EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of August 7, 2000, by and among ATMOS ENERGY CORPORATION, a Texas and
Virginia corporation ("Atmos"), ATMOS ENERGY MARKETING, LLC, a Delaware limited
liability company ("Energy"), ▇▇▇▇▇▇▇▇ MARKETING, INC., a Texas corporation
("WMI"), ▇.▇. ▇▇▇▇▇▇▇▇, III, an individual, and ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, an
individual (collectively, "▇▇▇▇▇▇▇▇"), and ▇▇▇▇▇ ▇▇▇▇▇, an individual, and ▇▇▇▇
▇. ▇▇▇▇▇, an individual (collectively, "▇▇▇▇▇").
WHEREAS, WMI owns 55% and Energy owns 45%, respectively, of the membership
interests of ▇▇▇▇▇▇▇▇ Marketing, L.L.C., a Delaware limited liability company
(the "LLC");
WHEREAS, the boards of directors of Atmos and WMI, the stockholders of WMI
and the managers of Energy have determined that it is in the best interests of
their respective companies, stockholders and owner, to effect the sale of
substantially all of the assets of WMI to Energy and to consummate the
transactions contemplated hereby upon the terms and subject to the conditions
set forth herein;
WHEREAS, in connection with the sale of substantially all of its assets,
WMI has adopted a plan of complete liquidation and dissolution;
WHEREAS, for federal income tax purposes, it is intended that the sale of
assets contemplated hereby, together with such liquidation, will constitute a
"reorganization" under Section 368(a) of the Internal Revenue Code of 1986, as
amended.
NOW, THEREFORE, in consideration of the mutual agreements herein contained,
Atmos, Energy, WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ hereby agree as follows:
A. On the basis of the representations, warranties, covenants and
agreements set forth herein, and subject to the terms and conditions set forth
herein, at the Closing, WMI shall sell, convey, assign, transfer, and deliver to
Energy, and Energy shall purchase and acquire from WMI, all of WMI's assets,
franchises, interests, properties, and rights and privileges of every kind and
description, real, personal or mixed, tangible or intangible, including all
right, title and interest of WMI therein and thereto as all of the foregoing
exist immediately prior to the Closing (collectively, exclusive of the Excluded
Assets, the "Acquired Assets"), constituting the following:
(i) All of the LLC Membership Interests owned by WMI and all rights and
benefits of WMI under the LLC Documents attributable to the period after the
Closing; and
(ii) 345,500 shares of Common Stock, no par value, of Atmos ("Common
Stock").
Notwithstanding the foregoing, WMI shall retain all of its other assets,
including all cash and cash equivalents, all accounts receivable, all notes
receivable from ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, all life insurance policies, all rights to
distributions from the LLC contemplated by Section 7.2, all books and records of
WMI not related to the LLC, all rights under this Agreement and the
Ancillary Agreements and all rights and benefits under the LLC Documents that,
under the terms of the LLC Documents, expressly survive the time when WMI is no
longer an owner of LLC Membership Interests or are attributable to the period
prior to the Closing (collectively, the "Excluded Assets").
B. As full payment for the Acquired Assets, WMI will receive the
following consideration (the "Purchase Consideration"): (i) 960,000 shares of
Common Stock, based upon a value of $24,000,000 at $25.00 per share (the "Base
Shares"), (ii) 345,500 shares of Common Stock (the "Included Shares") and (iii)
463,193 shares of Common Stock, based on the Trading Value of the Common Stock
as of the date hereof (the "Cumulative Shares").
C. The portion of the Purchase Consideration constituting the Base Shares
shall be subject to adjustment in the circumstances, and to the extent, provided
in this Section C, and subject to Section E below. If between the first
anniversary of the Closing Date and the Date of Determination, the Closing Price
for the Common Stock for each trading day in any period of thirty (30)
consecutive days shall have been at least $25.00, no additional consideration
shall be payable. If as of the Date of Determination there shall not have been
any such period in which the Closing Price shall have been at least $25.00,
additional consideration (the "True-up Consideration") shall be payable in
respect of the Base Shares issued at the Closing Date. For each Base Share, the
True-up Consideration shall be the amount by which the Trading Value as of the
Date of Determination is less than $25.00. Any True-up Consideration required to
be paid by this Section C shall be paid in shares of Common Stock, valued at the
Trading Value as of the Date of Determination, no later than three (3) business
days after the Date of Determination.
D. If any True-up Consideration is required to be delivered pursuant to
Section C above, WMI shall also receive an amount (the "Dividend Adjustment")
equal to the aggregate amount of dividends and other distributions that would
have been received from the Closing Date to the Date of Determination (the
"Missed Dividends") on or in respect of the number of shares of Common Stock to
be delivered as True-up Consideration. To the extent the Missed Dividends are
comprised of cash, the Dividend Adjustment shall be paid in shares of Common
Stock, valued at the Trading Value as of the Date of Determination, not later
than three (3) business days after the Date of Determination. To the extent the
Missed Dividends are comprised of Common Stock, the Dividend Adjustment shall be
paid in an equal number of shares of Common Stock.
E. Notwithstanding Section C above, the aggregate number of shares of
Common Stock delivered under Section C above shall not exceed 232,547 shares.
F. For purposes of the foregoing:
(i) The term "Date of Determination" shall mean the earlier of (A) the
fifth anniversary of the Closing Date or (B) the date of a Change in Control.
(ii) The term "Trading Value" shall mean, for any date, the average Closing
Price for the Common Stock for the ten (10) then most recent trading days ending
on the second trading day prior to such date.
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(iii) The term "Closing Price" shall mean, for any trading day, the closing
price for the Common Stock as reported for New York Stock Exchange Composite
Transactions or, if the Common Stock is not listed on the New York Stock
Exchange, as reported for the principal exchange or system on which such shares
are listed or traded.
(iv) The number, kind and value of shares or other consideration so
issuable, and determinations of prices associated therewith, shall be subject to
such customary anti-dilution adjustments as shall be determined in good faith by
Atmos to reflect any stock splits, reverse stock splits, stock dividends,
reclassifications, recapitalizations, mergers, consolidations or other changes
in capital structure occurring or for which a record date occurs after the date
hereof.
(v) No certificates representing fractional shares of Common Stock will
be issued as a result of the transactions contemplated hereby. If WMI would
otherwise have been entitled to receive a fraction of a share of Common Stock,
WMI shall receive, in lieu thereof, additional Common Stock in order to round up
to the next whole share the Common Stock it is otherwise entitled to receive.
G. At the Closing, Energy shall assume the executory obligations of WMI
under (i) the LLC Documents relating to the period beginning immediately after
the Closing Date and (ii) the Bank of America Facility (the "Assumed
Obligations"). Notwithstanding any other provisions hereof or any doctrine of
law, except for Assumed Obligations, WMI shall retain and Energy shall not
assume or agree to pay, perform, or discharge, any liabilities or obligations of
WMI, whether known or unknown, accrued or contingent or otherwise, including (i)
any liabilities or obligations that WMI owes to any Affiliate, (ii) any
liabilities or obligations that relate to the Excluded Assets, (iii) any
obligations or liabilities to employees, whether for compensation, under any
Employee Benefit Arrangement or by applicable law, rule or regulation, (iv) any
liabilities or obligations with respect to any Environmental Requirements or
Hazardous Materials, (v) any liabilities for any pending or threatened claims,
actions, suits, investigations or proceedings, or (vi) any Taxes (collectively,
the "Retained Liabilities").
H. The parties acknowledge that, as the owners of WMI, ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇ will receive consideration for their obligations hereunder as a result of
the consideration to be delivered to WMI hereunder.
ARTICLE I.
REPRESENTATIONS AND WARRANTIES
OF WMI, ▇▇▇▇▇▇▇▇ AND ▇▇▇▇▇
WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, jointly and severally, hereby represent and
warrant to Atmos and Energy that the statements set forth in this Article I are
true, correct and complete, except as set forth in the WMI Disclosure Schedule
attached hereto as Exhibit A.
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SECTION 1.1. Organization and Qualification.
(a) WMI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas. The LLC is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware. Each of WMI and the LLC has all requisite corporate or
limited liability company power and authority and possesses
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all franchises, grants, authorizations, licenses, permits, easements, consents,
certificates, approvals and orders ("Governmental Authorizations") necessary to
own, lease and operate its properties and assets and to carry on its business as
it is presently conducted, except where the failure to have any of such
Governmental Authorizations would not reasonably be expected to have a Material
Adverse Effect on WMI or the LLC. Each of WMI and the LLC is duly qualified as a
foreign corporation and limited liability company, respectively, to do business
and is in good standing in the State of Texas and each jurisdiction in which the
character of the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except where the
failure to so qualify would not reasonably be expected to have a Material
Adverse Effect on WMI or the LLC.
(b) WMI has not been a subsidiary or division of another corporation or
entity at any time during the two-year period prior to the date of this
Agreement.
(c) WMI has heretofore delivered to Atmos and Energy true and complete
copies of WMI's Articles of Incorporation and Bylaws, including all amendments
thereto, and the LLC Documents, including all amendments thereto.
SECTION 1.2. Subsidiaries. Other than its 55% ownership interest in the LLC
and 345,500 shares of Common Stock, WMI does not own, directly or indirectly,
any equity or similar interest in any corporation, partnership, limited
liability company, joint venture or other business association or entity. The
entire ownership interest in the LLC consists of 100 Units of LLC Membership
Interests, all of which are issued and outstanding. All of such ownership
interest is duly authorized, validly issued, fully paid and, except as provided
in the LLC Documents, non-assessable and free of preemptive rights. WMI and
Energy are the only members of the LLC, and no other person or entity owns or
has the right to acquire any ownership interest in the LLC by, through or under
WMI. Except as provided in the LLC Documents, there are no options, warrants, or
other rights, agreements, arrangements, or commitments of any character relating
to WMI's ownership interest in the LLC or obligating the LLC to issue or sell
any such ownership interest, or any securities convertible into or evidencing
the right to purchase any such ownership interest or other equity interests in
the LLC. There are no obligations, contingent or otherwise, of the LLC to
repurchase, redeem or otherwise acquire any of its ownership interest except as
provided in the LLC Documents.
SECTION 1.3. Capitalization. The entire authorized capital stock of WMI
consists of 100,000 shares, par value $0.01 per share, of common stock (the "WMI
Stock"), of which 1,695 shares of WMI Stock are issued and outstanding.
SECTION 1.4. Authority Relative to this Agreement. WMI has all requisite
corporate power and authority to execute and deliver this Agreement and the
Ancillary Agreements to which it is a signatory, and to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the Ancillary
Agreements to which WMI is a signatory have been duly and validly authorized by
WMI's board of directors and stockholders, and no other corporate proceedings on
the part of WMI are necessary to authorize this Agreement or the Ancillary
Agreements to which WMI is a signatory or to consummate the transactions
contemplated herein and therein. This Agreement has been, and the Ancillary
Agreements to which they are signatories will be, duly and validly executed and
delivered by WMI and, assuming that this Agreement constitutes, and the
Ancillary Agreements to which they are
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signatories will constitute when signed, the legal, valid and binding
obligations of the other parties hereto and thereto, each such agreement
constitutes or will constitute the legal, valid and binding obligation of WMI,
enforceable in accordance with its terms subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or similar laws
(including court decisions) and doctrines affecting the rights of creditors
generally and general equitable principles.
SECTION 1.5. No Conflicts.
(a) Except as set forth in the WMI Disclosure Schedule, the execution,
delivery and performance of this Agreement and the Ancillary Agreements to which
WMI is a signatory by WMI and the consummation by WMI of the transactions
contemplated hereby and thereby do not and will not conflict with or constitute
a breach or violation of or default under, or trigger any payment or other
material obligations pursuant to, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of WMI or the LLC
pursuant to, any contract, indenture, mortgage, loan agreement, note, license,
franchise, permit, lease or other instrument to which WMI or the LLC is a party
or by which either of them is or may be bound or to which any of their
respective properties or assets is subject, nor will such action result in any
breach or violation of, or default under, the provisions of the Articles of
Incorporation or Bylaws of WMI or the LLC Documents or of any applicable law,
administrative regulation or administrative or court decree.
(b) Except as set forth in the WMI Disclosure Schedule, the execution,
delivery and performance of this Agreement and the Ancillary Agreements to which
they are signatories by ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ and the consummation by ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇ of the transactions contemplated hereby and thereby do not and will not
conflict with or constitute a breach or violation of or a default under, any
contract, indenture, mortgage, loan agreement, note or other instrument to which
▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ is a party or by which either of them is or may be bound, nor
will such action result in any breach or violation of, or default under any
applicable law, administrative regulation or administrative or court decree.
SECTION 1.6. Required Filings and Consents. No authorization, approval or
consent of, or registration or filing with, any Person is required for the
execution, delivery or performance by WMI, ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ of this Agreement
or the Ancillary Agreements to which they are signatories or the consummation by
WMI, ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ of the transactions contemplated herein and therein,
except (i) the applicable requirements of federal and state securities laws,
(ii) the filing requirements under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act and (iii) the
consents of those Persons listed in Section 1.6 of the WMI Disclosure Schedule.
SECTION 1.7. Compliance. Neither WMI nor the LLC is in breach, default or
violation of, and no event has occurred or is occurring that with notice or
lapse of time or both would become a breach, default or violation of (i) WMI's
Articles of Incorporation or Bylaws or the LLC Documents, (ii) any law, rule,
regulation, order, judgment or decree applicable to WMI or the LLC or by which
WMI or the LLC or any of their respective properties is bound or affected, or
(iii) any material contract, indenture, mortgage, loan agreement, note, license,
franchise, permit, lease or other instrument to which WMI or the LLC is a party
or by which either of them
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is or may be bound or to which any of their respective property or assets is
subject, nor has WMI or the LLC received and not finally resolved any written
notice of a breach, default or violation of any of the foregoing nor, to the
best of WMI's Knowledge, are any threatened, except for any such breaches,
defaults or violations that would not reasonably be expected to have a Material
Adverse Effect on WMI or the LLC.
SECTION 1.8. Contracts. The WMI Disclosure Schedule contains a list of all
material contracts, including without limitation, gas purchase agreements, gas
sales agreements, pipeline transportation agreements, loan agreements, natural
gas hedging, trading and gas commodity futures, options and swap agreements,
indentures, commitments, indemnities and other material agreements or
arrangements to which WMI or the LLC is a party or by which WMI or the LLC or
any of their respective properties is bound as of the date of this Agreement.
All such contracts and instruments have been duly and validly authorized,
executed and delivered by WMI or the LLC, are in full force and effect and
neither WMI nor the LLC are in breach or default of any obligation, agreement,
covenant or condition contained in any such contract or instrument, other than
breaches or defaults which, singly or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on WMI or the LLC; none of such
contracts or instruments has been assigned by WMI or the LLC and neither WMI nor
the LLC has received written notice of any present condition or fact which would
prevent compliance by WMI or the LLC with the terms of any such contract or
instrument in all material respects; and neither WMI nor the LLC has received
written notice that any other party to any such contract or instrument has any
intention not to render full performance in all material respects as
contemplated by the terms thereof.
SECTION 1.9. Financial Statements.
(a) WMI has heretofore delivered to Atmos and Energy the unaudited
financial statements of WMI and the audited financial statements of the LLC for
the fiscal years ended December 31, 1998 and 1999 and the unaudited financial
statements of WMI and the LLC for the four month period ended April 30, 2000
attached hereto as Schedule 1.9(a) (collectively, the "Financial Statements").
The Financial Statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods covered thereby and fairly present in all material respects the
financial condition, results of operations and cash flows, as the case may be,
of WMI and the LLC as of and for the respective dates or periods indicated,
except in the case of interim statements, for the omission of note disclosure
and normal year end adjustments not expected to be material in amount.
(b) Since December 31, 1999, and except as contemplated by this Agreement
or described in the WMI Disclosure Schedule, (i) WMI and the LLC have conducted
their business only in the ordinary course of business and have taken no action
of the type referred to in Section 4.1, (ii) to the Knowledge of WMI, there has
been no Material Adverse Effect on WMI or the LLC, whether or not arising in the
ordinary course of business, (iii) there have been no transactions, agreements
or arrangements entered into by WMI or the LLC, other than those in the ordinary
course of business, which are material with respect to WMI or the LLC and (iv)
there has been no dividend or distribution of any kind declared, paid or made by
WMI on its capital stock.
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(c) Neither WMI nor the LLC has any liabilities or obligations (whether
accrued, absolute, contingent, known or otherwise) that are material in amount,
whether individually or in the aggregate, except for liabilities and obligations
that (i) are accrued or reserved against in the balance sheets of WMI and the
LLC as of April 30, 2000 included in the Financial Statements, or disclosed in
the notes to the balance sheets of WMI and the LLC as of December 31, 1999
included in the Financial Statements, (ii) were incurred after April 30, 2000 in
the ordinary course of business consistent with past practice (none of which is
materially adverse), or (iii) arise under any contract, commitment or agreement
disclosed in the WMI Disclosure Schedule and, in the case of any liability
relating to any default, violation or performance at a loss thereunder that
could reasonably be expected to have a Material Adverse Effect on WMI or the
LLC, are disclosed in the WMI Disclosure Schedule.
(d) WMI has no trading activity.
SECTION 1.10. Books and Records. WMI has made available to Atmos and
Energy, and will continue to make available to Atmos and Energy, all of the
books, records and certificates of WMI and the LLC. The books and records of WMI
and the LLC fairly reflect in all material respects the transactions to which
WMI or the LLC is or was a party or by which any of their respective properties
are or were bound, and such books and records are and have been properly kept
and maintained in all material respects, with the revenues, expenses, assets and
liabilities of WMI and the LLC accurately recorded therein in all material
respects.
SECTION 1.11. Litigation. The WMI Disclosure Schedule contains a list of
all material claims, actions, suits, investigations or proceedings pending or,
to WMI's Knowledge, threatened against or affecting WMI or the LLC or any of
their respective properties or rights at law or in equity before or by any
court, arbitrator or administrative, governmental or regulatory authority or
body. None of such claims, actions, suits, investigations or proceedings is
reasonably expected to have a Material Adverse Effect on WMI or the LLC or to
hinder in any material respect or prevent the consummation by WMI of the
transactions contemplated by this Agreement and the Ancillary Agreements.
Neither WMI, the LLC nor any of their respective properties is subject to any
order, writ, judgment, injunction, decree, determination or award reasonably
expected to have a Material Adverse Effect on WMI or the LLC.
SECTION 1.12. Title to, and Condition of, Assets. WMI and the LLC each have
good and indefeasible title to, or a valid leasehold interest in, all of its
assets and properties, real and personal, including the properties, assets and
leasehold interests reflected in the Financial Statements (except for any
properties or assets disposed of in the ordinary course of business), necessary
or appropriate for the operation of its business, free and clear of all liens,
mortgages, pledges, security interests or other encumbrances, except for such
liens, mortgages, pledges, security interests or other encumbrances that, if
present, would not reasonably be expected to have a Material Adverse Effect on
WMI or the LLC (collectively, the "Permitted Encumbrances"). All of the personal
property and assets of WMI and the LLC are, in all material respects, in good
condition and repair, taken as a whole, ordinary wear and tear excepted, and are
adequate and sufficient for the conduct of the business of WMI and the LLC as
conducted as of the date hereof.
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SECTION 1.13. Real Property Interests. Neither WMI nor the LLC has ever
owned any real property or, except for leases of office facilities, had any
interest in real property. All real property now or heretofore leased by WMI or
the LLC was and has been used in compliance, in all material respects, with all
Environmental Requirements. No Hazardous Materials were or have been generated,
stored, transported, disposed of on site or sent off-site by WMI or the LLC
from, in, on, at or upon the premises so leased except materials of a type and
used and stored in quantities normally used or stored in connection with the
operation of office facilities. Neither WMI nor the LLC has received any written
notice asserting any violation of Environmental Requirements or any obligation
or liability of WMI or LLC to remediate any condition or pay any costs in
respect of remediation or other environmental response.
SECTION 1.14. Taxes.
(a) Tax Returns Filed and Taxes Paid. All Tax Returns required to be filed
by or on behalf of WMI and the LLC have been duly filed (or extensions obtained,
as disclosed in the WMI Disclosure Schedule), and such Tax Returns are true,
complete and correct in all material respects. All Taxes reflected on such Tax
Returns or any subsequent assessments with respect thereto have been paid in
full on a timely basis, and no other Taxes that are material in amount, whether
individually or in the aggregate, are payable by WMI or the LLC with respect to
items or periods covered by such Tax Returns (whether or not shown on or
reportable on such Tax Returns) or with respect to any period prior to the date
of this Agreement. WMI and the LLC have withheld and paid over all Taxes that
are material in amount, whether individually or in the aggregate, required to
have been withheld and paid over, and complied with all information reporting
and backup withholding requirements, including maintenance of required records
with respect thereto, in connection with amounts paid to any employee, creditor,
independent contractor, or other third party. There are no liens on any of the
assets of WMI or the LLC with respect to Taxes, other than liens for Taxes not
yet due and payable. Neither WMI nor the LLC does any material business in or
derives any material income from any state, local, territorial or foreign taxing
jurisdiction other than those for which all Tax Returns required to be filed by
WMI or the LLC have been furnished to Atmos and Energy.
(b) Tax Returns Furnished. WMI has furnished to Atmos and Energy true,
correct and complete copies of (i) income tax audit reports, statements of
deficiencies, closing or other material agreements received by the LLC relating
to Taxes, and (ii) all federal and state income or franchise Tax Returns for the
LLC for all periods ending on and after 1995.
(c) Tax Deficiencies. To the Knowledge of WMI, no deficiency for any Taxes
that are material in amount, whether individually or in the aggregate, has been
proposed, asserted, assessed or threatened against WMI or the LLC that has not
been resolved and paid in full. WMI and the LLC are neither a party to any
action or proceeding for assessment or collection of Taxes, nor has WMI received
written notice that such an event has been asserted or threatened against WMI,
the LLC or any of their assets. No waiver or extension of any statute of
limitations is in effect with respect to Taxes or Tax Returns of WMI or the LLC.
(d) Tax Sharing Agreements. Neither WMI nor the LLC is (nor has either of
them ever been) a party to any Tax sharing agreement and have not assumed the
Tax liability of any other person under contract.
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(e) Tax Elections and Special Tax Status. The LLC is not a party to any
safe harbor lease within the meaning of Section 168(f)(8) of the Code, as in
effect prior to amendment by the Tax Equity and Fiscal Responsibility Act of
1982. From the formation of WMI, all stockholders of WMI have been individuals,
and no stockholder of WMI has ever been a person other than a United States
person within the meaning of Code Section 7701(a)(30). WMI is not a "foreign
person" (as that term is defined in Sections 1445 and 6038A(c)(3) of the Code).
The LLC has not entered into any compensatory agreements with respect to the
performance of services which payment thereunder would result in a nondeductible
expense to the LLC pursuant to Section 280G of the Code or an excise tax to the
recipient of such payment pursuant to Section 4999 of the Code. The LLC has not
agreed, nor is it required to make, any adjustment under Code Section 481(a) by
reason of a change in accounting method or otherwise.
(f) Tax Status. From its formation, the LLC has been treated as a
partnership for federal tax purposes pursuant to Treasury Regulation Section
301.7701-3. For each taxable year of WMI since its formation, WMI (i) has had a
validly existing S corporation election in effect for federal income tax
purposes, (ii) has filed all federal Tax Returns as an S corporation, and (iii)
has taken no action, and its stockholders have taken no action, that would
terminate the S corporation election.
SECTION 1.15. Employee Benefit Plans. Except as otherwise set forth in the
WMI Disclosure Schedule or as not reasonably expected to have a Material Adverse
Effect on WMI or the LLC:
(a) The WMI Disclosure Schedule sets forth (i) the name of each Plan and
indicates any Plan that is a "multiemployer plan," as defined in ERISA Section
4001, (ii) the name of any other employee benefit plan as defined in Section
3(3) of ERISA with respect to which WMI, the LLC or any Group Member is a "Party
in Interest," as defined in Section 3(14) of ERISA and (iii) the name of any
other Employee Benefit Arrangement.
(b) Each Plan is now, and has been from its inception, administered in
accordance with its terms and in compliance in all material respects with the
provisions of applicable law, including without limitation ERISA and the Code.
Each Plan intended to be qualified under Section 401(a) of the Code is so
qualified and has been determined to be so qualified by the IRS, and nothing has
occurred since the date of the last such determination which resulted or is
likely to result in the loss of such qualification. All required reports and
descriptions of each Plan have been timely filed and distributed as required by
ERISA.
(c) There has not occurred with respect to any Plan any "Prohibited
Transaction," as defined in either Section 406 of ERISA or Section 4975 of the
Code. With respect to each Plan and Employee Benefit Arrangement and any other
similar plan or arrangement either currently or previously terminated,
maintained, or contributed to by any current or former Group Member, no event
has occurred and no condition exists that after the Closing Date could subject
Atmos, WMI or the LLC, directly or indirectly, to any material liability
(including liability under any indemnification agreement) under Section 412,
413, 4971, 4975, or 4980B of the Code or Section 302, 502, 515,601, 606, or
Title IV of ERISA.
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(d) There has not occurred with respect to any Plan any "Reportable Event,"
as defined in Section 4043 of ERISA, for which the thirty-day notice requirement
has not been waived under applicable PBGC requirements. No Plan has applied for
or obtained a waiver from the IRS of any minimum funding requirement under
Section 412 of the Code. The funding method used in connection with each ERISA
Pension Plan meets the requirements of ERISA and the Code and the actuarial
assumptions used in connection with each such plan are reasonable, given the
experience of such ERISA Pension Plan and reasonable expectations. The fair
market value of the plan assets of each Plan are at least equal to (i) the
present value of its benefit liabilities (as defined in ERISA Section
4001(a)(16), including any unpredictable contingent event benefits within the
meaning of Code Section 412(l)(7), and determined on the basis of assumptions
prescribed by the PBGC for purposes of ERISA Section 4044), and (ii) the
Projected Benefit Obligations thereunder, as defined in Statement of Financial
Accounting Standards No. 87, including any allowance for indexation and ad hoc
increases.
(e) (i) No Plan has been terminated, and no complete or partial withdrawal
from or insolvency or reorganization with respect to any "multiemployer plan,"
as defined in Section 4001 of ERISA, has occurred since the inception of any
Plan under circumstances that have given rise to, or would give rise to, any
actual or potential liability to the PBGC, or any multiemployer plan, or any
other person (excluding liabilities to participants for benefits payable in the
normal course of events pursuant to any such termination); (ii) no event or
condition exists which presents a risk of termination of any Plan by the PBGC;
and (iii) there is no actual or potential liability to the PBGC or any other
person (other than any liability for Plan benefits) expected by WMI, the LLC, or
any Group Member to be incurred with respect to any Plan, including, but not
limited to, any liability for premium payments, for any liability for
accumulated funding deficiency as defined in Section 302 of ERISA, or for any
minimum funding contribution under Section 302 of ERISA.
(f) No lien imposed under Section 412(n) of the Code exists in favor of any
Plan upon any property belonging to a Group Member.
(g) WMI has previously delivered or made available to Atmos and Energy true
and correct copies of each Plan and each Employee Benefit Arrangement, together
with, if applicable, true and correct copies of the annual reports and actuarial
reports filed with respect to each such Plan and Employee Benefit Arrangement
for the preceding two plan years, summary plan descriptions and any other
communications to employees relating to each such Plan and Employee Benefit
Arrangement, documents (including financial statements) relating to any trust or
third-party funding vehicle, and all letters and other correspondence to and
from the IRS, if any, including but not limited to written confirmation of the
tax-exempt status or qualification of any Plan under Section 401(a) of the Code.
(h) Neither (i) WMI, the LLC or any Group Member, or any director, officer,
employee or agent of WMI, the LLC or any Group Member has, with respect to any
Plan, nor (ii) any Plan or trust created thereunder or trustee or administrator
thereof has, engaged in any conduct that would result in any penalties under
Section 502 of ERISA or any liability under Section 409 of ERISA. All benefits
due under each Plan and Employee Benefit Arrangement have been timely paid, and
no civil or criminal action or claim (other than uncontested claims for
benefits) is pending or, to the best of WMI's Knowledge, threatened with respect
to any Plan.
10
All contributions and payments to or with respect to each Employee Benefit
Arrangement or Plan have been timely made.
(i) Each Plan or Employee Benefit Arrangement maintained by WMI, the LLC or
any Group Member specifically provides that it may be terminated at any time by
its sponsoring employer (subject, in the case of any Plan which is subject to
Title IV of ERISA, to the provisions of Section 4041 of ERISA), and there are no
circumstances or conditions that exist prior to Closing that would prevent the
applicability of those provisions. Each Plan or Employee Benefit Arrangement can
be terminated or amended unilaterally by WMI or the LLC on not more than 90 days
notice, and none of WMI, the LLC, or any Group Member or any director, officer
or employee of any of the foregoing have taken any action that would commit WMI,
the LLC or any Group Member to continue any Plan or Employee Benefit Arrangement
or any benefit thereunder for any present or former employee of WMI, the LLC or
any Group Member or that would prevent WMI, the LLC or any Group Member from
changing or terminating any such benefit or plan.
(j) Neither WMI nor the LLC now have in effect, and neither WMI nor the LLC
have previously had in effect, any welfare benefit plan, commitment or
arrangement providing for medical or death benefits (whether insured or
uninsured) with respect to current or former employees beyond their date of
retirement or other termination of service (other than coverage mandated by
Section 4980B of the Code and Section 601 of ERISA, the cost of which is fully
paid by the former employee or his or her dependents). Except as disclosed in
the WMI Disclosure Schedule, no Employee Benefit Arrangement or Plan provides
for any severance pay, accelerated payments, deemed satisfaction of goals or
conditions, new or increased benefits, forgiveness or modification of loans, or
vesting conditioned in whole or in part upon a change in control of any Group
Member or any plant closing.
(k) Neither WMI, the LLC nor any Group Member maintains, participates in,
contributes to, or has any obligation to contribute to any liability with
respect to any multiple employer plan, or has had any obligation with respect to
such a plan during the six years immediately preceding the date of this
Agreement.
SECTION 1.16. Labor Matters. None of WMI's or the LLC's employees is
covered by any collective bargaining agreement, and there are no employee
activities or controversies (including, but not limited to, any labor organizing
activities, election petitions or proceedings or proceedings preparatory
thereto, unfair labor practice complaints, labor strikes, employment
discrimination claims, disputes, slowdowns or work stoppages) pending or, to
WMI's Knowledge, threatened, between WMI or the LLC and any of their respective
employees.
SECTION 1.17. Transactions with Affiliates, Directors, Officers and
Employees. The WMI Disclosure Schedule contains a list and description of all
agreements, arrangements, commitments or other transactions between WMI or the
LLC and any controlling Affiliates of WMI currently in effect or entered into at
any time within the three years prior to the date of this Agreement. The WMI
Disclosure Schedule contains a list and description of all agreements,
arrangements, commitments or other transactions between WMI or the LLC and any
of their respective directors, officers, managers or employees (other than
managers appointed by Energy)
11
currently in effect or entered into at any time within the three years prior to
the date of this Agreement, the terms of which are not generally available or
applicable to employees as a group.
SECTION 1.18. Insurance. WMI has listed in the WMI Disclosure Schedule all
insurance policies or binders maintained by the LLC with respect to its
properties and business, and the LLC is not in default with respect to any
provision contained in any such policy or binder or has not failed to give any
material notice or present any material claim under any such policy or binder in
due and timely fashion. There are no outstanding unpaid claims under any such
policy or binder, and the LLC has not received any written notice of any
material claim against the LLC that is not fully covered by the listed insurance
policies (subject to the deductibles and other terms and provisions thereof).
The LLC has not received written notice of cancellation or nonrenewal of any
such policy or binder, and the consummation of the Merger will not result in the
automatic termination of any of such policies or binders or give the insurance
carrier any right to terminate any such policy or binder. WMI does not maintain
any insurance policies, nor is it covered by any insurance policies or binders
of the LLC.
SECTION 1.19. Absence of Unethical Business Practices. Neither WMI, the LLC
nor, to the best of WMI's Knowledge, any manager of the LLC designated by WMI,
or any director, officer, employee or Affiliate of WMI or the LLC (excluding
Atmos, Energy or any manager designated by Energy), has directly or indirectly
given or agreed to give any gift or similar benefit to any customer,
subcontractor, supplier, government employee, or other person who was or is in a
possible position to help or hinder WMI or the LLC, which gift or benefit (a)
would reasonably be expected to subject WMI or the LLC to any damages or
penalties in any civil or criminal proceeding, or (b) would reasonably be
expected to have had, singly or in the aggregate, a Material Adverse Effect on
WMI or the LLC if not given or continued.
SECTION 1.20. Brokers and Finders. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of WMI, the LLC, ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇.
SECTION 1.21. Limitation on Trading Position. The Net Position of WMI and
the LLC does not exceed 2,500,000 MMBTUs. The WMI Disclosure Schedule contains a
complete list of all open New York Mercantile Exchange commodity future, option
or swap contracts or other gas purchase or gas sales contracts to which WMI or
the LLC is a party as of the date hereof, the quantity of natural gas (in
MMBTUs) which each contract represents, the current value, in dollars, of each
contract, the exercise or strike date of each such contract and the approximate
current value (positive or negative) of each contract. On the Closing Date, WMI
shall provide Atmos with a revised WMI Disclosure Schedule that will indicate
the then current information with respect to such contracts. All such contracts
have been incurred in the normal course of business consistent with the amended
risk policy of the LLC, copies of which have been distributed to the board of
managers of the LLC.
12
ARTICLE II.
CERTAIN REPRESENTATIONS AND
WARRANTIES OF WMI, ▇▇▇▇▇▇▇▇ AND ▇▇▇▇▇
WMI and each of ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, severally (and not jointly), hereby
represent and warrant to Atmos and Energy (as to itself or himself, and not the
others) that the statements set forth in this Article II are true, correct and
complete, except as set forth in the WMI Disclosure Schedule.
SECTION 2.1. Understanding that Shares will Be Issued without
Registration. WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ understand that the shares of Common
Stock to be issued pursuant to this Agreement (the "Shares") will be issued
without registration under the Securities Act, in reliance upon exemptions from
registration under the Securities Act including the safe harbor provided by
Regulation D promulgated under Section 4(2) of the Securities Act. WMI,
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ further understand that such exemptions depend in part upon,
and such shares will be issued in reliance on, the representations and
warranties made by WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ in this Article II.
(a) Investment Intent. WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ will acquire the Shares for
their own respective accounts for investment purposes only and not with a view
to resale or other distribution thereof, in whole or in part; provided, however,
that, subject to the terms hereof, the disposition of WMIs, ▇▇▇▇▇▇▇▇'▇ and
▇▇▇▇▇'▇ property shall at all times be within their control; and WMI, ▇▇▇▇▇▇▇▇
and ▇▇▇▇▇ will not assign, sell, hypothecate or otherwise transfer the Shares
unless (i)(a) a registration statement is in effect under the Securities Act
with respect to such Shares or (b) a written opinion of counsel acceptable to
Atmos is obtained to the effect that no such registration is required (except
for the transfers from WMI to ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ in the liquidation of WMI),
and (ii) they have complied with all applicable holding periods imposed by the
Securities Act (and the regulations thereunder) and this Agreement. ▇▇▇▇▇▇▇▇
and ▇▇▇▇▇ have no reason to anticipate any change in their personal
circumstances, financial or otherwise, that would cause or require any sale or
distribution of the Shares in violation of this Section 2.1(a).
(b) Investor Awareness. WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ acknowledge, agree and are
aware that: (i) no United States federal or state or any foreign agency has
passed upon the accuracy, validity or completeness of this Agreement or made any
finding or determination as to the fairness of an investment in the Shares; (ii)
pursuant to the terms of this Agreement, there are substantial restrictions on
the transferability of the Shares; (iii) the Shares have not been registered
under the Securities Act or under the securities laws of any other jurisdiction;
(iv) an offer or sale of any of the Shares by WMI, ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ in the
absence of registration under the Securities Act will require the availability
of an exemption thereunder; and (v) a restrictive legend is or shall be placed
on the certificates representing the Shares and a notation shall be made in the
appropriate records of Atmos indicating that the Shares are subject to
restrictions on transfer.
SECTION 2.2. Accredited Investor. WMI qualifies as an "accredited
investor" within the meaning of Rule 501 under the Securities Act, because it
has total assets exceeding $5,000,000. ▇.▇. ▇▇▇▇▇▇▇▇, III, and ▇▇▇▇▇ ▇▇▇▇▇ each
qualify as an "accredited investor" within
13
the meaning of Rule 501 under the Securities Act, because either (i) each has an
individual net worth, or a joint net worth with their respective spouses,
exceeding $1,000,000; or (ii) each had an individual income in excess of
$200,000 in each of the two years immediately preceding the date hereof, or each
had joint income with their respective spouses in excess of $300,000 in each of
those years, and each of ▇.▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ has a reasonable
expectation of reaching the same income level in the current year.
SECTION 2.3. Receipt of Information; Access to Information. WMI, ▇▇▇▇▇▇▇▇
and ▇▇▇▇▇ each acknowledge that they:
(a) have been furnished with the Articles of Incorporation and Bylaws of
Atmos, the Atmos SEC Reports and any documents that may have been made available
upon its or his request (collectively, the "Other Documents"), and are capable
of understanding and evaluating the risks of acquiring the Shares;
(b) have been given the opportunity to ask questions of, and receive
answers from, Atmos and its officers and employees concerning the terms and
conditions of the acquisition of the Shares and other matters pertaining to an
investment in the Shares, have been given the opportunity to obtain such
additional information necessary to evaluate the merits and risks of acquiring
the Shares to the extent Atmos possesses such information, and have received all
documents and information that each of them has requested relating to an
investment in the Shares;
(c) have not relied upon any representations or other information (whether
oral or written) from Atmos or its directors, officers or affiliates, or from
any other persons, other than the representations of Atmos made in this
Agreement and the Other Documents;
(d) are familiar with the nature of and risks attendant to investments in
the business of Atmos and securities in general and have carefully considered
and have, to the extent each of them believes such discussion necessary,
discussed with their respective professional legal, financial and tax advisers
the suitability of an investment in the Shares for their respective financial
and tax situations and have determined that the Shares are a suitable investment
for each of them; and
(e) have made, and are solely responsible for making, their respective own
independent evaluations of the economic and other risks involved in their
respective investments in the Shares and their own respective independent
decisions to make such investments.
SECTION 2.4. WMI Stockholders. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ are the only beneficial
and record stockholders of WMI, and no other Person owns or has the right to
acquire any shares of capital stock of WMI.
SECTION 2.5. Authority Relative to this Agreement. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇
have all requisite legal right, power and authority to execute and deliver this
Agreement and the Ancillary Agreements to which they are signatories and to
perform their respective obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby. This Agreement has been, and
the Ancillary Agreements to which they are signatories will be, duly and validly
executed and delivered by ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ and, assuming that this Agreement
14
constitutes, and the Ancillary Agreements to which they are signatories will
constitute when signed, the legal, valid and binding obligations of the other
parties hereto and thereto, each such agreement constitutes or will constitute
the legal, valid and binding obligation of ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, as the case may
be, enforceable in accordance with its terms subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or similar laws
(including court decisions) and doctrines affecting the rights of creditors
generally and general equitable principles.
SECTION 2.6. No Conflicts. Except as set forth in the WMI Disclosure
Schedule, the execution, delivery and performance of this Agreement and the
Ancillary Agreements to which they are signatories by ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ and the
consummation by ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ of the transactions contemplated hereby and
thereby do not and will not conflict with or constitute a breach or violation of
or a default under, any contract, indenture, mortgage, loan agreement, note or
other instrument to which ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ is a party or by which either of
them is or may be bound or to which any shares of WMI Stock held by either of
them are subject, nor will such action result in any breach or violation of, or
default under, any applicable law, administrative regulation or administrative
or court decree.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
OF THE ATMOS ENTITIES
The Atmos Entities, jointly and severally, hereby represent and warrant to
WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ that the statements set forth in this Article III are
true, correct and complete, except as set forth in the Atmos Disclosure Schedule
attached hereto as Exhibit B.
---------
SECTION 3.1. Organization and Qualification. Atmos is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas and the Commonwealth of Virginia. Energy is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Each of the Atmos Entities has all requisite corporate or
limited liability company power and authority and possesses all Governmental
Authorizations necessary to own, lease and operate its properties and assets and
to carry on its business as it is presently conducted, except where the failure
to have any of such Governmental Authorizations would not have a Material
Adverse Effect on Atmos and its Subsidiaries taken as a whole. Each of the
Atmos Entities is duly qualified as a foreign corporation or foreign limited
liability company, respectively, to do business and is in good standing in each
jurisdiction in which the character of the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification
necessary, except where the failure to so qualify would not have a Material
Adverse Effect on Atmos and its Subsidiaries taken as a whole. Atmos has
heretofore delivered or made available to WMI true and complete copies of the
Articles of Incorporation and Bylaws of Atmos and the organizational documents
of Energy, including all amendments thereto.
SECTION 3.2. Capitalization.
(a) The entire authorized capital stock of Atmos consists of 100,000,000
shares of Common Stock. As of August 4, 2000, (i) 31,794,899 shares of Common
Stock were issued and
15
outstanding, all of which are duly authorized, validly issued, fully paid and
nonassessable and free of statutory preemptive rights, and (ii) no shares of
Common Stock are held in the treasury of Atmos. No such shares were issued in
violation of any contractual or statutory preemptive rights. As of the date
hereof, other than options granted by Atmos under its 1998 Long-Term Incentive
Plan and the Long-Term Stock Plan for the United Cities Gas Company Division and
stock units under its Equity Incentive and Deferred Compensation Plan for Non-
Employee Directors or as described in the Atmos SEC Reports, there are no
options, warrants or other rights, agreements, arrangements or commitments of
any character relating to the capital stock of Atmos or obligating Atmos to
issue or sell any shares of capital stock of, or any securities convertible into
or evidencing the right to purchase any shares of capital stock of or other
equity interests in, Atmos. There are no obligations, contingent or otherwise,
of Atmos to repurchase, redeem or otherwise acquire any shares of Common Stock.
(b) All of the issued and outstanding member interests of Energy are duly
authorized, validly issued, fully paid and nonassessable and owned by Atmos.
(c) When issued, the Shares will be duly authorized, validly issued, fully
paid, nonassessable and free of any preemptive rights.
SECTION 3.3. Authority Relative to This Agreement. Each of the Atmos
Entities has all requisite corporate or limited liability company power and
authority to execute and deliver this Agreement and the Ancillary Agreements to
which they are signatories and to perform their respective obligations hereunder
and thereunder and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the Ancillary
Agreements to which they are signatories have been duly and validly authorized
by the board of directors of Atmos and by the managers of Energy, and no other
proceedings on the part of the Atmos Entities are necessary to authorize this
Agreement or the Ancillary Agreements to which they are signatories or to
consummate the transactions contemplated herein and therein. This Agreement has
been, and the Ancillary Agreements to which they are signatories will be, duly
and validly executed and delivered by the Atmos Entities and, assuming that this
Agreement constitutes, and the Ancillary Agreements will constitute when signed,
the legal, valid and binding obligations of the other parties hereto and
thereto, each such agreement constitutes or will constitute the legal, valid and
binding obligation of the Atmos Entities, as the case may be, enforceable in
accordance with its terms subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or similar laws (including
court decisions) and doctrines affecting the rights of creditors generally and
general equitable principles.
SECTION 3.4. No Conflict. The issuance by Atmos of the Shares, the
execution, delivery and performance of this Agreement and the Ancillary
Agreements to which they are signatories by the Atmos Entities, and the
consummation by the Atmos Entities of the transactions contemplated hereby and
thereby do not and will not conflict with or constitute a breach or violation
of, or a default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Atmos Entities pursuant
to, any contract, indenture, mortgage, loan agreement, note, license, franchise,
permit, lease or other instrument to which the Atmos Entities is a party or by
which it is or may be bound or to which any of its property or assets is
subject, nor will such action result in any breach or violation of, or
16
default under, the provisions of the Articles of Incorporation or Bylaws of
Atmos or the organizational documents of Energy or of any applicable law,
administrative regulation or administrative or court decree.
SECTION 3.5. Required Filings and Consents. No authorization, approval or
consent of, or registration or filing with, any Person is required for the
issuance of the Shares by Atmos, the execution, delivery or performance by the
Atmos Entities of this Agreement or the Ancillary Agreements to which the Atmos
Entities are signatories or the consummation by the Atmos Entities of the
transactions contemplated herein and therein, except (i) the applicable
requirements of federal and state securities laws, (ii) the filing requirements
under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, and (iii) the approvals of the Colorado Public
Utilities Commission, Georgia Public Service Commission, Kentucky Public Service
Commission, Illinois Corporation Commission, Tennessee Regulatory Authority, and
the Virginia Corporation Commission.
SECTION 3.6. SEC Filings; Financial Statements, Absence of Undisclosed
Liabilities.
(a) Atmos has filed all forms, reports and documents required to be filed
with the SEC since September 30, 1998, and has heretofore delivered or made
available to WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, in the form filed with the SEC, (i) its
Annual Reports on Form 10-K for the fiscal years ended September 30, 1998 and
1999, (ii) its Quarterly Reports on Form 10-Q for the periods ended December 31,
1999 and March 31, 2000, and (iii) all proxy statements relating to Atmos'
meetings of shareholders (whether annual or special) held since September 30,
1999, (iv) all Forms 8-K filed by Atmos with the SEC since September 30, 1999,
(v)all other reports or registration statements filed by Atmos with the SEC
since September 30, 1999, and (vi) all amendments and supplements to all such
reports and registration statements filed by Atmos with the SEC since September
30, 1999 (collectively, the "Atmos SEC Reports"). The Atmos SEC Reports were
prepared in substantial compliance, in all material respects, with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
did not at the time they were filed contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(b) Atmos has heretofore delivered or made available to WMI, ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇, its audited consolidated financial statements of Atmos and its
subsidiaries (together with the notes thereto) for its fiscal years ended
September 30, 1998 and 1999 and its unaudited consolidated financial statements
for the period ended March 31, 2000. All such financial statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods covered thereby (subject, in the case
of any such financial statements that are unaudited, to year-end adjustments in
such amount and of such type as are or will be consistent with adjustments made
in prior fiscal years). Such financial statements (together with the notes
thereto) fairly, in all material respects, present the financial condition and
results of operations and cash flows of Atmos and its Subsidiaries on a
consolidated basis at the dates and for the periods set forth therein.
(c) Since September 30, 1999, there has been no Material Adverse Effect on
Atmos or its subsidiaries, taken as a whole, whether or not arising in the
ordinary course of business.
17
(d) Neither Atmos nor its Subsidiaries have any material liabilities
(whether accrued, absolute or contingent) whether individually or in the
aggregate, except for liabilities that (i) are accrued or reserved against in
the consolidated balance sheet of Atmos and its Subsidiaries, as at September
30, 1999 or reflected in the notes thereto, or are not required by generally
accepted accounting principles to be so accrued, reserved or reflected, (ii)
were incurred after the date of such balance sheet, (iii)were disclosed in the
Atmos SEC Reports.
SECTION 3.7. Brokers and Finders. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Atmos Entities.
SECTION 3.8. Litigation. Except as described in the Atmos SEC Reports,
there are no claims, actions, suits, investigations or proceedings pending or,
to Atmos' Knowledge, threatened against Atmos or any of its Subsidiaries or any
of their respective properties or rights at law or in equity before or by any
court, arbitrator or administrative, governmental or regulatory authority or
body that are reasonably expected to have a Material Adverse Effect on Atmos and
its Subsidiaries, taken as a whole, or to hinder in any material respect or
prevent the consummation by the Atmos Entities of the transactions contemplated
by this Agreement and the Ancillary Agreements.
ARTICLE IV.
AGREEMENTS AND COVENANTS REGARDING WMI AND THE LLC
SECTION 4.1. Conduct of Business by WMI Pending the Closing. Except for
the distributions to ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ of certain assets other than the LLC
Membership Interests and shares of Common Stock as disclosed in the WMI
Disclosure Schedule and contemplated by Section 7.2, between the date of this
Agreement and the Closing Date, unless Atmos and Energy shall otherwise agree in
writing, WMI shall, and shall cause the LLC to, conduct its business only in the
ordinary course and in a manner consistent with past practice; and WMI shall
maintain the corporate existence of WMI and the limited liability company
existence of the LLC, preserve intact the business and organization of WMI and
the LLC, keep available the services of its present officers, employees and
consultants, and preserve the relationships and goodwill of WMI and the LLC with
its customers, suppliers and other persons with which WMI or the LLC has
significant business relations. By way of amplification, but not limitation,
except for the distributions to ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ of all its assets other than
the LLC Membership Interests and 345,500 shares of Common Stock and
distributions contemplated by Section 7.2, WMI shall not, and shall cause the
LLC not to, between the date of this Agreement and the Closing Date, directly or
indirectly, do any of the following without the prior written consent of Atmos
and Energy or, in the case of the LLC, the approval of a Super-Majority in
Interest (as defined in the LLC Agreements) (as to which approval neither Atmos
nor Energy shall have any obligation):
(a) amend or otherwise change its Articles of Incorporation or Bylaws or
LLC Documents;
(b) issue, sell, pledge, dispose of or encumber, or authorize the issuance,
sale, pledge, disposition or encumbrance of (i)any shares of capital stock of
any class, or any options,
18
warrants, convertible securities or other rights of any kind to acquire any
shares of capital stock of, or any other equity interest in, WMI (except in
accordance with the WMI Shareholders' Agreement) or the LLC or (ii) any assets
of WMI or the LLC (except for sales of assets in the ordinary course of business
and in a manner consistent with past practice);
(c) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock or other equity interest;
(d) distribute, pay out or set aside any of its cash or assets;
(e) reclassify, combine, split, subdivide, redeem, purchase or otherwise
acquire or offer to acquire, directly or indirectly, any of its capital stock or
other equity interests;
(f) acquire (by merger, consolidation or acquisition of stock or assets)
any corporation, partnership or other business organization or division thereof
or acquire any shares of WMI Stock or other equity interests except pursuant to
the WMI Shareholders' Agreement;
(g) incur any indebtedness for borrowed money or issue any debt securities
or assume, guarantee or endorse, or otherwise as an accommodation become
responsible for, the obligations of any person, or make any loans or advances,
except, in the case of the LLC, in the ordinary course of business consistent
with past practice or the Bank of America Facility;
(h) enter into or amend any contract, agreement, commitment or arrangement
other than in the ordinary course of business consistent with past practice;
(i) authorize any capital expenditures that are in excess of $150,000 in
the aggregate during a calendar year, plus up to $450,000 for compressors and
related equipment;
(j) increase the compensation payable or to become payable to its managers,
directors, officers or employees, except for increases in salary or wages of
non-officer employees in accordance with past practices, or grant any severance
or termination pay or stock options to, or enter into any employment or
severance agreement with any manager, director, officer or other employee, or
establish, adopt, enter into or amend any collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or other
plan, agreement, trust, fund, policy or arrangement for the benefit of any
current or former managers, directors, officers or employees, except as required
by contract disclosed in the WMI Disclosure Schedule or by law, and except for
the termination of consulting and other agreements with former directors of WMI;
(k) make any loan or advance (except for normal business expense advances)
to any of its managers, directors, officers, employees or stockholders, or to
any other person or entity or cancel without payment in full any note, loan or
other obligation receivable from any manager, director, officer, employee or
stockholder or any member of their families or from any corporation or other
entity in which any manager, director, officer, employee or stockholder or any
member of their families has any direct or indirect interest known to ▇▇▇▇▇▇▇▇
or ▇▇▇▇▇;
(l) take any action other than in the ordinary course of business and in a
manner consistent with past practice (none of which actions shall be
unreasonable or unusual) with
19
respect to accounting policies or procedures and the filing of Tax Returns
(including procedures with respect to the payment of accounts payable and
collection of accounts receivable);
(m) make any tax election or settle or compromise any material federal,
state, local or foreign income tax liability or settle, waive or compromise any
other material claim, including litigation;
(n) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or asserted contingent or otherwise),
other than as may be paid, discharged or satisfied in the ordinary course of
business and consistent with past practice;
(o) take any action or omit to take any necessary action, which action or
omission results in any breach of or constitutes a default (or an event that
with notice or lapse of time or both would become a default) under any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which it is a party or by which
it or its properties is bound or affected and is reasonably expected to have a
Material Adverse Effect on WMI or the LLC; or
(p) permit the Net Position of WMI and the LLC to exceed 2,500,000 MMBTUs
of natural gas.
SECTION 4.2. No Solicitation of Transactions. WMI will not, and will not
authorize or permit the LLC or any manager, director, officer, employee or agent
of WMI or the LLC to:
(a) solicit, initiate or encourage the submission of proposals or offers
from any person or entity (other than Atmos, Energy or an Affiliate of Atmos)
relating to,
(b) participate (except with Atmos) in any negotiations regarding, or
furnish to any person any information with respect to WMI or the LLC for the
purposes of, or
(c) cooperate with, assist or participate in, facilitate or encourage
(except, in each case, with Atmos) any effort or attempt by any person to seek
or effect,
any merger or other business combination involving WMI or the LLC or the
purchase of all or a substantial portion of WMI's or the LLC's assets or any
equity interest in WMI or the LLC. WMI and Atmos will each promptly notify the
other if any such proposal or offer, or any inquiry by, or contact with any
person with respect thereto, is made.
SECTION 4.3. Access to Information; Confidentiality. (a) From the date
hereof to the Closing Date, WMI will, and will direct the LLC and the managers
of the LLC designated by WMI, directors, officers, employees and agents of WMI
and the LLC to, permit and afford Atmos, Energy and their respective
representatives full and complete access at all reasonable times and with
reasonable prior notice to the employees, offices, properties, books and records
of WMI and the LLC, including the work papers of its certified public
accountants and Tax Returns of WMI, for a due diligence review and will furnish
Atmos and Energy with all Tax Returns, financial, operating and other data and
information of WMI or the LLC as Atmos or Energy, through its officers,
managers, employees or representatives, may reasonably request. In addition,
WMI will permit Atmos and Energy to perform other inspections and tests
(including
20
leak surveys) of WMI's and the LLC's physical properties as Atmos or Energy may,
in its sole discretion and at its sole expense, elect to perform. Further, WMI
understands and agrees that Atmos, Energy or their respective employees, agents
and representatives may find it appropriate to contact Governmental Bodies in
connection with their analyses of certain environmental information concerning
WMI or the LLC, and WMI hereby consents to such contact.
(b) WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ acknowledge that they may receive or have
received from Atmos and Energy information and data regarding Atmos and Energy
that is non-public and proprietary in nature. WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ shall
hold in confidence all such information and data and shall ensure that its
directors, officers, employees and agents do not disclose such information and
data to others without the prior written consent of Atmos or Energy, as the case
may be. In the event that this Agreement is terminated, upon receipt of a
written request, WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ will return to Atmos and Energy all
such documents and other material (and all copies thereof) obtained from Atmos
and Energy, respectively, in connection with the transactions contemplated
hereby and will destroy all such documents and other material prepared by WMI,
▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ or their agents, representatives or advisors that reflect non-
public information received by WMI, ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ in connection with the
transactions contemplated hereby.
SECTION 4.4. Insurance. Through the Closing Date, WMI shall cause the LLC
to maintain in full force and effect all of its policies of insurance that were
in effect on the date hereof or insurance comparable to the coverage afforded by
such policies.
SECTION 4.5. Preparation of Tax Returns and Payment of Taxes. (a) WMI
shall prepare and timely file at its expense, and cause the LLC to prepare and
timely file at the LLC's expense, all Tax Returns and amendments thereto
required to be filed by WMI or the LLC on or before the Closing Date. WMI and
the LLC shall each pay and discharge all Taxes, assessments and governmental
charges upon or against it or any of its properties or assets, and all
liabilities at any time existing, before the same shall become delinquent and
before penalties accrue thereon, except to the extent and as long as the same
are being contested in good faith and by appropriate proceedings pursued
diligently and in such a manner as not to cause any Material Adverse Effect on
WMI or the LLC.
(b) Atmos shall prepare and timely file at its expense, or cause to be
prepared and timely filed, when due, all Tax Returns and amendments thereto
required to be filed by the LLC for any Tax periods ending after the Closing
Date (including all Tax periods that begin before and end after the Closing
Date). ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ shall have a reasonable opportunity to review and
comment on all such Tax Returns and amendments thereto to the extent such Tax
Returns cover tax periods that begin before the Closing Date.
SECTION 4.6. Certain Tax Covenants. Prior to the Closing Date, WMI shall
not, and shall cause the LLC not to, take any of the following actions:
(a) make, revoke or amend any Tax election;
(b) execute any waiver of restrictions on assessment or collection of any
Tax; or
(c) enter into or amend any agreement or settlement with any Tax Agency.
21
ARTICLE V.
AGREEMENTS AND COVENANTS
OF WMI, ▇▇▇▇▇▇▇▇ AND ▇▇▇▇▇
SECTION 5.1. Compliance with Securities Regulations. WMI, ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇ shall not sell, offer to sell or otherwise dispose of any Shares for a
period of one year after the date of issuance of such Shares, whether issued on
the Closing Date or issued after the Closing Date, except for the offer, sale or
disposition of the Included Shares to the extent, if any, permitted by Rule 144
under the Securities Act in a transaction which, in the opinion of legal counsel
(such opinion being reasonably satisfactory to Atmos), is so exempt from the
registration requirements of the Securities Act. After such one-year periods,
WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ shall not sell, offer to sell or otherwise dispose of
any Shares, except (A) pursuant to an effective registration statement or (B)in
a transaction which, in the opinion of legal counsel (such opinion being
reasonably satisfactory to Atmos), is exempt from the registration requirements
of the Securities Act. WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ acknowledge that certificates
representing the Shares may contain a legend setting forth the restrictions that
such shares may be sold only as provided herein. Notwithstanding the foregoing,
the Shares may be transferred to ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ in the liquidation of WMI.
SECTION 5.2. Covenant Not to Compete.
(a) Other than in the course of performing their duties from their
employment by Atmos or the LLC, WMI, ▇.▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ will not, for
a period of five years from and after the Closing Date (the "Non-Competition
Period"), directly or indirectly (whether through WMI, any Affiliate or
otherwise), engage in any of the following activities in the States of Texas and
Tennessee, and all other States in which WMI or the LLC has or has had
customers, to or from which WMI or the LLC has purchased or sold natural gas, or
in which the other parties to the contracts of WMI or the LLC for the purchase
or sale of natural gas, or any other future, option, swap or other derivative
instrument in respect thereof, are or were located (collectively, the "Non-
Competition Area"): (i) conduct or participate in any business or enterprise
involved in purchasing and selling natural gas, entering into or trading in
contracts for the purchase or sale of natural gas, and any future, option, swap
or other derivative instrument in respect thereof, including the gas marketing
business of providing natural gas or derivatives thereof to municipalities and
industrial customers, or (ii) solicit, attempt to solicit or assist any other
person or entity in soliciting or attempting to solicit customers of the
business operated by WMI or the LLC prior to the Closing Date or the employees
of WMI or the LLC prior to the Closing Date to cease doing any business with the
LLC or ceasing their employment with the LLC. ▇.▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇
shall not be deemed to be so competing solely by reason of purchasing or owning
securities in companies listed on the New York Stock Exchange, the American
Stock Exchange, or quoted on the National Association of Securities Dealers
Automatic Quotation System (NASDAQ), provided that the direct and beneficial
ownership of any class of securities in any of such entities by them, together
with their respective Affiliates, is less than 2% of the aggregate number of
outstanding units, interests or units of such class of securities. The parties
hereto expressly acknowledge and agree that (A) the agreements set forth in this
Section 5.2 contain reasonable limitations as to time, geographical area and
scope of activity, (B) WMI, ▇.▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ have heretofore been
engaged in purchasing and selling natural gas, traded in contracts for the
purchase and sale of natural gas, and future,
22
option, swaps and other derivative instruments in respect thereof, including the
gas marketing business and related activities incidental thereto, in the Non-
Competition Area and (C) in light of the operations heretofore conducted by WMI,
▇.▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇, the interests of the parties hereto and the
nature of the transactions contemplated by this Agreement, the agreements
contained in this Section 5.2 are reasonable and do not impose a greater
restraint than is necessary to protect the goodwill and other business interests
associated with the LLC. However, notwithstanding the foregoing to the contrary,
each of WMI, ▇.▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ may continue, directly or indirectly,
(1) to operate (and have ownership interests in) the gas gathering and metering
systems described in Schedule 5.2 hereto and extensions thereof, (2) to conduct
the oil and gas exploration and production described in Schedule 5.2 hereto, (3)
buy, sell, transport or store oil and gas purchased, sold, gathered or produced
through such businesses and (4) engage in trading, hedging or similar financial
transactions for the oil and gas gathered, produced, transported or stored in
such businesses to the extent such transactions do not interfere with the
performance of their duties from their employment by Atmos or the LLC.
(b) From and after the Closing Date, WMI, ▇.▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇
will keep confidential and not disclose any confidential or proprietary
information concerning the Acquired Assets or the LLC or its business, including
any information regarding the customers of the LLC; provided that they may
disclose such information if it relates to information of WMI (other than
relating to the LLC) and may disclose such information of WMI or the LLC if it
becomes generally available to the public other than by breach of this Section
5.2(b) or the disclosure is required by applicable law or the disclosure is in
connection with the enforcement or defense of claims under this Agreement and
the documents and instruments entered into in connection herewith or in
connection with the employment of ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ by Atmos or the LLC.
(c) It is expressly understood and agreed that if any of the agreements set
forth in this Section 5.2 are found to be unreasonably broad, oppressive or
unenforceable in an action, suit or proceeding before any federal or state court
or other governmental authority, such court or other governmental authority (i)
shall narrow the Non-Competition Period or the Non-Competition Area or shall
otherwise endeavor to reform the scope of such agreements in order to ensure
that the application thereof is not unreasonably broad, oppressive or
unenforceable and (ii) to the fullest extent permitted by law, shall enforce
such agreements as so reformed.
(d) Any threatened or actual breach or violation of this Section 5.2 shall
entitle Atmos or Energy to an injunction restraining any further or continued
breach or violation. Such right to an injunction shall be in addition to and
cumulative with (and not in lieu of) any other remedies to which Atmos or Energy
may be entitled because of such breach or violation.
(e) The provisions of Section 5.2 supersede the provisions of Section 7.2
of the Transfer Restriction Agreement, which Section is hereby terminated
effective as of the Closing. If this Agreement is terminated, the provisions of
Section 7.2 of the Transfer Restriction Agreement shall remain applicable.
SECTION 5.3. Rights to Name. On the Closing Date, WMI shall change its
name to a name other than "▇▇▇▇▇▇▇▇ Marketing," and WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ will
assign all of their right, title and interest in and to the name, "▇▇▇▇▇▇▇▇
Marketing" or any derivation thereof, and
23
all goodwill associated therewith, to Energy, such assignment to be effective in
perpetuity; provided that ▇▇▇▇▇▇▇▇ may use "▇▇▇▇▇▇▇▇ Pipeline," "▇▇▇▇▇▇▇▇
Development" and "▇▇▇▇▇▇▇▇ Partners" and may use the name "▇▇▇▇▇▇▇▇" in any
other manner that is not confusingly similar to "▇▇▇▇▇▇▇▇ Marketing" for any
business other than a business described in Section 5.2(a)(i).
ARTICLE VI.
AGREEMENTS AND COVENANTS
OF THE ATMOS ENTITIES
SECTION 6.1. Access to Information; Confidentiality.
(a) From the date hereof to the Closing Date, the Atmos Entities will, and
will cause their respective directors, managers, officers, employees and agents
to, permit and afford WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ and their respective
representatives reasonable access at all reasonable times and with reasonable
prior notice to the employees, offices, properties, books and records of the
Atmos Entities for a due diligence review and will furnish WMI, ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇ with all information of the Atmos Entities as WMI, ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ may
reasonably request.
(b) The Atmos Entities acknowledge that they may receive or have received
from WMI, ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ information and data regarding WMI, ▇▇▇▇▇▇▇▇ or
▇▇▇▇▇ that is non-public and proprietary in nature. The Atmos Entities agree to
hold in confidence all such information and data and shall ensure that their
respective directors, managers, officers, employees and agents do not disclose
such information and data to others without the prior written consent of WMI,
▇▇▇▇▇▇▇▇ or ▇▇▇▇▇, as the case may be. In the event that this Agreement is
terminated, upon receipt of a written request, the Atmos Entities will return to
WMI, ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇, as the case may be, all such documents and other
material (and all copies thereof) obtained from WMI, ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ in
connection with the transactions contemplated hereby and will destroy all such
documents and other material prepared by the Atmos Entities or their respective
agents, representatives or advisors that reflect non-public information received
by the Atmos Entities in connection with the transactions contemplated hereby.
SECTION 6.2. Employees and Employee Benefits.
(a) As of the Closing Date, the employees of the LLC other than ▇.▇.
▇▇▇▇▇▇▇▇ shall continue as employees of the LLC. Subject to contractual
obligations disclosed in the WMI Disclosure Schedule, such employees' salaries
or wages, benefits, job titles and job duties from and after the Closing Date
will be determined by the LLC in its sole discretion. Subject to contractual
obligations, such employees will be employed with the LLC on an "at will" basis.
(b) Atmos will retain ▇.▇. ▇▇▇▇▇▇▇▇ and will cause the LLC to amend the
terms of retention of ▇▇▇▇▇ ▇▇▇▇▇, each as employees, and Messrs. ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇ agree to such retention as employees, beginning with the Closing Date.
Subject to contractual obligations, such employees will be employed with Atmos
or the LLC, as the case may be, on an "at will" basis. The specific terms of
employment (which shall supersede the current terms of employment as of the
Closing Date) are set forth in Exhibits C and D, respectively. The terms
----------------
24
and conditions contained in Exhibit C are intended to be similar to those
---------
applicable to other employees of Atmos of comparable qualifications and
experience. Moreover, the LLC will enter into change in control agreements with
the employees of the LLC who have been identified as "Key Employees" by WMI and
agreed to by Atmos, beginning with the Closing Date. The specific terms of such
change in control agreements shall be mutually acceptable to Atmos and ▇▇▇▇▇▇▇▇.
(c) Atmos will cause the LLC initially to provide compensation and benefits
substantially comparable in the aggregate to that currently provided by the LLC
to its employees, except for the ▇▇▇▇▇▇▇▇ Marketing, L.L.C. Performance Plan
("Performance Plan"). The rights of the existing LLC employees to benefits on
or after the Closing Date shall be governed by the terms, as may be amended or
modified from time to time, of any LLC plan or program in which they may
participate, and such employees will have no rights in or claims against Atmos'
welfare, pension or retirement plans as of the Closing Date. Such employees
will not participate in the Atmos Total Rewards program. On or prior to the
Closing, the Performance Plan will be terminated and payments to participants
therein will be made by the LLC in accordance with the accrued amounts provided
in the Financial Statements therefor. Neither ▇▇▇▇▇▇▇▇ nor ▇▇▇▇▇ are or will be
participants under the Performance Plan. After the Closing, the Atmos Entities
will cause the LLC to adopt an incentive compensation program for LLC employees
as shall be mutually acceptable to Atmos and ▇▇▇▇▇▇▇▇.
(d) It is expressly understood by the parties hereto that Atmos assumes no
responsibility, and makes no commitment, for the maintenance and continuation,
after the Closing, of any Plan or Employee Benefit Arrangement previously
adopted or maintained by the LLC or any Group Member, or for any continued
employment or the terms and conditions of any employment for any of the LLC's
employees.
SECTION 6.3. Registration Rights. Atmos agrees to enter into a
registration rights agreement with ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ on the Closing Date,
providing certain "piggy-back" registration rights, in substantially the form of
Exhibit E attached hereto (the "Registration Rights Agreement").
---------
ARTICLE VII.
MUTUAL AGREEMENTS AND COVENANTS
OF THE ATMOS ENTITIES, WMI AND ▇▇▇▇▇▇▇▇ AND ▇▇▇▇▇
SECTION 7.1. Consents and Approvals.
(a) Each of the parties hereto shall use all reasonable efforts to obtain
all consents, waivers, approvals, authorizations, opinions and orders of all
third parties (including attorneys and accountants) and local, state and federal
governmental authorities (including, but not limited to, the approvals of the
Colorado Public Utilities Commission, Georgia Public Service Commission,
Kentucky Public Service Commission, Illinois Corporation Commission, Tennessee
Regulatory Authority, and the Virginia Corporation Commission referred to in
Sections 1.6 and 3.5 above) required in connection with the authorization,
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby. Each of the parties hereto shall attend all
proceedings of, and file all documents with the Colorado Public
25
Utilities Commission, Georgia Public Service Commission, Kentucky Public Service
Commission, Illinois Corporation Commission, Tennessee Regulatory Authority, and
the Virginia Corporation Commission as reasonably necessary to obtain each of
such commissions' approval of the purchase of the Acquired Assets and/or the
issuance of the Shares. Each of the parties hereto shall also reasonably
cooperate with and assist each of the other parties hereto in all proceedings
before and in the preparation and filing of any documents they are required to
file with the Colorado Public Utilities Commission, Georgia Public Service
Commission, Kentucky Public Service Commission, Illinois Corporation Commission,
Tennessee Regulatory Authority, and the Virginia Corporation Commission.
(b) Each of the parties hereto shall, as soon as reasonably practicable
after the date of this Agreement, file any Notification and Report Forms and
related material that they may be required to file with the Federal Trade
Commission and the Antitrust Division of the Department of Justice under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, shall use their respective reasonable efforts to obtain
an early termination of the applicable waiting period and shall make any further
filings pursuant thereto that may be necessary, proper or advisable and respond
as promptly as practicable to all inquiries received from the Federal Trade
Commission or the Antitrust Division of the Department of Justice for additional
information or documentation.
(c) The parties hereto shall have the right to review in advance all
characterizations of the information relating to this Agreement and the
transactions contemplated hereby that appear in any filing made as contemplated
herein.
SECTION 7.2. Distributions. The parties agree to the following
distributions:
(a) In recognition of changes in distribution restrictions imposed by
lenders to the LLC, the parties hereto agree that they shall cause Energy and
WMI to approve monthly distributions of cash by the LLC to its members from the
date hereof through the Closing equal to the aggregate amount of net income
(adjusted to disregard unrealized gains and losses resulting from the marked to
market forward positions as of the end of each month) of the LLC for each month
beginning on May 1, 2000 and ending on the close of business on the date
preceding the Closing, that have not been previously distributed and that can be
distributed from the cash flow of the LLC subsequent to April 30, 2000 without
requiring capital contributions or borrowings (the "Ordinary Cash
Distributions"). The amount of the Ordinary Cash Distributions shall be
estimated by Atmos and WMI in good faith and paid by the LLC within 75 days
after the end of each such month or, in the case of the month in which the
Closing occurs, within 75 days after the Closing. Any true-up adjustments shall
be paid as provided in Section 7.2(c), subject to the right of WMI, ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇ (and their respective representatives) to review the books and records of
the LLC with respect to such calculations.
(b) As soon as practicable but not later than seventy-five (75) days
following the Closing Date, Atmos shall prepare and deliver to WMI, ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇ a certificate showing the calculation of the Ordinary Cash Distributions
of the LLC through the close of business on the date preceding the Closing Date
("Actual Amount"), together with reasonably detailed substantiation therefor.
In the absence of notice of objection or exercise of review rights within ninety
(90) days after the delivery of such certificate and substantiation, the amount
reflected in such certificate will be deemed accepted.
26
In the event ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ dispute the certificate, they shall provide
written notification of objection within such ninety (90) day period (or, if a
review is requested, within sixty (60) days after commencement of such review
and, for a period of thirty (30) days after such notification (or expiration of
such sixty (60) day period, as the case may be), ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ and Atmos
shall attempt to resolve the dispute in good faith by mutual agreement. If a
review is requested, Atmos agrees to cooperate in good faith to facilitate such
review of the books and records of the LLC. When the parties are in agreement,
any adjustment to the payment shall be calculated and, prior to the end of the
next calendar month, paid.
SECTION 7.3. Notice of Certain Events. Each of the parties hereto shall
give prompt written notice to the other parties of (i) the occurrence or non-
occurrence of any event, the occurrence or non-occurrence of which would be
likely to cause any representation or warranty of such party contained in this
Agreement to be untrue or inaccurate and (ii) any failure of such party to
comply with or satisfy any term, condition or agreement to be complied with or
satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section 7.3 shall not limit or otherwise affect the remedies
available hereunder to the other parties hereto.
SECTION 7.4. Reorganization. Each party hereto shall treat the sale of
the Acquired Assets contemplated hereby for income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code. From and after
the date hereof, no party to this Agreement shall take any action, or fail to
take any action, that would, in the reasonable determination of such party (in
the case of the Atmos Entities, by the chief financial officer of Atmos, and in
the case of WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, by ▇.▇. ▇▇▇▇▇▇▇▇), jeopardize qualification
of such sale as a reorganization within the meaning of Section 368(a) of the
Code, including, for a period of at least two years from the Closing, the
agreement of Atmos and its Affiliates to (i) refrain from making a contribution
of capital to the LLC other than capital contributions in the ordinary course of
business, with respect to any post-Closing acquisitions, expansions, or
investments, or otherwise approved by ▇.▇. ▇▇▇▇▇▇▇▇ as the executive officer in
charge of the non-utility operations of Atmos, and (ii) not repay any debt of
the LLC existing as of the Closing Date other than in the ordinary course of
business of the LLC or otherwise in connection with a refinancing of such debt
by the LLC.
SECTION 7.5. Expenses. Except as otherwise expressly set forth herein,
WMI, Woodward, Kifer, and the Atmos Entities shall each be responsible for, and
will pay, his or its own legal, accounting and other expenses incurred in
connection with the preparation and negotiations of this Agreement and the
Ancillary Agreements and the consummation of the transactions contemplated
hereby and thereby. The LLC shall not pay or be liable for any such expenses.
SECTION 7.6. Tax Controversies.
(a) In the case of an audit, claim or other action taken or proposed to be
taken by the IRS or any other taxing authority or agency (a "Tax Agency") with
respect to the Tax Returns of the Atmos Entities relating to the tax
consequences of the transactions contemplated hereby, the Atmos Entities shall
have the right to defend or contest such audit, claim or other action and to
exercise complete control of the defense of such audit, claim or other action;
provided, however, that the Atmos Entities shall not take a position in
connection with such audit, claim or other
27
action inconsistent with the treatment of the transactions contemplated hereby
as a tax-free reorganization. WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ will cooperate with the
Atmos Entities or their representatives in the defense or contest of such audit,
claim or other action.
(b) In the case of an audit, claim or other action taken or proposed to be
taken by a Tax Agency with respect to the Tax Returns of the LLC for any period
prior to or including the Closing Date, WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ shall have the
right to defend or contest such audit, claim or other action and to exercise
control of the defense of such audit, claim or other action, except to the
extent Atmos, Energy or (from and after the Closing Date) the LLC has any
liability not fully covered by indemnification of WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇
hereunder; provided, however, that WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ shall not take a
position in connection with such audit, claim or other action inconsistent with
the treatment of the transactions contemplated hereby as a tax-free
reorganization. The Atmos Entities will cooperate with WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇
or their representatives in the defense or contest of such audit, claim or other
action.
(c) Between the date hereof and the Closing Date, to the extent ▇▇▇▇▇▇▇▇,
▇▇▇▇▇ or WMI has Knowledge of the commencement or scheduling of any Tax audit,
the assessment of any Tax, the issuance of any notice of Tax due or any ▇▇▇▇ for
collection of Tax due, or the commencement or scheduling of any other
administrative or judicial proceeding with respect to the determination,
assessment or collection of any Tax of the LLC, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ or WMI, as
appropriate, shall provide prompt notice to Atmos and Energy of such matter,
setting forth information (to the extent known) describing any asserted Tax
liability in reasonable detail and including copies of any notice or other
documentation received from the applicable Tax authority with respect to such
matter.
SECTION 7.7. Access to Records Following Closing. Woodward, Kifer, the
LLC, and the Atmos Entities agree that so long as any books, records and files
retained by WMI, ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ relating to the business of WMI or the LLC,
or retained by the Atmos Entities, WMI or the LLC relating to the business of
WMI or the LLC, or the books, records and files delivered to the control of the
Atmos Entities pursuant to this Agreement to the extent they relate to the
operations of WMI or the LLC prior to the Closing Date, remain in existence and
are available, each party (at its expense) shall have the right upon prior
notice to inspect and to make copies of the same at any time during business
hours for any proper purpose. Woodward, Kifer, the LLC, and the Atmos Entities
and WMI shall use reasonable efforts not to destroy or allow the destruction of
any such books, records and files without first offering in writing to deliver
them to the other.
SECTION 7.8. Tax Credits, Tax Refunds and Amended Tax Returns.
(a) If in any period ending after the Closing Date, the Atmos Entities or
LLC earns any credit or recognizes any loss which cannot be applied against its
Tax liability for such period, and is permitted by law to carry back such credit
or loss to a period ending on or prior to the Closing Date, and if WMI, ▇▇▇▇▇▇▇▇
and ▇▇▇▇▇ shall receive a Tax Benefit for the period to which such credit or
loss is properly carried back, then WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ shall, within thirty
(30) days following the receipt of such Tax Benefit, remit to the LLC the amount
of such Tax Benefit resulting from such carryback of credit or loss. WMI,
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ agree that they will cooperate with the Atmos Entities and
the LLC and their respective
28
representatives, in a prompt and timely manner, in connection with (i) the
preparation and filing of, and (ii) any administrative or judicial proceedings
involving, any Tax Return or information filed or required to be filed by or for
the LLC or the Atmos Entities.
(b) If WMI, ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ receives a Tax Benefit with respect to WMI or
WMI's share of Taxes arising from the LLC in the Tax periods ending after the
Closing Date (including all Tax periods that begin before and end after the
Closing Date, but in such situation, only the portion of such period after the
Closing Date), WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ shall, within thirty (30) days following
the receipt of such Tax Benefit, pay the amount of such Tax Benefit to Atmos.
WMI and, to the extent of their respective Prorata shares thereof (and only to
such extent), ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ shall have joint and several liability for the
amount required to be paid to Atmos in the foregoing sentence.
(c) Subject to Section 7.10(a), any amended Tax Return or claim for Tax
refund for any Tax period of WMI shall be filed, or cause to be filed, only by
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ shall not without the prior written
consent of Atmos (which consent shall not be unreasonably withheld or delayed,
make or cause to be made, any such filing, to the extent such filing, if
accepted, reasonably might adversely change the Tax liability of the Atmos
Entities or any of Atmos' Subsidiaries or Affiliates for any Tax period.
SECTION 7.9. Further Action. Upon the terms and subject to the conditions
hereof, each of the parties hereto shall (i) promptly make its respective
filings and thereafter make any other required submissions, and (ii) use all
reasonable efforts to take, or cause to be taken, all appropriate action, and to
do or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation,
using all reasonable efforts to obtain all licenses, permits, consents,
approvals, authorizations, qualifications and orders of governmental authorities
and parties to contracts with the Atmos Entities, the LLC and WMI as are
necessary for the consummation of the transactions contemplated by this
Agreement. In case at any time after the Closing Date any further action is
necessary or desirable to carry out the purposes of this Agreement, the parties
to this Agreement shall use all reasonable efforts to take all such necessary
action.
SECTION 7.10. Lease Agreement. The Atmos Entities agree to cause the LLC
to enter, and WMI agrees to cause ▇▇▇▇▇▇▇▇ Development, Inc. to enter, into a
lease with respect to the office space and ▇▇▇▇▇▇▇▇ Pipeline, Inc. ("WPI") to
enter into a lease with respect to the furniture, fixtures and equipment owned
by WPI located therein on substantially the terms and conditions in effect on
the date hereof, which are described in Exhibit F hereto.
---------
SECTION 7.11. Public Announcements. Between the date of this Agreement
and the Closing Date, each of the parties hereto and any of its directors,
managers, officers, employees, agents or representatives shall not issue any
press release or otherwise make any public statements with respect to this
Agreement and the transactions contemplated hereby without the prior written
consent of the other party; provided, however, that each party reserves the
right to make such statements to regulatory authorities in the ordinary course
of business or as are required, in the opinion of its counsel, by applicable law
or the rules of any stock exchange.
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SECTION 7.12. Termination of Certain Agreements. As of the Closing Date,
the Transfer Restriction Agreement is terminated and the parties thereto are
hereby released from any further rights or obligations under any of the
provisions thereof. No party hereto shall exercise any right under Article III
of the Transfer Restriction Agreement prior to the Closing Date, unless this
Agreement is terminated pursuant to Article X.
ARTICLE VIII.
CONDITIONS TO CLOSING
SECTION 8.1. Conditions to Obligations of Each Party to Close. The
respective obligations of each party to effect the closing of the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Closing Date of the following conditions, except to the extent that such
conditions are waived in writing by Atmos and WMI:
(a) Utility Commission Approvals. All necessary approvals of the Colorado
Public Utilities Commission, Georgia Public Service Commission, Kentucky Public
Service Commission, Illinois Corporation Commission, Tennessee Regulatory
Authority, and the Virginia Corporation Commission shall have been granted by
final order and such orders shall not contain any condition which would
reasonably be expected to have a Material Adverse Effect on any of the parties
hereto or the LLC, including a Material Adverse Effect on the current rate
structure of any Atmos business unit regulated thereby;
(b) ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act. The waiting period (and any extension thereof)
applicable to the consummation of the transactions contemplated hereby under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act shall have expired or been terminated; and
(c) No Order. No United States or state governmental authority or other
agency or commission or United States or state court of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) which in effect restricts, prevents or
prohibits consummation of the transactions contemplated by this Agreement.
SECTION 8.2. Additional Conditions to Obligations of Atmos and Energy.
The obligations of Atmos to issue the Shares and of the Atmos Entities to effect
the closing of the transactions contemplated hereby are, at the option of Atmos
and Energy, also subject to the satisfaction at or prior to the Closing Date of
the following conditions, except to the extent that such conditions are waived
in writing by Atmos and Energy:
(a) Representations and Warranties. The representations and warranties of
WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ contained in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and as of the Closing
Date with the same force and effect as if made at and as of the Closing Date
except for changes that are permitted or contemplated by this Agreement, and
Atmos and Energy shall have received a certificate signed by the Chief Executive
Officer and the Chief Financial Officer of WMI and by ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, in
their respective individual capacities, and dated as of the Closing Date to that
effect;
(b) Agreements and Covenants. WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ shall each have
performed or complied in all material respects with all agreements and covenants
required by
30
this Agreement to be performed or complied with by it or him at or prior to the
Closing Date, and Atmos and Energy shall have received a certificate signed by
the Chief Executive Officer of WMI and by ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, in their
respective individual capacities, and dated as of the Closing Date to that
effect;
(c) Consents Obtained. All material consents and waivers required to be
obtained by WMI, the LLC, ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ for the authorization, execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby and thereby shall have been obtained in form and substance satisfactory
to Atmos;
(d) Material Adverse Changes. Since the date of this Agreement, there
shall have occurred no Material Adverse Effect on the LLC;
(e) Litigation. No action, suit or proceeding shall be pending against any
of the parties hereto or Known to be threatened before any court or quasi-
judicial or administrative agency of any federal, state, local or foreign
jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling or charge would (i) prevent consummation of any
of the transactions contemplated by this Agreement or the Ancillary Agreements,
(ii) cause any of the transactions contemplated by this Agreement or the
Ancillary Agreements to be rescinded following consummation, (iii) have a
Material Adverse Effect on the right of Atmos or Energy to own the assets and to
operate the business of the LLC in a manner consistent with present practice, or
(iv)have a Material Adverse Effect on the right of the LLC to own its assets and
to operate its business (and no such injunction, judgment, order, decree, ruling
or charge shall be in effect);
(f) Opinion of WMI's and ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇'▇ Counsel. Atmos and Energy
shall have received an opinion of LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.,
counsel to WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, dated as of the Closing Date substantially
in the form and to the effect set forth in Exhibit G hereto; and
---------
(g) Deliveries. Each of WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ shall have executed and
delivered each Ancillary Agreement to which it is a signatory and shall have
delivered all other documents and items contemplated in Section 9.3 or elsewhere
in this Agreement.
SECTION 8.3. Additional Conditions to Obligations of WMI, ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇. The obligations of WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ to effect the closing of the
transactions contemplated hereby are, at the option of WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇,
also subject to the satisfaction at or prior to the Closing Date of the
following conditions, except to the extent that such conditions are waived in
writing by WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇:
(a) Representations and Warranties. The representations and warranties of
the Atmos Entities contained in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and as of the Closing Date
with the same force and effect as if made at and as of the Closing Date except
for changes that are permitted or contemplated by this Agreement, and WMI,
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ shall have received certificates signed by the Presidents or
Chief Financial Officers of the Atmos Entities and dated as of the Closing Date
to that effect;
31
(b) Agreements and Covenants. The Atmos Entities shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by them at or prior to the
Closing Date and WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ shall have received certificates signed
by the Presidents or Chief Financial Officers of the Atmos Entities and dated as
of the Closing Date to that effect;
(c) Consents Obtained. All material consents, waivers, approvals,
authorizations or orders required to be obtained by Atmos and Energy for the
authorization, execution and delivery of this Agreement and the Ancillary
Agreements and the consummation by them of the transactions contemplated hereby
and thereby shall have been obtained in form and substance satisfactory to WMI,
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇;
(d) Material Adverse Changes. Since the date of this Agreement, there
shall have occurred no Material Adverse Effect on Atmos and its Subsidiaries,
taken as a whole;
(e) Opinion of the Atmos Entities' Counsel. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ shall have
received an opinion of ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, counsel to the Atmos
Entities, dated as of the Closing Date substantially in the form and to the
effect set forth in Exhibit H hereto;
---------
(f) Registration Rights Agreement. WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ shall have
received a counterpart of the Registration Rights Agreement duly executed by
Atmos;
(g) Certain Guaranties. (i) The bank lenders to the LLC shall have released
WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ from any personal liability for, or guarantee of, or
other security arrangement for, the notes, debts and obligations of the LLC to
such lenders, or (ii) all indebtedness of the LLC to such banks shall have been
repaid and the related credit facilities terminated and WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇
shall have received an indemnity from Atmos, reasonably satisfactory to them,
from all obligations in respect of such indebtedness. If ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ has
delivered any other guarantees for the benefit of the LLC, the release of such
guarantees shall also have been obtained or the guaranteed obligations satisfied
and a similar indemnity provided;
(h) Litigation. No action, suit or proceeding shall be pending against any
of the parties hereto or Known to be threatened before any court or quasi-
judicial or administrative agency of any federal, state, local or foreign
jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling or charge would (i) prevent consummation of any
of the transactions contemplated by this Agreement or the Ancillary Agreements,
(ii) cause any of the transactions contemplated by this Agreement or the
Ancillary Agreements to be rescinded following consummation, (iii) have a
Material Adverse Effect on the right of Atmos or Energy to own the assets and to
operate the business of the LLC in a manner consistent with present practice, or
(iv)have a Material Adverse Effect on the right of the LLC to own its assets and
to operate its business (and no such injunction, judgment, order, decree, ruling
or charge shall be in effect); and
(i) Deliveries. Each of the Atmos Entities shall have executed and
delivered each Ancillary Agreement to which it is a signatory and shall have
delivered all other documents and items contemplated in Section 9.4 or elsewhere
in this Agreement.
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ARTICLE IX.
CLOSING AND CLOSING DATE
OF THE MERGER
SECTION 9.1. Closing. The closing of the sale of the Acquired Assets, the
issuance of the Shares and the other transactions contemplated hereby (the
"Closing") shall take place either at (i) the offices of ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇
LLP in Dallas, Texas at 10:00 a.m. Central Time on the fifth Business Day
following the date on which the last of the conditions to the consummation of
the Closing that are to be fulfilled or waived in writing, as set forth in
Article VIII of this Agreement (other than those conditions, such as deliveries,
that by their nature are to be fulfilled at the Closing, but subject to the
fulfillment or waiver of such conditions) are fulfilled or waived in accordance
with this Agreement or (ii) such other time and place and on such other date as
the parties hereto shall agree in writing (the "Closing Date").
SECTION 9.2. Principal Deliveries. At the Closing:
(a) WMI will deliver to Energy instruments of assignment and transfer for
the Acquired Assets, reasonably satisfactory to Atmos, together with one or more
certificates representing 345,500 shares of Common Stock (duly endorsed or
accompanied by stock powers duly signed in blank), and Energy will deliver to
WMI an instrument of assumption of the Assumed Obligations, reasonably
satisfactory to WMI; and
(b) Atmos will deliver, or cause to be delivered, to WMI (or at its request
to ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ Prorata) one or more certificates representing the Base
Shares, the Included Shares and the Cumulative Shares.
SECTION 9.3. Other Deliveries of WMI. At the Closing, WMI will deliver to
Atmos the materials listed in this Section 9.3 or otherwise contemplated by this
Agreement including the following:
(a) A certificate, dated the Closing Date, signed by the Secretary or
Assistant Secretary of WMI certifying as to the (i) Articles of Incorporation of
WMI, as amended, (ii) Bylaws of WMI, as amended; (iii) incumbency and signatures
of signing officers of WMI; and (iv)adoption and continued effect of the
resolutions of WMI's stockholders and board of directors approving and
authorizing the execution, delivery and performance of this Agreement and the
Ancillary Agreements to which WMI is a party and the transactions contemplated
hereby.
(b) A certificate from the Secretary of State of the State of Texas, dated
not more than five Business Days prior to the Closing Date, certifying as to the
good standing of WMI.
(c) Written evidence satisfactory in form and substance to Atmos that all
material consents or approvals necessary to permit WMI to execute, deliver and
perform this Agreement and the Ancillary Agreements have been obtained and are
final.
(d) All other documents, instruments and writings required by this
Agreement and the Ancillary Agreements to be delivered by WMI, ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇
at or prior to the Closing.
33
SECTION 9.4. Other Deliveries of the Atmos Entities. At the Closing, the
Atmos Entities will deliver to WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ the materials listed in
this Section 9.4 or otherwise contemplated by this Agreement including the
following:
(a) Certificates, dated the Closing Date, signed by the Secretary or
Assistant Secretary of the Atmos Entities certifying as to the (i) Articles of
Incorporation of Atmos and of Certificate of Formation of Energy, each as
amended; (ii) Bylaws of Atmos and the Limited Liability Company Agreement of
Energy, each as amended; (iii) incumbency and signatures of signing officers of
the Atmos Entities; and (iv)adoption and continued effect of the resolutions of
the board of directors of Atmos, and of the managers and member of Energy
approving and authorizing the execution, delivery and performance of this
Agreement and the Ancillary Agreements to which they are signatories, the
transactions contemplated hereby and, in the case of Atmos, the issuance of the
Shares.
(b) Certificates from the Secretary of State of the states of their
respective organization, dated not more than five Business Days prior to the
Closing Date, certifying as to the good standing of the Atmos and Energy.
(c) Written evidence satisfactory in form and substance to WMI that all
material consents or approvals necessary to permit the Atmos Entities to
execute, deliver and perform this Agreement and the Ancillary Agreements have
been obtained and are final.
(d) All other documents, instruments and writings required by this
Agreement and the Ancillary Agreements to be delivered by the Atmos Entities at
or prior to the Closing.
SECTION 9.5. Further Assurances. At any time and from time to time after
the Closing Date, upon the request of Energy and without any cost or expense
thereto, WMI shall execute and deliver such instruments of conveyance,
assignment and transfer and other documents as Energy may reasonably request to
transfer to and vest in Energy, and to put Energy in possession of, any Acquired
Assets or otherwise to carry out the intent and purpose of this Agreement.
SECTION 9.6. Transfer and Other Taxes. At the Closing, WMI and Energy
shall each pay one-half of any state or local sales and use, ad valorem or
similar transfer-type Taxes ("Transfer Taxes") and recording charges in
connection with the conveyance, assignment, or transfer of the Acquired Assets.
If the final amount of any such Transfer Taxes or recording charge are not
determinable on the Closing Date, WMI and Energy shall pay such Transfer Taxes
or recording charge on the Closing Date based upon the estimated amount thereof
and shall thereafter pay any balance of such Transfer Taxes or recording charge
as soon as it becomes determinable.
ARTICLE X.
TERMINATION, AMENDMENT AND WAIVER
SECTION 10.1. Termination. This Agreement may be terminated at any time
prior to the Closing Date:
(a) by mutual written consent duly authorized by the boards of directors of
Atmos and WMI, the managers of Energy and by ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇; or
34
(b) by written notice from Atmos, Energy, WMI, ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ if the
Closing shall not have been consummated on or before February 28, 2001 (except
that this date shall be December 31, 2001 if, on February 28, 2001, the
conditions to the Closing set forth in Section 8.1(a) shall not have been
fulfilled but the Closing Date would otherwise occur) or such later date as may
be agreed to in writing by the parties; provided, however, that the right to
terminate this Agreement under this Section 10.1(b) shall not be available to
any party whose willful failure to fulfill any material obligation under this
Agreement has been the cause of or resulted in the failure of the Closing Date
to occur on or before such date; or
(c) by written notice from Atmos, Energy, WMI ,▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ if any
condition to the obligations of such party as set forth in Article VIII of this
Agreement has not been met or performed as of the Closing Date and such
condition shall not have been waived in writing by such party; provided,
however, that the right to terminate this Agreement under this Section 10.1(c)
shall not be available to any party whose willful failure to fulfill any
material obligation under this Agreement has been the cause of or resulted in
the failure of such condition to be met or performed on or before such date; or
(d) by written notice from Atmos or Energy if ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ dies or
becomes "disabled" for more than 180 days, within the meaning of the term
"disabled" as defined in the Atmos Long-Term Disability Plan in effect at the
Closing Date; or
(e) by written notice from Atmos, Energy, WMI, ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ if (i) any
Governmental Body, the consent of which is a condition to the obligations of the
parties to consummate the Closing, shall have determined not to grant its or
their consent and all appeals of such determination shall have been taken and
have been unsuccessful, (ii) one or more courts of competent jurisdiction in the
United States or any state shall have issued an order, judgment or decree
permanently restraining, enjoining or otherwise prohibiting the Closing, and
such order, judgment or decree shall have become final and nonappealable or
(iii) any statute, rule or regulation shall have been enacted by any state or
Federal government or governmental agency in the United States which prohibits
the consummation of the Closing.
SECTION 10.2. Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 10.1, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto, provided,
however, that nothing herein shall relieve any party from liability for any
willful breach hereof.
SECTION 10.3. Amendment. This Agreement may be amended by mutual action
taken by or on behalf of the respective boards of directors of Atmos or WMI or
the managers of Energy and by ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ at any time prior to the
Closing Date. This Agreement may not be amended except by an instrument in
writing signed by the parties hereto.
SECTION 10.4. Waiver. At any time prior to the Closing Date, any party
hereto may (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto, and (iii) waive compliance with any of the agreements or
conditions contained herein of which it is the beneficiary. Any such extension
or waiver shall be valid if set forth in an instrument in writing signed by the
party or parties to be bound thereby
35
and shall be applicable only with respect to the particular condition or
provision as extended or waived and not to any other condition or provision
herein.
ARTICLE XI.
INDEMNIFICATION
SECTION 11.1. Indemnification by ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇. WMI and, to the
extent of their respective Prorata shares thereof (and only to such extent),
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, jointly and severally, shall indemnify and hold harmless the
Atmos Entities and their respective representatives, Affiliates, successors and
assigns (collectively, the "Atmos Indemnified Persons") for, and will pay to the
Atmos Indemnified Persons the amount of any loss, liability, claim, damage, or
expense (including costs of investigation and defense and reasonable attorneys'
fees) or diminution of value, whether or not involving a third-party claim
(collectively, "Damages"), incurred by an Atmos Indemnified Person arising from:
(a) any inaccuracy or breach of any representation or warranty made by WMI,
▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ in this Agreement or any other certificate or document
delivered by any of them to the Atmos Entities pursuant to this Agreement (other
than in respect of Taxes, which are addressed in Section 11.2);
(b) any breach by WMI, ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ of any covenant or obligation of
any of them in this Agreement to the extent performable prior to the Closing
("WMI Pre-Closing Covenant");
(c) any breach by WMI, ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ of any other covenant or
obligation of either of them in this Agreement; or
(d) any Retained Liabilities;
provided, however, that, (x) in the case of any Damages arising under clause (a)
-------- -------
or (b) of this Section 11.1, other than in respect of the representations and
warranties in Sections 1.3 and 2.4, ("Certain Indemnifiable Damages"), (1)such
indemnification shall be effective only with respect to claims written notice of
which (specifying the factual basis of any claim in reasonable detail) is
received by ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ from Atmos or Energy no later than eighteen
months after the Closing Date, and (2)no amounts shall be due and payable until
the aggregate amount of the Certain Indemnifiable Damages is equal to at least
$250,000, with no amounts being due and payable for any amounts that in the
aggregate are less than such $250,000 deductible, and (y)in no event shall the
aggregate amount of all payments made by WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, taken
together, in respect of Certain Indemnifiable Damages exceed an aggregate of
$4,000,000. Notwithstanding the foregoing, if the claim for Damages relates to
a breach of representation, warranty or covenant in Articles II or V by ▇▇▇▇▇▇▇▇
or ▇▇▇▇▇ or with respect to shares of WMI stock owned by ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ or
Shares acquired by ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ upon the liquidation of WMI, the indemnity
herein with respect to such breach shall not be borne Prorata but shall be borne
entirely by whichever of ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ caused the breach.
36
SECTION 11.2. Tax Indemnification.
(a) From and after the Closing Date, WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, jointly and
severally, shall protect, defend, indemnify and hold harmless the Atmos
Indemnified Persons from any and all Taxes imposed on an Atmos Indemnified
Person in respect of WMI's income, business, property or operations or for which
WMI may otherwise be liable (i) for any taxable period of WMI, including any
Taxes other than one-half of the Transfer Taxes in connection with the
transactions contemplated hereby, or (ii) for WMI's allocable portion of the
income or gain of the LLC in respect of any taxable period ending on or prior to
the Closing Date, or (iii) resulting from the breach of ▇▇▇▇▇▇▇▇'▇ or ▇▇▇▇▇'▇
representations and warranties set forth in Section 1.14 of this Agreement.
(b) WMI's distributive share of the LLC's income, gain, loss or deduction
for the taxable year of the LLC that includes the Closing Date shall be
determined on the basis of an interim closing of the books of the LLC as of the
close of business on the Closing Date and shall not be based on a proration of
such items for the entire taxable year.
SECTION 11.3. Indemnification by Atmos. The Atmos Entities, jointly and
severally, shall indemnify and hold harmless WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, and their
respective representatives, Affiliates, successors and assigns (collectively,
the "▇▇▇▇▇▇▇▇ Indemnified Persons") for, and will pay to the ▇▇▇▇▇▇▇▇
Indemnified Persons the amount of any Damages arising from:
(a) any inaccuracy or breach of any representation or warranty made by the
Atmos Entities in this Agreement or in any certificate or document delivered by
the Atmos Entities to WMI, ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ pursuant to this Agreement;
(b) any breach by the Atmos Entities of any covenant or obligation of the
Atmos Entities in this Agreement to the extent performable prior to the Closing
("Atmos Pre-Closing Covenant"); or
(c) any breach by the Atmos Entities of any other covenant or obligation of
the Atmos Entities in this Agreement;
provided, however, that (x) in the case of any Damages arising under clause(a)
-------- -------
or (b) of this Section 11.3 ("Certain Indemnifiable Losses"), (1) such
indemnification shall remain in effect only with respect to claims written
notice of which (specifying the factual basis of any claim in reasonable detail)
is received by Atmos from ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ no later than eighteen months after
the Closing Date, and (2)no amounts shall be due and payable until the aggregate
amount of Certain Indemnifiable Losses is equal to at least $250,000, with no
amounts being due and payable for any amounts that in the aggregate are less
than such $250,000 deductible, and (y) in no event shall the aggregate amount of
all payments made by Atmos, taken together, in respect of Certain Indemnifiable
Losses exceed an aggregate of $4,000,000.
SECTION 11.4. Procedure for Indemnification - Third Party Claims.
(a) Promptly after receipt by an indemnified party under Section 11.1, 11.2
or 11.3 of notice of the commencement of any action, suit, arbitration,
investigation or other proceeding
37
(each a "Proceeding") against it, such indemnified party shall, if a claim is to
be made against an indemnifying party under such section, give written notice to
the indemnifying party of the commencement of such claim, but the failure to
notify the indemnifying party shall not relieve the indemnifying party of any
liability that it may have to any indemnified party, except to the extent that
the indemnifying party demonstrates that the defense of such action is
prejudiced by the indemnified party's failure to give such notice. Such notice
shall describe the nature of the claim in reasonable detail, including a copy of
the claim if such claim was made in writing, and will indicate the estimated
amount, if practicable, of the Damages that have been or may be sustained by the
indemnified party.
(b) If any Proceeding referred to in Section 11.4(a) is brought against an
indemnified party, the indemnifying party shall, unless the claim involves
Taxes, be entitled to participate in such Proceeding and, to the extent that it
wishes to assume the defense of such Proceeding with counsel reasonably
satisfactory to the indemnified party and, after notice from the indemnifying
party to the indemnified party of its election to assume the defense of such
Proceeding, the indemnifying party shall not, as long as it diligently conducts
such defense, be liable to the indemnified party under this Section 11.4 for any
fees of other counsel (including the indemnified party's counsel) or any other
expenses with respect to the defense of such Proceeding, in each case
subsequently incurred by the indemnified party in connection with the defense of
such Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, (i) it shall be
conclusively established for purposes of this Agreement that the claims made in
that Proceeding are within the scope of and subject to indemnification; (ii) no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent unless (A) there is no finding or
admission of any violation of legal requirements or any violation of the rights
of any person and no effect on any other claims that may be made against the
indemnified party or the settlement includes a complete and unconditional
release of the indemnified party with respect to the third party's claims in the
Proceeding, and (B) the sole relief provided is monetary damages that are paid
in full by the indemnifying party; and (iii) the indemnified party will have no
liability with respect to any compromise or settlement of such claims effected
without its consent. If the indemnified party desires to participate in, but
not control, any such defense or settlement the indemnified party may do so at
its sole cost and expense. The indemnified party shall cooperate with the
indemnifying party's defense against any third party claim. If written notice
as described in Section 11.4(a) is given to an indemnifying party of the
commencement of any Proceeding and the indemnifying party does not, within
twenty (20) days after the indemnified party's notice is given, give notice to
the indemnified party of its election to assume the defense of such Proceeding,
the indemnifying party will be bound by any determination made in such
Proceeding or any compromise or settlement effected by the indemnified party,
subject to the provisions of this Article XI.
(c) All references in Sections 11.4 or 11.5 to items being at the cost or
expense of the indemnifying party, or words of similar import, shall in no way
limit the recovery of the indemnified party under the other provisions of
Article XI.
SECTION 11.5. Procedure for Indemnification - Other Claims. A claim for
indemnification for any other matter not involving a third-party claim may be
asserted by written notice to the party from whom indemnification is sought
given prior to the expiration of the
38
indemnification notice period, stating the nature of such claim in reasonable
detail and indicating the estimated amount, if practicable, but in any event not
later than forty-five (45) days after the indemnified party becomes aware of
such claim (provided that the failure to notify the indemnifying party shall not
relieve the indemnifying party of any liability it may have to any indemnified
party, except to the extent that the indemnifying party demonstrates that the
defense of such claim is prejudiced by the indemnified party's failure to give
such notice), and the indemnifying party will have a period of ninety (90) days
within which to respond to such claim, specifying the portion of the claim that
is disputed and the basis for such position. If the indemnifying party does not
respond within such ninety (90) day period the indemnifying party will be deemed
to have accepted such claim (subject to the other provisions of this Article
XI). If the indemnifying party responds within such ninety (90) day period, the
indemnifying party will be deemed to have accepted and be liable for payment of
the undisputed portion of such claim, if any, on demand (subject to the other
provisions of this Article XI). If the indemnifying party rejects any portion of
such claim, the indemnified party will be free to seek enforcement of its rights
to indemnification under this Agreement.
SECTION 11.6. LIMITATION OF LIABILITIES. EXCEPT AS OTHERWISE EXPRESSLY
PROVIDED HEREIN, BUT NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT WHICH
MAY BE TO THE CONTRARY, NEITHER ANY PARTY NOR ANY OF ITS RESPECTIVE DIRECTORS,
OFFICERS, AFFILIATES, EMPLOYEES OR AGENTS SHALL BE LIABLE TO ANY OTHER PARTY OR
ITS RESPECTIVE DIRECTORS, OFFICERS, AFFILIATES, EMPLOYEES OR AGENTS FOR, AND THE
TERM "DAMAGES" FOR PURPOSES OF ARTICLE XI, SHALL NOT INCLUDE, CONSEQUENTIAL
(OTHER THAN FORESEEABLE DIMINUTION IN VALUE), TREBLE, EXEMPLARY OR PUNITIVE
DAMAGES OF ANY TYPE UNDER ANY CIRCUMSTANCES (EXCEPT FOR SUCH DAMAGES OWED TO A
THIRD PARTY) REGARDLESS OF WHETHER SUCH DAMAGES MAY BE AVAILABLE UNDER TEXAS OR
DELAWARE LAW, THE LAW OF ANY OTHER STATE OR JURISDICTION, OR FEDERAL LAW.
SECTION 11.7. NEGLIGENCE. THE INDEMNIFICATION PROVIDED IN THIS AGREEMENT
SHALL BE APPLICABLE WHETHER OR NOT NEGLIGENCE OR STRICT LIABILITY OF THE PERSON
ENTITLED TO INDEMNIFICATION HEREUNDER IS ALLEGED OR PROVEN.
SECTION 11.8. Exclusivity. From and after the Closing Date,
indemnification pursuant to this Article XI shall be the sole and exclusive
remedy of any Indemnified Party for any breach of any representation, warranty,
covenant or other agreement herein, whether such claim may be asserted as a
breach of contract, tort, statute or otherwise, except for fraud or willful
misconduct, and except for injunctive relief and specific performance in respect
of the obligations set forth in Sections 5.1, 5.2, 5.3 and 6.1.
SECTION 11.9. Mitigation. If the amount of any Damages, at any time
subsequent to the making of an indemnity payment in respect thereof, is reduced
by recovery, settlement or otherwise under or pursuant to any insurance coverage
other than insurance of Atmos (in the case of a claim by any Atmos Indemnified
Person) or WMI, ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ (in the case of a claim by any ▇▇▇▇▇▇▇▇
Indemnified Person), or pursuant to any claim, recovery, settlement or
39
payment by or against any other entity other than an insurance carrier of Atmos
or WMI, ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇, as the case may be, the amount of such reduction,
less any costs, expense or premiums incurred in connection therewith, will
promptly be repaid by the indemnified party to the indemnifying party against
any such third party in respect of the Damages to which the indemnity payment
relates; provided, however, that, until the indemnified party recovers full
payment of its Damages, any and all claims of the indemnifying party against any
such third party on account of such indemnity payment is hereby made expressly
subordinate and subject in right of payment to the indemnified party's rights
against such third party.
SECTION 11.10. Effect on Materiality. For the purposes of this Article
XI, once a determination has been made that a specific breach of a
representation, warranty, covenant or agreement has occurred for purposes of the
indemnification obligation hereunder, the calculation of Damages with respect to
such specific breach shall be made without regard to any other limitation or
qualification as to materiality set forth in such representation, warranty,
covenant or agreement.
SECTION 11.11. Other Matters. The parties acknowledge that the intended
effect of this Agreement and the transactions contemplated hereby is the
acquisition by Atmos through its Affiliates of the equity of the LLC not
currently owned by Energy, without incurring any obligation or liability of WMI
other than the Assumed Obligations, and not to provide Atmos or its Affiliates
with any right of recovery as to the interest in the LLC already held by Energy
as of the date hereof or immediately prior to the Closing Date on account of the
representations and warranties, covenants or indemnities of ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ or
WMI made in this Agreement or any document executed by them in connection with
the Closing. In addition, the parties also acknowledge that any right of
recovery with respect to a representation or warranty made in this Agreement or
any document executed in connection with the Closing requires the reasonable
reliance thereon of the indemnified party to which such representation or
warranty was made.
SECTION 11.12. Election to Deliver Common Stock. WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇
shall have the option to elect to pay any amount owing in respect of the Certain
Indemnifiable Claims (and not in respect of any other claims) by delivery of
shares of Common Stock, valued for these purposes at the Trading Value as of the
date of such delivery.
SECTION 11.13. Certain Accounting Policies. The parties agree that,
notwithstanding anything to the contrary in this Agreement, no representation or
warranty of WMI, ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ shall be breached, nor shall WMI, ▇▇▇▇▇▇▇▇ or
▇▇▇▇▇ be obligated to make any payment under Article XI with respect thereto, by
virtue of the tax accounting principles followed by the LLC that were approved
by Energy as a member of the LLC or the manager of the LLC appointed by Energy.
ARTICLE XII.
MISCELLANEOUS
SECTION 12.1. Definitions. For purposes of this Agreement, the following
terms used herein shall have the meanings set forth below:
"Acquired Assets" has the meaning as set forth in Section A.
40
"Affiliate" means, when used with respect to any Person, any other Person
at the time directly or indirectly controlling, controlled by or under direct or
indirect common control with, such Person. The term "control" as used herein
means the power to direct or cause the direction of the management or policies
of such Person, whether by contract or otherwise.
"Agreement" means this Agreement, as the same may be amended or
supplemented from time to time, together with the schedules hereto.
"Ancillary Agreements" means the Registration Rights Agreement, the
assignments contemplated by Section 5.3, and any additional instrument or
agreement delivered pursuant to Section 9.2.
"Assumed Obligations" has the meaning set forth in Section G.
"Atmos Entities" means Atmos and Energy.
"Atmos SEC Reports" has the meaning set forth in Section 3.6(a).
"Bank of America Facility" means (i) the Credit Agreement providing for an
uncommitted borrowing base demand credit facility in the aggregate amount of up
to $100,000,000 with Bank of America, N.A., as agent, currently being negotiated
by the LLC, in the form finally authorized and executed and delivered by the
LLC, and any amendments thereto, and all guaranties and other agreements
executed and delivered to such agent and the banks parties thereto in connection
therewith or (ii) such other credit facility entered into from time to time
prior to the Closing by the LLC with Bank of America, N.A., or any other
financial institution.
"Base Shares" has the meaning set forth in Section B.
"Business Day" means a day other than a Saturday, Sunday or a legal holiday
or a day on which banking institutions are authorized by law to close in Dallas
or Houston, Texas.
"Change in Control" means any of the following events: any "person" or
"group" (within the meaning of Section 13(d) or 14(d) of the Exchange Act)
becomes, directly or indirectly, the "beneficial owner" (as defined in Rules
13d-3 (other than subsection (d) thereof) and 13d-5 under the Exchange Act), by
way of merger, consolidation or otherwise of 40% or more of the voting power of
Atmos.
"Closing" has the meaning set forth in Section 9.1.
"Closing Date" has the meaning set forth in Section 9.1.
"Code" means the Internal Revenue Code of 1986, as amended, and regulations
promulgated thereunder.
"Common Stock" has the meaning set forth in the preamble hereof.
"Cumulative Shares" has the meaning set forth in Section B.
41
"Employee Benefit Arrangement" means any employee benefit, fringe benefit,
compensation, or other plan, policy, agreement, or arrangement that is not an
employee benefit plan within the meaning of Section 3(3) of ERISA but which (i)
provides compensation or benefits to any one or more of the current or former
directors, officers or other employees of WMI, the LLC or any Group Member, such
as a bonus, incentive, stock purchase or stock appreciation rights plan, or any
employment or consulting agreement, any termination-or plant closing program, or
any change in control arrangement, or (i) with respect to which WMI, the LLC, or
any Group Member has any liability or obligation or is otherwise bound.
"Environmental Requirements" means all laws, ordinances, statutes, codes,
rules, regulations, agreements, judgments, orders and decrees now or hereafter
enacted, promulgated or amended, of the United States, the states, the counties,
the cities or any other political subdivisions in which real property is
located, and any other political subdivision, agency or instrumentality
exercising jurisdiction over WMI or the LLC, any real property or the use of the
real property owned or used by either of them, relating to pollution, the
protection or regulation of human health, natural resources or the environment,
or the emission, discharge, release or threatened release of pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances or waste or
Hazardous Materials into the environment (including, without limitation, ambient
air, surface water, ground water, land or soil).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Assets" has the meaning set forth in Section A.
"Financial Statements" has the meaning set forth in Section 1.9(a).
"Governmental Authorizations" has the meaning set forth in Section 1.1.
"Governmental Body" means any domestic or foreign national, state or local
government, any subdivision, agency, board, commission, bureau or other
instrumentality or authority thereof, or any quasi-governmental or private body
exercising any regulatory or taxing authority thereunder.
"Group Member" means any member of any "affiliated service group," as
defined in Section 414(m) of the Code, that includes WMI or the LLC; any member
of any "controlled group of corporations," as defined by Section 414(b) of the
Code, that includes WMI or the LLC; or any member of any group of "trades or
businesses under common control," as defined in Section 414(c) of the Code, that
includes WMI or the LLC; provided that "Group Member" does not include the Atmos
Entities or any of their respective Affiliates.
"▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended.
"Hazardous Material" means any substance which is or contains (i) any
"hazardous substance" as now or hereafter defined in (S) 101(14) of the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended ("CERCLA") (42 U.S.C. (S)
42
9601 et M.) or any regulations promulgated under CERCLA; (ii) any "hazardous
waste" as now or hereafter defined in the Resource Conservation and Recovery Act
(42 U.S.C. (S) 6901 et seq.) ("RCRA") or regulations promulgated under RCRA;
(iii) any substance regulated by the Toxic Substances Control Act (15 U.S.C. (S)
2601 et seq.); (iv) gasoline, diesel fuel or other petroleum hydrocarbons; (v)
asbestos and asbestos containing materials, in any form, whether friable or non-
friable; (vi) polychlorinated biphenyls; or (vii) radon gas; and any additional
substances or materials which are now or hereafter classified or considered to
be hazardous or toxic under Environmental Requirements or the common law, or any
other applicable laws. Hazardous Materials shall include, without limitation,
any substance, the presence of which (A) requires reporting, investigation or
remediation under Environmental Requirements; (B) causes or threatens to cause a
nuisance on any real property or adjacent property or poses or threatens to pose
a hazard to the health or safety of persons on any real property or adjacent
property; or (C) which, if it emanated or migrated from the real property, could
constitute a trespass.
"Included Shares" has the meaning set forth in Section B.
"IRS" means the Internal Revenue Service.
"Knowledge" or "Known" means, with respect to any Person, such Person's
actual and conscious knowledge, after reasonably inquiry of the management and
employees of such Person and its Affiliates who are the individuals generally
responsible for the subject matters to which the knowledge is pertinent.
"Knowledge of Atmos" means the Knowledge of the Atmos Entities.
"Knowledge of WMI" means the Knowledge of WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇.
"LLC Documents" means the Certificate of Formation of the LLC filed with
the Secretary of State of Delaware on January 23, 1995, the Limited Liability
Company Agreement of the LLC dated as of May 1, 1995, as amended, and the
Transfer Restriction Agreement.
"LLC Membership Interests" means the units of membership interest in the
LLC.
"Long Position" means the aggregate number of MMBTUs of natural gas which
are either held in inventory by a Person or which a Person has contracted to
purchase (whether by purchase of a contract on a commodities exchange or
otherwise), or which a Person will receive on exchange or the notional quantity
under a swap contract including all option contracts representing the obligation
of a Person to purchase natural gas at the option of a third party, and in each
case, for which a fixed purchase price has been set. Long Positions shall be
expressed as a positive number.
"Material Adverse Effect" means a material adverse effect on the
operations, properties, condition (financial or otherwise), assets or
liabilities of the designated party or parties provided that the foregoing shall
not include any material adverse effect attributable to (a) factors affecting
such party's industry generally, (b) general national, regional or local
economic or financial conditions, (c) changes in governmental or legislative
laws, rules or regulations, or (d) contracts (other than agreements or consents
settling any liability, obligation or claim) approved by the Board of Managers
of the LLC by an affirmative vote that includes managers appointed by
43
Energy after full and fair disclosure of all material information in respect
thereof to such board by management of the LLC.
"Net Position" means the sum of all Long Positions and Short Positions.
"Non-Competition Area" has the meaning set forth in Section 5.2(a).
"Non-Competition Period" has the meaning set forth in Section 5.2(a).
"Other Documents" has the meaning set forth in Section 2.3(a).
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Encumbrance" has the meaning set forth in Section 1.12.
"Person" means any corporation, association, partnership, limited liability
company, organization, business, individual, trust or a Governmental Body.
"Plan" means at any time-any employee benefit plan as defined in Section
3(3) of ERISA (i) which is either (1)maintained by WMI, the LLC or any Group
Member, or maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
any of WMI, the LLC or any Group Member is then making or accruing an obligation
to make contributions or has within the preceding five plan years made
contributions, or (2)with respect to which WMI, the LLC or any Group Member has
any liability or obligation or is otherwise bound.
"Prorata" means prorata in accordance with the ownership of WMI Stock and,
therefore, is 59% as to ▇▇▇▇▇▇▇▇ and 41% as to ▇▇▇▇▇.
"Purchase Consideration" has the meaning set forth in Section B.
"Registration Rights Agreement" has the meaning set forth in Section 6.3.
"Retained Liabilities" shall have the meaning set forth in Section G.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" has the meaning set forth in Section 2.1.
"Short Position" means the aggregate number of MMBTUs of which a Person has
contracted to sell (whether by sale of a contract on a commodities exchange or
otherwise) or deliver on exchange or under a swap contract, including all option
contracts representing the obligation of a Person to sell natural gas at the
option of a third party and in each case for which a fixed sales price has been
set. Short Positions shall be expressed as a negative number.
"Subsidiary" with respect to any entity ("parent") means any entity,
corporation, firm, association or trust of which such parent, at the time in
respect of which such term is used, (a) owns directly or indirectly more than
fifty percent (50%) of the equity or beneficial interest, on a consolidated
basis, and (b) owns directly or controls with power to vote, indirectly through
one
44
or more Subsidiaries, shares of equity or beneficial interest having the power
to cast at least a majority of the votes entitled to be cast for the election of
the directors, trustees, managers or other officials having powers analogous to
those of directors of a corporation.
"Tax Agency" has the meaning set forth in Section 7.6(a).
"Tax Benefit" shall mean any refund, credit or actual reduction in
otherwise required Tax payments including any interest payable thereon. Any Tax
Benefit shall be computed net of any related Tax cost (which shall be computed
in the same manner in which Tax Benefits are otherwise computed pursuant to this
definition).
"Taxes" shall mean all taxes, however denominated, including any interest,
penalties or other additions to tax, including any transferee or secondary
liability in respect of any tax, whether imposed by law, contractual agreement
or otherwise, that may become payable in respect thereof, imposed by any
federal, territorial, state, local or foreign government or any agency or
political subdivision of any such government, which taxes shall include, without
limiting the generality of the foregoing, all income or profits taxes
(including, but not limited to, federal income taxes and state income taxes),
real property gains taxes, payroll and employee withholding taxes, unemployment
insurance taxes, social security taxes, sales and use taxes, ad valorem taxes,
excise taxes, franchise taxes, gross receipts taxes, business license taxes,
occupation taxes, real and personal property taxes, stamp taxes, environmental
taxes, transfer taxes, workers' compensation, PBGC premiums and other
governmental charges, value added, alternative minimum and other obligations of
the same or of a similar nature to any of the foregoing, which a person or
entity is required to pay, withhold or collect.
"Tax Returns" shall mean all reports, estimates, declarations of estimated
tax, information statements and returns relating to, or required to be filed in
connection with, any Taxes or the determination, assessment or collection of any
Taxes, including information returns or reports with respect to backup
withholding and other payments to third parties, and any amendments or
supplements to any of the foregoing.
"Transfer Restriction Agreement" means that certain Transfer Restriction
Agreement of the LLC dated as of May 1, 1995 among the LLC, Energy, WMI,
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇, as amended.
"WMI Shareholders' Agreement" means that certain WMI Shareholders'
Agreement dated March 1, 1999, among WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇.
"WMI Stock" has the meaning set forth in Section 1.3.
SECTION 12.2. Survival of Representations, Warranties and Agreements. The
representations, warranties and agreements in this Agreement shall survive the
Closing Date and any investigation by the parties hereto, except that (i) the
representations and warranties of WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ set forth in this
Agreement or any document entered into in connection herewith (other than those
in or in respect of Sections 1.3, 1.14 and 2.4) shall terminate on the
expiration of eighteen (18) months after the Closing Date; and (ii) the
agreements set forth in this Agreement or any document entered into in
connection herewith shall survive the Closing indefinitely.
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SECTION 12.3. Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered or mailed if delivered personally or by
facsimile or mailed by registered or certified mail (postage prepaid, return
receipt requested) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) If to the Atmos Entities:
Atmos Energy Corporation
1800 Three Lincoln Centre
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ III
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to WMI, ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇:
▇▇▇▇▇▇▇▇ Marketing, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇.▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
LeBoeuf, Lamb, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 12.4. Assignment. This Agreement is not assignable by any of the
parties hereto; provided that ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ shall be permitted, in
conjunction with a transfer of shares of WMI Stock to a trust or other entity
created for estate planning purposes, to assign a corresponding portion of their
respective rights under this Agreement to such trust or other entity prior to
the Closing and to such extent, after any such permitted assignment the terms
"▇▇▇▇▇▇▇▇" and "▇▇▇▇▇" shall also refer to such permitted assignees; provided
that such assignment shall not relieve ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ of their respective
obligations hereunder nor impose any obligations under Article XI on such
permitted assignees.
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SECTION 12.5. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, an other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible.
SECTION 12.6. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
SECTION 12.7. Entire Agreement. This Agreement, together with the
Ancillary Agreements, constitutes the entire agreement and supersedes all prior
agreements and undertakings, both written and oral, among the parties, or any of
them, with respect to the subject matter hereof and is not intended to confer
upon any other person any rights or remedies hereunder.
SECTION 12.8. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 12.9. Construction; Headings. The parties hereto have
participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement. The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. In
construing this Agreement:
(a) examples shall not be construed to limit, expressly or by implication,
the matter they illustrate;
(b) the word "includes" and its derivatives means "includes, but is not
limited to," and corresponding derivative expressions;
(c) a defined term has its defined meaning throughout this Agreement, and
each exhibit, attachment, and schedule to this Agreement, regardless of whether
it appears before or after the place where it is defined;
(d) the plural shall be deemed to include the singular, and vice versa;
(e) each gender shall be deemed to include the other genders;
(f) all references to prices, values or monetary amounts refer to United
States dollars;
47
(g) all references to articles, sections, paragraphs, clauses, exhibits,
attachments or schedules refer to articles, sections, paragraphs and clauses of
this Agreement, and to exhibits, attachments or schedules attached to this
Agreement, unless expressly provided otherwise;
(h) each schedule to this Agreement is a part of this Agreement, but if
there is any conflict or inconsistency between the main body of this Agreement
and any schedule, the provisions of the main body of this Agreement shall
prevail;
(i) the words "this Agreement," "herein," "hereof," "hereby," "hereunder"
and words of similar import refer to this Agreement as a whole and not to any
particular subdivision, unless expressly so limited; and
(j) the word "or" is not exclusive.
SECTION 12.10. Incorporation of Exhibits. The Exhibits hereto are
incorporated herein by reference and made a part hereof for all purposes.
SECTION 12.11. Counterparts. This Agreement may be executed in
counterparts, each of which will be an original, but all of which together will
constitute one and the same agreement.
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IN WITNESS WHEREOF, the Atmos Entities, WMI, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ have
executed this Agreement as of the date first written above by, in the case of
Atmos, Energy and WMI, their respective officers thereunto duly authorized.
ATMOS ENERGY CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. BEST
----------------------------
▇▇▇▇▇▇ ▇. Best
Chairman of the Board,
President and CEO
ATMOS ENERGY MARKETING, LLC
By: /s/ ▇▇▇▇▇▇ ▇. BEST
----------------------------
▇▇▇▇▇▇ ▇. Best
President
▇▇▇▇▇▇▇▇ MARKETING, INC.
By: /s/ ▇.▇. ▇▇▇▇▇▇▇▇, III
----------------------------
▇.▇. ▇▇▇▇▇▇▇▇, III
President and Chairman of the Board
/s/ ▇.▇. ▇▇▇▇▇▇▇▇, III
-------------------------------
▇.▇. ▇▇▇▇▇▇▇▇, III
/s/ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇
-------------------------------
▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇
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