SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
July 3, 1996
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Date of Report (Date of earliest event reported)
AMERICAN RESOURCES OF DELAWARE, INC.
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(Exact name of Registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
0-21472 86-0713506
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(Commission File Number) (IRS Employer Identification No.)
160 Morgan Street
P. O. Box 87
Versailles, Kentucky 40383
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(Address of principal executive offices) (Zip Code)
(606) 873-5455
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(Registrant's Telephone Number, including Area Code)
Not Applicable
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(Former name or former address, if changed since last report)
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Item 1. Changes in Control of Registrant. Not Applicable.
Item 2. Acquisition or Disposition of Assets.
Purchase of Assets of Century:
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On July 3, 1996, the Registrant, through its wholly
owned subsidiary, Southern Gas Co. of Delaware, Inc. ("Southern")
acquired proved developed and undeveloped oil and gas properties,
equipment and pipelines from Century Offshore Management
Corporation ("Century") located offshore Louisiana. As
consideration for the assets, the Registrant paid $4,000,000 in
cash, issued a subordinated debenture ("Debenture") in the amount
of $4,000,000 with a due date of August 15, 1996 (the Debenture
provides for payment at the Registrant's option of cash or the
issuance of restricted common stock of the Registrant at $3.00
per share), the extinguishment of an existing note from Century
to the Registrant in the amount of $6,500,000 and the assumption
of existing liens against the assets in the approximate amount of
$1,051,000 (which are required to be paid by July 31, 1996). The
foregoing transaction was effected pursuant to an Asset Purchase
Agreement (attached hereto as Exhibit "A" and incorporated herein
by reference) entered into by and between the Registrant,
Southern and Century, dated July 3, 1996.
Additionally, the Registrant, through Southern,
acquired certain rights and interest in undeveloped properties
from Century located onshore Louisiana. As consideration for
these interest, the Registrant paid $3,884,000 in cash and issued
1,500,000 shares of restricted common stock in the Registrant at
a deemed price of $4.00 per share. The foregoing transaction was
effected pursuant to an Asset Purchase Agreement (attached hereto
as Exhibit "B" and incorporated herein by reference) entered into
by and between the Registrant, Southern and Century, dated July
3, 1996.
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.
As of the date of this form 8-K, it is impracticable
for Registrant to provide the financial information required by
Item 7 of Form 8-K. The required financial statements will be
filed as an amendment to this Form 8-K. Such filing will be made
as soon as practicable but not later than 60 days after this Form
8-K is filed.
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EXHIBITS
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Exhibit "A"-- Asset Purchase Agreement by and between
American Resources of Delaware, Inc.
("ARI"), Southern Gas Co. of Delaware,
Inc. ("Southern") and Century Offshore
Management Corporation ("Century") dated
July 3, 1996, for the acquisition of the
South Timbalier 148 Properties.
Exhibit "B"-- Asset Purchase Agreement by and between
American Resources of Delaware, Inc.
("ARI"), Southern Gas Co. of Delaware,
Inc. ("Southern") and Century Offshore
Management Corporation ("Century") dated
July 3, 1996 for the acquisition of the
contractual rights for the Salt Dome
Properties.
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
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Jeffrey J. Hausman
Its: Chief Financial Officer
Dated: July 17, 1996
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EXHIBIT A
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (the "Agreement"),
dated July 3rd, 1996, is by and between SOUTHERN GAS CO. OF
DELAWARE, INC. ("Southern"), a Delaware corporation, AMERICAN
RESOURCES OF DELAWARE, INC., ("ARI") and CENTURY OFFSHORE
MANAGEMENT CORPORATION ("Century"), a Kentucky corporation.
WHEREAS, Century desires to sell to Southern and
Southern desires to purchase from Century on the terms set forth
in this Agreement those certain oil and gas properties set forth
hereinafter.
NOW, THEREFORE, in consideration of the mutual promises
contained herein, the benefits to be derived by each party
hereunder, and intending to be legally bound, the parties hereby
agree as follows:
ARTICLE I.
DEFINITIONS AND PURCHASE AND SALE OF ASSETS
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1.01 DEFINITIONS. All capitalized terms and the definition
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set forth in this Agreement, not defined in the body of this
Agreement, are set forth in Exhibit A, attached hereto and
incorporated herein by reference.
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1.02 ASSETS TO BE SOLD. Subject to the terms and conditions
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of this Agreement, Century shall sell, transfer and assign to
Southern, and Southern shall purchase from Century, effective
July 1, 1996 (the "Effective Date"), certain specified interests
in and to the assets described below located in or pertaining to
the South Timbalier Area, Block 148, on the Outer Continental
Shelf off the coastline of the State of Louisiana (the "Assets").
The Assets shall consist of all of:
(a) The right, title and interest specified on
Exhibit "B" hereto in and to the Oil, Gas and
Lease of Submerged Lands Under the Outer
Continental Shelf Lands Act, dated effective March
1, 1969, granted by the United States Department
of Interior, Bureau of Land Management, in favor
of Continental Oil Company and Cities Service Oil
Company, covering Block 148, West Half, East
Timbalier Area, as shown on OCS Official Leasing
Map, Louisiana Map No. 6, containing approximately
2,500 acres, designated as OCS-1898 (the "Lease").
(The interests in the Lease, as specified on
Exhibit "B" hereto, shall be collectively referred
to as the "Leasehold Interest");
(b) Those interests attributable to the Leasehold
Interest, including but not limited to, wells
(those wells are identified in Exhibit"C"),
wellbores, pipe, gathering lines, compressors,
materials, inventory, facilities, supplies,
equipment, platforms, pipelines and any and all
other personal, real, movable and immovable
property, fixtures or equipment which are located
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on or presently used in connection with, or
relating to, the wells, the production, treatment
or transportation of oil and gas from the Lease,
and any replacements, attachments or accessories
now or hereafter attached, added or affixed
(collectively the "Equipment");
(c) The gas, oil, casinghead gas, drip gasoline,
natural gasoline and all other liquid and gaseous
hydrocarbons (hereinafter referred to collectively
as "Gas and Oil") produced from or attributable to
the Leasehold Interest on or after the Effective
Date; and
(d) To the extent the same are assignable or
transferable by Century and to the extent and only
to the extent that the same relate to the
ownership or operation of the Leasehold Interest,
the interest in and to all orders, contracts,
agreements (including without limitation all
operating agreements, bidding agreements,
transportation agreements, unit agreements,
participation agreements, gathering agreements and
processing agreements), instruments, licenses,
authorizations, well record files, reserve
reports, maps, surveys, bonds, title opinion,
permits, audits, claims, liens, suits, settlements
and demands, and other rights, privileges,
benefits and powers conferred upon Century,
including but not limited to those described on
Exhibit "D" (the "Contracts").
1.03 PURCHASE PRICE. The purchase price for the Assets to
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be paid by Southern to Century at Closing, as herein defined,
shall be as follows:
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(a) Southern shall pay Four Million Dollars
($4,000,000.00) to Century at the time of the
Closing, as herein defined, by wire transfer;
(b) Southern shall deliver to Century at Closing an
ARI Subordinated Debenture, in a form acceptable
to Century, which shall provide that on or before
August 15, 1996, it shall pay Four Million Dollars
($4,000,000.00) to Century 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 $4,000,000.00. Southern and ARI
shall use their best efforts to raise equity
monies to fund the full cash payment set forth in
the ARI Subordinated Debenture. 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
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to keep the Registration Statement and such
qualifications current and in effect for a period
of time not to exceed two years.
(c) Southern shall cause to be delivered at Closing
the original promissory note dated November 28,
1994, executed by Settle Oil & Gas Company and the
amendment thereto dated effective August 22, 1995,
payable in the principal amount of Six Million
Five Hundred Thousand Dollars ($6,500,000.00),
secured by a Mortgage and Security Agreement dated
November 15, 1994 (the "Mortgage") with
appropriate cancellation language and shall
further cause the cancellation of said Mortgage
and related financing statement filed on November
30, 1994 in the UCC records of Orleans Parish,
Louisiana, as UCC File No. 36-89183 (the "UCC").
The Mortgage and UCC were filed and recorded as
set forth on Exhibit "E" hereto, and cancellations
of the Mortgage and UCC shall be filed in all such
jurisdictions;
(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 July 31, 1996, of all of the Permitted Liens,
which are described on Exhibit "F";
(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
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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. The Advance Notes
shall be secured as of the dates they are issued
by a first priority mortgage and/or security
interest covering Century's rights, as further
described in Exhibit "G" (the "Saltdome Assets")
hereto; provided, however, that Southern agrees
that it will subordinate its mortgage or security
interest in favor of Stratum Group, L.P. or any
other lender (the "New Lender") that takes the
place of BMO Financial, Inc., provided the
Subordination Agreement between Southern and the
New Lender requires the New Lender to marshall the
collateral securing its loan in the event of a
voluntary or involuntary sale, so that the
collateral other than the Saltdome Assets are sold
initially with all proceeds being applied to the
indebtedness owed by Century to the New Lender.
If those proceeds are inadequate to satisfy the
debt to the New Lender, the Saltdome Assets shall
be sold and the
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proceeds distributed according to the perfected
security interests in the Saltdome Assets.
Further, Southern agrees to release such security
interest to the extent necessary for Century to
sell a portion of its interest in the Saltdome
Assets to a third party to fund Century and
Southern's participation in the lease acquisition
activities.
(The obligations specified in paragraphs (a) through (e) above
shall hereinafter be collectively referred to as the "Purchase
Price.")
1.04 DELIVERIES BY CENTURY TO SOUTHERN.
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(a) At the Closing, Century shall deliver to Southern:
(i) A certificate from the Secretary of
State (or equivalent official) of the
State of Kentucky as to the good
standing of Century in the State of
Kentucky, certified as of a date within
ten (10) days of Closing;
(ii) A certificate of an Officer attesting to
those matters set forth in Article II;
(iii) A copy of the resolutions, certified by
the Secretary of the Century,
authorizing Century to enter into the
transactions contemplated by this
Agreement;
(iv) The Opinion of Century's counsel, in a
form acceptable to Southern's counsel,
referred to in Section 5.03;
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(v) An Opinion of Century's counsel, in form
acceptable to Southern's Counsel,
opining that the transactions
contemplated herein, do not require
bankruptcy court, Century creditors,
Bank of Montreal or BMO Financial
approval;
(vi) All other previously undelivered items
required to be delivered by Century to
Southern at, or prior to, such date.
(vii) Instruments of conveyance including but
not limited to assignments, bill of
sale, and/or other instruments of
transfer as more fully set forth in
Exhibit "H" hereto and further
identified as an Assignment of Record
Title and Bill of Sale (Exhibit "H-1"),
Assignment of Operating Rights (Exhibit
"H-2") and Assignment of Overriding
Royalty Interest (Exhibit "H-3"), all of
which shall be reasonably satisfactory
to Southern's counsel.
(viii) Copies of all insurance policies
pertaining to the Assets, setting forth
the description and level of coverage,
as well as all applicable deductions.
1.05 DELIVERIES BY SOUTHERN TO CENTURY.
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(a) At the Closing, Southern shall deliver to Century:
(i) The wire transfer provided for in
Section 1.03(a);
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(ii) The Subordinated Debenture referenced in
Section 1.03(b);
(iii) The promissory note referenced in
Section 1.03(c);
(iv) Release of the Mortgage, Security
Agreements and Financing Statements
referenced in Section 1.03(c);
(v) The opinion of the Southern's Counsel
referred to in Section 5.04 hereof; and
(vi) Certificates from the Secretary of State
of Delaware as to the good standing of
Southern and ARI in the State of
Delaware, certified as of a date within
thirty (30) days of Closing;
(vii) All other previously undelivered items
required to be delivered by Southern to
Century at, or prior to, such date.
1.06 LOCATION AND TIME OF THE CLOSING. The Closing shall be
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held on the 1st day of July, 1996 at 10:00 AM (Eastern Time) or
as shall be mutually agreed upon by Century and Southern. The
Closing shall be held at the offices of Century in Lexington,
Kentucky or such other place as the parties hereto may agree in
writing.
1.07 BURDENS. Southern acknowledges and agrees that the
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Leasehold Interest to be assigned shall bear (1) its
proportionate part of the lessor's royalty, and (2) the
overriding royalty interests specified on Exhibit "I" hereto.
1.08 OPERATING AGREEMENT. Effective as of the Effective
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Date, Southern shall become a party to that certain Joint
Operating Agreement dated August 1, 1994 covering the W/2 of
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South Timbalier 148 by and between Newfield Exploration Company
("Newfield"), Century and Settle Oil and Gas Company ("JOA").
Southern hereby agrees that if it intends to elect not to
participate in any operation proposed pursuant to the JOA, it
shall in a timely manner notify Century of same and provide
Century with the option to advance the necessary funds for such
operation. Further, if Century advances such funds, Southern
shall cause Century to receive those revenues generated by such
operation in such amount that a Participating Party, as defined
in the JOA, would receive if such party had advanced those funds,
on behalf of Southern.
1.09 POST-CLOSING MANAGEMENT OF ASSETS. Century shall, at
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the request of Southern, continue to perform on behalf of
Southern, those management functions necessary for the operations
and oversight of the Assets. Those functions and oversight
responsibilities shall be all activities currently conducted by
Century, including but not limited to, marketing of oil and gas
for Southern's account, monitoring AFE's from Newfield, balancing
and transportation, oversight of production, reservoir and
engineering review and revenue distribution. Century agrees to
perform these activities until June 30, 1997 and will continue to
perform them for as long as Century retains a common ownership
interest in any of the Assets. In the event Century elects to
sell its common ownership interest in the Assets, it shall
provide ninety day notice prior to terminating these services.
Southern shall reimburse Century for all out of pocket expenses
incurred in connection with this function. Furthermore, Southern
will pay to Century a reasonable overhead fee for providing this
service in the event it is reasonable determined that this
obligation becomes an administrative burden beyond that which is
currently experienced. Excepting gross negligence and/or wilful
malfeasance, Southern shall hold harmless and release
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Century from any and all claims or liabilities which may be
asserted by Southern (or any third party claiming by or through
Southern), against Century for the activities and functions
identified in this Article 1.09.
1.10 MERGER. ARI shall have the option to require a merger
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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
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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 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.
1.11 ALLOCATION OF PURCHASE PRICE. Attached hereto as
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Exhibit "M" is the allocation of Purchase Price, agreed upon by
the parties.
ARTICLE II
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REPRESENTATIONS AND WARRANTIES OF CENTURY
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Century hereby represents and warrants to Southern and ARI
as of the date hereof that:
2.01 EXISTENCE OF CENTURY. Century is a corporation duly
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organized, validly existing and in good standing under the laws
of the State of Kentucky and is duly qualified with the United
States Minerals Management Service to carry on its business on
the Outer Continental Shelf, Gulf of Mexico federal waters, and
has the power and authority to own its property and to carry on
its business as now conducted and except as set forth in Section
2.06, to enter into and carry out the terms of this Agreement;
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2.02 POWER OF CENTURY. Century has the corporate power to
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enter into and perform this Agreement and the transactions
contemplated hereby. The execution, delivery and performance of
this Agreement by Century, and the transactions contemplated
hereby, will not violate (i) any provision of the certificate of
incorporation or bylaws of Century, (ii) any material agreement
or instrument to which Century is a party or by which Century is
bound which pertains to the Leasehold Interest, (iii) any
judgment, order, ruling, or decree applicable to Century as a
party in interest, or (iv) except as set forth in Section 2.06,
any law, rule or regulation applicable to Century;
2.03 AUTHORIZATION OF CENTURY. The execution, delivery and
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performance of this Agreement and the transactions contemplated
hereby have been duly and validly authorized by all requisite
corporate action on the part of Century. This Agreement has been
duly executed and delivered on behalf of Century, and at the
Closing all documents and instruments required to be executed and
delivered by Century pursuant to this Agreement shall have been
duly executed and delivered. This Agreement does, and such
documents and instruments shall, constitute legal, valid and
binding obligations of Century enforceable in accordance with
their terms, subject, however, to the effect of bankruptcy,
insolvency, reorganization, moratorium and similar laws from time
to time in effect relating to the rights and remedies of
creditors, as well as to general principles of equity (regardless
of whether such enforceability is considered in a proceeding in
equity or at law).
2.04 LITIGATION-AGREEMENT. No litigation, claims,
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administrative proceedings or other proceedings or governmental
investigations are pending, or to the best of Century's actual
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knowledge threatened, which would prevent or delay the execution,
delivery or performance of this Agreement by Century;
2.05 LITIGATION - ASSETS. Except for Permitted Liens, to
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the best of Century's Knowledge, there are no court,
administrative, regulatory or similar proceeding (whether civil,
quasi-criminal or criminal); arbitration or other dispute
settlement procedure; investigation or inquiry by any government,
administrative, regulatory or similar body or any third person or
entity; or any similar matter or proceeding (collectively
"Proceedings") (a) against the Assets, or (b) against Century and
relating in any way to the Assets, which would have a material
adverse effect on the Assets(whether in progress or threatened);
as it pertains to the Assets, no event has occurred which might
give rise to any Proceedings, there is no judgment, decree,
injunction, rule, award or order of any court, government
department, board, commission, agency, arbitrator or similar body
outstanding against Century and no complaint, grievance, claim,
work order or investigation has been filed, made or commenced
against Century.
2.06 MMS APPROVAL. On April 24, 1996, documentation
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reflecting the merger of Settle Oil and Gas Company into Century
was filed with the MMS. The MMS has not yet formally approved
the merger and will not approve the assignments contemplated by
this Agreement until such time. Century has been informed by the
staff of the Adjudication Unit of the MMS that such approval is
imminent. To the best of Century's Knowledge, there is no other
matter or circumstance which would preclude and/or inhibit
unconditional MMS approval of the assignment of the leasehold
interest, the working interest, overriding interest or operating
rights from Century to Southern.
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2.07 CONSENTS AND PREFERENTIAL PURCHASE RIGHTS. There are
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no consents (except as set forth in 2.06 and governmental
consents which are customarily obtained after the assignment of
the Lease), agreements or waivers of preferential rights
necessary to the valid assignment of the Assets to Southern at
Closing and there are no preferential purchase rights or calls on
production with respect to the production from the Leasehold
Interest.
2.08 ENVIRONMENTAL MATTERS. To the best of Century's
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knowledge, information and belief after reasonable inquiry, there
exists no Environmental Defect with respect to the Assets. An
Environmental Defect means a condition or circumstance that
exists in connection with the Leasehold Interest or the Assets
that is not in material compliance with any law, regulation,
order or judgment of or agreement with any federal, state or
local agency or court relating to the environment or that under
such law, regulation, order, judgment or agreement requires the
owner or operator of such leases or assets to undertake any
cleanup, remediation or other expense (an "Environmental
Defect"). To the best of Century's Knowledge, Century has not
received notice of any material violation of applicable
environmental laws, rules, regulations, ordinances and orders
relating thereto, including laws relating to actual or threatened
emissions, discharges or releases of pollutants, contaminants or
hazardous or toxic materials or waste into air, water or land, or
otherwise relating to the generation, manufacture, processing,
transportation or distribution of pollutants, contaminants or
hazardous toxic substances or wastes, the noncompliance with
which would have a material adverse effect on the ownership or
operation of the Assets.
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2.09 COMPLIANCE WITH LAWS. To the best of Century's
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Knowledge, the Assets have been operated in compliance with all
laws, ordinances, regulations and orders applicable to the Assets
and the operations undertaken in connection therewith.
Furthermore, no notice from any governmental body has been served
upon Century for the Assets claiming any material violation of
any law or any other code, rule or regulation, which would have
material adverse effect on the Assets. To the best of Century's
Knowledge, none of the Assets, nor the ownership, leasing,
occupancy, or the operation thereof, is in material violation of
any such law, ordinance, code, rule or regulation, which would
have a material adverse effect on the Assets.
2.10 ASSETS IN SATISFACTORY CONDITION. Except as set forth
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in this Agreement, Southern acknowledges that Century has not
made any warranty or representation, whether express, implied, at
common law, by statute or otherwise, relating to the fitness for
an intended purpose or condition of any movable property,
constituting a portion of the Assets and Southern shall acquire
such personal property in "WHERE IS, AS IS" condition. To the
best of Century's Knowledge, all the physical Assets necessary
for the operation of the Lease as currently constructed are in
satisfactory operating condition for their intended use. WITHOUT
LIMITING THE GENERALITY OF THIS PARAGRAPH, CENTURY DISCLAIMS AND
NEGATES AS TO ANY PERSONAL PROPERTY, FIXTURES, IMPROVEMENTS AND
APPURTENANCES SUBJECT TO THIS AGREEMENT (INCLUDING ALL WELLS):
(A) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (B) ANY
IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE,
AND (C) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO MODELS
OR SAMPLE OR MATERIALS.
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SOUTHERN EXPRESSLY AGREES THAT TITLE TO SUCH PERSONAL PROPERTY,
FIXTURES, IMPROVEMENTS AND APPURTENANCES WILL BE ACCEPTED "AS
IS," "WHERE IS," "WITH ALL FAULTS," AND IN ITS PRESENT CONDITION
AND STATE OF REPAIR.
2.11 INSURANCE. All the Assets conveyed hereunder are
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covered by fire and other insurance with responsible insurers
against such risks and in such amounts as are reasonable for
prudent owners of comparable assets. Century will provide, prior
to Closing a copy of all the insurance policies pertaining to the
Assets, held by the Century, including the name of the insurer,
the risks insured against, the amount of coverage, the policy
numbers and the expiration dates. No other insurance is
necessary to the conduct of the business or would be considered
to be desirable by a prudent Person operating a similar business.
Century is not in default with respect to any of the provisions
contained in any such policies of insurance or has failed to give
any notice or pay any premium or present any claim under any such
insurance policy.
2.12 PERMITS. To the best of Century's Knowledge, either
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Century or the current operator of the Assets, hold all permits,
licenses, approvals and franchises (collectively, "permits")
which it requires, or is required to have, to operate, own or
lease the Assets conveyed hereunder. All such permits are full
force and effect; Century is in material compliance with all the
terms and conditions relating to such permits; and there are no
proceedings in progress, pending or threatened which may result
in revocation, cancellation, suspension or any adverse
modification of any of such permits. Neither the terms and
conditions relating to such permits nor the legislation or
regulations pursuant to which the same were issued require that
any consent or
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approval of, or filing with or notice to, any governmental agency
or regulatory body or other Person be made to assure the
continued holding by Southern of such permits after completion of
the transaction contemplated by this Agreement.
2.13 MATERIAL FACTS DISCLOSED. Century has disclosed in
---- ------------------------
writing to Southern facts within their Knowledge relating to the
Assets which could reasonably be expected to be material to an
intending purchaser of the Assets or that would have a Material
Adverse Effect on the Assets, or on Southern's acquisition and
ownership thereof.
2.14 LEASE. Except to Permitted Liens, Century owns its
---- -----
portion of the Lease free and clear of liens, claims and
encumbrances placed against the Assets by Century or incurred by
Century, and Century has duly performed all of the obligations
under the Lease that are now or will prior to the Closing Date be
required to be performed by Century. Century has not received
any notice of default under the Lease nor is any such notice
pending. The Lease is valid and enforceable in accordance with
their terms; further, that:
(i) Century has not received any notice of,
and there exists no event of default
under the Lease or event which
constitutes or would constitute (with
notice or lapse of time or both) a
default in any material respect
thereunder; and
(ii) all working interest owners under such
Lease have consented (where such consent
is necessary pursuant to the Lease or
other agreements) to the consummation of
the transactions contemplated by this
Agreement without
-18-
<PAGE>
requiring modification in the rights or
obligations of Century under the Lease.
(iii) With respect to the Assets, and limited
to the time period during which Century
has owned the Assets, to the best of
Century's Knowledge, all rentals and
royalties (including minimum royalties,
shut-in or otherwise) required to be
paid to perpetuate the Lease to the date
of this Agreement have been timely and
properly paid to the proper parties and
in the proper amounts. To the best of
Century's Knowledge, (i) the Lease, and
all material agreements, orders and
other instruments creating the Assets or
out of which the Assets arise are legal
valid, binding, subsisting, in good
standing and in full force and effect,
and (ii) the Lease is in full force and
effect by operations as approved by the
Minerals Management Service, in
accordance with 30 C.F.R. Section
250.13.
2.15 RIGHTS OF WAY. There are no rights of way, easements,
---- -------------
contracts and other arrangements (as they pertain to rights of
way and easements), including amendments that are utilized in the
operations of the Assets (collectively, the "Rights of Way").
2.16 DISCLOSURE. No representation or warranty by or on
---- ----------
behalf of Century contained in this Agreement, in any Schedule
hereto, in any agreement entered into pursuant hereto or in
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connection herewith, in any certificate delivered at Closing, or
in any other certificate which states that it is delivered
pursuant to or in connection with this Agreement (certificates
referred to in this sentence are sometimes referred to herein
individually as an "Agreement Certificate" and collectively as
the "Agreement Certificates"), contains or will contain any
untrue statement of a material fact, or omits or will omit to
state any material fact required to make the statements herein or
therein contained not misleading. Except as set forth in this
Agreement, in any Schedule hereto, in any agreement entered into
pursuant hereto or in connection herewith, or in any Agreement
Certificate delivered at or prior to the execution hereof,
Century is not aware of any event or condition which could
reasonably be expected to have a material adverse effect on the
condition (financial or otherwise), of the Assets. The
representations and warranties contained in this Agreement, in
the Schedules hereto, in the agreements entered into pursuant
hereto or in connection herewith, or in any Agreement Certificate
shall not be affected or deemed waived by reason of (i) any
investigation made by Southern or its representatives or (ii) the
fact that Southern and/or its representatives knew or should have
known that any such representation or warranty is or might be
inaccurate in any respect.
Neither the furnishing of opinions or reports pursuant to
this Agreement nor any information disclosed by any investigation
or examination by Southern, nor any failure by Southern to make
any investigation or examination under this Agreement, nor the
Closing of the transactions contemplated hereby, shall in any way
reduce any rights Southern may have under any representatives,
warranties or covenants contained in this Agreement.
-20-
<PAGE>
Except as may be specifically set forth to the contrary in
this Agreement, Southern acknowledges that Century has made no
representations or warranties whatever, express or implied
(Century having hereby expressly disclaimed all such warranties)
as to the accuracy, completeness, or materiality of any data,
information, record or materials now, heretofore, or hereafter
made available in connection the quality or quantity or
hydrocarbon reserves attributable to the Assets, if any; future
production rates, exploratory or development drilling
opportunities, potential for production of hydrocarbons from the
Assets, decline rates, the legal, tax or other consequences of
owning a portion of Century's interest in the Assets.
2.17 TITLE WARRANTY. The Leasehold Interest to be conveyed
---- --------------
by Century to Southern shall be conveyed by Century to Southern
without warranty of title, expressed, implied or statutory, and
without recourse, even as to the return of the Purchase Price,
except that Century shall warrant title against the demands and
claims of all persons asserting an adverse claim to the Leasehold
Interest that arises by, through, or under Century, with the
exception of the liens identified on Exhibit "F" hereto (the
"Permitted Liens"), which liens Southern recognizes and
acknowledges and agrees to take the Leasehold Interest subject to
said liens. Century also shall convey title to the Leasehold
Interest to Southern with full substitution and subrogation in
and to all covenants and warranties of Century's predecessors-in-
title.
2.18 CONTRACTUAL AGREEMENTS. To the best of Century's
---- ----------------------
Knowledge Exhibit "D" sets forth all operating agreements,
farm-out or farm-in agreements, pooling or unitization orders and
agreements, oil or gas sales contracts, processing contracts,
drilling or service contracts, partnership or joint venture
agreements and any other material contracts or agreements
affecting
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<PAGE>
any of the Assets, (ii) no present or future production from any
of the Assets is dedicated under or subject to and contract,
commitment, agreement or arrangement of any kind, (iii) no person
or entity has any call upon, option to purchase or similar rights
with respect to the Assets, (iv) Century is not obligated, by
virtue of a prepayment arrangement, a "take or pay arrangement, a
production payment or any other arrangement, to deliver
hydrocarbons produced from the Assets at some future time without
then or thereafter receiving payment therefor, and (v) Century is
not in default of its material obligations under any agreements.
2.19 MATERIAL ADVERSE EFFECTS. To the best of Century's
---- ------------------------
Knowledge, there is no new or recent development, occurrence,
event or condition which has materially and adversely affected or
may materially and adversely affect the Assets, and Century has
not done anything with respect to the Assets which is not in the
ordinary course of Century's business, and which would have a
material adverse effect on the Assets.
2.20 PAYMENT OF FUNDS. To the best of Century's Knowledge,
---- ----------------
Century has duly and timely paid all taxes, governmental charges,
duties, penalties, interests and fines due and payable by it and
affecting the Assets and its operation on or before the date of
this Agreement where the failure to make such payment would have
a material adverse effect on the Assets.
2.21 GAS IMBALANCE. Century represents and warrants that no
---- -------------
gas imbalances exist for the Assets.
2.22 WELLS PREVIOUSLY PLUGGED AND ABANDONED. Century
---- --------------------------------------
represents and warrants that it has not previously plugged and
abandoned any wells on the Lease prior to the Effective Date.
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<PAGE>
2.23 CENTURY DUE DILIGENCE AND REVIEW OF ARI. Century
---- ---------------------------------------
represents and warrants that it has received and that an
executive officer of Century has read ARI's 1995 Annual Report to
Shareholders, ARI's 1995 Annual Report on Form 10-KSB, ARI's
Quarterly Reports on Form 10-QSB for the period ended March 31,
1996, all 8-K Reports dated subsequent to December 31, 1995 filed
by ARI, and all news releases issued by ARI subsequent to June
27, 1996.
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES OF SOUTHERN
------------------------------------------
Southern represents as of the date hereof that:
3.01 EXISTENCE OF SOUTHERN. Southern is a corporation duly
---- ---------------------
organized and validly existing and in good standing under the
laws of the State of Delaware and has the power and authority to
own its property and to carry on its business as now conducted
and to enter into and to carry out the terms of this Agreement
and is duly qualified with the United States Department of the
Interior, Minerals Management Service, to carry on business in
the Outer Continental Shelf, Gulf of Mexico federal waters;
3.02 POWER OF SOUTHERN. Southern has the corporate power to
---- -----------------
enter into and perform this Agreement and the transactions
contemplated hereby. The execution, delivery and performance of
this Agreement by Southern, and the transactions contemplated
hereby, will not violate (i) any provision of the certificate of
incorporation or bylaws of Southern, (ii) any material agreement
or instrument to which Southern is a party or by which Southern
is bound, (iii) any judgment, order, ruling, or decree applicable
to Southern as a party in interest, or (iv) any law, rule or
regulation applicable to Southern;
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<PAGE>
3.03 AUTHORIZATION OF SOUTHERN. The execution, delivery and
---- -------------------------
performance of this Agreement and the transactions contemplated
hereby have been duly and validly authorized by all requisite
corporate action on the part of Southern. This Agreement has
been duly executed and delivered on behalf of Southern, and at
the Closing all documents and instruments required to be executed
and delivered by Southern shall have been duly executed and
delivered. This Agreement does, and such documents and
instruments shall, constitute legal, valid and binding
obligations of Southern enforceable in accordance with their
terms, subject, however, to the effect of bankruptcy, insolvency,
reorganization, moratorium and similar laws from time to time in
effect relating to the rights and remedies of creditors, as well
as to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at
law);
3.04 LITIGATION. No litigation, claims, administrative
---- ----------
proceedings or other proceedings or governmental investigations
are pending, or to the best of Southern's actual knowledge
threatened, which would prevent or delay the execution, delivery
or performance of this Agreement by Southern;
3.05 ACQUIRING FOR OWN ACCOUNT. Southern is acquiring the
---- -------------------------
Leasehold Interest for its own account and not with a view to, or
for offer of resale in connection with, a distribution thereof
within the meaning of the Securities Act of 1933, as amended, and
the rules and regulations pertaining to it or a distribution
thereof in violation of any applicable securities laws; and
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<PAGE>
3.06 MMS APPROVAL. Southern has no knowledge of any matter
---- ------------
or circumstance which would preclude and/or inhibit unconditional
United States Minerals Management Service approval of the
Assignment of the Assets from Century to Southern.
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES OF
---------------------------------
AMERICAN RESOURCES OF DELAWARE,INC.
-----------------------------------
American Resources of Delaware, Inc. ("ARI") represents as
of the date hereof that:
4.01 EXISTENCE OF ARI. ARI is a corporation duly organized
---- ----------------
and validly existing and in good standing under the laws of the
State of Delaware and has the power and authority to own its
property and to carry on its business as now conducted and to
enter into and to carry out the terms of this Agreement.
4.02 POWER OF ARI. ARI has the corporate power to enter
---- ------------
into and perform this Agreement and the transactions contemplated
hereby. The execution, delivery and performance of this
Agreement by ARI, and the transactions contemplated hereby, will
not violate (i) any provision of the certificate of incorporation
or bylaws of ARI, (ii) any material agreement or instrument to
which ARI is a party or by which ARI is bound, (iii) any
judgment, order, ruling, or decree applicable to ARI as a party
in interest, or (iv) any law, rule or regulation applicable to
ARI;
4.03 AUTHORIZATION OF ARI. The execution, delivery and
---- --------------------
performance of this Agreement and the transactions contemplated
hereby have been duly and validly authorized by all requisite
corporate action on the part of ARI. This Agreement has been
duly executed and
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<PAGE>
delivered on behalf of ARI, and at the Closing all documents and
instruments required to be executed and delivered by ARI shall
have been duly executed and delivered. This Agreement does, and
such documents and instruments shall, constitute legal, valid and
binding obligations of ARI enforceable in accordance with their
terms, subject, however, to the effect of bankruptcy, insolvency,
reorganization, moratorium and similar laws from time to time in
effect relating to the rights and remedies of creditors, as well
as to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at
law).
4.04 LITIGATION. No litigation, claims, administrative
---- ----------
proceedings or other proceedings or governmental investigations
are pending, or to the best of ARI's actual knowledge threatened,
which would prevent or delay the execution, delivery or
performance of this Agreement by ARI;
4.05 ARI STOCK TO BE ISSUED TO CENTURY. All of the shares
---- ---------------------------------
of ARI Stock which may be issued to Century as payment of the
Purchase Price have been duly authorized and, when issued at
Closing, will be validly and legally issued, fully paid and non-
assessable, and will be, at the time of their delivery on August
16, 1996, if delivered to Century, free and clear of all liens,
charges, security interests, mortgages, pledges and other
encumbrances, except any and all restrictions as provided for by
securities laws of the federal and state governments.
4.06 MATERIAL ACTIONS. There are no material actions,
---- ----------------
suits, proceedings, arbitrations or investigations pending or, to
ARI's knowledge threatened, against ARI or any of its affiliates
which would be required to be disclosed in a Form 10-K or Form
10-Q, pursuant to Item 103 of Regulation S-K that are not so
disclosed.
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<PAGE>
ARTICLE V
---------
CONDITIONS TO THE OBLIGATIONS OF THE PARTIES
--------------------------------------------
The obligation of Century on the one hand and Southern on
the other to complete the transaction contemplated by this
Agreement is subject to the satisfaction of, or compliance with,
at or prior to the Time of Closing, each of the following
conditions, unless waived in writing by the parties:
5.01 ACCURACY OF REPRESENTATIONS AND COMPLIANCE WITH
---- -----------------------------------------------
COVENANTS. The representations and warranties of the parties
- ---------
made in or pursuant to this Agreement shall be true and correct
at the Closing with the same force and effect as if made at and
as of the Time of Closing; the covenants contained in this
Agreement to be performed by the parties at or prior to the Time
of Closing shall have been performed; the parties shall not be in
breach of any agreement on their part contained in this
Agreement; and shall have received certificates confirming the
foregoing, signed by the parties by whom such representation is
made.
5.02 CLOSING DOCUMENTS AND PROCEEDINGS. All documents
---- ---------------------------------
relating to the authorization and completion of the transaction
contemplated by this Agreement and all actions and proceedings to
be taken at or prior to the Time of Closing in connection with
the performance by Century and Southern of their respective
obligations under this Agreement shall be satisfactory to the
respective parties' Counsel and the parties shall have received
copies of all such documents and evidence that all such actions
and proceedings have been taken as they may reasonably request,
in form and substance satisfactory to such parties and their
Counsel.
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<PAGE>
5.03 OPINION OF CENTURY'S COUNSEL. Southern shall have
---- ----------------------------
received within five business days after Closing, an opinion of
Century's Counsel in form and substance satisfactory to
Southern's Counsel and in the form attached hereto as Exhibit "J"
and "K" respectively. In rendering such opinion, Century's
Counsel shall be entitled to rely, as to matters of fact, on
certificates of Century and senior officers of Century and shall
be entitled to qualify, by reference to his knowledge after
appropriate enquiry, those portions of the opinion which it is
reasonable and customary to so qualify.
5.04 OPINION OF SOUTHERN'S COUNSEL. Century shall have
---- -----------------------------
received an opinion of Southern's Counsel in form and substance
satisfactory to Century's Counsel substantially to the same
effect as the representations and warranties of the Southern in
Article III, and as to such other matters incidental to the
matters herein contemplated as Century and Century's Counsel may
reasonably request. In rendering such opinion, Southern's
Counsel shall be entitled to rely, as to matters of fact, on
certificates of Southern and senior officers of Southern and
shall be entitled to qualify, by reference to his knowledge after
appropriate enquiry, those portions of the opinion which it is
reasonable and customary to so qualify.
5.05 NO SUBSTANTIAL DAMAGE. No substantial damage by fire
---- ---------------------
or other hazard to the Assets, which in the opinion of Southern
is material, shall have occurred prior to the Time of Closing.
5.06 NO ACTION TO RESTRAIN. No action or proceeding shall
---- ---------------------
be pending or threatened by any person to restrain or prohibit
Southern from acquiring the Assets contemplated herein.
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<PAGE>
5.07 CONSENTS AND APPROVALS. In the event that any consents
---- ----------------------
and approvals are required to be obtained by Century, with the
exception of MMS approval of the assignments, the same shall have
been delivered to Southern, in each case in form and substance
satisfactory to Southern and Southern's counsel.
5.08 BOARD APPROVAL. The parties to this Agreement shall
---- --------------
have received approval from their respective board of directors
or where applicable their shareholders, to this Agreement and the
transactions contemplated herein.
5.09 DELIVERY OF DOCUMENTS. Century shall have delivered
---- ---------------------
all instruments of conveyance referenced herein, in form
acceptable to Southern.
5.10 DUE DILIGENCE. Southern shall complete any due
---- -------------
diligence Southern deems appropriate and prudent. If Southern,
in its sole discretion, determines that it should not consummate
the transactions contemplated in this Agreement because of any
information discovered in its due diligence, then Southern may
terminate and abandon this Agreement by giving written notice to
Century prior to the Closing. If any of the other conditions
contained in this Article V shall not be fulfilled or performed
at or prior to the Time of Closing to the satisfaction of
Southern (acting reasonably), Southern may, by notice to Century,
terminate this Agreement and the obligations hereunder. Any
condition contained in this Article may be waived in whole or in
part by Southern without prejudice to any claims it may have for
breach of covenants, representations or warranties by Century.
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<PAGE>
ARTICLE VI
----------
INDEMNIFICATION AND REMEDIES
----------------------------
6.01 CENTURY INDEMNIFICATION. Century agrees to indemnify,
---- -----------------------
defend and hold harmless Southern, its affiliates, successors and
assigns, officers, directors, employees and agents against any
and all claims, losses, expenses, costs, obligations and
liabilities of any kind, including reasonable attorney's fees
("Indemnity Amounts") which they may incur to the extent arising
out of or resulting from any inaccuracy in or breach of any of
the representations, warranties, covenants or any other provision
of this Agreement by Century.
Century further agrees to indemnify, defend and hold
harmless Southern, its partners, officers, directors,
shareholders, employees, agents and representatives, and the
officers, directors, shareholders, employees, agents and
representatives, and the officers, directors, shareholders,
employees, agents and representatives of its partners (the
"Southern Group"), regardless of whether the Southern Group was
wholly or partially negligent or otherwise at fault, from and
against any and all claims, liabilities, losses, environmental
liabilities, fines and penalties, costs and expenses (including,
without limitation, court costs and reasonable attorneys' fees)
arising from:
(1) events that have transpired or conditions
that have come into existence prior to the
Effective Date that are attributable to the
ownership or operation of the Assets, except
that this shall not extend to Southern's
obligations under 6.02(2) and 6.02(3) below;
and
(2) property damage or injury or death of persons
occurring prior to the Effective Date and
arising out of the ownership or operation of
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<PAGE>
the Assets regardless of whether claims
related to said damage, injury or death are
asserted on, before or after the Effective
Date.
6.02 SOUTHERN INDEMNIFICATION. Southern agrees to
---- ------------------------
indemnify, defend and hold harmless Century, its affiliates,
successors and assigns, officers, directors, employees and agents
against any and all claims, losses, expenses, costs, obligations
and liabilities of any kind, including reasonable attorney's fees
which they may incur to the extent arising out of or resulting
from any inaccuracy in or breach of any of the representations,
warranties, covenants or any other provision of this Agreement by
Southern.
Limited to the extent of the Leasehold Interest to be
acquired pursuant to this Agreement Southern hereby assumes all
of the following described obligations, and Southern agrees to
indemnify, defend and hold harmless Century, its officers,
directors, shareholders, employees, agent and representatives
(the "Century Group"), regardless of whether the Century Group
was wholly or partially negligent or otherwise at fault, from and
against any and all claims, liabilities, losses, environmental
liabilities, fines and penalties, costs and expenses (including,
without limitation, court costs and reasonable attorneys' fees)
arising from:
(1) events that transpire or conditions that come
into existence on or after the Effective Date
that are attributable to the ownership or
operation of the Assets on or after the
Effective Date;
(2) notwithstanding the terms and provisions of
6.03, the proper plugging and abandonment of
all wells now or hereafter located on the
Leasehold Interest;
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<PAGE>
(3) notwithstanding the terms and provisions of
6.03, abandonment, removal, salvage and
clean-up expenses of the Easements and
Equipment;
(4) all liability for property damage or injury
to or death of persons occurring on or after
the Effective Date and arising out of the
ownership or operation of the Assets,
regardless of whether said damages or injury
is attributable in whole or in part to
conditions that existed before the Effective
Date;
(5) the compliance with and assumption of any and
all express or implied covenants in the
instruments, regulations and agreements to
which the Leasehold Interest is subject,
including, but not limited to, the covenants
of reasonable development and protection
against drainage, insofar as said covenants
may apply to the Leasehold Interest, on or
after the Effective Date; and
(6) the compliance with and the assumption of all
of Century's rights, burdens, and obligations
contained in any operating agreement, farmout
agreement, acquisition agreement and/or any
other agreement, on or after the Effective
Date, insofar and only insofar as such
agreements cover, pertain or apply to the
Leasehold Interest, on or after the Effective
Date, including, but not limited to the
Contracts.
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<PAGE>
6.03 GENERAL PROVISIONS. In the case of any claim for
---- ------------------
indemnification brought under this Agreement:
(a) A party claiming indemnification under this
Agreement (an "Indemnified Party") shall promptly
(i) notify the party from whom identification is
sought (the "Indemnifying Party") of any third-
party claim or claims asserted against the
Indemnified Party ("Third Party Claim") which
could give rise to a right of indemnification
under this Agreement and (ii) transmit to the
Indemnifying Party a written notice ("Claim
Notice") describing in reasonable detail the
nature of the Third Party Claim, a copy of all
papers served with respect to such claim (if any),
an estimate of the amount of damages attributable
to the Third Party Claim and the basis of the
Indemnified Party's request for indemnification
under this Agreement. Within thirty (30) days
after receipt of any Claim Notice (the "Election
Period"), the Indemnifying Party shall notify the
Indemnified Party (i) whether the Indemnifying
Party disputes its potential liability to the
Indemnified Party under this Article VI with
respect to such Third Party Claim and (ii) whether
the Indemnifying Party desires, at the sole cost
and expense of the Indemnifying Party, to defend
the Indemnified Party against such Third Party
Claim.
(b) If the Indemnifying Party notifies the Indemnified
Party within the Election Period that the
Indemnifying Party does not dispute its potential
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liability to the Indemnified Party under this
Article VI and that the Indemnifying Party elects
to assume the defense of the Third Party Claim,
then the Indemnifying Party shall have the right
to defend, as its sole cost and expense, such
Third Party Claim by all appropriate proceedings,
which proceedings shall be prosecuted diligently
by the Indemnifying Party to a final conclusion or
settled at the discretion of the Indemnifying
Party in accordance with this Section 6.03. The
Indemnifying Party shall have full control of such
defense and proceedings, including any compromise
or settlement thereof. The Indemnified Party is
hereby authorized, at the sole cost and expense of
the Indemnifying Party (but only if the
Indemnified Party is actually entitled to
indemnification hereunder or if the Indemnifying
Party assumes the defense with respect to the
Third Party Claim), to file, during the Election
Period, any motion, answer or other pleadings
which the Indemnified Party shall deem necessary
or appropriate to protect its interest or those of
the Indemnifying Party and not prejudicial to the
Indemnifying Party (it being understood and agreed
that if an Indemnified Party takes any such action
which is prejudicial and conclusively causes a
final adjudication which is adverse to the
Indemnifying Party, the Indemnifying Party shall
be relieved of its obligations hereunder with
respect to such Third Party Claim). If requested
by the Indemnifying Party, the Indemnified Party
agrees, at the
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<PAGE>
sole cost and expense of the Indemnifying Party,
to cooperate with the Indemnifying Party and its
counsel in contesting any Third Party Claim which
the Indemnifying Party elects to contest,
including, without limitation, the making of any
related counterclaim against the person or entity
asserting the Third Party Claim or any cross-
complaint against any person. The Indemnified
Party may participate in, but not control, any
defense or settlement of any Third Party Claim
controlled by the Indemnifying Party pursuant to
this Section 6.03 and shall bear its own costs and
expenses with respect to such participation.
(c) If the Indemnifying Party fails to notify the
Indemnified Party within the Election Period that
the Indemnifying Party elects to defend the
Indemnified Party or if the Indemnifying Party
elects to defend the Indemnified Party but fails
to diligently and promptly prosecute or settle the
Third Party Claim, then the Indemnified Party
shall have the right to defend, at the sole cost
and expense of the Indemnifying Party, the Third
Party Claim by all appropriate proceedings, which
proceedings shall be promptly and vigorously
prosecuted by the Indemnified Party to a final
conclusion or settled. The Indemnified Party
shall have full control of such defense and
proceedings, provided, however, that the
Indemnified Party may not enter into, without the
Indemnifying Party's consent, which shall not be
unreasonably withheld, any compromise or
settlement of such
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<PAGE>
Third Party Claim. Notwithstanding the foregoing,
if the Indemnifying Party has delivered a written
notice to the Indemnified Party to the effect that
the Indemnifying Party disputes its potential
liability to the Indemnified Party under this
Article VI and if such dispute is resolved in
favor of the Indemnifying Party by final,
nonappealable order of a court of competent
jurisdiction, the Indemnifying Party shall not be
required to bear the costs and expenses of the
Indemnified Party's defense pursuant to this
Section or of the Indemnifying Party's
participation therein at the Indemnifying Party in
full for all costs and expenses of such
litigation. The Indemnifying Party may
participate in, but not control any defense or
settlement controlled by the Indemnified Party
pursuant to this Section, and the Indemnifying
Party shall bear its own costs and expenses with
respect to such participation.
(d) In the event any Indemnified Party should have a
claim against any Indemnifying Party hereunder
which does not involve a Third Party Claim, the
Indemnified Party shall transmit to the
Indemnifying Party a written notice (the
"Indemnity Notice") describing in reasonable
detail the nature of the claim, an estimate of the
amount of damages attributable to such claim and
the basis of the Indemnified Party's request for
indemnification under this Agreement. If the
Indemnifying Party does not notify the Indemnified
Party within sixty (60) days from its receipt of
the Indemnity
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<PAGE>
Notice that the Indemnifying Party disputes such
claim, the claim specified by the Indemnified
Party in the Indemnity Notice shall be deemed a
liability of the Indemnifying Party hereunder. If
the Indemnifying Party has timely disputed such
claim, as provided above, such dispute shall be
resolved by litigation in an appropriate court of
competent jurisdiction.
ARTICLE VII
-----------
TERMINATION
-----------
7.01 METHODS OF TERMINATION. The transactions contemplated
---- ----------------------
by this Agreement may be terminated at any time, but not later
than Closing:
(a) By mutual consent of Century and Southern; or
(b) By Southern on the Closing Date, if any of the
conditions provided for in Article V to have been
performed by Century has not been met or waived in
writing by Southern; or
(c) By Century on the Closing Date, if any of the
conditions provided for in Article V to have been
performed by Southern has not been met or waived
in writing by Century.
(d) By Southern, after Closing, if Century fails to
deliver the opinions of Century's counsel or any
other documents required to be delivered pursuant
to Article 1.04(a) at Closing, within five
business days after the
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<PAGE>
Closing. In said event Century shall immediately
return all payments of consideration identified
and paid to Century in this Agreement, and
Southern shall execute the appropriate documents
to reconvey the Assets to Century. As security
for the repayment of the above consideration,
Southern shall be entitled to retain ownership of
the Assets until it receive the consideration from
Century or until it receives proceeds from the
Assets in an amount equal to the full
consideration paid Century plus all monies
expended by Southern on the Assets.
7.02 PROCEDURE UPON TERMINATION. In the event of
---- --------------------------
termination by Southern or Century, pursuant to this Article,
written notice thereof shall forthwith be given to the other
party or parties and the transactions contemplated by this
Agreement shall be terminated, without further action by Southern
or Century. If the transactions contemplated by this Agreement
are terminated as provided herein then all obligations, except
for all provisions providing for the confidentiality, shall cease
between the parties.
ARTICLE VIII
------------
POST-CLOSING
------------
8.01 RECEIPTS AND CREDITS. All monies, proceeds, receipts,
---- --------------------
credits and income attributable to the Assets for all periods of
time subsequent to the Effective Date shall be the sole property
and entitlement of Southern, and, to the extent received by
Century, Century shall fully disclose, account for and transmit
same to Southern promptly together with copies of all
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remittance advises, purchase statements, meter charts and
interpretations and support for disbursements of royalty,
overriding royalty interests, working interests and taxes to the
extent not previously provided.
All monies, proceeds, receipts and income attributable to
the Assets for all periods of time prior to the Effective Date
shall be the sole property and entitlement of Century and, to the
extent received by Southern, Southern shall fully disclose,
account for and promptly transmit same to Century, together with
copies of all remittance advises, purchase statements, meter
charts and interpretations and support for disbursements of
royalty, overriding royalty interests, working interests and
taxes not otherwise provided.
Except as otherwise set forth in Article VI, all costs,
expenses, disbursements, obligations and liabilities, with
respect to the Assets attributable to periods of time prior to
the Effective Date, regardless of when due or payable, shall be
the sole obligation of Century, and Century shall promptly pay,
or if paid by Southern, promptly reimburse Southern for and
defend and hold Southern harmless from and against same. Except
as otherwise set forth in Article VI, all costs, expenses,
disbursements, obligations, and liabilities with respect to the
Assets attributable to periods of time subsequent to the
Effective Date, regardless of when due or payable, shall be the
sole obligation of Southern, and Southern shall promptly pay, or
if correctly paid by Century, promptly reimburse Century for and
defend and hold Century harmless from and against same.
Century shall be entitled to a credit for and reimbursement
in an amount equal to any amount received by Southern after
closing for any delivery or performance by Century prior to
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<PAGE>
the Effective Date. All accounts receivable relating to the
Assets and attributable to the period of time after the Effective
Date shall be assigned to Southern. All accounts receivable
relating to the Assets and attributable to the period of time
before the Effective Date shall be retained by Century.
In particular, notwithstanding anything to the contrary
contained herein, Southern agrees that in the event Closing as
contemplated by this Agreement occurs, it shall be responsible
for and pay all cash calls as more fully set forth in Exhibit
"L", which were or are received by Century and/or Southern on or
after June 14, 1996 from Newfield attributable to the Leasehold
Interest.
8.02 ACCESS. After the Closing and for a transitional
---- ------
period of six months thereafter, upon the reasonable request of
Southern, Century shall, and shall cause its officers and
employees to, cooperate with and assist Southern to ensure an
orderly transition of the ownership of the Assets to Southern and
to answer inquires and supply information, whether written or
oral, relating to the Assets (including legal, accounting,
environmental, government affairs and other information). All
out-of-pocket expenses incurred in connection herewith shall be
borne by Southern. Century shall also join in any notifications
to third parties, where necessary, to document the transfer of
ownership of the Assets. Century acknowledges that it has been
informed that as a result of transactions contemplated herein,
Southern will be required to file certain disclosure documents
with the Securities and Exchange Commission and other
governmental agencies.. Century agrees to submit to an audit of
its financial statements as of and for the fiscal years ended
December 31, 1994 and 1995 as they pertain to the Assets.
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<PAGE>
Century agrees to assist the independent accounting firm selected
by Southern to the extent necessary in order for the independent
accounting firm to perform an audit under the United States
General Accepted Auditing Standards for the purpose of rendering
an opinion on ARI's and Southern's financial statements for the
above periods presented under United States Generally Accounting
Principles and for Southern and ARI to comply with regulatory
reporting requirements. Such assistance shall include issuing a
letter to the independent accounting firm which details the
representations of Southern's management and providing the
independent accounting firm documents necessary for them to
complete their audit.
ARTICLE IX
----------
TAXES
-----
9.01 APPORTIONMENT OF AD VALOREM AND PROPERTY TAXES. All ad
---- ----------------------------------------------
valorem taxes, real property taxes, personal property taxes, and
similar obligations attributable to the Assets ("Property Taxes")
with respect to the tax period in which the Effective Date occurs
shall be apportioned as of the Effective Date between Century and
Southern. The owner of record on the assessment date shall file
or cause to be filed all required reports and returns incident to
the Property Taxes and shall pay or cause to be paid to the
taxing authorities all Property Taxes relating to the tax period
on which the Effective Date occurs but shall be entitled to
reimbursement from the other party for its proportional share.
9.02 SALES TAXES. Any sales, use or other tax on the
---- -----------
transfer of the Assets from Century to Southern shall be shared
equally by the parties.
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<PAGE>
9.03 OTHER TAXES. All taxes (other than income taxes) which
---- -----------
are imposed on or with respect to the production of Oil, natural
gas or other hydrocarbons or minerals or the receipt of proceeds
therefrom (including but not limited to severance, production,
and excise taxes) shall be apportioned between the parties based
upon the respective shares of production taken by the parties.
All such taxes which have accrued prior to the Effective Date
have been or will be properly paid or withheld by Century and all
statements, returns, and documents pertinent thereto have been or
will be properly filed by Century. Southern shall be responsible
for paying or withholding or cause to be paid or withheld all
such taxes which have accrued after the Effective Date and for
filing all statements, returns, and documents incident thereto.
ARTICLE X.
MISCELLANEOUS
-------------
10.1 ENTIRE AGREEMENT AND AMENDMENTS. This Agreement
---- -------------------------------
constitutes the entire agreement between Century and Southern
with respect to the transactions contemplated herein, and
supersedes all prior oral or written agreements, commitments,
understandings, or information otherwise furnished by Century and
Southern with respect to such matters and may not be altered or
amended, nor may any rights hereunder be waived, except by an
instrument in writing executed by the party to be charged with
such amendment or waiver.
10.2 ASSIGNMENT. Neither Century nor Southern may assign
---- ----------
its rights or delegate its duties or obligations under the terms
of this Agreement without the prior written consent of the other
party, which consent shall not be unreasonably withheld.
Notwithstanding the provisions
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<PAGE>
of this Section or other provisions of this Agreement, Century
shall not assign its rights to require registration by ARI of the
ARI Stock referenced herein.
10.3 HEADINGS. The headings of the Articles and Sections of
---- --------
this Agreement are for guidance and convenience of reference only
and shall not limit or otherwise affect any of the terms or
provisions hereof.
10.4 LAW GOVERNING. This Agreement shall be governed by and
---- -------------
construed in accordance with the laws of the State of Louisiana.
10.5 PARTIES IN INTEREST. This Agreement shall be binding
---- -------------------
upon, and shall inure to the benefit of, the parties hereto and,
except as otherwise prohibited, their respective successors and
assigns, and nothing contained in this Agreement, express or
implied, is intended to confer upon any other person or entity
any benefits, rights or remedies.
10.6 FURTHER ASSURANCES. After execution, Century and
---- ------------------
Southern shall execute, acknowledge and deliver or cause to be
executed, acknowledged and delivered such instruments and take
such other action as may be reasonable necessary or advisable to
carry out their obligations under this Agreement and under any
document, certificate or other instrument delivered pursuant
hereto.
10.7 RELATIONSHIP. It is not the purpose or intention of
---- ------------
Century or Southern to create any partnership, joint venture,
mining partnership, or any association or any other relationship
between them whether legal or quasi-legal whereby one party is
held liable for the acts or omissions of the other party, and
neither this Agreement nor the operations hereunder shall be
construed or considered as creating any such relationship.
-43-
<PAGE>
10.8 LSA-R.S. 9:2780. The parties hereto specifically
---- ---------------
recognize that this Agreement is not an agreement pertaining to a
well for Oil, gas or water, or drilling for minerals within the
scope of and as defined in LSA-R.S. 9:2780 and specifically agree
that this Agreement is not to be governed by said statute.
10.9 PUBLICITY. Southern agrees to consult Century prior to
---- ---------
the issuance of any public announcements, however Century
acknowledges that Southern has certain regulatory and statutory
responsibilities to disburse information to the public.
10.10 NOTICES. All notices and consents to be given
----- -------
hereunder shall be in writing and shall be deemed to have been
duly given if delivered personally, sent by facsimile
transmission, registered or certified mail, postage prepaid and
return receipt requested, addressed as follows:
If to Century:
Century Offshore Management Corporation
400 East Vine Street, Suite 400
Lexington, Kentucky 70407
Telephone: (606) 253-1300
Facsimile: (606) 233-7471
Attention: Howard A. Settle
If to Southern:
Southern Gas Co. of Delaware, Inc.
160 Morgan Street
Versailles, Kentucky 40383
Telephone: (606) 873-5455
Facsimile: (606) 873-4689
Attention: David Stetson
The addresses so indicated may be changed by similar written
notice. Notices shall be deemed effective as of the date of
their receipt.
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<PAGE>
10.11 CONFIDENTIALITY. Southern acknowledges that all
----- ---------------
information furnished or disclosed pursuant hereto must remain
confidential until Closing. Prior to the Closing, Southern may
disclose such information:
(a) to its employees or consultants or to any
related corporation or the employees or
consultants thereof taking the customary
precautions to ensure that they keep such
records, data, studies, opinions and other
information confidential;
(b) as may in the opinion of an attorney or
Counsel for Southern or for any related
corporation be required by law or for the
reasonable protection of Southern or related
corporation or their respective directors or
other officers;
(c) to any government or governmental authority
or any financier or prospective financier of
Southern;
10.12 SEVERABILITY. If any term or other provisions of
----- ------------
this Agreement is invalid, illegal or incapable of being enforced
under any rule or law, all other conditions and provisions of
this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions
contemplated hereby is not affected in a materially adverse
manner with respect to either party.
10.13 NO THIRD PARTY BENEFICIARY. This Agreement is not
----- --------------------------
intended to create, nor shall it be construed as to create, any
rights in any third party under doctrines concerning third party
beneficiaries or stipulations POUR AUTRUI.
-45-
<PAGE>
10.14 PAYMENT OF EXPENSES AND FEES. Southern and
----- ----------------------------
Century shall bear their respective costs and expenses, including
but not limited to, attorneys' fees incurred in connection with
the transactions contemplated in this Agreement; provided,
however, Southern shall pay all recording fees or transfer taxes
in connection with the recording of any instrument of transfer of
the Leasehold Interest from Century to Southern hereunder.
10.15 ARBITRATION. Upon the demand of Southern or
----- -----------
Century (collectively, the "parties"), whether made before the
institution of any judicial proceeding or not more than 60 days
after service of a complaint, third party complaint, cross-claim
or counterclaim or any answer thereto or any amendment to any of
the above, any Dispute (as defined below) shall be resolved by
binding arbitration in accordance with the terms of this Section
10.15. A "Dispute" shall include any action, dispute, claim, or
controversy of any kind, whether founded in contract, tort,
statutory or common law, equity, or otherwise, now existing or
hereafter occurring between the parties arising out of,
pertaining to or in connection with this Agreement or any related
agreements, documents, or instruments (the "Documents"). The
parties understand that by this Section 10.15, they have decided
that the Dispute may be submitted to arbitration rather than
being decided through litigation in court, however the parties do
not waive their respective rights to appeal any decision on due
process grounds or failure to adhere to the procedures set forth
herein.
GOVERNING RULES. Arbitrations conducted pursuant to
---------------
this Section 10.15, including selection of arbitrators, shall be
administered by the American Arbitration Association
("Administrator") pursuant to the Commercial Arbitration rules of
the Administrator. Arbitrations conducted pursuant to the terms
hereof shall be governed by the provisions of the Federal
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<PAGE>
Arbitration Act (Title 9 of the United States Code), and to the
extent the foregoing are inapplicable, unenforceable or invalid,
the laws of the State of Louisiana. Judgment upon any award
rendered hereunder may be entered in any court having
jurisdiction. Any party who fails to submit to binding
arbitration following a lawful demand by the opposing party shall
bear all costs and expenses, including reasonable attorney's
fees, incurred by the opposing party in compelling arbitration of
any Dispute.
ARBITRATOR POWERS AND QUALIFICATIONS; AWARDS.
--------------------------------------------
Arbitrators shall resolve all Disputes in accordance with the
applicable substantive law including the award of attorneys' fees
and expenses if permitted by law or the agreement of the parties.
All statutes of limitation applicable to any Dispute shall apply
to any proceeding brought in accordance with this Section 10.15.
Any arbitrator selected to act as the only arbitrator in a
Dispute shall be required to be a practicing attorney with not
less than 10 years practice in commercial law in the State of
Louisiana. With respect to a Dispute in which the claims or
amounts in controversy do not exceed $100,000, a single
arbitrator shall be chosen and shall resolve the Dispute. In
such case the arbitrator shall have authority to render an award
up to but not to exceed $100,000 including all damages of any
kind whatsoever, costs, fees and expenses. Submission to a
single arbitrator shall be a waiver of all parties' claims to
recover more than $100,000. Disputes involving claims or amounts
in controversy exceeding $100,000 shall be decided by a majority
vote of a panel of three arbitrators ("Arbitration Panel"). An
Arbitration Panel shall be composed of one arbitrator who would
be qualified to sit as a single arbitrator in a Dispute decided
by one arbitrator, and two arbitrators who have at least ten
years experience in the oil and gas business. Arbitrator(s)
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<PAGE>
may, in the exercise of their discretion, at the written request
of a party, (i) consolidate in a single proceeding any multiple
party claims that are substantially identical, and
(ii) administer multiple arbitration claims as class actions in
accordance with Rule 23 of the Federal Rules of Civil Procedure.
The arbitrator(s) shall be empowered to resolve any dispute
regarding the terms of this Agreement or the arbitrability of any
Dispute or any claim that all or any part (including this
provision) is voidable but shall have no power to change or alter
the terms of this Section 10.15. The award of the arbitrator(s)
shall be in writing and shall specify the factual and legal basis
for the award.
MISCELLANEOUS. To the maximum extent practicable, the
-------------
Administrator, the Arbitrator(s) and the parties shall take any
action necessary to require that an arbitration proceeding
hereunder be concluded within 180 days of the filing of the
Dispute with the Administrator. The Arbitrator(s) shall be
empowered to impose sanctions for any party's failure to proceed
with the times established herein. Arbitration proceedings
hereunder shall be conducted in Louisiana at a location
determined by the Administrator. In any such proceeding the
doctrines of RES JUDICATA and collateral estoppel shall apply and
a party shall state as a counterclaim any claim which arises out
of the transaction or occurrence or is in any way related to the
Documents which does not require the presence of a third party
which could not be joined as a party in the proceeding. The
provisions of this Section 10.15 shall survive any termination,
amendment, or expiration of the Documents unless the parties
otherwise expressly agree in writing. Each party agrees to keep
all Disputes and arbitration proceedings strictly confidential,
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<PAGE>
except for disclosures of information required in the ordinary
course of business of the parties or as required by applicable
law or regulation.
10.16 ACCESS TO EMPLOYEES. Century and Southern each
----- -------------------
shall use its reasonable efforts to afford the other with access
to its employees, as follows: (i) in the case of Century,
employees of Century, as Southern may reasonably request for
Southern's proper business purposes regarding the Assets, but not
as to matters proprietary to either Southern or Century, who
remain employees of Century following the date of Closing and who
are familiar with the operations of the Assets, and (ii) in the
case of Southern, employees of Southern, as Century may
reasonably request for Century's proper business purposes,
including without limitation, the defense of legal proceedings.
Such access may include interviews (provided however, no such
interview shall be conducted without attendance of such
employee's counsel) or attendance at depositions or legal
proceedings (provided however, no such attendance will be made
without attendance of such employee's counsel); provided,
however, that in any event all out-of-pocket expenses (including
wages and salaries) reasonably incurred by any party in
connection with this Section 10.16 shall be paid or promptly
reimbursed by the party requesting such services.
10.17 NORM. Southern acknowledges that it has been
----- ----
informed that Oil and Gas producing formations can contain
naturally occurring radioactive material ("NORM"). Formation of
scale or deposits can concentrate NORM on equipment and in
sludges. The presence of NORM in certain concentrations requires
that certain appropriate health, safety, and environmental
precautions be taken.
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<PAGE>
10.18 ARI. American Resources of Delaware, Inc. joins
----- ---
in the execution of this Agreement for the limited purpose of
making the representations set forth in Article IV and to
undertake those specific obligations of ARI as more fully set
forth in 1.03(b) and 1.03(c).
10.19 SURVIVAL OF REPRESENTATIONS. The covenants,
----- ---------------------------
representations and warranties contained in this Agreement and in
all certifications and documents delivered pursuant to or
contemplated by this Agreement shall survive the Closing and
shall continue for a period of five (5) years. Century shall
insure that its respective covenants, representations and
warranties contained in this Agreement and in all certifications
and documents delivered pursuant to or contemplated by this
Agreement are true and correct at all times.
10.20 NO FINDER'S FEES. Each of the parties represent
----- ----------------
and warrants to the other parties that such party has not taken,
and agrees that it will not take, any action that would cause any
other party to become liable to any claim or demand for a
brokerage commission, finder's fee or other similar payment.
50
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Agreement on this 3rd day of July, 1996.
WITNESSES: CENTURY OFFSHORE MANAGEMENT
CORPORATION
/s/ Leonard K. Nave By: /s/ Howard A. Settle
- ------------------------- --------------------------------
Name: Leonard K. Nave Howard A. Settle
--------------------
(Please Print) President
/s/ Douglas L. Hawthorne
- -------------------------
Name: Douglas L. Hawthorne
--------------------
(Please Print)
SOUTHERN GAS CO. OF DELAWARE, INC.
/s/ Leonard K. Nave By: /s/ Rick G. Avare
- ------------------------- --------------------------------
Name: Leonard K. Nave Rick G. Avare
--------------------
(Please Print) Chief Operating Officer
/s/ Douglas L. Hawthorne
- -------------------------
Name: Douglas L. Hawthorne
--------------------
(Please Print)
AMERICAN RESOURCES OF DELAWARE,
INC.
/s/ Leonard K. Nave By: /s/ Rick G. Avare
- ------------------------- --------------------------------
Name: Leonard K. Nave Rick G. Avare
--------------------
(Please Print) President
/s/ Douglas L. Hawthorne
- -------------------------
Name: Douglas L. Hawthorne
--------------------
(Please Print)
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<PAGE>
ACKNOWLEDGMENTS
---------------
STATE OF KENTUCKY SS
COUNTY OF FAYETTE SS
On this the 3rd day of July, 1996, before me appeared
Howard A. Settle to me personally known, who being by me duly
sworn, did say that he is the President of CENTURY OFFSHORE
MANAGEMENT CORPORATION, and that the foregoing instrument was
signed on behalf of said corporation by authority of its Board of
Directors, and said Howard A. Settle acknowledged said instrument
to be the free act and deed of said corporation.
/s/ Howard A. Settle
-----------------------------------
Howard A. Settle
/s/ Judy C. Burchard
-----------------------------------
NOTARY PUBLIC FOR THE COUNTY OF
FAYETTE, STATE OF KENTUCKY
My Commission Expires: 3/4/2000
-------------
STATE OF KENTUCKY SS
COUNTY OF FAYETTE SS
On this the 3rd day of July, 1996, before me appeared
Rick G. Avare to me personally known, who being by me duly sworn,
did say that he is the Chief Operating Officer of SOUTHERN GAS
CO. OF DELAWARE, INC. and that the foregoing instrument was
signed on behalf of said corporation by authority of its Board of
Directors, and said Rick G. Avare acknowledged said instrument to
be the free act and deed of said corporation.
/s/ Rick G. Avare
-----------------------------------
Rick G. Avare
/s/ Judy C. Burchard
-----------------------------------
NOTARY PUBLIC FOR THE COUNTY OF
FAYETTE, STATE OF KENTUCKY
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<PAGE>
STATE OF KENTUCKY
COUNTY OF FAYETTE SS
On this the 3rd day of July, 1996, before me appeared
Rick G. Avare to me personally known, who being by me duly sworn,
did say that he is the President of AMERICAN RESOURCES OF
DELAWARE, INC., and that the foregoing instrument was signed on
behalf of said corporation by authority of its Board of
Directors, and said Rick G. Avare acknowledged said instrument to
be the free act and deed of said corporation.
/s/ Rick G. Avare
-----------------------------------
Rick G. Avare
/s/ Judy C. Burchard
-----------------------------------
NOTARY PUBLIC FOR THE COUNTY OF
FAYETTE, STATE OF KENTUCKY
My Commission Expires: 3/4/2000
-------------
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<PAGE>
EXHIBIT B
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (the "Agreement"), dated
July 3rd, 1996, is by and between SOUTHERN GAS CO. OF DELAWARE,
INC. ("Southern"), a Delaware corporation, AMERICAN RESOURCES OF
DELAWARE, INC., ("ARI") and CENTURY OFFSHORE MANAGEMENT CORPORATION
("Century"), a Kentucky corporation.
WHEREAS, Century and Southern desires to mutually develop
and obtain certain Leasehold Interests (as hereinafter defined) in
salt domes located in the gulf coast region, including those salt
domes more fully described.
NOW, THEREFORE, in consideration of the mutual promises
contained herein, the benefits to be derived by each party
hereunder, and intending to be legally bound, the parties hereby
agree as follows:
ARTICLE I.
DEFINITIONS AND PURCHASE AND SALE OF ASSETS
-------------------------------------------
1.01 DEFINITIONS. All capitalized terms and the definition
---- -----------
set forth in this Agreement, not defined in the body of this
Agreement, are set forth in Exhibit "F", attached hereto and
incorporated herein by reference.
1
<PAGE>
1.02 ASSETS TO BE SOLD. Subject to the terms and conditions
---- -----------------
of this Agreement, Century shall sell, transfer and assign to
Southern, and Southern shall purchase from Century, effective July
1, 1996 (the "Effective Date"), certain specified contract
interests in and to the assets described below pertaining to the
three salt dome areas hereinbelow described (collectively the
"Assets"). The Assets shall consist of the following:
(a) An undivided 32.941% of Century's 85% interest,
being an undivided 28% interest, in and to the rights and
obligations set forth in that certain unrecorded Letter Agreement
dated January 12, 1996, by and between Aegis Energy, Inc. and
Century, a copy of which is attached hereto as Exhibit "A" (the
"Bayou Bouillon Salt Dome Contract Rights");
(b) An undivided 33.333% of Century's 75% interest,
being an undivided 25% interest, in and to the rights and
obligations set forth in that certain unrecorded Letter Agreement
dated February 5, 1996 by and between Aegis Energy, Inc. and
Century, a copy of which is attached hereto as Exhibit "B-1" and
that certain unrecorded Letter Agreement dated May 6, 1996 by and
between Century and St. Martin Land Company, a copy of which is
attached hereto as Exhibit "B-2" (collectively the "Plumb Bob Salt
Dome Contract Rights"); and
(c) An undivided 32.8125% of Century's 32% interest,
being an undivided 10.5% interest, in and to the rights and
obligations set forth in that certain unrecorded Letter Agreement
dated September 27, 1995, by and between TexStar North America,
Inc. and Century, as amended by the Supplemental Agreement dated
December 22, 1995, by and between TexStar
2
<PAGE>
North America, Inc., Century, ARI (as hereinafter defined), and
Cheyenne Petroleum Company, copies of which documents are attached
hereto as Exhibits "C-1" and "C-2" (collectively the "White Castle
Salt Dome Contract Rights").
(d) To the extent the same are assignable or
transferable by Century and to the extent and only to the extent
that the same relate to the ownership or operation of the Assets,
the interest in and to all orders, contracts, agreements,
instruments, licenses, authorizations, well record files, reserve
reports, maps, surveys, bonds, (including without limitation all
operating agreements, bidding agreements, transportation
agreements, unit agreements, participation title opinion, permits,
3-D seismic information (in Century's possession now or in the
future) agreements, gathering agreements and processing
agreements), instruments, licenses, authorizations, well record
files, reserve or other rights, privileges, benefits and powers
conferred upon Century, pertaining to the Assets. reports, maps,
surveys, bonds, title opinion, permits, audits, claims, liens,
suits, settlements and demands, and other rights, privileges,
benefits and powers conferred upon Century.
1.03 PURCHASE PRICE. The purchase price for the Assets to be
---- --------------
paid by Southern to Century at Closing, as herein defined, shall be
Nine Million Eight Hundred Eighty-Four Thousand Dollars
($9,884,000.00) payable as follows:
(a) The sum of Three Million Eight Hundred and Eighty Four
Thousand Dollars ($3,884,000), the receipt of, which is hereby
acknowledged by Century.
(b) As a prepayment for the Leasehold Interest to be acquired
hereunder, Southern shall cause American Resources of Delaware Inc.
("ARI") to issue One Million Five Hundred
3
<PAGE>
Thousand (1,500,000) shares of ARI's common stock, par value
$.00001 per share ("ARI") 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 on 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 in such jurisdictions as the
parties reasonable agree and to keep the Registration Statement and
such qualifications current and in effect. Century agrees that
during the first six (6) months after the issuance, it will not
sell any of the ARI Stock and that after such time it will not sell
more than 8.33% of the ARI Stock in any one month. Notwithstanding
the above, ARI hereby agrees and acknowledges that Century may, at
any time after the Closing, pledge any part or all of the ARI Stock
for the purpose of raising capital ("Private Placement Funds"), so
long as the proceeds received as a result of said pledge of ARI
Stock or any sale of ARI Stock are used solely for the Leasehold
Interests related to the White Castle Dome Contract Rights, Bayou
Bouillon Dome Contract Rights and the Plumb Bob Dome Contract
Rights (collectively hereinafter referred to as the "Domes"). At
such time as the sum of Five Million Seven Hundred Thousand Dollars
($5,700,000) of the Private Placement Funds have been expended by
Century for the Leasehold Interests (including monies expended by
Century prior to the pledging or sale of the ARI Stock), the
proceeds of the Private Placement Funds and any sale of the ARI
Stock by Century may be used by Century for any purpose. The
parties acknowledge that they have
4
<PAGE>
entered into a separate Purchase and Sale Agreement of even date
herewith, which provides in part that Southern, as set forth in
paragraph 1.03(e) of such agreement, shall advance to Century the
sum of Three Million Dollars ($3,000,000), payable in increments of
One Million Dollars ($1,000,000) each. To the extent Century has
been unable to raise $5,700,000 of the Private Placement Funds by
the time such advances are made, then Century agrees to use the
proceeds of such advances for the Leasehold Interests until a total
of $5,700,000 has ben expended.
(The obligations specified in paragraphs (a) and (b) above
shall hereinafter be subject collectively referred to certain
restrictions and rights of ARI as hereinafter set forth the
"Purchase Price.")
1.04 ALLOCATION OF PURCHASE PRICE. For the purpose of setting
---- ----------------------------
forth the performance requirements set out hereinbelow, the parties
hereto acknowledge and agree that the Purchase Price to be paid by
Southern hereunder shall be allocated as follows:
(a) It shall be deemed that Southern will have paid the
sum of Two Million Five Hundred Thousand Dollars ($2,500,000.00)
for the acquisition of a Leasehold Interest in the White Castle
Salt Dome Contract Rights, comprising $2,250,000 in cash
contribution and 62,500 shares of ARI Stock.
(b) It shall be deemed that Southern will have paid the
sum of Four Million Five Hundred Fifty Thousand Dollars
($4,550,000.00) for the acquisition of a Leasehold Interest in the
Bayou Bouillon Salt Dome Contract Rights, comprising $1,000,000 in
cash contribution and 887,500 shares of ARI Stock.
5
<PAGE>
(c) It shall be deemed that Southern will have paid the
sum of Two Million Eight Hundred Thirty Four Thousand Dollars
($2,834,000.00) for the acquisition of a Leasehold Interest in the
Plumb Bob Salt Dome Contract Rights, comprising $634,000 in cash
contribution and 550,000 shares of ARI Stock.
1.05 CENTURY'S BACK-IN. At such time as Century has fulfilled
---- -----------------
its representations pursuant to paragraph 2.16 (a),(b) and (c)
herein and Southern has recouped, from revenues attributable to the
Assets or the rights to be acquired pursuant thereto, the sum of
(i) Fifteen Million Dollars ($15,000,000.00) plus (ii) the sum of
all capital expenditures, operating costs and any other direct
costs which Southern has paid with respect to the Assets, Southern
shall convey to Century twenty-five (25%) percent of the Assets
(and the rights to be acquired pursuant thereto) acquired hereunder
(the "Back-In Interest"). (Southern's obligation to convey the
Back-In Interest shall be called the "Back-In Obligation"). The
Back-In Interest shall be conveyed to Century free and clear of all
liens, encumbrances and burdens which may have been created or
arose during Southern's ownership of this interest. Southern shall
have the option until December 31, 1997 to purchase the Back-In
Obligation by paying Century Three Million Dollars ($3,000,000.00)
on or before December 31, 1997.
1.06 MERGER VALUE. In the event of a merger between Century
---- ------------
and ARI (or a business entity formed by ARI for the purpose of the
merger), Century shall be allowed to include the Back-In Interest
in its Assets and value the Back-In Interest at the Netherland
Sewell & Associates, Inc. established value or Two Million Five
Hundred Thousand Dollars ($2,500,000.00), whichever is greater, in
order to establish Century's value for merger purposes.
6
<PAGE>
1.07 DELIVERIES BY CENTURY TO SOUTHERN.
---- ---------------------------------
(a) At the Closing, Century shall deliver to Southern:
(i) A certificate from the Secretary of State
(or equivalent official) of the State of
Kentucky as to the good standing of
Century in the State of Kentucky,
certified as of a date within ten (10)
days of Closing;
(ii) A certificate of an Officer attesting to
those matters set forth in Article II;
(iii) A copy of the resolutions, certified by
the Secretary of the Century, authorizing
Century to enter into the transactions
contemplated by this Agreement;
(iv) The Opinion of Century's counsel, in a
form acceptable to Southern's counsel,
referred to in Section 5.03;
(v) An Opinion of Century's counsel, in form
acceptable to Southern's Counsel, opining
that the transactions contemplated
herein, do not require bankruptcy court,
Century creditors, Bank of Montreal or
BMO Financial approval;
(vi) All other previously undelivered items
required to be delivered by Century to
Southern at, or prior to, such date.
7
<PAGE>
(vii) Instruments of conveyance including but
not limited to assignments, bill of sale,
and/or other instruments of transfer as
more fully set forth in Exhibit "D" which
shall be reasonably satisfactory to
Southern's counsel.
1.08 DELIVERIES BY SOUTHERN TO CENTURY.
---- ---------------------------------
(a) At the Closing, Southern shall deliver to Century:
(i) The ARI Stock provided for in Section
1.03(b);
(ii) The opinion of ARI's and Southern's
Counsel referred to in Section 5.04
hereof; and
(iii) Certificates from the Secretary of State
of Delaware as to the good standing of
Southern and ARI in the State of
Delaware, certified as of a date within
thirty (30) days of Closing;
(iv) All other previously undelivered items
required to be delivered by Southern to
Century at, or prior to, such date.
1.09 LOCATION AND TIME OF THE CLOSING. The Closing shall be
---- --------------------------------
held on the 3rd day of July, 1996 at 10:00 AM (Eastern Time) or as
shall be mutually agreed upon by Century and Southern. The Closing
shall be held at the offices of Century in Lexington, Kentucky or
such other place as the parties hereto may agree in writing.
1.10 BURDENS. Southern specifically agrees that it will
---- -------
acquire the Assets subject to each term and provision of the
agreements described hereinbelow and, except as set forth herein
below,
8
<PAGE>
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.
With regard to the Plumb Bob Salt Dome Contract Rights
agreements, Southern further acknowledges that Century's rights in
the agreement described in subparagraph 2 are subject to and said
agreement was acquired in accordance with the terms of the
agreement, described in subparagraph 1.
(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 Salt Dome Contract Rights.
--------------------------------------
(1) Letter Agreement dated September 27, 1995, by
and between TexStar North America, 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.
9
<PAGE>
(3) Supplemental Agreement dated December 22, 1995
by and between TexStar North America, Inc., Century, ARI (as
hereinafter defined), and Cheyenne Petroleum Company.
1.11 POST-CLOSING MANAGEMENT OF ASSETS. To the extent Century
---- ---------------------------------
is currently providing management of the Assets, Century will
continue to perform those management functions necessary for the
operations and oversight of the Assets.
ARTICLE II
----------
REPRESENTATIONS AND WARRANTIES OF CENTURY
-----------------------------------------
Century hereby represents and warrants to Southern and ARI as
of the date hereof that:
2.01 EXISTENCE OF CENTURY. Century is a corporation duly
---- --------------------
organized, validly existing and in good standing under the laws of
the State of Kentucky and has the power and authority to own its
property and to carry on its business as now conducted and to enter
into and carry out the terms of this Agreement.
2.02 POWER OF CENTURY. Century has the corporate power to
---- ----------------
enter into and perform this Agreement and the transactions
contemplated hereby. The execution, delivery and performance of
this Agreement by Century, and the transactions contemplated
hereby, will not violate (i) any provision of the certificate of
incorporation or bylaws of Century, (ii) any material agreement or
instrument to which Century is a party or by which Century is bound
which pertains to the Leasehold Interest, (iii) any judgment,
order, ruling, or decree applicable to Century as a party in
interest, or (iv) any law, rule or regulation applicable to
Century;
10
<PAGE>
2.03 AUTHORIZATION OF CENTURY. The execution, delivery and
performance of this Agreement and the transactions contemplated
hereby have been duly and validly authorized by all requisite
corporate action on the part of Century. This Agreement has been
duly executed and delivered on behalf of Century, and at the
Closing all documents and instruments required to be executed and
delivered by Century pursuant to this Agreement shall have been
duly executed and delivered. This Agreement does, and such
documents and instruments shall, constitute legal, valid and
binding obligations of Century enforceable in accordance with their
terms, subject, however, to the effect of bankruptcy, insolvency,
reorganization, moratorium and similar laws from time to time in
effect relating to the rights and remedies of creditors, as well as
to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
2.04 LITIGATION-AGREEMENT. No litigation, claims,
---- --------------------
administrative proceedings or other proceedings or governmental
investigations are pending, or to the best of Century's actual
knowledge threatened, which would prevent or delay the execution,
delivery or performance of this Agreement by Century;
2.05 LITIGATION - ASSETS. To the best of Century's Knowledge,
---- -------------------
there are no court, administrative, regulatory or similar
proceeding (whether civil, quasi-criminal or criminal); arbitration
or other dispute settlement procedure; investigation or inquiry by
any government, administrative, regulatory or similar body or any
third person or entity; or any similar matter or proceeding
(collectively "Proceedings") (a) against the Assets, or
(b) against Century and relating in any way to the Assets, which
would have a material adverse effect on the Assets (whether in
11
<PAGE>
progress or threatened); as it pertain to the Assets, no event has
occurred which might give rise to any Proceedings, there is no
judgment, decree, injunction, rule, award or order of any court,
government department, board, commission, agency, arbitrator or
similar body outstanding against Century and no complaint,
grievance, claim, work order or investigation has been filed, made
or commenced against Century.
2.06 CONSENTS AND PREFERENTIAL PURCHASE RIGHTS. There are no
---- ----------------------------------------
consents (except as set forth in Exhibit "E"), agreements or
waivers of preferential rights necessary to the valid assignment of
the Assets to Southern at Closing and there are no preferential
purchase rights or calls on production with respect to the
production from the Assets.
2.07 COMPLIANCE WITH LAWS. To the best of Century's
---- --------------------
Knowledge, the Assets have been operated in compliance with all
laws, ordinances, regulations and orders applicable to the Assets
and the operations undertaken in connection therewith.
Furthermore, no notice from any governmental body has been served
upon Century for the Assets claiming any material violation of any
law or any other code, rule or regulation, which would have
material adverse effect on the Assets. To the best of Century's
Knowledge, none of the Assets, nor the ownership, leasing,
occupancy, or the operation thereof, is in material violation of
any such law, ordinance, code, rule or regulation, which would have
a material adverse effect on the Assets.
2.08 PERMITS. To the best of Century's Knowledge, either
---- -------
Century or a third party under the Assets, hold or will acquire all
permits, licenses, approvals and franchises (collectively,
"permits") which it requires, or is required to have, to operate,
own or lease the Assets conveyed hereunder. All such permits are
full force and effect; Century is in material compliance with all
12
<PAGE>
the terms and conditions relating to such permits; and there are no
proceedings in progress, pending or threatened which may result in
revocation, cancellation, suspension or any adverse modification of
any of such permits. Neither the terms and conditions relating to
such permits nor the legislation or regulations pursuant to which
the same were issued require that any consent or approval of, or
filing with or notice to, any governmental agency or regulatory
body or other Person be made to assure the continued holding by
Southern of such permits after completion of the transaction
contemplated by this Agreement.
2.09 MATERIAL FACTS DISCLOSED. Century has disclosed in
---- ------------------------
writing to Southern facts within their Knowledge relating to the
Assets which could reasonably be expected to be material to an
intending purchaser of the Assets or that would have a Material
Adverse Effect on the Assets, or on Southern's acquisition and
ownership thereof.
2.10 ASSETS. Century owns its portion of the Assets free and
---- ------
clear of liens, claims and encumbrances placed against the Assets
by Century or incurred by Century, and Century has duly performed
all of the obligations under the Assets that are now or will prior
to the Closing Date be required to be performed by Century.
Century has not received any notice of default under the Assets nor
is any such notice pending. The contracts which comprise Assets are
valid and enforceable in accordance with their terms; further,
that:
(i) Century has not received any notice of,
and there exists no event of default
under the Assets or event which
constitutes or would constitute (with
notice or lapse of time or both) a
default in any material respect
thereunder; and
13
<PAGE>
(ii) With respect to the Assets, and limited
to the time period during which Century
has owned the Assets, to the best of
Century's Knowledge, all payments
required to be paid to perpetuate the
Assets to the date of this Agreement have
been timely and properly paid to the
proper parties and in the proper amounts.
To the best of Century's Knowledge, the
Assets, and all material agreements,
orders and other instruments creating the
Assets or of which the Assets arise are
legal valid, binding, subsisting, in good
standing and in full force and effect.
2.11 DISCLOSURE. No representation or warranty by or on
---- ----------
behalf of Century contained in this Agreement, in any Schedule
hereto, in any agreement entered into pursuant hereto or in
connection herewith, in any certificate delivered at Closing, or in
any other certificate which states that it is delivered pursuant to
or in connection with this Agreement (certificates referred to in
this sentence are sometimes referred to herein individually as an
"Agreement Certificate" and collectively as the "Agreement
Certificates"), contains or will contain any untrue statement of a
material fact, or omits or will omit to state any material fact
required to make the statements herein or therein contained not
misleading. Except as set forth in this Agreement, in any Schedule
hereto, in any agreement entered into pursuant hereto or in
connection herewith, or in any Agreement Certificate delivered at
or prior to the execution hereof, Century is not aware of any event
or condition which could reasonably be expected to have a material
adverse effect on
14
<PAGE>
the condition (financial or otherwise), of the Assets. The
representations and warranties contained in this Agreement, in the
Schedules hereto, in the agreements entered into pursuant hereto or
in connection herewith, or in any Agreement Certificate shall not
be affected or deemed waived by reason of (i) any investigation
made by Southern or its representatives or (ii) the fact that
Southern and/or its representatives knew or should have known that
any such representation or warranty is or might be inaccurate in
any respect.
Neither the furnishing of opinions or reports pursuant to this
Agreement nor any information disclosed by any investigation or
examination by Southern, nor any failure by Southern to make any
investigation or examination under this Agreement, nor the Closing
of the transactions contemplated hereby, shall in any way reduce
any rights Southern may have under any representatives, warranties
or covenants contained in this Agreement.
Except as may be specifically set forth to the contrary in
this Agreement, Southern acknowledges that Century has made no
representations or warranties whatever, express or implied (Century
having hereby expressly disclaimed all such warranties) as to the
accuracy, completeness, or materiality of any data, information,
record or materials now, heretofore, or hereafter made available in
connection with the success of any 3-D seismic program, ability to
obtain all seismic permits and/or options necessary to fully image
the prospective geological formation of each salt dome, ability to
discover and produce hydrocarbons based upon the prospective 3-D
seismic program, or the ability to properly image the salt, the
legal, tax or other consequences of owning a portion of Century's
interest in the Assets. Furthermore, Southern
15
<PAGE>
acknowledges that, because the agreements comprising the Assets are
unrecorded, they are not enforceable against third parties.
2.12 TITLE WARRANTY. The Assets to be conveyed by Century to
---- --------------
Southern shall be conveyed by Century to Southern without warranty
of title, expressed, implied or statutory, and without recourse,
even as to the return of the Purchase Price, as hereinafter
defined, except that Century shall warrant title against the
demands and claims of all persons asserting an adverse claim to the
Assets, by, through or under Century. Century also shall convey
title to the Assets to Southern with full substitution and
subrogation in and to all covenants and warranties of Century's
predecessors-in-title.
2.13 MATERIAL ADVERSE EFFECTS. To the best of Century's
---- ------------------------
Knowledge, there is no new or recent development, occurrence, event
or condition which has materially and adversely affected or may
materially and adversely affect the Assets, and Century has not
done anything with respect to the Assets which is not in the
ordinary course of Century's business, and which would have a
material adverse effect on the Assets.
2.14 PAYMENT OF FUNDS. To the best of Century's Knowledge,
---- ----------------
Century has duly and timely paid all taxes, governmental charges,
duties, penalties, extensions of Assets, rental payments, interests
and fines due and payable by it and affecting the Assets and its
operation on or before the date of this Agreement where the failure
to make such payment would have a material adverse effect on the
Assets.
2.15 CENTURY DUE DILIGENCE AND REVIEW OF ARI. Century
---- ---------------------------------------
represents and warrants that it has received and that an executive
officer of Century has read ARI's 1995 Annual Report to
Shareholders, ARI's 1995 Annual Report on Form 10-KSB, ARI's
Quarterly Reports on Form
16
<PAGE>
10-QSB for the period ended March 31, 1996, all 8-K Reports dated
subsequent to December 31, 1995 filed by ARI, and all news reassess
issued by ARI subsequent to June 27, 1996.
2.16 ACQUISITION OF LEASEHOLD INTEREST.
---- ---------------------------------
(a) Century hereby represents and warrants that it will
complete the acquisition of that Leasehold Interest in the property
that is the subject of the White Castle Salt Dome Contract Rights
no later than March 31, 1997(the "WC Completion Date"); however, in
the event it does not complete the duties as contemplated herein as
it pertains to the White Castle Salt Dome Contract Rights,, subject
to force majeure conditions, then Century will be obligated, at its
option, to either (i) pay Southern cash in the amount of the unused
portion of the Purchase Price allocated for the White Castle Salt
Dome Contract Rights as set out in paragraph 1.04(a) hereinabove;
or (ii) deliver to Southern shares of stock in ARI which are equal
in value to such deemed Purchase Price. For purposes of this
paragraph such shares are to be valued at the average closing price
per share of ARI's stock over the twenty (20) business days
preceding March 31, 1997, or Four Dollars ($4.00) per share,
whichever is greater. Upon receipt of said cash or shares,
Southern shall reconvey to Century all of its rights in the White
Castle Salt Dome Contract Rights and any interests acquired
pursuant thereto and this agreement shall terminate as to such
Asset.
(b) Century hereby represents and warrants that it will
complete the acquisition of that Leasehold Interest in the property
that is the subject of the Bayou Bouillon Salt Dome Contract
Rights no later than December 31, 1997 (the "BB Completion Date");
however, in the event the 3-D Seismic Survey on the property that
is the subject of the Bayou Bouillon Salt
17
<PAGE>
Dome Contract Rights has not been acquired by the BB Completion
Date, subject to force majeure conditions, then Century will be
obligated, at its option, to either (i) pay Southern cash in the
amount of the deemed purchase price for the Bayou Bouillon Salt
Dome Contract Rights as set out in paragraph 1.04(b) hereof; or
(ii) deliver to Southern shares of stock in ARI which are equal in
value to such deemed Purchase Price. For purposes of this
paragraph such shares to be valued at the average closing price per
share of ARI's stock over the twenty (20) business days preceding
December 31, 1997, or Four Dollars ($4.00) per share, whichever is
greater. In such case, Century shall be provided a credit of
$400,000, unless the ARI Stock received by Century in accordance
with paragraph 1.03(b) has an average price, as calculated above as
of the B.B. Completion Date of $4.45, or greater, per share, in
which event, there shall be no credit. Upon receipt of said cash
or shares, Southern shall reconvey to Century all of its rights in
the Bayou Bouillon Salt Dome Contract Rights and any interests
acquired pursuant thereto and this agreement shall terminate as to
such Asset.
(c) Century hereby represents and warrants that it will
complete the acquisition of that Leasehold Interest in the property
that is the subject of the Plumb Bob Salt Dome Contract Rights no
later than March 31, 1998 (the "PB Completion Date"); however, in
the event the 3-D Seismic Survey on the property that is the
subject of Plumb Bob Salt Dome Contract Rights has not been
acquired by the PB Completion Date, subject to force majeure
conditions, then Century will be obligated, at its option, to
either (I) pay Southern cash in the amount of the deemed Purchase
Price for the Plumb Bob Salt Dome Contract Rights as set out in
paragraph 1.04(c) hereof; or (ii) deliver to Southern shares of
stock in ARI which are equal in value to the deemed
18
<PAGE>
purchase price. For purposes of this paragraph such shares to be
valued at the average closing price per share of ARI's stock over
the twenty (20) business days preceding March 31, 1998, or Four
Dollars ($4.00) per share, whichever is greater. In such case,
Century shall be provided a credit of $234,000, unless the ARI
Stock received by Century in accordance with paragraph 1.03(b) has
an average price, as calculated above as of the P.B. Completion
Date of $4.45, or greater, per share, in which event, there shall
be no credit. Upon receipt of said cash or shares, Southern shall
reconvey to Century all of its rights in the Plumb Bob Salt Dome
Contract Rights and any interests acquired pursuant thereto and
this agreement shall terminate as to such Asset.
(d) For purposes of this Section 2.16, force majeure
conditions shall include acts of God, such as major storms, floods
or other similar natural disasters or major accidents beyond
Century's control, including a blowout, hurricane, fire or
explosion, scarcity of crews of equipment, or any other condition
of like nature which prevents Century or its partners,
participants, employees, representatives or contractors from
continuing its operations. In the event a force majeure situation
exists, Century shall so notify Southern, and the Completion Dates
as set forth hereinabove in subparagraphs (a), (b) and (c) for each
such Asset shall be extended for a period of time corresponding to
the duration of the force majeure provision, plus thirty (30) days.
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES OF SOUTHERN
------------------------------------------
Southern represents as of the date hereof that:
19
<PAGE>
3.01 EXISTENCE OF SOUTHERN. Southern is a corporation duly
---- ---------------------
organized and validly existing and in good standing under the laws
of the State of Delaware and has the power and authority to own its
property and to carry on its business as now conducted and to enter
into and to carry out the terms of this Agreement.
3.02 POWER OF SOUTHERN. Southern has the corporate power to
---- -----------------
enter into and perform this Agreement and the transactions
contemplated hereby. The execution, delivery and performance of
this Agreement by Southern, and the transactions contemplated
hereby, will not violate (i) any provision of the certificate of
incorporation or bylaws of Southern, (ii) any material agreement or
instrument to which Southern is a party or by which Southern is
bound, (iii) any judgment, order, ruling, or decree applicable to
Southern as a party in interest, or (iv) any law, rule or
regulation applicable to Southern;
3.03 AUTHORIZATION OF SOUTHERN. The execution, delivery and
---- -------------------------
performance of this Agreement and the transactions contemplated
hereby have been duly and validly authorized by all requisite
corporate action on the part of Southern. This Agreement has been
duly executed and delivered on behalf of Southern, and at the
Closing all documents and instruments required to be executed and
delivered by Southern shall have been duly executed and delivered.
This Agreement does, and such documents and instruments shall,
constitute legal, valid and binding obligations of Southern
enforceable in accordance with their terms, subject, however, to
the effect of bankruptcy, insolvency, reorganization, moratorium
and similar laws from time to time in effect relating to the rights
and remedies of creditors, as well as to general principles of
equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law);
20
<PAGE>
3.04 LITIGATION. No litigation, claims, administrative
---- ----------
proceedings or other proceedings or governmental investigations are
pending, or to the best of Southern's actual knowledge threatened,
which would prevent or delay the execution, delivery or performance
of this Agreement by Southern.
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES OF
---------------------------------
AMERICAN RESOURCES OF DELAWARE,INC.
-----------------------------------
American Resources of Delaware, Inc. ("ARI") represents as
of the date hereof that:
4.01 EXISTENCE OF ARI. ARI is a corporation duly organized
---- ----------------
and validly existing and in good standing under the laws of the
State of Delaware and has the power and authority to own its
property and to carry on its business as now conducted and to enter
into and to carry out the terms of this Agreement.
4.02 POWER OF ARI. ARI has the corporate power to enter into
---- ------------
and perform this Agreement and the transactions contemplated
hereby. The execution, delivery and performance of this Agreement
by ARI, and the transactions contemplated hereby, will not violate
(i) any provision of the certificate of incorporation or bylaws of
ARI, (ii) any material agreement or instrument to which ARI is a
party or by which ARI is bound, (iii) any judgment, order, ruling,
or decree applicable to ARI as a party in interest, or (iv) any
law, rule or regulation applicable to ARI;
4.03 AUTHORIZATION OF ARI. The execution, delivery and
---- --------------------
performance of this Agreement and the transactions contemplated
hereby have been duly and validly authorized by
21
<PAGE>
all requisite corporate action on the part of ARI. This Agreement
has been duly executed and delivered on behalf of ARI, and at the
Closing all documents and instruments required to be executed and
delivered by ARI shall have been duly executed and delivered. This
Agreement does, and such documents and instruments shall,
constitute legal, valid and binding obligations of ARI enforceable
in accordance with their terms, subject, however, to the effect of
bankruptcy, insolvency, reorganization, moratorium and similar laws
from time to time in effect relating to the rights and remedies of
creditors, as well as to general principles of equity (regardless
of whether such enforceability is considered in a proceeding in
equity or at law).
4.04 LITIGATION. No litigation, claims, administrative
---- ----------
proceedings or other proceedings or governmental investigations are
pending, or to the best of ARI's actual knowledge threatened, which
would prevent or delay the execution, delivery or performance of
this Agreement by ARI;
4.05 ARI STOCK TO BE ISSUED TO CENTURY. All of the shares of
---- ---------------------------------
ARI Stock which are issued to Century as payment of the Purchase
Price have been duly authorized and, when issued at Closing, will
be validly and legally issued, fully paid and non-assessable, and
will be, at the time of their delivery at Closing, if delivered to
Century, free and clear of all liens, charges, security interests,
mortgages, pledges and other encumbrances, except any and all
restrictions as provided for by securities laws of the federal and
state governments. Shareholders of ARI do not have any preemptive
rights.
4.06 MATERIAL ACTIONS. There are no material actions, suits,
---- ----------------
proceedings, arbitrations or investigations pending or, to ARI's
knowledge threatened, against ARI or any of its affiliates
22
<PAGE>
which would be required to be disclosed in a Form 10-K or Form
10-Q, pursuant to Item 103 of Regulation S-K that are not so
disclosed.
ARTICLE V
---------
CONDITIONS TO THE OBLIGATIONS OF THE PARTIES
--------------------------------------------
The obligation of Century on the one hand and Southern on
the other to complete the transaction contemplated by this
Agreement is subject to the satisfaction of, or compliance with, at
or prior to the Time of Closing, each of the following conditions,
unless waived in writing by the parties:
5.01 ACCURACY OF REPRESENTATIONS AND COMPLIANCE WITH
---- -----------------------------------------------
COVENANTS. The representations and warranties of the parties made
- ---------
in or pursuant to this Agreement shall be true and correct at the
Closing with the same force and effect as if made at and as of the
Time of Closing; the covenants contained in this Agreement to be
performed by the parties at or prior to the Time of Closing shall
have been performed; the parties shall not be in breach of any
agreement on their part contained in this Agreement; and shall have
received certificates confirming the foregoing, signed by the
parties by whom such representation is made.
5.02 CLOSING DOCUMENTS AND PROCEEDINGS. All documents
---- ---------------------------------
relating to the authorization and completion of the transaction
contemplated by this Agreement and all actions and proceedings to
be taken at or prior to Closing in connection with the performance
by Century and Southern of their respective obligations under this
Agreement shall be satisfactory to the respective parties' Counsel
and the parties shall have received copies of all such documents
and evidence that all
23
<PAGE>
such actions and proceedings have been taken as they may reasonably
request, in form and substance satisfactory to such parties and
their Counsel.
5.03 OPINION OF CENTURY'S COUNSEL. Southern shall have
---- ----------------------------
received within five business days after Closing, an opinion of
Century's Counsel in form and substance satisfactory to Southern's
Counsel. In rendering such opinion, Century's Counsel shall be
entitled to rely, as to matters of fact, on certificates of Century
and senior officers of Century and shall be entitled to qualify, by
reference to his knowledge after appropriate enquiry, those
portions of the opinion which it is reasonable and customary to so
qualify.
5.04 OPINION OF ARI'S AND SOUTHERN'S COUNSEL. Century shall
---- ---------------------------------------
have received an opinion of Southern's and ARI's Counsel in form
and substance satisfactory to Century's Counsel substantially to
the same effect as the representations and warranties of the
Southern and ARI in Article III and IV, and as to such other
matters incidental to the matters herein contemplated as Century
and Century's Counsel may reasonably request. In rendering such
opinion, Southern's and ARI's Counsel shall be entitled to rely, as
to matters of fact, on certificates of Southern and ARI and senior
officers of Southern and ARI and shall be entitled to qualify, by
reference to his knowledge after appropriate enquiry, those
portions of the opinion which it is reasonable and customary to so
qualify.
5.05 NO ACTION TO RESTRAIN. No action or proceeding shall be
---- ---------------------
pending or threatened by any person to restrain or prohibit
Southern from acquiring the Assets contemplated herein.
24
<PAGE>
5.06 CONSENTS AND APPROVALS. In the event that any consents
---- ----------------------
and approvals are required to be obtained by Century, the same
shall have been delivered to Southern, in each case in form and
substance satisfactory to Southern and Southern's counsel.
5.07 BOARD APPROVAL. The parties to this Agreement shall have
---- --------------
received approval from their respective board of directors or where
applicable their shareholders, to this Agreement and the
transactions contemplated herein.
5.08 DELIVERY OF DOCUMENTS. Century shall have delivered all
---- ---------------------
instruments of conveyance referenced herein, in form acceptable to
Southern.
5.09 DUE DILIGENCE. Southern shall complete any due diligence
---- -------------
Southern deems appropriate and prudent. If Southern, in its sole
discretion, determines that it should not consummate the
transactions contemplated in this Agreement because of any
information discovered in its due diligence, then Southern may
terminate and abandon this Agreement by giving written notice to
Century prior to the Closing. If any of the other conditions
contained in this Article V shall not be fulfilled or performed at
or prior to the Time of Closing to the satisfaction of Southern
(acting reasonably), Southern may, by notice to Century, terminate
this Agreement and the obligations hereunder. Any condition
contained in this Article may be waived in whole or in part by
Southern without prejudice to any claims it may have for breach of
covenants, representations or warranties by Century.
25
<PAGE>
ARTICLE VI
----------
INDEMNIFICATION AND REMEDIES
----------------------------
6.01 CENTURY INDEMNIFICATION. Century agrees to indemnify,
---- -----------------------
defend and hold harmless Southern, its affiliates, successors and
assigns, officers, directors, employees and agents against any and
all claims, losses, expenses, costs, obligations and liabilities of
any kind, including reasonable attorney's fees ("Indemnity
Amounts") which they may incur to the extent arising out of or
resulting from any inaccuracy in or breach of any of the
representations, warranties, covenants or any other provision of
this Agreement by Century.
Century further agrees to indemnify, defend and hold harmless
Southern, its partners, officers, directors, shareholders,
employees, agents and representatives, and the officers, directors,
shareholders, employees, agents and representatives, and the
officers, directors, shareholders, employees, agents and
representatives of its partners (the "Southern Group"), regardless
of whether the Southern Group was wholly or partially negligent or
otherwise at fault, from and against any and all claims,
liabilities, losses, environmental liabilities, fines and
penalties, costs and expenses (including, without limitation, court
costs and reasonable attorneys' fees) arising from:
(1) events that have transpired or conditions that
have come into existence prior to the
Effective Date that are attributable to the
ownership or operation of the Assets, except
that this shall not extend to Southern's
obligations under 6.02(2) and 6.02(3) below;
and
(2) property damage or injury or death of persons
occurring prior to the Effective Date and
arising out of the ownership or operation of
26
<PAGE>
the Assets regardless of whether claims
related to said damage, injury or death are
asserted on, before or after the Effective
Date.
6.02 SOUTHERN INDEMNIFICATION. Limited to the extent of the
---- ------------------------
Assets to be acquired pursuant to this Agreement Southern hereby
assumes all of the following described obligations, and Southern
agrees to indemnify, defend and hold harmless Century, its
officers, directors, shareholders, employees, agent and
representatives (the "Century Group"), regardless of whether the
Century Group was wholly or partially negligent or otherwise at
fault, from and against any and all claims, liabilities, losses,
environmental liabilities, fines and penalties, costs and expenses
(including, without limitation, court costs and reasonable
attorneys' fees) arising from:
(1) events that transpire or conditions that come
into existence on or after the Effective Date
that are attributable to the ownership or
operation of the Assets on or after the
Effective Date;
(2) all liability for property damage or injury to
or death of persons occurring on or after the
Effective Date and arising out of the
ownership or operation of the Assets,
regardless of whether said damages or injury
is attributable in whole or in part to
conditions that existed before the Effective
Date;
(3) the compliance with and assumption of any and
all express or implied covenants in the
instruments, regulations and agreements to
which the Assets are subject, insofar as said
covenants may apply to the Assets, on or after
the Effective Date.
27
<PAGE>
6.03 ARI INDEMNITY. ARI agrees to indemnify, defend and hold
---- -------------
harmless Century, its affiliates, successors and assigns,
officers, directors, employees and agents against any and all
claims, losses, expenses, costs, obligations and liabilities of any
kind, including reasonable attorney's fees, which they may incur
to the extent arising out of or resulting from any inaccuracy in
or breach of any of the representations, warranties, covenants or
any other provision of this Agreement by ARI.
6.04 GENERAL PROVISIONS. In the case of any claim for
---- ------------------
indemnification brought under this Agreement:
(a) A party claiming indemnification under this
Agreement (an "Indemnified Party") shall promptly
(i) notify the party from whom identification is
sought (the "Indemnifying Party") of any third-
party claim or claims asserted against the
Indemnified Party ("Third Party Claim") which could
give rise to a right of indemnification under this
Agreement and (ii) transmit to the Indemnifying
Party a written notice ("Claim Notice") describing
in reasonable detail the nature of the Third Party
Claim, a copy of all papers served with respect to
such claim (if any), an estimate of the amount of
damages attributable to the Third Party Claim and
the basis of the Indemnified Party's request for
indemnification under this Agreement. Within thirty
(30) days after receipt of any Claim Notice (the
"Election Period"), the Indemnifying Party shall
notify the Indemnified Party (i) whether the
Indemnifying Party disputes its potential liability
28
<PAGE>
to the Indemnified Party under this Article VI with
respect to such Third Party Claim and (ii) whether
the Indemnifying Party desires, at the sole cost
and expense of the Indemnifying Party, to defend
the Indemnified Party against such Third Party
Claim.
(b) If the Indemnifying Party notifies the Indemnified
Party within the Election Period that the
Indemnifying Party does not dispute its potential
liability to the Indemnified Party under this
Article VI and that the Indemnifying Party elects
to assume the defense of the Third Party Claim,
then the Indemnifying Party shall have the right to
defend, as its sole cost and expense, such Third
Party Claim by all appropriate proceedings, which
proceedings shall be prosecuted diligently by the
Indemnifying Party to a final conclusion or settled
at the discretion of the Indemnifying Party in
accordance with this Section 6.03. The
Indemnifying Party shall have full control of such
defense and proceedings, including any compromise
or settlement thereof. The Indemnified Party is
hereby authorized, at the sole cost and expense of
the Indemnifying Party (but only if the Indemnified
Party is actually entitled to indemnification
hereunder or if the Indemnifying Party assumes the
defense with respect to the Third Party Claim), to
file, during the Election Period, any motion,
answer or other pleadings which the Indemnified
Party shall deem necessary or appropriate to
protect its interest or those of the Indemnifying
Party and not prejudicial to the Indemnifying Party
29
<PAGE>
(it being understood and agreed that if an
Indemnified Party takes any such action which is
prejudicial and conclusively causes a final
adjudication which is adverse to the Indemnifying
Party, the Indemnifying Party shall be relieved of
its obligations hereunder with respect to such
Third Party Claim). If requested by the
Indemnifying Party, the Indemnified Party agrees,
at the sole cost and expense of the Indemnifying
Party, to cooperate with the Indemnifying Party and
its counsel in contesting any Third Party Claim
which the Indemnifying Party elects to contest,
including, without limitation, the making of any
related counterclaim against the person or entity
asserting the Third Party Claim or any cross-
complaint against any person. The Indemnified
Party may participate in, but not control, any
defense or settlement of any Third Party Claim
controlled by the Indemnifying Party pursuant to
this Section 6.03 and shall bear its own costs and
expenses with respect to such participation.
(c) If the Indemnifying Party fails to notify the
Indemnified Party within the Election Period that
the Indemnifying Party elects to defend the
Indemnified Party or if the Indemnifying Party
elects to defend the Indemnified Party but fails to
diligently and promptly prosecute or settle the
Third Party Claim, then the Indemnified Party shall
have the right to defend, at the sole cost and
expense of the Indemnifying Party, the Third Party
30
<PAGE>
Claim by all appropriate proceedings, which
proceedings shall be promptly and vigorously
prosecuted by the Indemnified Party to a final
conclusion or settled. The Indemnified Party shall
have full control of such defense and proceedings,
provided, however, that the Indemnified Party may
not enter into, without the Indemnifying Party's
consent, which shall not be unreasonably withheld,
any compromise or settlement of such Third Party
Claim. Notwithstanding the foregoing, if the
Indemnifying Party has delivered a written notice
to the Indemnified Party to the effect that the
Indemnifying Party disputes its potential liability
to the Indemnified Party under this Article VI and
if such dispute is resolved in favor of the
Indemnifying Party by final, nonappealable order of
a court of competent jurisdiction, the Indemnifying
Party shall not be required to bear the costs and
expenses of the Indemnified Party's defense
pursuant to this Section or of the Indemnifying
Party's participation therein at the Indemnifying
Party in full for all costs and expenses of such
litigation. The Indemnifying Party may participate
in, but not control any defense or settlement
controlled by the Indemnified Party pursuant to
this Section, and the Indemnifying Party shall bear
its own costs and expenses with respect to such
participation.
(d) In the event any Indemnified Party should have a
claim against any Indemnifying Party hereunder
which does not involve a Third Party Claim, the
31
<PAGE>
Indemnified Party shall transmit to the
Indemnifying Party a written notice (the "Indemnity
Notice") describing in reasonable detail the nature
of the claim, an estimate of the amount of damages
attributable to such claim and the basis of the
Indemnified Party's request for indemnification
under this Agreement. If the Indemnifying Party
does not notify the Indemnified Party within sixty
(60) days from its receipt of the Indemnity Notice
that the Indemnifying Party disputes such claim,
the claim specified by the Indemnified Party in the
Indemnity Notice shall be deemed a liability of the
Indemnifying Party hereunder. If the Indemnifying
Party has timely disputed such claim, as provided
above, such dispute shall be resolved by litigation
in an appropriate court of competent jurisdiction.
ARTICLE VII
-----------
TERMINATION
-----------
7.01 METHODS OF TERMINATION. The transactions contemplated by
---- ----------------------
this Agreement may be terminated at any time, but not later than
Closing:
(a) By mutual consent of Century and Southern; or
(b) By Southern on the Closing Date, if any of the
conditions provided for in Article V to have been
performed by Century has not been met or waived in
writing by Southern; or
32
<PAGE>
(c) By Century on the Closing Date, if any of the
conditions provided for in Article V to have been
performed by Southern has not been met or waived in
writing by Century.
(d) By Southern, after Closing, if Century fails to
deliver the opinions of Century's counsel or any
other documents required to be delivered pursuant
to Article 1.04(a) at Closing, within five business
days after the Closing. In said event Century
shall immediately return all payments of
consideration identified and paid to Century in
this Agreement, and Southern shall execute the
appropriate documents to reconvey the Assets to
Century. As security for the repayment of the
above consideration, Southern shall be entitled to
retain ownership of the Assets until it receive the
consideration from Century or until it receives
proceeds from the Assets in an amount equal to the
full consideration paid Century plus all monies
expended by Southern on the Assets.
7.02 PROCEDURE UPON TERMINATION. In the event of termination
---- --------------------------
by Southern or Century, pursuant to this Article, written notice
thereof shall forthwith be given to the other party or parties and
the transactions contemplated by this Agreement shall be
terminated, without further action by Southern or Century. If the
transactions contemplated by this Agreement are terminated as
provided herein then all obligations, except for all provisions
providing for the confidentiality, shall cease between the parties.
33
<PAGE>
ARTICLE VIII
------------
POST-CLOSING
------------
8.01 RECOUPMENT DATE ISSUES. (a) Except as otherwise set
---- ----------------------
forth in Section 8.01(b), (c), (d), (e) and (f), all costs,
expenses, disbursements, obligations and liabilities, with respect
to each of the respective Assets attributable to periods of time
prior to the Southern's Recoupment Date, as hereinafter defined,
for said Asset, regardless of when due or payable, shall be the
sole obligation of Century, and Century shall promptly pay, or if
paid by Southern, promptly reimburse Southern for and defend and
hold Southern harmless from and against same. Except as otherwise
set forth in Section 8.01(b), (c), (d), (e) and (f), all costs,
expenses, disbursements, obligations, and liabilities with respect
to each of the respective Assets attributable to periods of time
subsequent to the Southern's Recoupment Date, regardless of when
due or payable, shall be the sole obligation of Southern, and
Southern shall promptly pay, or if correctly paid by Century,
promptly reimburse Century for and defend and hold Century harmless
from and against same.
Southern's Recoupment Date shall mean for each of the Assets
the date on which Century completes its acquisition of the
Leasehold Interest covering the Assets acquired hereunder.
(b) With respect to the White Castle Salt Dome Contract
Rights only, if upon the occurrence of Southern's Recoupment Date
for said Asset the sum of $8,000,000.00 has not been expended or
incurred as of that date for all costs, fees, and expenses
attributable to or directly related to the acquisition of the
Leasehold Interest contemplated herein on the property that is the
subject of the White Castle Salt Dome Contract Rights (the "W.C.
Total Project Cost"), then Southern's Recoupment Date for this
34
<PAGE>
Asset shall be postponed and Century shall be obligated to pay
Southern's share of future costs attributable to this Asset until
such time as the W.C. Total Project Cost has been so expended.
(c) With respect to the Plumb Bob Salt Dome Contract Rights
only, if upon the occurrence of Southern's Recoupment Date for
said Asset, the sum of $7,360,000.00 has not been expended or
incurred as of that date for all costs, fees, and expenses
attributable to or directly related to the acquisition of the
Leasehold Interest contemplated herein on the property that is the
subject of the Plumb Bob Salt Dome Contract Rights (the "P.B. Total
Project Cost"), then Southern's Recoupment Date for this Asset
shall be postponed and Century shall be obligated to pay Southern's
share of future costs attributable to this Asset until such time as
the P.B. Total Project Cost has been so expended.
(d) With respect to the Bayou Bouillon Salt Dome
Contract Rights only, if upon the occurrence of the Southern's
Recoupment Date for said Asset the sum of $10,350,000.00 has not
expended or incurred as of that date for all costs, fees, and
expenses attributable to or directly related to the acquisition of
the Leasehold Interest contemplated hereon on the property that is
the subject of the Bayou Bouillon Salt Dome Contract Rights (the
"B.B. Total Project Cost"), then Southern's Recoupment Date for
this Asset shall be postponed and Century shall be obligated to pay
Southern's share of future costs attributable to this Asset until
such time as the B.B. Total Project Cost has been so expended.
(e) Century shall fulfill this obligation within one (1)
year from the respective Completion Dates set out herein.
35
<PAGE>
(f) In the event Century has acquired the Leasehold
Interest as contemplated and has not expended amounts equal to the
Total Project Costs as set forth in Sections 8.01 (b) (c) and/or
(d) within the required time frames and Century and Southern have
mutually agreed that it is not feasible to proceed with the
respective project(s), then for each such Asset Century shall
refund to Southern its pro rata share of the unexpended costs,
expenses and fees in the same manner as set out herein, less and
except a credit in favor of Century as set forth herein. Said
credits shall be as set forth in said provisions, except that the
date used to determine the stock value shall be those dates as set
forth herein, as extended by paragraph 8.01(e).
8.02 ACCESS. After the Closing and for a transitional period
---- ------
of six months thereafter, upon the reasonable request of Southern,
Century shall, and shall cause its officers and employees to,
cooperate with and assist Southern to ensure an orderly transition
of the ownership of the Assets to Southern and to answer inquires
and supply information, whether written or oral, relating to the
Assets (including legal, accounting, environmental, government
affairs and other information). All out-of-pocket expenses
incurred in connection herewith shall be borne by Southern.
Century shall also join in any notifications to third parties,
where necessary, to document the transfer of ownership of the
Assets. Century acknowledges that it has been informed that as a
result of transactions contemplated herein, Southern will be
required to file certain disclosure documents with the Securities
and Exchange Commission and other governmental agencies. Century
agrees to submit to an audit of its financial statements as of and
for the fiscal years ended December 31, 1994 and 1995 as they
pertain to the Assets. Century agrees to assist the independent
accounting firm selected by Southern to the extent necessary in
36
<PAGE>
order for the independent accounting firm to perform an audit under
the United States General Accepted Auditing Standards for the
purpose of rendering an opinion on ARI's and Southern's financial
statements for the above periods presented under United States
Generally Accounting Principles and for Southern and ARI to comply
with regulatory reporting requirements. Such assistance shall
include issuing a letter to the independent accounting firm which
details the representations of Southern's management and providing
the independent accounting firm documents necessary for them to
complete their audit.
ARTICLE IX
----------
TAXES
-----
9.01 APPORTIONMENT OF AD VALOREM AND PROPERTY TAXES. All ad
---- ----------------------------------------------
valorem taxes, real property taxes, personal property taxes, and
similar obligations attributable to the Assets ("Property Taxes")
with respect to the tax period in which the Effective Date occurs
shall be apportioned as of the Effective Date between Century and
Southern. The owner of record on the assessment date shall file or
cause to be filed all required reports and returns incident to the
Property Taxes and shall pay or cause to be paid to the taxing
authorities all Property Taxes relating to the tax period on which
the Effective Date occurs but shall be entitled to reimbursement
from the other party for its proportional share.
9.02 SALES TAXES. Any sales, use or other tax on the transfer
---- -----------
of the Assets from Century to Southern shall be shared equally by
the parties.
37
<PAGE>
9.03 OTHER TAXES. All taxes (other than income taxes) which
---- -----------
are imposed on or with respect to the production of Oil, natural
gas or other hydrocarbons or minerals or the receipt of proceeds
therefrom (including but not limited to severance, production, and
excise taxes) shall be apportioned between the parties based upon
the respective shares of production taken by the parties. All such
taxes which have accrued prior to the Effective Date have been or
will be properly paid or withheld by Century and all statements,
returns, and documents pertinent thereto have been or will be
properly filed by Century. Southern shall be responsible for
paying or withholding or cause to be paid or withheld all such
taxes which have accrued after the Effective Date and for filing
all statements, returns, and documents incident thereto.
ARTICLE X.
MISCELLANEOUS
-------------
10.1 ENTIRE AGREEMENT AND AMENDMENTS. This Agreement
---- -------------------------------
constitutes the entire agreement between Century and Southern with
respect to the transactions contemplated herein, and supersedes all
prior oral or written agreements, commitments, understandings, or
information otherwise furnished by Century and Southern with
respect to such matters and may not be altered or amended, nor may
any rights hereunder be waived, except by an instrument in writing
executed by the party to be charged with such amendment or waiver.
10.2 ASSIGNMENT. Century shall not assign its rights or
---- ----------
delegate its duties or obligations under the terms of this
Agreement or the Assets, without the prior written consent of
Southern, which consent shall not be unreasonably withheld.
38
<PAGE>
Century acknowledges that before approval of an assignment of any
interest in this Agreement or the Assets can be made to any third
party, that a full financial review of such third party is
reasonable and prudent, and that such third party must demonstrate
the financial ability to comply with the terms and conditions of
this Agreement and the agreements which comprise the Assets. In
addition to the above requirements, the third party shall agree to
give Southern complete access to all seismic information, including
but not limited to, review of all accounting charges and expenses
incurred in the obtaining 3D seismic information. In the event
Southern consents to an assignment, Southern may require that
Century remain liable and obligated for the Performance Guaranty
and the remedies set forth in Section 1.07, until the Performance
Guaranty has been satisfied. Notwithstanding the provisions of
this section or other provisions of this Agreement, Century shall
not assign its rights to require registration by ARI of the ARI
Stock referenced herein.
10.3 HEADINGS. The headings of the Articles and Sections of
---- --------
this Agreement are for guidance and convenience of reference only
and shall not limit or otherwise affect any of the terms or
provisions hereof.
10.4 LAW GOVERNING. This Agreement shall be governed by and
---- -------------
construed in accordance with the laws of the State of Louisiana.
10.5 PARTIES IN INTEREST. This Agreement shall be binding
---- -------------------
upon, and shall inure to the benefit of, the parties hereto and,
except as otherwise prohibited, their respective successors and
assigns, and nothing contained in this Agreement, express or
implied, is intended to confer upon any other person or entity any
benefits, rights or remedies.
39
<PAGE>
10.6 FURTHER ASSURANCES. After execution, Century and
---- ------------------
Southern shall execute, acknowledge and deliver or cause to be
executed, acknowledged and delivered such instruments and take such
other action as may be reasonable necessary or advisable to carry
out their obligations under this Agreement and under any document,
certificate or other instrument delivered pursuant hereto.
10.7 RELATIONSHIP. It is not the purpose or intention of
---- ------------
Century or Southern to create any partnership, joint venture,
mining partnership, or any association or any other relationship
between them whether legal or quasi-legal whereby one party is held
liable for the acts or omissions of the other party, and neither
this Agreement nor the operations hereunder shall be construed or
considered as creating any such relationship.
10.8 LSA-R.S. 9:2780. The parties hereto specifically
---- ---------------
recognize that this Agreement is not an agreement pertaining to a
well for Oil, gas or water, or drilling for minerals within the
scope of and as defined in LSA-R.S. 9:2780 and specifically agree
that this Agreement is not to be governed by said statute.
10.9 PUBLICITY. Southern agrees to consult Century prior to
---- ---------
the issuance of any public announcements, however Century
acknowledges that Southern has certain regulatory and statutory
responsibilities to disburse information to the public.
10.10 NOTICES. All notices and consents to be given
hereunder shall be in writing and shall be deemed to have been duly
given if delivered personally, sent by facsimile transmission,
registered or certified mail, postage prepaid and return receipt
requested, addressed as follows:
40
<PAGE>
If to Century:
Century Offshore Management Corporation
400 East Vine Street, Suite 400
Lexington, Kentucky 70407
Telephone: (606) 253-1300
Facsimile: (606) 233-7471
Attention: Howard A. Settle
If to Southern:
Southern Gas Co. of Delaware, Inc.
160 Morgan Street
Versailles, Kentucky 40383
Telephone: (606) 873-5455
Facsimile: (606) 873-4689
Attention: David Stetson
The addresses so indicated may be changed by similar written
notice. Notices shall be deemed effective as of the date of
their receipt.
10.11 CONFIDENTIALITY. Southern acknowledges that all
----- ---------------
information furnished or disclosed pursuant hereto must remain
confidential until Closing. Prior to the Closing, Southern may
disclose such information:
(a) to its employees or consultants or to any
related corporation or the employees or
consultants thereof taking the customary
precautions to ensure that they keep such
records, data, studies, opinions and other
information confidential;
(b) as may in the opinion of an attorney or
Counsel for Southern or for any related
corporation be required by law or for the
reasonable protection of Southern or related
corporation or their respective directors or
other officers;
41
<PAGE>
(c) to any government or governmental authority or
any financier or prospective financier of
Southern;
10.12 SEVERABILITY. If any term or other provisions of
----- ------------
this Agreement is invalid, illegal or incapable of being enforced
under any rule or law, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so
long as the economic or legal substance of the transactions
contemplated hereby is not affected in a materially adverse manner
with respect to either party.
10.13 NO THIRD PARTY BENEFICIARY. This Agreement is not
----- --------------------------
intended to create, nor shall it be construed as to create, any
rights in any third party under doctrines concerning third party
beneficiaries or stipulations POUR AUTRUI.
10.14 PAYMENT OF EXPENSES AND FEES. Southern and Century
----- ----------------------------
shall bear their respective costs and expenses, including but not
limited to, attorneys' fees incurred in connection with the
transactions contemplated in this Agreement; provided, however,
Southern shall pay all recording fees or transfer taxes in
connection with the recording of any instrument of transfer of the
Leasehold Interest from Century to Southern hereunder.
10.15 ARBITRATION. Upon the demand of Southern or Century
----- -----------
(collectively, the "parties"), whether made before the institution
of any judicial proceeding or not more than 60 days after service
of a complaint, third party complaint, cross-claim or counterclaim
or any answer thereto or any amendment to any of the above, any
Dispute (as defined below) shall be resolved by binding arbitration
42
<PAGE>
in accordance with the terms of this Section 10.15. A "Dispute"
shall include any action, dispute, claim, or controversy of any
kind, whether founded in contract, tort, statutory or common law,
equity, or otherwise, now existing or hereafter occurring between
the parties arising out of, pertaining to or in connection with
this Agreement or any related agreements, documents, or instruments
(the "Documents"). The parties understand that by this Section
10.15, they have decided that the Dispute may be submitted to
arbitration rather than being decided through litigation in court,
however the parties do not waive their respective rights to appeal
any decision on due process grounds or failure to adhere to the
procedures set forth herein.
GOVERNING RULES. Arbitrations conducted pursuant to this
---------------
Section 10.15, including selection of arbitrators, shall be
administered by the American Arbitration Association
("Administrator") pursuant to the Commercial Arbitration rules of
the Administrator. Arbitrations conducted pursuant to the terms
hereof shall be governed by the provisions of the Federal
Arbitration Act (Title 9 of the United States Code), and to the
extent the foregoing are inapplicable, unenforceable or invalid,
the laws of the State of Louisiana. Judgment upon any award
rendered hereunder may be entered in any court having jurisdiction.
Any party who fails to submit to binding arbitration following a
lawful demand by the opposing party shall bear all costs and
expenses, including reasonable attorney's fees, incurred by the
opposing party in compelling arbitration of any Dispute.
ARBITRATOR POWERS AND QUALIFICATIONS; AWARDS.
--------------------------------------------
Arbitrators shall resolve all Disputes in accordance with the
applicable substantive law including the award of attorneys' fees
and expenses if permitted by law or the agreement of the parties.
43
<PAGE>
All statutes of limitation applicable to any Dispute shall apply to
any proceeding brought in accordance with this Section 10.15. Any
arbitrator selected to act as the only arbitrator in a Dispute
shall be required to be a practicing attorney with not less than 10
years practice in commercial law in the State of Louisiana. With
respect to a Dispute in which the claims or amounts in controversy
do not exceed $100,000, a single arbitrator shall be chosen and
shall resolve the Dispute. In such case the arbitrator shall have
authority to render an award up to but not to exceed $100,000
including all damages of any kind whatsoever, costs, fees and
expenses. Submission to a single arbitrator shall be a waiver of
all parties' claims to recover more than $100,000. Disputes
involving claims or amounts in controversy exceeding $100,000 shall
be decided by a majority vote of a panel of three arbitrators
("Arbitration Panel"). An Arbitration Panel shall be composed of
one arbitrator who would be qualified to sit as a single arbitrator
in a Dispute decided by one arbitrator, and two arbitrators who
have at least ten years experience in the oil and gas business.
Arbitrator(s) may, in the exercise of their discretion, at the
written request of a party, (I) consolidate in a single proceeding
any multiple party claims that are substantially identical, and
(ii) administer multiple arbitration claims as class actions in
accordance with Rule 23 of the Federal Rules of Civil Procedure.
The arbitrator(s) shall be empowered to resolve any dispute
regarding the terms of this Agreement or the arbitrability of any
Dispute or any claim that all or any part (including this
provision) is voidable but shall have no power to change or alter
the terms of this Section 10.15. The award of the arbitrator(s)
shall be in writing and shall specify the factual and legal basis
for the award.
44
<PAGE>
MISCELLANEOUS. To the maximum extent practicable, the
-------------
Administrator, the Arbitrator(s) and the parties shall take any
action necessary to require that an arbitration proceeding
hereunder be concluded within 180 days of the filing of the Dispute
with the Administrator. The Arbitrator(s) shall be empowered to
impose sanctions for any party's failure to proceed with the times
established herein. Arbitration proceedings hereunder shall be
conducted in Louisiana at a location determined by the
Administrator. In any such proceeding the doctrines of res
judicata and collateral estoppel shall apply and a party shall
state as a counterclaim any claim which arises out of the
transaction or occurrence or is in any way related to the Documents
which does not require the presence of a third party which could
not be joined as a party in the proceeding. The provisions of this
Section 10.15 shall survive any termination, amendment, or
expiration of the Documents unless the parties otherwise expressly
agree in writing. Each party agrees to keep all Disputes and
arbitration proceedings strictly confidential, except for
disclosures of information required in the ordinary course of
business of the parties or as required by applicable law or
regulation.
10.16 ACCESS TO EMPLOYEES. Century and Southern each
----- -------------------
shall use its reasonable efforts to afford the other with access to
its employees, as follows: (i) in the case of Century, employees
of Century, as Southern may reasonably request for Southern's
proper business purposes regarding the Assets, but not as to
matters proprietary to either Southern or Century, who remain
employees of Century following the date of Closing and who are
familiar with the operations of the Assets, and (ii) in the case of
Southern, employees of Southern, as Century may reasonably request
for Century's proper business purposes, including without
45
<PAGE>
limitation, the defense of legal proceedings. Such access may
include interviews (provided however, no such interview shall be
conducted without attendance of such employee's counsel) or
attendance at depositions or legal proceedings (provided however,
no such attendance will be made without attendance of such
employee's counsel); provided, however, that in any event all out-
of-pocket expenses (including wages and salaries) reasonably
incurred by any party in connection with this Section 10.16 shall
be paid or promptly reimbursed by the party requesting such
services.
10.17 ARI. American Resources of Delaware, Inc. joins in
----- ---
the execution of this Agreement for the limited purpose of making
the representations set forth in Article IV and to undertake those
specific obligations of ARI as more fully set forth in 1.03(b) and
6.03.
10.18 SURVIVAL OF REPRESENTATIONS. The covenants,
----- ---------------------------
representations and warranties contained in this Agreement and in
all certifications and documents delivered pursuant to or
contemplated by this Agreement shall survive the Closing and shall
continue for a period of five (5) years. Century shall insure that
its respective covenants, representations and warranties contained
in this Agreement and in all certifications and documents delivered
pursuant to or contemplated by this Agreement are true and correct
at all times.
10.20 NO FINDER'S FEES. Each of the parties represent and
----- ----------------
warrants to the other parties that such party has not taken, and
agrees that it will not take, any action that would cause any other
party to become liable to any claim or demand for a brokerage
commission, finder's fee or other similar payment.
46
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Agreement on this 3rd day of July, 1996.
WITNESSES: CENTURY OFFSHORE MANAGEMENT
CORPORATION
/s/ Leonard K. Nave By: /s/ Howard A. Settle
- ------------------------- --------------------------------
Name: Leonard K. Nave Howard A. Settle
--------------------
(Please Print) President
/s/ Douglas L. Hawthorne
- -------------------------
Name: Douglas L. Hawthorne
--------------------
(Please Print)
SOUTHERN GAS CO. OF DELAWARE, INC.
/s/ Leonard K. Nave By: /s/ Rick G. Avare
- ------------------------- --------------------------------
Name: Leonard K. Nave Rick G. Avare
--------------------
(Please Print) Chief Operating Officer
/s/ Douglas L. Hawthorne
- -------------------------
Name: Douglas L. Hawthorne
--------------------
(Please Print)
AMERICAN RESOURCES OF DELAWARE, INC.
/s/ Leonard K. Nave By: /s/ Rick G. Avare
- ------------------------- --------------------------------
Name: Leonard K. Nave Rick G. Avare
--------------------
(Please Print) President
/s/ Douglas L. Hawthorne
- -------------------------
Name: Douglas L. Hawthorne
--------------------
(Please Print)
47
<PAGE>
ACKNOWLEDGMENTS
---------------
STATE OF KENTUCKY SS
COUNTY OF FAYETTE SS
On this the 1st day of July, 1996, before me appeared
Howard A. Settle to me personally known, who being by me duly
sworn, did say that he is the President of CENTURY OFFSHORE
MANAGEMENT CORPORATION, and that the foregoing instrument was
signed on behalf of said corporation by authority of its Board of
Directors, and said Howard A. Settle acknowledged said instrument
to be the free act and deed of said corporation.
/s/ Howard A. Settle
-----------------------------------
Howard A. Settle
/s/ Judy C. Burchard
-----------------------------------
NOTARY PUBLIC FOR THE COUNTY OF
FAYETTE, STATE OF KENTUCKY
My Commission Expires: 3/4/2000
-------------
STATE OF KENTUCKY SS
COUNTY OF FAYETTE SS
On this the 1st day of July, 1996, before me appeared
Rick G. Avare to me personally known, who being by me duly sworn,
did say that he is the Chief Operating Officer of SOUTHERN GAS CO.
OF DELAWARE, INC. and that the foregoing instrument was signed on
behalf of said corporation by authority of its Board of Directors,
and said Rick G. Avare acknowledged said instrument to be the free
act and deed of said corporation.
/s/ Rick G. Avare
-----------------------------------
Rick G. Avare
/s/ Judy C. Burchard
-----------------------------------
NOTARY PUBLIC FOR THE COUNTY OF
FAYETTE, STATE OF KENTUCKY
49
<PAGE>
STATE OF KENTUCKY
COUNTY OF FAYETTE SS
On this the 1st day of July, 1996, before me appeared
Rick G. Avare to me personally known, who being by me duly sworn,
did say that he is the President of AMERICAN RESOURCES OF DELAWARE,
INC., and that the foregoing instrument was signed on behalf of
said corporation by authority of its Board of Directors, and said
Rick G. Avare acknowledged said instrument to be the free act and
deed of said corporation.
/s/ Rick G. Avare
-----------------------------------
Rick G. Avare
/s/ Judy C. Burchard
-----------------------------------
NOTARY PUBLIC FOR FAYETTE
----------------,
STATE OF KENTUCKY
My Commission Expires: 3/4/2000
-------------
50
