SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Amendment No. 1
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
July 3, 1996
- - -----------------------------------------------------------------
Date of Report (Date of earliest event reported)
AMERICAN RESOURCES OF DELAWARE, INC.
- - -----------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware
- - -----------------------------------------------------------------
(State or other jurisdiction of incorporation)
0-21472 86-0713506
- - -----------------------------------------------------------------
(Commission File Number) (IRS Employer
Identification No.)
160 Morgan Street
P. O. Box 87
Versailles, Kentucky 40383
- - -----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(606)873-5455
- - -----------------------------------------------------------------
(Registrant's Telephone Number, including Area Code)
Not Applicable
- - -----------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 1. Changes in Control of Registrant. Not Applicable.
Item 2. Acquisition or Disposition of Assets.
Purchase of Assets of AKS:
-------------------------
On July 3, 1996, the Registrant acquired oil and gas
properties, equipment and pipelines from Century Offshore
Management Corporation ("Century"). The purchase was previously
reported by the Registrant on Form 8-K which was filed on July
18, 1996. The purpose of this Form 8-K/A is to provide the
financial information required by Item 7 of Form 8-K and to amend
portions of Item 2 which referenced the acquisition by the
Registrant of properties from Century located onshore and
offshore Louisiana.
In the 8-K filed on July 18,1996, the Registrant
disclosed its acquisition of undeveloped properties from Century
located onshore Louisiana for the consideration of $3,884,000 in
cash and the issuance of 1,500,000 shares of restricted common
stock in the Registrant. This transaction was memorialized in
the Asset Purchase Agreement (the "Saltdome Agreement") which
was attached to the 8-K as Exhibit "B". Subsequently, the
parties elected to terminate the Saltdome Agreement, thereby
relieving the Registrant of the requirment of issuing to Century
the above referenced restricted common stock. The Saltdome
Agreement contemplated the Registrant acquiring an undivided
interest of 10.5% in the White Castle, 28% in the Bayou Bouillon
and 25% in the Plumb Bob salt domes. As a part of the
termination of the Saltdome Agreement the Registrant and Century
entered into a Capitalization Agreement and Termination of
Purchase and Sale Agreement (the "Capitalization Agreement")
which provides for the Registrant to acquire, for the payment of
$3,884,000 in cash, 9.45% in the White Castle, 6.15% in the Bayou
Bouillon and 5.59% in the Plumb Bob salt domes. A copy of said
Capitalization Agreement is attached hereto as Exhibit "A" and
incorporated herein by reference.
The Registrant and Century also amended the Asset
Purchase Agreement (the "South Timbalier Agreement") dated July
3, 1996, attached as Exhibit "A" to the 8-K, which provided for
the acquisition of a portion of Century's interest in the South
Timbalier 148 property. The Amendment to South Timbalier
Agreement (attached hereto as Exhibit "B" and incorporated herein
by reference) did not amend the original terms as it pertains to
the property acquired or consideration paid. The Registrant and
Century did amend the South Timbalier Purchase and Sale Agreement
as follows:
(i) Section 1.03(b) was amended to identify the
payments due Century as installment payments
and the dates of those payments were extended
from August 15, 1996 until August 31, 1996
and September 30, 1996.
2
<PAGE>
(ii) Section 1.03(d) was amended to extend the
time to make full payment of Permitted Liens
from July 31, 1996 to September 30, 1996 for
three lien holders and the balance of the
lien holders are to be paid by November 15,
1996.
(iii) Section 1.03(e) was amended to delete
references to Century's granting to the
Registrant a first priority mortgage in the
Saltdome Assets as security for a loan.
Century granted the Registrant the right to
convert the loan to a working interest in
certain salt dome projects.
(iv) Section 1.10 was amended to add language
allowing additional value to be given to
Century in the event the Registrant would
elect to merge with Century.
As of the filing date for this 8-K/A, the Registrant has not
yet paid Century the August 31, 1996 installment. If the
Registrant elects to issue stock for the installment payments,
Century will receive approximately 666,666 shares of restricted
common stock per installment payment.
Item 3. Bankruptcy Receivership. Not Applicable.
Item 4. Change in Registrant's Certified Accountant. Not
Applicable.
Item 5. Other Events. Not Applicable.
Item 6. Resignation of Registrant's Directors. Not Applicable.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
The audited Statements of Revenues and Direct
Operating Expenses of the Century properties for each of the years
in the two-year period ended December 31, 1995, are presented with
accompanying notes.
(b) Pro Forma Financial Information.
The Unaudited Pro Forma Condensed Consolidated
Balance Sheet at June 30, 1996, is presented assuming that the
purchase of certain oil and gas properties, equipment, and
assumed lien obligations from Century occurred on June 30, 1996.
The Unaudited Pro Forma Consolidated Statement of Operations for the
year ended December 31, 1995 and the six-month interim period
ended June 30, 1996, are presented assuming that the purchase
of certain oil and gas properties,
3
<PAGE>
equipment and assumed lien obligations from Century occurred on
January 1, 1995. The Unaudited Pro Forma Consolidated Statement
of Operations for the year ended December 31, 1995, also assumes
the previously reported purchase in early 1996 of certain
properties of Arakis occurred on January 1, 1995. The Unaudited
Pro Forma Financial Statements have been prepared based on the
historical financial statements as of the same date or for the
same period as indicated and are not necessarily indicative of the
results which would have been obtained had the acquisitions
taken place on such dates.
(c) Exhibits.
Exhibit "A"-- Capitalization Agreement and
Termination of Purchase and Sale
Agreement by and between Southern
Gas Co. of Delaware, Inc., American
Resources of Delaware, Inc. and
Century Offshore Management
Corporation dated August 31, 1996.
Exhibit "B"-- Amendment to South Timbalier
Purchase and Sale Agreement by and
between Southern Gas Co. of
Delaware, Inc., American Resources
of Delaware, Inc. and Century
Offshore Management Corporation
dated August 31, 1996.
4
<PAGE>
Independent Auditors' Report
----------------------------
To the Board of Directors
American Resources of Delaware, Inc.:
We have audited the accompanying statements of revenues and
direct operating expenses of the Century Properties purchased by
American Resources of Delaware, Inc. for each of the years in the
two-year period ended December 31, 1995. These statements of
revenues and direct operating expenses are the responsibility of
the property owner's management. Our responsibility is to
express an opinion on these statements of revenues and direct
operating expenses based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the statements of revenues and direct operating expenses are free
of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
statements of revenues and direct operating expenses. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall presentation of the statements of revenues and direct
operating expenses. We believe that our audits of the statements
of revenues and direct operating expenses provide a reasonable
basis for our opinion.
The accompanying statements were prepared as described in note 1
for the purpose of complying with certain rules and regulations
of the Securities and Exchange Commission (SEC) for inclusion in
certain SEC regulatory reports and filings and are not intended
to be a complete financial presentation.
In our opinion, the accompanying statements of revenues and
direct operating expenses present fairly, in all material
respects, the revenues and direct operating expenses of the
Century Properties purchased by American Resources of Delaware,
Inc. for each of the years in the two-year period ended December
31, 1995, in conformity with generally accepted accounting
principles.
Houston, Texas
September 16, 1996
<PAGE>
THE CENTURY PROPERTIES PURCHASED BY
AMERICAN RESOURCES OF DELAWARE, INC.
Statements of Revenues and
Direct Operating Expenses
Years ended December 31, 1995 and 1994
and the six-months ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
June 30, June 30, December 31,
-------- -------- ----------------
1996 1995 1995 1994
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Revenues $ 854,821 245,202 477,223 361,725
Direct operating expenses 370,399 39,292 84,253 65,469
--------- ------- ------- -------
Revenues in excess of direct
operating expenses $ 484,422 205,910 392,970 296,256
========= ======= ======= =======
</TABLE>
See accompanying notes to the Statements of Revenues and Direct
Operating Expenses.
<PAGE>
THE CENTURY PROPERTIES PURCHASED BY
AMERICAN RESOURCES OF DELAWARE, INC.
NOTES TO STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying statements present the revenues and direct
operating expenses of the working interests in certain oil
and gas properties purchased by American Resources of
Delaware, Inc. (ARI) from Century Offshore Management
Corporation during July 1996 for approximately $15.6 million
in cash, stock of ARI, forgiveness of debt and assumption of
certain liens. The Century Properties in the South
Timbalier 148 Field are located in the state of Louisiana
and include producing properties and certain unproved
properties.
In the opinion of management, the accompanying unaudited
statements shown contain all adjustments, consisting only of
those of a normal recurring nature, necessary to present
fairly the Company's revenues and direct operating expenses
for the six-months ended June 30, 1996 and 1995. These
results are not indicative of the results to be expected for
the full fiscal years.
The statements of oil and gas revenues and direct lease
operating expenses include only the oil and gas revenues and
direct lease operating expenses attributable to the Century
Properties and are not intended to be a complete set of
financial statements. Oil and gas revenues and direct lease
operating expenses included herein are not necessarily
representative of future operations. Additionally, the
financial statements do not include depreciation, depletion
and amortization, general and administrative expenses,
interest expense, or federal and state income taxes.
REVENUE RECOGNITION
The sales method is used for accounting for gas revenues.
(2) SUPPLEMENTAL DISCLOSURES OF SELECTED EXPENDITURES
(UNAUDITED)
Total exploration and development costs and general
administrative expenses for the years ended December 31,
1995 and 1994 are as follows:
<TABLE>
1995 1994
---- ----
<S> <C> <C>
Exploration costs 958 11,108
Development costs 303,628 1,194,601
</TABLE>
(3) SUPPLEMENTAL OIL AND GAS RESERVE INFORMATION (UNAUDITED)
Total proved and proved developed oil and gas reserves of
the Century Properties for the periods presented have been
estimated based on reserve estimates prepared by Netherland
Sewell, Inc. as of January 1, 1996 and the Hise Company as
of January 1, 1995. The future net cash flows from
production of these proved reserve quantities were computed
by applying current prices of oil and gas (with
consideration of price changes only to the extent provided
by contractual arrangements) as of January 1, 1996 and 1995
estimated future production of proved oil and gas reserves
less the estimated future expenditures (based on current
costs) as of January 1, 1996 and 1995 to be incurred in
developing and producing the proved reserves. Income taxes
were calculated without consideration of any remaining
historical cost basis of the Century Properties. The
Century Properties are located in the state of Louisiana.
(Continued)
<PAGE>
THE CENTURY PROPERTIES PURCHASED BY
AMERICAN RESOURCES OF DELAWARE, INC.
NOTES TO STATES OF REVENUES AND DIRECT OPERATING EXPENSES
Estimated Quantities of Oil and Gas Reserves:
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1995 1994
-------- --------
(mcfe) (mcfe)
---- ----
<S> <C> <C>
Proved reserves:
Beginning of year 2,677,268 1,154,438
Revision of prior year estimate 1,166,594 155,410
New discoveries and extensions 11,418,014 1,521,074
Production (213,611) (153,654)
---------- ---------
End of year 15,048,265 2,677,268
========== =========
Proved developed reserves:
Beginning of year 2,468,691 233,683
End of year 10,589,949 2,468,691
========== =========
</TABLE>
Standardized Measure of Discounted Future Net Cash Flows Relating
to Proved Oil and Gas Reserves (in 000s):
<TABLE>
As of December 31,
------------------
1995 1994
---- ----
<S> <C> <C>
Future cash inflows $ 36,932 5,953
Future development costs (7,247) (158)
Future production costs (7,112) (473)
-------- -----
Future net cash inflows
before income taxes 22,573 5,322
10% discount factor (4,819) (881)
-------- -----
Future income taxes, net of
discount at 10% per annum (9,030) (2,129)
-------- ------
Standardized measure of
discounted future
net cash in flows $ 8,724 2,312
======== ======
</TABLE>
(Continued)
<PAGE>
THE CENTURY PROPERTIES PURCHASED BY
AMERICAN RESOURCES OF DELAWARE, INC.
NOTES TO STATES OF REVENUES AND DIRECT OPERATING EXPENSES
Changes in Standardized Measure of Discounted Future Net Cash
Flows Relating to Proved Oil and Gas Reserves (in 000s):
<TABLE>
As of December 31,
------------------
1995 1994
---- ----
<S> <C> <C>
Standardized measure, beginning
of year $ 2,312 887
Revision of quantity estimates 1,626 245
Extensions and discoveries net of
future development costs 16,431 2,476
Changes in estimated future
development cost (4,566) 11
Sales, net of production costs (393) (296)
Net change in income taxes (4,275) (950)
Change in sales prices (130) 252
Accretion of discount 385 148
Changes in production rates
(timing) and other (2,666) (461)
------- -----
Standardized measure, end of year $ 8,724 2,312
======= =====
</TABLE>
PRO FORMA FINANCIAL STATEMENTS
The Unaudited Pro Forma Condensed Consolidated Balance Sheet
at June 30, 1996, is presented assuming that the purchase of
certain oil and gas properties, equipment, and assumed lien
obligations from Century Offshore Management Corporation
occurred on June 30, 1996. The Unaudited Pro Forma
Consolidated Statement of Operations for the year ended
December 31, 1995 and the six-month interim period ended
June 30, 1996 are presented assuming that the purchase of
certain oil and gas properties, equipment, and assumed lien
obligations from Century Offshore Management Corporation
occurred on January 1, 1995. The Unaudited Pro Forma
Consolidated Statement of Operations for the year ended
December 31, 1995, also assumed the previously reported
purchase in early 1996 of certain properties of Arakis
occurred on January 1, 1995. The Unaudited Pro Forma
Financial Statements have been prepared based on the
historical financial statements as of the same date or for
the same period as indicated and are not necessarily
indicative of the results which would have been obtained had
the acquisitions taken place on such dates.
<PAGE>
AMERICAN RESOURCES OF DELAWARE, INC.
AND SUBSIDIARY
Unaudited Pro Forma Condensed Consolidated Balance Sheet
June 30, 1996
<TABLE>
<CAPTION>
American
Resources of Adjustments Unaudited
--------------------------
Delaware, Inc. Debit Credit Pro Forma
-------------- ----- ------ ---------
<S> <C> <C> <C> <C>
Current assets:
Cash $ 628,422 628,422(1) ---
Accounts and notes
receivable 1,892,061 1,892,061
Deferred income taxes,
prepaid and other 430,231 430,231
----------- ----------
Total current assets 2,950,714 2,322,292
Net property and equipment 35,522,148 15,552,000(1) 51,074,148
Other assets 8,962,926 6,000,000(1) 2,962,926
Total assets $47,435,788 56,359,366
=========== ==========
Current liabilities:
Current installments at
long-term debt 4,093,048 500,000(1) 4,593,048
Unearned revenue 1,307,743 1,307,743
Accounts payable 1,518,241 1,518,241
Other current liabilities 667,765 1,052,000(1) 1,719,765
----------- ----------
Total current liabilities 7,586,797 9,138,797
----------- ----------
Long-term debt, excluding
current maturities 13,255,096 3,371,578(1) 20,626,674
4,000,000(1)
Deferred income taxes and other 3,210,365 3,210,365
Unearned revenue 2,878,204 2,878,204
Stockholders' equity 20,505,326 20,505,326
----------- ----------
Total liabilities and
stockholders' equity $47,435,788 56,359,366
=========== ==========
</TABLE>
(1) To record the acquisition of the properties, assuming the cash portion
of purchase price was paid out of the June 30, 1996 cash balance and
borrowings under the Company's existing line of credit were used to
finance the remainder of the cash portion. The Company incurred a
note payable to Century in conjunction with the acquisition. The
Company has the option to pay the note in cash or in shares of common
stock at $3.00 per share value. The purchase price was allocated as
follows:
<TABLE>
<S> <C>
Cost paid at closing $ 4,000,000
Permitted liens assumed 1,052,000
Issuance of Note Payable to Century 4,000,000
Exchange of Note Receivable 6,000,000
Obligation to Directors for portion of
Century Note transferred 500,000
----------
$15,552,000
===========
</TABLE>
<PAGE>
AMERICAN RESOURCES OF DELAWARE, INC.
AND SUBSIDIARY
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the year ended December 31, 1995
<TABLE>
<CAPTION>
American
Resources of Arakis Century Adjustments Unaudited
---------------------------
Delaware, Inc. Properties Properties Debit Credit Pro Forma
------------- ---------- ---------- ----- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues $17,214,299 910,486 477,223 18,602,008
Expenses 14,421,916 305,160 84,253 1,565,573(1) 16,376,902
Administrative expenses 2,364,389 --- ---(2) 2,364,389
Deferred compensation
and employee severance
expense 1,488,259 --- 1,488,259
----------- ------------ ------------- ----------
Operating income (loss) (1,060,265) 605,326 392,970 (1,627,542)
Other income, net 1,469,731 --- 1,236,766(3) 232,965
----------- ------------ ------------- ----------
Income before income
tax expense 409,466 605,326 392,970 (1,394,577)
Income tax expense 143,313 --- 143,313(4) ---
----------- ------------ ------------ ----------
Net income loss $ 266,153 605,326 392,970 (1,394,577)
=========== ============ ============ ==========
Per common share:
Primary $ 0.07 (0.34)
=========== ==========
Weighted average number
of common shares and
common share equivalents
outstanding 4,067,677 4,067,677
=========== ==========
Fully diluted $ 0.05
===========
Weighted average number
of common shares and
common share equivalents
outstanding 5,722,432
===========
</TABLE>
(1) To record pro forma depletion and depreciation expense on the Arakis
and Century properties acquired.
(2) The Company does not anticipate incurring additional administrative
expenses in the management of these properties.
(3) To record pro forma interest expense on additional borrowings which
would have been required to finance the cash portion of the purchase
of the Arakis and Century properties and the assumption of certain
liabilities. This assumes no issuance of stock to Century.
(4) To adjust pro forma income tax expense.
<PAGE>
AMERICAN RESOURCES OF DELAWARE, INC.
AND SUBSIDIARY
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the six-months ended June 30, 1996
<TABLE>
<CAPTION>
American
Resources of Century Adjustments Unaudited
---------------------
Delaware, Inc. Properties Debit Credit Pro Forma
-------------- ---------- ----- ------ ---------
<S> <C> <C> <C> <C> <C>
Revenues $16,101,952 854,821 16,956,773
Expenses 14,075,398 370,399 278,118(1) 14,723,915
Administrative expenses 927,618 --- ---(2) 927,618
----------- ----------- ----------
Operating income (loss) 1,098,936 484,422 1,305,240
Other income (expense), net (253,012) --- 429,970(3) (682,982)
----------- ----------- ----------
Income before income
tax expense 845,924 484,422 622,258
Income tax expense 324,746 --- 75,806(4) 248,940
----------- ----------- ----------
Net income $ 521,178 484,422 373,318
=========== =========== ==========
Per common share:
Primary $ 0.09 0.06
=========== ==========
Weighted average number of
common shares and common
share equivalents outstanding 5,991,679 5,991,679
=========== ==========
Fully diluted $ 0.08 0.06
=========== ==========
Weighted average number of
common shares and common
share equivalents outstanding 6,417,791 6,417,791
=========== ==========
</TABLE>
(1) To record pro forma depletion and depreciation expense on the Century
properties acquired.
(2) The Company does not anticipate incurring additional administrative
expenses in the management of these properties.
(3) To record pro forma interest expense on additional borrowings which
would have been required to finance the cash portion of the purchase
of the properties. This assumes no issuance of stock to Century.
(4) To adjust pro forma income tax expense.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
AMERICAN RESOURCES OF DELAWARE, INC.
By: /s/Jeffrey J. Hausman
---------------------------------
Jeffrey J. Hausman
Its: Chief Financial Officer
Dated: September 16, 1996
------------------------
<PAGE>
EXHIBIT "A"
CAPITALIZATION AGREEMENT
AND
TERMINATION OF PURCHASE AND SALE AGREEMENT
This CAPITALIZATION AGREEMENT AND TERMINATION OF PURCHASE
AND SALE AGREEMENT (the "Agreement") entered into this 31st day
of August, 1996, by and between SOUTHERN GAS CO. OF DELAWARE,
INC. ("Southern"), AMERICAN RESOURCES OF DELAWARE, INC. ("ARI"),
and CENTURY OFFSHORE MANAGEMENT CORPORATION ("Century").
RECITALS
--------
WHEREAS, the parties entered into a certain Purchase and
Sale Agreement dated July 3, 1996, which provided for the
acquisition by Southern of certain contractual rights from
Century, in salt domes located in the state of Louisiana (the
"Salt Dome Agreement"); and
WHEREAS, the parties have elected to terminate the Salt Dome
Agreement; and
WHEREAS, Southern and ARI have contributed capital to
Century to purchase a portion of Century's contract rights to
acquire leasehold interests in oil and gas properties located in
the Gulf Coast region; and
WHEREAS, the parties wish to memorialize the contribution
made by Southern and ARI and to identify the contract rights
acquired from Century.
NOW THEREFORE, in consideration of mutual covenants and
conditions contained herein and the parties agree as follows:
ARTICLE I
1.01 Termination of Agreement. The parties hereby terminate
------------------------
the Salt Dome Agreement entered into by the parties on July 3,
1996. The parties further release and forever discharge each
other from the respective obligations and responsibilities under
the Salt Dome Agreement and acknowledge that no further
obligations and responsibilities exist among the parties
pertaining thereto.
<PAGE>
ARTICLE II
ALLOCATION OF CONTRIBUTION
--------------------------
2.01 Allocation of Contribution. Century acknowledges that
--------------------------
it has received Four Million Five Hundred and Nine Thousand
Dollars ($4,509,000) from Southern and ARI, for the purpose of
acquiring certain contract rights owned by Century to acquire
leasehold interests in properties identified as the White Castle
Dome, Bayou Bouillon, and Plumb Bob salt domes (the "Salt
Domes"). The allocations of the above-referenced capital
contribution among the Salt Domes are as follows:
<TABLE>
<CAPTION>
Property Capital Contribution Interest Percentage
-------- -------------------- -------------------
<S> <C> <C>
White Castle Dome $2,875,000.00 9.45%
Bayou Bouillon $1,000,000.00 6.1538%
Plumb Bob $ 634,000.00 5.5928%
</TABLE>
2.02 Assignment of Interests. That Century hereby agrees to
-----------------------
execute any and all documents necessary to evidence the
assignment of the above-referenced contract rights to Southern
and will agree to provide Southern access to any and all
information within its possession or control necessary for
Southern to review and evaluate the Salt Domes.
2.03 Burdens on Salt Domes. Southern specifically agrees
---------------------
that it has acquired the above contract rights in the Salt Domes
subject to all the terms and provisions of the agreements
described hereinbelow and, except as set forth hereinbelow,
Southern agrees to bear its share of Century's obligations, as
set forth in each of these agreements:
(a) Plumb Bob Salt Dome Contract Rights.
-----------------------------------
(1) That certain unrecorded Letter Agreement
dated February 5, 1996, by and between
Century and Aegis Energy, Inc.
(2) That certain unrecorded agreement dated May
6, 1996, by and between Century and St.
Martin Land Company.
2
<PAGE>
(b) Bayou Bouillon Salt Dome Contract Rights.
----------------------------------------
(1) That certain unrecorded agreement dated
January 12, 1996, by and between Century and
Aegis Energy, Inc., which agreement includes,
among other provisions, an area of mutual
interest.
(c) White Castle Dome Contract Rights.
---------------------------------
(1) Letter Agreement dated September 27, 1995, by
and between TexStar North American, Inc. and
Century.
(2) 3-D Seismic Exploration Agreement, White
Castle Area, Iberville Parish, Louisiana,
dated effective as of December 1, 1994, by
and between TexStar North America, Inc. and
Shell Western E&P Inc.
(3) Supplemental Agreement dated December 22,
1995, by and between TexStar North American,
Inc., Century, ARI (as hereinafter defined),
and Cheyenne Petroleum Company.
2.04 Consents. Century has obtained, where applicable, all
--------
required consents to assign a portion of its contract rights in
the Salt Domes. Furthermore, there are no waivers of
preferential rights necessary for the valid assignment of
Century's contract rights to the Salt Domes to Southern and there
are no preferential purchase rights or calls on production with
respect to the production from the Salt Domes.
2.05 Seismic. Century agrees and stipulates that Southern
-------
shall not be responsible for any costs associated with the
obtaining of 3-D seismic data necessary for the evaluation of the
Salt Domes.
3
<PAGE>
IN WITNESS THEREOF, the parties have executed this Agreement
as of the date first above mentioned.
SOUTHERN GAS CO. OF DELAWARE, INC.
/s/Rick G. Avare
----------------------------------------
BY: RICK G. AVARE
ITS: CHIEF OPERATING OFFICER
AMERICAN RESOURCES OF DELAWARE, INC.
/s/Rick G. Avare
----------------------------------------
BY: RICK G. AVARE
ITS: PRESIDENT
CENTURY OFFSHORE MANAGEMENT CORPORATION
/s/Howard A. Settle
----------------------------------------
BY: HOWARD A. SETTLE
ITS: PRESIDENT
4
<PAGE>
EXHIBIT "B"
AMENDMENT TO SOUTH TIMBALIER
PURCHASE AND SALE AGREEMENT
This AMENDMENT TO SOUTH TIMBALIER PURCHASE AND SALE
AGREEMENT (this "First Amendment") is made and entered into this
31st day of August, 1996, between SOUTHERN GAS CO. OF DELAWARE,
INC. ("Southern"), AMERICAN RESOURCES OF DELAWARE, INC. ("ARI"),
and CENTURY OFFSHORE MANAGEMENT CORPORATION ("Century").
RECITALS
--------
WHEREAS, Century, Southern, and ARI entered into a Purchase
and Sale Agreement to acquire certain interests of Century in the
South Timbalier 148 block, dated July 3, 1996 (the "Agreement")
and,
WHEREAS, the parties are desirous of amending the Agreement
in the particulars hereinafter set forth;
NOW, THEREFORE, in consideration of mutual covenants and
agreements of the parties to the Agreement, as set forth therein,
and the mutual covenants and agreements of the parties hereto, as
set forth in this First Amendment, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
-----------
1.01 Terms Defined Above. As used herein, each of the terms
-------------------
"Agreement," "Southern," "ARI," "Century," and "First Amendment"
--------- -------- --- ------- ---------------
shall have the meaning assigned to such term hereinabove.
1.02 Terms Defined in Agreement. As used herein, each term
--------------------------
defined in the Agreement shall have the meaning assigned thereto
in the Agreement, unless expressly provided herein to the
contrary.
<PAGE>
1.03 References. References in this First Amendment to
----------
Article or Section numbers shall be to Articles and Sections of
this First Amendment, unless expressly stated herein to the
contrary. References in this First Amendment to "hereby,"
"herein," "hereinafter," "hereinabove," hereinbelow," "hereof,"
and "hereunder" shall be to this First Amendment in its entirety
and not only to the particular Article or Section in which such
reference appears.
1.04 Article and Sections. This First Amendment, for
--------------------
convenience only, has been divided into Articles and Sections and
it is understood that the rights, powers, privileges, duties, and
other legal relations of the parties hereto shall be determined
from this First Amendment as an entirety and without regard to
such division into Articles and Sections and without regard to
headings prefixed to such Articles and Sections.
1.05 Number and Gender. Whenever the context requires,
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reference herein made to the single number shall be understood to
include the plural and likewise the plural shall be understood to
include the singular. Words denoting sex shall be construed to
include the masculine, feminine, and neuter, when such
construction is appropriate, and specific enumeration shall not
exclude the general, but shall be construed as cumulative.
Definitions of terms defined in the singular and plural shall be
equally applicable to the plural or singular, as the case may be.
ARTICLE II
AMENDMENTS
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Southern, ARI, and Century hereby amend the Agreement in the
following particulars:
2.01 Amendment of Section 1.03(b). Section 1.03(b) of the
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Agreement is hereby amended in its entirety to read as follows:
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"1.03(b) Southern shall on or before August 31, 1996, pay
to Century the sum of Two Million Dollars ($2,000,000.00) by wire
transfer or by the issuance and delivery to Century of shares of
duly authorized and restricted common stock of ARI, (the "ARI
Stock") at a value of $3.00 per share or any combination of wire
transfer and stock equal to $2,000,000.00. Southern shall on or
before September 30, 1996, pay to Century the additional sum of
Two Million Dollars ($2,000,000.00) by wire transfer or by the
issuance and delivery to Century of shares of duly authorized and
restricted common ARI Stock, at a value of $3.00 per share or any
combination of wire transfer and stock equal to $2,000,000.00.
(The payments of $2,000,000.00 on or before August 31 and
September 30, 1996 shall be referred to collectively as the
"Installment Payments"). Southern and ARI shall use their best
efforts to raise equity monies to fund the full cash payment of
the Installment Payments. To the extent the ARI Stock is
delivered to Century, ARI, at its own cost and expense, will
prepare and file at the earliest practicable time pursuant to
reasonable and prudent business practice, Form S-3, a
registration statement (the "Registration Statement") under the
Securities Act of 1933 (the "Securities Act") complying with all
the requirements of the Securities Act applicable thereto for the
purpose of registering the ARI Stock described above. ARI shall
use its best efforts to cause the Registration Statement to
become effective as soon as practicable, to qualify the ARI Stock
under the securities or blue sky laws of any and all such
jurisdictions as the parties may reasonably agree and to keep the
Registration Statement and such qualifications current and in
effect for a period of time not to exceed two years."
2.02 Amendment of Section 1.03(d). Section 1.03(d) of the
----------------------------
Agreement is hereby amended in its entirety to read as follows:
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"1.03(d) Southern shall pay and satisfy in full and obtain
full and complete releases, which releases shall be properly
recorded in the appropriate courthouses and governmental offices,
on or prior to September 30, 1996, those Permitted Liens,
identified as Grasso Production Management, Inc., Offshore
Logistics, Inc., and Coastwise Marine Service Centers, and on or
prior to November 15, 1996, the remaining Permitted Liens, which
are described on Exhibit "F", shall be satisfied. Southern shall
reimburse Century for all payments made by Century on the
Permitted Liens after July 3, 1996."
2.03 Amendment of Section 1.03(e). Section 1.03(e) of the
----------------------------
Agreement is hereby amended in its entirety to read as follows:
"1.03(e) Subject to the approval and consent of Den norske
Bank, which Southern will use its best efforts to obtain,
Southern agrees to advance to Century as a loan the sum of Three
Million Dollars ($3,000,000.00) in equal amounts of one million
per advance commencing September 1, 1996, and continuing monthly
until the full advance is made, if Southern has the ability to
fund said advances from cash flow or an equity raise-up, in
compliance with the Credit Facility Agreement between Southern
and Den norske Bank. Said advances shall be evidenced by a
series of promissory notes (the "Advanced Notes") executed and
delivered to Southern upon each advancement. The Advanced Notes
shall be due and payable on December 31, 1997, and shall bear
interest at the rate of ten percent (10%), with interest payable
monthly. Southern shall have the right to convert this
indebtedness into working interest in certain salt dome projects
of Century at a conversion price per unit to be determined by the
parties."
2.04 Amendment of Section 1.10. Section 1.10 of the
-------------------------
Agreement is hereby amended in its entirety to read as follows:
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"1.10 ARI shall have the option to require a merger between
Century and ARI (provided that all necessary approvals for such
merger are obtained) in accordance with the terms and conditions
to be agreed to by the parties in a definitive merger agreement
to be executed by the parties no later than June 30, 1997.
Although specific terms and conditions of the merger shall be set
forth in the definitive agreement, the following terms shall be
required provisions of the definitive agreement: (i) ARI's
exclusive option to merge with Century shall be exercised no
later than June 30, 1997; (ii) at such time that ARI exercises
its option to merge, Century shall have the right to select the
date for valuation of the oil and gas properties of Century and
ARI ("Valuation Date"), the Valuation Date to be no later than
December 31, 1997; (iii) the merger shall become effective within
ninety (90) days after the Valuation Date, which may be extended
if approval of ARI's or Century's shareholders or other consents
are necessary to consummate the merger; (iv) the merged company
shall be able to adopt the full cost method of accounting for its
oil and gas properties, as defined by the Financial Accounting
Standards Board; (v) the respective values for ownership
determination of the merged company of both Century and ARI shall
be based on the audited book value of each company, such audit to
be conducted by an accounting firm acceptable to the other party,
less the book value of the oil and gas reserves plus the PV10
value of each company's oil and gas reserves as determined by
Netherland, Sewell & Associates, Inc. on the Valuation Date,
using consistent pricing; (vi) a favorable fairness opinion must
be received by ARI prior to merger; (vii) on the Valuation Date,
all outstanding options and warrants issued by ARI, which
exercise price is equal to or less than the ARI common stock bid
price on the Valuation Date, shall be considered common shares of
ARI, and added to the value of ARI applying the respective
exercise price of each warrant and option, for the purpose of
determining the number of common shares to be issued to Century
in the merged company based on
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the valuation as determined in accordance with (v) above.
Furthermore, no options or warrants shall be issued by ARI from
the Valuation Date to the date of merger without the prior
written approval of Century. If ARI elects to merge, Century
shall receive additional value at the time of merger based on a
valuation equal to the average closing price per share of ARI's
stock over the twenty (20) business days preceding the Valuation
Date less Four Dollars ($4.00) per share (if the difference is a
positive number) times 1,500,000. If ARI elects not to merge,
Century shall receive shares of ARI stock, no later than August
31, 1997, to be registered as specified in Section 2.01 of this
First Amendment, equal in value to the average closing price per
share of ARI's stock over the twenty (20) business days preceding
June 30, 1997 ("Determination Price"), less Four Dollars ($4.00)
per share (if the difference is a positive number) times
1,500,000 ("Determination Value"). The number of shares to be
issued to Century shall be the Determination Value divided by
the Determination Price."
ARTICLE III
REPRESENTATIONS AND WARRANTIES
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3.01 Reaffirmation of Representations and Warranties. The
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parties hereby expressly re-make all representations and
warranties set forth in the Agreement, and represent and warrant
that all such representations and warranties remain true.
Century hereby stipulates and agrees that the acceptance by
Southern and ARI of Century's counsel's opinion shall not
constitute a waiver by either Southern or ARI of Century
representations and warranties that the Assets conveyed hereunder
are done so free and clear of any liens, claims, or encumbrances
except for the Permitted Liens. Century reaffirms those
indemnity provisions of the Agreement and agrees to indemnify
Southern and ARI from any claims made by any creditors of Century
against the Assets or the proceeds therefrom.
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ARTICLE IV
MISCELLANEOUS
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6.01 Scope of Amendment. The scope of this First Amendment
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is expressly limited to the matters addressed herein and this
First Amendment shall not operate as a waiver of any past,
present, or future breach, Default, or Event of Default under the
Agreement, except to the extent, if any, that any such breach,
Default, or Event of Default is remedied by the effect of this
First Amendment.
6.02 Agreement as Amended. All references to the Agreement
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in any document heretofore or hereafter executed in connection
with the transactions contemplated in the Agreement shall be
deemed to refer to the Agreement as amended by this First
Amendment.
6.03 Parties in Interest. All provisions of this First
-------------------
Amendment shall be binding upon and shall inure to the benefit of
the parties and their respective successors and assigns.
6.04 Rights of Third Parties. All provisions herein are
-----------------------
imposed solely and exclusively for the benefit of the parties,
and no other Person shall have standing to require satisfaction
of such provisions in accordance with their terms and any or all
of such provisions may be freely waived in whole or in part by
the parties at any time if in their sole discretion they deem it
advisable to do so.
6.05 Entire Agreement. THIS FIRST AMENDMENT CONSTITUTES THE
----------------
ENTIRE AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT TO THE
SUBJECT HEREOF AND SUPERSEDES ANY PRIOR AGREEMENT, WHETHER
WRITTEN OR ORAL, BETWEEN SUCH PARTIES REGARDING THE SUBJECT
HEREOF. FURTHERMORE IN THIS REGARD, THIS FIRST AMENDMENT, THE
AGREEMENT, AND THE OTHER WRITTEN DOCUMENTS REFERRED TO IN THE
AGREEMENT REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT AMONG THE
PARTIES THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF
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THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE
PARTIES.
IN WITNESS THEREOF, the parties have executed this Amendment
as of the date first above mentioned.
SOUTHERN GAS CO. OF DELAWARE, INC.
/s/Rick G. Avare
---------------------------------------
BY: RICK G. AVARE
ITS: CHIEF OPERATING OFFICER
AMERICAN RESOURCES OF DELAWARE, INC.
/s/Rick G. Avare
----------------------------------------
BY: RICK G. AVARE
ITS: PRESIDENT
CENTURY OFFSHORE MANAGEMENT CORPORATION
/s/Howard A. Settle
---------------------------------------
BY: HOWARD A. SETTLE
ITS: PRESIDENT
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