative  minimum tax
for federal tax purposes and may subject the Optionee to alternative minimum tax
in the year of exercise.

               (b) Disposition of Shares.

                      (i)  NSO.  If the Optionee holds NSO Shares for at least
one year,  any gain  realized  on  disposition  of the Shares will be treated as
long-term capital gain for federal income tax purposes.

                      (ii)  ISO.  If the Optionee holds ISO Shares for at least
one year after exercise and two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term  capital gain for federal
income tax  purposes.  If the  Optionee  disposes of ISO Shares  within one year
after  exercise  or two years after the grant  date,  any gain  realized on such
disposition  will be treated as compensation  income (taxable at ordinary income
rates) to the extent of the excess,  if any, of the lesser of (A) the difference
between the fair market value of the Shares acquired on the date of exercise and
the aggregate  Exercise Price,  or (B) the difference  between the sale price of
such Shares and the aggregate Exercise Price.

               (c) Notice of  Disqualifying  Disposition  of ISO Shares.  If the
Optionee sells or otherwise  disposes of any of the Shares acquired  pursuant to
an ISO on or before the later of (i) two years after the grant date, or (ii) one
year after the exercise date, the Optionee shall immediately  notify the Company
in  writing  of such  disposition.  The  Optionee  agrees  that he or she may be
subject to income tax  withholding  by the  Company on the  compensation  income
recognized  from such early  disposition of ISO Shares by payment in cash or out
of the current earnings paid to the Optionee.

        By your  signature  and the  signature of the  Company's  representative
below,  you and the Company agree that this Option is granted under and governed
by the terms and conditions of the Plan and this Option Agreement.  Optionee has
reviewed  the Plan and  this  Option  Agreement  in their  entirety,  has had an
opportunity  to obtain the  advice of counsel  prior to  executing  this  Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding,  conclusive and final all decisions
or  interpretations of the Administrator upon any questions relating to the Plan
and  Option  Agreement.  It is  agreed  that  this  Option  Agreement  shall  be
interpreted  and construed in accordance  with the laws of that  jurisdiction in
which enforcement is sought.  Should any portion of this Agreement be judicially
held to be  invalid,  unenforceable  or void,  such  holding  shall not have the
effect of  invalidating  the  remainder  of this  Agreement  or any  other  part
thereof,  the parties  hereby  agreeing  that the portion so held to be invalid,
unenforceable,  or void  shall,  if  possible,  be deemed  amended or reduced in
scope. This Option Agreement shall supersede the terms of any prior agreement or
understanding  between  Optionee and the Company  regarding  the subject  matter
hereof, and constitutes the full and entire  understanding and agreement between
Optionee  and the Company  regarding  the  subject  matter  hereof.  This Option
Agreement may be modified or amended only in writing signed by an officer of the
Company and by Optionee.  Optionee  agrees and  acknowledges  the  Company's "at
will"  employment  policy,  which  is that the  Company  reserves  the  right to
discontinue  Optionee's  employment  at any time  for any  reason  or no  reason
without notice,  and that the Company accords  Optionee the right to discontinue
employment at any time for any reason or no reason without notice. The Company

                                       18
<PAGE>

agrees  and  acknowledges  that  it's "at  will"  employment  policy  may not be
enforceable in the jurisdiction in which Optionee is domiciled.  Optionee agrees
that nothing in this Agreement  shall be construed as a limitation of the rights
of the Company to terminate  Optionee's  employment with the Company at any time
for any reason or no reason without notice.

OPTIONEE:               AMERICAN RESOURCES AND DEVELOPMENT COMPANY: