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 11, 1997
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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 0-21472 86-0713506
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(State or other jurisdiction (Commission (IRS employer
of incorporation file no.) identification no.)
160 Morgan Street, P.O. Box 87, Versailles, KY 40383
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(Address of principal executive offices, including 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 5. OTHER EVENTS.
(a) Sale of Stock. On July 16, 1997, the Company entered
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into a Securities Purchase Agreement with Den norske Bank ASA
(the "Bank") pursuant to which the Company issued and sold to the
Bank 500,000 shares of the Company's $.00001 par value common
stock ("Common Stock") for $2.66 per share for an aggregate sales
price of $1,330,000. The per share sales price was based on the
average closing price for the Common Stock for the thirty trading
days preceding July 14, 1997. The Company also entered into a
Registration Rights Agreement with the Bank under which the
Company granted to the Bank certain demand and piggy-back
registration rights with respect to such Common Stock. Copies of
the Securities Purchase Agreement and Registration Rights
Agreement are attached hereto as Exhibits 10.80 and 10.81,
respectively, and incorporated herein.
The Bank required, as a condition precedent to the
Securities Purchase Agreement, that Rick G. Avare ("Avare"), the
Company's President and Chief Executive Officer, and Southern Gas
Holding Company, Inc.("SGH"), which owns 993,623 shares of Common
Stock, enter into a Co-Sale Agreement with the Bank under which
Avare and SGH agreed to purchase a percentage of the Bank's
Common Stock if Avare and/or SGH should sell over a specified
number of their shares of Common Stock in private transactions. A
copy of the Co-Sale Agreement is attached hereto as Exhibit 10.82
and incorporated herein.
(b) Amendment to Restated Certificate of Incorporation. On
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July 8, 1997, the Company's stockholders approved an amendment to
the Company's Restated Certificate of Incorporation increasing
the authorized number of shares of the Company's $.00001 par
value common stock from 20,000,000 shares to 50,000,000 shares
and dividing the Board of Directors into three classes with
staggered three year terms. An appropriate Certificate of
Amendment to the Restated Certificate of Incorporation of the
Company was filed with the Delaware Secretary of State on July
11, 1997 and a conformed copy of that Certificate is attached
hereto as Exhibit 3.12.
(c) Risk Factors. From time to time various presentations
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made by officers of the Company, news releases issued by the
Company and reports filed by the Company with the Securities and
Exchange Commission may contain projections and forward looking
statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities
Exchange Act, as amended. Such projections and statements will
reflect the Company's then current views with respect to future
events and financial performance. However, no assurances can be
given that those events will occur or that those projections will
be achieved, and actual results could differ materially from
those projected as a result of the following factors:
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1. LIMITED OPERATING HISTORY; UNCERTAINTY OF FUTURE
OPERATING RESULTS. American Resources of Delaware, Inc. (the
"Company") was formed in August 1992 to acquire the assets and
assume certain liabilities of Standard Oil and Exploration of
Delaware, Inc. ("Standard Oil"), a gas and oil company operating
under the protection of Chapter 11 of the U.S. Bankruptcy Code
at that time. The Company acquired a substantial portion of its
wells and pipeline system subsequent to the consummation of the
Standard Oil transaction and only commenced operations in the
Gulf Coast in October 1994. Accordingly, the Company has a
limited operating history upon which an evaluation of its
performance and prospects can be made. The Company's prospects
must be considered in light of the numerous risks, expenses,
delays, problems and difficulties frequently encountered in the
establishment and continual expansion of a new business in an
industry characterized by intense competition. The Company's
operating expenses have increased and can be expected to increase
significantly in connection with the proposed expansion of its
operations. As a result, the Company's future operating results
will be dependent upon corresponding increases in revenue from
operations. The Company's prospects could be adversely affected
by unfavorable general economic conditions, including downturns
in the economy, substantial or extended declines in gas and oil
prices, political and regulatory developments and increased
competition from other sources of energy. There can be no
assurance that the Company's rate of revenue growth will continue
in the future or that the Company's future operations will be
profitable.
2. NEED FOR ADDITIONAL FINANCING. The Company
anticipates, based on currently proposed plans and assumptions
relating to its operations (including the costs associated with
its proposed expansion), that its projected cash flow from
operations may not be sufficient to satisfy its anticipated cash
requirements. Consequently, the Company may be required to obtain
additional financing. There can be no assurance that additional
financing will be available to the Company on commercially
reasonable terms, or at all. To the extent that the Company
issues equity securities in connection with such financing, any
such issuance of equity securities would result in dilution to
the interest of the Company's stockholders. Additionally, to the
extent that the Company incurs indebtedness or issues debt
securities in connection with any financing, the Company will be
subject to risks associated with incurring substantial
indebtedness, including the risks that interest rates may
fluctuate and cash flow may be insufficient to pay principal and
interest on any such indebtedness.
3. SIGNIFICANT OUTSTANDING INDEBTEDNESS: SECURITY
INTERESTS. The Company has available a $30,000,000 line of
credit (the "Line of Credit"), from Den norske Bank AS. The
amount outstanding under the Line of Credit exceeds $20,000,000.
The funds borrowed under the Line of Credit bear interest at an
annual rate equal to the floating prime rate plus 1/2%. Such
indebtedness is in addition to accounts payable and accrued taxes
and expenses of the Company. The Line of Credit is secured by a
lien on substantially all of the assets of the Company and
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prohibits the Company from taking certain actions without the
written consent of the bank, such as consolidating or merging
with another entity, selling significant assets, changing senior
management, and declaring or paying dividends or other
distributions on the Company's securities as long as the Line of
Credit is outstanding. The Company has been in violation of
certain loan covenants from time to time. Although the bank has
waived all of such defaults in the past, there can be no
assurance that any of such defaults will be waived in the future.
In the event of future violations or other defaults by the
Company of its obligations under the Line of Credit, the bank
could declare the amounts outstanding under the Line of Credit
to be due and payable and, in certain cases, foreclose on the
Company's assets. The inability of the Company to maintain the
Line of Credit would have a material adverse effect on the
Company, including requiring it to cease its expansion
activities. Moreover, to the extent that the Company's assets
continue to secure the Line of Credit such assets will not be
available to secure additional indebtedness, which may adversely
affect the Company's ability to borrow in the future.
4. DEPENDENCE UPON SUCCESSFUL OPERATIONS; DEPENDENCE UPON
THIRD PARTIES. The success of the Company will be materially
dependent upon the success of its acquisitions and exploratory
drilling program. Such activities include the necessity of
incurring significant expenditures to locate and acquire
producing properties and to drill wells. There can be no
assurance that commercially productive natural gas and crude oil
reservoirs will be encountered. The cost of drilling, completing
and operating wells is often uncertain, and drilling operations
may be curtailed, delayed or cancelled as a result of a variety
of factors, including unexpected formations and drilling
conditions, pressure or mechanical irregularities, information
and equipment failures or accidents, as well as weather
conditions, compliance with governmental requirements and
shortages or delays in the delivery of equipment. Also, the
success of the Company's operations is dependent, to a large
extent, on joint ventures with non-affiliated third parties. The
time and resources devoted by such third parties will be
controlled by such third parties and not by the Company. There
can no assurance that the third parties will fulfill their
obligations, financial or otherwise, to the joint venture or
that the Company will be able to enter into new joint ventures
or that such arrangements will result in commercially successful
operations.
5. VOLATILITY OF GAS AND OIL PRICES; MARKETABILITY OF
PRODUCTION; FLUCTUATIONS IN OPERATING RESULTS. The Company's
revenues, profitability and future rate of growth are
substantially dependent upon prevailing prices for gas and crude
oil. Gas and crude oil prices have been extremely volatile in
recent years and are affected by many factors outside the control
of the Company, including federal and state regulation of gas and
oil production and transportation, weather conditions, general
economic conditions, tax and energy policies, changes in supply
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and demand, the condition of the United States economy, the
actions of the Organization of Petroleum Exporting Companies
("OPEC"), the foreign supply of oil and gas, prices and
availability of alternative energy sources and political
conditions in the Middle East. These external factors and the
volatile nature of the energy markets make it difficult to
estimate future prices of gas and oil. Any substantial decline in
the price of gas and oil will likely lead to substantial
reductions in cash flow and profitability. The marketability of
the Company's production also depends upon the availability,
proximity and capacity of gathering systems, pipelines and
processing facilities. As a result of the foregoing factors, as
well as the success of exploration and drilling activities, the
time of bringing new wells on line and the acquisition of new
wells and other properties, the Company has experienced and
expects to continue to experience fluctuations in its operating
results, which at times could be significant. As a result, the
Company's operating results for any given period are not
necessarily indicative of the results that may be achieved for a
full year.
6. REPLACEMENT OF PROPERTIES. The Company's future
success depends upon its ability to find, develop and acquire
additional oil and gas reserves that are economically
recoverable. As is generally the case in the Gulf Coast region,
many of the Company's producing properties are characterized by a
high initial production rate, followed by a steep decline in
production. As a result, the Company must locate and develop or
acquire new oil and gas reserves to replace those being depleted
by production. Without successful exploration or acquisition
activities, the Company's reserves and revenues will decline
rapidly. No assurances can be given that the Company will be
able to find and develop or acquire additional reserves at an
acceptable cost.
The exploration for oil and gas requires the expenditure of
substantial amounts of capital, and there can be no assurances
that commercial quantities of oil or gas will be discovered as a
result of such activities. The successful acquisition of
producing properties requires an assessment of recoverable
reserves, future oil and gas prices and operating costs,
potential environmental and other liabilities and other factors.
Such assessments are necessarily inexact and their accuracy
inherently uncertain. In addition, no assurances can be given
that the Company's exploitation and development activities will
result in any increases in reserves. The Company's operations
may be curtailed, delayed or canceled as a result of lack of
adequate capital and other factors, such as title problems,
weather, compliance with governmental regulations or price
controls, mechanical difficulties or shortages or delays in the
delivery of equipment. In addition, the costs of exploration and
development may materially exceed initial estimates.
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7. UNCERTAINTY OF ESTIMATES OF GAS AND OIL RESERVES. The
Company's filings report estimates of oil and gas reserves, and
the future net cash flows attributable to those reserves,
prepared by Netherland, Sewell & Associates, Inc., independent
petroleum and geological engineers (the "Reserve Engineers").
There are numerous uncertainties inherent in estimating
quantities of proved reserves and cash flows attributable to such
reserves, including factors beyond the control of the Company and
the Reserve Engineers. Reserve engineering is a subjective
process of estimating underground accumulations of oil and gas
that cannot be measured in an exact manner. The accuracy of an
estimate of quantities of reserves, or of cash flows attributable
to such reserves, is a function of the available data,
assumptions regarding, future oil and gas prices and expenditures
for future development and exploitation activities, and of
engineering and geological interpretation and judgment.
Additionally, reserves and future cash flows may be subject to
material downward or upward revisions, based upon production
history, development and exploitation activities and prices of
oil and gas. Actual future production, revenue, taxes,
development expenditures, operating expenses, quantities of
recoverable reserves and the value of cash flows from such
reserves may vary significantly from the assumptions and
estimates set forth herein. In addition, reserve engineers may
make different estimates of reserves and cash flows based on the
same available data. In calculating reserves on a Mcfe basis,
oil was converted to gas equivalent at the ratio of six Mcf of
gas to one Bbl of oil. While this ratio approximates the energy
equivalency of gas to oil on a Btu basis, it may not represent
the relative prices received by the Company on the sale of its
oil and gas production.
The estimated quantities of proved reserves and the discounted
present value of the net cash flows attributable to estimated
proved reserves set forth in the Company's filings were prepared
by the Reserve Engineers in accordance with the rules of the SEC,
and are not intended to represent the fair market value of such
reserves.
8. OPERATING HAZARDS AND UNINSURED RISKS. The Company's
operations are subject to the hazards and operating risks
inherent in drilling for, and production and transportation of,
gas and oil, including the risk of fire, explosions, blow-outs,
pipe failure, abnormally pressured formations and environmental
hazards such as oil spills, gas leaks, ruptures or discharges of
toxic gases. Moreover, offshore operations are subject to a
variety of operating risks peculiar to the marine environment,
such as hurricanes or other adverse weather conditions, to more
extensive governmental regulation, including regulations that
may, in certain circumstances, impose strict liability for
pollution damages, and to interruption or termination of
operations by governmental authorities based on environmental or
other considerations. The occurrence of any of these events could
result in substantial losses to the Company due to injury or loss
of life, severe damage to or destruction of property, natural
resources and equipment, pollution or other environmental
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damages, resulting in clean-up responsibilities, regulatory
investigation and penalties and suspension of operations. In
accordance with customary industry practice, the Company
maintains insurance against some, but not all, of these risks.
There can be no assurance that any insurance will be adequate to
cover any losses or liabilities or that adequate levels of
coverage will be available in the future, at reasonable cost, or
at all. A partially uninsured or completely uninsured successful
claim against the Company could have a material adverse effect on
the Company. In connection with the acquisition of the properties
from AKS, AKS represented and warranted to the Company, among
other things, that there were no undisclosed liabilities relating
to the assets and agreed to indemnify the Company for any breach
or breaches of its representation and warranties to the extent
that a single breach exceeds $25,000 or aggregate breaches exceed
$100,000; provided, however, that the maximum amount of such
indemnity shall not exceed an aggregate of $250,000. There can be
no assurance that $250,000 would be sufficient to cover any
breach or breaches of AKS's representations and warranties or
that AKS would be financially able to indemnify the Company to
the extent of its losses or at all. In connection with the
acquisition of the South Timbalier properties from Century,
Century represented and warranted to the Company, among other
things, that to the best of its knowledge, information and
belief, and after reasonable inquiry, that the assets were not
subject to environmental defects. Century agreed to indemnify the
Company for any claims, losses, expenses, costs, obligations or
liabilities of any kind ("Losses") which the Company incurs
because of any inaccuracy in or breach of any of its
representations and warranties to the Company. Should Century
breach its representation and warranty, there can be no assurance
that Century would be financially able to indemnify the Company
to the full extent of its Losses or at all.
9. GEOGRAPHIC CONCENTRATION. Substantially all of the
Company's operations are located in the Gulf of Mexico region and
in Southeast Kentucky. Because of the Company's geographic
concentration, any regional events that increase costs, reduce
availability of equipment or supplies, reduce demand or limit
production, including weather and natural disasters, may impact
the Company more than if its operations were more geographically
diversified. The Company's operations located in the Gulf of
Mexico region utilize local pipeline systems not owned by the
Company for processing at local processing plants. The Company's
operations located in Southeast Kentucky utilize pipelines owned
both by the Company and by nonaffiliated companies. While the
Company expects to have flexibility to mitigate the effects of
pipeline curtailments or plant shut-downs, curtailment of a
significant portion of a pipeline or a prolonged plant shut-down
could adversely affect the Company's operations, perhaps
materially.
10. PRODUCTION AND CUSTOMER CONCENTRATION. A large
percentage of the Company's total oil and gas production is
attributable to fewer than 10 wells located in the Gulf of
Mexico off the Louisiana coast (the "Key Wells") and a large
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percentage of the Company's total production is sold to fewer
than 5 customers ("Key Customers"). If any of the Key Wells
become nonproducing for any reason or if the Key Customer ceases
to purchase the Company's production, the Company could be
materially and adversely affected because there can be no
assurance that the Company will not continue to be dependent upon
production from a limited number of wells or sales to a limited
number of customers.
11. GOVERNMENT REGULATION. The Company's activities are
subject to existing federal, state and local laws and regulations
governing environmental quality and pollution control. Although
no assurances can be made, the Company anticipates that, absent
the occurrence of an extraordinary event, compliance with
existing federal, state and local laws, rules and regulations
regulating the release of materials into the environment or
otherwise relating to the protection of the environment will not
have a material effect upon the capital expenditures, earnings or
the competitive position of the Company with respect to its
operations. The Company cannot predict what effect additional
regulation or legislation, enforcement policies issued
thereunder, and claims for damages to property, employees, other
persons and the environment resulting from the Company's
operations could have on its activities.
Activities of the Company with respect to gas facilities,
including the operation and construction of pipelines, plants and
other facilities for transporting, processing, treating or
storing gas and other products, are subject to stringent
environmental regulation by state and federal authorities
including the Environmental Protection Agency ("EPA"). Such
regulation can increase the cost of planning, designing,
installing and operating such facilities. In most instances, the
regulatory requirements impose water and air pollution control
measures. Although the Company believes that compliance with
environmental regulations will not have a material adverse effect
on the Company, risks of substantial costs and liabilities
related to environmental compliance issues are inherent in oil
and gas production operations, and no assurance can be given that
significant costs and liabilities will not be incurred.
Moreover, it is possible that other developments, such as
stricter environmental laws and regulations, and claims for
damages to property or persons resulting from oil and gas
production. would result in substantial costs and liabilities to
the Company.
Solid and Hazardous Waste. The Company currently owns or leases,
and has in the past owned or leased, numerous properties that
have been used for production of oil and gas for many years.
Although the Company has utilized operating and disposal
practices that were standard in the industry at the time,
hydrocarbons or other solid wastes may have been disposed or
released on or under the properties owned or leased by the
Company. In addition, many of these properties have been
operated by third parties. The Company had no control over such
parties' treatment of hydrocarbons or other solid wastes and the
manner in which such substances may have been disposed or
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released. State and federal laws applicable to oil and gas
wastes and properties have gradually become stricter over time.
Under these new laws, the Company could be required to remove or
remediate previously disposed wastes (including wastes disposed
or released by prior owners or operators) or property
contamination (including groundwater contamination by prior
owners or operators) or to perform remedial plugging operations
to prevent future contamination.
The Company generates wastes, including hazardous wastes,
that are subject to the Federal Resource Conservation and
Recovery Act ("RCRA") and comparable state statutes. The EPA has
limited the disposal options for certain hazardous wastes and is
considering the adoption of stricter disposal standards for
nonhazardous wastes. Furthermore, it is possible that certain
wastes currently exempt from treatment as "hazardous wastes"
generated by the Company's oil and gas operations may in the
future be designated as "hazardous wastes" under RCRA or other
applicable statutes, and therefore be subject to more rigorous
and costly disposal requirements.
Superfund. The Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), also known as the
"Superfund" law, imposes liability, without regard to fault or
the legality of the original conduct, on certain classes of
persons with respect to the release of a "hazardous substance"
into the environment. These persons include the owner and
operator of a site and any party that disposed or arranged for
the disposal of the hazardous substance found at a site. CERCLA
also authorizes the EPA and, in some cases, third parties, to
take actions in response to threats to the public health or the
environment and to seek to recover from the responsible classes
of persons the costs of such action. In the course of the
Company's operations, the Company has generated and will generate
wastes that may fall within CERCLA's definition of "hazardous
substances." The Company may also be an owner of sites on which
"hazardous substances" have been released. The Company may be
responsible under CERCLA for all or part of the costs to clean up
sites at which such wastes have been disposed. At this time,
neither the Company nor its predecessors has been designated as a
potentially responsible party under CERCLA with respect to any
such site.
Oil Pollution Act. The Oil Pollution Act of 1990 (the "OPA")
and regulations thereunder impose a variety of regulations on
"responsible parties" related to the prevention of oil spills and
liability for damages resulting from such spills in "waters of
the United States." The term "waters of the United States" has
been broadly defined to include inland waterbodies, including
wetlands and intermittent streams. A "responsible party"
includes the owner or operator of a facility or vessel, or the
lessee or permittee of the area in which an offshore facility is
located. The OPA assigns liability to each responsible party for
oil removal costs and a variety of public and private damages.
While liability limits apply in some circumstances, a party
cannot take advantage of liability limits if the spill was caused
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by gross negligence or willful misconduct or resulted from
violation of a federal safety, construction or operating
regulation. If the party fails to report a spill or to cooperate
fully in the cleanup, liability limits also do not apply. Few
defenses exist to the liability imposed by the OPA.
The OPA also imposes ongoing requirements on a responsible
party, including proof of financial responsibility to cover at
least some costs in a potential spill. OPA currently requires
owners and operators of offshore oil and gas facilities to
establish $150 million in financial responsibility. Under the
rule, financial responsibility can be established through
insurance, guaranty, indemnity, surety bond, letter of credit,
qualification as a self-insurer or a combination thereof. It is
unlikely that insurance companies or underwriters will be willing
to provide coverage under the OPA because the statute provides
for direct lawsuits against insurers who provide financial
responsibility coverage, and most insurers have strongly
protested this requirement. The financial tests or other
criteria that will be used to judge self-insurance are also
uncertain. On September 30, 1996, Congress passed legislation
lowering the financial responsibility requirement under OPA to
$35 million, subject to increase to $150 million if a formal risk
assessment indicates the increase is warranted. The requirements
under OPA may have the potential to result in the imposition of
substantial additional annual costs on the Company or otherwise
materially adversely affect the Company. The impact of the rule
is not expected to be any more burdensome to the Company than it
will be to other similarly or less capitalized owners or
operators in the Gulf of Mexico.
Air Emissions. The operations of the Company are subject to
local, state and federal laws and regulations for the control of
emissions from sources of air pollution. Administrative
enforcement actions for failure to comply strictly with air
regulations or permits are generally resolved by payment of
monetary fines and correction of any identified deficiencies.
Alternatively, regulatory agencies could require the Company to
cease construction or operation of certain air emission sources,
although the Company believes that in such case it would have
enough permitted or permittable capacity to continue its
operations without a material adverse effect on any particular
producing field.
OSHA and other Regulations. The Company is subject to the
requirements of the Federal Occupational Safety and Health Act
("OSHA") and comparable state statutes. The OSHA hazard
communication standard, the EPA community right-to-know
regulations under Title III of CERCLA and similar state statutes
require the Company to organize and/or disclose information about
hazardous materials used or produced in the Company's operations.
Certain of this information must be provided to employees, state
and local governmental authorities and local citizens.
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12. COMPETITION. The Company operates in a highly
competitive environment. The Company competes with major
independent gas and oil companies for the acquisition of
additional properties and the transportation and marketing of its
production. Many of those companies have financial and other
resources substantially in excess of these available to the
Company. These competitors may be better positioned to take
advantage of industry opportunities and to withstand changes
affecting the industry, such as fluctuations in gas and oil
prices and production, the availability of alternative energy
sources and the application of government regulation. There can
be no assurance that the Company will be able to compete
successfully.
13. RELATED TRANSACTIONS. The Company has, from time to
time, entered into transactions with certain of its officers and
directors and with affiliated entities of such persons involving,
among other things, loans to the Company, participation in notes
receivable owned by the Company, participation in working
interests in oil and gas wells owned by the Company and the
lease of office space to the Company. Each of these transactions
has the potential of creating conflicts between the directors and
officers involved and the Company. There can be no assurance that
any prior transactions between the Company and its affiliates
have been on terms no less favorable to the Company as could have
been obtained from unaffiliated third parties, that future
transactions or arrangements between the Company and it
affiliates will not result in conflicts of interest, or that if
conflicts of interest arise, they will be resolved in a manner
favorable to the Company.
14. CONTROL BY MANAGEMENT. Officers and directors of the
Company beneficially own or control a substantial percentage of
the outstanding Common Stock. Such individuals, acting together,
are in a position to effectively control the Company, including
having the ability to elect all of the Company's directors,
increase the authorized capital, merge or sell the assets of the
Company and approve most matters submitted to the stockholders
for approval. The Board of Directors of the Company (the "Board")
is divided into three classes with staggered three-year terms.
The staggered Board makes it more difficult for stockholders to
change the composition of the Board even if the stockholders
believe that such a change would be desirable. Because of the
additional time required to change control of the Board, the
staggered Board tends to perpetuate incumbent management. The
staggered Board increases the amount of time required for a
takeover bidder to obtain control of the Company without the
Cooperation of the Board, even if the bidder were to acquire a
majority of the Company' outstanding stock and it tends to
discourage certain tender offers. As a result, stockholders may
be deprived of opportunities to sell some or all of their shares
in a tender offer. The staggered Board could also discourage open
market purchases by a potential takeover bidder. Such purchases
could temporarily increase the market value of the Company's
common stock (the "Common Stock"), enabling stockholders to sell
their shares at a price higher than that which would otherwise
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prevail. The staggered Board could also decrease the market price
of the Common Stock by making the stock less attractive to
persons who invest in securities in anticipation of an increase
in price if a takeover attempt develops.
15. DEPENDENCE ON KEY PERSONNEL. The Company's success is
highly dependent on the personal efforts of certain key
personnel. Although the Company entered into employment
agreements with several key executives, the loss of one or more
of such persons or the loss of other key personnel could have a
material adverse effect on the Company's business, financial
condition and result of operations. The recruitment, retention
and motivation of skilled executives, sales and technical
personnel and other employees are important to the Company's
operations. Although the Company has not experienced significant
problems in recruiting and retaining qualified personnel, there
can be no assurance that it will not encounter such problems in
the future.
16. NO DIVIDENDS AND RESTRICTIONS ON DIVIDENDS. To date,
the Company has not paid any dividends on its Common Stock and
does not intend to declare any dividends in the foreseeable
future. The Company intends to retain earnings, if any, for the
future operation and development of its business. In addition,
the payment of such dividends is prohibited by the term of the
Company's Line of Credit.
17. POSSIBLE VOLATILITY OF MARKET PRICE. The Common Stock
is currently traded on the NASDAQ Small Cap Market. From time to
time the market price of certain oil and gas companies have been
affected by various factors, including adverse publicity. There
can be no assurance given that the market price of the Common
Stock will not be volatile as a result of factors such as the
Company's financial results, possible adverse publicity resulting
from any infractions of governmental regulations and various
other factors affecting the oil and gas industry or the market
generally. Additionally, in recent years the stock market has
experienced wide price fluctuations not necessarily related to
the operating performance of such companies.
18. EFFECT OF OUTSTANDING OPTIONS, WARRANTS AND CONVERTIBLE
SECURITIES. The Company had outstanding options, warrants and
conversion rights to purchase or otherwise acquire approximately
5,000,000 shares of Common Stock. To the extent that the
outstanding options, warrants and conversion rights are
exercised, the price of the Common Stock in the market may be
substantially reduced. Moreover, the holders thereof are given an
opportunity to profit from a rise in the market price of the
Company's Common Stock, with a resulting dilution in the interest
of the other stockholders. Further, the terms on which the
Company may obtain additional financing during that period may be
adversely affected since the holders of such options, warrants,
convertible preferred stock and convertible debentures may
exercise or convert them at a time when the Company would likely
be able to obtain additional capital through a new offering of
securities on terms more favorable than those provided thereby.
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19. DILUTION. The Company is authorized to issue
50,000,000 shares of Common Stock. The Board of Directors is
authorized to issue and sell shares of Common Stock for any valid
corporate purpose at such prices as it may determine to be in the
best interest of the Company. To facilitate its growth, the
Company has issued and sold shares of Common Stock and
convertible preferred stock for cash in private transactions (i)
to fund the acquisition of oil and gas properties, (ii) to repay
indebtedness, (iii) to pay for services, and (iv) to provide
working capital. The holders of Common Stock do not have a
preemptive right to purchase additional shares of Common Stock.
The issuance of additional shares of Common Stock would have a
dilutive effect on the percentage of equity of the Company owned
by the holders of Common Stock. Also, depending on the prices at
which additional shares of Common Stock are issued, such
issuances could have a dilutive effect on the net book value and
net earnings per share of Common Stock.
20. POSSIBLE STATE AND FEDERAL RESTRICTIONS ON EXERCISE OF
NON-PLAN OPTIONS AND WARRANTS. When exercised, the holders of
Non-Plan Options and Warrants will be able to sell the underlying
shares of Common Stock only if a current registration relating to
such shares of Common Stock has been declared effective by the
Commission and only if the shares of Common Stock are qualified
for sale or are exempt from qualification under the applicable
securities laws of the states in which the holders reside. If
such shares are not qualified for sale, it is unlikely that the
holders will exercise the Non-Plan Options and Warrants, in which
event the Company would not receive any funds.
21. RISKS RELATED TO POSSIBLE ACQUISITIONS. The Company
intends to expand its operations though the possible acquisition
of additional oil and gas properties and related assets which the
Company believes are compatible to its business. The Company has
not established any minimum criteria for any new acquisition and
management will have complete discretion in determining the terms
of any such acquisitions. Consequently, there is no basis for any
of the investors to evaluate the specific merits or risks of any
potential new acquisitions that the Company may undertake. There
can be no assurance that the Company will be able to ultimately
effect additional acquisitions. Although the Company will
endeavor to evaluate the risks inherent in a particular
acquisition, there can be no assurance that the Company will
properly ascertain or assess all significant risk factors prior
to consummating any additional acquisition.
22. POSSIBLE DELISTING OF SECURITIES FROM NASDAQ SYSTEM;
RISK ASSOCIATED WITH LOW PRICED STOCKS. The Company's Common
Stock is currently listed on NASDAQ. However, in order to
continue to be listed on NASDAQ, a company must maintain
$2,000,000 in total assets, a $200,000 market value of the public
float and $1,000,000 in total capital and surplus. In addition,
Page ___ of ___ Pages
<PAGE>
continued inclusion requires two market makers and a minimum bid
price of $1.00 per share; provided, however, that if a company
falls below such minimum bid price, it will remain eligible for
continued inclusion on NASDAQ if the market value of the public
float is at least $1,000,000 and the company has $2,000,000 in
capital and surplus. The failure to meet these maintenance
criteria in the future may result in the delisting of the
Company's Common Stock from NASDAQ and trading, if any, in the
Company's Common Stock would thereafter be conducted in the non-
NASDAQ over-the-counter market. As a result of such delisting, an
investor may find it more difficult to dispose of, or to obtain
accurate quotations as to the market value of, the Company's
Common Stock. In addition, if the Common Stock was to become
delisted from trading on NASDAQ, and the trading price of the
Common Stock is below $5.00 per share, trading in the Common
Stock would also be subject to the requirements of certain rules
promulgated under the Securities Exchange Act of 1934 (the
"Exchange Act"), which require additional disclosure by broker-
dealers in connection with any trades involving a stock defined
as a penny stock (generally, any non-NASDAQ or non-exchange
traded equity security that has a market price of less than $5.00
per share, subject to certain exceptions). Such rules require the
delivery, prior to any penny stock market transaction, of a
disclosure schedule explaining the penny stock market and the
risks associated therewith, and impose various sales practice
requirements on broker-dealers who sell penny stocks to persons
other than established customers and accredited investors
(generally institutions). For these types of transactions, the
broker-dealer must make a special suitability determination for
the purchaser and have received the purchaser's written consent
to the transaction prior to the sale. The additional burdens
imposed upon broker-dealers by such requirements may discourage
them from effecting transactions in the Common Stock, which
could severely limit the liquidity of the Common Stock and the
ability of the purchasers in this Offering to sell the Common
Stock in the secondary market.
23. AUTHORIZATION AND DISCRETIONARY ISSUANCE OF PREFERRED
STOCK. The Company's Certificate of Incorporation authorizes the
issuance of "blank check" preferred stock with such designations,
rights and preferences as may be determined from time to time by
the Board of Directors. Accordingly, the Board of Directors is
empowered, without stockholder approval, to designate and issue
additional series of preferred stock with dividend, liquidation,
conversion, voting or other rights which could adversely affect
the voting power or other rights of the holders of the Company's
Common Stock. In the event of issuance, the preferred stock
could be utilized, under certain circumstances, as a method
discouraging, delaying or preventing a change in control of the
Company. Although the Company has no present intention to
designate any additional series of preferred stock or to issue
any additional shares of its preferred stock, there can be no
assurance that the Company will not do so in the future.
Page ___ of ___ Pages
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial statements.
Not applicable.
(c) Exhibits.
The following exhibits are attached hereto and
incorporated herein.
Number: Description:
------ -----------
3.12 Certificate of Amendment to Restated
Certificate of Incorporation filed with the
Delaware Secretary of State on July 11, 1997.
10.80 Securities Purchase Agreement dated July 16,
1997 between the Company and Den norske Bank
ASA.
10.81 Registration Rights Agreement dated July 16,
1997 between the Company and Den norske Bank
ASA.
10.82 Co-Sale Agreement dated July 16, 1997 among
the Company, Rick G. Avare, Southern Gas
Holding Company, Inc. and Den norske Bank
ASA.
SIGNATURES
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/ Rick G. Avare
------------------------------------
Rick G. Avare
President and Chief
Executive Officer
Date: July 24, 1997
Page ___ of ___ Pages
<PAGE>
EXHIBIT 3.12
------------
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
**********
American Resources of Delaware, Inc., a corporation
organized and existing under and by virtue of the General
Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
FIRST. That a meeting of the Board of Directors of American
Resources of Delaware, Inc., resolutions were duly adopted
setting forth the following proposed amendments to the Restated
Certificate of Incorporation of said corporation, declaring said
amendments to be advisable, and providing that said amendments be
presented for consideration by the corporation's stockholders at
the 1997 annual meeting of stockholders of the corporation. The
resolutions setting forth the proposed amendments are as follows:
RESOLVED, that subject to the approval of the corporation's
stockholders, that the first paragraph of Article Four of the
corporation's Restated Certificate of Incorporation be amended to
read as follows:
"The aggregate number of shares of capital stock of all
classes which the Corporation shall have authority to
issue is FIFTY-THREE MILLION (53,000,000), of which
FIFTY MILLION (50,000,000) shares having a par value of
$.00001 per share shall be of a class designated
"Common Stock" (or "Common Shares"), ONE MILLION
(1,000,000) shares of preferred stock having a par
value of $12.00 per share which shall be of a class
designated SERIES 1993 8% CONVERTIBLE PREFERRED STOCK
and TWO MILLION (2,000,000) shares having a par value
of $.00001 per share shall be of a class designated
"Preferred Stock" (or "Preferred Shares"). All shares
of the Corporation shall be issued for such
consideration or considerations as the Board of
Directors may from time to time determine. The
designations, voting powers, preferences, optional or
other special rights and qualifications, limitations,
Page ___ of ___ Pages
<PAGE>
or restrictions of the above classes of stock shall be
as follows:"
RESOLVED, that subject to the approval of the corporation's
stockholders, that the corporation's Restated Certificate of
Incorporation be amended to add ARTICLE ELEVEN thereto to read as
follows:
"The board of directors of the corporation shall be
divided into three (3) classes; the term of office of
those of the first class to expire at the annual
meeting next ensuing; of the second class one (1) year
thereafter; of the third class two (2) years
thereafter; and at each annual election held after such
classification and election, directors shall be chosen
for a full term, as the case may be, to succeed those
whose terms expire."
SECOND. That thereafter, the necessary number of shares
required by statute were voted in favor of said amendments at the
1997 Annual Meeting of the stockholders of said corporation duly
called and held on July 8, 1997 upon notice given in accordance
with Section 222 of the General Corporation Law of the State of
Delaware.
THIRD. That said amendments were duly adopted in accordance
with the provisions of Section 242 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, said American Resources of Delaware,
Inc. has caused this certificate to be signed by Rick G. Avare,
its President and Chief Executive Officer, this 10th day of July,
1997.
American Resources of Delaware, Inc.
By: s/Rick G. Avare
-------------------------------------
Rick G. Avare
President and Chief
Executive Officer
Page ___ of ___ Pages
<PAGE>
Exhibit 10.80
=================================================================
500,000
SHARES OF
COMMON STOCK, $0.00001 PAR VALUE
SECURITIES PURCHASE AGREEMENT
by and between
AMERICAN RESOURCES OF DELAWARE, INC.
and
Den norske Bank ASA
July 16, 1997
=================================================================
<PAGE>
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (the "Agreement") is made
and entered into as of July 16, 1997, by and among American
Resources of Delaware, Inc., a Delaware corporation (the
"Company") with its principal office at 160 Morgan Street,
Versailles, Kentucky 40383, and Den norske Bank ASA, a Norwegian
bank (the "Purchaser").
ARTICLE I. SALE OF COMMON STOCK
SECTION 1.1 SALE OF COMMON STOCK. Subject to the terms
and conditions of this Agreement, the Company agrees to issue and
sell to Purchaser and Purchaser agrees to purchase from the
Company, at the Closing (as defined in Section 2.1), 500,000
shares ("Shares") of common stock, $0.00001 par value per share
("Common Stock") for cash consideration equal to the "Market
Value" (as herein defined) per Share. The Market Value per share
of Common Stock shall equal the average of the closing sales
prices of the Common Stock on the Nasdaq Small Cap Market on the
30 trading days immediately preceding July 14, 1997 ($2.66 per
share).
ARTICLE II. CLOSING DATE; DELIVERY
SECTION 2.1 CLOSING DATE. The closing of the purchase and
sale of the Shares hereunder ("Closing") shall be held at the
offices of the Company, at 10:00 a.m. Lexington, Kentucky Time,
on July 16, 1997, or at such other time and place upon which the
Company and the Purchaser shall agree. The date of the Closing is
hereinafter referred to as the "Closing Date."
SECTION 2.2 DELIVERY; PAYMENT. At the Closing, the
Company will deliver to Purchaser a certificate or certificates,
registered in the Purchaser's name, representing the Shares
purchased by the Purchaser. Such delivery shall be against
payment of the purchase price therefor by wire transfer to the
Company's bank account set forth on Schedule II in the amount of
the purchase price of the Shares. At the Closing, the Company
and the Purchaser shall make the additional deliveries and take
the additional actions contemplated by Section 4.2.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF THE
COMPANY. The Company represents and warrants to the Purchaser as
follows:
(a) ORGANIZATION AND GOOD STANDING. The Company is a
corporation duly organized, validly existing and in good
standing under the laws of Delaware. The Company has full
corporate power and authority to own, use and lease its
properties and to conduct its business as such properties
are owned, used or leased and as such business is currently
conducted. The Company is duly qualified to do business as a
foreign corporation and is in good standing in each
<PAGE>
jurisdiction in which it owns or leases property or where
the conduct of its business would require such
qualification, except where the failure to be so qualified
would not have a material adverse effect on the condition,
financial or otherwise, or on the earnings, business affairs
or business prospects of the Company and its subsidiaries
taken as a whole ("Material Adverse Effect").
(b) CORPORATE POWER AND AUTHORITY; AUTHORIZATION. The
Company has full corporate power and authority to enter into
this Agreement and to perform its obligations hereunder,
including the issuance and sale of the Shares to the
Purchaser and to enter into and perform its obligations
under the Registration Rights Agreement attached as Exhibit
A and the Co-Sale Agreement attached as Exhibit B
(collectively, the "Ancillary Agreements"). The execution,
delivery and performance of this Agreement and the Ancillary
Agreements, and the consummation of the transactions
contemplated hereby and thereby have been duly authorized
and approved by the Board of Directors of Company, and no
other corporate proceeding on the part of the Company is
necessary to authorize and approve this Agreement and the
Ancillary Agreements and the transactions contemplated
hereby and thereby. This Agreement and the Ancillary
Agreements each will have been duly executed and delivered
by, and constitute a valid and binding obligation of, the
Company, enforceable against the Company in accordance with
its terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights
generally or by the principles governing the availability of
equitable remedies, and except that the enforceability of
indemnification provisions for the violation of securities
laws may be limited by public policy).
(c) CAPITAL STOCK. The authorized capital stock of
the Company is as set forth in the SEC Reports (as defined
herein). As of the date hereof, 9,682,922 shares of Common
Stock are issued and outstanding and 268,851 shares of
Series 1993 8% Convertible Preferred Stock, $12.00 par value
per share ("Series 1993 Preferred Stock"), are issued and
outstanding. All of the outstanding shares of Common Stock
and Series 1993 Preferred Stock are validly issued, fully
paid and nonassessable. There are not any outstanding
agreements, warrants, options, calls, preemptive or other
rights, or other commitments of any nature relating to any
of the authorized but unissued shares of capital stock or
other shares held in the treasury of the Company, other than
as described in the SEC Reports.
<PAGE>
(d) ISSUANCE AND DELIVERY OF THE SHARES. The Shares,
when issued in compliance with the provisions of this
Agreement, will be validly issued, fully paid and non-
assessable. The issuance and delivery of the Shares are not
subject to preemptive or any other similar rights of the
stockholders of the Company or any liens, claims or
encumbrances.
(e) SIGNIFICANT SUBSIDIARIES. Each significant
subsidiary of the Company, as defined in the Rules and
regulations of the Securities and Exchange Commission
("SEC") under the Securities Exchange Act of 1943 ("Exchange
Act") are identified in the SEC Reports. Except as set
forth in the SEC Reports, the Company has no stock or equity
interest in, or any commitment to acquire any such interest
in, any corporation, firm, partnership or organization and
is not a party to any joint venture or similar affiliation.
(f) NO CONFLICTS. The execution, delivery and
performance by the Company of this Agreement and the
Ancillary Agreements and the consummation of the transac-
tions contemplated hereby and thereby will not violate any
provision of law or conflict with, or result in any breach
of, or constitute a default under, or result in the creation
of a lien, claim or encumbrance on any of the properties or
assets of the Company pursuant to any corporate charter,
bylaw or regulation or any agreement, instrument, judgment
or decree to which the Company is a party or by which the
Company or its properties is or may be bound or affected, or
eliminate or impair any intangible right, concession
(including any tax concession), license or privilege allowed
to or enjoyed by the Company. No unobtained approval,
authorization, consent, order or other action of, or filing
with, any person, firm or corporation, or any court,
administrative agency or other governmental authority,
domestic or foreign, is required in connection with the
execution and delivery by the Company of this Agreement and
the Ancillary Agreements or the consummation by the Company
of the transactions contemplated hereby or thereby,
including the issuance of the Shares to the Purchaser,
except for post-Closing filings required to perfect
exemptions under and to comply with federal and state
securities laws.
(g) ACCURACY OF SEC REPORTS. None of the Reports,
schedules or other documents, including exhibits and
schedules thereto, or materials incorporated by reference
therein, filed with the SEC since January 1, 1997
(collectively, and including all exhibits and schedules
incorporated by reference, the "SEC Reports"), as of their
respective dates contained any untrue statement of material
fact or omits or omitted to state a material fact required
to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they
were made, not misleading. Purchaser has been given true and
correct copies of the SEC Reports. The financial statements
<PAGE>
of the Company included in the SEC Reports (the "Financial
Statements") have been prepared in accordance with generally
accepted accounting principles consistently applied and
fairly present the financial position of the Company at the
dates thereof and the results of operations and cash flows
for the periods then ended (subject, in the case of
unaudited statements, to normal, recurring adjustments that
are not in the aggregate material).
(h) NO MATERIAL CHANGE. Except as otherwise disclosed
herein or in the SEC Reports, since March 31, 1997, there
has not been:
(1) Any change in the financial condition or
results of operations of the Company from that
reflected in the Financial Statements except changes in
the ordinary course of business which have not been,
either individually or in the aggregate, materially
adverse;
(2) Any material increase in indebtedness for
borrowed money, current liabilities or total
liabilities (whether absolute, accrued, contingent or
otherwise) incurred by the Company, except for
liabilities, commitments and obligations incurred in
the ordinary course of business;
(3) Any sale, assignment, transfer or other
disposition of, or any loss or damage to, any material
tangible or intangible asset of the Company, except in
the ordinary course of business;
(4) Any extraordinary transaction by the Company;
(5) Any execution or authorization of a material
agreement by the Company; or
(6) Any amendment, alteration or other change to
the Certificate of Incorporation or By-Laws of the
Company other than the amendments approved at the
stockholders meeting of the Company held July 8, 1997.
(i) LITIGATION. Except as set forth in the SEC
Reports, there are no actions, suits, proceedings or
investigations pending or, to the best of the Company's
<PAGE>
knowledge, threatened against the Company or any of its
properties before or by any court or arbitrator or any
governmental body, agency or official in which there is a
reasonable likelihood (in the judgment of the Company) of an
adverse decision that (a) could have a Material Adverse
Effect or (b) could impair the ability of the Company to
perform in any material respect its obligations under this
Agreement.
(j) COMPLIANCE. The Company and its use and occupancy
of its assets and properties wherever located, are in
substantial compliance in all material respects with all,
and, to its knowledge, not in violation of any, and the
Company has not received any claim or notice that it is not
in material compliance with, or that it is in violation of
any, applicable federal, state, local or other governmental
laws or ordinances, or any order, rule or regulation of any
federal, state or local or other governmental agency or
body, to which the Company or its respective businesses,
operations, agents, employees, assets or properties are
subject (including, without limitation, all record keeping
and reporting requirements thereof); nor has the Company
failed to obtain or to adhere to the requirements of any
government license, permit or authorization reasonably
necessary to the ownership of its assets and properties or
the conduct of its business, which noncompliance, violation
or failure to obtain or adhere would have a Material Adverse
Effect.
(k) INDEPENDENT ACCOUNTANTS. The certified public
accountants who have certified certain financial statements
of the Company included in the SEC Reports, are independent
public accountants as required by the Securities Act of
1933, as amended ("Securities Act") and the rules and
regulations thereunder.
(l) RESERVE INFORMATION. The information supplied by
the Company to the independent petroleum engineering
consultants for the Company for purposes of preparing the
reserve reports and estimates of such consultants included
in the SEC Reports ("Reserve Reports"), including, without
limitation, production, costs of operation and development,
current prices for production, agreements relating to
current and future operations and sales of production, was
true and correct in all material respects on the date
supplied and was prepared in accordance with customary
industry practices; Netherland, Sewell & Associates, Inc.
and Richard M. Russell & Associates, Inc., who prepared
estimates of the amount and value of proved reserves of the
Company as set forth in the SEC Reports, are independent
with respect to the Company. The information with respect
to the estimated quantities of the Company's proved reserves
and the present value of such reserves included in the SEC
Reports was prepared in accordance with the rules and
guidelines set forth in the rules and regulations of the
<PAGE>
Securities and Exchange Commission ("SEC") for inclusion of
reserve information in financial statements filed with the
SEC.
(m) INVESTMENT COMPANY; PUBLIC UTILITY HOLDING
COMPANY. The Company is not an "investment company" as
defined in the Investment Company Act of 1940, as amended,
and the rules and regulations promulgated thereunder, and
the Company is not a "holding company" or and "affiliate" of
a holding company or public utility as defined in the Public
Utility Holding Company Act of 1940, as amended, and the
rules and regulations promulgated thereunder.
(n) OIL AND GAS PROPERTIES. The Company has
defensible title to its oil and gas properties and gas
gathering properties free and clear of all liens,
encumbrances and defects, except (1) those described in the
SEC Reports, (2) liens securing taxes and other governmental
charges, or claims of materialmen, mechanics and similar
persons, not yet due and payable, (3) liens and encumbrances
under operating agreements, unitization and pooling
agreements, and gas sales contracts, securing payment of
amounts not yet due and payable and of a scope and nature
customary in the oil and gas business and (4) liens,
encumbrances and defects that do not in the aggregate
materially and adversely affect the value of such oil and
gas properties or gas gathering properties or materially and
adversely affect the use made or proposed to be made of such
properties by the Company; except as described in the SEC
Reports, the oil, gas and mineral leases, options to lease,
concessions or other property interests held by the Company
reflect in all material respects the right of the Company to
explore for or receive production from the undeveloped
properties included in the Reserve Reports, and the care
taken by the Company with respect to acquiring or otherwise
procuring such leases, options to lease, drilling
concessions and other property interests was generally
consistent with standard industry practices for acquiring or
procuring leases and interests therein to explore such for
hydrocarbons.
(o) PAYMENTS. All royalties, rentals, deposits and
other amounts required to be paid under the producing oil
and gas leases of the Company have been properly and timely
paid, and no proceeds from the sale of production
attributable to the producing oil and gas leases of the
Company are currently being held in suspense by any
purchaser thereof, and there are no claims under take-or-pay
contracts pursuant to which natural gas purchasers have any
<PAGE>
make-up rights affecting the interest of the Company in its
oil and gas properties which, in any such case, would have a
Material Adverse Effect.
(p) BALANCING. The aggregate undiscounted net
monetary liability, after giving effect to oil and gas due
from co-owners, of the Company for oil or gas taken or
received under any operating or gas balancing and storage
agreement relating to its oil and gas properties that
permits any person to receive any portion of the interest of
the Company in oil or gas or to receive cash or other
payments to balance any disproportionate allocation of oil
or gas will not, singularly or in the aggregate, have a
Material Adverse Effect.
(q) ENVIRONMENTAL LAWS. The Company (A) is in
compliance with any and all applicable federal, state and
local laws and regulations relating to the protection of
human health and safety, the environment or hazardous or
toxic substances or waste, pollutants or contaminants
("Environmental Laws"), (B) has received all permits,
licenses or other approvals required of it under applicable
Environmental Laws to conduct its business and (C) is in
compliance with all terms and conditions of any such permit,
license or approval, except for such noncompliance with
Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals
that would not, singularly or in the aggregate, have a
Material Adverse Effect. There has been no storage,
disposal, generation, transportation, handling or treatment
of hazardous substances or solid wastes by the Company (or
to the knowledge of the Company, any of its predecessors in
interest) at, upon or from any of the property now or
previously owned or leased by the Company in violation of
any applicable law, ordinance, rule, regulation, order,
judgment, decree or permit or which would require remedial
action by the Company under any applicable law, ordinance,
rule, regulation, order, judgment, decree or permit, except
for any violation or remedial action which would not result
in, or which would not be reasonably likely to result in,
singularly or in the aggregate with all such violations and
remedial actions, a Material Adverse Effect; there has been
no spill, discharge, leak, emission, injection, escape,
dumping or release of any kind onto such property or into
the environment surrounding such property of any solid
wastes or hazardous substances due to or caused by a knowing
act or omission by the Company, except for any such spill,
discharge, leak, emission, injection, escape, dumping or
release which would not result in or would not be reasonably
likely to result in, singularly or in the aggregate with all
such spills, discharges, leaks, emissions, injections,
escapes, dumpings or releases, a Material Adverse Effect;
and the terms "hazardous substances" and "solid wastes"
shall have the meanings specified in any applicable local,
state and federal laws or regulations with respect to
environmental protection.
<PAGE>
(r) REGISTRATION RIGHTS. Except for the
registration rights granted in connection with (i) the
Registration Rights Agreement, (ii) described in the
SEC Reports or (iii) granted in connection with
securities previously registered, the Company has not
agreed to register the sale of any of securities issued
or guaranteed by it under the Securities Act.
(s) CONTRACTS. The Company is not a party to, or
in any way obligated under, nor is any property or
asset of the Company subject to, any contract, lease or
other obligation, absolute or contingent, the term of
which (including all renewal periods other than those
at the option solely of the Company) may extend beyond
twelve months from the date of this Agreement other
than (i) those disclosed in the SEC Reports, (ii) those
for materials or supplies, none of which calls for
aggregate payments in excess of $100,000 in any one
fiscal year, and (iii) oil and gas leases, operating
agreements, farm-in and farm-out agreements, pooling or
unitization agreements and similar agreements related
to the exploration, development and production of oil
or gas in the ordinary course of the Company's
business. The Company is not a party to, or in any way
obligated under, and no property or asset of the
Company is subject to, any contract or commitment
which, in the opinion of the Company, is unusually
burdensome or of a kind or character which may in the
future materially adversely affect the business
operations or the financial condition of the Company.
(t) CONTRACTUAL DEFAULTS. The Company is not in
default (nor has the Company been notified to such
effect) with respect to any obligation to be performed
under any material contract, lease, guaranty,
indenture, loan agreement, document or other agreement
or arrangement (each, a "Contract") to which any of the
assets of the Company is subject. No other person whose
obligations under a Contract have been guaranteed by
the Company is in default, and the Company is not aware
of any event which, with the passage of time, the
giving of notice, or both, would constitute such a
default. Neither the execution and delivery of this
Agreement nor the consummation of the transactions
contemplated hereby will constitute a default under any
Contract or impose any penalty upon the Company in the
performance of such Contract, or accelerate the
performance thereof, or result in the creation of any
lien, charge or encumbrance upon any of the properties
or assets of the Company or make any Contract to which
the Company is a party subject to termination or
cancellation. All parties with which the Company has
contractual arrangements are, to the knowledge of the
Company, in substantial compliance therewith and are
<PAGE>
not in default (and no event has occurred which, with
the passage of time, the giving of notice, or both,
would constitute a default) thereunder.
(u) INSURANCE. All of the Company's policies of
insurance are on the date hereof valid and enforceable
in accordance with their terms and in full force and
effect with all premiums thereon then due having been
paid.
(v) EMPLOYMENT AGREEMENTS, ERISA, ETC. The
Company has no employment or other agreements with any
of its directors or officers except as set forth in the
SEC Reports. Except as set forth in the SEC Reports,
the Company does not maintain or contribute to, nor has
it heretofore maintained or contributed to any
"employee benefit plan", within the meaning of Section
3 of the Employee Retirement Income Security Act of
1974, as amended, including the regulations promulgated
thereunder ("ERISA"), including, but not limited to,
any bonus, percentage compensation, profit sharing,
deferred compensation, retirement, pension or union
plan, or any other agreement, policy, or practice
providing pension or welfare benefits to current or
former employees of the Company. There are no, claims,
suits or proceedings which might cause the Company to
incur any liability to any employee or former employee,
including any liability for severance payments.
(y) TAX RETURNS AND LIABILITIES. The Company has
(i) filed all tax returns relating to its operations
required to be filed by any jurisdiction to which they
are or have been subject, (ii) paid in full all taxes
due and all taxes claimed to be due by each such
jurisdiction, and any interest and penalties with
respect thereto, subject to audit by the taxing
authority of such jurisdiction, (iii) fully accrued on
its books all taxes for any period which are not yet
due and (iv) made timely payments of the taxes required
to be deducted and withheld from the wages paid to its
employees. All federal, state and local tax returns,
schedules, declarations and other tax related documents
filed by the Company correctly reflect income, expense,
deductions, credits and loss carryovers of the Company
and the taxes due and are otherwise accurate and
complete in all material respects and have not been
amended. The Company has not received any notice of
deficiency or assessment or proposed deficiency or
assessment from any federal, state, local or foreign
taxing authority which has not been paid. There are no
agreements, consents or waivers by the Company for the
extension of the time for the assessment of any taxes
or deficiencies against the Company or with respect to
its operations or assets, and no power of attorney
granted by the Company with respect to any matter
relating to taxes is currently in force.
<PAGE>
(z) DISCLAIMER. The Company shall not be deemed
to have made to Purchaser any representation or
warranty other than as expressly made in Section 3.1
hereof. Without limiting the generality of the
foregoing, and notwithstanding any otherwise express
representations and warranties made by the Company
herein, the Company makes no representation or warranty
to the Purchaser with respect to: (i) any projections,
estimates or budgets heretofore delivered to or made
available to Purchaser of future revenues, expenses or
expenditures or future results of operations; or (ii)
except as expressly provided in Section 3.1 hereof, any
other information or documents (financial or otherwise)
made available to Purchaser or its counsel, accountants
or advisers with respect to the Company.
SECTION 3.2. REPRESENTATIONS, WARRANTIES AND
COVENANTS OF THE PURCHASER. Purchaser hereby represents and
warrants to the Company, as follows:
(a) AUTHORIZATION. Purchaser represents and
warrants to the Company that: (i) Purchaser has all
requisite legal and corporate or other power and
capacity and has taken all requisite corporate or other
action to execute and deliver this Agreement and the
Ancillary Agreements and to carry out and perform all
of its obligations under this Agreement and the
Ancillary Agreements; and (ii) this Agreement and the
Ancillary Agreements each constitutes the legal, valid
and binding obligation of the Purchaser, enforceable in
accordance with its terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, or
similar laws relating to or affecting the enforcement
of creditors' rights generally and (b) as limited by
equitable principles generally.
(b) INVESTMENT EXPERIENCE. Purchaser is an
"accredited investor" as defined in Rule 501(a) under
the Securities Act. Purchaser is aware of the Company's
business affairs and financial condition and has had
access to and has acquired sufficient information about
the Company to reach an informed and knowledgeable
decision to acquire the Shares. Purchaser has such
business and financial experience as is required to
give it the capacity to protect its own interests in
connection with the purchase of the Shares.
(c) INVESTMENT INTENT. Purchaser has not been
formed for the purpose of acquiring the Shares.
Purchaser is purchasing the Shares for its own account
as principal, for investment purposes only, and not
with a present view to, or for, resale, distribution or
fractionalization thereof, in whole or in part, within
<PAGE>
the meaning of the Securities Act. Purchaser
understands that its acquisition of the Shares has not
been registered under the Securities Act or registered
or qualified under any state securities law in reliance
on specific exemptions therefrom, which exemptions may
depend upon, among other things, the bona fide nature
of Purchaser's investment intent as expressed herein.
Purchaser has, in connection with its decision to
purchase the Shares relied solely upon the SEC Reports,
the representations and warranties of the Company
contained herein and the investigation conducted by
Purchaser of the Company and its business, assets,
liabilities and prospects. Purchaser will not, directly
or indirectly, offer, sell, pledge, transfer or
otherwise dispose of (or solicit any offers to buy,
purchase or otherwise acquire or take a pledge of) any
of the Shares except in compliance with the Securities
Act, applicable state securities laws, and the rules
and regulations promulgated thereunder.
(d) REGISTRATION OR EXEMPTION REQUIREMENTS.
Purchaser further acknowledges and understands that the
Shares may not be resold or otherwise transferred
except in a transaction registered under the Securities
Act or unless an exemption from such registration is
available. Purchaser understands that the
certificate(s) evidencing the Shares will be imprinted
with a legend that prohibits the transfer of the Shares
unless (i) they are registered or such registration is
not required, and (ii) if the transfer is pursuant to
an exemption from registration other than Rule 144
under the Securities Act and, if the Company shall so
request in writing, an opinion of counsel reasonably
satisfactory to the Company is obtained to the effect
that the transaction is so exempt.
(e) BROKERS. There are no brokerage commissions,
finder's fees or similar fees or commissions payable in
connection with the transactions contemplated hereby
based on any agreement, arrangement or understanding
with the Purchaser or any action taken by the
Purchaser.
(f) NO LEGAL, TAX OR INVESTMENT ADVICE. Purchaser
understands that nothing in this Agreement or any other
materials provided to Purchaser in connection with the
purchase and sale of the Shares constitutes legal, tax
or investment advice. Purchaser has consulted such
legal, tax and investment advisors as it, in its sole
discretion, has deemed necessary or appropriate in
connection with its purchase of the Shares.
<PAGE>
ARTICLE IV. CONDITIONS TO CLOSING
SECTION 4.1 CLOSING CONDITIONS OF PURCHASER.
Purchaser's obligation to purchase the Shares at the Closing
is, at the option of Purchaser, subject to the fulfillment
or waiver as of the Closing Date of the following
conditions:
(a) INFORMATION TO BE SUPPLIED. The Company has
delivered or made available to, or caused the Company
to deliver or make available to, the Purchaser the
following documents and schedules of information
relating to the Company and the business conducted by
the Company. The Company represents to the best of its
knowledge that such documents and schedules of
information are true, correct and complete.
(i) CHARTER AND BY-LAWS. (a) Copies of the
articles of incorporation, as amended to date, of
the Company, certified by the Secretary of State
or other appropriate official of the State of
Delaware, and (b) the By-Laws of the Company,
certified as true, correct and complete by an
appropriate officer of the Company.
(ii) MINUTES. Minutes of all meetings of, or
other evidence of action taken by, the
shareholders, the Board of Directors or any
committee of the Board of Directors of the
Company.
(iii) LOAN AGREEMENTS; LIENS. A list,
together with copies of: (A) agreements, notes,
instruments or other documents relating to
indebtedness of or to the Company (other than open
accounts payable), or money borrowed, or money
loaned, or issued by or to the Company in
satisfaction of obligations of or to the Company,
including all mortgages, loan, credit, surety,
guarantee, and lease-purchase arrangements or
other financing agreements to which the Company is
a party; and (B) all conditional sales contracts,
chattel mortgages and other security agreements or
arrangements with respect to personal property
used or owned by the Company.
(iv) TAX RETURNS. Complete and correct copies
of all income, franchise and other tax returns
related to the operations of the Company for each
of the three fiscal years ended on December 31,
1996, together with complete and correct copies of
all reports of tax authorities relating to
examinations of such returns. In addition, the
<PAGE>
Company shall make available to the Purchaser for
inspection all other tax returns, including sales
and use tax returns, related to the operations of
the business of the Company.
(b) REPRESENTATIONS AND WARRANTIES TRUE;
COVENANTS PERFORMED. The representations and
warranties made by the Company in this Agreement shall
be true and correct at the Closing in all material
respects, and all covenants required to be performed by
the Company prior to the Closing Date shall have been
performed in all material respects. The Company shall
have furnished to the Purchaser certificates of
officers of the Company as to the accuracy of the
representations and warranties of the Company as of the
Closing Date, compliance with all agreements and
conditions under this Agreement and as to such other
matters as the Purchaser may reasonably request.
(c) DELIVERY OF CERTIFICATES. The Company shall
have made delivery of certificates representing the
Shares as required by Article I.
(d) LEGAL OPINION. Purchaser shall receive a
legal opinion of David Stetson, general counsel to the
Company, in substantially the form of Exhibit C.
(e) NO MATERIAL ADVERSE CHANGE. There shall not
have occurred any event which has caused a Material
Adverse Effect since March 31, 1997, and no event shall
have occurred which could, in the opinion of Purchaser,
be expected to have a Material Adverse Effect.
(f) CONDUCT OF BUSINESS. Other than in
connection with the transactions contemplated by this
Agreement, the Company shall have conducted its
business in the ordinary course from the date hereof to
the Closing Date, and no extraordinary or other
material transactions not in the ordinary course of
business shall have occurred without the Purchaser's
consent.
(g) CHARTER AND BY-LAWS OF THE COMPANY. No
amendments to the Certificate of Incorporation or By-
Laws of the Company as in effect on the date hereof
shall have been effected.
(h) MARKET CONDITIONS. Between the date hereof
and the Closing Date, (a) trading in securities
generally on the New York Stock Exchange shall not have
been suspended or limited or minimum or maximum prices
shall not have been generally established on such
<PAGE>
exchange, or additional material governmental
restrictions, not in force on the date of this
Agreement, shall not have been imposed upon trading in
securities generally by such exchange or by order of
the SEC or any court or governmental authority; (b) a
general banking moratorium shall not have been declared
by either federal or New York state authorities and (c)
there shall not have occurred any material adverse
change in the financial or securities markets in the
United States or in political, financial of economic
conditions in the United States or any outbreak of
material escalation of hostilities or declaration by
the United States of a national emergency or war or
other calamity or crisis.
(i) LITIGATION. No action, suit, proceeding,
claim or dispute shall have been brought or otherwise
arisen at law, in equity, in arbitration or before any
governmental authority against the Company which would,
if adversely determined, in the reasonable judgment of
the management of the Company, (i) have a Material
Adverse Effect on the condition of the Company or (ii)
have a Material Adverse Effect on the ability of the
Company to perform its obligations under this Agreement
or the Ancillary Agreements.
(j) REGISTRATION RIGHTS AGREEMENT. The Company
shall have executed and delivered the Registration
Rights Agreement in substantially the form attached as
Exhibit A.
(k) STOCKHOLDERS' AGREEMENT. The Company and
certain stockholders of the Company shall have executed
and delivered the Co-Sale Agreement attached as Exhibit
B.
(l) PROCEEDINGS SATISFACTORY TO COUNSEL. All
proceedings, corporate or otherwise, to be taken by the
Company in connection with the transactions
contemplated by this Agreement, and all documents
incident thereto, shall be satisfactory in form and
substance to the Purchaser, and the Company shall have
made available to counsel for the Purchaser all records
and documents relating to the business and affairs of
the Company which such counsel may reasonably request
in connection with its review as aforesaid.
SECTION 4.2 CONDITIONS TO CLOSING OF COMPANY. The
Company's obligation to sell and issue the Shares at the
Closing is, at the option of the Company, subject to the
fulfillment or waiver of the following conditions:
<PAGE>
(a) REPRESENTATIONS AND WARRANTIES. The
representations and warranties made by the Purchaser in
Section 3.2 hereof shall be true and correct in all
material respects on the Closing Date.
(b) COVENANTS. All covenants, agreements and
conditions contained in this Agreement to be performed
by Purchaser on or prior to the Closing Date shall have
been performed or complied with by Purchaser in all
material respects.
(c) PURCHASE PRICE. Purchaser shall have paid
the purchase price of the Shares as contemplated by
Section 2.2.
(d) REGISTRATION RIGHTS AGREEMENT. The Purchaser
shall have executed and delivered the Ancillary
Agreements in substantially the form of Exhibits A and
B.
ARTICLE V. COVENANTS AND AGREEMENTS
SECTION 5.1 FINANCIAL INFORMATION. The Company
hereby covenants and agrees to provide the following to
Purchaser until it transfers, assigns or sells all of the
Shares purchased by such Purchaser pursuant to this
Agreement:
(a) Within one hundred twenty days after the end
of each fiscal year, a copy of its Annual Report on
Form 10-K or Form 10-KSB.
(b) Within sixty (60) days after the end of the
first, second and third quarterly accounting periods of
each fiscal year of the Company, a copy of its
Quarterly Report on Form 10-Q or Form 10-QSB.
(c) Promptly, all information sent or delivered
to holders of the Common Stock of the Company.
(d) Promptly, any reports, schedules or other
documents filed by the Company with the SEC.
SECTION 5.2 ANCILLARY AGREEMENTS. At the Closing,
each of the Purchaser and the Company agree to execute and
deliver the Ancillary Agreements in the forms attached as
Exhibits hereto.
SECTION 5.4 INSPECTION. The Company will permit
representatives of the Purchaser to visit and inspect any of
its properties, to examine its corporate, financial and
operating records and make copies thereof and abstracts
therefrom, and discuss its affairs, finances and accounts
with its directors, executive officers and accountants, all
<PAGE>
at such reasonable times during normal business hours and as
may be reasonably requested, upon reasonable notice to the
Company.
SECTION 5.5 REGISTRATION AND LISTING. If any shares
of Common Stock require registration with or approval of any
governmental authority under any federal or state or other
applicable law before such Common Stock may be issued, the
Company will in good faith and as expeditiously as possible,
cause the Common Stock to be duly registered or approved, as
the case may be, unless such registration is caused by a
breach of the Purchaser's representations in Section 3.2.
The Company shall cause the Shares to be included for
quotation on the Nasdaq Small Cap Market and, after the date
of such inclusion, shall cause its shares of Common Stock to
continue to be quoted on the Nasdaq NMS or Small Cap Market
or listed on a national securities exchange.
ARTICLE VI. RESTRICTIONS ON TRANSFERABILITY OF SHARES
SECTION 6.1 RESTRICTIONS ON TRANSFERABILITY. The
Shares shall not be transferred in the absence of a
registration under the Securities Act or an exemption
therefrom or in the absence of compliance with any term of
this Agreement. The Company shall be entitled to give stop
transfer instructions to its transfer agent with respect to
the Common Stock in order to enforce the foregoing
restrictions.
SECTION 6.2 LEGEND. Each certificate representing
the Shares shall bear the following legend (in addition to
any legends required under applicable state securities
laws):
"The transfer of the Common Stock represented by
this certificate has not been registered under the
Securities Act of 1933, as amended ("Act"), has been
acquired for investment and not with a view to the
distribution thereof, and may not be sold, offered for
sale, transferred, pledged or hypothecated unless (i)
the sale, transfer, pledge or hypothecation of such
shares is registered under such Act, (ii) there is
furnished an opinion of counsel satisfactory in form
and substance to the Company that registration of such
shares under such Act is not required, or (iii) the
holder of such shares provides evidence satisfactory to
the Company that an exemption from registration is
available."
Such certificates shall be endorsed on the front
thereof as follows:
"See restrictions on transfer hereof on reverse
side."
<PAGE>
ARTICLE VII. MISCELLANEOUS
SECTION 7.1 WAIVERS AND AMENDMENTS. The terms of
this Agreement may be waived or amended with the written
consent of the Company and the Purchaser.
SECTION 7.2 GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED IN ALL RESPECTS BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF DELAWARE WITHOUT ANY REGARD TO
CONFLICTS OF LAWS PRINCIPLES.
SECTION 7.3 SURVIVAL. The representations,
warranties, covenants and agreements made in this Agreement
shall survive any investigation made by the Purchaser and
the Closing.
SECTION 7.4 SUCCESSORS AND ASSIGNS. The provisions
hereof shall inure to the benefit of, and be binding upon,
the successors, assigns, heirs, executors and administrators
of the parties to this Agreement. Notwithstanding the
foregoing, Purchaser shall not assign this Agreement or
assign any of Purchaser's rights or delegate any of
Purchaser's duties under this Agreement without the prior
written consent of the Company.
SECTION 7.5 ENTIRE AGREEMENT. This Agreement
constitutes the full and entire understanding and agreement
between the parties with regard to the subjects thereof.
SECTION 7.6 NOTICES, ETC. All notices and other
communications required or permitted under this Agreement
shall be effective upon receipt and shall be in writing and
may be delivered in person, by telecopy, overnight delivery
service or registered or certified United States mail,
addressed to the Company or the Purchaser, as the case may
be, at their respective addresses set forth at the beginning
of this Agreement or on the signature page hereof, or at
such other address as the Company or the Purchaser shall
have furnished to the other party in writing. All notices
and other communications shall be effective upon the earlier
of actual receipt thereof by the person to whom notice is
directed or (i) in the case of notices and communications
sent by personal delivery or telecopy, one business day
after such notice or communication arrives at the applicable
address or was successfully sent to the applicable telecopy
number, (ii) in the case of notices and communications sent
by overnight delivery service, at noon (local time) on the
second business day following the day such notice or
communication was sent, and (iii) in the case of notices and
communications sent by United States mail, seven days after
such notice or communication shall have been deposited in
the United States mail.
SECTION 7.7 SEVERABILITY OF THIS AGREEMENT. If any
provision of this Agreement shall be judicially determined
to be invalid, illegal or unenforceable, the validity,
<PAGE>
legality and enforceability of the remaining provisions
shall not in any way be affected or impaired thereby.
SECTION 7.8 COUNTERPARTS. This Agreement may be
executed in any number of counterparts, each of which shall
be an original, but all of which together shall constitute
one instrument.
SECTION 7.9 FURTHER ASSURANCES. Each party to this
Agreement shall do and perform or cause to be done and
performed all such further acts and things and shall execute
and deliver all such other agreements, certificates,
instruments and documents as the other party hereto may
reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
SECTION 7.10 EXPENSES. The Company shall bear its own
expenses incurred on its behalf with respect to this
Agreement and the transactions contemplated hereby,
including fees of legal counsel, and shall reimburse
Purchaser for its expenses incurred with respect to this
Agreement and the transactions contemplated hereby,
including fees of legal counsel.
SECTION 7.11 CURRENCY. All references to "dollars" or
"$" in this Agreement shall be deemed to refer to United
States dollars.
IN WITNESS WHEREOF, the Company and Purchaser have
executed this Agreement as of the date first above written.
Address "COMPANY"
AMERICAN RESOURCES OF
DELAWARE, INC.
160 Morgan Street
Versailles, Kentucky 40383 By: \s\ Rick G. Avare
--------------------------
Name: Rick G. Avare
------------------------
Attention: David Stetson Title: President
-----------------------
"PURCHASER"
DEN NORSKE BANK ASA
Stranden 21
N-0107 Oslo, Norway By: \s\ William V. Moyer
--------------------------
Name: William V. Moyer
------------------------
Fredrik Wahl Title: First Vice President
-----------------------
<PAGE>
Exhibit 10.81
Exhibit A to
Securities Purchase Agreement
============================================================
REGISTRATION RIGHTS AGREEMENT
by and between
AMERICAN RESOURCES OF DELAWARE, INC.
a Delaware Corporation
(the "Company")
and
Den norske Bank ASA
a Norwegian bank
("Stockholder")
July 16, 1997
============================================================
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement") is
entered into as of this 16th day of July, 1997, by and
between American Resources of Delaware, Inc., a Delaware
corporation (the "Company"), and Den norske Bank ASA, a
Norwegian bank ("Stockholder") and evidences that for good
and valuable consideration, the receipt and sufficiency of
which is acknowledged, the parties hereto agree as follows:
ARTICLE I. DEFINITIONS
SECTION 1.1. DEFINITIONS. As used herein, unless the
context otherwise requires, the following terms have the
following respective meanings:
COMMISSION: The Securities and Exchange Commission or
any other Federal agency at the time administering the
Securities Act.
COMMON STOCK: The common stock, par value $0.00001, of
the Company.
COMPANY: As defined in the introductory paragraph of
this Agreement.
EXCHANGE ACT: The Securities Exchange Act of 1934, or
any similar federal statute, and the rules and regulations
of the Commission thereunder, all as the same shall be in
effect at the time. Reference to a particular section of
the Securities Exchange Act of 1934 shall include a refer-
ence to the comparable section, if any, of any such similar
federal statute.
INITIATING HOLDERS: Any holder or holders of at least
51% of the Registrable Securities by number of shares at the
time outstanding and initiating a request pursuant to
Section 2.1 for the registration of all or part of such
holder's or holders' Registrable Securities.
PERSON: A corporation, an association, a partnership,
an organization, business, an individual, a governmental or
political subdivision thereof or a governmental agency.
PURCHASE AGREEMENT: The Securities Purchase Agreement
between the Company and the Stockholder of even date
herewith.
REGISTRABLE SECURITIES: (a) any shares of Common Stock
issued to the Stockholder pursuant to the Purchase
Agreement, (b) any securities issued or issuable with
<PAGE>
respect to any Common Stock referred to in the foregoing
subdivision by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise.
As to any particular Registrable Securities, once issued
such securities shall cease to be Registrable Securities
when (a) a registration statement with respect to the sale
of such securities shall have become effective under the
Securities Act and such securities shall have been disposed
of in accordance with such registration statement, (b) they
shall have been distributed to the public pursuant to Rule
144 (or any successor provision) under the Securities Act,
(c) they shall have been otherwise transferred, new
certificates for them not bearing a legend restricting
further transfer shall have been delivered by the Company
and subsequent disposition of them shall not require
registration or qualification of them under the Securities
Act or any similar state law then in force, or (d) they
shall have ceased to be outstanding.
REGISTRATION EXPENSES: All expenses incident to the
Company's performance of or compliance with Article II or
III, including, without limitation, all registration,
filing, listing, and NASD fees, all fees and expenses of
complying with securities or blue sky laws, all word
processing, duplicating, printing and engraving expenses,
messenger and delivery expenses, the fees and disbursements
of counsel for the Company and of its independent public
accountants, including the expenses of any special audits or
"cold comfort" letters required by or incident to such per-
formance and compliance, the fees and disbursements of a
single counsel and accountants retained by the holder or
holders of more than 51% of the Registrable Securities being
registered, premiums and other costs of policies of in-
surance against liabilities arising out of the public
offering of the Registrable Securities being registered and
any fees and disbursements of underwriters customarily paid
by issuers or sellers of securities, but excluding
underwriting discounts and commissions and transfer taxes,
if any.
REQUESTING HOLDER: As defined in Section 4.8 of this
Agreement.
SECURITIES ACT: The Securities Act of 1933, or any
similar Federal statute, and the rules and regulations of
the Commission thereunder, all as of the same shall be in
effect at the time. References to a particular section of
the Securities Act of 1933 shall include a reference to the
comparable section, if any, of any such similar Federal
statute.
<PAGE>
ARTICLE II. DEMAND REGISTRATION
SECTION 2.1. REQUEST. Upon the written request of
one or more Initiating Holders, requesting that the Company
effect the registration under the Securities Act of all or
part of such Initiating Holders' Registrable Securities and
specifying the intended method of disposition thereof, the
Company will promptly give written notice of such requested
registration to all registered holders of Registrable
Securities, and thereupon the Company will use its best ef-
forts to effect the registration under the Securities Act of
the following:
(a) the Registrable Securities which the Company
has been so requested to be registered by such
Initiating Holders for disposition in accordance with
the intended method of disposition stated in such
request;
(b) all other Registrable Securities the holders
of which shall have made a written request to the
Company for registration thereof within 30 days after
the giving of such written notice by the Company (which
request shall specify the intended method of
disposition of such Registrable Securities); and
(c) all shares of Common Stock which the Company
may elect to register in connection with the offering
of Registrable Securities pursuant to this Article II;
all to the extent requisite to permit the disposition (in
accordance with the intended methods thereof as aforesaid)
of the Registrable Securities and the additional shares of
Common Stock, if any, so to be registered; provided, that,
the provisions of this Article II shall not require the
Company to effect more than one registration of Registrable
Securities; and provided further, that the Initiating
Holders shall not be entitled to request a registration of
Registrable Securities under this Section 2.1 if the
restrictions on resale of Registrable Securities shall have
previously terminated pursuant to Rule 144(k) promulgated
under the Securities Act.
SECTION 2.2. REGISTRATION STATEMENT FORM. Regis-
trations under this Article II shall be on an appropriate
registration form of the Commission (i) as shall be selected
by the Company and shall be reasonably acceptable to the
holders of more than fifty percent (by number of shares) of
the Registrable Securities so to be registered and (ii) as
shall permit the disposition of such Registrable Securities
in accordance with the intended method or methods of
disposition specified in their request for such regis-
tration. The Company agrees to include in any such
<PAGE>
registration statement all information which holders of
Registrable Securities being registered shall reasonably
request, but only if such information is furnished to the
Company by a written instrument duly executed by the holder
of the Registrable Securities specifying that it is for use
in the registration statement, preliminary prospectus, final
prospectus, summary prospectus or any amendment or
supplement thereto.
SECTION 2.3. EXPENSES. The Company will pay all
Registration Expenses in connection with any registration
requested pursuant to this Article II.
SECTION 2.4. EFFECTIVE REGISTRATION STATEMENT. A
registration requested pursuant to this Article II shall not
be deemed to have been effected (i) unless a registration
statement with respect thereto has become effective;
provided, that a registration which does not become
effective after the Company has filed a registration
statement with respect thereto solely by reason of the
refusal to proceed of the Initiating Holders (other than a
refusal to proceed based upon the advice of counsel relating
to a matter with respect to the Company) shall be deemed to
have been effected by the Company at the request of such
Initiating Holders unless the Initiating Holders shall have
elected to pay all Registration Expenses in connection with
such registration, (ii) if, after it has become effective,
such registration is withdrawn by the Company (other than at
the request of a majority of the Initiating Holders), in-
terfered with by any stop order, injunction or other order
or requirement of the Commission or other governmental
agency or court for any reason prior to the expiration of a
180 day period following such registration statement
effectiveness (or, in the case of a Shelf Registration, the
time period provided in Section 2.9), or (iii) the con-
ditions to closing specified in any purchase agreement or
underwriting agreement entered into in connection with such
registration are not satisfied, other than due solely to
some act or omission by such Initiating Holders.
SECTION 2.5. SELECTION OF UNDERWRITERS. If a
requested registration pursuant to this Article II involves
an underwritten offering, the underwriter or underwriters
thereof shall be selected by the consent of holders of a
majority (by number of shares) of Registrable Securities and
shall be reasonably acceptable to the Company.
SECTION 2.6. PRIORITY IN REQUESTED REGISTRATIONS. If
a requested registration pursuant to this Article II
involves an underwritten offering, and the managing
underwriter shall advise the Company in writing (with a copy
to each holder of Registrable Securities requesting
registration) that, in its opinion, the number of securities
<PAGE>
requested to be included in such registration (including
securities of the Company which are not Registrable
Securities) exceeds the number which can be sold in such of-
fering within a price range reasonably acceptable to the
Company and to the holders of a majority (by number of
shares) of the Registrable Securities requested to be
included in such registration, the Company will include in
such registration, to the extent of the number which the
Company is so advised can be sold in such offering, (i)
first, Registrable Securities requested to be included in
such registration pro rata among the holders thereof
requesting such registration as provided in Section 2.1 on
the basis of the number of such securities requested to be
included in such registration by the holder or holders of
Registrable Securities, and (ii) second, other securities of
the Company included in such registration in any manner and
amount selected by the Company.
SECTION 2.7. NOT A REQUESTED REGISTRATION IF COMPANY
PARTICIPATES. If the Company registers any of its
securities on its own behalf in a Registration initiated as
a Requested Registration pursuant to this Article II, such
Requested Registration shall not count for the purposes of
determining the number of Requested Registrations which
holders of Registrable Securities are entitled to under this
Article II; provided, however, that the registration shall
continue to be a Requested Registration for all other
purposes.
SECTION 2.8. SHELF-REGISTRATION. A request by an
Initiating Holder pursuant to Section 2.1 may specify that
the intended method of disposition is a "shelf offering"
("Shelf Offering Request"). In addition to the other
obligations of the Company set forth herein, in connection
with a Shelf Offering Request, the Company will file a
"shelf" registration statement on an appropriate form
pursuant to Rule 415 under the Securities Act or any similar
rule that may be adopted by the Commission with respect to
all Registrable Securities the Company is required to effect
the registration of under this Article II (a "Shelf
Registration"). The Company shall keep the Shelf
Registration continuously effective for a period of at least
twenty-four months following the date on which the Shelf
Registration is declared effective (or such shorter period
that terminates on the earlier of (i) a date specified by
the holders of a majority (by number of shares) of the
registrable Securities covered by such statement or (ii) the
date on which all Registrable Securities covered by such
Shelf Registration have been sold or withdrawn, but in no
case prior to the expiration of the 90-day period referred
to in Section 4(3) of the Securities Act and rule 174
thereunder, if applicable). The Company shall supplement or
make amendments to the Shelf Registration, if required by
the registration form used by the Company, the instructions
thereto, the Securities Act or the rules and regulations of
the Commission, or if reasonably requested by a holder of
<PAGE>
Registrable Securities covered by the Shelf Registration.
The Company will furnish the holders of Registrable
Securities covered by the Shelf Registration a copy of all
such supplements or amendments at least one business day
prior to filing such supplement or amendment.
ARTICLE III. "PIGGY BACK" REGISTRATION
SECTION 3.1. RIGHT TO INCLUDE REGISTRABLE SECURITIES.
If the Company at any time proposes to file a registration
statement under the Securities Act covering any of its
securities other than a registration on Form S-4 or Form S-
8, or any successor or similar forms and other than pursuant
to Article II, whether or not for sale or its own account,
it will each such time give prompt written notice to all
holders of Registrable Securities of its intention to do so
and of such holders' rights under this Article III. Upon
the written request of any such holder made within 30 days
after the receipt of any such notice (which request shall
specify the Registrable Securities intended to be disposed
of by such holder and the intended method of disposition
thereof), the Company will use its best efforts to effect
the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to
register by the holders thereof, to the extent requisite to
permit the disposition (in accordance with the intended
methods thereof as aforesaid) of the Registrable Securities
so to be registered, by inclusion of such Registrable Se-
curities in the registration statement which covers the
securities which the Company proposes to register; provided,
that if, at any time after giving written notice of its
intention to register any securities and prior to the
effective date of the registration statement filed in
connection with such registration, the Company shall
determine for any reason either not to register or to delay
registration of such securities, the Company may, at its
election, give written notice of such determination to each
holder of Registrable Securities and, thereupon, (i) in the
case of a determination not to register, shall be relieved
of its obligation to register any Registrable Securities in
connection with such registration (but not from its
obligation to pay the Registration Expenses in connection
therewith), without prejudice, however, to the rights of any
holder or holders of Registrable Securities entitled to do
so to request that such registration be effected as a
registration under Article II and (ii) in the case of a
determination to delay registering, shall be permitted to
delay registering any Registrable Securities, for the same
period as the delay in registering such other securities.
No registration effected under this Article III shall
relieve the Company of its obligation to effect any
registration upon request under Article II. The Company
<PAGE>
will pay all Registration Expenses incurred by holders by
Registrable Securities in connection with each registration
of Registrable Securities requested pursuant to this Article
III.
SECTION 3.2. PRIORITY IN PIGGY-BACK REGISTRATIONS.
If (i) a registration pursuant to this Article III involves
an underwritten offering of the securities being registered,
whether or not for sale for the account of the Company, to
be distributed (on a firm commitment basis) by or through
one or more underwriters of recognized standing under
underwriting terms appropriate for such a transaction, and
(ii) the managing underwriter of such underwritten offering
shall inform the Company and holders of the Registrable
Securities requesting such registration by letter of its
belief that the distribution of all or a specified number of
such Registrable Securities concurrently with the securities
being distributed by such underwriters would interfere with
the successful marketing of the securities being distributed
by such underwriters (such writing to state the basis of
such belief and the approximate number of such Registrable
Securities which may be distributed without such effect),
then the Company may, upon written notice to all holders of
such Registrable Securities, reduce pro rata (if and to the
extent stated by such managing underwriter to be necessary
to eliminate such effect) the number of such Registrable
Securities and securities proposed to be sold by any person
other than the Company the registration of which shall have
been requested by each holder of Registrable Securities and
each person other than the Company so that the resultant
aggregate number of such Registrable Securities so included
in such registration shall be equal to the number of shares
stated in such managing underwriter's letter.
ARTICLE IV. REGISTRATION PROCEDURES
SECTION 4.1. PREPARATION OF FILINGS. If and whenever
the Company is required to use its best efforts to effect
the registration of any Registrable Securities under the
Securities Act as provided in Articles II or III, the
following shall apply:
(a) REGISTRATION STATEMENT. The Company shall
promptly prepare and file (in the case of a regis-
tration pursuant to Article II, such filing to be made
within 90 days after the initial request of one or more
Initiating Holders of Registrable Securities or in any
event as soon after such request as possible) with the
Commission the requisite registration statement to
effect such registration (including such audited
financial statements as may be required by the
Securities Act or the rules and regulations promulgated
thereunder) and thereafter use its best efforts to
cause such registration statement to become and remain
<PAGE>
effective; provided, however, that the Company may
withdraw any registration of its securities which are
not Registrable Securities (and, under the
circumstances specified in Section 3.2, its securities
which are Registrable Securities) at any time prior to
the effective date of the registration statement
relating thereto; provided further, that before filing
such registration statement or any amendments thereto,
the Company will furnish to the holders of Registrable
Securities that are to be included in such registration
and their counsel copies of all such documents proposed
to be filed, which documents will be subject to the
review and reasonable approval of such holders and
their counsel.
(b) AMENDMENTS. The Company shall prepare and
file with the Commission such amendments, post
effective amendments and supplements to such
registration statement and the prospectus used in
connection therewith as may be necessary to keep such
registration statement effective and to comply with the
provisions of the Securities Act with respect to the
disposition of all securities covered by such
registration statement for the following time periods:
(i) in the case of a Shelf Registration under Article
II, the time period specified in Section 2.8; (ii) in
the case of a registration under Article II other than
a Shelf Registration, 30 days or such shorter period as
all Registrable Securities have been sold in accordance
with the intended methods of disposition specified by
the holders thereof; and (iii) in the case of a
registration under Article III, such period of time as
the Company determines.
(c) COPIES OF DOCUMENTS. The Company shall
furnish to each seller of Registrable Securities
covered by such registration statement and each
underwriter, if any, of the securities being sold by
such seller such number of conformed copies of such
registration statement and of each amendment and sup-
plement thereto (in each case including all exhibits to
such Registration Statement), such number of copies of
the prospectus contained in such registration statement
(including each preliminary prospectus and any summary
prospectus) and any other prospectus filed pursuant to
Rule 424 under the Securities Act and such other doc-
uments, as such seller and underwriter, if any, may
reasonably request in order to facilitate the public
sale or other disposition of the Registrable Securities
owned by such Seller (it being understood that the Com-
pany consents to the use of the prospectus and any
amendments or supplement thereto by each holder of
Registrable Securities covered by the Registration
Statement and the underwriter or underwriters, if any,
in connection with the offering and sale of Registrable
<PAGE>
Securities covered by the prospectus or any amendment
or supplement thereto).
(d) BLUE-SKY. The Company will use its best
efforts to register or qualify all Registrable
Securities under the securities laws or blue sky laws
of the jurisdictions as any seller thereof and any
underwriter of the securities being sold by such seller
and any Requesting Holder shall reasonably request, to
keep such registrations or qualifications in effect for
so long as such registration statement remains in
effect, and take any other action which may be
reasonably necessary or advisable to enable such seller
and underwriter to consummate the disposition in such
jurisdictions of the securities owned by such seller,
except that the Company shall not for any such purpose
be required to qualify generally to do business as a
foreign corporation in any jurisdiction wherein it
would not but for the requirements of this subsection
(d) be obligated to be so qualified, or to consent to
general service of process in any such jurisdiction.
(e) OTHER APPROVALS. The Company will use its
best efforts to cause all Registrable Securities
covered by such registration statement to be registered
with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or
sellers thereof to consummate the intended disposition
of such Registrable Securities.
(f) OPINIONS; COMFORT LETTERS. The Company shall
furnish to each seller of Registrable Securities a
signed counterpart, addressed to such seller, (and the
underwriters, if any) of
(i) an opinion of counsel for the
Company, dated the effective date of such
registration statement (and, if such
registration includes an underwritten public
offering, an opinion dated the date of the
closing under the underwriting agreement),
reasonably satisfactory in form and substance
to such seller, and
(ii) a "comfort" letter, dated the
effective date of such registration statement
(and, if such registration includes an under-
written public offering, a letter dated the
date of the closing under the underwriting
agreement), signed by the independent public
accountants who have certified the Company's
financial statements included in such regis-
tration statement,
<PAGE>
covering substantially the same matters with respect to
such registration statement (and the prospectus
included therein) and, in the case of the accountants'
letter, with respect to events subsequent to the date
of such financial statements, as are customarily
covered in opinions of issuer's counsel and in
accountants' letters delivered to the underwriters in
underwritten public offerings of securities and, in the
case of the accountants' letter, such other financial
matters, and, in the case of the legal opinion, such
other legal matters, as such seller or such Requesting
Holder (or the underwriters, if any) may reasonably
request.
(g) NOTICE OF EVENTS. The Company will notify
each seller of Registrable Securities covered by such
registration statement at any time when a prospectus
relating thereto is required to be delivered under the
Securities Act, upon the Company's discovery that, or
upon the happening of any event as a result of which,
the prospectus included in such registration statement,
as then in effect, includes an untrue statement of a
material fact or omits to state any material fact re-
quired to be stated therein or necessary to make the
statements therein not misleading in the light of the
circumstances under which they were made, and at the
request of any such seller promptly prepare and furnish
to such seller and each underwriter, if any, a reason-
able number of copies of a supplement to or an amend-
ment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securi-
ties, such prospectus shall not include an untrue
statement of a material fact or omit to state a
material fact required to be stated therein or neces-
sary to make the statements therein not misleading in
the light of the circumstances under which they were
made.
(h) EARNINGS STATEMENT. The Company will other-
wise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make
available to its security holders, as soon as rea-
sonably practicable, an earnings statement covering the
period of at least twelve months, but not more than
eighteen months, beginning with the first full calendar
month after the effective date of such registration
statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act, and
will furnish to each such seller and each Requesting
Holder at least five business days prior to the filing
thereof a copy of any amendment or supplement to such
registration statement or prospectus and shall not file
<PAGE>
any thereof to which any such seller or any Requesting
Holder shall have reasonably objected on the grounds
that such amendment or supplement does not comply in
all material respects with the requirements of the
Securities Act or of the rules or regulations
thereunder.
(i) LISTING. The Company will cause all
Registrable Securities covered by the registration
statement to be listed on each securities exchange or
traded or quoted on each market on which the same class
of securities issued by the Company are then listed,
traded or quoted.
(j) TRANSFER AGENT. The Company will provide a
transfer agent, registrar and a CUSIP number for all
Registrable Securities no later than the effective date
of such Registration Statement.
(k) ACCESS. The Company will make available for
inspection by any holder of Registrable Securities
included in such registration statement, any
underwriter participating in any disposition pursuant
to such registration statement, and any attorney,
accountant or other agent retained by any such seller
or underwriter (collectively, the "Inspectors"), all
financial and other records, pertinent corporate
documents and properties of the Company (collectively,
the "Records"), as shall be reasonably necessary to
enable them to exercise their due diligence
responsibility, and cause the Company's officers,
directors and employees to supply all information
reasonably requested by any such Inspector in connec-
tion with such registration statement; provided that
records which the Company determines, in good faith, to
be confidential and which it notifies the Inspectors
are confidential shall not be disclosed to the Inspec-
tors unless (i) the disclosure of such Records is nec-
essary to avoid or correct a misstatement or omission
in the registration statement or (ii) the release of
such Records is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction; provided,
further, that any decision not to disclose information
pursuant to clause (i) shall be made after consultation
with counsel for the Company and counsel for such
holders; and each holder of Registrable Securities
agrees that it will, upon learning that disclosure of
such Records is sought in a court of competent juris-
diction, give notice to the Company and allow the Com-
pany at its expense, to undertake appropriate action
and to prevent disclosure of the Records deemed con-
fidential.
SECTION 4.2. DATA FROM HOLDERS OF REGISTRABLE
SECURITIES. The Company may require each seller of
Registrable Securities as to which any registration is being
<PAGE>
effected to furnish the Company such information regarding
such seller and the distribution of such securities as the
Company may from time to time reasonably request in writing.
SECTION 4.3. DISCONTINUANCE OF USE OF PROSPECTUS.
Each holder of Registrable Securities agrees by acquisition
of such Registrable Securities that, upon receipt of any
written notice from the Company of the occurrence of any
event of the kind described in Section 4.1(g), such holder
will forthwith discontinue such holder's offer of
Registrable Securities pursuant to the registration
statement relating to such Registrable Securities until such
holder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 4.1(g) and, if so
directed by the Company, will deliver to the Company (at the
Company's expense) all copies, other than permanent file
copies, then in such holder's possession of the prospectus
relating to such Registrable Securities current at the time
of receipt of such notice. In the event the Company shall
give any such notice, the period mentioned in Section 4.1(b)
shall be extended by the length of the period from and in-
cluding the date when each seller of any Registrable
Securities covered by such registration statement shall have
received such notice to the date on which each such seller
has received the copies of the supplemented or amended
prospectus contemplated by Section 4.1(g).
SECTION 4.4. REFERENCES TO HOLDERS IN REGISTRATION
STATEMENTS. If any registration or comparable statement
refers to any holder of Registrable Securities by name or
otherwise as the holder of any securities of the Company
then such holder shall have the right to require (i) the
insertion therein of language, in form and substance
satisfactory to such holder, to the effect that the holding
by such holder of such securities is not to be construed as
a recommendation by such holder of the investment quality of
the Company's securities covered thereby and that such
holding does not imply that such holder will assist in meet-
ing any future financial requirements of the Company, or
(ii) in the event that such reference to such holder by name
or otherwise is not required by the Securities Act or any
similar federal statute then in force, the deletion of the
reference to such holder.
SECTION 4.5. UNDERWRITTEN OFFERINGS. If requested by
the underwriters for any underwritten offering by holders of
Registrable Securities pursuant to a registration requested
under Article II, the Company will enter into an under-
writing agreement with such underwriters for such offering,
such agreement to be reasonably satisfactory in form and
substance to the Company, each such holder and the
underwriters, and to contain such representations and
warranties by the Company and such other terms as are
generally prevailing in agreements of this type, including,
<PAGE>
without limitation, indemnities to the effect and to the
extent provided in Section 5.1. The holders of the
Registrable Securities will cooperate with the Company in
the negotiation of the underwriting agreement and will give
consideration to the reasonable suggestions of the Company
regarding the form thereof; provided, that nothing herein
contained shall diminish the foregoing obligations of the
Company. The holders of Registrable Securities to be
distributed by such underwriters shall be parties to such
underwriting agreement and may, at their option, require
that any or all of the representations and warranties by,
and the other agreements on the part of, the Company to and
for the benefit of such underwriters shall also be made to
and for the benefit of such holders of Registrable
Securities and that any or all of the conditions precedent
to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the
obligations of such holders of Registrable Securities. Any
such holder of Registrable Securities shall not be required
to make any representations or warranties to or agreements
with the Company or the underwriters other than representa-
tions, warranties or agreements regarding such holder, such
holder's Registrable Securities and such holder's intended
method of distribution and any other representation required
by law.
SECTION 4.6. HOLDBACK AGREEMENTS. The Company agrees
(i) if so required by a managing underwriter of an offering
of Registrable Securities not to effect any public sale or
distribution of its equity securities or securities con-
vertible into or exchangeable or exercisable for any of such
securities during the seven days prior to and the 90 days
after any underwritten registration pursuant to Articles II
or III has become effective, except as part of such under-
written registration and except pursuant to registrations on
Form S-4 or Form S-8, or any successor or similar forms
thereto, and (ii) to cause each holder of its securities or
any securities convertible into or exchangeable or
exercisable for any of such securities, in each case pur-
chased directly from the Company at any time after the date
of this Agreement (other than in a public offering) to agree
not to effect any such public sale or distribution of such
securities during such period except as part of such under-
written registration.
SECTION 4.7. PREPARATION; REASONABLE INVESTIGATION.
In connection with the preparation and filing of each regis-
tration statement under the Securities Act pursuant to this
Agreement, the Company will give the holders of Registrable
Securities registered under such registration statement,
their underwriters, if any, and their respective counsel and
accountants, the opportunity to participate in the
preparation of such registration statement, each prospectus
included therein or filed with the Commission, and each
amendment thereof or supplement thereto, and will give each
<PAGE>
of them such access to its books and records and such
opportunities to discuss the business of the Company with
its officers and the independent public accountants who have
certified its financial statements as shall be necessary, in
the opinion of such holders' and such underwriters' re-
spective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act.
SECTION 4.8. RIGHTS OF REQUESTING HOLDERS. The
Company will not file any registration statement under the
Securities Act (other than by a registration on Form S-4 or
Form S-8), unless it shall first have given to each holder
of Registrable Securities at the time outstanding at least
thirty days prior written notice thereof. The Company shall
provide any Person who requests, within thirty days after
such notice (a "Requesting Holder"), the following: (i) all
information, documents and other materials such Requesting
Holder would be entitled to if such Requesting Holder were a
seller of Registrable Securities as provided in Section
4.1(c), (f), and (g); and (ii) the rights to participate and
access provided to sellers of Registrable Securities under
Section 4.7. In addition, if any such registration state-
ment refers to any Requesting Holder by name or otherwise
then such holder shall have the right to require (i) the
insertion therein of language, in form and substance
satisfactory to such holder, to the effect that the holding
by such holder of such securities does not necessarily make
such holder of a "controlling person" of the Company within
the meaning of the Securities Act and is not to be construed
as recommendation by such holder of the investment quality
of the Company's debt or equity securities covered thereby
and that such holding does not imply that such holder will
assist in meeting any future financial requirements of the
Company, or (ii) in the event that such reference to such
holder by name or otherwise is not required by the
Securities Act or any rules and regulations promulgated
thereunder, the deletion of the reference to such holder.
ARTICLE V. INDEMNIFICATION
SECTION 5.1. INDEMNIFICATION BY THE COMPANY. In the
event of any registration of any securities of the Company
under the Securities Act, the Company will, and hereby does,
indemnify and hold harmless (i) in the case of any
registration statement filed pursuant to Articles II and
III, the holder of any Registrable Securities covered by
such registration statement, its directors and officers,
each other Person who participates as an underwriter in the
offering or sale of such securities and each other Person,
if any, who controls such holder or any such underwriter
within the meaning of the Securities Act, and (ii) in the
case of any registration statement of the Company, any
Requesting Holder, its directors and officers and each other
<PAGE>
Person, if any, who controls such Requesting Holder within
the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which
such holder or Requesting Holder or any such director or
officer or underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect
thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained
in any registration statement under which such securities
were registered under the Securities Act, any preliminary
prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, and the Company will
reimburse such holder, such Requesting Holder and each such
director, officer, underwriter and controlling person for
any legal or any other expenses reasonably incurred by them
in connection with investigating or defending any such loss,
claim, liability, action or proceeding; provided that the
Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or
is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus,
final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written
information furnished to the Company through an instrument
duly executed by such holder or Requesting Holder, as the
case may be, specifically stating that its for use in the
preparation thereof and, provided further that the Company
shall not be liable to any Person who participates as an
underwriter, in the offering or sale of Registrable
Securities or to any other Person, if any, who controls such
underwriter within the meaning of the Securities Act, in any
such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or
expense arises out of such Person's failure to send or give
a copy of the final prospectus, as the same may be then
supplemented or amended, within the time required by the
Securities Act to the Person asserting an untrue statement
or alleged untrue statement or omission or alleged omission
at or prior to the written confirmation of the sale of
Registrable Securities to such Person if such statement or
omission was corrected in such final prospectus. Such
indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of such holder or
such Requesting Holder or any such director, officer,
underwriter or controlling person and shall survive the
transfer of such securities by such holder.
<PAGE>
SECTION 5.2. INDEMNIFICATION BY THE SELLERS. The
Company may require, as a condition to including any
Registrable Securities in any registration statement filed
pursuant to Article II or III, that the Company shall have
received an undertaking satisfactory to it from the
prospective seller of Registrable Securities, to indemnify
and hold harmless (in the same manner and to the same extent
as set forth in Section 5.1) the Company, each director of
the Company, each officer of the Company and each other
person, if any, who controls the Company within the meaning
of the Securities Act, with respect to any statement or
alleged statement in or omission or alleged omission from
such registration statement, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or
any amendment or supplement thereto, if such statement or
alleged statement or omission or alleged omission was made
in reliance upon and in conformity with written information
furnished to the Company through an instrument duly executed
by such seller specifically stating that it is for use in
the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment
or supplement; provided, that such Sellers' liability under
such indemnification shall be limited to the net sales
proceeds actually received by such seller from the sale of
the Company's securities pursuant to such Registration
Statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement. Such indemnity shall
remain in full force and effect, regardless of any inves-
tigation made by or on behalf of the Company or any such
director, officer or controlling person and shall survive
the transfer of such securities by such seller.
SECTION 5.3. NOTICES OF CLAIMS, ETC. Promptly after
receipt by an indemnified party of notice of the
commencement of any action or proceeding involving a claim
referred to in Sections 5.1 or 5.2, such indemnified party
will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the
commencement of such action, provided that the failure of
any indemnified party to give notice as provided herein
shall not relieve the indemnifying party of its obligations
under Sections 5.1 or 5.2, except to the extent that the
indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against an
indemnified party, unless in such indemnified party's
reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of
such claim, the indemnifying party shall be entitled to
participate in and to assume the defense thereof, jointly
with any other indemnifying party similarly notified, to the
extent that the indemnifying party may wish, with counsel
reasonably satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the
<PAGE>
indemnifying party shall not be liable to such indemnified
party for any legal or other expenses subsequently incurred
by the latter in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying
party shall, without the consent of the indemnified party,
consent to entry of any judgment or enter into any set-
tlement of any such action which does not include as an
unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all
liability, or a covenant not to sue, in respect to such
claim or litigation. No indemnified party shall consent to
entry of any judgment or enter into any settlement of any
such action the defense of which has been assumed by an
indemnifying party without the consent of such indemnifying
party.
SECTION 5.4. OTHER INDEMNIFICATION. Indemnification
similar to that specified in Sections 5.1 and 5.2 (with
appropriate modifications) shall be given by the Company and
each seller of Registrable Securities with respect to any
required registration or other qualification of securities
under any federal or state law or regulation of any gov-
ernmental authority, other than the Securities Act.
SECTION 5.5. INDEMNIFICATION PAYMENTS. The
indemnification required by this Article V shall be made by
periodic payments of the amount thereof during the course of
the investigation or defense, as and when bills are received
or expense, loss, damage or liability is incurred.
ARTICLE VI. RULE 144
SECTION 6.1. RULE 144. The Company shall timely file
the reports required to be filed by it under the Securities
Act and the Exchange Act (including but not limited to the
reports under Sections 13 and 15(d) of the Exchange Act
referred to in subparagraph (c)(1) of Rule 144 adopted by
the Securities and Exchange Commission under the Securities
Act) and the rules and regulations adopted by the Commission
thereunder (or, if the Company is not required to file such
reports, will, upon the request of any holder of Registrable
Securities, make publicly available other information) and
will take such further action as any holder of Registrable
Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell
Registrable Securities without registration under the Secu-
rities Act within the limitation of the exemptions provided
by (a) Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission. Upon the
request of any holder of Registrable Securities, the Company
will deliver to such holder a written statement as to
whether it has complied with such requirements.
<PAGE>
ARTICLE VII. MISCELLANEOUS
SECTION 7.1. REMEDIES. The Company agrees that
monetary damages would not be adequate compensation for any
loss incurred by reason of such a breach and hereby agrees
to waive the defense in any action for specific performance
of such an obligation that a remedy at law would be ade-
quate.
SECTION 7.2. NO INCONSISTENT AGREEMENTS. Without the
written consent of the holders of a majority of the then
outstanding Registrable Securities, the Company will not on
or after the date of this Agreement enter into any agreement
with respect to its securities which is inconsistent with
the rights granted to the holders of Registrable Securities
in this Agreement or otherwise conflicts with the provisions
hereof. The Company has not previously entered into any
agreement with respect to its securities granting any
registration rights to any Person. The rights granted to
the holders of Registrable Securities hereunder do not in
any way conflict with and are not inconsistent with the
rights granted to the holders of the Company's securities
under any agreements previously entered into by the Company.
SECTION 7.3. ADJUSTMENTS AFFECTING REGISTRABLE
SECURITIES. The Company will not take any action, or permit
any change to occur, with respect to the Registrable
Securities which would adversely affect the ability of the
holders of Registrable Securities to include such
Registrable Securities in a registration undertaken pursuant
to this Agreement.
SECTION 7.4. ASSIGNMENT. This Agreement shall be
binding upon and inure to the benefit of and be enforceable
by the parties hereto and their respective successors and
assigns. In addition, and whether or not any express
assignment shall have been made, the provisions of this
Agreement which are for the benefit of the parties hereto
other than the Company shall also be for the benefit of and
enforceable by any subsequent holder of any Registrable
Securities.
SECTION 7.5. DESCRIPTIVE HEADINGS. The descriptive
headings of the several sections and paragraphs of this
Agreement are inserted for reference only and shall not
limit or otherwise affect the meaning hereof.
<PAGE>
SECTION 7.6. GOVERNING LAW. THIS AGREEMENT SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF
THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF
DELAWARE WITHOUT REFERENCE TO THE PRINCIPLES OF CONFLICTS OF
LAWS.
SECTION 7.7. COUNTERPARTS. This Agreement may be
executed simultaneously in any number of counterparts, each
of which shall be deemed an original, but all such coun-
terparts shall together constitute one and the same in-
strument.
SECTION 7.8. ENTIRE AGREEMENT. This Agreement
embodies the entire agreement and understanding between the
Company and each other party hereto and supersedes all prior
agreements and understandings relating to the subject matter
hereof.
SECTION 7.9. SEVERABILITY. In the event that any one
or more of the provisions contained herein, or the
application thereof in any circumstance, is held invalid,
illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect
and of the remaining provisions contained herein shall not
be affected or impaired thereby.
SECTION 7.10. AMENDMENTS AND WAIVERS. This Agreement
may be amended and the Company may take any action herein
prohibited, or omit to perform any act herein required to be
performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to
act, of the holder or holders of 51% or more of the shares
of Registrable Securities. Each holder of any Registrable
Securities at the time or thereafter outstanding shall be
bound by any consent authorized by this section 7.10,
whether or not such Registrable Securities shall have been
marked to indicate such consent.
SECTION 7.11. NOMINEES FOR BENEFICIAL OWNERS. In the
event that any Registrable Securities are held by a nominee
for the beneficial owner thereof, the beneficial owner
thereof may, at its election, be treated as the holder of
such Registrable Securities for purposes of any request or
other action by any holder or holders of Registrable
Securities pursuant to this Agreement or any determination
of any number or percentage of shares of Registrable
Securities held by any holder or holders of Registrable
Securities contemplated by this Agreement. If the bene-
ficial owner of any Registrable Securities so elects, the
Company may require assurances reasonably satisfactory to it
of such owner's beneficial ownership of such Registrable
Securities.
<PAGE>
SECTION 7.12. NOTICES. Except as otherwise provided
in this Agreement, all communications provided for hereunder
shall be in writing and sent by first-class mail, postage
prepaid, and (a) if addressed to a party to the Purchase
Agreement other than the Company, addressed to such party in
the manner set forth in the Purchase Agreement or at such
other address as such party shall have furnished to the
Company in writing, or (b) if addressed to any other holder
of Registrable Securities, at the address that such holder
shall have furnished to the Company in writing, or, until
any such other holder so furnishes to the Company an
address, then to and at the address of the last holder of
such Registrable Securities who has furnished an address to
the Company, or (c) if addressed to the Company, 160 Morgan
Street, Versailles, Kentucky 40383 to the attention of its
President, or at such other address, or to the attention of
such other officer, as the Company shall have furnished to
each holder of Registrable Securities at the time
outstanding.
IN WITNESS WHEREOF, the parties have caused this Agree-
ment to be executed and delivered by their respective
officers thereunto duly authorized as of the date first
above written.
AMERICAN RESOURCES OF
DELAWARE, INC.
By: \s\ Rick G. Avare
---------------------------
Name: Rick G. Avare
-------------------------
Title: President
------------------------
DEN NORSKE BANK ASA
By: \s\ William V. Moyer
---------------------------
Name: William V. Moyer
-------------------------
Title: First Vice President
------------------------
<PAGE>
Exhibit 10.82
Exhibit B to
Securities Purchase Agreement
CO-SALE AGREEMENT
among
AMERICAN RESOURCES OF DELAWARE, INC.
(a Delaware corporation),
and
the shareholders and Purchaser who are signatories hereto
July 16, 1997
<PAGE>
CO-SALE AGREEMENT
THIS CO-SALE AGREEMENT, dated as of July 16, 1997
("Agreement"), is among Southern Gas Holding Co., Inc.
("SG") and Rick G. Avare ("Avare") (each individually
sometimes referred to as a "Shareholder" and collectively
referred to as the "Shareholders"), AMERICAN RESOURCES OF
DELAWARE, INC., a Delaware corporation (the "Company") and
Den norske Bank ASA, a Norwegian bank ("Purchaser").
W I T N E S S E T H :
WHEREAS, each Shareholder is the record and beneficial
owner of the number of issued and outstanding shares of
Common Stock, par value $0.00001 per share, of the Company
("Common Stock") listed opposite such shareholder's name on
the signature page hereto; and
WHEREAS, the Purchaser has agreed to acquire 500,000
shares of Common Stock of the Company pursuant to a
Securities Purchase Agreement of even date herewith
("Purchase Agreement");
WHEREAS, in order to induce the Purchaser to purchase
the shares of Common Stock pursuant to the Purchase
Agreement, the Company and the Shareholders desire to
provide certain assurances to and make agreements with the
Purchaser relating to ownership of the Company, all upon the
terms and subject to the conditions set forth in this
Agreement;
WHEREAS, capitalized terms not otherwise defined in
this Agreement shall have the respective meanings assigned
to such terms in the Purchase Agreement;
NOW, THEREFORE, in consideration of the premises and
the mutual covenants contained herein, the receipt and
sufficiency of which consideration are hereby acknowledged,
the parties hereto agree as follows:
ARTICLE I. PURCHASE OFFERS
SECTION 1.1. NOTICE OF PURCHASE OFFERS. Should
either of the Shareholders (or both acting in concert)
propose to accept one or more bona fide offers from any
Person to purchase, in a single transaction or series of
related transactions, 200,000 or more shares of Common Stock
(an "Offer") then owned by such Shareholder ("Seller"), then
the Seller shall promptly, but in any event not later than
30 Business Days prior to the date of the consummation of
such sale (the "Sale Date"), notify each Purchaser, the
other Shareholder and the Company in writing (the "Offer
Notice") of the terms and conditions of such Offer,
including the name and address of the offeror (the
<PAGE>
"Offeror"). An Offer shall not include any transactions
effected on the open market pursuant to "Brokers'
Transactions", as such term is defined in the Securities Act
of 1933.
SECTION 1.2. PURCHASER'S AND SHAREHOLDER'S RIGHT TO
SELL SHARES TO SELLER.
(a) CO-SALE NOTICE. Within 20 Business Days following
each Purchaser's or Shareholder's receipt of an Offer
Notice, each Purchaser and/or Shareholder may make a demand
for the Seller to purchase or cause the purchase of shares
of Common Stock owned by such Purchaser or Shareholder by
delivering to the Seller a notice ("Co-Sale Notice") duly
executed by such Purchaser or Shareholder and specifying the
following:
(i) the fact that such Purchaser or Shareholder
is making demand for the Seller to purchase Common
Stock;
(ii) the amount of Common Stock such Purchaser or
Shareholder is requiring the Seller to purchase, up to
the maximum number determined in Section 1.02(c); and
(iii) the account or accounts to which the
purchase price for the Common Stock should be wire
transferred.
(b) PURCHASE AND SALE. On the Sale Date, such
Purchaser or Shareholder shall deliver to Seller or Seller's
purchaser certificates representing Common Stock, duly
endorsed for transfer to Seller or Seller's purchaser, free
and clear of all liens, claims, pledges or other security
interests, and Seller will pay to such Purchaser or
Shareholder, by wire transfer of immediately available
funds, the Purchase Price for the Common Stock transferred.
(c) NUMBER OF SHARES PURCHASED. The maximum number of
shares of Common Stock that a Purchaser or Shareholder (a
"participating Purchaser" or "participating Shareholder",
respectively) may cause Seller or Seller's purchaser to
purchase pursuant to a Co-Sale Notice shall equal the number
of shares of Common Stock set forth in the offer multiplied
by a fraction, the numerator of which is the number of
shares of Common Stock owned by such participating Purchaser
or participating Shareholder immediately prior to the Sale
Date and the denominator of which is the sum of the number
of shares of Common Stock owned by the participating
Purchaser and the participating Shareholder plus the number
of shares of Common Stock owned by Seller.
(d) PURCHASE PRICE. The Purchase Price for shares of
Common Stock shall equal the average price per share
specified in the Offer for such Common Stock, as the case
may be, and shall include the amount of cash, the market
2
<PAGE>
value of marketable securities, the amount and type of any
other securities and consideration for non-competition
covenants and payments pursuant to employment or consulting
agreements where the value of the services to be rendered as
reasonably and fairly determined in good faith by the Board
of Directors does not substantially equal the value of the
consideration paid.
SECTION 1.4. ONGOING RIGHTS. The exercise or
non-exercise of a Purchaser's or Shareholder's right in one
or more sales of shares of Common Stock by a Seller shall
not adversely affect the ability of such Purchaser or
Shareholder to exercise any of its rights, powers or
privileges under this Agreement in the future.
ARTICLE II. PROHIBITED TRANSFERS
SECTION 2.1. TREATMENT OF PROHIBITED TRANSFERS. In
the event a Shareholder should sell any Common Stock in
contravention of this Agreement (a "Prohibited Transfer"),
each Purchaser or other Shareholder, in addition to such
other remedies as may be available at law, in equity or
hereunder, shall have the right to receive the Purchase
Price in the same manner as such Purchaser or other
Shareholder otherwise would have been entitled under this
Agreement. For purposes of this Section 2.1, the Seller
shall pay to such Purchaser or other Shareholder such
Purchase Price within 30 days after the later of (i) the
date on which such Purchaser or other Shareholder received
notice from the Seller of the Prohibited Transfer and (ii)
the date such Purchaser or Other Shareholder otherwise
became aware of the Prohibited Transfer. Notwithstanding
the foregoing, any transfer of shares, or purported or
attempted transfer to be effected, not in accordance with
the terms and conditions of this Agreement, shall be
voidable by the Company at the option of the Purchaser or
other Shareholder; provided, however, any such transfer or
purported or attempted transfer or any such voidance by the
Company shall not affect the obligation of the Seller to pay
the Purchase Price to the Purchaser or other Shareholder in
accordance with Section 1.2. In the event the Company
receives notice from the Seller of a Prohibited Transfer or
otherwise becomes aware of a Prohibited Transfer, the
Company shall promptly notify each Purchaser or other
Shareholder. The Company agrees it will not effect any such
transfer nor will it treat any alleged transferee as the
registered owner of such shares of Common Stock without
affording to each Purchaser or other Shareholder notice and
opportunity to exercise its rights pursuant to Section 1.2
or 2.1.
3
<PAGE>
ARTICLE III. LEGENDED CERTIFICATES
A copy of this Agreement shall be filed with the
Secretary of the Company and kept with the records of the
Company. Each certificate representing shares of the Common
Stock now or hereafter owned by either Shareholder (and all
certificates issued in exchange therefor or substitution
thereof) shall be endorsed with the following legend:
THE SALE OR TRANSFER OF THE SECURITIES REPRESENTED
BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND
CONDITIONS OF A SHAREHOLDERS AGREEMENT, DATED AS
OF JULY 16, 1997, AMONG THE STOCKHOLDERS NAMED ON
THE SIGNATURE PAGES THERETO AND THE Company. A
COPY OF SUCH AGREEMENT IS ON FILE AT THE OFFICE OF
THE Company. THE Company SHALL FURNISH A COPY OF
SUCH AGREEMENT TO THE RECORD HOLDER HEREOF WITHOUT
CHARGE UPON WRITTEN REQUEST.
ARTICLE IV. TERMINATION OF RIGHTS
The term of this Agreement shall continue until such
time as (a) the Purchaser shall no longer be the registered
holder of any shares of Common Stock issued pursuant to the
Purchase Agreement or (b) neither Avare nor SG shall be the
registered owner of any shares of Common Stock (unless the
disposition of such shares constituted a Prohibited
Transfer). For purposes of this Article IV, "Purchaser"
shall be deemed to include the Purchaser and its direct and
indirect, wholly-owned subsidiaries and the entities that
directly and indirectly own Purchaser.
ARTICLE V. MISCELLANEOUS
SECTION 5.1. SPECIFIC PERFORMANCE. The parties
acknowledge and agree that any breach of the agreements and
covenants contained in this Agreement would cause
irreparable injury to the Purchaser, Shareholders or the
Company for which the Purchaser, Shareholders or the Company
would have no adequate remedy at law. In addition to any
other remedy that the Purchaser, Shareholders or the Company
may be entitled to, the parties agree that temporary and
permanent injunctive relief and other equitable relief and
specific performance may be granted without proof of actual
damages or inadequacy of legal remedy in any proceeding that
may be brought to enforce any of the provisions of this
Agreement.
SECTION 5.2. FURTHER ASSURANCES. Each party agrees
to use its best efforts to take, or cause to be taken, and
to do, or cause to be done, all things that may be necessary
or appropriate to consummate and make effective the
transactions contemplated by this Agreement.
4
<PAGE>
SECTION 5.3. AMENDMENT. This Agreement may not be
modified or amended except by a written instrument executed
by or on behalf of each of the parties hereto.
SECTION 5.4. WAIVERS. The observance of any term of
this Agreement may be waived (either generally or in a
particular instance and either retroactively or
prospectively) by the party entitled to enforce such term,
but such waiver shall be effective only if in a writing
signed by the party or parties against which such waiver is
to be asserted. Unless otherwise expressly provided herein,
no delay or omission on the part of any party hereto in
exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any waiver or
omission on the part of any party hereto of any right, power
or privilege hereunder operate as a waiver of any other
right, power or privilege hereunder operate as a waiver of
any other right, power or privilege hereunder nor shall any
single or partial exercise of any right, power or privilege
hereunder preclude any other or further exercise thereof or
the exercise of any other right, power or privilege
hereunder. All remedies, either under this Agreement or by
law or otherwise afforded to any party, shall be cumulative
and not alternative.
SECTION 5.5. ENTIRE AGREEMENT. This Agreement and
the documents expressly referred to or incorporated herein
constitute the entire agreement among the parties hereto
with respect to the matters covered hereby, and any other
prior or contemporaneous oral or written understandings or
agreements with respect to the matters covered hereby are
expressly superseded by this Agreement.
SECTION 5.6. SEVERABILITY. If any provision of this
Agreement, or the application of such provision to any
person or circumstance, shall be judicially declared to be
invalid, unenforceable or void, such decision will not have
the effect of invalidating or voiding the remainder of this
Agreement or affect the application of such provision to
other persons or circumstances, and the parties hereto agree
that the part or parts of this Agreement so held to be
invalid, unenforceable or void will be deemed to have been
stricken herefrom and the remainder of this Agreement will
have the same force and effect as if such part or parts had
never been included herein. Any such finding or invalidity
or unenforceability shall not prevent the enforcement of
such provision in any other jurisdiction to the maximum
extent permitted by applicable law.
SECTION 5.7. NOTICES. Unless otherwise expressly
provided herein, all notices, requests, demands, consents,
waivers, instructions, approvals and other communications
hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered to or mailed,
certified mail, return receipt requested, first-class
postage paid, addressed as follows:
5
<PAGE>
If to Shareholders, to them at their address as set
forth below, with a copy (which shall not constitute
effective notice under this Section 5.7) to:
Southern Gas Holding Co., Inc.
160 Morgan Street
Versailles, Kentucky 40383
Attn: Rick G. Avare
and
Rick G. Avare
160 Morgan Street
Versailles, Kentucky 40383
If to the Company, to it at:
160 Morgan Street
Versailles, Kentucky 40383
Attn: David Stetson
If to the Purchaser, as follows:
Den norske Bank ASA
Stranden 21
N-0107 Oslo, Norway
Attn: Fredrik Wahl
with a copy (which shall not constitute effective
notice under this Section 5.7) to:
Butler & Binion, L.L.P.
1000 Louisiana, Suite 1600
Houston, Texas 77002
Attention: Guy Young, Esq.
or to such other address or to such other individuals as any
party shall have last designated by notice to the other
party. All notices and other communications given to any
party in accordance with the provisions of this Agreement
shall be deemed to have been given when delivered or sent to
the intended recipient thereof in accordance with the
provisions of Section 5.7.
6
<PAGE>
SECTION 5.8. GOVERNING LAW. THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE IN ACCORDANCE WITH, AND THE RIGHTS
OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF THE STATE
OF DELAWARE WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF
LAWS.
SECTION 5.9. SUCCESSORS AND ASSIGNS. Unless
otherwise expressly provided herein, this Agreement shall be
binding upon and inure to the benefit of the parties hereto,
and their respective legal representatives, successors and
permitted assigns. In addition, and whether or not any
express assignment shall have been made, the provisions of
this Agreement which are for the benefit of Purchaser shall
also be for the benefit of and enforceable by any subsequent
holder of the shares of Common Stock to be purchased by the
Purchaser pursuant to the Purchase Agreement.
SECTION 5.10. HEADINGS. The Article and Section
headings in this Agreement are for convenience of reference
only and shall not be deemed to alter or affect the meaning
or interpretation of any provisions hereof.
SECTION 5.11. COUNTERPARTS. This Agreement may be
executed in two or more counterparts, each of which shall be
deemed to be an original and all of which together shall be
deemed to be one and the same instrument.
SECTION 5.13. COMPANY'S OBLIGATIONS. The Company is
executing this Agreement to acknowledge its obligations
under Articles II and III, and the other parties hereto
acknowledge that, except as provided in such Articles, the
Company shall have no obligations under this Agreement.
IN WITNESS WHEREOF, this Agreement has been duly
executed and delivered as of the date first above written.
AMERICAN RESOURCES OF DELAWARE,
INC.
By: /s/ Rick G. Avare
-------------------------------
Name: Rick G. Avare
-----------------------------
Title: President
----------------------------
7
<PAGE>
NUMBER OF SHARES OWNED: SHAREHOLDERS:
993,623 Southern Gas Holding Co., Inc.
By: /s/ Leonard Nave
---------------------------
Name: Leonard Nave
-------------------------
Title: President
------------------------
107,324 /s/ Rick G. Avare
------------------------------
Rick G. Avare
PURCHASER:
Den Norske Bank ASA
By: /s/ William V. Moyer
---------------------------
Name: William V. Moyer
-------------------------
Title: First Vice President
------------------------
8
